Analysis: Whose e-wallet is right on the money?

By Peter Gothard
18 Jul 2012 View Comments

Be it MasterCard or Visa, Orange or O2, Apple or PayPal, providers from every sector seem to be scrabbling for a piece of the e-wallet pie, and a generous helping of the all-important real-world contactless payment extensions that come with it. But who will get the lion’s share, and with what specific technology?

“The unique selling point isn’t the network; it’s going to be the device,” said Adam Banks, CTO of Visa Europe. “So the chances are it will be someone in the real world, like an Apple or a RIM, than it will be a Google or a PayPal.”

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PayPal UK’s Rob Skinner begs to differ: “We are basically a digital wallet. It sits on the cloud, and it doesn’t matter what kind of device you try to use PayPal on; it adapts. That’s been the idea of PayPal from the early days.”

While Visa currently circulates 24 million contactless cards across 140,000 terminals across the UK, PayPal prides itself on the portability of its app-based model – to the point where it currently holds back from engagement with near-field communication (NFC) on a technical level, relying on the trust and ubiquity of the brand, rather than the growing trend for convenience.

“We are open-minded about NFC,” said Skinner. “We’ve always said it’s a bit of an obsession with the tech and payment industries. It’s seen almost as a Holy Grail by people who say ‘Oh gosh, we need something to get mobile payments moving’. Well, we handled $4bn (£2.6bn) globally last year without NFC, and we’re thinking that’s going to grow to $7bn this year, still without NFC.”

O2 Money market development manager Claire Maslen, meanwhile, said her company’s handsets will one day not only “replace the physical wallet in terms of payment, but also tickets, coupons and loyalty”.

O2’s plans arguably sit at the opposite end of the spectrum to PayPal’s desire to keep e-payment simple, and in the cloud. O2, said Maslen, has merely dipped its “first toe in the water” with its recently launched O2 Wallet app. Very soon, a contactless card will appear, and not long after that, O2 will be ready to throw its latest handsets into the attack.

“We’ll start using [RFID-equipped] handsets that we’ve already been shipping for six months,” said Maslen. “I guess our approach there was to seed the market, so we know we have however many millions of handsets that have wireless capabilities for when we flick the switch on the wallet.”

O2’s SIM-based model, meanwhile, gives the company an added level of security and portability, according to Maslen. “A lot of plugins are single use, for one product in each case - say stickers from the banks and financial organisations,” she said.

She adds that SIM also links contactless payment and e-wallets to new opportunities to build up brand power both virtually and on the high street. “We can make it really, really targeted,” said Maslen, “and that’s a key to making this a success.”

Wendy Dobson, head of innovation at MasterCard-owned transaction processing firm DataCash, agrees. “Some of these mobile wallets can only be used in one environment or area. Those are the ones that will fall by the wayside,” said Dobson.

Trust - like convenience and versatility - will be another key factor in deciding who will eventually win the contest for contactless supremacy.

“You’re taking your physical wallet and putting it on a device. So who would you trust to hold all those details? Would you trust Google or eBay? From my point of view, the only person I’d trust is someone who has the governance over those payments, and cards,” said Dobson.

However, Dobson is not so sure about the SIM-based model O2 and others are championing. While it offers increased security, there is a downside.

“You have to make sure it adheres to the right specification and compliance level,” said Dobson. “That’s been an overriding factor since the beginning of chip and pin. How would you manage that on a phone? How do you make people update their phone to use a security update?"

CEO of Norwegian mobile authentication firm Encap, Thomas Bostrøm Jørgensen, also has reservations about the SIM-based approach.

“The problem with telecom companies is they typically can’t fully support all customers in a country, because they don’t cover it all with their SIM card,” said Jørgensen. “For pay-to-pay between customers on the same network, maybe, but do you really want to have to think about what phone operator your friend is using?”

DataCash payment product manager David Adams, foresees doom for much of the competition in a market that, given the polarised viewpoints of its players, has no realistic fate but convergence.

“I don’t see one single power coming out, but we’ll see the smaller players dropping away in the midst of strong partnerships, which will be combinations of big payment networks and strong infrastructures,” said Adams.

Above all, though, Adams believes that, even with Apple’s e-wallet-packing iOS 6 on the horizon, that a “one payment” model will never happen. "While the brands may be strong, there’s going to be only so much slice of a pie that one brand can capture.”


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