Is There Any Money for Carriers in the Mobile Wallet?

Right now, U.S. network operators are pushing the concept of the “mobile wallet,” which would enable subscribers to buy all sorts of digital goods with their handsets. The problem? There’s little evidence consumers would prefer whipping out their phones for transactions in place of using cash or credit cards. Carriers, then, would be wise to follow Sprint’s lead and view themselves not as ersatz billing companies but as extensions of existing payment systems to mobile.

If It Ain’t Broke…

AT&T recently launched payment trials to allow its 93 million customers to charge digital content directly to their wireless bills. Users simply enter their phone numbers instead of a credit card number and are sent a text message asking them to confirm the transaction. Similarly, Verizon Wireless earlier this year stuck its toe in the mobile payments water with an offering that allows users to charge their phone bills up to $25 a month (in an apparent attempt to limit its liability) in digital goods from some undisclosed gaming sites and social networks.

The problem with many of these initiatives, of course, is that they provide a new “solution” to replace systems that already work just fine. Cash, credit cards and online payment companies are sufficient for most of us whether we’re buying a bike at a brick-and-mortar retailer or a song online. That’s especially true when it comes to the kind of digital purchases the carriers seem to be pursuing. It’s true that typing in a 16-digit credit card number is a pain on the phone, but I already have online accounts with iTunes, Android/Google Checkout and PayPal, where my credit card information is stored and a purchase is only a click or two away. So what incentive is there for me to set up yet another account? Network operators and handset manufacturers, by and large, fail to bring anything compelling, innovative or more convenient to the table, despite countless NFC-powered trials at the retail counter to peer-to-peer payments between subscribers.

Sprint: Bridging the Mobile Gap?

That’s why I think Sprint is onto something with its new “Mobile Wallet” feature, which launched a day prior to AT&T’s recent announcement. The offering serves as something of a mobile bridge to my existing financial accounts, enabling me to pay for both digital and physical goods with my phone but have the transactions billed to Visa, PayPal, Amazon, etc., through a single PIN. Sprint’s initiative doesn’t try to replace any billing mechanism. Rather, it extends existing transaction systems to mobile, increasing the carrier’s value to the consumer. The operator becomes a part of the transaction without trying to own the transaction.

Just how well Sprint will be able to monetize its new m-commerce offering is unclear — but that isn’t the important question right now, because the feature will first have to gain traction. Instead of immediately trying to generate revenue, the carrier is wisely planning to pre-install the app on many of its handsets starting next year and offer free access to customers of its Everything Data plan. That’s a sure way to get customers to experiment with the feature and get them accustomed to the idea of buying goods with their phones. And that would be a big step in spurring the adoption of m-commerce services such as mobile ticketing and coupons, which could truly offer some value to consumers.

The only merchandising partners that have been disclosed for Sprint Mobile Wallet are Gameloft, Namco and SkyMall, so the carrier has a lot of work to do in adding some high-profile retailers to attract the attention of consumers. But if Sprint can deliver a solid user experience and make mobile purchasing easy for consumers, the service could be a key selling point against the competition. And this could mean mobile payments at the retail counter — opening a door that hasn’t budged in the U.S. despite the industry’s best efforts.

Question of the week

Will carriers make money through the mobile wallet?
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Colin Gibbs

Colin Gibbs

Founder and Principal Peak Mobile Insights

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