1. Must haves in a digital wallet strategyThought Paperwww.infosys.com/finacleUniversal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing

2. Must haves in a digital wallet strategy Will the digital wallet sound the death knell for Near Field Communication (NFC) is becoming cash and credit cards? Many experts seem toa favorite technology and according to one think so. Research also seems to agree in aestimate global NFC payment transactions recent report, a research organization thatare expected to reach US$ 50 billion worldwide studies the impact of the Internet, says thatby 2014 consumers will not need to carry credit cards Social commerce sales will more than double or cash as early as 2020; another survey by ato GBP 3.3 million in the next five years. By leading mobile audience media firm states that2012, 41% of UK consumers will use social 37% of mobile using consumers used a mobilemedia or at least be influenced by it while wallet in the last three months, a sure sign ofpurchasing. This figure rises significantly to increasing adoption.73% for 25-34 year olds, as 45% of this The vendor action has already heated up in age group is already utilizing this platform anticipation, and a wallet war is on between while purchasing. mobile operators, card companies, device In a report on multi-channel shopping released manufacturers and financial service providers. in December 2011, a global consulting firm Wallet providers need a sound strategy to hold reveals many insights about changing consumer their own in a competitive marketplace, with behavior. The most significant finding was that the ability to provision digital money seamlessly customers were consolidating their retailer set. across multiple touch points, being one of the Over half of respondents in the study shopped key imperatives. on different channels with less than five Why is it so important that a digital wallet be retailers; most of the chosen retailers stood usable across all consumer touch points? Theseout for their integrated management of the numbers do the talking: business and the delivery of a high quality buying experience backed by seamless The number of touch points is increasing rapidly execution across all touch points. as evident from the following research: What this tells us is that customers expect to People are increasingly buying smartphones transact on multiple touch points as well asover feature phones thanks to greater enjoy a shopping experience promising theaffordability same convenience, ease of use, commercial terms Tablets are fueling the trend of multipleand security on each.devices; they are not replacing, but are Since mobility is at the heart of digital walletinstead supplementing smartphones. The commerce for reasons that are well known iPad 3 sold three million units in the first ubiquity, convenience and adoption, a multiweekend after it was launched. Thats 42,000 touch point strategy must necessarily factorper hour or 694 per minute! Another estimate this in to have any chance of success.says that more than 81 million tablets willbe sold in 2012, up fivefold from theapproximately 16 million sold in 201002 Thought Paper 3. Other focus areas of a digital wallet strategyAccessibility payment options like checks and credit cards.Retailers might be able to deploy it across theProviders must make their digital walletsentire transaction cycle using NFC technology,accessible by ensuring widespread distributionand enable in-store customers to scan purchasesand acceptance. The nature of distributioninto the wallet, generate an invoice, transfervaries with the type of provider. For instance,the information to their POS systems, and finallythe mobile wallet from M-Pesa, Kenyas iconicpay, all using the same device or application.mobile money service is distributed by telecomAnd handset manufacturers offering digitaloperator, Safaricom, which has built the walletwallets can draw upon other device features toapplication into its SIM card. Its a strategy thatenhance the wallet experience: for instance, useworks primarily because of the ubiquity andaugmented reality to indicate which merchantaffordability of mobile phones. On the otherestablishments in the vicinity accept their wallet.hand, growing adoption of smartphones andtablets among tech savvy populations mightOpennessrequire distribution of wallets through appstores. In future, some handset manufacturers While the wallet war introduces competitionmight in-build a wallet into the phone itself.in the market and choice for customers, it alsoWhatever the case may be, it is crucial thatinconveniences the latter by forcing them tothe distribution be tailored to the needs, behavior maintain multiple wallets from multiple providersand infrastructure environment of the target user.which are all linked to different cards/accounts.This is a source of customer dissatisfaction.User experience It is very important that providers open up theirAt the beginning of this paper, there is a mentionofferings. The days of closed-loop wallets areof how customers have started to use more numbered. Retailers must accept a variety ofthan one touch point to fulfill their needs.linked cards/accounts, and not just their own.The implicit inference is that customers expect The wallet should be interoperable betweenconsistency and seamlessness across each andthe touch points of different banks, so thatevery touch point. Hence, a mobility device usera customer can top up the wallet with fundsmust enjoy the same buying experience as hisfrom one bank, but withdraw cash from thedesktop using counterpart. Going forward, there ATM of another.must be no boundaries between the physicaland virtual world, so that a customer could wellSecurityfill a shopping cart online and store the details Studies have repeatedly highlighted securityin the online wallet, only to visit the store later concerns as one of the biggest barriers toto physically inspect the goods, and finally payonline/mobile payment adoption. Obviously,from