Final Frontier for the Virtual Wallet

The final frontier for the Virtual Wallet is not commerce. What is the final frontier? Virtual ID. This came to me today as I read Wired Magazine’s article on Dunkin’ Donuts roll-out of their new Dunkin Donuts smartphone app, that they compared to, and claim as similar to the Starbucks smartphone app for payment and loyalty.

The majority of news and effort seems to be around the battle payment cards (Visa and MasterCard) are waging to bring their card-based solution into the digital present in preparation for the uber-digital future. This battle is being fought with the Google, Amazon, Groupon and other global companies like them in the world that already hold the transaction attention of consumers.

My Experience

We read about people that try to experiment and spend a year without cash  to prove the virtual wallet works. These interesting case studies expose more doubt than proof. Here’s a good example of my experience, and what makes the choice between using what’s in my wallet, vs. what’s loaded on my smart phone.

I go to Starbucks regularly, and have the Starbucks Android payment and loyalty app loaded on my phone (latest update needs some work, it was a step backward in managing multiple virtual loyalty “cards”) It works, but I still have to carry my wallet. Why? I still must have my ID, to drive my car to get to the Starbucks store. I need my ID to be recognized if I’m asked for identification should I get in an accident, or be witness to one, and so many other reasons.  So, I pull out the physical card for Starbucks, and pay with that. It’s a habit, but it’s also better. It’s gold, people ask me about it, it has my name embossed on it, and it “brands” me, like it or not as a “Starbucks” expert. The mobile app is transient and doesn’t do this, as well.  …but back to ID, and the final frontier.

Virtual ID?

The physical wallet just is not going away easily and as long as we all have to carry around a driver’s license or photo ID there really isn’t a huge incentive to change to the mobile payment app. It’s just as easy, and some (not me) think it’s more secure to pull out the Visa card at the Mall, or the American Express Black Card for a business dinner. The mobile payments business in the virtual wallet is not yet able to compete with itself – because the anchor is still your personal picture ID or driver’s license.  If you are a world traveler, this may also be your passport. And, don’t forget about your healthcare ID.

Your Social

Another point of epiphany for me was a call from my son, a student at the University of Minnesota. He called this morning to ask me for his Social Security ID Card. It sits in my safety deposit box, along with my wife’s, daughter’s, and my own Social Security ID Card. In fact, my own Social Security Card is my original card, decades old, with a grade-school scribbled signature on it.  I can tell you that I have NEVER ever had to produce it, it has not been seen by anyone but me, my wife, my mom and dad, and perhaps one or two other relatives.

My son needed to produce his Social Security Card for an employment opportunity he had on campus. Seemed an odd request that they would not rely on a photo-copy, nor would they look into his other records on file with the University that had it when he applied for admission. Apparently with identity theft on the rise, we’re going to need our physical wallets even more, not less.

Final Frontier for the Virtual Wallet

I’m not advocating that we should be any less careful with our ID cards, I’m pointing out that the need to carry a wallet remains high, for this one single reason. That reason is to have your ID with you.  Until that barrier is solved, it’s still easier to pull out the Dunkin Donuts or Starbucks card over the smartphone app. Or, at the very least, you can have a virtual wallet, but you must carry both a physical wallet and your virtual wallet until this ID problem is solved.

Will we have digital driver’s licenses or passports anytime soon? I don’t know.

To Ponder

What’s funny about all this is that a “wallet” is a “container.” It contains your ID, cash, credit cards, a slip of paper with your anniversary on it, and other items that you want handy at all times. A true “virtual wallet” must really be a “container”, not a virtual cash machine. It needs to be the hyper-secure, un-breach-able system that allows you to store your ID – your identity, your virtual cash AND other items that you feel necessary to keep handy in your back pocket.

The Challenge I See

Seems to me that the cross-industry and cross agency barriers are very difficult to overcome. The rush to engage and connect with customers lead by retailers’ loyalty programs is way out in front, but unfortunately lives in a silo. How can the agendas of all the players be synchronized to meet the needs of consumers? how can they all come together to enable the real value in a virtual wallet? Who is the right entity to bring together the five players?

1. State and federal government (primary issuers of valid identification – driver’s license and passports)
2. The efforts of the commercial banks (Visa, MasterCard, etc.)
3. Enterprise initiatives of Google, Amazon and Groupon
4. Healthcare providers that connect you physically, with your payer, provider, and healthcare records.
5. The vast array of individual payment apps for retailers that went ahead based on loyalty (Starbucks, Dunkin’ Donuts

None of these five necessarily have an internal need for a disruptive innovation that can align each of their unique objectives for a virtual wallet that would enable them all to gain materially by replacing the physical wallet. However, that is going to be the precise and unavoidable barrier that each individual effort, must overcome to really drive the concept of a virtual wallet that truly replaces the physical wallet.