Mobile Wallet: What’s Your Value Prop?


Today’s open-loop mobile wallet offerings generally concentrate on three things: payments, loyalty and promotions.  Most, however, are primarily focused on enabling the smartphone to connect with a merchant’s payment terminal (wirelessly in the case of NFC or optically in the case of 2D bar codes) for the purpose of transmitting the information that typically resides on the mag-stripe of a consumer’s traditional credit/loyalty card.

Some, however, are taking a fundamentally different approach to the mobile wallet by concentrating on digital asset management. Apple, for example, has positioned their Passbook offering as a platform for receiving, organizing and dispensing digital facsimiles of tickets, passes, coupons, etc.  How does Passbook work?

Take coupons for example. When a Passbook user visits the app or website of a participating merchant or brand and sees a coupon/promotion that they like, they simply tap/click on the coupon’s Passbook icon to save it to their Passbook account.  Once saved, the coupons are available for use by the consumer during checkout.

Now let’s consider a ticketing example.  Flight or concert tickets, for example, can be purchased in the customary manner using an airline’s or concert promoter’s web site or mobile app.  Upon completing the purchase, the user is presented with the option to save their digital boarding pass or event ticket to their Passbook account. Once saved, the assets are available for presentation at the relevant venues.

A quick search of the Internet indicates that merchants, brands, consumers and developers are rapidly endorsing Passbook. Given the simplicity of the Passbook solution and its apparent growing acceptance by all participant categories, one is forced to conclude that a community-centric approach to digital asset creation and management is creating a successful mobile wallet offering for Apple.

It appears that Apple has done with the mobile wallet what they did with the smartphone: They created an ecosystem that enables a network of third parties to use their collective intelligence to increase the value of Apple’s wallet.

In terms of value to the consumer, it is clear that there is great value in a mobile wallet ecosystem that increasingly enables the mobile consumer to easily find, select, organize and use digital assets. Consumers are benefiting from this by saving time and, in many cases, saving significant money.  The same, unfortunately, cannot be said about other open-loop wallet solutions – especially those with a payment-centric focus.

Truth be told, today’s payment-centric wallet solutions neither offer an ecosystem nor offer digital asset management.  Most, in fact, provide little to no discernable value to the consumer at all. Some actually complicate the consumer’s life by requiring them to execute nearly twice the number of steps to consummate a purchase as they would with a traditional credit card. Since the consumer receives no benefit for expending the extra effort, they either use the offering only once or eschew it all together.

Most payment-centric wallet providers actually recognize this and are forced to promote less tangible benefits such as the promise of greater security and ease of replacement in the event of a wallet’s loss.  Unfortunately, this is not a value proposition that would entice most consumers to change their habits and behaviors.  In my experience, consumers generally don’t like change and they especially don’t embrace change for the sake of addressing a potentially negative experience that they feel, rationally or not, is in their power to avoid.

Considering the above, the key lessons for the open-loop mobile wallet provider are these:  First, your solution must  greatly simplify the consumer’s life or provide them with a tangible financial benefit.  Second, it must support an ecosystem wherein a community of participants can easily contribute content that will enhance the wallet’s value.  Third, your solution must easily support digital asset creation and management.  Finally, it should emphasize payments only after creating a tangible value proposition for all ecosystem participants. Do these things and your open-loop wallet will be successful.


7 Responses to “Mobile Wallet: What’s Your Value Prop?”

  1. Good article with good points. However, I have not been in one store yet that accepts mobile payments or coupons. I have never seen anyone scan a QR code in a store either. In many stores especially the large ones my data don’t even work. Also using all those apps are great when your phone is plugged in but batteries don’t keep a charge long enough for a mobile payment system to be reliable enough to trust.

    • Thanks for taking the time to comment. You make some good points that highlight one of the biggest problems mobile payment providers have in deploying their solutions: Retailers aren’t ready. Some stores, however, are moving faster than others and are installing optical scanners capable of scanning QR codes. Starbucks and Target are two that come to mind immediately. Battery life is always an issue but getting less so with each successive generation of phone. It all bears watching.

  2. Imagine this:

    I go to a restaurant, order and eat.

    The server presents to me my bill. On it is either a QR code, printed on the check, containing all the info necessary to charge my credit card, or the server presents the restaurant / merchant’s point of sale system in a tablet or smartphone of their own – a device with NFC transfer capability.

