2013 - Not the Year of Mobile Wallet But Better Luck Next Year

By Kam Taitt

The concept of a mobile wallet isn't new. After all, Google Wallet has been live for a year-and-a-half and prior to that there have been a number of startup payment systems in the marketplace. What's changed in the marketplace is that many tech industry experts and tastemakers are proclaiming 2013 the year of the mobile wallet. Here are the reasons why:

Smartphones have continued to become the most personal and integral device in consumers’ day-to-day lives. The consumption of apps and operating system base features like Google Now and Siri provide so much convenience to consumers that the adoption of mobile wallets has been both seamless and organic.
The proliferation of loyalty schemes, cards and discount programs has made it difficult for consumers to manage. The mobile wallet is providing consumers with timely, location-relevant reminders about discounts and promotions for the services they belong to.
Lastly, and perhaps most importantly, smartphones have caught up with mobile wallet technology. We're past the trial phase; mobile wallets are now extremely reliable and beneficial to consumers’ shopping experiences.

Players in the Mobile Wallet Category
iOS Passbook: Perhaps the most talked about feature of the iPhone 5 was Passbook. Passbook allows users to store virtual cards, tickets, coupons and offers in iOS devices — a feature that would even make George Costanza blush because it streamlines the payment process and allows for less waste.

Passbook is a stand-alone feature, but it can also be used in tandem with other marketing tactics such as the following:

SMS reminders to target consumers about relevant sales based on what cards are in their wallet;
alerts users of their card balances and expiring services; and
vendors can automatically provide new coupons to customers when they're in close proximity of their store.

5th Finger Account Manager Christina Park said the following in regards to Passbook: "The fact that Apple had a feature like Passbook as part of its iPhone 5 release validated to the masses that mobile wallets are not a trend. I personally had clients calling me immediately after the feature was announced about how best to integrate Passbook into their mobile couponing programs. A number of these same clients were hesitant to use existing mobile wallet technology. Apple helped … validation was the difference."

As for now, the only perceived drawback to iOS Passbook is that it doesn't allow consumers to make actual purchases. It only offers the ability to be a "wallet" replacement feature, holding your existing cards digitally. Closing the loop on purchase behaviors of consumers by collecting information such as geo-location, time of purchase, purchase volume, average cost of purchase, redemptions, etc., is key to helping marketers optimize their campaigns and better target consumers.

Google Wallet: Google Wallet, however, records payment information and transaction history in addition to coupon and promotional offers. All of this is done on an individual level. Google Wallet is a base Android OS feature that's also available for use over the web. Mobile users are directed to store their payment information in Google Wallet, then use NFC technology. They then only need to tap their phone against a retailer's scanner as payment.

Widespread adoption of Google Wallet hasn't been limited due to consumer adoption, but rather carrier and retail adoption. Certain carriers have been unwilling to support Google Wallet since it functions essentially as its own mobile bank, cutting the carriers out of an important revenue stream. Meanwhile, the NFC technology requires retailers to upgrade their very expensive point-of-sale systems.

5th Finger CTO Barry Latimer commented that "Google Wallet for the moment is like having a Maserati that you only drive once a week at the speed limit. There's endless capabilities to the level of consumer targeting that you can do with Google Wallet, but consumers and brands alike aren't seeing it perform to its true potential just yet."

Square: Square entered the marketplace as a device company that enabled small business owners and merchants the ability to accept credit and debit card payments on their mobile phones with lower transaction fees.

Square has evolved from a device company to a mobile wallet technology provider. In going a step past Google Wallet, consumers using Square don't even need to take out their mobile phone to make a payment. Instead, they load their credit card or debit card into Square Wallet and make payments at retailers who accept Square Wallet simply by providing their name. This is very much the ideal state of convenience for any consumer who is having a busy day.

A new feature to Square Wallet is the ability for users to send other users coupons and gift cards through the platform. This is a very clever, thoughtful and convenient way for users to send a gift or just say thank-you through the platform.

"Although Square Wallet doesn't have the exposure of Passbook, Google Wallet or even Square's card reader, we feel that its features are creating a social connectivity not seen by other platforms," said Latimer.

And the Winner Will Be …
A particular brand or even operating system won't be the big winner in the rise of mobile wallets; instead, it will be consumers. Although email marketing is still effective and should always be considered as part of your consumer relationship marketing program, it's started to feel like spam because it's very wide casting and often takes a while to appropriately retarget consumers based on their behavior.

"The manner in which email segmentation is done still feels cumbersome and slow," said 5th Finger's Park. "SMS communications have really surpassed email in the sense that consumers can be reprofiled, targeted and messaged to in almost real time. This means that when it comes to mobile wallet technology, brands can give consumers more impactful, meaningful and timely messaging. This translates into consumers learning about offers that are most relevant to them."

In addition to consumers learning about offers that are most relevant to them, it also means never having to worry about remembering cash or if you brought the right credit card. Also, the platforms highlighted in this feature can actually keep track of your account balances. Talk about ease and convenience.

Whereas consumers will be the big winners through message and offer optimization, brands are also positioned to be seen as "trusted partners" to their customers, taking the guesswork out of "What do my shoppers want?".

2013 may not be the year of the mobile wallet, but instead the year that consumers and brands all recognized the benefits of the technology. As smartphones continue to play a more integral part of our daily lives, it makes senses that we'd also look to them to help streamline our purchases and overall finances.

Kam Taitt is a senior account manager at 5th Finger, a Merkle company. Kam can be reached at kam.taitt@5thfinger.com.