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<h4>by Sirpa Nordlund</h4>
Executive Director at Mobey Forum
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January saw the curtailment of the first big mobile wallet to hit the market following news from O2 that is was withdrawing its service. With a lifespan of just 18 months, the O2 wallet was the first MNO wallet to make a noise in the marketplace and actively promote its services to consumers. So why did it fail?
MNO wallets are not picking up
The reasons given by O2 were market conditions and changing consumer preferences. But this may not be the full story. Firstly, consumers simply do not naturally equate money management with mobile network operators (MNO).
Looking into consumer behaviour; when do you call your MNO? The only contact I have is to upgrade, make a complaint or question a bill; the interaction is just not there on a regular basis to reassure consumers that MNOs have the credentials to handle their finances effectively and securely. This also extends to MNOs’ ability to drive uptake. Complaint resolution calls are the wrong environment in which to sell anything at all, let alone a new product that depends on customer trust for success. For banks, the process is much easier. An upgrade can either be made to the customer’s existing mobile banking app or an ad can be placed within the app promoting the wallet.
The interactions between supplier and consumer do not follow a pattern that lends itself well to developing the levels of trust required for customers to give up their hard-earned cash. Understanding this, O2’s parent company Telefonica entered into an agreement with Santander and CaixaBank to develop a joint mobile wallet with the banks.
I also believe that MNO wallets should be simple, single purpose platforms; used for parking or loyalty, for example. Multipurpose wallets, like O2’s, demand more features and the only way to offer this is to have payment functionality at its heart. Additionally, banks are able to leverage their close contacts with merchants. The positioning is then very clear for the consumer: “your wallet’s payment functionality is enabled by [insert financial institution] and is currently accepted by these merchants for POS payments, loyalty and gifting”.
Bank wallets fail too
To be fair, it’s not only the MNO wallets that are failing: Swedbank closed its QR-code based Bart mobile payment system only last week, due to a lack of consumer demand. The use of QR codes is still in its infancy. Bart did not offer any additional incentive for payments and was simply overlooked for being too complex.
Trust
Trust plays a huge role in financial services and MNOs currently lack the reassuring credentials with consumers that encourage mass adoption. Banks, on the other hand, have been doing this for generations. I therefore see collaboration between banks and MNOs as the best and most mutually beneficial business model for the industry. Mobile wallets will not bring instant ROI, so it important that the key players in each market come together and develop solutions that not only benefit those involved, but offer genuinely valuable services to consumers.
Strategy in the middle
Finally, and this reason can also apply to banks too, mobile wallet strategy should sit at the centre of the organisational structure. It seems that mobile payments are often set in a separate unit (often seen by others as a ‘Cost Centre’ or intermediate exercise) within a large corporation, which has difficulties in collaborating with existing business units (the ones who consider themselves established ‘Profit Centres’). When a mobile payments division is not integrated across the whole business, it is very easy to not commit to it fully and sweep it under the carpet if it does not perform. Making it a cross-organisational exercise will increase chances of success significantly as numerous departments will have a stake in the project.
Uphill battle to build a value proposition
Consumers are not going to change their habits and start paying by mobile unless they have an added benefit in doing so. Current payment systems, cash and cards, work well enough and there isn’t an urgent need for an additional means of payment. The added benefit for consumers to start using mobile payments will come from loyalty, coupons, offers and other value added services. However, building a multi-purpose value proposition with such features is an uphill battle and requires cross-industry collaboration. The use of a mobile wallet has to reward both the merchant and the consumer for using new technology. Wallet providers all over the world are still searching for an incentive that is sustainable from both the business model perspective and that provides well-defined rewards for users.
These requirements may well lead to an era of closed-loop wallets, such as Starbucks Wallet, that only serves the merchant and its customers.
