Digital wallets, first update from SXSW

Brian Steffens, Director of Communications

Christine Nguyen White, user experience designer for SapientNitro, covered the basics of the challenges and opportunities for digital wallets … some of it we’ve heard before, some we know intuitively, some are worth a reminder, and a few new nuggets to ponder.

I mean, eBay, Microsoft and several others have tried one form or another of the digital wallet, and fell short, for at least a decade.

The early failures were blamed on technology (then) not able to handle micro-payments efficiently. White cautions us that a wallet is a very personal thing … from a barebones money clip to wallets that barely fit in a pocket or purse. A wallet can be a repository for money, credit cards, family pictures, store loyalty cards, coupons, insurance cards, work ID’s, driver’s license, receipts, shopping lists, event tickets and much, much more.

Micropayments, or payments of any sort, by themselves, just won’t suffice as the new digital wallet.

A new digital wallet will need to address all or most of those functions, and allow the user to choose which ones, and how they work … personalization at the most primary level. That’s a lot to ask, and manage, for a system that involves at least three distinct players: financial institutions (banks and credit card companies), carriers (AT&T, Sprint, Verizon, T-Mobile, etc.), and retailers.

The three players use separate, different technologies. The members of each of the three groups use separate and different technologies. And retailers use several different platforms. Knitting them all together in an app or product that works seamlessly, efficiently, quickly, dependably and conveniently is no easy task. (If it was, Microsoft would have done it by now, or Apple, or Google, or ?)

White’s view is that financial institutions lack customer focus, carriers lack common standards, and many retailers have yet to embrace “everywhere shopping.” The challenge sounds daunting, and it is. Even if someone can knit this all together, who then owns or controls it?

White mentioned how Asia is ahead of North America in that citizens in Japan, Hong Kong and elsewhere can use their phones to pay for purchases, etc. Much of the functionality we talk about already exists in Asia. Someone from the audience pointed out that in that case the carrier owns/controls that space. The suggestion was than North American financial institutions and retailers would never willingly subrogate their interests to the carriers.

White suggests that the equation looks something like this: financial institutions and carriers are enablers; retailers are the content, the driver of the conversation. A conversation is needed to produce a sale or transaction, and further conversation is necessary to bring the customer back, to build loyalty.

One key question to ask when tackling this challenge: what’s the acquisition model? Is it handing a customer a three-page credit application form at the checkout counter, to be taken home, filled out and mailed in, waiting days or weeks for approval or rejection? Or is it something akin to bumping phones where the necessary data is immediately transferred, causing the appropriate credit reports to spit out the all-important scores, then applied to the retailer’s accept/reject algorithm, followed by near-immediate acceptance/rejection.

Sure, you can stand at the register at progressive national retailers for 5-10 minutes while a clerk asks you for personal data and types it in, then wait a few minutes for approval. But if you’re not at a major retailer, that’s not happening. And are you comfortable sharing your information with all the clerks you come across?

A digital wallet will emerge. It makes total sense. And it addresses the one key thing that customers value: convenience. The more convenient we make the process, the more likely customers are likely to spend their dollars with us.

Not convinced? You have bank accounts or charge cards from Bank of America or Chase? They both have apps for the iPhone. You have pictures of the family in your wallet? It’s likely you have dozens in your smartphone. Carry coupons in your purse. They’re available on your cellphone via Cellfire and maybe a dozen other companies. Carry an American Airlines or Delta frequent flyer card or print out their boarding passes? They have apps for that. You’re already more than halfway there.

Watch eBay in this space, along with a Microsoft/Bling Nation partnership. They won’t be the only ones testing models this year.

Brian Steffens is the director of communications at the Reynolds Journalism Institute. Read his other blog posts here, and talk back at steffensb@rjionline.org and @BrianSteffens on Twitter.