Mar 28, 2013 Dave King
There's plenty of buzz surrounding digital wallets lately, and with good reason. Because these tools are highly convenient, many shoppers have adopted services like PayPal to power online transactions. Providers of these technologies have been attempting to make the move offline more recently, edging into the mobile sphere. However, while many users are aware of mobile wallets, it seems that developers and merchants have yet to unlock the secret to widespread adoption in some cases.
What will it take?
According to Mobile Commerce Daily, a recent study from PricewaterhouseCoopers (PwC) found some major discrepancies between awareness of mobile wallets and their use. According to the data, while 100 percent of individuals in a focus group of 1,000 18 to 74-year-olds knew about PayPal's mobile wallet app, 83 percent have actually used it. This is good news for the company, but similar results didn't pan out for others. Nearly 60 percent of those polled were aware of Google Wallet, while only 9 percent were adopters. Of the 46 percent who claimed to know about MasterCard's Pay Pass, only 7 percent used it.
Considering that Google and MasterCard are trusted names in their respective industries, why are consumers hesitant? It may come down to emerging shortcomings.
"It takes seven seconds to swipe a credit card," Andy O'Dell, a co-founder of Philadelphia-based digital wallet developer Clutch, told Main Street. "Consumers are happy. Merchants are happy. To succeed a wallet has to go beyond the transaction."
This may be one sticking point as many digital wallet options offer similar functionality to that of a credit, debit and ACH cards. For more consumers to jump on the bandwagon, it may require developers and merchants to team up to engineer capabilities that set these payment technologies apart from competing platforms. As Hank Israel of banking consultancy Novantas added, consumers don't need transactional wallets, they have leather ones for that.
The strong performance of mobile payments as a whole suggests that further tweaking could lead to success on the mobile wallet front. Computerworld reported that Nick Holland of research firm Yankee Group predicts that mobile payments will reach $1 trillion worldwide by 2015, which indicates that customers are likely to be receptive to using the solutions if the right benefits are available.
There are many parties involved with the process of producing great solutions - it certainly isn't limited to the developers. Merchants who see digital wallet use as potentially beneficial to their businesses should embrace their role in the cycle and reach out to app specialists to work on better options for their consumers, who already may be demanding expanded payment methods.
Innovation isn't all
However, retailers may not be able to do this alone. Mobile Commerce Daily noted that the PwC study found that 50 percent of respondents trust their primary financial institution most when it comes to mobile wallets and another 22 percent would trust their credit card company to offer the technology. On the other hand, only 1 percent would be confident in mobile wallets backed by retailers alone. So, while it is important for merchants to get involved in the payments industry and support the growth of mobile transaction practices, they may also need to go about it in ways in which patrons are willing to place their faith.
Like with many other elements of business, customer confidence is critical when it comes to mobile wallets. PwC noted that 85 percent of consumers were wary of mobile payment solutions due to what they perceive as a lack of security, citing anxieties that a stolen phone could result in the compromise of personal information. These breaches could lead to identity fraud and, in turn, damage to consumer credit reports. Quelling fears will likely be important to the future of the mobile wallet.