POINT OF view
Thin Is In:
The Future of Digital Wallets
By Christina White, Manager Experience Design, SapientNitro
What’s in your wallet? At the very least, most of us carry some sort of payment method, whether it’s
a credit card, debit card, or cash. But you probably have a bit more — loyalty cards, business cards,
receipts, insurance cards, IDs, subway tickets, event tickets, and the list goes on.
When we talk about what a digital wallet is, it’s not just a way to pay with a device. It’s taking that actual
wallet in your back pocket, with all of its contents and associated behaviors and integrating it into some
type of digital device. Most often, that device is a mobile phone, though it doesn’t necessarily need to
be. And the phone has already started to replace the wallet. From digital family pictures to an online
banking app, the phone — and consumer behavior — is adopting the new digital wallet.
Let’s talk about digital wallets through the eyes of the consumer, how they fit into the consumers’
everyday lives, and what we can expect to see in the near future.
DIGITAL WALLET 101
Payment Financial Coupons Comparison Tickets/
Method Management Shopping Passes
Much of how we define the digital wallet is a way to pay with our phones. But it goes beyond that.
Just like with a physical wallet, it’s an ecosystem of applications and experiences. Let’s look inside
the digital wallet and break down the individual aspects within it, including secondary functionalities
that help us spend our money.
The payment piece is at the core of the wallet. But in order for digital wallets to be readily adopted by
the consumer market, marketers and developers will need to figure out exactly how to process the
payment and in many cases provide a worthy incentive to change from the superfluous, but simple
plastic swipe we often do today. All other aspects of the wallet enhance the experience, but Payment
Method is compulsory. Take these two examples of how:
1. PayPal. PayPal has made its mark by serving as the middleman for online payments, and has now
taken that model to real-world payments. Through a partnership with Bling Nation, PayPal is making
strides in digital payment through the use of NFC-enabled stickers (we’ll discuss this more later),
which allow contact-less payment on any type of mobile phone. They give consumers the ability to
make quick, simple purchases on shopping sites with their existing PayPal accounts. Those accounts
can be tied to credit cards or debit — where the real profit is.
© Sapient Corporation, 2011
POINT OF view
2. Starbucks. Starbucks is a retailer that has embraced the mobile retail space. Their app lets
consumers load Starbucks gift cards onto their phones and reload from their debit cards, credit cards,
or PayPal accounts. In essence this comes off as mobile payment to the consumer when it is actually
making debits off of a loyalty/gift card program. Once loaded, customers can scan their phone using
a POS system at a Starbucks counter and easily “pay” in a contact-less way. Extending the experience
beyond payments, this program also allows its users to build loyalty points that can be redeemed for
free coffee or coupons, thus retaining customers and increasing return visits.
Financial management (e.g., Mint.com) is a way to easily manage finances on a mobile device, not
necessarily purchasing or paying. It’s one of many tools to help users better manage and spend their
money based on their payments and transactions. Mint’s model is to push relevant advertising from
3rd parties that are best relevant to a customer’s financial situation.
Coupons (e.g., Groupon, ScoutMob) and check-in incentives (e.g., shopkick) tap into the social,
communal idea of group discounts and shopping incentives. Many of these services allow a consumer
to activate a coupon (often through a store WI-FI or phone GPS) that exists within their digital wallet,
or check in at a store to receive promotions or discounts. By providing this incentive, retailers hope
to draw more consumers into their stores.
Another tool to help assist users to spend their money better is comparison shopping. Now, the digital
wallet can scan UPC or 2D barcodes in a store to find the cheapest price, customer reviews, or other
options such as product demos, related content, or additional inventory. Red Laser has been the leader
in this space and was quickly acquired by eBay. The carriers are becoming emerging players in their
ability to pre-load their mobile app scanners on devices prior to customer purchase.
