Dollars and coins are becoming so 20th century. Sure, we still plop cash into the tip jar at the coffee house, and dole out a few bucks for our kids’ allowances.
Increasingly, however, our daily purchases entail swiping a card that triggers an electronic transfer of digital cash. But even plastic cards might become passé, with the entrance of the mobile wallet. Part of its allure: no paper or plastic. Instead, we pay at the point of sale (POS) with our smartphones.
How soon will the mobile wallet be mainstream and ubiquitous in the U.S.?
That’s the billion-dollar question. “Globally, most money will be transferred using mobile devices by the end of this year,” Payton Dobbs, Google’s head of industry, banking, and lending, told attendees at the recent National Credit Union Roundtable. “This is standard procedure in the rest of the world; the U.S. is just now catching up.”
► Mobile wallet technology someday will be mainstream and ubiquitous.
► Two mobile platforms lead the race for standards: NFC- and cloud-based options.
► Board focus: Review what-if scenarios and consider the trade-offs that come with different mobile payment strategies.
Some believe a mobile payment venture called Isis Mobile Wallet will be the game-changer. Isis certainly thinks so. “Isis can provide the consumer choice and scale necessary for widespread adoption of mobile commerce,” said Scott Mulloy, the company’s chief technology officer, in media statements last fall.
It’s still unclear, though, when mobile payments will catch on big-time in the U.S., and which system will surface as the “winning” solution—if there turns out to be one top choice. One thing is for sure, though: Credit unions ought to be monitoring events.
A fragmented field
Isis is a noteworthy development, says Jim Block, director of advanced technology development at Diebold, a CUNA Strategic Services alliance provider. “It’s important because there has to be some mechanism to reach critical mass in the market before mobile payments start to get traction.”
But it’s not clear yet how any such infrastructure would be successful in the market, he says. “There’s also Google Wallet, among others, and there’s always speculation about what Apple might do.”
Both Google Wallet and Isis Mobile Wallet use near field communication (NFC) technology, which enables contactless payments. To date, Google Wallet has partnered with Citi and MasterCard and is available only via Sprint on Samsung Nexus S, Galaxy Nexus, HTC, and LG mobile phones. The last two were added in May.
Isis’ founders include three mobile carriers—Verizon, AT&T, and T-Mobile—that have built partnerships with Chase, Capital One, and BarclayCard on the bank side, and four major payment system providers: Visa, MasterCard, Discover, and American Express. Isis will be usable on HTC, LG, Motorola, RIM, Samsung, and Sony Ericsson devices.
This broader base of partners across sectors could be what gives Isis a leg up in the market. The prognosis might be clearer after Isis completes pilot programs in Salt Lake City and Austin, Texas, this summer.
“Isis is clearly one of the largest players and one to watch,” says Al Ko, vice president of product management at Intuit Financial Services, a CUNA Strategic Services alliance provider. “But it’s too early to know how Isis will evolve or to pick one winner—or even if there will be one winner or multiple winners.”
Certainly the field won’t be as fragmented as it is today, he adds. There are dozens of competing visions, frameworks, and partnerships in the mobile payments world.
Indeed, Google and Isis are only two of many players in the mobile payments arena. There are two broad groups, says Brian Day, Dwolla product leader at The Members Group, a Des Moines, Iowa-based credit union service organization. “You have the NFC camp, which includes Google and Isis,” he explains, “and then you have the cloud camp. So not only do you have competing systems, but you also have different competitors within each system.”
Cloud-based products include what are known as alternative payment products, such as PayPal, Square, Dwolla, and several others. These options use software applications rather than NFC chips. Credit unions need to be ready for both, says Day.
“We coach our credit unions that they need to have
two strategies: one for a mobile wallet that uses the traditional MasterCard and Visa rails, and the other for an alternative payment product that doesn’t rely on MasterCard and Visa,” he explains.
While credit unions don’t need to make either/or decisions yet, they must understand what’s out there, he says. YouTube videos, he says, give helpful introductory demonstrations of these various forms of mobile wallet options.
NEXT: Questions and concerns