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Why Mobile Wallets Are Doomed 272

Posted by Soulskill
from the all-about-the-mobile-benjamins dept.
redletterdave writes: "The other shoe has dropped for Square. The once-hyped mobile payments company is killing off its Wallet payments app and replacing it with a new app called Order, which will allow users to order food and beverages ahead of time at their favorite cafes and restaurants. For entrepreneurs, the concept of a mobile wallet seems so logical that the payments industry looks like it's ripe for disruption. If everybody is always carrying around a powerful computer in their pockets, it's natural to consider loading payment information onto that secure device as an alternative to cash or plastic cards. The problem comes when this logical entrepreneurial spirit merges with an industry segment that is classically illogical. The payments system in the United States is a mess of entrenched interests, fragmented business opportunities, old infrastructure (like point-of-sale systems), back room handshakes and cut throat competition. This behavior is not going to change any time soon, which means mobile wallets like Square are going to continue to struggle — at least until a more legitimate, easy-to-use and cost-effective solution comes along."
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Why Mobile Wallets Are Doomed

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  • by alen (225700) on Tuesday May 13, 2014 @02:14PM (#46992505)

    why is paying by phone so much better than with plastic?
    i do it starbucks for the rewards
    only other reason is if a food truck took cards instead of cash. why do it anywhere else?

    for the retailers its more money to spend with no return on investment

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      so your the one guy in the line of 20 in the morning that sits there dicking around passing his phone back and fort while we all wait to pay with actual money in a timely fashion

    • by jythie (914043)
      Well, their idea was that buying and selling should be more 'social', so it was not just 'pay by phone', it was your phone announces to the store that you are in it and you tell the cashier who you are, they compare you to a photo, and deduct the money. The designer waxed poetically about bringing personal connections back to transactions, which means they probably think well of expensive boutique stores where you pay a premium for 'authenticity' or such.

      Thus the benefit was never really economic or even
    • by AmiMoJo (196126) *

      Retailers get contactless payments when their card payment terminals are upgraded. It's built into the terminal, no additional hardware needed, doesn't cost them any extra.

      Consumers seem to like it because it is faster and makes accounting easier. Receipts are digital and can be read directly into accounting software or emailed to the company expenses department.

    • by duranaki (776224)
      I was kind of excited about Google Wallet, but it's been almost entirely a disappointment. The one place I semi-regularly have a chance to use it is at Jack in the Box, but the NFC scanner is attached to the credit card reader, and some miscreant cut the cable between the credit card reader and the machine. This has no impact on the function of the NFC scanner, mind you, yet each time I tell them I'm paying with my phone they inform me it's broken because someone cut the cable. I've shown them it still w
    • Their was an idea floating around that people were more likely to leave their wallet at home than their phone. I'm not sure where that idea came from, it's always seemed unlikely to me. Retailers in a lot of cases are installing the new POSs that read a tap from a credit card. It's the same hardware to read a tap from a phone (both are NFC), so it doesn't cost them any extra. The tap-to-pay really is convenient for low value transactions (usually $50) because you don't need to enter a PIN.
    • by vidnet (580068)

      why is paying by phone so much better than with plastic?

      Why is paying with plastic so much better than by phone? Here's a transaction I had yesterday at Toys'R'Us:

      1. In line, I unlocked my phone and found my loyalty card
      2. The cashier pointed a scanner at my phone and read it
      3. I already had the phone unlocked in my hand, so I touched it to the payment terminal.

      What would I have gained by putting down my phone and taking out and swiping my credit card instead?

    • by mattack2 (1165421)

      Not have to carry as many rewards/credit cards in your wallet/on your keychain?

      • by mattack2 (1165421)

        Uggh, not having.. or "to not have to..."

      • Not have to carry as many rewards/credit cards in your wallet/on your keychain?

        Easy. I have no reward cards and one (platinum) CC - paid off each month.

        • by mattack2 (1165421)

          Well, then you're paying more than you need to. I pay off my credit cards too, but use at least 2 regularly. One for restaurant purchases (almost 3% back), one for grocery store (IIRC 2% back)... and several rewards cards.

