The age of mobile payments is upon us. Increased awareness, acceptance and demand is leading to a huge surge in uptake across the globe.
From an Android perspective, today’s success can be traced back to the incorporation of host card emulation into Android KitKat 4.4 in 2013. This sparked intense activity as it enabled banks to develop and launch their own services, independent of the mobile network operators (MNOs). In parallel, the industry’s giants made their move and quickly launched Android Pay and Samsung Pay, and the payment schemes emerged as the gatekeepers to the mobile payments ecosystem.
For banks, Android mobile payments present huge opportunities. Identifying the right strategy, however, is key to taking advantage. And for some, it is hard to know where to start.
Launching digital technologies can be a bit like pinball. Both are fast-paced, unpredictable and challenging. But with the right skills, knowledge and experience, success can be achieved.
So, when it comes to launching Android mobile payments solutions, how can banks get ahead of the game?
It may seem obvious, but banks first need to consider whether they want (or need) to offer mobile contactless payments to their customers.
To do so, they must consider several factors.
Many issuers want to expand on the convenience, simplicity and security of contactless cards by supporting or launching mobile wallets that offer greater interactivity and the option to offer value added services. On top of this, cash management costs are considerable, so any reduction in this will be of huge interest.
Regional variation also plays a part. In advanced markets with a wide, established contactless base, speed is of the essence. Where acceptance is limited, more time may be required.
Customer retention is also a key consideration. Some banks’ reputation is dependent on their first-mover status, so moving quickly to develop a mobile payments proposal is essential. Conversely, banks with a more conservative approach must avoid customers ‘voting with their feet’ to a competitor that does offer mobile services.
Once banks make the decision to enter the game, they need to decide what kind of player they want to be. Banks need to identify the roles they want to play, their routes to market and the partners they need to get there.
A game of phones
Just as no two games of pinball are the same, mobile payments implementations are also all different.
Samsung Pay and Android Pay are often referred to as ‘OEM Pays’, but it’s important for banks to consider them as separate channels with their own intricacies and requirements. Device availability, security methods and merchant acceptance all differ. Banks must therefore evaluate the OEM Pays individually against their own requirements to ensure they are successfully integrated into their specific business strategy.
Playing the long game
OEM Pays enable banks to bring mobile payments to their customers quickly. But banks must be careful to avoid being marginalized in the search for expediency.
One way to retain visibility, loyalty and customer data is to develop and launch an own-brand mobile wallet. This delivers full control of the user experience and data, as well as offering channels to deliver value-added services.
Although developing an own-brand wallet presents its own challenges, and may not bring instant success and rewards, playing the long game can prove beneficial.
Formulating a game plan
There are a number of challenges to be navigated on the way to a successful deployment.
On a technological level, banks must overcome the issues posed by integrating new technologies and third party services into legacy systems. In addition, they must ensure their offering is appropriate to the wider acceptance landscape.
Strategically, banks must consider how their mobile payments offering fits into their overall business model, how quickly they can bring a service to market and their ability to drive customer adoption.
On an implementation level, banks need to address card management processes and how to evolve them in line with new authentication options, risk profiles and scenarios presented by mobile payments.
With so many important decisions to make, banks may want to team-up with specialist partners to understand the market dynamics and develop a game plan to address, and overcome, these challenges.
Risk versus reward
The most fundamental challenges facing the mobile payments industry, however, is security.
Banks must deploy a combination of authentication, security and risk management measures in the fight against fraud.
Biometric, multi-factor, device and application authentication all help banks verify legitimate users.
Tokenization replaces sensitive payment data with a non-sensitive equivalent, referred to as a ‘token’. It is highly effective in limiting the value of data if intercepted, and has emerged as a standard method of securing mobile transactions. In addition, further security can be provided by software-based security methods like code obfuscation and white-box cryptography, or advanced hardware options such as a secure element or trusted execution environment.
To be successful, a pinball player must strike the right balance between risk and reward. When it comes to mobile payments, banks must counter security with usability. Every implementation is different, so a ‘layered’ combination of the above technologies and techniques should be tailored to meet specific needs.
Getting to the next level
To take advantage of the huge opportunities afforded by mobile payments, the time to act is now.
The complexity of the mobile payments ecosystem, however, can be daunting. This is where trusted implementation partners enter the game. From project initiation through to launch, they guide banks through every step of this process to ensure a successful launch in line with business strategy and goals. This will ensure that they fully understand the market, technologies and deployment options and launch solutions that meet the needs of their customers and board, on time and on budget. In short, it enables them to win.
Download FIME’s eBook, 7 key questions for banks launching mobile payment solutions, to find out more.
Christian Raccuglia, Head of Consulting & Engineering Marketing, FIME