Payments do not make a wallet

31 07 2013

There are many “wallet” offerings becoming available each month, only in the past few days, we’ve seen announcements from MasterCard, ISIS (USA only), VISA, Zapp and a few others. But how many of them can actually claim to be a real wallet?

Mobile Wallets need to do everything our wallet does, and more...

Mobile Wallets need to do everything our wallet does, and more…


The fact is that mobile wallets almost all focus purely on making a payment, and that payment is made against either a consumers debit or credit card. While they all get a lot of press it seems, I still don’t understand why no one has looked at how these product offerings can be classed as digital wallets.


I choose what I have in my wallet

My first issue with almost all digital wallets is that they force me to spend my hard earned money using a particular debit / credit card. That on its own is quite frustrating, but it can get a lot worse in the world of mobile payments. In some cases I am forced to have a particular card and card scheme to be able to use the wallet, that isn’t that flexible at all. Does MasterCard for example really expect me to ditch my banks VISA card in favour of their card scheme just so I can complete a transaction on my phone? Hold on though, things can get worse than this still. Not only could I be forced to use a particular card scheme, with a particular card with a particular wallet, I may also be forced to have a particular SIM from my mobile network and the final nail in the coffin is have to have a particular device (which rules out the iPhone by the way).

Not sure I like all these things dictating me what my wallet is, the fact it holds nothing else but a payment card and how I can spend using my wallet. I personally like having the choice to put easily any number of different payment cards in my own wallet, including loyalty cards which double up as payment cards in certain stores (ala Starbucks).


My wallet holds more than payments

When looking at not just my wallet, almost anyone’s wallet the first thing I notice is that actually, debit / credit cards take up very little space. Do this right now, and see if you get a similar result. As I type this, I’m opening up my wallet to count no less than 9 card locations. That’s quite a lot. But how many of these actually hold a debit or credit card….The answer, 3 in my case.

I have my own personal debit card used for my day to day spending, my company Credit Card, and a joint Credit Card I have with my wife for weekly spending on shopping for example. Don’t miss understand me, the remaining card slots are all filled. I’ve an Oyster card (used for transport around London if you aren’t familiar with this), and the other slots are all made up with membership cards, oh and 2 loyalty cards being forced to share a slot.

I would also like to point out, that just like Sheldon Cooper in the Big Bang Theory (if you ever watch that TV show) I’ve had to abandon many a loyalty scheme or membership card from my wallet, simply due to the lack of space.

But let’s continue, what else makes up the contents of my wallet. Well, cash makes up a little part of it, numerous deals and vouchers (a lot from Sainsbury it seems), travel tickets, VAT receipts for petrol and a number of other receipts. I also have a key code dongle thing for entry to the office and a few bits of paper with notes on particular deliveries I am expecting.

So with my wallet content in mind, why do digital wallet companies claim to deliver a wallet when they essentially force me just to carry a single payment method and nothing else??? I’m sorry, but that is never going to replace my real wallet.



While I’m moaning about my wallet contents not being made available, I should also have a moan at the fact that these mobile wallets also don’t add any real intelligence. At most it seems I can check my balance, that’s not that intelligent is it. Why can I not see my receipts, my spending habits, my loyalty points, how long I have to go to be able to redeem loyalty points, when a particular voucher expires etc… I expect a smartphone to be smart, and any wallet on my smartphone to also be smarter than my actual physical wallet, and yet the vast majority of wallet offerings simply aren’t smart.

All in all, when I look at the mobile payments landscape I am not surprised that no one method rules the world or that any have really gained traction (with the exception of the Starbucks loyalty app).


Zync Wallet?

Those of you who read my blog or know me will already know that obviously I have an interested in mobile payments and digital wallets, after all my own company has designed and built the Zync wallet app. But my issues and comments in this post are spot on. They are also in many ways the issues that have driven Zync Wallet in the direction it has taken.

We firmly believe that if a mobile wallet is to really work, then it needs to replace everything that I can carry in my wallet today (with the exception of those items that really do need to be physically on you….I’m sure you can think of a few). Our Zync Wallet is all about flexibility, security and intelligence.

Zync Wallet is flexible enough for you to top it up using any bank account, we even provide you with the option to hook in access to your bank account directly into the wallet. We also won’t limit you to one payment method, rather we have many others coming online in the wallet very soon. We also won’t limit you to what you can store in the wallet, we provide support for membership cards, discount schemes, loyalty cards and schemes, deals, vouchers and a lot more.

But I would say our biggest thing is intelligence and relationships. Our wallet is about making the wallet intelligent, so it can help serve you better. That means it lets you know easily how many loyalty points you have, what deals you have, where you can find the best deals, how many points you need to gain before you can redeem them. It even helps you build relationships with your favourite stores while helping them provide you with better customer service.


