The Race for the Mobile Wallet

8/13/2019 The Race for the Mobile Wallet

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FINANCIAL INSTITUTIONS:

The race for

the mobile wallet


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FINANCIAL INSTITUTIONS:

The race for the mobile wallet

For many financial institutions, mobilepayments are top-o-mind and a logi-cal next step or their mobile bankingstrategy. But industry executives ofenhave a number o questions about howimplementation will actually work—pri-marily concerns about security, evolving

technologies, and the risk o betting onthe wrong approach.

O primary interest is the mobile wal-let, a key enabler o payments thatprovides a single access point to anindividual’s cards and accounts orpayments. There is a conusing array omobile wallets on the market or underdevelopment, different products o-er different options, and there are nomobile wallet standards in place. Forfinancial institutions, this can present acomplicated, shifing landscape that’sdifficult to understand.

In that environment, many financialinstitutions are hesitatant to move or-ward and are instead adopting a holdingstrategy toward mobile wallets. “We aretaking a ‘wait-and-see’ approach ormobile until…there is clear demand orit,” one industry executive recently toldVantiv/Mercator researchers.

“The wait-and-see strategy is under-standable, but it may also be a badidea,” says Dean Seiert, senior vicepresident, Product Strategy, at Vantiv.“The mobile marketplace is taking shapequickly, and waiting puts financial insti-tutions out o step with customers—

and makes them likely to be lef behind.”

Mobile Wallets: On the Move

From the financial institution’s per-spective, the value proposition ormobile wallets is clear. They enable theinstitution to engage cardholders andbuild loyalty through offers and promo-tions, and create new revenue streamsthrough mobile advertising whilekeeping their brand at the oreront.“In an inormation-driven, mobile world,whoever owns the wallet owns thecustomer,” says Seiert. But executives’concerns make them hesitant to takeadvantage o mobile wallets.

Over the past two years, Vantiv/Merca-tor research has explored the attitudeso consumers and financial industryexecutives toward payment methods.It ound several “disconnects” betweenthe views o these two groups, par-

Many banks and credit unions are lagging behind non-bankcompetitors in the mobile payments arena—but new wallet

options are creating opportunities to close the gap.

KEY POINTS

• Research shows that the

“wait-and-see” mobile walletstrategies adopted by manyfinancial institutions areout o step with consumerexpectations.

• Consumers are open to

non-bank competitors’wallet offerings, and thosecompetitors are aggressively

moving ahead quickly withwallet programs.

• Cloud-based wallets avoid

expensive inrastructure andallow financial institutions todecrease deployment timewhile increasing security andconvenience.

• “White-label” mobile wal-let programs let institutionsmaintain their brand through-out the purchase experience,resulting in deeper customerrelationships.

• Financial institutions have

the advantage o high levelso trust through existingrelationships with custom-ers—but they need to moveahead soon in their pursuit omobile wallets.


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ticularly about mobile payments andwallets. Consumer interest is quite high,

and 62% expect to see this method inwide use in two to five years. But finan-cial institution executives tend to see

adoption taking much longer.

What’s more, the research ound that“high-value” customers—those making$100,000 a year or more—are espe-cially interested in mobile payments.So are younger consumers age 18 to34—a clear indicator o the direction oconsumer attitudes in the coming years.In short, consumer expectations or mo-bile payments are high—and consumersare not likely to be patient with financialinstitutions that won’t deliver.

A number o larger, sophisticated finan-cial institutions are currently exploringthe use o their own wallets. So tooare non-bank players such as Google,Apple, and PayPal—and research showsthat consumers are open to consider-ing such organizations as wallet pro-viders. For financial institutions, thesenew competitors threaten to erodecard-network-based and interchangerevenues. Perhaps more troubling is thepotential or disintermediation, withnon-bank wallet providers having accessto point-o-sale (POS) communica-tions and customer payment data thatcan be used or marketing—in essence,enabling the provider to get betweenfinancial institutions and cardholders.

Simplifying the Mobile Wallet

In this ast-moving environment, fi-nancial institutions can combine their

caution with action and take measuredsteps into the mobile wallet space bytesting, piloting, and expanding gradu-ally. By doing so, they can minimize riskwhile gaining experience and learning

more about what cardholders want romwallet offerings. And by introducing theservice to their cardholders earlier ratherthan later, they can encourage thosecardholders to remain with them as mo-bile payments become more common.

Several recent developments reduce thecost o entry and make it easier to takea measured approach to mobile wallets.For example, some wallets use QR codes

or transactions, making it possibleto leverage traditional merchant POS

systems and consumer smartphonesor mobile payments. That means thatfinancial institutions can move orwardwith wallet programs without having tobuild out an expensive inrastructurewhile NFC and other standards continue

to be debated.

