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Are banks adopting wallets and contactless the right way

NFC contactless and m-wallets have a significant role to play in the future of mobile financial services and mobile commerce. As much as we know this for a fact, banks have been sceptical in their minds and slow in their approach to embrace contactless payments while being much slower on wallets. The million dollar question is whether they are doing enough and doing it right to augment the rate of adoption and sell the value of wallets.

Most arguments around adoption and acceptance issues centre on immaturity of the partner ecosystem and their infrastructure, the most common one being the lack of readiness of retailers with contactless POS reader terminals. With most of the popular devices also being used for enterprise businesses, whether this is a difficult thing to achieve is a different point of discussion. To be fair to banks, a good number of them have either already launched or are currently piloting their wallets and NFC payments. Most of them have banked on the reach and network of retailers to see success. However, a lot many of them seem to market their wallets using NFC payments and this does not appear to be the best value sale for wallets.

Of late I have been using the wallet being piloted by one of the leading banks in Netherlands in partnership with a local retailer, large enough in this country to trigger a viral adoption. NFC stickers are sold free at the retailer which is advised to be attached to the phone. A pre-paid wallet can be downloaded into your device and loaded with money from your bank account through iDeals, the most ubiquitous payments gateway used by the Dutch on e-commerce portals. A self service POS terminal with a bar code reader and an NFC reader complete a DIY purchase and payment. Fast and good but was it good enough.

There are some broad-as-daylight issues here. For starters, there is no perceivable connection between the contactless payment and the wallet – surely no pre-purchase connection or any perceived post-purchase connection. The only connection is the obvious transaction statement view in the wallet which is shown only on login into the wallet. The NFC sticker works with or without the phone. Stick it on a piece of wood and it still works as good and therefore is no different from a contactless payment card. The wallet itself has nothing more to offer than a transaction statement like a bank account. Neither was any offers notified to me nor was a post transaction alert given to me with a balance or a statement. All in all, a bad advertisement for both contactless and the wallet. The payment experience itself is no better than what my chip card offers – it is pre-loaded with money and does not require a pin either.

The retailer has a brilliant mobile app on the store (discount deals, geo-location features, shopping cart and the likes) which could have been leveraged in this case and integrated with the wallet itself. One can only hope that such value adds are on its way since most banks are in a pilot stage with wallets. Understandably most banks are testing the infrastructure behind the new payment method through such pilots but in the process are probably not helping the cause for adoption.

The truth is that mass adoption of wallets and contactless payments through retailers will take off only when they are complemented with each other. Until then why should I throw away my contactless card yet.



Comments: (3)

A Finextra member
A Finextra member 03 January, 2012, 11:12Be the first to give this comment the thumbs up 0 likes

The difficulty some banks will have is to go for a big bang approach or to implement and learn in phases.  As banks generally struggle to deliver anything of substantial complexity is probably best they stick with phasing it in as is the case with your trial.

John Dring
John Dring - Intel Network Services - Swindon 05 January, 2012, 12:13Be the first to give this comment the thumbs up 0 likes

The type of trial you mention is typical and, yes, has little to do with 'mobile NFC payments'.  Its just another way to get NFC out there for the bank customer.

It serves the purpose of stimulating familiarity to using NFC POS.  I mean, the number of times I pay with chip and pin and then realise the POS was NFC enabled - its just not obvious yet that I should pay that way.

Banks are in the incumbent position which means that any new wallet solution has to consider how a customer can 'load' their existing bank card credentials into the wallet.  As long as the Visa/MC/Amex/Diners networks are courted by the wallet solution, then the banks can sit back (to a big extent) and wait. 

The danger is of course that a new entrant will emerge which negates the use of the existing card payment system.  Square is one example. iZettle is another.  But the POS device is still king and owned by the banks, along with existing settlement relationships with millions of merchants, so its not so easy ;)

My guess is that banks will, and are, partnering with multiple emerging wallet plays, and that it will take time for this channel to gain mass adoption.



Salil Ravindran

Salil Ravindran

Head, Digital Banking Research and Advisory


Member since

31 Jul 2009



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