In this rapidly changing mobile commerce market, it is still too early to predict which wallets and platforms will win the hearts and minds of consumers. One thing is for certain. There is no shortage of players vying for a top spot. Today, there are multiple mobile wallets either in development or in pilot programs in the U.S.
In general, mobile wallet contenders fit into six categories:
These mobile wallets reflect the natural evolution of banking. The center of gravity has shifted from branches to self-service ATM machines to online banking to mobile banking. The next logical step for credit unions and their members is the use of the mobile device itself as a payment tool.
Mobile wallets can enable merchants or retailers to strengthen their bonds with existing customers and attract new ones, leveraging coupons and discounts to move from broad mass marketing to a more individualized strategy. Amazon is an excellent example, reaching out to customers and making purchase suggestions based on what they have bought previously.
Mobile technology can help move online payment systems into the physical brick-and-mortar world. PayPal, Amazon, and Apple iTunes are examples of popular payment tools. Their goal is to leverage this popularity into accepted methods of payment for goods and services purchased offline.
This area of mobile wallets will be a battle of the giants. VISA, MasterCard, Google, Isis, and others are jockeying for dominance over the way that near field communication (NFC) ─ which allows a consumer to wave a mobile device in front of a reader to authorize payment ─ will be used.
Are consumers carrying too many gift cards, prepaid cards, and loyalty cards? Companies in this space think they are, and their solution is to consolidate all cards and functions into a single application. The goal is to help consumers better leverage the value in their cards and accumulate or track loyalty points and rewards.
Single Feature Wallets
These mobile wallet solutions have a narrow focus, essentially doing a single task but doing it very well. One example of this approach is Dwolla, a closed-loop network that emphasizes low transaction fees.
On another front there is a battle waging in regards to NFC and the associated NFC Secure Element, which is getting a lot of attention thanks to the clout of the companies involved. This competitiveness is driven by the fact that whoever controls the Secure Element also controls the gateway to commerce on the mobile device. This control allows a company to charge financial institutions for engaging in commerce via that phone.
Other interesting developments are happening in regards to the banking and retailer wallets. By themselves, mobile devices have merely changed the way payments are made. But when those mobile payments are paired with permission-based marketing, customers and potential customers are able to take unprecedented advantage of a shopping environment.
Consumers make most of their purchases at a small number of retail outlets, including one or two grocery stores, coffee shops, electronics outlets, and clothing stores. But with new forms of mobile wallets, stronger relationships between consumers and their favorite merchants, as well as their financial institutions, are possible.
The second half of 2012 should see these various groups and interests start to come together in dynamic ways. Heralding in new applications, new business models, and positive changes in consumer behavior and sales, the mobile wallet represents a great opportunity. But there are challenges to consider as well.
The rise of mobile commerce brings with it a massive paradigm shift. Wise institutions will view the mobile wallet as much more than a self-service tool, an ATM without the cash withdrawal, a mobile version of online banking, or a device-based debit or credit card. Rather, this technology should be seen as a key intersection between consumers, merchants, and financial institutions that will change the face of commerce forever.
Ben Love is the vice president of mobile strategy at Vantiv. His range of experiences include rolling out the first ever wireless EMV products into Northern European markets to coordinating international product and development teams to deliver enterprise solutions to complex business and payment problems in the U.S. and Canada, as well as the introduction of centralized application POS technologies into North America. Love continues to drive new technologies, forward thinking, and change in the world of secure payments.
Learn more about how your organization can position itself to take advantage of the opportunities in mobile commerce. Our experienced professionals are ready to help you find solutions that can meet your mobile needs. Visit us at www.vantiv.com or contact Ben Love at 404.406.3281 or Ben.Love@vantiv.com.
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