Digital wallet and self-check-out - are they the answer to shorter check-out queues.
Market Size projections for Mobile Wallet Range from $41 B (per Forrester Report in 2013) to $64B (emarketer report in 2014) in US by 2017. There is an even more impressive report card for Global Mobile Wallet market with estimates ranging from $ 191 B for 2017 (ABI Research for NFC Mobile payments) to $ 1602 B (Transparency Market Research, Oct 2014) by 2018 with a CAGR of 31% from 2012-18.
As we debate the correctness of various estimates, the writing is clear - these are well and truly exciting times for Mobile Payments in general and Digital Wallets in particular.
While there is a huge potential to transform the payment space, even at current levels of maturity the market is crowded and fragmented (at least in the US) with many players aiming to take a slice of the pie - see image below on who the players are and what are the various types of offering (US Context)
Image1: Overview of Different Types of Wallets and Players
One would imagine that with the plethora of options,the awareness and adoption rate will be quite high, however the reality is quite contradictory - there is a high awareness (~ 80% in US) but a dismal adoption rate (< 20% in US) (src: Yankee Group 2014 report)
So what is really the problem - does the wallet not provide the convenience or benefits? Are consumers worried about security and data privacy?
Let's now consider the benefits of a Digital Wallet. Many proponents of the digital wallet will argue that usage of wallet results in shorter check out queues. While there are really no proven data points to quantify the actual saving, on the contrary there are some examples where different digital wallets have failed miserably on usage and performance that they had to be discontinued eventually ex: Starbucks Failed Square Wallet Rollout in 2012. Also, more importantly there's nothing particularly inconvenient about traditional card payments at POS / checkout. Given this kind of a scenario, the Mobile Wallet as a replacement of Credit Card with marginal improvement in checkout times will not be a great business case.
So now let's look at critical success factors that will help in adoption and in providing better benefits to customers. These factors fall under 3 different heads:
Customer Centric Design -Foundation of any good mobile wallet offering
2. Address Customer and Merchant Concerns
Image2: Key Concerns
3. Provide Value Adds
Image3: Key Value Added Functionality
In short rather than limiting the benefits of the wallet to just faster checkout times (yes this is absolutely needed but it is the bare minimum), the focus has to be more on looking at the digital wallet as a customer experience enhancement platform with built in components to address concerns and provide value adds so as to enable smooth payments by the wave or tap of a phone.
The success of any digital wallet program will depend on the extent to which it scales across the 3 dimensions of design, handling concerns and providing value adds to customer (see image below)
Image4: Attributes of a Good Digital Wallet Solution
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