More than a decade ago, AT&T, Verizon, and T-Mobile joined forces to create a phone-based payments platform– a mobile wallet–which may be best remembered for its original name, ISIS (something that events in the Middle East compelled them to change). I remember a video they produced that showed a woman heading to the door to leave home, phone in hand, and pointedly leaving her wallet behind.
Ah, the digital wallet.
That was a long time ago. And in the interval many wallets have been launched (indeed, Google alone has tried a few) and some have gained traction.
Here Comes a New Player
Now, according to a recent Wall Street Journal article, a group of large banks are planning to launch their own wallet powered by Early Warning Services (EWS), the same folks who power Zelle. Let’s call it the EWS wallet.
Why are the banks doing this? The article states, “One goal of the new service is to compete with third-party wallet operators such as PayPal and Apple, according to people familiar with the matter. Banks are worried about losing control of their customer relationships. Apple, in particular, poses a big threat.”
Fair enough. Those are real concerns.
But I’m skeptical this will play out as the article suggests, for a few reasons.
Concern #1: What can the wallet hold?
The more a wallet can do, the more utility it has, and the more it will be used. And with frequency of use, opening that app – which after all is what a wallet is – becomes habit. For a wallet to do this, it must offer more than simply payment functionality.
Google and Apple certainly know this. My Apple wallet holds, in addition to my payment cards, my healthcare card, movie ticket, boarding passes, and should soon hold my driver’s license as well. It is a true multi-purpose wallet.
The EWS wallet will just hold Visa and Mastercard, at least to start.
Concern #2: Will it be easy to use?
Per the WSJ article, “The banks are still ironing out the details of the customer experience. It likely will involve consumers’ typing their email on a merchant’s checkout page. The merchant would ping EWS, which would use its back-end connections to banks to identify which of the consumer’s cards can be loaded onto the wallet. Consumers would then choose which card to use or could opt out.”
Will that be a seamless experience for the consumer? Hard to say based on what we know today.
But we do know that design by committee is really, really hard, and more often than not you get a camel instead of a horse. And as Bernstein analyst Harshita Rawat noted, “It simply takes a very long time, a killer customer experience (which needs to be better than incumbents, not just similar), and a compelling merchant value proposition to build the two-sided network effects in payments to achieve scale.”
Witness Apple Pay, which, for all of its great customer experience, has only a sliver of consumer payments 8 years after launching in the US. Changing consumer payment behavior is hard.
A Difficult… but Not Impossible Path Forward
Given that we’re talking about banks here, we can’t forget the regulatory aspect– any time large banks join to launch a product they will be scrutinized.
All of this means the banks’ effort will be difficult, but certainly possible. Coming late to the game doesn’t doom a product; witness Zelle, another EWS product, which launched after many other P2P products, yet moves far more volume. And as Ron Shevlin pointed out in his post on this topic, this is not a winner-takes-all game: consumers use multiple payment apps.
So there is an opportunity for the EWS wallet to take share among pure payment wallets: this plays to the strengths of banks and EWS. But if the goal is to take share away from real multi-purpose wallets like Apple Pay – that will be a much more difficult road to travel.
Further Advisory is a boutique management consultancy with deep expertise in the payments industry. Our experience in this sector has helped clients reinvent payment and credit models, enabling them to rethink experiences for consumers, small businesses, large enterprises, merchants, and B2B suppliers. We partner with payments institutions to accelerate their time-to-market for new products, facilitating faster and greater capture of customer wallet share… whether digital or not.