In an interesting, and I believe important development last month, both Visa and MasterCard announced digital wallet initiatives. Both Visa’s V.Me and MasterCard’s PayPass Wallet allow consumers to store electronic details of several cards (not just Visa or MasterCard) as well as billing and delivery addresses, in order to make “one-click” online purchases via PC or mobile phone, or at the physical POS via NFC. Clearly, this is far more convenient than the usual practice of remembering and typing in a 16 digit account number and address details. In some ways the surprising thing is why it has taken the card schemes so long, when arch-rival PayPal has been offering effectively the same service since its launch, and has gained huge market share as a result.
Like all metaphors, the term “digital wallet” means different things in different circumstances and this can be a source of confusion when trying to understand the significance and timing of the card schemes’ initiatives.
About ten years ago a digital wallet was seen mainly as the vehicle for deploying a digital certificate for secure e-commerce. The metaphor then was with the “secure place for storing valuable things” characteristic of a physical wallet. Times have changed, and the positioning of the new Visa and MasterCard wallets is far more about convenience, with the security angle in a sense taken for granted. Indeed, it is not immediately obvious how these announcements align with the card schemes’ parallel initiatives towards highly secure electronic transactions in terms of EMV chip and 3D Secure. Instead, V.Me and PayPass Wallet are probably better understood as reactions to the very many other announcements of digital wallet propositions by the likes of Isis, Google, and indeed PayPal, focused on the mobile payment opportunity. The metaphor in this case is with the “something convenient I carry about” aspect of a physical wallet with an added flavour of “repository for storing several things together”.
It may be that the wallet metaphor is completely misleading in the sense that an increasing number of online merchants already offer the opportunity for storing card details and delivery addresses for repeat purchases. Amazon was the pioneer here with its “One Click” facility. As a frequent and long term online shopper I’ve noticed that the majority of my purchases are from a fairly small set of trusted e-retailers all of which now hold my card details – illustrating once again the triumph of convenience over security concerns! The metaphor here is not so much with a wallet as with an acceptance mark.
Whatever we call it, there is clearly a lot going on in this space. It is interesting that MasterCard’s wallet is open for partners such as banks and merchants to white label their own products. And both schemes offer intriguing possibilities for integrating loyalty cards, personalised offers and other added value propositions. There remain big questions surrounding issues such as customer ownership, data sharing, business models, and as mentioned above, security. But the entry of MasterCard and Visa into this already crowded market suggests the stakes are high and it is going to be fascinating to watch this story unfold. Moreover, unlike the overhyped mobile NFC payment story, this one is as much, or more, about the very real and vastly bigger online commerce market, whether via a PC or mobile phone. In this respect I wonder if it is significant that MasterCard have chosen to identify their wallet with the PayPass brand. This could represent a very sensible shift of attention from the so-far disappointing mobile contactless payments proposition to the much more promising mobile commerce opportunity.
Banking Automation Bulletin Article, June 2012, by Nick Collin