          • Well, then you're paying more than you need to. I pay off my credit cards too, but use at least 2 regularly. One for restaurant purchases (almost 3% back), one for grocery store (IIRC 2% back)... and several rewards cards.

            My privacy and empty USPS/e-mail boxes are worth more than that to me as well as only having one CC bill each month. Also, those reward cards usually charge higher transaction fees to the vendor. Sure that's not your/our problem, but it's something to consider overall.

        • For supermarkets at least, you don't always need to have a rewards card to take advantage of the (manufactured) savings. Tell the cashier you forgot/lost yours and they'll use the card on top of the register. There's a reason it's there; when the customer knows they're paying more than they have to...that's a pissed customer and the manager doesn't want that. Doesn't matter if it's the customer's "fault" or not.

          You've already given them a (database) key anyway by using a credit card so the principle of n

    • by bberens (965711)
      Soon the US will enter the modern world and require chip and pin for all credit card transactions. When this happens every restaurant will require those little hand held devices that they can bring to your table to allow you to enter your pin. These devices break, are a hassle to keep charged, and are generally a pain in the butt. The most reliable device, by far, is the phone you have in your pocket. I can't wait for the day when my receipt has a 2-d barcode that I scan which allows me to pay via a Pay
      • by hendrips (2722525)

        I, on the other hand, am horrified at the idea of trusting either Paypal or Google with any personal or financial information. My credit union isn't perfect, but I'll take them any day of the week over your suggestions.

        On an unrelated note, I find it slightly amusing that you disparage restaurants for getting their payment processing equipment from Ebay while lauding the use of Paypal...

      • by znrt (2424692)

        That way I don't have to trust your crappy POS system your restaurant bought on ebay to secure my credit card data. I can choose from a number of trusted vendors to secure my data and handle the transaction.

        what you all seem to fail to note is that you can trust that shiny phone in your pocket even less, and that's probably why this model doesn't work (and shouldn't work).

    • A) Done properly no one beside the bank will ever have access to my payment details (however, this is not the case with current systems as far as I know)
      B) Secured by PIN and/or password
      C) Can be remotely wiped if lost or stolen without having cards reissued
      D) Single interface to all your payment options; no multiple cards
      E) I'm much more likely to lose or forget a credit card than my phone

    • why is paying by phone so much better than with plastic?

      your phone is theoretically more secure because you can layer any sort of auth you can think of on it and also erase it if it's stolen.

      also, it's a matter of redundancy. if i can pay w/ my phone, and i have my phone with me at all times anyway, i'd prefer to not carry something else that doesn't serve a purpose.

  • Regular Wallet (Score:5, Insightful)

    by PvtVoid (1252388) on Tuesday May 13, 2014 @02:17PM (#46992543)
    If I have to carry something around in order to pay for shit, a regular wallet works just fine. With actual cash in it.
    • Re:Regular Wallet (Score:5, Insightful)

      by Noah Haders (3621429) on Tuesday May 13, 2014 @02:19PM (#46992583)
      even if you have a mobile wallet, you'll still need your plastic CCs as well. and debit card. also, wallets have driver license, insurance cards, etc. and cash. so there's no way to replace your regular wallet with your phone. so what's the benefit to consumers?
      • by healyp (1260440)
        It's my hope that we can get past all of that as well. GEICO, Cigna and Liberty Mutual have apps for your insurance cards already. I'm hoping that one day the various DMVs can move to an electronic ID card as well. It works for Estonia doesn't it?
        • Re:Regular Wallet (Score:4, Informative)

          by praxis (19962) on Tuesday May 13, 2014 @03:33PM (#46993365)

          I would never hand over an unlocked phone to a police officer so he can take it back with him to his cruiser to "copy down the information".

        • Actually, I was recently pulled over by the CHP and he remarked that you can just take a picture of your insurance card and the cops will accept that as proof of insurance. I assume it has to be a decent picture with the account numbers visible and the like...

          • by gmhowell (26755)

            Actually, I was recently pulled over by the CHP and he remarked that you can just take a picture of your insurance card and the cops will accept that as proof of insurance. I assume it has to be a decent picture with the account numbers visible and the like...

