Why the digital wallet is the key to the future

How will customers pay for goods and services in the future, and how will they manage their money? How will access to the internet via smartphones change consumer shopping habits? How will companies and customers integrate the online and offline worlds? These are some of the questions taken up at the first-ever Money 2020 Conference, held in October in Las Vegas.

Mobile payments are growing fast. By the end of this year, the US market will be worth $640 million, and by 2016, the total transaction value of mobile payments in the US will be $62.24 billion. By that year, 48.1 million Americans will regularly use their mobile phones to pay for goods and services, according to eMarketer, the digital marketing research company.

Google, the search engine giant that last year posted revenues of $37.9 billion, is vying for a piece of this market with Google Wallet, a mobile payment system the company is planning to re-launch with updated and added features this month. (Among those features is a rumoured physical card that consumers can use when digital payments are not feasible.) Osama Bedier, Google’s vice-president of payments and a former PayPal executive, said that the company today is “striving to create a better, smarter digital wallet that works everywhere”.

Knowledge@Wharton sat down with Bedier to talk about what’s ahead for Google Wallet and mobile payments. An edited transcript of the conversation follows.

Knowledge@Wharton: Describe the current mindset of the consumer when it comes to paying for goods and services – online, offline and on their smartphones. Are they frustrated?

Osama Bedier: I think consumers are frustrated. They see a lot of the apps, they understand that there could be value there, but they’re almost always let down by technology. It’s actually a rare moment when the consumer’s expectations of technology surpass our ability to deliver…. Consumers want their smartphones to do more as it relates to the shopping experience.

Knowledge@Wharton: Are retailers and sellers just as frustrated?

Bedier: Merchants have always wanted to connect better with their customers – especially their most loyal customers. Very few of them have figured out how to leverage technology and get more out of that relationship. The majority of merchants have a die-hard segment of customers who [account for] the majority of the company’s transactions. They know this, but they actually have a hard time reaching those customers when it matters most –whether it is to get them into the store, getting them to increase their basket size while they’re in the store or bringing them back again. Despite all of the advances retailers have made so far, they haven’t figured out exactly how to do that.

Knowledge@Wharton: And a digital wallet is the answer?

Bedier: I think a digital wallet will be the answer. I don’t think it is today. The digital wallet is more of a concept than a reality. There are a lot of companies trying to work toward it. We all name it the digital wallet, but it’s not there yet.

Knowledge@Wharton: What’s in it for consumers?

Bedier: Consumers are actually pretty straightforward. They want to save time, they want to save money and they want to feel appreciated. And they don’t want to work too hard to do these things.