This fall, the launch of Passbook marked Apple’s first foray into the crowded arena of alternative mobile payment schemes. Considering its well-founded reputation for producing disruptive tech, it’s tempting to assume Passbook is destined to do the same. And there’s certainly an argument to be made that the company has some distinct advantages in its favor – not least, a fanatical and still-growing iOS user base of tens of millions in the U.S. alone.
But a few high-profile failings have shown that the company is indeed mortal, most recently with the high-profile implosion of Maps, or the ill-fated Ping – Apple’s half-hearted attempt to shove social networking into iTunes that was mercifully cut short (in favor of integrating Facebook and Twitter).
Before weighing in on Passbook’s fate, let’s first look back at some other potentially disruptive digital commerce technologies in the past –both successes and failures – to determine what crucial elements will be required to hit critical mass with consumer adoption.
Let’s start with the losers. Remember Flooz? (No? Exactly!) The late ’90s dotcom paid precious startup cash to Whoopi Goldberg to promote an alternative currency to be used just on the Internet, but it was offering a solution to a problem that didn’t yet exist. The need for an alternative form of payment online was simply not clear to consumers at the time. It failed to attract merchants and users and was eventually shut down after about two years amid a bankruptcy filing.
More recently Facebook – certainly another obvious pick for assured front-runner status – killed off its own high-profile foray into virtual currency. After three years of trying, the company unceremoniously shut down Facebook Credits in June, opting instead to focus on beefing up its payments capabilities.
And then there’s Google’s efforts to do away with the physical wallet. While it’s too early to dub it a loser, the company has been tight-lipped with data around transactions processed via Google Wallet. And continued media coverage points to slow adoption, and leads to questions around its necessity. While the wallet-free concept is appealing on the surface, the rub it seems is that the effort on the part of the merchant is complicated and costly.
PayPal was among the earliest contenders to seize on a market opportunity that many major credit-card companies and traditional commerce outlets missed (or underestimated). By providing an easy way for people to pay online without having to sacrifice time or security, PayPal offered a simple solution for a problem that was emerging alongside the rise in e-commerce and especially online peer-to-peer marketplaces like eBay. PayPal will now try to extend its reach offline having partnered with Discover Financial Services and multiple retailers, including Home Depot and Barnes & Noble.
Another standout market transformer – which, notably, primarily benefits merchants – is Square. Using a postage stamp-sized dongle, Square has significantly expanded the offline commerce market by enabling anyone with a smartphone to sell anything, almost anywhere and anytime. Its traction has been measurable, and it recently announced that it is already processing more than $10 billion in payments a year, with some three million merchants using its service. A recent deal with Starbucks should help propel user adoption dramatically.
If it’s not broken…
The key with both winners is ease and convenience — both PayPal and Square require little effort on the user’s part, but offer high value in return. PayPal builds on something most people are already using, namely online commerce , but adds the critical element of security.
And Square requires a fraction of the investment on the part of the merchant compared to traditional POS card readers – which can cost $10,000 to $15,000 – and actually makes the transaction easier for all parties involved. Let’s also not underestimate the appeal of the ‘cool’ factor with Square. As an example, take your local food truck, which now has access to cutting-edge technology enabling it to deal with potentially more customers; consumers benefit by simply being able to quickly sign their bill with a finger and receive an instant email receipt. Because of these ease-of-use advantages, Square has exploded while mobile wallets have at best lingered, with none poised to catch on.
Recently, I attended the Money 2020 conference in Las Vegas where attendees and speakers were providing a reality check on the state of mobile commerce. In one session, Jennifer Schulz, head of global product strategy at Visa, summed up the issue succinctly: “There won’t be mass adoption of mobile payments until there is a better consumer experience beyond the card.” I couldn’t have said it better myself. (Full disclosure: I work at edo, a card-linked offers provider).
Duplicative vs. Daring
Companies looking for innovative ways to engage with consumers, especially around mobile payments, should first and foremost focus on building solutions that are easy for all parties involved ̶ consumers, banks and merchants ̶ and that tap into a long-standing need in the marketplace. In the case of Passbook, the problem I see is that it’s not layering anything new onto my iPhone experience. To the contrary, my question about Passbook is why I need it, when I already have all the apps I want on my smartphone.
Even at this early stage of its functionality, Passbook should be more than simply an aggregator of digital cards and instead offer something truly unique. Currently, users must first download the brand’s mobile app (Starbucks, United Airlines, Sephora, and so on) and then connect the app into Passbook. Early users are finding this process confusing and duplicative, expressing frustration around the manual work needed to add different cards and services into Passbook, with limited return. In addition, the number of participating merchants is still very limited, and even those that exist often offer restricted availability. For example, McDonald’s has integrated with Passbook, but (curiously) only in France.
Passbook then is at best a novelty at this point. While there’s certainly the possibility Apple will revamp the app wholesale, and in turn gain meaningful traction, I’m more inclined to put my money on the bet it’s destiny is to join poor Ping in the ignominious Apple Graveyard. I think that nothing will replace ubiquitous credit and debit card payment systems until a service comes along that is a dramatically simpler solution, or offers compelling additional functionality that encourages people to leave their cards (and wallets!) at home. Given Apple’s dominance as the mobile device of choice around the world, Passbook has as strong a shot of success as anyone, but only if they figure out how to overcome these limitations. Until then, plastic will still be king.
Photo courtesy of Shutterstock/Pressmaster.