Your Digital Wallet Future

Digital wallet wars are raging.  Way too many companies (and jointly form consortiums) are building and releasing digital wallets.  PayPal, Google, ISIS, Square, Kuapay, Lemon, Visa, MasterCard, American Express, Wal-Mart, Citi, the list goes on.  They are all betting big that digital wallets are in our future.  And, they are right.  Most people will be using digital wallets in the near future.

What exactly is a digital wallet and why do you want one?  A digital wallet is a place where you will put all your financial instruments (credit cards, bank accounts, pre-paid cards, etc.) and then you will use it to pay when and where you need to pay.  You will also use it to review past transactions, hold receipts, coupons, gift cards, store a few family photos and yes, hold your driver’s license just in case you get pulled over by the man.

In the trenches of the wallet wars there is much debate about which type of wallet, a “digital” wallets or “mobile” wallets will win the day.  What is the difference?  A digital wallet has all your payment information stored remotely.  Think PayPal on steroids.  A mobile wallet stores your payment information, such as credit cards, on your mobile smartphone.  This information is transferred from your phone to the point of sales (POS) systems (store register) via a near field communication (NFC) device in your phone.

So are wallets going to be digital or mobile?  The answer is both.  I believe NFC or some other communication method will connect your smartphone to POS systems when you are making an in-store purchase, but everything will be connected remotely via the cloud (internet).  You will not necessarily need your smartphone to make many types of payments.  You will make them via the cloud.  Why is this true?  It’s true because the services consumers will require can only be provided by the cloud.  Besides, all of your computing and your personal digital environment will reside in the cloud. Of course your wallet will be in the cloud, just like everything else digital.   Look for a future blog post entitled “Your Cloudy Future” where I will describe why your computational environment will reside in the cloud.

So who will win the war and be your digital wallet provider?  A large number of companies are vying for the honor.  I believe PayPal has the advantage today but their slow progress and lack of advertising is confounding.  At this point it’s impossible to tell who will win this digital wallet war.  There are just too many players and too many moving parts.  While I can’t tell you who will win, I can tell you how they will win.  The winner will focus on consumer innovation and customer service.

Many wallet providers today are wrongly focused on wooing merchants to accept their wallets.  They are building marketing features like business intelligence and geo-located advertising.  This is not a winning strategy.  To win they will have to focus on customer innovation and service.

Some of the innovations consumers will demand are stored digital receipts for all purchases, categorized and downloadable purchase details, wallet portals with tons of features (search, summary, etc.),  scheduled payments,  delayed payments, sub-accounts for children, joined wallets for significant others, pay after purchase and many, many others.  I will focus a future article on the features of the future digital wallets.  In that article I will also speak to both the features consumers will be demanding as well as features merchants will need.

It is conceivable the future dominate provider of digital wallets may have yet joined the war.  I believe the “unbanked” providers such as Bluebird or GreenDot could be building the features consumers demand into their pre-paid card offering and then provide the wallet as a logical extension.  This could very well be the ultimate path to success.

Whoever wins the war consumers will benefit with more features, flexibility and convenience.  And your digital future will almost certainly include your wallet in the cloud.

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One Response to Your Digital Wallet Future

  1. Ross Foard says:

    James, I believe you have hit on one of the keys of our digital future, although I think there will be more than dollars in our wallet. Ultimately, the digital world presents MANY things that have been maintained and secured physically into information.

    For instance in the physical world one might lock up a car to keep it secure from theft or damage and store the title to the car in a fire-proof safe to protect the legal right to the vehicle. The corollary to these actions might also live in the digital world, with the car security being enhanced by digital security to keep the car from being stolen and digital imagery that would be able to detect, record, and notify when damage were to be inflicted on the vehicle. Of course a digital version of the title would also be stored, likely with both the owner and the state.

    My point is that one will need to have a online, personal digital store to maintain all of the various digital assets. David Siegel (author of the Power of Pull) has articulate some of this vision in what he calls Personal Data Locker. To be sure, the expanse of the amount of information each of us will need to access and secure, including money, will be immense. I am not sure if those you have named will be the winner, it might just be companies that have a grander vision, as yet fulfilled, that will end up on top.

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