Karen Webster of PYMNTS.com wrote an interesting article this week examining the plight of digital wallets. She proposed that there were two diametrically opposed assessments of their future: one camp says digital wallets have been a failure and are dead in the water, the other believes the future is bright. We think history tells us it's too soon to pass the first judgment. Our view is that this was never going to be an overnight process. The payments world is a huge multi-channel, multi-international behemoth of an industry. And behemoths are not known for the speed in which they change direction. And as far as digital wallets are concerned, there are so many potential players and interests, one cohesive path to a digital age is impossible to envisage.
"The payments world is a huge multi-channel, multi-international behemoth of an industry. And behemoths are not known for the speed in which they change direction"
What's more, the explosion of ideas and innovations in the payments world is creating new opportunities much faster than any real practical change can be implemented. Those who say digital wallets are dead, perhaps don't appreciate they're still very much in their infancy. Indeed, providing a solution that really takes hold is a task much more difficult than first meets the eye.
Take Debit cards for example. As Karen Webster highlights in her piece, it took a good 20 years for the idea to really take hold. And while they now enjoy a massive share of the market, the only payment method they have even come close to completely replacing and making obsolete is the cheque book - something that my bank does not even issue unless specifically requested.
We can't imagine a world where debit and credit cards don't happily co-exist playing a major role in the payments industry. But there was no guarantee they would both be a success, and it really all hinged on the backing of the major players such as Visa and Mastercard and the universal acceptance among retailers. Again, not an overnight process.
In 20 years' time, it is quite easy to imagine it will be much the same for digital wallets and that they will satisfy a large percentage of the market. I say that not because of any predetermined technological progress, or a belief that we must always have a 'next step', I say it because I believe there is enough evidence to show that a digital solution to payments is getting closer and closer to meeting the needs, not only of consumers, but of retailers too.
"In 20 years' time, it is quite easy to imagine it will be much the same for digital wallets and that they will satisfy a large percentage of the market"
There are benefits to the financial sectors too, but they may be the slowest to change as they have a lot of skin in the game and the most to lose if current payment methods decline in the face of a digital transition. But once they get behind the change and add digital to their multi-channel payment solutions - and all the evidence seems to suggest that they will eventually be compelled to do so - then the digital wallet breakthrough will occur and the usage take off.
And although we think that the digital wallet market will eventually take off, we are perhaps slightly more neutral about the issue than you might imagine. After all, we are neither a traditional payments provider, nor a digital wallet company. Ensygnia's sweetspot is to create a secure trusted environment to exchange information - and to associate a confirmed transaction with a verified identity. We have the potential to do this with any payment method - traditional cards, a digital wallet, an internet currency such as bitcoin, or a chargeable account such as carrier billing.
Indeed, the other reason we believe the digital wallet will eventually play a big role in the eco-system that Ensygnia will serve is that consumers are showing the willingness to embrace the change. They also like choice. And the banks, retailers, service providers and eco-system players that give them the most choice and the simplest and most secure methods of exercising that choice, will be the ones that succeed.
Because the other lesson that history teaches us - apart from not being too quick to pass judgement - is the one about the survival of the fittest. Or in this case, the solutions that are most fit for purpose.
By Matthew Taylor 20th June 2014
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