Written by Keith Diamond
The digital credit card, and digital wallets in general, have stalled in their quest to replace the standard wallet. This may not be terribly surprising when one considers that up to 85 percent of the global market still uses cash, says CNET. Even here in the United States, with an iPhone or Android in every hand, the digital wallet isn’t catching on. Credit card companies, though, are betting that this will change.
Money to be made
Even though the initial push for digital wallets did not gain the ground proponents hoped, there are multiple players in the digital wallet game. These players, from Google to PayPal to major credit card companies, are all betting heavily that the digital wallet will take off. It is only logical that smartphones will take over wallet duties, and there is an immense amount of money to be made if they do.
Intuit surmises things like e-coupons, location-based services and mobile ads – all coming through smartphones – will grow into a $24 billion market in the next few years, notes the Huffington Post. A multitude of companies want to tap into this emerging market. A vice president for MasterCard recently told CNET that digital wallets and the mobile payments they can conduct offer huge growth opportunities for the credit card giant. These opportunities apply not only to the 15 percent of the global economy that already uses its services, but to the large majority who do not.
Credit card companies already make money every time people swipe their cards. They also have created vast, reliable networks to enable such transactions. Some companies, like Visa, are attempting to create their own digital wallets. Others, such as MasterCard, plan to make their money by using their network for existing products. Either way, they will profit significantly if digital wallets take off.
Why will people switch
It is easy to understand the enthusiasm of businesses involved in the digital wallet market. There is obviously a great amount of money to be made. The main question most people have, however, is why they would ever do away with their tried and true wallet? It already works so well. Cash is useful on occasion, and credit cards already offer fast and painless payment options.
A 2012 Forrester Research poll asked people about their desire to use a mobile device to make payments in stores. Only 17 percent said they were interested, with 69 percent saying they were not.
There are advantages to the digital wallet, however, that the regular wallet cannot top. Digital wallets offer increased security. Strong passwords and encryption can protect financial information in ways a wallet does not. Digital wallets also allow users to manage their money better, with different products emphasizing budgeting techniques and tracking and management software. Neither of these, though, has encouraged the public to switch.
Consumers need more incentive to go digital. There is little doubt that companies will continue working to find the right motivation. Being able to screen business credit card offers through email and automatically update your wallet with a new payment method would be convenient. So would doing away with a bulky wallet filled with plastic cards. So far, convenience has not been enough to motivate the switch.
It will take more
It will probably take considerable innovation to convince the world to adopt digital wallets. Currently there are numerous products vying for attention. Perhaps once the initial contests are over, and a few excellent offerings rise to the top, people will take a closer look at the new age of wallets. Until then, most people will continue swiping plastic.
About the Author
Keith Diamond
Keith went to business school on the East Coast and loves writing about technology.