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Directors Briefing April 2012

The Mobile Wallet

02 / THE MOBILE WALLET

The Mobile Wallet

The Mobile WalletThe concept of a mobile wallet has been growing for the past 18 months. Last autumn Google launched the Google Wallet concept which has grown to replace the Google Checkout and attract additional partners. The launch of an additional 3 Google phones with NFC (Spring 2012) will further grow the potential reach of the Google Wallet.

Meanwhile the UK mobile operators are starting to flex their muscles with a number of new mobile wallet initiatives.

What is the mobile wallet?The mobile wallet concept is simply the ability for a mobile phone to be used in lieu of a wallet or purse to purchase goods and services in person. Apple and Google have all successfully grown ‘on ‘phone’ purchases of digital content with their app stores and in app purchases whilst Amazon has grown from successfully selling ‘mail order’ goods through an app to competing with Apple & Google for a slice of the digital entertainment revenue. In late April 2012, Amazon’s stock price rocketed 20% on reports that the Amazon Fire investment in hardware was starting to pay dividends on digital content after less than 6 months.

In essence most of the mobile wallet operators are working to connect an online source of fudging (or online access to authorisation) which in turn can be transferred/paid ‘in the real world.’ Most of these initial wallets are offering pre paid options allowing you to draw funds from a prepaid account or card rather than directly from your bank account.

The differentiation between providers will be a combination of physical payment method (NFC, Cloud Based or number based) and the size of account or transaction value.)

The opportunities for the mobile wallet In December 2011 Comscore USA released data from their Q4 survey into mobile purchasing habits. The survey identified that,

“.. Digital content purchases, such as music, eBooks, TV episodes and movies, were the most popular mobile purchases with 47 percent of smartphone purchasers buying these items. 37 percent purchased clothing or accessories directly from retailer, while 35 percent of purchasers bought event tickets. Slightly more than one in three mobile purchasers bought daily deals and gift certificates on their device during the month.”

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The Mobile Wallet

“.. Analysis of where consumers were located when they purchased products/services on their smartphone found that 56 percent did so while at home, leading as the most popular purchase location. 42 percent of consumers made purchases while out of home (i.e. restaurants, parks, etc.) or at work, with 37 percent making purchases while traveling/commuting. Slightly more than one in three purchasers used their smartphone to make a purchase while in a store, highlighting the increasingly important role mobile is playing in consumers’ brick and mortar retail experience, especially as a tool for real-time price and product comparisons.”

l-in-one payment device, identification system, coupon book and financial planner.

The mobile wallet systems could hold a number of advantages over the use of cash and credit cards for payment. A Mobile Wallet is potentially simpler to use as consumers could carry a single all-purpose device rather than multiple forms of paper and plastic. The addition of location-awareness and can tracking users’ shopping and purchasing behavior in real time, mobile wallet systems can offer advanced “personal shopper” services (such as recommendations and special deals based on one’s location and past purchasing history) as well as improved loyalty programs and more targeted promotions from vendors (a modern take on the “buy ten get one free” card, but with the card stored digitally in the cloud).

The Key PlayersGoogle Wallet

The first high profile mobile wallet came from Google. Since launch Google Wallet has had a rocky time with user adoption [like many new Google products] but continues to grow. The rebranding of Google Checkout to Google Wallet will also divert heat from the mobile element of the product.

Due for European launch this summer, Google wallet will look add UK partners to help growth.

Apple iPhone

Apple could really shake up the mobile wallet industry. They have the user accounts in the app store and iTunes, they have dominance in the handset market and continue to grow. BUT they have not included NFC in the past two handset releases. Speculation, naturally focuses on the iPhone 5 but we have no solid information to that fact.

Since 2010 Apple have been filing wallet related patents and hiring NFC experts. However, with no solid information we won’t speculate further.

UK Mobile Operators

The UK mobile operators are all pushing for mobile wallet capabilities. Each key player now has, or is launching [at the time of writing] a mobile wallet offering. Since summer 2011, Vodafone, O2, Deutsche Telecom (T Mobile) & France Telecom (Orange) have been working together on “Project Oscar” They are also considering grouping together under the condense “Project Oscar” .

“.. The MNOs intend to license technology to banks, retailers and other companies enabling those parties’ customers to pay for goods/services via their mobile phones (so-called “mobile wallets”). Payments would be made either by accessing the mobile internet or through the use of Near Field Communications (NFC) enabling the user to swipe their handset across a special reader.”

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The Mobile Wallet

After complaints from PayPal and Google, Project Oscar has been referred to the European Commission for review, stifling plans for a swift launch.

Visa

V.me form Visa will launch in the autumn 2012. The service V.me will enable users to make online purchases via a web browser on a PC, laptop, tablet or mobile device. The service will be available through Visa’s member banks and consumers will be able to put multiple cards into the wallet.

V.me will not enable contactless payments, but is intended to complement the NFC-based payWave applications that Visa Europe is developing with its partners. For Visa, the digital wallet will become the place where online transactions, person-to-person payments and loyalty services all meet.

PayPal

PayPal aim to become the dominant player in mobile wallets, with an app that will allow payments from Paypal and storing of additional card details and frequent flyer programmes. Working with Home Depot in the USA, Paypal has not been pushing NFC, instead working with numbers and pin to connect offline payments with the app.

The Future of Mobile WalletsMobile wallets are still a few years from full consumer take-up. The use of Oyster cards is now common in London and major payment providers are making inroads to this market. In our opinion, the iPhone is the biggest unknown that could catalyse take up and acceptance of the mobile wallet.