I received a note from a payments industry expert the other day, discussing hot topics for 2013. Ben Saren, vice president of marketing at payment processor Litle & Co., caught my attention on the subject of mobile wallets and mobile payments. He did not hold back. Here is what he had to say.
“People are never going to switch to mobile wallets as long as it’s just as easy to pull out a credit card as it is to pull out your phone. There’s no incentive to change the channel,” Saren says. “Recent industry buzz would suggest that mobile payments and mobile wallet technologies are suddenly arriving on the scene. That is just not the case. This stuff has been around for a while. The problem is that no one has made the first move. Everyone is waiting on everyone else. Merchants are waiting for consumer adoption. Consumers are waiting for merchants to make the stuff available. Manufacturers are waiting for merchants to request the technology. And around we go.”
Saren points to the high level of performance of the credit card networks as a primary hurdle for mobile payments.
“Consumers are not asking for this. We take for granted how easily and quickly we can pay for something with a piece of plastic,” he says. “Love or hate the card networks, they have paved all of the highways and largely made them traffic-free. When you go to a retail location and buy something with a piece of plastic, the authorization happens in less than a second. That is absolutely outstanding. And in most cases, merchants see the settlement a mere hour later. So somebody needs to tell me how the system is broken today and why we need something else. I just don’t see it. This one is not clicking for me, and I’m in the business.”
Credit cards really are the culprit behind the lack of interest in mobile wallets and mobile payments. (Mind you, mobile payments in the form of consumers paying with credit and debit cards on m-commerce sites and mobile apps are doing just fine.) Mobile wallets today are not a better mousetrap, though to be fair, they are connected to the Internet in ways cards are not and can thus afford access to loyalty accounts and coupons.
When Near Field Communication, or NFC, wireless technology becomes prevalent on smartphones and cash registers enabling quick tap-and-go transactions, then maybe a better case can be made for mobile wallets. But even then, I doubt that will be any quicker than swiping a card. You’ll still have to get your phone out of your pocket and turn it on, and perhaps launch an app.
Somewhere down the line, way down the line, I think making payments via smartphones will catch on, simply because of the central role smartphones are coming to have in people’s lives. But that day will not come anytime soon due to a variety of hurdles, credit cards being perhaps the biggest. So beware the hype.