May 27, 2012

From NFC to cloud wallets: what pains are we solving?

Now that it's clear that NFC is not making much progress, all of a sudden the industry is moving in another direction. Cloud based wallets.

These have been around a long time of course, with PayPal, Amazon, and iTunes. But up until very recently, the payments industry has been enamored with NFC and Google Wallet as the new way to pay.

Things have shifted. Visa recently launched and MasterCard launched PayPass Wallet.

They all accept multiple cards from various banks and payment networks, and they all want to include other wallet type objects like private label retailer cards, coupons, and even rewards currencies like airline miles. A bit too complex right now.

It's not clear yet what pain they solve.

Watching demos, you can see a customer pull out their phone, tap to go into the wallet, swipe through several cards to choose one with contactless functionality, then hold the phone up to a reader at the point of sale. Instead of fumbling through his wallet, the customer fumbles around with his phone.

I get the need for connections with multiple card issuers and the need for branding by each of these issuers. But these are issuer and payment network pains. They are not consumer pains.

The modern payment brands like Visa and MasterCard came about in the 1960's to solve a real pain for customers, who needed to be able to use their cards across a large number of retailers, not just retailers that had special agreements with the customer's bank.

How will cloud based wallets solve real pains for customers?


Sarah Lee said...

I think the cloud wallets is the future, but the security element will be back.

One option could be the finger prince recognition, however its still not a perfect solution.

Aaron McPherson said...

After using a few times, one of the things I like about it is it has its own alerting system, that lets me know when my card is used in a CNP situation. Perhaps that's available through the issuer site, but it's nice to have it in the walllet.

I realize that doesn't sound very compelling, but it's something I didn't think of when signing up. I'm sure as these services mature, clever people will find much more interesting things to do with them. The open nature of the platform lends itself to this sort of emergent functionality, unlike NFC.

For what it's worth, the pro-NFC forces seem to be in the ascendance, now that the Isis trials have launched and MasterCard and Visa have intensified their pressure on the merchants to upgrade their terminals for EMV (by default, these terminals will be NFC-compliant). I'm still skeptical, but the EMV angle may be something I hadn't sufficiently taken into account. I'll be watching it closely.

denis vacher said...

There is a really new wallet : the square one. When you use "pay with square" you don't need to swipe or use your mobile phone, just be present.