Smarter Wallets?
The growing reach of smart phones
March 23 2011

by tmartin on March 23, 2011

MY PHYSICAL WALLET bulges with stacks of loyalty cards, credit cards, membership cards, gift cards, coupons-I-might-use-someday, and receipts-I-should-remember-to-file.

Every now and again, when the zipper threatens to separate from the leather, I dump it all out and sort through it. Why on earth do I haul this stuff around?

A slender little book I read recently, The SmartPhone Wallet, asks the very same question.

Do a wallet inventory, it says, and you’ll find yourself asking “What do all these objects have in common?”

Hmm, I said. Hmm. “Self, what does this four-inch high stack of stuff have in common?”

I immediately thought of an answer: things I should organize better! But of course that wasn’t really the answer.

You see, the real answer has far wider implications: All these things are managed by a computer network.

A lot of people have apparently asked the same question and come up with the same computer network answer – including the usual suspects Google, Paypal, Apple, the cell phone carriers, Visa, MasterCard, the large banks, and most large retailers.

In fact, this week The New York Times (http://www.nytimes.com/2011/03/24/technology/24wallet.html?_r=1) highlighted the smartphone wallet question in an article that looked the way battles between corporations with vested interests are slowing mobile wallet adoption.

These giants all own a piece of those cards I haul around … and they are all jockeying for position in the upcoming transition from wallet to smart phone wallet.

The smart phone, you see, isn’t just about playing games and browsing the web and following the bouncing blue ball as you drive from point A to B. No, the smart phone wants to become your virtual wallet, and when that happens an awful lot of business relationships could change.

It is only logical, notes The SmartPhone Wallet author David Schropfer. If your smartphone can be a secure part of your mobile phone network, why can’t it be a secure part of other networks too?

Schropfer (http://davidschropfer.wordpress.com/about/), a partner in consulting firm The Luciano Group, specializes in mobile commerce. He wrote The SmartPhone Wallet to explore two related observations:

1) The data in your wallet lives on a network;

2) Your phone could connect to the same network.

Look at those observations clearly and the obvious conclusion jumps forth — whether you like it or not, your credit cards and your smart phone are about to meet.

Between 1958, when the first payment card was launched, and continuing through the 1960s as competing banks worked out the concept, a whole new layer of dollars entered the sales ecosystem.

In the standardized processing systems we know and grumble about today, buyers and sellers connect through a series of banks and middlemen, each of whom makes a small profit from each and every transaction.

While each transaction may generate only pennies in profit, the aggregate is enormous. Visa, one of those middlemen, has 1.8 Billion cards that transacted $4.8 Trillion in sales in 2009, with operating sales of $6.9 Billion and net income of $2.4 Billion.

Do you wonder that cellular carriers and software and hardware companies want in on the game? And will drag their heels until they figure out how to get on the field?

Mobile banking has been with us for a number of years and has been growing steadily. It has become indispensable, especially in more remote or distributed areas of the world.d It’s been developed as a tool for enabling developing regions to connect to financial institutions and participate in the globe economy.

For example, In 2009, the Bill and Melinda Gates Foundation and the International Finance Corporation funded the development of mobile banking (http://www.capeeyes.com/columns/2009/2009-03-03mobilebank.html) in developing regions in Africa, Asia, and Latin America to help overcome the barriers brought by lack of access to banking.

Here in the US, we trip over a brick and mortar bank branch on every other corner – sometimes I think that banks are as much in the real estate business as the money transfer business! That’s not the case in other parts of the world, both industrialized and developed.

As a result, smart phones already serve as the platform for financial transactions in locations ranging from cutting edge and technology-heavy cultures like Japan to rural and remote corners of Kenya.

And just look around at the mobile apps out there today. Dozens of third party developers are creating mobile tools for managing all your accounts in one place. There’s even an application where in you deposit a check through your smart phone camera.

Near field communications are hot. NFC is a set of technologies that connect devices in a secure wireless network across very very short distances – as in, distances measured in inches. The short range networks enable smart phones to “bump” a cash resister to make a purchase.

Let’s review: everything from credit cards to loyalty card to coupon gets managed via a computer network … and our mobile devices connects into a network … and we’ve got mobile banking with its requisite security technology … and we’ve got all finds of financial mobile apps … add that up and it’s clear we’re but one small step from connecting our mobile device to all our consumer actions.

Analysts predict that within a short time – maybe less than five years – we’ll be ‘swiping’ our smart phones instead of our plastic. Clearly, smart phone wallets aren’t a question of “if” — they are a question of “when.”

Which means we need to start asking even more questions. For me, the most frightening questions involve privacy. When every transaction is recorded on a network and in a database somewhere, the already-fragile privacy barrier wobbles even more.

Technology doesn’t protect privacy – policy does. Our public policy already supports corporate profit interests over personal privacy. What does is our own individual personal policy willing to tolerate? How much privacy will we sell?

The only thing we know for sure is that technology changes business as usual. We’ve seen industry after industry be upended and reshaped by digital change, then by by on-line trends, and now by mobile opportunities. All that stuff bulging in our wallets lies right in the sight line of disruption.

This isn’t futuristic dreaming. This is today’s reality. It’s just a matter of time until it becomes wide spread and common practice.

Which makes me think that my original answer wasn’t so out of line. What do all those things my my wallet have in common? They are all things I should organize better, They are things I should be in control of: my finances, my spending, and my consumer history.

Will the smart phone wallet really make that possible without a personality transplant? Probably not. But at least the digital cards, the pixel-weight coupons, and the pdf receipts will take up a lot less room in my wallet, which then might then actually fit in my bag. But that’s a whole other story!

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