I’m at the Consumer Electronics Show in Las Vegas this week, which means I’ll hopefully have some nifty things to share soon. In the meantime, this seems like a good opportunity to get into some predictions for the upcoming year.
Mobile wallets are a good place to start. Sure, the promise of ditching physical wallets and using only our smartphones to pay for stuff has been around for years, but in 2013 the stars will finally align and it will become reality. I recently sat down with a lawyer friend who specializes in this stuff and he explained that the infrastructure is just about in place and, more importantly, some players in the field are taking bold initiatives, which is going to force the issue.
Infrastructure-wise, two things have needed to happen. Stores and merchants needed to have terminals equipped with near-field communication technology and consumers needed phones with similar connectivity.
On both ends of the equation, this is finally taking shape. Many merchants—especially in Canada—are already equipped with NFC terminals for reading chip-enabled credit cards, while the technology is quickly becoming standard on smartphones. In fact, I can’t imagine any manufacturer unveiling a new phone at CES this week without NFC in it.
As such, big merchants and retailers such as donut-and-coffee chain Tim Hortons, which recently showed off cashless payments, are geared up and ready.
The thing that has slowed the promise of mobile wallets so far is, as usual, money.
The credit card system is currently a complex web of stakeholders. At the top, there are the networks (Visa, MasterCard, etc.), who enjoin issuers (banks) and brokers to deal with their respective sides of the chain. Banks issue cards to consumers while brokers take care of transactions with merchants. All of these players get their cuts of the various fees associated with credit card usage.
With mobile wallets, a bunch of new players want into this web, from cellphone carriers (Rogers was part of that Tim Hortons test) to phone makers and even software providers. The problem is, the technology won’t take off if consumers are forced to pay extra for it, so which of the existing parties is willing to take a smaller cut of the action in order to let newcomers in?
The correct answer is likely none of them. And so we have an impasse.
Where things get interesting is when one of the new players decides it doesn’t necessarily need a cut—that there is something else of value in the whole transaction besides simple monetary reward.
Enter Google. With data being the company’s main currency, Google is far more interested in the information it can glean on users from their financial transactions than it is in a gaining a few percentages of a penny on each purchase. While the gathering of such sensitive financial data is sure to have privacy implications, it also represents a gold mine for a company that deals primarily in information.
Not surprisingly, the company is pushing ahead quickly with its own mobile payment app, Google Wallet. With Android making up the bulk of the smartphone market, Google could very well run away with the mobile payment market, which is why other would-be players—such as Verizon—are trying to slow it down.
But as the old saying goes, when you can’t beat ‘em, you might as well join ‘em, which is why there will be a flurry of mobile wallet activity in 2013.