QR-based solutions can also take

advantage o the cloud to store theconsumer’s payment inormation, andeasily enable consumers to use a varietyo cards and other payment methodsto make purchases. Sensitive inorma-tion, such as personal or PCI data, is not

shared with the POS terminal or storedon the mobile device, so a lost phoneis not a significant security concern.Already, 2 out o 5 consumers are inter-ested in using this type o payment, theresearch ound.

An evolving marketplace is also mak-ing it easier or financial institutions

IN BANKS THEY TRUST

Consumers rank banks and

credit unions at the top in

terms of preferred wallet

providers—a reflection of

the trust built up by those

institutions.

0% 20% 40% 60%

50%

Source: Vantiv/Mercator Insight Research 2013

Banks, creditunions

Major cardnetworks

Online paymentproviders

Major technologycompanies

MajoreCommercecompanies

Wirelessproviders

Major retailers

6

43%

59%

20%

27%

13%

18%

■All respondents

■Respondents most likely to use mobile wallets

13%

18%

13%

18%

12%18%


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Vantiv Corporate Headquarter

8500 Governors Hill Drive, Cincinnati, OH 4524

866-622-2880 | www.vantiv.com

TL0003 7/

to get involved. For example, we arenow seeing “white-label” mobile wal-lets that allow institutions to issue

their own branded mobile walletsand easily integrate that unctional-ity into their existing mobile bankingplatorms, while the wallet providermanages the actual operation o theprogram. The institution can thereoremaintain its relationship with card-holders and strengthen that relation-ship through offers and promotionsat the point o sale.

That approach also allows the finan-cial institution to rely on the skills and

resources o the wallet provider tonavigate the complicated, changingworld o wallet standards and hand-set technologies. “The technology ismoving so ast…,” one credit unionexecutive told researchers. “Are we ontop o the market? Are we identiyingthe best alternatives and partneringwith the right vendors?” A partner canhelp institutions get up and runningquickly, build relationships with mer-chants, process secure transactions,and integrate payments with loyaltyprograms.

The Industry’s Opportunity

As they consider wallet programs, fi-nancial institution executives should re-member that their organizations bring

some unique strengths to the table—akey one being trust.

Consumers tend to view bank oeringsas secure—a critical point, since 3 outo 5 consumers who aren’t interestedin mobile payments cite security as aprimary barrier, according to the Vantiv/Mercator research. In addition, 74% oconsumers said they are concernedabout too many vendors having theirpurchase inormation. Banks are alreadyentrusted with cardholders’ personaland financial inormation. As a result,cardholders using bank-issued walletsdon’t need to share that inormation

with a new—and perhaps less well-known—provider. When researchersasked consumers what type o mobilewallet provider they would preer, 50%said banks and credit unions, puttingthese institutions at the top o thelist—well ahead o organizations suchas Google and Apple, as well as retailersand card networks.

“The mobile wallet space is becominghighly competitive, but financial institu-tions still have some advantages thatlet them stand out rom the growingnumber o non-bank competitors,”says Seiert. “But they need to takeaction and build on those advantagesi they are to end off the competitionand use mobile payments to get closerto customers.”

About Vantiv

Vantiv LLC is one of the leading integrated

payment processors in the United States.Known as Fifh Third Processing Solutions

since 1971, the company, headquartered in

Cincinnati, Ohio, changed its name to Vantiv

in 2011, and became a public company in

2012. Vantiv’s credit, debit, prepaid, and

mobile solutions help businesses and financial

institutions o all sizes get the most out o

payment activities.

Strengthening the

Value Proposition

Mobile wallets can be a valu-able part o mobile banking—and the right mobile banking

strategy can help ensure thesuccess o those wallets.

Vantiv/Mercator research hasound that consumers are look-ing or a comprehensive mobilestrategy that offers more than

just payments. “Consumers

want mobile payments thatgive them more inormation andimprove the shopping experi-ence, while letting them makepurchases and perorm tradi-

tional banking unctions,” saysVantiv’s Dean Seiert.

As financial institutions prepareto offer mobile wallets, they canenhance the mobile bankingplatorm itsel to give consum-ers the broader set o unctionsthey want. These can includeeatures such as mobile checkdeposits, alerts , budgeting, andpersonal financial managementtools, and the ability to easilymanage and use coupons. Withthose kinds o eatures, saysSeiert, “financial institutionscan offer payments as part oa larger value proposition thatgives consumers the controland convenience they want.”

Documents

The Race for the Mobile Wallet