iphone image for DT 1.15After years of watching quietly while Bling Nation, Google, Isis/Softcard, PayPal and others tried and failed to popularize the digital wallet, Apple finally launched its product in October. What’s the impact? The concept of the digital wallet is now dead, and it’s been replaced by the physical-digital wallet.

The traditional leather wallet is a storage mechanism for consumers’ cash, credit, debit and loyalty cards and coupons. The first generation digital wallet, starting in the late 1990s with PayPal and eBay, was a software solution that provided convenient way to store cards for repeat online purchases.

Once the iPhone came about and mobile commerce began to take hold, Apple extended this model to iTunes, and Google followed with Google Play, both providing a software solution for repeat online purchase via the mobile device. Braintree and Stripe extended this even further, capturing the in-app and mobile transactions that took place outside of iTunes and Google Play.

Mobile network operators (MNOs) sought to take the digital wallet concept offline by storing payment credentials within the only part of the mobile device that the MNOs could control — the SIM card, and transmitting the credential to payment terminals via a near field communications (NFC) radio. This introduction of hardware componentry into the payments game created a tug-of-war between the haves (those that had influence over hardware components) versus the have-nots (those who did not have influence over mobile hardware).

So, we are left with the death of the digital wallet concept and only the physical wallet survives, but in a mobile form. What does this mean? It means that banks can pretty much give up on their plans to launch their own wallets, they will need to partner with the operating system owners, or go home.

Mobile Payments Today, January 2, 2015
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