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Mobile wallets forgot the merchant

Financial institutions, venture capitalists and any organization that believes in mobile payments are busy building their vision for a mobile wallet. However, the majority of these groups are building a wallet and customer experience without giving any thought to the true enablers of a mobile wallet. This group is what I refer to as the merchants, the group that ultimately enables the payment.

Merchants are constantly trying to get closer to their customers to understand them better, while improving their infrastructure to decrease their cost structure. However, mobile wallets fail to help them:

  • Increase the efficiency of the payment process
  • Decrease the time it takes to settle a transaction
  • Retain knowledge (data) on their customers’ likes, dislikes, purchasing behavior and life events
  • Leverage data to create a personalized online or in-store experience through target offers or a personalized in-store experience
  • Increase customers’ visits and shopping cart size

I have yet to see a mobile wallet that comes close to solving more than two of these five merchant needs. Instead, the industry is trying to develop a solution that will entice customers to move their payment vehicles to mobile devices in the hopes that it can push the change through the merchant. Relying on a push strategy to encourage merchants of all sizes to spend money upgrading their payment infrastructure is unlikely to persuade merchants to embrace this change and will ultimately impact aggregate adoption rates.

Wallet providers and developers need to invite merchants to the table, which will benefit all stakeholders. Merchants can offer firsthand knowledge of how customers interact at the moment of truth, when payment actually occurs. They also can provide valuable insight into how they leverage data to build customized shopping experiences. These shopping experiences can be pushed to the wallet, which would increase customer engagement, spend and loyalty toward the wallet. In addition, merchants can help developers build more intuitive interfaces and interoperable platforms that encourage the free flow of data. All parties can then access the data, which can be used to help customers research products or recommend merchants to purchase from. Imagine a wallet that pulls in reviews from your social network when researching home insurance, or a wallet that recommends a gift for your spouse based on demographic and purchase data.

The players rushing to build the next game-changing mobile wallet may understand their customers, but they do not understand the merchants. Ignore this critical stakeholder that provides the need to the customer that creates the payment at your own peril.

What steps do you think the industry should take to include merchants in mobile wallet strategies?


Comments: (1)

A Finextra member
A Finextra member 18 July, 2013, 17:42Be the first to give this comment the thumbs up 0 likes

Merchant adoption certainly is a barrier and pace car to the progression of emerging payment technologies. The responsibility, however, in my view, should and often is facilitated through merchant acquirers. The Financial Institutions who serve the merchant and ingest the payment on behalf of the merchants. Often times these institutions are divisions or subsidiaries of the largest banks (ChasePaymentech, Citi Retail Services, Bank of America Merchant Services, etc.). These teams should be working together to think holistically on connecting the experience for all parties in the payment ecosystem. Processors, like FirstData and Elavon are too a part of this ecosystem and have strong technologies that can provide tremendous insight to customers, spend trends, and merchant performance. 

To help these businesses progress, SKU level data access would provide more transaction granularity yielding better analytics. An example of this in action is the FSA exception for medical purchases at retailers to provide assurance of qualified tax purposes. Since its deployment, there’s better assurance and less fraud occurring across these accounts. The industry should consider extending this and opening up SKU level purchases to processors, networks, issuers and acquirers. 

As big data is coming from new directions and players, merchants may want to keep it simple and have their financial partners build them analytics to provide real insight to business performance through known and trusted providers. 

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