How to pay: the War of Wallets

14 December 2018

Onlife consumers are starting to grasp that transferring personal data is part of the payment process. In exchange for their openness, they expect swift and simple payment methods.

Wallets and apps are digital payment services accessible from any device. The wallet is a digitally improved version of your physical wallet crammed with cash and a stack of credit and store loyalty cards. Payment apps usually only have the payment option, syncing all those cards into one. After filling out your personal info and bank details when you first use them, you can transfer money into the app or wallet, and then you’re good to go. They are also a popular option for businesses, for tracking loyalty points and more.

The onlife consumer gets a conveniently speedy monetary transaction, but wallets and apps also help the process of orientation and selection by contributing to store conversion and customer retention. PayPal, Apple Pay and MasterPass by MasterCard are the most well-known examples of wallets used today. Globally, the payment apps used most are the ones belonging to Uber, Starbucks and those used by Chinese people everywhere, run by Alibaba (Alipay) and Tencent/WeChat (WeChat Pay).

Platforms lead the way

A lot of (web)stores have great difficulty keeping up with the sheer number of new initiatives. Confused and baffled, they retreat into wariness, not adopting any of the latest technology. Using a wait-and-see approach, they hold off on making necessary investments.

Banks, platforms, marketplaces, (web) stores, search engines and brand manufacturers are well aware that access to a customer’s digital wallet equals the perfect commitment in the consumer relationship. It is now a given that wallets and apps will become an essential part of doing business for new and existing global shopping platforms. As the ultimate new retail power blocks, these tech giants use their own payment propositions to bolster their reign over the retail value chain.

Wallflowers in the digital payment dance

A frenzy has taken hold of traditional banks and insurance companies, desperate to make up for their late entry to this game. Creating a wallet involves so much more than developing a payment app, which means a gargantuan challenge for banks. Interoperability between banks is further complicating matters in the US and Europe, and banks all over the world have been struggling.

Fintech startups are proving far more agile in their response to the altered consumer payment desires. Banks and credit card firms, often have no choice than to join forces with these vibrant new businesses, as they face the imminent danger of losing touch with their customers in the immediate future. Ultimately, they risk becoming nothing more than back-office payment administrators for the handling of financial retail transactions. They are already the wallflowers in the digital payment dance, which is fast turning into a kind of tango between customers and (web) stores. At present, services like Apple Pay still need banks, but the actual bank has become an (almost) invisible actor within the transaction. The big tech wallets and apps are the ones in charge of the “front-end” of the payment. Reaffirming their customer relationships by tapping into the trust they’ve been granted by those very customers is the only way forward for banks. They can then enter the realm of online identification, working alone or with startups, and help (web) stores move from few-clicks-buy to one-click-buy or even no-click-buy. 

Who will win the War of Wallets?

Now, consumers tend to use just a handful of wallets and payment apps on their smartphones. Wallets and apps that combine several payment options are particularly popular, as are those that connect to loyalty programs and other services. The ones that build on consumer loyalty are the ones set to win. For onlife consumers, there are no limits, so why should their payment methods have boundaries? A wallet that can incorporate every possible (international) payment option is the one that will conquer all.

This is blog 38, based on my book ‘The end of online shopping. The future of retail in an always connected world’, published by Business Contact (Dutch/Flemish editions), Nubiz (English edition for UK and US, and Danish editions), WSCP Singapore (English edition for SE Asia), Post & Telecom Publishers Beijing (Chinese edition), Hoepli (Italian edition). The book will be published in Korean in December 2018 and is being translated in German, to be published in spring 2019. Additional translations are in preparation for 2019.

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