Thousands of years ago, humans traded grains and rocks for goods. We dug into our satchels for bits of silver. How little things have changed. Generation after generation has spent its days “pulling stuff out of our pockets and handing it to someone to get something back,” said Edward Castronova, a professor of media at Indiana University.
The author of Wildcat Currency: How the Virtual Money Revolution is Transforming the Economy, Mr. Castronova believes, finally, a transformation is coming.
No more pockets. No more reaching, even. Just tapping on the lens of your glasses will bring up a tally of your financial assets, from dollars and bitcoins to loyalty points and frequent-flyer miles. When you want to obtain something, some chip will calculate the best combination of currencies and execute the transaction for you.
We will become the perfect consumer: a “walking source of purchasing power, able to freely walk through the world and acquire whatever you wanted,” Mr. Castronova envisions. “Until a little red beep would go off telling you that you’re out of money.” Little wonder that tech companies, and payment companies, are racing to beat each other to dominate in the space, most recently with Apple’s announcement this week of its launch of the Apple Pay device-based wireless payment system, compatible with the next generation of iPhones and Apple Watch.
The wallet, that overstuffed modern satchel — “an organizer, a secretary, and a friend,” asSeinfeld’s George Costanza once described his book-thick pocketbook — could have as little as five years left to live, the author suggests. Digital devices are already organizing our lives like secretaries, and connecting us to our friends. The only thing missing is the money.
“Our vision is to replace this,” Apple chief executive Tim Cook said during Tuesday’sproduct gala, gesturing to the image of a bulging black leather wallet on the giant video screen behind him.
Justin Sullivan/Getty Images
Apple Pay, a contactless system, which uses near-field communication technology, will be available on its newest iPhones and the Apple Watch, starting in the U.S. in October.
The company will have to succeed where others have only struggled. Google Inc. has yet to make its Google Wallet, launched in 2011, take off on a wide scale. PayPal, which was acquired by e-commerce company EBay in 2002, has expanded beyond facilitating online payments and into physical stores, but hasn’t achieved widespread traction either.
But Apple has shown a knack before of being able to improve on existing products and make them ubiquitous, noted Maynard Um, equity analyst for Wells Fargo in New York. There were MP3 players around before the superior iPod roared into the space and put one in every music lover’s hand.
“If there’s one thing that Apple has done well in the past, is it’s gotten people to adopt technologies that they have not been willing to in the past,” he said. “It’s all about the execution of the technology.”
And Apple has built features into its platform that positions it a few steps ahead of its competitors, said Forrester Research analyst Denée Carrington.
Consumers have been reluctant to change the way they pay because many existing mobile-payment platforms are cumbersome, requiring users to figure out which app to use, and pull it up to make a purchase, she says. There hasn’t been a compelling reason for merchants to change their ways either, she added.
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Apple Pay, however, is using its PassBook app to automatically detect when the user is in a store and prompt them to pay, she said. The Touch ID function to detect a user’s fingerprint as a security measure when paying will also make consumers more comfortable, she added.
“They have designed a lot of things into the experience that are different than the way other [digital] wallets work,” said Ms. Carrington. “That will help remove the barriers that have existed before, and make it easier to even think about trying it,” she said.
And because iPhone users are typically early adopters of technology — and big spenders — merchants will be more willing to change their current point-of-sale terminals and adopt Apple Pay to cater to this audience, she added.
Apple’s entry is enough of a threat that some analysts, such as Piper Jaffray’s Gene Munster, have downgraded EBay.
The iPhone maker has already signed deals with Visa, MasterCard, American Express, and major retailers including Staples, McDonald’s and Whole Foods.
Still, Ms. Carrington doesn’t think the five-year deathwatch for the wallet is particularly realistic.
“There are things in your wallet, such as an ID,” she said. “And times when you need to have coins or cash. And that’s not going to go away entirely in the next year, or five years.” Mr. Um wonders how you deal with paying digitally for groceries when your device batteries are dead.
Jack Dorsey, CEO of payment-systems’ maker Square Inc., who was a co-founder of Twitter, said he is preparing for Apple, with its marketing and execution prowess, to finally shake up the sleepy digital-payment space.
“[Near field communication] is not new technology … It really hasn’t taken off because there hasn’t been a huge consumer demand for it,” said Mr. Dorsey, at the launch of Square’s Kitchener, Ont. office on Wednesday. “We think Apple may change that.” (Square launched its own wallet app in 2011, but pulled the plug earlier this year — now Mr. Dorsey says he doesn’t consider Apple Pay competition, but rather a complement to his system, which is agnostic about the form of payment).
But for all his anticipation of the end of the wallet, Mr. Castronova doesn’t actually believe it will be Apple — or any of the big Silicon Valley firms — that will put an end to our bulging pockets. As with Facebook and Twitter and social media, he expects a small, nimbler company will develop the ultimate solution to the modern satchel.
“It took a small company to take the full plunge,” he said. “The same thing is going to go on here.”
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