Technology is a constant source of debate for the banking industry and the ‘mobile wallet’ is a key area of discussion. It is one of a number of innovations which can afford financial institutions and IT vendors as many headaches as it does opportunities.
The adoption of mobile by the banking industry has increased dramatically over the last 18 months and has been driven by consumer behaviour. It is their love affair with new technology such as smartphones and tablet computers which has meant the financial services industry has had to rethink the banking solutions and models currently in place.
Mobile is something banks would be ill-advised to ignore as numerous reports illustrate. Recent research by Gartner showed that the total number of smartphones sold worldwide in the third quarter of 2011 was 115 million – 42 per cent higher than the amount purchased in in the same period the previous year.(1)
comScore recently reported that 32.5 million Americans accessed banking information on their mobile devices in June this year, a figure up by 21 per cent on the fourth quarter of 2010.(2)
The mobile wallet marketplace is also filling with participants from outside the traditional banking sphere. Google and Facebook have both entered the mobile payments space, moves illustrating how competition surrounding the technology is opening up.
However, despite the obvious growth opportunities and technological changes, the Mobey Forum’s ‘Mobile Wallet – definition and vision’ white paper suggests that banks and telecoms operators need to do more to work out how they can benefit from mobile. Simply offering consumers the convenience and functionality of mobile wallet technology will not be sufficient to drive mass-market adoption, the research showed.
What is the ‘mobile wallet’?
The term ‘mobile wallet’s is one much quoted but not often defined. Indeed, Sirpa Nordlund, executive director of Mobey Forum, said that the concept of the mobile wallet often causes as much confusion as it does excitement. And the concept means different things to each market participant.
“If you talk to a banker, they will say it is a prepaid card in your wallet – it is an epay card in your mobile phone. If you talk to a telecoms provider, they will say it is a beautiful interactive interface in your mobile phone, which will enable you to make payments,” she explained and continued: “In fact, it can be both and much more.”
The Mobey Forum defines the mobile wallet as the functionality on a mobile device that can securely interact with digitalised valuables.
“It needs to be secure surrounding data forms and end-to-end functionality, it needs to be digitalised in a way that it is not compared to a physical wallet but it can also reside in the network. So the device is more like a remote control and everything may be in the network. It can also use one or more secure elements for required applications. Valuables are defined by the user. It can be a photo or a payment,” Nordlund said.
Key drivers behind adoption
Technology vendors need to be aware that consumers want more from their mobile wallet than just the capabilities of a traditional wallet in a virtual environment, the Mobey Forum explained in its white paper.
Nordlund said that technology vendors need to always keep customer needs in mind when designing their mobile banking solutions. But there are also other factors such as the market, the location, the types of phones people are using which should also influence how vendors and banks work in this area.
She suggested that the most appealing mobile wallets are those which offer a unique value proposition.
“Perhaps an ideal interface would also track my spending so I could see where my money goes – how much do I spend on clothes, bills, food. An online track of my spending would really provide value for users.
“If you combine this usability with entertainment – or social media functionality – this allows users to interact with their friends when they make a purchase – then they can share details with them and show them what they have bought.”
She said that the financial services industry should focus on the possibilities of mobile wallet rather than the threats and keep looking to the future. “Ultimately bank and telecom operators need to get together and combine forces to make a successful mobile wallet,” she concluded.
By Jim Ottewill
You can access the Mobey Forum white paper by clicking here
1. Mobile banking research
2. Mobile Banking App Usage in the U.S. Increases 45 Percent from Q4 2010