The mobile wallet has not panned out in the way the tech industry expected. But Kenneth Chenault, chief executive at American Express, is not giving up hope just yet.
During a conversation at the M1 Summit in New York Tuesday, Chenault attributed the recent failure of some of the most-hyped mobile payments products to a lack of focus and an inability for these services to equal the established ease of the credit card. But he remained confident that a fundamental transformation in the payments industry was still underway.
“I don’t think [the mobile wallet] is dead. At the end of the day, the failure of these early wallets was not being focused enough on customer needs,” said Chenault, echoing many early concerns about mobile payment services like Square. “But what’s important to remember is that payments and commerce is going through a fundamental period change. Plastic is not going to go away, but you will see a demarcation between two types of payment companies: those that innovate, and those that stay in the status quo and facilitate payments. [The latter] will be reduced to a commodity.”
The excitement around mobile payments has waned over the past two years leaving many of the highest-profile projects gasping for air. Early this week, Square pulled its Wallet app from both Google and Apple’s Appstore, ending an experiment which was widely considered the future of the company. The company replaced the wallet app with Order, which exclusively allows you to order ahead at cafes and restaurants.
In many ways, the Order app reflects the type of scenario-specific approach that has catapulted Uber to the forefront of the tech industry. The taxi-hailing app has exploded in the public consciousness over the past year, and seems to have replaced Square as the example-par-excellence within the catechisms of the tech industry.
“The best innovations are the products which you do not even realize you had a need until it was being met,” said Chenault. “That’s what Uber does. People didn’t come up with Uber through research. [What makes Uber work is that] there’s no change to the basic payments infrastructure at all. That’s the philosophy which we’re following.”
American Express has — to an extent — taken a page out of Square’s playbook. The company has made a big investment in bringing payment infrastructure to small businesses through its Serve project. The initiative, which Chenault says processes over $6 billion in annual transactions, mirrors the approach that Square took on the merchant-side of the business, using mobile to lower the costs and bring an existing technology to an underserved market rather than creating a new service for an existing one.
The takeaway here is that defining a mobile product segment (payments) through the lens of an older model (cash) is problematic. As Chenault points out, what makes the mobile device so valuable is that it follows the user throughout their purchase journey. The idea that you would create a product based around one stage (i.e. payment) in that journey seems to be a waste of the device’s potential. Instead, the companies that bundle discovery, transaction and fulfillment (e.g. marketplaces such as Uber) tend to win out.
*** Notes ***
- In a conversation with Rachel Sklar, venture capitalist and blogger Mark Suster, made a phenomenal comparison between Apple and China. Speaking about the need for “mobile-first” startups to consider the web, he warned entrepreneurs about the dangers of relying too heavily on Apple’s App Store, saying: “[Apple] is a lot like China… It’s mostly benevolent, and encourages businesses… until one day, you’re shot in the back of the head and you didn’t see it coming.”
- The Uber-swoonfest continued as the taxi-hailing app seems to have extended its stay in the “do-no-wrong” phase in its startup lifecycle. When asked which companies they would like to go back and work for, Santya Patel, the one-time VP of product for Twitter-turned-investor, and General Catalyst’s Spencer Lazar both gleefully chose Uber. (The runner up was Airbnb.)
- Overall, there seems to be renewed interest in applications which use the information already collected on a mobile device to drive the product. The term “contextual-driven applications” was a serious contender for the most used piece of jargon.
Steven Jacobs is Street Fight’s deputy editor.