Why Square Wallet failed, and why Coin card is next...

Great aticle and analysis Bret,

I think the success that Starbucks are seeing is because they have not invested in a new payment method, but they have invested in their relationship with their loyal customers.

A meaningful relationship (by enriching, experience, etc.) not only drives short term usage, but also longer term loyalty. 

For Starbucks their business is selling coffee to customers, the Mobile App is now another valuable weapon in their armoury.

I think it's a generational thing. My GenY nephew hits a button on his Webmail, selects a file from his hard disk, stares at the screen for the next 5-10 minutes that it takes to finish attaching a large file to his email, before he can hit the Send button. Having been initiated into email via a desktop client like Outlook - where I simply copy-paste the file and hit the Send button and move on - I find the Webmail procedure to be excruciatingly painful.

In the same way, my nephew's set will find it perfectly natural to fire up a mobile wallet app, wait for several seconds / minutes to locate the store, all for the pleasure of using a mobile phone to make a payment unlike me who'd find it much easier to whip out my wallet and use my plastic card.

Personally, SQUARE Wallet should've targeted the 18-25 years segment. It failed because its promo videos featured people who looked to be in their late 20s or early 30s.

Talking about Coin, an overwhelming majority of readers who took the survey on my blog post said they'd pay not more than US$ 10 for it. If the company sticks to its $50 / 100 price, I agree that Coin's going to be DOA.

Ketharaman,

Maybe, but the generational thing doesn't explain the success of the Starbucks app as it stands today, nor does it explain the success of Kindle, Spotify, iTunes, etc. Behavior shifts across the board when it is compelling, Square Wallet wasn't compelling enough because shifting from a swipe to a tap or a face authentication isn't exciting enough to warrant a wholesale change in my behavior.

We all continuously change our perception/vision, it's a natural process. Brett is happy to swipe his Moven card now, yet less than a year ago he was adamant during our heated debate that Moven should be card-free... Tempora mutantur.

It's always easy to have a clear 20/20 hindsight. Should Moven fail, few would doubt the conclusion that it was just a "better bank proxy" and that consumers don't need "day-to-day bank a/c experience"...

My point is simple: any true disruptor will face setbacks and failures. It's part of the game. Especially when we are talking about fundamental "tectonic" shift in behavior.

Yes, there have been several high-profile flops in mobile payments (G, Sq, Clinkle, etc). Likewise, there were tons of MP3 players not going anywhere fast, with geeky appeal and limited value proposition. Then Apple came along and the rest was history. It was not about MP3 ("mobile payments"), it was about UX, ecosystem and business case.

Alexander,

Saying "I'm happy to swipe my card" is not correct. Gregory's Coffee doesn't have a contactless POS so I can't use NFC there. Moven is card free for 25% of transactions in the US, which is more than 25x the national average of contactless transactions. 

My advice on payments has been absolutely consistent. We don't need sexy payments, it is what happens before and after the payment which will be the game changer. Remember the disappearing payment post?

My line on this has never changed. Please don't twist my words to fit an argument you are making, which I don't understand.

BK 

When IBM sold off its PC business, it didn't mean that PCs were dead. The fact that Lenovo took it over and has turned it into a profit machine doesn't mean that PCs are thriving. IMO, success or failure of an individual brand (iPod, Amazon) does not reflect the fundamental validity or otherwise of the generic product (MP3 player) or business model (online). It means largely that the said company did a great or lousy job.

I thought you'd unequivocally written off swipe when you'd written, "So does this mean there's life left in cards? Not a chance." Many years later, your stats seem to imply that contactless accounts for merely 1% of card transactions. To me, that suggests that swipe is very much alive and kicking. 

If the payment itself is irrelevant, the genre "mobile payment" should become defunct as well - nothing invisible deserves a whole product category named after it. The spotlight should shift to "mobile loyalty", "mobile engagement", etc., if those are the only things that really matter. The same way it's called "smart meter", not "smart electricity". Starbucks and Uber are invalid lighthouses for mobile payments. 

Brett, my argument was simple: it's OK to be wrong, especially with emerging technology. 

Ketharaman, I am not sure I agree: sometimes a single player (e.g. Apple) opens up a whole new industry (e.g. mobile music or smartphones). Take wearables as an example: we can argue about it until the cows come home, yet Apple, Moto and Samsung keep pushing ahead and the market gets formed. 

Hence, it's not necessarily about wrong approach or product, it's about being too early to the market (plus execution, as you pointed out). It's the second mice that gets the cheese, and pioneers are the guys with arrows in their backs (I have a few in mine...)

2012: "The likelihood is that the digital wallet, whether via a smartphone initiated payment or simply built contextually into shopping experiences, has got too much momentum now to save the [card] paradigm." (Thank you for the pointer, Ketharaman)

@AlexP:

Steve Jobs was named as the Best CEO of the Century, credited for disrupting not one or two but three different industries. Therefore, Apple is perhaps an outlier that can't be treated as representative of the whole world of business.

While a single player may open up a whole new industry, that doesn't automatically guarantee success for every player that enters that industry. Banks have been making huge profits in the credit card industry but SQUARE makes a whopping loss.

The converse is also true: For every Blockbuster that failed in brick-and-mortar, there's a Warby Parker that began as a pure play online player but has now decided to open physical stores.

Ketharaman/Alex,

We both know where you guys stand. You know where I stand. My view is that there is no way that we will meet in the middle, but I will meet you at the cardless destination...

The fact is clear. Uber, Starbucks, iTunes and other mobile wallets or payment apps have shown that mobile payments are mainstream and are increasing in velocity faster than any other transaction modality. Using the US as a case in point is crazy because they are 10 years behind the rest of the world. Let's talk UK, Australia, Singapore, Hong Kong, even Poland for goodness sake and contactless is already well established.

My points on value add before and after the payment being the threat to the swipe has been absolutely consistent. In fact, read BANK 2.0 authored in 2009 which details this, including the predicition that by 2016 mobile payments (mobile wallet, P2P, dedicated payment apps, etc) will overtake card payments in terms of net number of transactions.

There is not a universe in which I am going to agree that cards and cash will stick around indefinitely, because that is just crazy talk.

BK