Conclusion, if there is one…

Is that payments alone do not, and will not ever deliver a great digital wallet. Mobile can deliver so much more, and yet the majority of offerings to date all seem to scrabble over market share of card payments, rather than focus on real consumer and business needs, and what can be achieved with mobile…As the title says, payments do not make a wallet…

The cost of taking our money

29 07 2013

As consumers we don’t really think about the costs involved with doing business, all we care about are the products or services we are looking for, and getting them at the lowest possible price. Oh, and to be fair, there is nothing wrong with that. All consumers know there are costs involved in running a business, but some costs, like a business paying to take our money, we often forget about…

This is something that even the EU is now trying to look into, proposing a cap on the “interchange fee” charged by your bank back to the merchant for taking your money from your debit / credit card. The problem here though, is that those fees will probably move elsewhere, meaning it will be pushed onto the consumer – more than likely in the form of us having to pay annually for the privilege of having a debit / credit card (something many EU banks already do).

So in this post I want to quickly look at costs businesses have to pay in order to take our money…

Someone has to pay, every time we use these

Someone has to pay, every time we use these


The average costs

When a business accepts debit / credit cards, they pay for being able to provide that option to us, the consumer. Now you may think that it’s a cost based purely on the transaction process itself, but you would be wrong. Typically, in order to take card payments, a business has to register for merchant services (SMEs and independents usually go through high street banks – though the actual merchant service is usually sub-contracted out). The business pays a monthly fee for this, and the cost of that will depend on the business, amount of transactions they process and their value. But many small businesses, start-ups etc pay around £30 per month per terminal. On top of that, there is a standard flat fee per transaction that goes through the machine, again this will vary in price. For debit cards though, a start-up maybe looking at loosing 20p per transaction, while credit cards may also have a fixed fee associated with them, but will include a fee based on a percentage value of the transaction value. To give you an idea here, this fee could be anything from 1% right up to 4% of the value of the transaction, again depends on your business, your provider etc etc.

Now these fees may seem small, but remember these fees per terminal are per month, and that every single transaction is subject to these fees. When you look at tight operating costs and small profit margins, you all of a sudden see why providing card facilities isn’t always an option for a business.

Here are some facts and figures. The average cost of a credit card transaction (remember average) to a business is 36.2p. This cost drops to 9.6p for debit cards, while handling cash is 1.5p. If you were to calculate your shop sold 100 items in a day – that would mean you have spent £36.20 in handling those transactions (if credit card). Now multiple that by 300 working days (just for simple maths) and you see you have £10,860 lost in credit card charges (not including the monthly fees). Now, for many SMEs, independents, start-ups, actually any business, this is a large chunk of money lost.  Obviously these are just some figures to illustrate my point, and that point is that actually, processing cards is not cheap.

So with these sorts of costs, is it any wonder that businesses want a cheaper alternative, and are actively looking for alternatives.


Will Mobile drive down costs?

Mobile payments are the most obvious alternative to typical card transactions. But there are 3 different form factors of mobile payments at the moment:

  1. Typical card processing, but using a mobile phone as a card terminal
  2. Using NFC technology for contactless payments
  3. Use real mobile payments, originating from mobile devices and no need for cards at all


So, option 1: Companies like Square, iZettle, Sumup etc provide a dongle that allows any business to turn their smart phone device into a device that allows them to process card transactions. This proposition brings down the monthly cost to the independent and SME business – they no longer need to pay for their merchant accounts with high street banks etc. But these solutions are still expensive for the merchant. Typical fees are at least 3.75% per transaction! That’s very high and ultimately expensive for the merchant. You must remember that these are still card transactions, so in our example earlier, the £30 per month fee may have been removed (saving the company £360 over the year), but their fees have gone up, so still looking at £10,000+ in card charges.

Option 2: Use contactless technology…Well you still need merchant accounts here, so you are still paying your £30 per month (if not more if your bank charges etc for NFC enabled technology). However, your card processing fees will drop a little – and this is because at the moment the interchange fees on an NFC transaction are lower than those associated with Chip and Pin transactions, signatures, and card not present. But this is making only a small dent in the overall fees paid, and again the merchant in our example is shelling out £10,000+


Option 3: Real mobile transactions offer real options to merchants. Since they aren’t dependent on card schemes such as VISA, MasterCard, there are less companies involved in the transaction handling process. This means savings can be made in every step of the process, and these savings are passed onto the merchant. Companies like CloudZync and their Zync Wallet product provide drastic savings to businesses. Take our merchant example, with CloudZync the merchant pays no monthly fees, and since they are processing 100 transactions per day, are simply charged 1p per transaction. That means their daily processing fee has dropped from £36.20, down to £1. So the business annual handling fee drops from in excess of £10,000, down to just £300 for the year.


Cost of business, and cost of not adding value

What we must remember with mobile though, is the potential here to add value to the merchant – consumer experience and relationship. While cards, cheque and cash provide payment methods, mobile has a lot more to give (just as it does with our emails, social connections, organisers etc). Mobile transactions can be the gateway to greater consumer merchant engagement, better shopping experiences and ultimately, provide a potential tool to ensure business growth.

So while this post really is focussed on the cost of doing business, and potentially doing business with mobile devices, we should also remember the cost of potentially not doing business with mobile devices….Can a business afford to not make processing savings and not increase customer engagement and retention? I don’t know any that can afford to miss out on both…