The number of companies offering or developing a mobile wallet solution is large and on the rise. The participants include major players in telecommunications, banking and the Web. Clearly the race is on to gain market share in the lucrative mobile wallet space. With so much competition and no universally accepted delivery model, who will emerge as the winner? Solutions that provide a strong return to financial institutions, cater to the needs of retailers and address the security concerns of consumers are poised to be the most successful in the end.
A mobile wallet is an innovative mobile payments solution that allows consumers to use most smartphones to make purchases at the point of sale (POS) and for online shopping. Consumers download an application offered by their financial institution or retailer, register their payment card information and securely scan a QR bar code at the POS to make a purchase. From the perspective of bank issuers, they want to be able to control the customer experience throughout this process and align the mobile wallet solution with their brand. They also want the ability to determine what types of payments can be made from the mobile wallet and which security features are in place. They don’t want a third party making these decisions for them – especially a third party that isn’t familiar with the financial services industry.
It is also best for bank issuers if a mobile wallet solution integrates with their current mobile payments solutions. This enables them to attract and retain customers via their own, bank-branded offerings. It can also improve customer awareness of the bank’s mobile wallet and make it easier for customers to use the offering once they sign up.
An effective mobile wallet solution can also offer considerable value propositions to retailers who want to implement mobile wallet solutions that use existing POS technology. Unfortunately, many solutions are reliant on Near Field Communication (NFC) technology to execute payments. NFC-based solutions require new readers at merchant locations, plus new chips for smartphones, which drags out the process for getting a solution in place. A better option is to process consumer transactions via a software connection through secure cloud computing. With this approach, no terminal upgrades are required. Also, because a cloud-based payment solution requires only downloadable applications for both consumers and retailers, it is “future proof.” In other words, because the solution isn’t hardware-dependent, it will be compatible with whatever new technology comes along. Clearly this is the best possible scenario for retailers: a mobile wallet solution that uses existing POS hardware while still being forward-compatible with new technology as it becomes available.
Cloud-based solutions also improve security. Customer-identifiable payment account information is not stored on the phone and is not passed into the POS terminal, so customer security is enhanced and the risk of fraud is reduced. With so much news coverage regarding POS skimming schemes, a cloud-based approach gives consumers peace of mind that their information is private and their transactions are safe. For retailers, because they never see the compromizable data, they don’t need to deal with the cost and complexity of maintaining PCI compliance for cloud-based mobile wallet transactions.
A mobile wallet solution should be built into a bank’s existing mobile application and into other financial institution or retailer apps, preserving brand equity and strengthening customer loyalty. Its cloud architecture eliminates dependency on smartphone hardware and POS terminal hardware while providing unmatched security for all transactions. Only those mobile wallet solutions that concentrate on delivering value props to financial institutions, retailers and consumers alike are the ones that will achieve long-term success. The bottom line is that an effective mobile wallet solution can help banks to grow interchange and generate new sources of revenue, help merchants reduce payment processing costs and fraud risk, and make the payment process safer, faster and more convenient for consumers.
Do the research and find the mobile wallet solution that is right for your financial institution. It will be a valuable investment into the future of your business.
Doug Brown is SVP of Mobile financial Services for Jacksonville, Fla.-based FIS.