The last two weeks have been a bit strange in the world of mobile wallet. First, Square Wallet came to an end, and just a few days later, LifeLock released scene LifeLock Wallet, product as a result of its acquisition of Lemon Wallet, in a multi-million dollar agreement announced last December. Both events have shaken the community of the mobile wallets worldwide and in Latin America, although opinions vary as to how much.
Square: too much ahead of the curve?
Square launched Square Wallet in 2011 in the hopes of making obsolete the cash registers and wallets. The May 12 officially discontinued the product, removing it from the app stores of Apple and Google. But while the movement certainly made noise, its consequences may not be as serious as you might think.
“In my personal opinion, it means nothing. Or rather, what you mean is that there are still some challenges that market participants need to overcome. In my opinion, the process of ‘virtualization of the money supply’ is inexorable and irreversible”, said Edson Silva, the President of Nexxera Group. After more than two decades in the field of technology businesses in Brazil, the company has recently shifted its focus to mobile and launched the product payment NexxPago.
Pablo Sánchez, CEO of Mango, the developer tools digital payments based Argentina, echoed the views of Silva in the sense that for the general community, the death of the Square Wallet is not as bad as it seems:
“I think the impact is not as great as some might think. Square just made a pivot in one of its products, that’s all. I do not think it has a great impact worldwide, or Latin America. Based on the reports we read on WSJ and other sources, I think the problem has deeper roots related to how the company entered the market and out of control spending”.
Even the impersonators Square Wallet, this is not the end of the road. “Square had his own vision, and capitalized”, Sanchez judgment. “Square began as the ‘dongle’ for iPhone / Android that would allow people to transact with each other. Then gradually changed and focused on small businesses. It was a bold move, and some products, such as POS systems, the online market and some products that are launching soon – they have to prove themselves that they are a good approximation for small and medium enterprises. Other companies (Shopify comes to mind, for example) had a different strategy on how to enter the market. They are now offering very similar products, and they are doing very well”.
Silva was a bit more cautious in their views on the implications for the clones, especially when it comes to investors:
“The fans are important to the consumer, the end user. Stimulate competition, expand the market and improve the services, and that creates efficiency. I think the ‘copycats’ have adopted the slogan ‘copy it and make it better’ of Asia. Many economies improved in this way. Many major companies in Brazil and in the world came up with this model. However, especially in the case of wallets, I think that could cause temporary damage to investors’ startups. Some companies might suffer because of some investors leave”.
Whatever business, entrepreneurs and developers can gather some important lessons from what has happened to Square. Of course it depends on where you think that things went wrong.
“The point is that the concept of wallet Square was using is a bit ahead of its time”, said Sanchez. “It was a little risky to expect people to have the same vision of merging the subscription fees (as can be used in an online service) with off line business of real life, as executives Square did”.
Also at stake are issues of management and capital. The fortune noted that although the company has yet to turn a profit, has incurred significant losses in product development-a harsh reality in the world of hardware. The company reported a total loss of $ 100 million in 2013, and Wall Street Journal reported in April that the company was discussing a possible sale. “We must also remember that the agreement with Starbucks was not as sweet as they thought, so no can only blame their failure on the wallet situation”, added Sanchez.
Silva said another facet of the problem and its major implications. “In my opinion, Square had a strategy point of contact, which was strongly supported by Starbucks. This is not bad, but customers expect more. Likewise, I see that some banks want their own portfolios, unique, and I predict the same perception of the customers”, he said. “Customer is multi-retail, multi-bank and multi-everything. A mobile payment solution you only pay for the coffee shop, or only process a bank account, will always be incomplete for the customer”.
Of course, there are other theories floating around as to what exactly is at the root of the problem of Square, like this:
Safety concerns will put the brakes on LifeLock Wallet
Perhaps even more surprising than the death of Square Wallet was the fall of LifeLock Wallet. The announcement of 16 May, Todd Davis, CEO of LifeLock wrote in a blog post that his company had determined that “certain aspects of the mobile application can not be fully compatible with the safety standards of payment card industry (PCI”). He promised to return with a new product with “the highest level of PCI compliance for users soon”.
LifeLock Wallet arose through the acquisition of the company in a transaction Lemon Wallet for $ 42.6 million completed in December. Founded by Argentine entrepreneur Wences Casares, Lemon built a promising product with a team largely based in Buenos Aires.
Security seems to be in the heart of the decision to remove the shelves LiefLock Wallet. In fact, the company went so far as to erase all user data stored. ZDNet highlighted the growing concerns about the safety standards of the payment card industry (PCI) and a growing number of traders who question the fines imposed by credit card companies for violations of the PCI. It’s also worth noting that the Argentine offices LifeLock (formerly belonging to Lemon) have been completely closed.
Sanchez talked about his opinion on the situation:
“I do not know in detail what happened beyond what the CEO said in the blog post. However, their approach to the problem was excellent. I can say that PCI compliance is very, very complicated. It’s hard enough to make a product with a good experience, excellent design and useful features. Make it compatible with all PCI is that an additional level of complexity. As for the implications for other players, I think it’s simple: developing safety as a high priority is not easy, but it’s the only way to do”.