There are so many wallets in the news, with new ones announced monthly, sometimes weekly. There are digital wallets and mobile wallets, Secure Element versus Host Code Emulation, mobile phone apps and mobile watch apps, QR code versus NFC. The choices, options and acronyms can be overwhelming for banks and credit unions to determine the best approach to keep their members delighted.
Which wallet(s) should you be in, and should you have your own, FI-branded mobile wallet? Which questions are the right ones to be asking?.
Apple blew up fintech news sources in the fall of 2014 with a surprising ApplePay announcement, and raised awareness, and usage, of mobile payments to levels never seen before. But paying by mobile had been around for several years prior.. I first became enamored with the ability to use my phone for payments in downtown St. Petersburg in 2011, when ParkMobile eliminated the need to fumble for quarters to pay a parking meter, or interrupt my dinner to jog back to “feed the meter” I could pay using my phone, get an alert when my time was running out, and click for more time. It cost extra to use, but was, and still is, well worth it. The bar was raised when I visited San Francisco the next year, and used Uber to request, and pay for, my ride, all from a mobile app. Most people don’t think of these apps as mobile wallets, but they hold payment credentials and allow me to pay using my phone, which to me is the quintessential definition of a mobile wallet. Of course, the “grandfather” of mobile payments was the Starbucks mobile app, still revered by faithful Frappuccino and Chai fans.
Roll forward to last year, and we see MCX announcing a launch (I know, still hasn’t happened), PayPal acquires white-label mobile wallet Paydiant, Samsung announces the acquisition of LoopPay in conjunction with the release of its own mobile wallet, SamsungPay, Google acquires SoftCard and announces GooglePay (and later rebrands as Android Pay). CapitalOne rolled out their mobile wallet, followed by a huge announcement at Money2020 for ChasePay, to be released sometime in 2016. A much more quiet rollout for Walmart Pay, and rumors for an LG wallet or possibly a reloadable card – GPay, and a wallet of some sort from Microsoft.
All of this has caused excitement, momentum – and confusion. Banks and credit unions are asking two questions consistently across the industry: “which wallet should we be in?” and “should we offer a branded wallet (like Chase and CapOne)?”
Unfortunately, neither of these questions are the right questions to be asking. The bigger question should be “What is the right digital strategy for me?”.
Why does an issuer need a digital strategy?
The launch of the “Pays” as well as the online digital wallets (including Visa Checkout, MasterPass, and several others) represents the start of an irreversible trend; we are witnessing a behavioral change, similar to the change from checking email and browsing on desktops, to laptops, to mobile phones. Like most trends, it starts slowly at first, and then almost without notice, there comes a tipping point. Witness the decline of branch visits giving way to mobile banking and mobile deposit. So why does an FI need a strategy? Simply put – your cardholders are, or soon will be, using mobile wallets, and digital wallets. And if your cards are not in these wallets, then your cardholders are using some other issuer’s cards in those wallets.
Bui it goes much deeper. Mobile payments will triple in the U.S. in 2015, according to emakerter – 1 in 5 smartphone users will use mobile payments by the end of next year. Granted, some of those users will try mobile payments once and go back to what they are used to. But even those users will come around when the next generation of mobile payments arrives – when mobile payments, loyalty, mobile banking, shopping, and P2P start to merge into a new, evolved, mobile lifestyle.
Another reason for this trend has to do with demographics. As older phones are replaced with mobile payments-capable phones, and as millennials, who conduct most aspects of their lives on their phone, become the biggest category of banking, adoption will be driven higher.
Another growth driver in mobile payments is not just the number of users, but the dollar size of the transactions. Today, tapping a mobile phone at a brick and mortar POS is typically for buying low-priced goods. Medium-priced purchases, $20-$100, is expected to rise to over 60% of the transactions over the next three years. Not losing the interchange on these transactions is yet another reason for an issuer to want their card in every wallet.
Banks and credit unions spend a lot of marketing dollars on awareness and on loyalty programs so that cardholders reach for their card first when making a payment. Staying “top of wallet” was the mantra for every issuer. Now, staying “top of phone” is paramount. And the way to do that is by being on the phone in the first place, and then offering state of the art apps and capabilities.
It’s important to be on the phone, and in the best way possible.
A study of credit union members’ satisfaction showed the #1 most important aspect of a member’s experience was the online and mobile banking. A similar study of banking customers showed that happy bankers are happy mobile bankers. 89% of respondents between 18 and 49 conduct at least half of their banking remotely (that is, on a mobile phone or tablet). Any bank or credit union that has a clunky mobile banking experience, one that does not offer mobile bill pay, one that does not offer mobile remote depots capture, one that is not seamless across branch, online tablet, and mobile, risks reducing the satisfaction of that customer, and ultimately losing that and other customers. So the first priority in an FIs digital strategy is to be on the phone, on the tablet, on the laptop, and on the desktop, with consistent, world-class apps and website.
The next priority should be to be everywhere. That is, an issuer needs to have their cards enabled for use, with card art, with tokenization, in all of the online and digital wallets. Why be in the mobile wallets? Because its either your cards or your competitors’ cards that will be the default for paying – it’s your choice.
The harder question is why be in the online wallets, such as MasterPass and Visa Checkout?