    I either scan the QR code with my smartphone’s payment app or tap my phone to the merchant’s device to receive the RPTID (riptide) the “Request for Payment Transaction ID” through NFC. The 2D bar code or NFC communication packet contains the link to the transaction request that the restaurant sent up to their merchant account.

    And that is the trick.

    The merchant first sends up a request for payment into the “Credit Cloud”. Using the transaction ID I receive from the merchant I can then connect and approve the funds transfer – my bank to theirs.

    With my Credit Cloud payment app open, and being connected to the net, I can then send up the merchant’s RPTID to my bank or Visa, Mastercard, PayPal, GooglePayments, what have you. This payment app on my phone facilitates the linkage between my payment authorization and the restaurant’s request – through the existing credit card banking system.

    I tap in a tip for the server, hit “Validate Payment” on the form that’s presented on my phone. The request is then transmitted up into the Cloud. Funds are transferred from my bank (credit or debit) to the merchant’s bank. The merchant’s payment system receives a “Transaction Complete” message on the RPTID they gave me. Transaction done.

    At no point have I shared a personal thing with the restaurant. I’m completely anonymous. Just like cash. All they know is that the transaction request was approved by their bank and I’m good to go.

    The core concept is that I do NOT send my information to the merchant. They send ME the transaction information which I use to complete the sale – in the Credit Cloud.

    Such a system would completely protect consumers from ID theft. No information is transferred to the merchant. The consumer and the merchant will meet in the Credit Cloud where the transaction is consummated. The Credit Cloud represents an exchange where two parties are connected to transact financial transfers.

    ID-less payment through the Credit Cloud.

    • Interesting concept. It reminds me of a PayPal-like solution. Request a payment, send a payment.

      Your suggestion, however, would suffer from the same issues as those of the other payment solutions. It requires a change to existing processes. It requires a change to consumer behavior. It requires a change to infrastructure (POS systems). It requires the cooperation of too many value chain participants. No one likes change unless it provides a slam-dunk value proposition to everyone in the value chain. It’s a hassle and costly to change.

      Look how long it has taken PayPal to grow to what it is today. This despite the fact that they’ve been able to to operate within a value chain that is relatively closed. It introduced a paradigm change and it took people a while to embrace it.

      On the other hand, look at Square. They’ve grown quickly because they’ve offered a great value prop to merchants, allowed consumers to pay with credit cards at places that had previously been restricted to cash and required no change of behaviors to the consumer.

      Your idea is very intriguing but tough to implement because of the change required.

      • A systemic change, yes, but not as painful to merchants or users as one might think. Mostly it would be a change in the banking payment transaction infrastructure. Users could still hand over credit/debit cards and merchants could still issue charges against those cards, but the back end system would need to first issue a RPTID for the merchant, and then, using the accompanying CC#, immediately validate the request. The users and merchants would be unaware of this change.

        But it’s the ability to transact business anonymously that it the allure here. No more personally identifying information need ever be exchanged again. That is the value proposition. That is where consumers might be willing to drive the need for the Credit Cloud.

        And as for Square, the Credit Cloud would eliminate them instantly. With my Cloud payment app, I, a consumer, can issue a call for a RPTID to my bank. I can allow you, a client, or a Craigslist buyer, or an apartment tenant, or anyone who wants or needs to delivery payment to me – to capture the RPTID I supply (QR code on screen or NFC bumped) and then issue a payment authorization to my account. I don’t know who you are – and don’t care, as long as you authorize the payment I requested.

        Online payments can also be done anonymously. Amazon does not need my credit card number. They would only need to present a quick response code (QR) on screen, or a RPTID number I can then use to send through my Cloud app, on my desktop or typed into my smartphone’s Cloud app. Amazon get’s their payment without ever having to interrogate me for my CC#. Sure they’ll need my shipping address, but other online merchants that deal with digital goods would never have to know who I am. They would only know that a request for payment – was paid.

        It really does represent a paradigm shift, but a shift back to the anonymity and privacy of cash. A shift that I think is due.

      • For things like this, I use my wife as a gauge. If she’d embrace it, then here friends would do the same. If they’d use it then it would have mass appeal and be worthy of the effort to make the change. I asked my wife for her opinion and she said that she wouldn’t change her behaviors in order to get anonymity.

        This is where the existing mobile payment guys are losing it. They don’t know how to appeal to the average consumer. Keep you eyes open for an upcoming post on designing for the consumer.

        Thanks again for the feedback.


  1. Mobile Wallet: What’s Your Value Prop? » Mobile Payments News - January 22, 2013

    […] Original Article: […]

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