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Mobile wallet herd-thinning needed

Sienna Kossman

Mobile wallets have been creeping onto the U.S. digital payment scene for a few years now with the enticing premise of making payments simply by tapping a button or scanning a bar code on a smartphone. Instead of carrying a handful of cards and cash, one device armed with an application would be all it takes to access your credit cards, bank account and even retailer-specific rewards and coupons.

It seems as though everyone wants to jump on board and corner their own portion of the mobile payment market and I don’t blame them. An estimated one of every five people in the world owns a smartphone, so there is a lot of potential, but with all the different options available now, it may be hard for consumers to get on board with the idea of mobile wallets, let alone even understand what they are.

Mobile wallet herd thinning needed

Right now one of the most complicated aspects of mobile wallets is the technology behind the service they provide.

For example, some wallets operate through a chip in your smartphone’s hardware that needs to be physically scanned at an equipped merchant’s payment terminal, while others run on cloud-based apps that can be accessed from virtually any digital device for on-the-go shopping or bill pay.

Some are directly connected to your credit cards for general use while others are simply a way to store coupons and vouchers and aren’t a full payment tool. There are also wallets that use a combination of these technologies and according to BAI Banking Strategies, there may even be others lurking in the background.

Yes, there’s a lot going on.

Additionally, none of these technologies are a strong front-runner in the market and until the herd can be thinned, mobile wallets won’t be a major financial player, according to the Northwest Credit Union Association.

And it won’t help consumers understand how they can use these tools, either.

Even if technology is streamlined we might not be able to ditch our traditional wallets completely. Few merchants today support mobile payments, so they will have to get on board with the service before mobile wallets can be widely used by the smartphone masses. However, consumers will have to express great interest in mobile payments before merchants willingly invest in new payment software and hardware, so it could easily become a chicken-and-egg situation, according to David Byttow, a former lead engineer for the Square Wallet.

And then there are the concerns about mobile wallet security. The security measures used to protect plastic credit cards users aren’t effective in a mobile payment setting. With more information stored in one place and often automatically linked for payment, losing your phone could even more detrimental than losing your wallet if protection measures aren’t in place.

“All of a sudden the mobile phone is about to be transformed beyond a spy in your pocket to your bank, your mortgage lender and your landlord,” Jeffrey Chester, the executive director of the nonprofit Center for Digital Democracy in Washington, told McClatchy DC. “In a way, it’s kind of a privacy tipping point, because one single device knows wherever you go your geographic history, your social media connections and your financial behaviors.”

It already seems as if hackers are adjusting to the changes in payment technology. Kapersky Lab security experts have uncovered and analyzed a text message malware sent to Android devices that once opened installs hidden software that will slowly drain any digital wallets connected to the device. Experts are advising digital wallet users to install security software on their smartphones to be safe.

If you’ve stuck with me this far and are feeling a bit lost, you’re in good company. Apple’s CEO is right there with you.

Apple’s Q2 2014 earnings call revealed that Apple currently has 800 million credit card numbers on file with iTunes accounts and CEO Tim Cook recognizes that payment potential. It’s only a matter of time before that number reaches 1 billion and as e-commerce continues to grow, the need for a stable mobile payments infrastructure will, too.

“I realize that there are some companies playing in it, but you still have a wallet in your back pocket and I do too which probably means it hasn’t been figured out just yet,” Cook said during the call.

Sometimes it takes experimentation to find out what works and what doesn’t, so maybe that’s what all of this will boil down to. It seems like ideas are there and the technology is available, everyone just has to get on the same page.

For now, use whatever mobile payment tools you understand and work for you, but don’t donate your trusty leather wallet to charity quite yet.

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