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Today’s open-loop mobile wallet offerings generally concentrate on three things: payments, loyalty and promotions. Most are primarily focused on enabling the smartphone to connect with a merchant’s payment terminal (wirelessly in the case of NFC or optically in the case of 2D bar codes) for the purpose of transmitting the information that typically resides on the mag-stripe of a consumer’s traditional credit/loyalty card.

Some are taking a fundamentally different approach to the mobile wallet by concentrating on digital asset management. Apple, for example, has positioned their Passbook offering as a platform for receiving, organizing and dispensing digital facsimiles of tickets, passes, coupons, etc. How does Passbook work?

Take coupons, for example. When a Passbook user visits the app or website of a participating merchant or brand and sees a coupon/promotion that they like, they simply tap/click on the coupon’s Passbook icon to save it to their Passbook account. Once saved, the coupons are available for use by the consumer during checkout.

Now let’s consider a ticketing example. Flight or concert tickets, for example, can be purchased in the customary manner using an airline’s or concert promoter’s web site or mobile app. Upon completing the purchase, the user is presented with the option to save their boarding pass or event ticket to their Passbook account. Once saved, the assets are available for presentation at the relevant venues.

A quick search of the Internet indicates that merchants, brands, consumers and developers are rapidly endorsing Passbook. Given the simplicity of the Passbook solution and its apparent growing acceptance by all participant categories, one is forced to conclude that a community-centric approach to digital asset creation and management is creating a successful mobile wallet offering for Apple.

It appears that Apple has done with the mobile wallet what they did with the smartphone: they created an ecosystem that enables a network of third parties to use their collective intelligence to increase their wallet’s value.

In terms of value to the consumer, it is clear that there is great value in a mobile wallet ecosystem that increasingly enables the mobile consumer to easily find, select, organize and use digital assets. Consumers are benefiting from this by saving time and, in many cases, significant money. The same, unfortunately, cannot be said about other open-loop wallet solutions – especially those with a payment-centric focus.

Truth be told, today's payment-centric wallets neither offer an ecosystem nor offer digital asset management. Most, in fact, provide little to no discernable value to the consumer at all. Some actually complicate the consumer's life by requiring them to execute nearly twice the number of steps to consummate a purchase as they would with a traditional credit card. Since the consumer receives no benefit for expending the extra effort, they either use the offering only once or eschew it altogether.

Most payment-centric wallet providers actually recognize this and are forced to promote less tangible benefits such as the promise of greater security and ease of replacement in the event of a wallet’s loss. Unfortunately, this is not a value proposition that would entice most consumers to change their habits and behaviors. In my experience, consumers generally don’t like change and they especially don’t embrace change for the sake of addressing a potentially negative experience that they feel, rationally or not, is in their power to avoid.

Considering the above, the key lessons for the open-loop mobile wallet provider are these: First, your solution must greatly simplify the consumer’s life or provide them with a tangible financial benefit. Second, it must support an ecosystem wherein a community of participants can easily contribute content that will enhance the wallet’s value. Third, your solution must easily support digital asset creation and management. Finally, it should emphasize payments only after creating a tangible value proposition for all ecosystem participants. Do these things and your open-loop wallet will be successful.

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User Comments – Give us your opinion!
  • Paul Tomes
    Fantastic article and your conclusion, at least in our experience, is absolutely spot on. While we (PassKit) provide the online Pass Designer and Analytics tools, as well as the ability to integrate Passbook Passes into existing business process, without a well thought our 'campaign' (be it financial incentive or otherwise) then take up from consumers is not as dramatic. On the other hand where the 'reason for the Pass' is clear (incentive, improved experience etc..) customers are jumping in very quickly. To cite one example, Subway in Hong Kong when they issued coupons via Passbook were in over 10,000 people's phones within 24 hours.
  • Jose Palomino
    A good idea is worthless if there's no clear value proposition attached to it. Before going to market -- even if the market is ripe for the taking -- every customer has to ask what their product offers the customers. One way to do this is to simply ask themselves: Would I change my habits with the product I'm offering? Because that's really at the heart of it -- just like you said. Customers are set in their ways -- humans are set in their ways -- and won't change unless there's a real incentive for doing so. Jose Palomino
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Latest posts by Steven Gurley
Steven Gurley
Steve Gurley is broadly recognized as an industry expert and thought-leader in mobile and mobile content management solutions. He is a widely published author of numerous papers, articles and blogs on mobility and serves on numerous mobile advisory boards and committees, including serving as the current chairman of the Digital Screenmedia Association's committee on mobile. Steve is currently the President and CEO of Pyrim Technologies, a mobile business and new market development company.
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