I think the whole “mobile wallet” thing is kind of overblown. What’s specifically occasioning this is the recent announcement of the Merchant Customer Exchange (MCX), which is a bid by a number of large merchants to develop a smartphone-based mobile wallet. Upload your payment info to the app, go to one of those merchants, pay with your phone. They get all sorts of awesome data on you – not just your detailed and identified purchase statistics, but also whatever phone data you sign away in the EULA. They use this to drive some incredible micro-targeting, convert you with X% more efficiency, and huzzah. I have two problems with this.
The first is scale. I’m sorry, but even if you’re Wal-Mart you don’t have the leverage in trying to get your customers to use your mobile wallet. Customers will go with whatever’s easiest to use and accepted at the most places, and basically 100% of the time the easiest thing to use is whatever’s built into the phone’s OS. Apple and Google control basically the entire smartphone market, and large merchants will be under pressure to accept whatever mobile wallet solution is built into iOS and Android. Maybe merchants will say that you can’t participate in whatever special deals or loyalty programs without using the MCX. Good luck with that.
Secondly and more fundamentally is that I’m coming to the conclusion that Big Data in the customer space is a classic Red Queen’s race
. The whole idea of individualized targeting is to capture share of wallet, but the sum total of all of these can’t really move the needle of total customer retail spending. That’s driven by much larger factors like the terrible economy. Once you grant that assumption, the whole data-driven-retail-transformation falls apart. The best micro-targeting and analytics strategies may offer fleeting advantages, but they will diffuse quickly across the entire industry. Retailers will be trapped in a race of ever-increasing sophistication and most likely software costs that spiral upwards while delivering little and fleeing competitive advantage,
I don’t really know what to do with that thought yet. It will all shake out in the long run, as these systems become lighter and omnipresent for retailers at every scale. But, you know, Keynes long run dead and so forth.