The Mobile Wallet Is More Promise Than Fact. And Maybe That's for the Best

The mobile wallet is a solution in search of a need.  The technology is pretty cool and the concept has its uses but when people really stop to think about it, the list of potential problems often outweighs the putative benefits.

Approximately 8,000 of them were left just at the nation's largest airports by harried travelers last year. No one is certain how many were left, loss or stolen in total. The question that arises is whether cramming so much value into a device so easily forgotten or lost is really a good idea to begin with. While it is apparent that consumers will do almost anything for a little more convenience, people 'whose lives are on their mobile' and then lose it must wonder what they were thinking. Adding financial risk to the hassle of losing phone numbers, addresses, important information - and access to one's banks accounts and/or credit card records adds significant risk to the emotional trauma.

Another issue is that virtually every global corporation with a pulse wants to own this business. They sense, perhaps correctly, that once locked into their system, consumers will not have the time or patience to switch, guaranteeing the electronic wallet provider a guaranteed source of revenue and profit for as long as the individual remembers not to lose it or stays solvent, whichever ends first.

Finally, there is the cost and potential for abuse. Once a company obtains that sort of control over important aspects of your life, they are unlikely to willingly let go. Excessive costs may be the result. For those who claim that the free market will regulate such matters, we suggest that they read the fine print attached to their latest credit card and mobile invoices.

This is not to say that the mobile wallet will not some day be a totally fail-safe, productive and cost effective addition to our lives. Send us an alert when that appears to be imminent. JL

Jenna Wortham reports in the New York Times:

A truly mobile wallet — one that would let you easily pay for restaurant meals, subway rides or beers at a bar with a quick wave of your cellphone — has long been described as imminent. But it remains elusive.
DURING the sweltering heat wave earlier this month, it seemed too hot to wear much, carry much or do much of anything at all. Every time I left the house, I tried to figure out where to stuff my bulky wallet. I always had room for my iPhone, even if it meant carrying it in my hand. But the wallet was one thing too many.

Some innovations have begun to bridge the gap, but most have been a disappointment or have not yet worked well enough for mainstream adoption.

In 2012, Square, which makes a credit card reader that can be plugged into an iPhone or iPad, worked on a credit-cardless system that let people pay for goods without ever pulling out their wallets or phones. When Square users walk into a store in its network, a Square-enabled register shows pictures of their faces, which are used as authentication for payment. But the app can be awkward to use.

Last summer, Apple introduced Passbook, a digital system for storing boarding passes, movie tickets, loyalty cards and gift cards on the iPhone. But it doesn’t do much beyond that, at least not yet. Google worked with major credit card companies and banks to create its Wallet app, which lets people pay for items at some stores by waving their phones but is available only for Android devices. Visa offers two digital wallets, payWave and V.me, but I’ve never seen anyone use them or signed up myself.  And the major mobile carriers in the United States banded together to form Isis, a mobile payments network, which has yet to roll out nationally.

Starbucks has arguably had the most success with the pay-by-phone idea in the United States. The company has persuaded millions of people to download an application that can be used to pay for their lattes. It works like a digital gift card — but only at Starbucks, obviously, so it’s limiting. (The company also invested $25 million in Square and is incorporating Square’s technology in its stores.)

When I complain to friends and colleagues about the inconvenience of fumbling around for my wallet when I’m shopping — and say I wish I could just use my phone instead — they often give me bewildered looks.

Apparently, that’s because paying with a phone today is rarely easier than paying with a credit card. Paying via phone often involves a series of awkward swipes and taps to start the transaction, and the process can be disrupted by spotty wireless connections, low batteries or other electronic hiccups.

“No one wants to be the guy holding up the grocery line at 6 p.m.,” said Joshua Reich, one of the founders of Simple, a banking start-up company that gives people free checking accounts and offers them data-rich analyses of their spending and saving habits. “You don’t want to look like that dork, the guy riding a Segway.”

Jan Dawson, an analyst at Ovum who covers the mobile industry, agreed.

“Mobile payments are trying to solve a problem that doesn’t exist for most people,” he said. “You don’t hear people moaning about how hard it is to pay with their credit cards or debit cards.”

The biggest problem for paying by cellphone is that so many kinds of businesses are competing to offer services. Companies as varied as phone carriers, banks, credit card companies and technology start-ups have had plans to get into the mobile payment business, but many are locking horns over who can profit the most, Mr. Dawson said.

“Everyone wants to be the primary payments provider,” he said.

Wireless carriers, desperate to bolster their revenue, are reluctant to hand over potentially lucrative streams to companies like Apple and Google, which already make billions from devices and the software that runs on them. Banks and credit card companies are also rolling out mobile checking services and applications, both to impress their younger users and to keep a hand in a game where billions of dollars are at stake annually, largely from the endless parade of small fees racked up with each purchase. And industry heavyweights like PayPal and Groupon are also scrambling to get their own offerings into the market.

It’s tough to persuade major retailers to spend money to work with Google Wallet or Apple’s Passbook, for example, when so many other options are still on the table. And what is popular today might be outdated in a few months.

Part of the reason that Starbucks’ own app works so well is that the company invested significantly to build out the infrastructure in its stores — sleek phone-scanning kiosks and mobile apps that work reliably and efficiently.

“There is a lot of reluctance in installing a lot of technology, especially if they aren’t sure it’ll take off,” said Rob von Behren, one of the lead engineers at Braintree, a payment services company that powers and processes transactions for popular services including Uber, the mobile taxi service, and Airbnb, the travel rental site. This reluctance leads to an “infinite waiting period and slows the growth of an industry,” he said.

Mr. von Behren was one of the creators of Google Wallet before he left to work at Square and later at Braintree. He said that while his Google team’s original goal was to simplify online purchases, it quickly realized that nudging mobile e-commerce forward seemed more urgent.

A large portion of shopping begins on cellphones, but getting to the final checkout remains a challenge because entering payment information on a small screen is clumsy. And most traditional big-box retailers that could build infrastructure to support mobile payments came of age “in an era where there wasn’t network connectivity,” making it harder to update their cashier software, payment methods or loyalty programs, Mr. von Behren said.

He ultimately decided that working with legacy retailers to create a system for in-store shopping with cellphones was a “tremendous juggling act.” He added, “It kind of worked and it kind of didn’t.”

BUT a new generation of innovation is coming, he said, so he thinks that wide use of pay-by-cellphone systems will arrive eventually. Braintree recently acquired Venmo, a company that lets people send money to one another via simple text messages. In addition, some promising newcomers say they are working on more complete alternatives.

Clinkle, a start-up, has persuaded a notable roster of venture capitalists to funnel $25 million into its mysterious and forthcoming mobile payment services. And a new company, Lemon, is working on its own digital wallet.

I guess I’ll have to wait and see. For now, I’ve come up with my own workaround for hot weather: securing my credit card and driver’s license to my iPhone with a rubber band. But it’s not what I had in mind when I pictured paying with my phone.