Tickets and Passes
It has been interesting to watch the digital wallet transform ticketing and transit functions (e.g., public
transit passes) and check-in (e.g., airline check-in, sporting events) standpoint by using “wave and
pay” instead of traditional methods. However, North America has been slower to adopt these methods
based on more fragmented infrastructure (carrier and networks) and less dense urban areas that
require transit for daily commutes. Ultimately, it may be these applications that offer the most benefit
of convenience at the POS, which is why it will be critical for NFC to be tied to other value-added
experiences to drive consumer adoption.
Devices that will be replaced* TV 5% % of respondents
by mobile phone users Personal ID card 18%
according to mobile phone eReader 22%
users worldwide, June 2010 Car Keys 24%
Video Recorder 27%
Credit Card 31%
Note: Ages 18+, *within 5 years Digital Camera 52%
Source: Oracle, “Opportunity Calling- iPod or MP3
The Future of Mobile Communications”, Player
Sept 22, 2010 GPS 54%
These examples prove that the technology to make digital wallets happen is here, but are consumers
ready? Oracle reports (as shown above) that the credit card is one of the top items that will be replaced
by mobile phones. If you look at the top three — digital cameras, music, and GPS — those are already
on our phones. How do we figure out how to make it real, useful, and easy?
© Sapient Corporation, 2011
POINT OF view
THE NEAR FIELD COMMUNICATIONS (NFC) CHIP
What is it?
Current efforts like the pay pass or the wave and pay (introduced by credit card companies) were the
first introduction a contactless payment through Radio-Frequency Identification (RFID) tags. NFC chips
are a new standard of RFID tags that offer a security layer that allows secure transactions through any
In many instances, NFC and mobile payments are seen as synonymous, but they are not. The NFC
chip is really a technology means with which to communicate and store data. And if we think about
communicating, we often forget that there are other ways to apply what’s already out there in regards
to passing info from one point to another — like scanning bar codes with your phone or presenting
QR codes from the phone to be scanned by a retail POS. Companies are also looking to use the NFC
chip technology outside of the phone. For instance, BMW is thinking of using it within the key itself to
allow remote starting, payments, and more. And, recent buzz about the digital wallet space is being
heightened by Google and Apple’s announcements that NFC chips will become a standard feature in
What is its value?
With credit cards and one-click online shopping sites, customers don’t really want or need another
way to spend money faster. And when we look at the difference between swiping a card and tapping
a phone, there’s not much tangible value added.
But what the consumer does want is a new way to spend money wiser. The digital wallet has the
opportunity to provide that — a contextual, intelligent, relevant way to spend money. The benefit of
NFC chips isn’t the ability to substitute a phone for a plastic card. The potential is in having intelligent
computer chips, phones, and POS devices that provide a better, smarter experience for the consumer
before, during, and after the shopping experience. These experiences can draw in the consumer
before they enter the store through incentives (couponing) or support tools (list making) and continue
the conversation after they leave the store by offering relevant, contextual incentives based on their
purchase, more personal customer support catered to the products they just purchased, or relevant
content to help them take advantage of the products’ full potential. This ongoing conversation between
the retailer and consumer builds a cycle of brand loyalty.
Financial institutions, carriers, and retailers are all looking to own a piece of the digital wallet pie,
and all three are critical in making the digital wallet a useful, seamless, everyday part of life for the
consumer. Let’s discuss what each one brings to the table, and what they still need to learn.
Financial institutions. Financial institutions are a must-have for a truly integrated digital wallet.
Without them, there is no digital wallet, because they are the players that have the actual ability to
process your payment and offer credit card and banking services. Their motivation is simply to make
money off of your money. But they are still offering non-memorable services for the most part.
Their challenge is the plan of attack against the competitive set of other institutions which most often
are held back by the lowest common denominator standards that all institutions abide by, and their
dependent connections with retailers who accept that form of payment and house the equipment (POS)
that the solution must be compatible with. Credit card companies, however, are now starting to make
their direct play as American Express announced desktop and mobile app service “Serve” in Spring of
this year, and Visa announced their digital wallet to arrive this fall.
