By 2020, mobile wallets will become the preferred method of in-store and digital payments, according to a study produced by Internet & American Life Project and Elon University. Proponents of smartphone technology are quick to highlight that this form of payment is one that simplifies transactions, loyalty programs, couponing and other incentives for financial institutions, retailers and consumers. Italian card Issuer CABEL, agrees that this scenario is highly plausible and has already deployed Auriga’s PlainPay mobile wallet solution as a critical foundation of their mobile payment strategy. In addition, CABEL is actively engaging with all of the players in the payments market: banks, processors, payment service providers, retailers, and importantly the consumers. If mobile payments are to achieve their full potential there needs to be complete buy-in from all participants and CABEL is committed to helping this process. Mobile payments have the potential to significantly grow the number of electronic transactions and deliver improved banking accessibility for all users.
This will have very positive effects on the entire payments chain including: a reduction in illegal and untraceable payments, a reduction in cash and the related costs and management risks, and greater customer loyalty and satisfaction. “The mobile wallet has a very real possibility for success in Italy. Credit and Debit cards have only had partial success and many people shun e-money options due to distrust, unfamiliarity, and prejudice. By working with our industry partners we are confident of finding a winning formula for mobile wallets that will make a real difference”, said Fabio Giuliani, CEO of CABEL.
The lack of streamlined compliance standards means that a number of different mobile wallet technologies exist. Just because a customer has a mobile wallet installed on a mobile device does not mean that the end institution has technology that syncs with that download. If the two technologies do not match, that means that the consumer cannot use his or her mobile wallet at the location in question.
From a hardware perspective, the variations in mobile wallets also require varying components. Some require a point-of-sale device that consumers tap or merely bring the associated mobile device in the vicinity of the hardware to make a purchase. In this situation, retailers utilize near field communication (NFC), which provides for contactless, or near contactless payment. Others utilize QR codes that retail employees scan to complete transactions. Some payment systems take the opposite approach and require customers to scan a QR code that the merchant produces. These different methods of use are an additional element of confusion in the market.
Regardless of how the transaction is completed, consumers have traditionally used the mobile wallet to store personal information associated with one or more credit or debit cards. A pin number that must be entered before any transaction can be completed protects the payment card information. A more recent innovation is the additional support for account-based payments that eliminate the requirement for an associated payment card. This new idea has the potential to revolutionize the commercial models for mobile payments and may provide the missing incentive for widespread Retailer adoption.
As with any new technology, standards development is a part of the process that eventually leads to mass acceptance. Standards for mobile wallets have not yet reached the required threshold to eliminate the confusion of entering the market. This is one hurdle that organizations looking to embrace the technology must overcome. From hardware to costs to implementation, there is not yet a standard set of rules that organizations can refer to in order to get an acceptable feeling as to how the technology
will impact the bottom line.
“Right now the industry lacks any sort of standardization around technology or guidelines for mobile wallets,” said Henry Helgeson, CEO of Merchant Warehouse, a credit card processing solution company. “Dispute resolution is an important part of the payments landscape, and setting up a good system around dispute resolution is going to be critical in providing a great consumer experience. Financial institutions are very familiar with this and will build this into their systems. However, there are a myriad of mobile payment startups that don’t fully grasp its importance and may release productswithout thinking this through.”
In addition to the practical processing issues that Helgeson highlights there are other fundamental questions relating to standards. For example, the market is still undecided whether a mobile payment application should exist in its own right or whether it should be an extension of the mobile banking services already provided. Like many banks and processors, CABEL isvery clear on their strategy:
“Our desire is to put the customer at the centre of our banking strategy, not just as a slogan, but as a reality. We selected PlainPay because it is part of a proven multichannel banking solution that provides our customers with a seamless interaction between the different banking channels. In addition, PlainPay is easy to evolve as our knowledge of the market’s needs grows”, Fabio Giuliani, CEO of CABEL.
There is a strong indication that mobile wallets will eventually achieve the level of acceptance amongst consumers that will compel the lagging banks and retailers to embrace the technology. Two factors are poised to accelerate this transformation; the emergence of technology standards and the emergence of new commercial models forged by innovation and regulatory pressures. Given the continued investment into mobile payments solutions it appears inevitable that they will become more of a focus for retailers and less of an oddity for consumers.