            Legality of that varies by jurisdiction, I'm sure.

      • Re:Regular Wallet (Score:5, Interesting)

        by Splab (574204) on Tuesday May 13, 2014 @02:50PM (#46992903)

        In Denmark, Mobile Pay is a massive success, users can transfer money to each other, split bill etc.

        The value added as a consumer using Mobile Pay, rather than CC, is the fact that we can instantly settle our "debt". No more "I bought round number 4, so I'm not up for another now", someone goes and pays with their CC (or using mobile pay in the places that accept that) and can instantly deal with the bill among their peers.

        Almost 25% of the population has adapted this solution in less than a year.

        • true. a mobile wallet definitely provides benefit to consumers. but the greatest benefit would come if we replaced a real wallet with a mobile wallet, and i don't think this is possible. I think the best solution would be if Apple or Amazon provided the service. This isn't a technological point of sale problem, but a network money transfer problem.
      • ... is a time-tested Slashdot commenting strategy!

        But seriously, I don't always carry my wallet with me, but I almost always carry my phone with me. Last year I found myself in the perfect position to benefit tremendously from a mobile wallet on my phone.

        I was on mile 4 of a long bike ride when my rear tire failed. Not the tube (I carry a spare), the actual tire. I had decided not to bring my wallet with me, but I did have my phone. Anyway, I needed a replacement tire, but I had no money on me, and I realiz

        • I'm not saying there's not benefit to mobile wallets. but what I'm saying is that the greatest benefit from mobile wallets would be if you didn't need to carry regular wallets, but that's not the case for a variety of reasons and it makes mobile wallets less compelling.

          I was on mile 4 of a long bike ride when my rear tire failed. Not the tube (I carry a spare), the actual tire. I had decided not to bring my wallet with me, but I did have my phone.

          I highly recommend you always bring driver's license or other ID and insurance cards with you, in case paramedics need to scrape you off the pavement and take you to the hospital. this happened to me just 6 months ago, although in a car acci

        • I was on mile 4 of a long bike ride when my rear tire failed. ... I had decided not to bring my wallet with me, but I did have my phone.

          Just curious, did you bring any ID, in case you die or get seriously injured? A (presumably) locked (or dead, if you're out there for a while) phone isn't very helpful in those cases...

        • by swb (14022)

          You're forgetting the other Slashdot commenting strategy:

          "I have extremely unusual personal preferences and need this really unusual and almost contradictory set of features, I don't understand why anyone else would do it differently."

      • even if you have a mobile wallet, you'll still need your plastic CCs as well. and debit card. also, wallets have driver license, insurance cards, etc. and cash. so there's no way to replace your regular wallet with your phone. so what's the benefit to consumers?

        then you aren't an early adopter.

  • by Maltheus (248271) on Tuesday May 13, 2014 @02:18PM (#46992569)

    I barely trust using my phone to log into a social network, let alone anything that might cost me money. With every app attempting to spy on each other, I would never trust my phone for financial transactions. Not for many years to come.

    • by AmiMoJo (196126) *

      So where are all the apps that steal money from people's Apple or Google accounts via their respective app store apps? Why aren't Japanese consumers, who have had this for years, plagued with fraud? Do you ever buy stuff online with your computer, and if so why is it more trustworthy? Did you know phones sandbox every app? I don't think you have a very good grasp of how the security of e-wallets works, or phones for that matter.

      • by Maltheus (248271)

        It doesn't matter. It's the perception that counts. And when it comes to my phone, I always double-bag it.

        I trust my home computer more because those open-source apps weren't designed with data harvesting in mind. Actually, I also stopped ordering anything from Windows computers years ago, because I couldn't trust them anymore either. I had more spyware/virus scanners than actual software, by the end.

        As for sandboxing, that doesn't work so well once you root your phone. I can choose not to root, but then th

    • "it's natural to consider loading payment information onto that secure device"

      Is there any such thing as a "secure device"? I'm aware of several types of devices that were initially proclaimed to be secure, and subsequently hacked.

