Consumers may be ready for mobile wallets, but the marketplace is not. Especially if stuff like this keeps happening. Apparently, some two dozen retailers, including big names like Walmart and Target, are working together to create their own mobile payments system, according to sources at the WSJ. That means in addition to mobile wallets provided by banks, mobile operators (Isis), credit card networks, startups (like Square and Dwolla) and tech companies like Google (Google Wallet) and PayPal, consumers will be asked to wrap their heads around yet another mobile payment method: one from the retailers themselves.
That’s bad news for consumers, as an addition like this can create confusion. But it could end up being great news for more disruptive payment systems like Square.
The report says the retailers behind this new push are developing mobile payment technology on their own because they “surveyed the ecosystem” and didn’t like what they found out there. The retailers were concerned about the security of the current systems, and were disappointed by their ability to deliver offers and coupons to consumers.
Frankly, that sounds like bullshit.
That’s not to say that there haven’t been security issues with some early mobile wallet systems. Recently, for example, an Android hack was found to expose the Google Wallet PIN on demand. However, the hack only worked on rooted phones – something which Google says it doesn’t support when it comes to Google Wallet. Square, too, came under fire from competitor VeriFone last year, when it was discovered that the company’s hardware dongles weren’t encrypting data. (For what it’s worth, TechCrunch called “FUD” on that one).
But with established financial services companies like MasterCard, Visa, American Express, and PayPal moving into the mobile payments/mobile wallet space, a claim that existing systems are insecure seems a bit off the mark.
So do the retailers think they’re really more favorably positioned to build something more technically advanced? The WSJ quotes Steve Mott, who runs a consulting firm that’s working on the new payment system, as saying the retailers “have decided they need to and can build a better system.”
Better for who? The consumers? No. Better for the retailers.
It’s not about building a better system at all, actually. It’s about owning the system.
The fight here is not about becoming the best mobile wallet provider, it’s about owning the access to the customers’ data that being a mobile wallet provider allows.
It’s also about owning the additional revenue streams that mobile wallets will provide, explains Daniel Trigub, who works in Business Development at Blue Bite, a location-based mobile marketing firm, and expert in mobile marketing and payment technology.
“[The retailers] want that same piece of the payments pie,” he says of the move. “They want to own the consumer and all that data that comes with knowing who the transaction is coming from. There is ultimately a fight for user data and information…whoever owns that (POS guys, handset manufacturers, Googles of the world, credit card companies, etc.) will be very powerful,” he says.
And once the retailers own the data, they can use it to provide value-added services, like targeted coupons, to their users.
Like a digital version of the store’s own plastic credit cards, it makes sense that retailers want their own mobile-friendly counterpart. After all, there’s a reason why every single checkout cashier asks you if you’d like to save 10 percent today by opening up a store credit card account.
But if there are too many players in the mobile wallet space, it’s bad for consumers. It creates confusion. Do you use the retailers’ wallet? Visa’s? MasterCard’s Google’s? PayPal’s? The carriers‘? With too many choices, the answer could end up being “none of the above.”
This move does leave room for more disruptive, non-NFC based wallet players – companies like Square, for example – to win. A cloud-based, and completely unique technology that provides not just dongles for swiping cards, but also hands-free mobile payments that allow you to just say your name at checkout, no need to pull out your phone? Maybe replacing the swipe-to-pay experience with a tap-to-pay experience isn’t the answer, after all. Maybe it’s about blowing up the current system entirely, and starting over.
Yeah. Good luck, retailers.