Estimated read time: 4-5 minutes
SALT LAKE CITY — Mini's Cupcakes in Salt Lake City is a little retro, and a little ahead of its time.
It's retro because owner Leslie Fiet decorated the bakery with assorted kitsch: an old soda bottle machine, a framed headshot of Audrey Hepburn, and a Donnie and Marie Osmond TV studio play set; ahead of its time because Fiet has a credit card reader that accepts money from cell phones.
She's had the device for a year, but she's still waiting for a customer to buy cupcakes with their phone. That's indicative of the state of the mobile wallet: people aren't quite ready to part with their plastic.
At the moment, the mobile wallet market is fragmented. Some of the digital wallets on or near the market include Google Wallet, Square, Paydiant, DigiMo, boxPay, Lemon Wallet and MCX — the latter being a joint venture by Walmart, Target and other stores.
It can be a little confusing, though. After a year with her NFC reader, Fiet just realized she could accept Google Wallet.
"Yeah, I had no idea that I could," she said, laughing.
A transformation begun
Some wallets, like Square, use QR codes that are scanned at the register. Others, like Google Wallet, rely on phones with near field communication, or NFC chips.
ISIS — a joint venture by Verizon, AT&T and T-Mobile — is betting NFC is the way to pay, and that Utahns are the kind of consumers that will pay that way. This month ISIS began testing its product in Salt Lake City and Austin, Texas.
"Salt Lake was chosen because it's a young demographic, progressive population," explained Dave Roberts, ISIS city development manager. "People here have a tendency to be computer-savvy."
ISIS has installed NFC readers in a number of businesses, such as Mini's Cupcakes, and is selling NFC phones through the wireless carriers. Until now, few of those phones were on the market.
"Four, five years ago, no one had smartphones; and look at how smartphones have just escalated," Roberts said. "We think that's how consumers are gonna adopt this technology."
The Utah Transit Authority, which has installed NFC readers for train and bus riders, is one of reasons ISIS chose Salt Lake as a test market.
UTA spokesman Gerry Carpenter compares the competing mobile wallet technologies to HD video discs. "You look back at the Blu-ray, HD DVD days, and there were competing models for a while until one came out on top as the winner and that was the adopted technology," he said.
Establishing trust and moving forward
Matt Pyles is one of the early adopters. Months ago,he bought a Galaxy Nexus NFC-enable phone just so he could use Google Wallet. There was only one NFC phone he could buy and just one (prepaid) credit card he could use it with.
The first time he used it — at a Macy's grocery store — he confused the cashier.
"I tapped my phone, and the guy looked at me like I was crazy," Pyles said.
Pyles, marketing director at Bambara restaurants, is now installing NFC readers at those establishments.
"It took a long time ... for people to start trusting that credit cards were going to work," Pyles said. "People were kind of nervous about it at first, and I think that's gonna happen with this."
These mobile wallet companies will need to convince consumers that their money is safe with their cellphones. Security vulnerabilities (and fixes) have been reported in Google Wallet and Square.
Roberts explains that ISIS protects customers with a user security code, encrypted data, and the fact that, if lost, the phone and the wallet can be disabled.
The big underlying question is why switch? Why should consumers abandon plastic when plastic works?
"Well that's the real question isn't it?" said Rob Brough, who monitors the state of the mobile wallet for Zions Bank. "What's the real motivation for the consumer, outside of the cool factor, of being able to use my phone? ... I believe for it to really fully adopt it has to be able to fully replace your wallet."
Pyles is more than ready to leave his wallet at home. He gave up cash, he scanned his health insurance cards into his phone, and he's more than ready to have a digital driver license.
Part of the answer to Brough's question might be coupons and loyalty cards.
One of the most successful mobile wallets belongs to Starbucks. The company's reported more than 55 million transactions. Its success may be due to the fact that the app is also your loyalty card and can give you coupons and special offers based on how many lattes you buy.
In a report published earlier this year, Forrester Research forecasted that mainstream use of digital wallets is still three to five years away.
As for Fiet, she is more than ready for what could be the future of money.
"I think it's a fabulous idea, the whole mobile wallet stuff," she said. "I'm the kind of person that I would probably embed it in my wrist if I could."