Carriers. The digital wallet movement currently lives here for North America, and it’s the carriers that
bring the networks and the actual devices into the consumer’s hands via our current post-paid culture.
They’re motivated to get the consumer’s recurring monthly payments because the more things your
phone does, the more you rely on that network. The North American conundrum is that we have big
carrier services (think: AT&T, T-Mobile, Verizon, and Sprint) that all offer varying numbers of devices
and operating systems. These carriers are here to stay, so they’ll need to adopt some sort of standard
© Sapient Corporation, 2011
POINT OF view
Currently, AT&T, Verizon, and T-Mobile (in process of being acquired) are creating a joint venture
together called ISIS, a planned mobile payment network that will create a standard solution for both
retailers and consumers. This system will use smartphones with embedded NFC chips for contact-
less payments. Outside of payments, they’re also working to introduce retailer-friendly value added
Retailers. Retailers are the key influencers when it comes to driving consumers to use the digital
wallet, because they have the most direct contact with the consumer through day-to-day transactions.
Retailers own the shopping experience and their challenge remains the same as it’s always been —
to differentiate themselves from other retailers and drive sales. To do so in the digital space, they need
to embrace the idea of “everywhere shopping,” the multi-channel experience. However, their often
razor thin margins make it difficult to make larger technology-based investments, whereby the store
multiplier effect greatly increases costs and keeps operating budgets small.
Startups and digital players. Startups and digital players are a new breed of player that is gaining
fast on mobile and the digital wallet, such as Google and Amazon that thrive on technology. The growth
of cloud services, increase in dotcom spending, and bridging between dotcom and brick and mortar
is opening up a new opportunity space that is not tied to antiquated store hardware. They also wisely
leverage the Y generation and early adoptors that is ready to change shopping habits.
As the digital wallet becomes a reality, there are two things to keep in mind:
It must be adoptable. Similar to the digitization of the telephone, digital wallets may start simply by
using an easily adoptable “pay now” button. Value-added services will likely be critical in getting the
user connected with benefits beyond an already convenient “swipe ‘n pay” routine. However, avoiding
the clutter will be key for eliminating frustration and paving the way. Our digital lives are becoming
increasingly cluttered between emailing, chatting, social networking, blogging, using apps, and more.
It’s important to avoid a bloated phone. At the end of the day, the wallet is something that is a day-to-
day necessity so it must stay “slim” while becoming ever more convenient, intelligent, and relevant.
THE DIGITAL WALLET CHALLENGE
There are complex questions that still need to be solved. Financial institutions, carriers, and retailers
need to figure out how to work together. They need to figure out how to get enough consumers to use
the digital wallet and enough merchants willing to accept mobile payments. It is dog-eat-dog, while
co-operation is probably the best approach as this space is thwart with 800 lb gorillas that have to
either work together to move things forward or be left behind. All the while, never forgetting that the
user experience must remain easy to use and intuitive. This is where Apple may have enough edge
in a mature, best-in-class, mobile ecosystem (devices, apps, and app store) and brand equity to get a
jumpstart on a bigger carrier conglomerate, or perhaps they will be the spark that ignites ISIS adoption
… all too exciting to watch unfold.
At the start of this paper, we asked, “What’s in your wallet?” But it seems that the question is really,
“What IS your wallet?” The technology is here. Now we need to decide what the wallet will be —
whether a phone, a key, intelligent credit card, or more — and figure out how to make that digital
wallet work — not just for the consumer, but with the financial institutions, the carriers, and the
retailers as well.
ABOUT THE AUTHOR
With a background in Industrial Design, Christina specializes in
the design & strategy of smart and usable experiences for mobile
and digital display interfaces. Recent work includes award-winning
AutoTrader iPhone application and The Home Depot’s inventory mobile
handheld, which recently rolled out to stores nationwide. Other clients
include Coca-Cola, DirecTV, GE Energy, and Michelin. Christina is part
of SapientNitro’s Mobile & Digital Display Center of Excellence.
© Sapient Corporation, 2011