Mobile Follow Up

I read an interesting article today about how the U.S. is currently lagging behind even the developing world in using cell phones as wallets (mwallets). In a recent survey conducted by Forrester in 2010, they reported that less than 6% of American adults have ever used a mobile wallet. I imagine that this statistic is supposed to make us all shake our heads, reel back and say, "Whaaaaa??? BUT WHY?! We're supposed to be the most powerful nation in the world!"

Well, I have to say that I think that this statistic, although accurate, is unfortunately a bit misleading. The American Adult doesn't really have that many opportunities to use a mobile wallet, even if they wanted to! 69% of those in the Asian market, according to Accenture have used their cell phones as a payment device (as opposed to 26% of Europeans and Americans).

But is there no hope? In late 2010, Starbucks launched a pilot (now fully in market) where they offered a closed-loop merchant system, where consumers could download an app that would produce a barcode. That barcode linked to the users pre-paid account, and allowed users to swipe their barcode to pay for purchases at over 6,800 Starbucks locations all over the U.S. So why were they so successful? Well, there's a lot of draw to a system like this. Firstly, Starbucks specializes in hyper-loyal, frequent users that are guaranteed to make small purchases (increasing the value proposition from a customer perspective and decreasing the amount of risk involved). Secondly, they have the advantage of  guaranteed merchant adoption- 6,800 locations could install the readers and provide a consistent, standardized roll out. Combining a high customer value proposition and guaranteed merchant adoption produces a winning combination.

So the next question is, how do we make this MORE successful? What if Starbucks was to join forces with a Target (they already share retail space)? So any preloaded amount on Starbucks could also be used for Target purchases? What if Starbucks say, partnered with a large issuer, say Visa, to offer an awesome promotion for users to get a free $5 credit? What if Starbucks started partnering with other demographic-friendly companies (Apple?) to offer a new way to spend those loyalty points (apps? games?)?

But there is a limit. It's likely that other merchants will find this model very appealing, but no consumer wants to carry around 6 different apps to pay at 6 different stores. So the real opportunity will lie in the ability to aggregate these barcodes into one app, maybe one that will also use location-based services to know which company's barcode to generate?