It’s being reported by the Gigaom that Google Wallet may be turning to a credit card like plastic card because its NFC strategy is moving too slow. PayPal already offers a plastic card connected to their wallet. These cards make it unnecessary for your smartphone to communicate and authenticate with the retail point of sale (R-POS) terminals.
Does this mean you won’t be using your smartphone at the R-POS? Is this the end of NFC and contactless payments, or does this mean that wallet functionality will not be on your smartphone? No. In fact all wallet providers, even those that issue cards, will use your smartphone for many of the features (digital receipts, payment notifications, setup, etc.). So why are Google, PayPal and others going old school with plastic?
They are going to plastic because changing the millions of payment terminals in the US is going to take awhile. NFC World reports that 87% of terminals will have NFC in 2017. 2017? I don’t think consumers want to wait 15 years for digital wallets to be useful. Besides, it is still not clear which wallet will prevail with consumers. Merchants will not be ready to invest until the picture is clearer.
Google and PayPal understand it’s not absolutely necessary for phones to communicate to the R-POS for their digital wallet to add value for the consumer. In fact they are betting their “in the cloud” wallets will win even without direct phone to R-POS communication. PayPal specifically states they are a “digital wallet” provider and not a “mobile wallet”. In the not too distant future, digital wallets will all communicate directly with retail POS terminals, but that is not a critical feature for the success today.
Is it possible that smartphones will never become your wallet? No. Direct phone to R-POS communications adds value for both consumers and merchants. Consumers like the convenience of not having to pull out their wallets plus notifications and control of digital wallets will happen via smartphone technology.
In the interim many people will use their phone as their wallet and still carry a physical wallet. They will use their smartphones because they are convenient. They will carry a physical wallet as backup and for items that cannot easily be digitized. Merchants will eventually be pushing for phones to communicate directly to the R-POS because it reduces checkout times and provides line-busting possibilities.
A good read is “My Walletless Month”, where Christina Bonnington of Wired recently went a month without plastic. Christina reported that “for a lot of activities, living walletlessly is not only doable but more convenient”. But it should be noted she lives in San Francisco. I’m sure it would have been a much different story had she lived in Des Moines. Also note, for many things she was using the internet and not purchasing directly via her smartphone.
The bottom line is carrying plastic will continue for the foreseeable future but not forever. Digital wallets will almost certainly replace physical wallets eventually. I applaud Google’s strategy to issue plastic for the time being (even if it does seem really un-cool).