  • by turkeydance (1266624) on Tuesday May 13, 2014 @02:19PM (#46992581)
    is carrying around ALL their DEBITS and ALL their CREDITS in their pockets. i diversify with a mattress.
    • by LoRdTAW (99712)

      Problem with that is if you soil your mattress and flip it, you now have to launder dirty money.

  • Just let these innovations arise in other countries if the USA has such a backwards infrastructure. Even credit cards are more secure in other countries (chip and pin may be flawed, but it is still better than the magnetic strip and signature of the USA).
  • I'd be very interested to see how they approach that. Well, any internet payment mechanism is going to struggle with chip and pin, I suppose.

    • by wbr1 (2538558)
      I am tired of hearing this uninformed excuse. Chip and pin works fine online and off in europe. The challenges are solved. It is industry resistance that stops it here. Nothing technical.
  • by Bradmont (513167) on Tuesday May 13, 2014 @02:23PM (#46992633)
    So I need to go back to lugging my safe around?
    • No, everyone's switching to Rai Stones [wikipedia.org].
      You leave them on whatever Pacific Island they were quarried on, and just update the ownership record.

      • by tepples (727027)
        That's how paper money was supposed to work back when it was backed by metal. You leave the gold in storage, and you trade ownership records as currency.
  • by Anonymous Coward on Tuesday May 13, 2014 @02:29PM (#46992695)

    Is that I have to plug them in to charge for 3 hours before I can use them to buy a coffee...

    The first time I get stuck somewhere because my phone died and I was unable to pay for a bus or taxi is also the last time I rely on mobile payments.

  • by NotSanguine (1917456) on Tuesday May 13, 2014 @02:34PM (#46992741) Journal

    Please. This is a "solution" in search of a problem. And not even a good solution. All the CC companies in the US are (finally) being forced to implement chip-and-pin. Do you really think they're going to switch off of that for something even less secure than a standard CC? Not that they really care about security.

    Besides, There are so many entities (not counting the malicious ones) tracking what goes on your smartphone, do you really want to trust your money to an app on one of these? If so, please use my app. It's complicated to set up, so please send me all your financial information and I'll get things going for you. You may notice some charges or emptying your bank accounts, but that just me making sure everything is working properly.

    • by AmiMoJo (196126) * <mojo@NOspAm.world3.net> on Tuesday May 13, 2014 @03:01PM (#46993041) Homepage

      E-wallets have been popular in Japan for years. They are extremely convenient, especially if you use public transport a lot (and Japan has good public transport). No more messing about with change at the convenience store either. Vending machines take them too. As an added bonus there is no receipt to throw away, that gets stored on your phone/online account automatically as well.

      Business users love them because they can easily import the receipts into Excel and file an expenses claim. Everyone else just finds it easier to pay for stuff at the end of the month via their mobile bill, instead of loading up a stored value card or fishing for change every time.

      I hate coming back to the UK and having to deal with all this crap just to buy stuff. Some places can just about cope with contactless debit cards now, but if you have more than one in your wallet you have to get it out or a random one will be charged. My phone is nice and separate.

      • by PvtVoid (1252388)

        E-wallets have been popular in Japan for years. They are extremely convenient, especially if you use public transport a lot (and Japan has good public transport). No more messing about with change at the convenience store either. Vending machines take them too.

        If I could get here what you can get from a vending machine in Japan [heavy.com], I might want one too!

        Public transit would be a very useful application for an e-wallet, especially in Tokyo with all those incompatible rail lines where you have to pay to transfer trains. But that could be solved by a dedicated transit pass which auto-recharges from a credit card account, sort of like the EZPass does in the U.S.

      • Re: (Score:2, Interesting)

        by Anonymous Coward

        You could manage the same thing with a prepaid card with contactless payment. This is what is used in London (Oyster), at least for public transport. No change required, but no issue with battery life.

        Contactless debit has got very common this year.

        • This is what is used in London (Oyster), at least for public transport. No change required, but no issue with battery life.

          I'm pretty sure oyster is only for public transport.

          Contactless debit has got very common this year.

          Which brings us to one of the problems with contactless cards. When you are carrying exactly one contactless card that will work for a given system it's great, you can just slam your wallet on the reader and go.

