In this acute age of class warfare, elitism, and social media tools, somewhere in the middle of all of it, the retail and financial services industries are spawning the latest "Must-have" digital bling: mobile wallets (or digital wallets).

Will credit cards become a thing of the past?  Will retailers pull away from all the transaction fees they have to pay on credit card purchases and go to a smartphone app-based transaction model instead? What about other payment processors like PayPal, Google, and others?

These are some of the strategic questions starting to pop up across different boardrooms and industry analysts as the idea of putting together a "digital wallet" application for smartphones begins to get real traction.

The technology that would make a smartphone capable of this type of service is NFC (Near Field Communications). This chip technology was not put into the Apple i5 which is very surprising.  It is backed by many of the major carriers and financial service companies.

There is a push to see this capability brought out to consumers.  It is not a matter of if this capability will be implemented, it is just a matter of when.

Many People Succumb to Peer Pressure
Will there be demand for this "mobile wallet" capability? Are you kidding?

What about the fabricated sense of "membership" and showing that country club elitism by whipping out a Gold or Platinum card? Those days are coming to an end with a smartphone-based digital wallet.

You can hear the conversations between Lance Remington IV and Montgomery Crestwood, Esq. as Monty tries to pick up the tab at Bushwood Country Club:

You have an American Express Gold Card? How passé!  Check out my smartphone with my digital wallet app. Get with the new century, Monty.

Having a digital wallet app will be the equivalent of Lance driving up in a new firemist red Bentley V16 while Monty pulls up in a chocolate brown Pontiac Aztek waving his Gold Card.

The same goes for younger, status-conscious consumers.  With all the peer pressure that you see in young consumers about wearing the right label gym shoes and jackets, the "cool way" to pay for things will be through their smartphone. You don't have a smartphone? You will be branded as an outcast.

Some retailers might be real happy if the trend continues. With major retailers like Wal-Mart, K-Mart, 7-11, CVS Pharmacy, Best Buy, Shell Oil and others backing the development of MCX, Merchant Customer Exchange, we could see a paradigm shift in the way consumers buy things at stores and restaurants very quickly.  All the pieces are being developed.

A Demographic Gold Mine
I discussed this in an earlier article:

Most retailers are looking at this new approach as a way to increase sales and reduce credit card transaction fees.  What they are only beginning to understand is, what effect does this have on understanding consumer behavior, demographics and micro-marketing to a target market?

Expect more research to be done on how to maximize the time you spend in the store. Will they try to steer you to another department after you have made a purchase in department? Chances are, they will.

Will they start to analyze all the demographic information that will be captured? Yes. How can you sell to your customers, if you cannot identify who your customers are?  (Their buying habits, their preferences, their motivations, their frequency of visits)

Will a shopping center be able to cross-market merchandise from several stores to the consumers who are walking through? All of these capabilities have to be addressed and incorporated to some backbone capability that will support the shopping center.

This is an area that will see a lot of changes quickly. Instead of having 4-5 retailers develop different solutions, in the same amount of  time, all their efforts could be pooled in together and establish one approach.

Keep track of what they do with MCX and NFC because it will definitely affect retailers and financial services companies as well as property owners of commercial buildings and shopping centers who need to make sure their infrastructure supports it.

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Copyright 2012 - James Carlini