Digital Wallets on Their Way

I’m by no means an expert in banking, but seems to me things are heating up in the world of alternative payments. Last week Benjamin Ensor from Forresters posted a nice overview of the rise of the digital wallet (also known as mobile wallet) in his article The Battle of the Digital Wallet. He says this is going to be a game-changer for the retail market:

A mobile digital wallet is more than just a mobile payment system because it combines:

  • Mobile payment. Digital wallets are likely combine several different payments systems into a single service, including mobile contactless payments, online (i.e. web) payments, and over-the-network mobile payments, making it easy for customers to make a variety of different types of payment from a mobile device.
  • Barcode scanning. Scanning barcodes or QR codes will let customers get more information about products, and let them pay for items on their phones before showing an on-screen receipt to leave the store.
  • Loyalty rewards. Instead of carrying (and sometimes forgetting) a separate loyalty card, digital wallets will track customers’ spending and offer merchant-funded rewards, either on the phone or at the point of sale.
  • Coupons and offers. Digital wallets are likely to offer customers coupons and location-based offers.

Potential providers

He goes on to outline the various potential providers that are gearing up to compete in this space:

  • Banks and other credit issuers teaming up with credit card networks such as Visa and MasterCard
  • Mobile operators working in consortia
  • “Disruptors” including PayPal, Google and Apple

Back in November 2007 (four years ago!) I reported on my own blog that one of the Canadian banks was already testing mobile payments back then.

Starbucks making a leap

Not a company to wait around for others to do it for them, last January Starbucks launched their own iPhone app in the U.S. to allow for payment from phones. This app was just made available in Canada earlier this month according to the Financial Post. The FP says that the iPhone app “allows people to add credit to their account via the phone and earns points towards the coffee chain’s loyalty program. It also gives food and beverage nutrition information and information about getting a job at Starbucks.” There are some nice screen shots of the app on the company’s website.

I saw this payment method in action last week as a customer and SBUX clerk who were both new at it gave it a try. It requires one to have a Starbucks card, and then money is electronically loaded onto that card. The card is then connected to the iPhone app. It then involved the customer making a specific screen on her iPhone available from the app (the screen with the barcode) so that the clerk could scan it with her barcode scanner.

I’m guessing that future iterations of mobile payments will be somehow more elegant, but it’s certainly a start. Once this is sorted out it won’t be long before we see the effects with things like digital payments for photocopies and vending machines.

What other examples have you seen of mobile payments?


  1. David Collier-Brown

    I wonder if this is going to interact with people’s expectation of privacy? Warrantless searches of phones is being debated in various jurisdictions as we speak …


  2. Some great questions, David. My question is typically how this differs from the use of a credit card on the Internet, for example. For sure groups like the banks, credit card companies and PayPal would have security well in mind, but I don’t have a feel for how they are addressing privacy with this.