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From the back pocket to the front

From the back pocket to the front

Marcel Woutersen

Senior Communications Consultant

18 February 2015

From the back pocket to the front

At the end of January, Amazon closed its mobile wallet app, after only six months. According to analysts the company had difficulties breaking into the mobile wallet market and it faced some tough competition with Apple and its Apple Pay platform. So, was the test a success or are digital wallets doomed to fail?

The Amazon wallet beta was silently introduced in June 2014, as a test for the company’s virtual payments app. It promised to eliminate physical credit, debit and loyalty cards. The underlying idea was that you wouldn’t have to carry around tons of cards and heavy wallets anymore, but instead the information is stored in a digital wallet. 

The potential go-to digital wallet for consumers

Did Amazon live up to that promise? Not really. An Amazon representative said that they have learned a great deal from the beta program and that they will look for ways to apply these lessons in the future and it is unclear if the digital wallet will be released again in the future, having failed in a difficult market. If anyone had the opportunity to breach the market and become the go-to digital wallet it was Amazon. According to Cnet,”The company offers the unique combination of a large registered customer base, hefty resources at its disposal, and an uncanny willingness to play the long game.”

At the time of the introduction, Amazon faced competition from other mobile wallet initiatives who experienced the same issues. Google had some problems with the Google Wallet, finding it was hard to convince anyone to pay for anything outside of Google gadgets. Facebook tried to introduce a gifts shopping and delivery service, but users made it very clear that they didn’t want to buy goods or services on the social network. PayPal was the only serious competitor, having introduced the first generation of digital wallets in the late 1990s together with eBay. Nowadays PayPal has 137 million registered accounts, compared to the 215 million active customer accounts at Amazon.

The potential to boost revenues and reduce costs

A lot of companies want a piece of the digital wallet market, but why is a mobile wallet strategy so important for them? “A mobile wallet has the potential to boost revenues and reduce operating costs,” according to Mobile Payments Today. “This may be accomplished by lowering fraud loss and/or payment processing fees. Mobile commerce is much more powerful than e-commerce ever was. This is largely because mobile is much more than just a channel — it is a bridge between the physical and online worlds.”

This solidifies why Amazon was so keen to introduce a mobile wallet, but it seems there was just one more hurdle to take. Without a seamless integration with a mobile phone, a mobile wallet won’t be used that much. “If Amazon cracks the mobile puzzle, it could end up creating a digital wallet that consumers are comfortable using anywhere,” stated the article on Cnet when the Amazon wallet was introduced.

And then, last October, there came Apple with its own digital wallet, integrated on the iPhone: Apple Pay.

The end of the digital wallet

Apple incorporated its mobile wallet solution directly into its operating system, and simultaneously incorporated a SIM-independent secure memory chip, an NFC chip and a fingerprint reader on the new iPhone. Rick Oglesby writes in the article ‘How Apple killed the digital wallet’ on Mobile Payments Today: “The mobile payments service Apple Pay was the combination of a hardware and operating system designed to facilitate transactions everywhere the device goes. The operating system is the only be-everywhere alternative that can seamlessly interact with every application, every website and every but or byte that crosses the mobile device.”