[Article written by Paul Crutchley, strategic engagement director, GSMA; Claire Maslen, head of financial services, GSMA; and Marie Austenaa, VP and head of personal data & mobile identity, GSMA.]

You've arrived at a retailer on your local high street, picked out what you're going to buy and you get in line to purchase the item. Just as you hand it over to the cashier you remember that you've forgotten the 20% off coupon on the kitchen table. Do you pay for the item or take the painstaking journey all the way home to get the coupon?

At one point or another we've all experienced this frustrating moment. We as consumers never seem to have the right paper coupon for the right store at the right time. But wouldn't it be great if there was an app or service where you could access all your digital vouchers, loyalty programmes, payment cards, tickets and other items wherever and whenever you want? Odds are that most of us have access to one or more of these services via an application on a mobile device.

Mobile wallets in the UK

While the majority of UK consumers might have heard of mobile wallets, there is still little understanding of what they are and how they work. MPayMe asked 1,500 UK adults whether they had used a mobile wallet such as Google Wallet to buy goods or services. Despite over 50% of the UK population owning the necessary smartphones to make the payment, less than 10% had actually used it. 

The recent wallet wars between Google, Apple and mobile operators only serve to incite further confusion along with the hype and promise of mobile wallets which have been met with public indifference. This is evident on the high street where, for example, less than 10% of Oxford Street merchants were set up to receive mobile wallet payments (MPayMe), defined as NFC or contactless cards.

It's very likely that consumers are in fact using a "mobile wallet" without realising it. For example, Apple's Passbook has been around for a while and now includes Apple Pay. In the US, consumers are using Apple Pay for regular purchases, though it's not deemed to be a wallet. It's considered a repository for mobile cards, loyalty programmes and travel tickets. This is exactly what a mobile wallet is, an app where consumers can put all their "stuff" for when they need it, avoiding the typical coupon conundrum mentioned earlier.

So is there really a demand?

While there may not be a demand for an application called a mobile wallet there is a demand from consumers to have an app or service where they have access to view coupons, travel vouchers and credit cards when they need them, much like Apple's Passbook.

Whether you're a retailer or consumer payment and redeeming coupons needs to be easy, cost effective and efficient. If mobile wallet, or any app or service for that matter has any chance of catching on it needs to make things much simpler for the user. When a consumer reaches the till and is looking to redeem coupons or pay for an item using their mobile device they will be less likely to use a mobile wallet if they have to open more than one application or authenticate who they are multiple times.

Only when mobile wallets simplify this scenario, for example by launching an app directly from the retailer or bank when a customer needs to redeem a coupon or pay, will consumers be more likely to use mobile wallets more regularly.

For retailers, being part of a service that provides a one-stop-shop for all things purchase and loyalty related means they remain relevant to their customers while still adding value. If customers don't have to worry about opening multiple applications to redeem, look at or pay for items they are more likely to use the a retailer's app from research, receiving offers right through to purchase.

How secure are mobile wallets?

Additionally, this type of service helps to further protect consumers’ identities. In a previous article, How Safe is Mobile Commerce? we talked about the security concerns retailers and customers have and also the benefits mobile provides, especially where identity is concerned such as reducing coupon fraud and consumers verifying who they are to receive relevant offers.  

Conversely, a key challenge facing the industry is increasing the security of payments while maintaining convenience for the consumer. Many of today's solutions for verifying credit card transactions and are clunky and cumbersome, with the use of one-time-passwords over SMS, separate number generators, tokens, and  long passwords to remember. With the increased flexibility offered by digital payment forms such awkward user experiences become an even greater hurdle to convenient and secure online payments and authentication.

A potential solution to these problems is the use of the mobile phone as a two-factor authentication device, combining the possession of the device with a secret PIN. This allows the consumer to use something they are familiar with and keep close to them while increasing the security of the payment transaction. 

Will mobile wallets ever be a reality?

What we're trying to do is demonstrate indifference and provide consumers and retailers with applications that are simple to employ and use. The struggle we face is that every partner and brand is slightly different, thus creating fragmentation in the market and a barrier to wider consumer adoption.

The mobile wallet and aggregated service space is massively untapped and retailers have only just scratched the surface. The retail industry has to educate its staff and consumers around the potential – making sure that everyone in the value chain understands the opportunity that passports and mobile wallets present to spur collaboration.

If we can't see an industry that comes together around what could be a good consumer experience it could take a number of years before we see wallet-like services widely adopted.

Paul Crutchley, strategic engagement director at mobile operators association, the GSMA, writes a regular Essential Retail column on mobile technology's influence on retail.

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