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Are mobile wallets being made by the wrong people?

The leaders in mobile wallet technology? Undoubtedly retailers.  Starbucks and McDonald’s are already building these wallets in response to customer demand.  But with mobile wallet use predicted to rise in 2014, should banks or mobile operators—who are better positioned to offer levels of security customers expect—be building them instead?

The challenge is that the business case for building a mobile wallet shows little direct financial benefit on its own to a bank or MNO (mobile network operator), while a retailer can leverage the wallet to drive loyalty.  But there’s actually no reason why banks should ignore the potential gains that will come from customer spending data and loyalty programmes that can be launched based on this information.

All the more so because banks and MNOs are well placed to capitalize on security infrastructures built to support mobile banking apps. There are good examples in Austria, for instance, where Austria Card, Card Complete, Drei, Erste Bank, First Data, MasterCard, Nexperts, PayLife Bank, T-Mobile and Visa joined forces to deliver a country-wide mobile wallet standard, making the service available to all customers with a phone.

Several banks in the UK are already promoting loyalty schemes and spending rewards programmes. They include RBS-NatWest and Halifax who now offer customers cashback on purchases at selected retailers. These banks would get a boost from spending-habit data generated via mobile wallets that would allow them to leverage their third party relationships and create stronger and more personalised products.

Then there’s the all-important question of trust. In recent years, savvy retailers have worked out how to build relationships with customers that most retail banks can only envy. But the more you look at what makes a successful wallet, the more you feel that banks have a huge opportunity in this space.

A successful wallet doesn’t need to be all things to all people, but at the very least it must have the ability to store and use multiple payment sources, have strong product integration with merchants’ POS systems and, most importantly, incorporate a level of security equal to, if not better, than current security levels available with alternatives like plastic cards.

These are all areas where banks can tap into years of hard-earned experience. They just need to communicate it to their customers. Free newspapers, discount music downloads and a latte-to-go are all very well. But at the end of the day, security and privacy are all that truly matters. And that’s where banks excel.

Would you be pleased to go cashless and cardless, and transact by tapping your phone, if you had a mobile wallet developed by your bank, secure and guaranteed like your credit card is?


Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 November, 2013, 18:53Be the first to give this comment the thumbs up 0 likes

Banks have had access to branch, phone and web transaction history for eons. Yet how many of them have succeeded in leveraging all that big data to generate additional revenue streams via targeted offers? As a matter of fact, how many success stories exist in that space even among MNOs and other nonbanks? IMHO, data alone is not a compelling reason for banks - or nonbanks - to enter mobile wallets. Even taking Starbucks, while most of mobile wallet spend happened at Starbucks, 90% of payments at Starbucks happened via cash and plastic cards, as I'd highlighted in Mobile Wallet Has Few Takers - Even At Starbucks. When mobile wallet is itself losing the payment war, there's hardly any point in debating which specific product will win the mobile wallet battle.

A Finextra member
A Finextra member 07 November, 2013, 02:39Be the first to give this comment the thumbs up 0 likes Starbucks, McDonald's etc do not offer WALLETS, they offer payment APPS... Do we need "wallets"?.. That depends: Bluetooth beacons allow for automatic app selection based on micro-location. In that case, individual payment/loyalty apps can simply sit in the phone without a wallet. Mobile payments wallet must offer added value to have a role to play. It can even be a dedicated embedded system device...

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