a mobile wallet! Another example could this has a huge bearing on the digital walletbe that a customer buys movie tickets fromespecially because there are so many touchhis Facebook wallet and consequently avails points and a gap in any one of these coulddiscounts on in-store purchases made through acompromise its safety.kiosk based-wallet. Needless to say, such a cross-While customers agree that not having to enterselling interaction requires tight integrationtheir credit card details for every transaction isbetween touch points.an important convenience offered by the wallet,Again, different institutions can leverage thethey will only embrace it if they are sure thatdigital wallet in different ways. Someday not the credit card information, which is nowtoo far away, banks might offer a catchall digital loaded on to the wallet, is fully protected by thewallet account in lieu of a savings account, and provider. This means that providers must takethereby eliminate the complexity of multipleadequate measures, such as setting up a layeredThought Paper 03 4. security mechanism and making sure thatthey are to win market share. For instance, sensitive data is not stored on the devices. banks could offer personal financial managementtools along with the wallet, which would Regulation automatically access its data to draw up Digital wallets, like all financial products, arebudgets, expenditure patterns and so on and likely to be regulated. However, the extent of save customers the inconvenience of trawling control may differ from country to country.through multiple bank or credit card statements For instance, M-Pesa does not need a banking to find out what theyve spent. Banks could license to operate, but in other countries,also tie up with the social security payment wallet providers might need to procure one. In agencies to drop pension payments and other some countries, collaboration between multiple subsidies directly into beneficiaries wallets. stakeholders can be perceived as being anti- Merchants could add useful features, such as competitive which may impede the launch of advance order booking of products, or the digital wallet initiatives.ability to compare prices of competing brands. Recently, the Canadian Bankers Association In fact, in Canada, a leading department store has decided to replace debit cards with mobile recently announced the launch of a fully wallets, and is preparing secure but opentransactional mobile website and mobile apps guidelines towards that goal. The extent ofthat enabled customers to make purchases using openness (permitted in a wallet) is a very their smartphones; could such features become significant consideration for an institution thatregular add-ons in future digital wallets? wishes to enter a new market.The digital wallet has the potential to be thenext big thing in payments. Indeed, experts Value added contentbelieve that it could handle transactions worth The breadth and variety of a wallet service also tens of billion dollars as early as 2015. Banks, determines the quality of user experience. A merchants, telecom companies and other service payments-only offering is not likely to find favor providers must put a robust multi touch point with customers. Providers must build additionalstrategy in place in readiness for when the value on top of the basic payment offering, if opportunity opens up.04 Thought Paper 5. References1. Customers Take Control: How the multi- 10.www.smartplanet.com/blog/smart-takes/can-channel shopper is changing the global retailmobile-wallet-tech-save-retail-stores/22139landscape, December 2011, PWC 11. Forget The Mobile Wallet, Just Take The2. Fighting for Position: The Mobile Wallet Wars,Mobile Store With You, April 3rd 2012, http://http://www.mercatoradvisorygroup.com/ www.techvibes.com/blog/forget-the-mobile-index.php?doc=Emerging_Technologies&wallet-just-take -the -mobile -store -with-action=view_item&id=643&catid=5 you-2012-04-033. Is Mobile Wallet Technology Secure, May 9th12. Second Google Wallet Security Vulnerability2012, http://www.idt911blog.com/2012/05/is- Confirmed, Affects All Users, February 9th 2012,mobile-wallet-technology-secure/http://www.theverge.com/2012/2/9/2787758/second-google-wallet-security-vulnerability-4. Consumers Use of Mobile Wallets Increasing,confirmed-affects-allMay 8th 2012, http://www.screenmediadaily.com/news-jiwire-location-based-mobile- 13. Banks and PayPal Are Winning the Trust Battleaudience-insight-report-mobile-shopping-for Consumer Digital Walletsbehavior-0014001861.shtml 14. April 17th 2012, www.gartner.com/id=19864185. `Mobile Wallets Will Soon Replace Credit Cards, 15. 2011 Mobile Payments Outlook AMay 14th 2012, http://www.canada.com/MobGolden Opportunity for Cross-industryile+wallets+will+soon+replace+credit+carPartnerships, http://www.kpmg.com/Global/ds/6619809/story.htmlen/IssuesAndInsights/ArticlesPublications/6. Google Wallet Issues: Why Losing Your mobile -payments/Pages/2011-mobile -Smartphone Could Mean Losing All Your payments-outlook.aspxMoney, February 11th 2012 16.Tablet Sales Expected to Quadruple by7.technorati.com/technology/article/google- 2012, December 9th 2010, http://mashable. wallet-issues-why-losing-your/#ixzz1vrxfT2Aacom/2010/12/09/tablet-sales-2012/8.technorati.com/technology/article/google- 17. In Five years S-Commerce Will More Than wallet-issues-why-losing-your/ Double, May 27th 2012, http://netbiznews.galanter.net/2012/05/27/in-five-years-s-9. Can Mobile Wallet Tech Save Retail Stores?,commerce-will-more-than-double/January 30th 2012 Shekhar KapoorSenior Consultant, Finacle Product Strategy, Infosys Thought Paper 05 6. About FinacleFinacle from Infosys partners with banks to transform process, productand customer experience, arming them with accelerated innovationthat is key to building tomorrows bank.For more information, contact finacleweb@infosys.comwww.infosys.com/finacle 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosysacknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.