Pay It Forward

The Decade-Long Road to the Mobile Wallet

At a mobile business development meeting I attended in the year 2000, a Nokia manager gave one of the most compelling and energetic presentations I’d ever seen. He stood up, pulled out his wallet, and began peeling away card after card. Customer loyalty cards, credit cards, debit cards, metro cards, library cards, company IDs. “These will all be in our phones within three years.”

It was brilliant: the case was crystal clear. A problem was identified. The technology enablers were just around the corner. Early adopter countries like Singapore were already running some forms of mobile payment services, and the handset was about to encroach on another industry. The term “smartphone” wasn’t widely used at the time, but our “personal trusted devices” were about to make life just a little bit easier and a lot more secure. The mobile wallet was one or two replacement cycles away.

Mobile payment has had a long gestation period. Yesterday, Apple achieved probably the most successful unveiling of mobile payment ever (see Instant Insight Apple Unveils iPhone 6, iPhone 6 Plus, Apple Watch and Apple Pay). Apple Pay felt like an inevitability: with around 800 million iTunes accounts and queues already forming to buy the NFC-enabled iPhone 6 models, Apple should quickly develop a significant installed user base for the service. The participation of most major American banks, credit card companies, and many retailers as partners means that Apple has the pieces in place and the clout to spark the industry. It will take some time, but yesterday Apple made the mobile payment launch that really matters. The mobile wallet has cleared its throat.

This is the way major trends work — taking years, often decades, to fall in line. Several companies become warm-up bands for the lead act, and of the many trials along the way, most are never seen. Technology disruptions are actually technology shifts. There are many steps to overnight changes.

The US rollout of Apple Pay comes as retailers are upgrading their point-of-sale terminals to accept chip-based cards. Infrastructure changes were required anyway, and news of several major financial security breaches during the past few months have helped Apple to highlight the need for improved security for credit card transactions (coincidentally, details of a major data breach at Home Depot were released as Apple was introducing its biometric-based payment system.)

Apple Pay can be expected to remain a proprietary service — competitor handset makers and platform providers will need to respond by reaching Apple’s level of user experience. Other companies have tried before, but Apple has implemented when the service was ready. In a matter of hours, the company has created real momentum for mobile payments and will be likely to drive the mobile wallet experience much further, replacing more cards and introducing more services (person-to-person payments, for example). Most mature markets are ready for change.

The largest uncertainly of success always lies with the consumer: it’s always the unknown variable. However, Apple’s track record of getting services right and its engaged user following are the ingredients for success. Mobile payment is a trend which is starting in earnest. Apple is addressing a year 2000 problem.