          But if you are carrying more than one that doesn't work so well. Sometimes it sees both and refuses to continue, sometimes it sees the wrong one first resulting in unexpected charges.

  • by fermion (181285) on Tuesday May 13, 2014 @02:37PM (#46992777) Homepage Journal
    Mobile wallets have not provided inconvenience for consumers. In most of these case where widespread adoption has not occurred it is because the entrepreneurs are trying to get the consumer to adjust to their business model instead of working a business model that suites consumers needs. We say this a lot in the late 90's when companies would create web sites that just mimicked the corporate org diagram. Unless you were part of the organization, there was no way to figure out where anything was. Bad web developers still do this.

    There are specific examples the implementation fails. For instance Starbucks has a good implementation, but many Starbucks does not accept the card. Why am I going to have something that is useless. It also by default wants to annoy you every time you go by a Starbucks. We see the same thing with CVS. It is nontrivial to pull up the card, and easier just to type in a phone number.

    Most of the digital wallet is just gather information on consumers without providing value in return. Like a grocery store loyalty card. Sure, some are going to use it. Some are going to shop at the store because of perceived value. But many are going to the store that just provides simple service. Walmart does not have a loyalty card.

  • If everybody is always carrying around a powerful computer in their pockets, it's natural to consider loading payment information onto that secure device as an alternative to cash or plastic cards.

    The summary used the words "computer" and "secure" in the same sentence as "payment information".

  • (Note: This comment is US-centric. I'll let others do the analysis for the rest of the world, but the case is actually easier there.)

    NFC is still coming, and soon. Now that any Android 4.4+ device can use Google Wallet and with ISIS deployed to AT&T, Verizon & T-mobile customers who want it, one half of the secure mobile payments infrastructure problem is all but solved. Android 4.4 includes open APIs so that anyone else can implement NFC payment apps, also, and there are rumors of many coming. There are hints that Apple is also doing something with NFC.

    The other half of the infrastructure problem is merchant acceptance. Visa and MasterCard announced in 2012 (IIRC) that the liability shift will be implemented end of 2015. What that means is that after the shift takes place, any merchant will be able to completely stop paying for any credit card fraud simply by deploying chip (including NFC) payment terminals. Given that merchants pay for nearly all fraud, and that it costs many billions annually, you'll see them moving fast. Already in some parts of the country I can go through a whole day using nothing but my phone for payment, and it's improving rapidly.

    It's about a decade later than when the industry thought it would be but contactless smart card / NFC payment is in full rollout mode now.

    Square is wise to drop their custom, proprietary solution to a problem that has an industry-standard solution in deployment.

  • by ADRA (37398)

    A few facts that aren't going away any time soon:
    1. There are 1000 different e-wallet based solutions which are swiss cheese of compatibility with the few number of retailers that have even bothered to look into them (These have fees as well mind you, just possibly less than CC transactions)
    2. There are many loyalty reward cards / apps that do what you want quite well but only for specific customer/retailer relationships
    3. Easy solutions that are both ubiquitous/cheap/secure would basically require the enti

    • by jbolden (176878)

      You are absolutely right. The only place I see this coming is a payment system being an adjunct form of credit card run by the credit card system enhancing their current duopoly.

  • its brown and leathery and contains a whole lot of money and other useful stuff :)

    • by vux984 (928602)

      Hmm...well mine is black and leathery and doesn't contain a "whole lot of money". Perhaps I should switch to brown.

  • My wallet is mobile and it works even days without recharging. Also most payment systems do not work that well at the local market or flee market. It is not free of charge. It is also unable to work between normal people everywhere. The latter could be fixed with a standard which works with different payment systems. The free of charge thing is most likely not fixable if the whole thing is not state or central bank driven. The biggest problem is, however, the limited battery power. With no electricity the t

  • I think the problem is the USA has a fairly cheap and good credit card system. In the USA merchants, with a few exceptions pay 1.4-4% with most in the 1.8-2.5% range. The customer generally gets about 1% of that or more in incentives. Which means there is only about 1% to play with for the merchant to cut costs or raise services. That probably isn't enough of a margin. There are areas where credit card fees are very high (adult services, gambling) but the reason fees are high is that these are impulse

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