Matt OppenheimerContributor
Matt Oppenheimer is co-founder and CEO of Remitly, a mobile company that offers international money transfers.
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A cycle starts when hype of a technology leads to big investments in that technology, which in turn creates more hype. Real-world use of the technology by customers can get lost in the cycle.
Investors and vendors in the fintech industry have heaped plenty of hype on “mobile wallets”— products, often built by wireless carriers and banks, with a stored value of money accessed via a mobile device that can be used for a range of financial services, such as peer-to-peer transactions, merchant payments and money lending.
Here is one data point to cut through the hype around mobile wallets: If you took a random set of 100,000 transactions in the money transfer business I run, roughly 19 of them will involve mobile wallets. A whopping 0.019 percent of these customers— generally tech-savvy folks using a mobile fintech service— use the service to send money to mobile wallets.
A few years ago, I too was fascinated by mobile wallets. Before founding a mobile remittance company, I worked at Barclays Bank in Kenya— the country that’s the “shining star” of mobile wallet adoption. During my time there I understood the key factors that led to widespread use of Safaricom’s M-Pesa mobile wallet. Safaricom’s mobile wallet may have been a good or poor technology product, but that’s not what mattered. It succeeded because Safaricom owned 81 percent of the mobile customers in Kenya and because it operated a financial service in a favorable regulatory environment— Safaricom was partially owned by the Kenyan government.
These conditions don’t exist in the vast majority of other markets. Mobile carriers around the world have tried to leverage their relationships with handset makers and mobile customers, but have failed fundamentally because the deck is rarely stacked in their favor as it was in Kenya. We’ve seen this with mobile wallets pushed by carriers in the Philippines, the U.K. andeven the short-lived joint venture of three carriers that built a mobile wallet called Softcard in the United States.
Amazingly, we’ve allowed this old metaphor— the wallet— to not only creep into the product’s user interface, but to define the entire segment of the fintech industry and the way these products are used by customers. The metaphor of the wallet isn’t serving a real purpose any more than the shutter sound of your phone’s camera.
So if carrier-backed mobile wallets are failing more often than not, what could help mobile wallets go mainstream? Less involvement by mobile carriers and banks, and more knowledge about customers in developing countries.
And the news is getting worse for mobile carriers. The rise of the smartphone in the developing worldwill accelerate the move away from carrier- and bank-dominated mobile wallets (see figure below from Mary Meeker’s 2015 Internet Trends Report).
In the next five years, carriers will continue to lose their leverage with smartphone makers and, more importantly, mobile customers. This disintermediation is happening. Smartphones are now being sold directly to customers by the companies that built them— even using monthly payment plans to reflect the models used by carriers. Companies that don’t look anything like carriers and banks will gain new reach and relationships with mobile customers.
The metaphor of the wallet isn’t serving a real purpose any more than the shutter sound of your phone’s camera.
These new companies will reimagine the bundle of financial services that make up mobile wallets and parse them out to their customers as part of innovative insurance, micro-lending, merchant payment and other apps. Apps like WeChat will grow and deliver new financial services. The apps won’t have the logos of banks or the backing of mobile carriers. The technology companies that build them won’t have the billing and banking relationships with customers that the carriers and banks do, but they’ll have a deep understanding of how people use smartphones. This will spur them to compete purely to win customer satisfaction.
Disintermediation will level the playing field among new entrants and entrenched carrier and banking competitors. Instead of advancing the status quo, disintermediation of mobile carriers and banks will lead to mobile financial services that solve real problems for customers.
Future mobile wallet apps won’t have a leathery wallet user interface, they won’t be found in the “mobile wallet” section of app stores and investors who back them may not even realize they’re betting on what emerged from the mobile wallet hype.
FAQs
Several key milestones have shaped the development of digital wallets: 1999: PayPal was launched and quickly became a popular payment method for online transactions. 2003: Alibaba introduced Alipay in China, revolutionizing the way payments were handled in the region and setting a precedent for future digital wallets.
