NETTING IT OUT

In many parts of the world, consumers are already able to pay for things securely using their mobile phones. In the U.S., no one brand has yet become the de facto standard for mobile phone payment systems. 2012/2013 is highly likely to be the timeframe in which the battle for the American consumer’s mobile e-wallet is waged and won.

It’s not often that we get to witness the birth and evolution of a customer-centric ecosystem—a vibrant ecosystem that’s actually aligned around customers’ best interests and goals.

Usually we realize that a customer-centric ecosystem has developed and evolved after the fact.

Many different companies have been trying to “own” consumers’ e-wallets since before the Internet became a commercial reality and certainly before mobile phones became ubiquitous. All of the previous efforts have failed (in the U.S.) because they were designed by and for retailers, financial services firms, telcos, and advertisers. None of the attempts to-date has really started with customers’ needs and desires.

In September, 2012, Apple is expected to unveil its iPhone 5, which is rumored to contain e-wallet functionality—the ability to pay for things using your mobile phone. Will Apple’s “i-Wallet” win the hearts and minds of consumers without much of a fight? Will it quickly become the dominant mobile payment system in the U.S. (and beyond)? Or, will there be a lively skirmish?

Will the winning e-wallet offering(s) be platform-dependent (e.g., iOS, vs. Android vs. Microsoft)? Or will they be telco-dependent (Verizon vs. AT&T vs. Sprint)? Or will they work cross-platform and cross-carriers? Will credit card companies be the central players, or will they be disintermediated?

The Next Generation of E-Wallets Will Let Us Pay with Our Mobile Phones

(Click on image to enlarge.)

1. In the U.S., we’re behind in adopting mobile phone payment systems. However, the e-wallet services that are emerging should let us: a) manage multiple credit/debit/stored value cards and loyalty/rewards cards and awards, b) pay at the point of sale or pay each other securely.

WHY IS A MOBILE PHONE E-WALLET IMPORTANT? TO WHOM?

Intimate Knowledge of Consumers’ Purchasing Behavior

I vividly remember sitting in Bill Gates’ parents’ living room with a group of other technology analysts Microsoft wanted to woo. It was in the mid-1980s. I was listening to Bill Gates and Steve Ballmer talk about their consumer strategy for Microsoft and how important it was to the future of their company. Bill said that Microsoft would never give up on extending Microsoft’s purview (I inferred “dominance”) outside of the enterprise and into the mass consumer realm. (This conversation took place WAY before the Xbox product launch). When Bill began talking about customer profiles and e-wallets, he became extremely passionate. He began his characteristic rocking motion. He said essentially that whoever gained consumers’ trust to be entitled to manage their profiles, and their e-wallets would reign supreme. That was clearly Bill’s ultimate holy grail. He was practically salivating! That was the moment when I realized that there would be a big battle for the “ownership” of customers’ profiles and their digital wallets. I also knew then and there that Microsoft would never gain consumers’ trust enough to win that privilege. Why? Because their motives were not customer-centric enough. I inferred that Steve and Bill were thinking first about the value of all the data they could amass about consumers’ lives, their shopping and spending habits if they “owned” their e-wallets. Customers’ safety, privacy, and convenience were definitely present in their thinking; but those were the barriers to adoption; not the raison d’etre for an e-wallet.

I still don’t believe that Microsoft is likely to become the trusted e-wallet player today. But I could be proven wrong. The playing field has shifted dramatically. The company that many people trust with their personal profiles and with all the intimate details about their lives and passions and habits is Facebook. The company they trust to have their best interests in mind when it comes to convenience and the quality of experience is Apple. The brand that already provides the most agnostic payment services is PayPal. The company many customers buy the most from is probably Amazon. The mobile e-payment system that has garnered the most buzz in the U.S. (and the greatest number of imitators) is Square.

Pay for Everything Using Your Mobile Phone

When I use the term “e-wallet,” I’m talking about enabling consumers to pay for things using their mobile phones and to pay each other via mobile phone. No cash, no plastic credit cards, no checks needed. You carry your money, credit cards, debit cards, rewards points, and loyalty cards around with you digitally. At the point of sale, you choose which payment type you want to use: take cash from your checking account, use money you’ve pre-loaded on a stored value “card,” charge it to your phone bill, charge it on a credit card account and pay later, and so on. Like a physical wallet, you can put things into it and take things out of it. And you can carry it around with you wherever you go. There’s now a hefty consensus that our mobile phones will become our e-wallets.

I’m using the term e-wallet generically. There is at least one company, Ilium, that offers a product called eWallet. Ilium’s eWallet is an application that runs on multiple platforms—iPhone, Android, Windows Mobile, Blackberry—and can be synched across them. But Ilium’s eWallet does NOT currently include a payment mechanism. It’s an app that lets you store all your passwords, your credit card numbers, and your loyalty card numbers. But it’s not an app that lets you pay for things.

In this discussion, let’s focus on e-wallets that will let you pay for things from your mobile phone and transfer funds from person-to-person using your mobile phone. We’re not going to dwell on the technologies that determine how the payment will take place in this article ...