There’s a revolution going on. Yes, right now.
You’ve probably seen it on the checkout line at your local grocer, or maybe while getting coffee at your favorite shop. The digital wallet is arriving and the way we pay for things is changing. Soon, spending money will never be the same. The power of the credit card will fade, as we begin paying for everything in a bunch of new ways, from phones to the very clothes we wear.
Around the world, big banks, tech giants, and startups are fighting to build the digital wallet of the future. They’re writing apps, designing smart cards, and revamping everything in between in calculated efforts to win our hearts and earn our trust.
Whether you’re clinging to cash or holding tight to your credit card, it’s going to become more and more difficult to avoid the evolving future of money.
Google starts the revolution, Apple sets it on fire
Every revolution has its watershed moment, a “shot heard ’round the world” that makes you realize there’s no turning back. The money revolution’s moment came in October 2014 with the launch of Apple Pay in the United States. Apple wasn’t the first company to design a way to pay with your smartphone, but it was the first to do it seamlessly, proving that this technology is not a novelty.
Digital wallets come in all shapes and sizes. We’ve seen tap-and-pay on our smartphones, gift-card apps with scannable QR codes, and even digital smartcards that mimic the features of a regular old credit card but come with extra features. Google was first with a true “digital wallet” contender in 2011, its tap-and-pay Google Wallet, but the feature never gained much traction.
In the three years that followed, Google made little progress with Wallet. It couldn’t rally enough fans behind the project, get enough phone makers to support it, sign up enough credit card companies and banks, or get merchants to upgrade their terminals to support NFC mobile payments.
Frankly, Google Wallet and Softcard were just never seen as a threat to the status quo.
Apple Pay changed all that when it launched with support from thousands of merchants and dozens of banks, and quickly grew to support 90 percent of iOS devices. There was also Softcard, a rather unknown digital wallet backed by T-Mobile, AT&T, and Verizon. Softcard ended up merging with Google Wallet to help close the gap between it and Apple Pay. Frankly, Google Wallet and Softcard were just never seen as a threat to the status quo. It wasn’t until September 2015 that Google put together its new payment solution to take on Apple Pay. It called the app Android Pay.
Abdsalem Alaoui Smaili, Managing Director of payment solutions company HPS, told Digital Trends that many other firms will soon build wallet apps thanks to Apple.
“The market has been hesitating to go to NFC … but having Apple come into this field is really a confirmation that it will be the platform that will be taken by most,” Smaili said. “Now that they’re in, all the others who were hesitating will now massively invest — because usually Apple is a visionary on anything they do.”
Meanwhile, other payment innovators, such as Samsung, look to circumvent the entire NFC part of the equation, so merchants need to do nothing to get compatibility going. Its payment service uses magnetic loop technology that’s supposed to support just about any card reader on the market today.
But as much as we blame Google and Softcard for their slow pace, there’s another big reason it took so long to see the war for our wallets to crawl out from under that rock: the payments cartel.
How cartels impede innovation
Since Apple Pay’s debut, alternative payment methods have exploded. Whether it’s Android Pay, Samsung Pay, Coin, Swyp, Stratos, Plastic, or whatever else is launching tomorrow, countless tech firms and startups are popping out of the woodwork to join the race.
But this wasn’t the case a little more than a year ago. Before Apple Pay, Google Wallet and Softcard struggled to hold ground, and many of their problems stemmed from the industry they tried to take on.
“Everyone’s trying to get their own piece of the payment processing pie,” Patrick Moorhead, President & Principal Analyst at Moor Insights & Strategy, told Digital Trends.
He’s referring to the companies operating behind the scenes of the credit card world. The payments industry — including everything from credit cards to bank accounts — is steeped in cartels and fiefdoms. Each group claims fees and controls a particular realm, whether that’s issuing cards, processing transactions, or some other part of the payments puzzle. Getting a revolutionary money app like Apple Pay or Google Wallet to work requires many of these cartels to give their consent. It took Apple’s blood, sweat, and tears to get its payment app to work. It also involved partnering with individual banks to support debit cards and other secure transaction requirements. Even Samsung has to play nice with banks and other players in the payments cartel to get secure credit cards to support its Samsung Pay platform.
But while Apple courted banks and payment processors, it made enemies. Another cartel has lined up to take on digital wallets, this one representing the many merchants sick of paying credit card fees. 7-Eleven, K-Mart, Dunkin Donuts, and others banded together to form the Merchants Customer Exchange (MCX), which offers its own digital wallet, CurrentC. At one point, CVS and Rite Aid even said no to Apple Pay, expecting to soon support MCX instead. They soon reversed this decision, and while CurrentC is still around in limited use, one look at its Play Store rating says everything you need to know about this digital wallet. While CurrentC is dead in the water, there’s no doubt that some merchants will continue resisting digital wallets as they gain traction.
Despite its accomplishments, Apple Pay is still a far cry from a true universal digital wallet. Pain points remain for digital wallets of all shapes and sizes. Yet the concept set fire to the old ways of paying, and as a result, there are now plenty of fresh faces looking to take on the payment cartels. Android Pay is finally in full swing, and a host of other competitors are emerging, including ones looking at digital wallets in an entirely different light.