What is the future of mobile wallet? ›
In the future, AI advisors, digital IDs, and biometrics will be integrated into wallets to enable more seamless ID verification, checkout, access, and travel experience. In addition, features such as ease of use and frictionless transactions can enhance the customer experience with virtual wallets.
What is the difference between mobile wallet and mobile banking? ›
Digital wallet apps are primarily used to store money and payment information, whereas banks allow you to manage more financial information across your accounts. On the other hand, bank accounts and mobile banking apps allow you to do more with your money.
What is the significance of mobile wallets? ›
Convenience and efficiency
Swift and seamless transactions: Mobile wallets offer a quick and hassle-free payment experience. Users can make transactions with a simple tap or scan, significantly reducing the time spent during the checkout process.
Why are digital wallets gaining popularity? ›
Mobile wallets are gaining popularity for a number of reasons-they give users greater flexibility and convenience, offer better security, and are easy to use. As more locations and websites accept mobile wallets we'll only see the continued popularity and use of digital wallets.
What are one of the disadvantages of a mobile wallet? ›
Security concerns: While digital wallets are generally more secure than traditional wallets, they are not entirely immune to security risks. Hackers and cybercriminals can still gain access to your digital wallet or steal your personal and financial information.
Why is mobile wallet adoption on the rise? ›
As with individuals, mobile payments provide improved payment security, faster checkout speeds and better data to track customer trends and inventory. These benefits are driving more merchants to accept mobile payments.
How safe are mobile wallets? ›
In general, digital wallets are considered much safer than using physical credit cards, which can be more easily lost or stolen.
Do you need a bank account for mobile wallet? ›
Digital wallets don't require a bank account at a bank with a physical branch.
Should you use mobile banking? ›
Mobile banking or any other activity that exposes your sensitive data should never be done on public Wi-Fi. If a hacker is monitoring the public Wi-Fi or hotspot you are using, they could potentially intercept the data being transferred to and from your phone and use it to access your banking account.
Mobile Money lets you send and receive money with the help of a mobile phone and the internet, while Mobile Banking allows you to carry out banking related transactions or transfers through a bank app.
Which mobile wallet is best? ›
5 Best Digital Wallet Apps for Android or iOS Platforms in 2023
- 1 - Apple Pay: Best for iOS. ...
- 2 - Google Pay - Compatible with Both Android & iOS. ...
- 3 - Cash App - Beginner-Friendly Stock Trading App. ...
- 4 - Venmo - Ideal for Peer-to-Peer Payment Network. ...
- 5 - Paypal - Ideal for Quick Transactions.
Who uses mobile wallets? ›
Seventy-nine percent of Gen Z consumers are avid digital wallet users, as are 67% of millennials, followed by 62% of bridge millennials and 44% of Gen Xers. Meanwhile, only 28% of baby boomers and seniors use digital wallets. But age is just one yardstick to judge digital wallet use.
Is Google Pay a mobile wallet? ›
Yes. Anywhere that you find Google Pay or contactless payment logos, you can make contactless payments with a supported form of payment that you stored in Google Wallet. Learn how to: Tap to pay with your phone.
When did people start carrying wallets? ›
Wallets were first invented as simple pouches used to carry coins and valuables in the 1300s. The modern bifold wallet was invented in the mid-20th century. Over the centuries, they have evolved remarkably to reflect technological, fashion, and currency changes.
When was Apple Wallet introduced? ›
Apple Passbook was announced at the 2012 Apple Worldwide Developers Conference on June 11, 2012, and released with iOS 6 on September 19, 2012. It was renamed "Apple Wallet" with the release of iOS 9 on September 16, 2015.
When did Google Wallet come out? ›
Originally launched as Android Pay, the service was released at Google I/O 2015. Android Pay was a successor to and built on the base established by Google Wallet which was released in 2011.
What percentage of people use mobile wallets? ›
Digital Wallet User Statistics
In 2022, there were 3.4 billion digital wallet users in the world or 42.6% of the global population. By 2026, the number of global digital wallet users is expected to grow by 53% to reach 5.2 billion, or over 60% of the global population.