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App Enablement: Turn Any App Into a Wallet

Today most companies understand that having their branded mobile app in a consumer’s smart phone is the closest connection they have ever had with their customers. With time spent on mobile devices rising, companies with a mobile app on a consumer’s phone have a spotlight and opportunity to connect like never before.

Apps are also an inexpensive communication channel. A bank would always prefer you to deposit a check using your smart phone through your banking app instead of going to the ATM or god forbid, the bank branch.

But the dirty little secret is that on average a whopping 80% of mobile apps are downloaded, used only once and eventually deleted. This phenomenon is true for most apps, free and paid, in various degrees. Even well financed apps from banks and retailers face the prospect of many downloads but poor usage.

Functionality is key to make apps an indispensable part of a consumer’s life. Different app categories focus on different functionality to make them a repeat use tool for consumers. But if you are involved in commerce, such as banks or merchants, one functionality is king: payments. And a perfect example of app loyalty through mobile payments is Starbucks.

The Starbucks Example

Starbucks said recently that 11% of sales volume comes through its own mobile wallet. This is simply a staggering number of transactions for a single retailer; about four million mobile payments per week with around eight million consumers using mobile apps to pay.

Having this repeat use channel of communication with consumers is priceless for Starbucks. The app became the main customer retention tool and channel for loyalty program, offers, and other incentives to consumers.

Banking and merchant apps can become powerful wallets

Banks, merchants and other players involved in commerce have a lot to gain from turning their apps into powerful repeat use mobile wallets for transactions in the physical world.

  1. Complete control over branding and consumer experience: By turning your app into your wallet, a bank or merchant can control all aspects of consumer experience end-to-end. Communication with the consumer can start at home, before they even leave for the store.
  2. Deliver an awesome shopping experience: A merchant can enable check-in functionality via BLE, deliver personalized offers to consumers inside the store, and allow consumers to make one tap mobile payments sending payment, coupons and loyalty information to the merchant POS system in a single tap of a phone.
  3. Engage consumers with promotions and loyalty: Provide convenience and savings to hook them into the app. Consumers no longer have to clip coupons, carry loyalty cards or bring catalogs to store. Everything can be in the app and synchronized with the wallet for easy redemption at the point of sale.
  4. Banks can be “top of app:” Beyond enabling their own apps for payment, banks can also enable other trusted apps in the mobile phone to use their credentials for payment. This is what we call card federation and it allows banks to increase card distribution and usage to become “top of app”, not only “top of wallet.”

APIs are about simplicity and empowerment

APIs have already made their mark in mobile commerce through easy to use APIs that enabled developers to add in-app or e-commerce functionality to their apps. Turning apps into mobile wallets for commerce in the physical world is can equally be achieved working with the right platform that abstracts the complexities of technology, security and devices from the developer. Ideally no developer should need to learn what is Host Card Emulation, Near Field Communication, Javacard security or other terms that make payments possible but mean little for them.

Bottom line is that APIs are about simplicity. And the industry should strive to bring this simplicity for apps to transact in the real world, where 94% of commerce happens. That will trigger an incredible amount of mobile commerce innovation in the real world by banks, merchants and other players and ultimately consumer loyalty to the apps that deliver the best mobile payments user experience.


Comments: (3)

A Finextra member
A Finextra member 03 October, 2014, 11:50Be the first to give this comment the thumbs up 0 likes

Reducing payment complexity for app delveopers is good - but make sure that you buy app security tools as well. Gartner predicts that in 2015, 75% of the apps will fail in basic security tests. If you want to protect your payment app from manipulation and data theft you also need to harden it. Including payment APIs and SDKs into the app is not enough. 

A Finextra member
A Finextra member 03 October, 2014, 14:41Be the first to give this comment the thumbs up 0 likes

Excellent point Bjorn! Especially relevant when it regards Host Card Emulation and cloud-based payments. I couldn't cover that aspect in this blog as it is such a big topic, but I will try to cover that in an upcoming blog.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 October, 2014, 09:34Be the first to give this comment the thumbs up 0 likes

Per this BI article, the Starbucks App numbers are even higher: 6M transactions / week and 15% share. However, growth rate in transaction volume has drastically dropped from 25% to 10% during the last 2 quarters. Even accounting for a slight drop in revenues during this period, this suggests that the adoption of the app has hit saturation point. Which is a pity considering it's still not used by 85% of Starbucks' customers.

Personally, mobile apps are great for ordering and foster loyalty when they stick to mobile commerce. The moment they start supporting payments, too many other things enter the picture and complicate matters viz. hardening, 2FA, signal strength, battery life, and so on. More often than not, in the resultant tradeoff between security and convenience, the app begins to put off customers and starts to engender disloyalty. 

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