Mobile Wallet: Now or Not Yet?
After years of hearing "this is the year" for mobile payments, many bankers may feel like the villagers in "The Boy Who Cried Wolf" – weary of false alarms that amount to little substance, particularly when it comes to the much-hyped mobile wallet.
Last week, Ginger Schmeltzer, senior vice president of emerging payments for Fiserv, facilitated a panel discussion, "Mobile Wallets: Now or Not Yet," at the NACHA Payments conference. Joining Schmeltzer were Paul Amisano, vice president of electronic money movement and emerging payments for BB&T, and Jeff Dennes, head of digital for SunTrust Bank, both of whom represent major banks with a prominent presence in the mobile space.
"Consumers are increasingly comfortable using smartphones for bill payments and other financial transactions, so those types of mobile payments are really happening," said Schmeltzer. "But how do we move beyond this to point-of-sale, which many believe is really the holy grail of mobile payments?"
Amisano and Dennes agreed that when it comes to point-of-sale purchases with a phone, there's a challenge to overcome. It's really not any easier – in fact some say it's more cumbersome – to pay with a smartphone than by swiping a credit or debit card. However, many in the industry say the compelling case for this emerging payment capability begins with an expanded definition of mobile payments that goes well beyond the point-of-sale to include person-to-person payments, mobile transfers, bill pay and mobile check deposit.
Investment and resulting returns on mobile wallet capabilities may not be imminent for most financial institutions, but other mobile transactions are making an impact. BB&T is seeing an impressive return on mobile bill pay, mobile deposits and mobile transfers, including significant retention benefits and an increase in the value of customers who use these tools. Although the bank is not active in the mobile point-of-sale space from a consumer perspective, BB&T offers several solutions to help merchants take advantage of mobile payments.
"Most consumers aren't asking for mobile wallet capabilities, but we're beginning to see changes in the marketplace," said Amisano. "Merchant-specific, 'card-on-file' apps are seeing more use, especially when they offer a specific – and better – experience for their customers. Technology that offers added value to consumers, such as consolidation, rewards or convenience, will gain traction over time."
Amisano believes a defensive short-term strategy for banks and credit unions may include making it easier and more worthwhile for customers to add their financial institution's card into an app rather than selecting a competing card. Once a card is in an app like iTunes, Uber or Starbucks, for example, consumers rarely consider changing it. Even though the payment is initiated from within a mobile app, the financial institution remains part of the payments ecosystem, and retains a revenue stream from the interchange.
"We can't take our eyes off what's happening in the industry and the coming innovations that have the potential to disintermediate," said Dennes. "Companies that are willing to innovate and create new experiences are taking slices of the payments pie, and banks have the most to lose – and the most to hold onto."
Just as physical wallets come in a wide range of sizes – from oversized purses to money clips – mobile wallets don't have to be a one-size-fits-all proposition. Whether the timing of the mobile wallet is now or not yet, consumers will continue to increase and customize their usage of mobile payments, choosing the apps and payment methods that fit their day-to-day buying habits and giving preference to the options that deliver an exceptional experience.
"Innovation is constant, and so the way we thought of the mobile wallet just five years ago is very different from today's reality," said Dennes. "The financial industry continues to reinvent itself, making this an opportune time to be in the mobile payments space – however we define it."