Mobile Wallet Countdown

This banking and payments platform’s time will arrive—sooner or later

By Nicole Swann

This leaves community bankers to ponder when they should join the pursuit of consumers’ virtual pocketbooks.

Proponents insist, however, that mobile wallets are not just another technology looking for a home, and that community banks need to be in the game or risk disintermediation and loss of an important relationship channel.

“Just like their marketing objectives now, community banks will still need to position their payment cards ‘at the top’ of their customers’ mobile wallets,” suggests Linda Echard, president and CEO of ICBA’s payments program, ICBA Bancard. “It will be harder to do that if the community banks don’t offer a trusted universal mobile wallet early on.”

Proponents cite Starbucks’ closed-loop payment app as proof of concept, noting that mobile wallets now account for roughly 10 percent of the retail chain’s transactions.

But critics point out that Starbucks is a closed-loop environment and that for consumers to truly displace checks and cash or forgo a physical card in a non-virtual environment, there must be a compelling reason for them to change their behavior, for merchants to change their point-of-sale systems and for handset manufacturers to alter their devices.

“[The mobile wallet] is not aspirational, it’s here. How community banks can play in that ecosystem is real,” insists John Ainsworth, group head of U.S. markets for MasterCard. Community banks already possess the key components to be major players—the trust of their customers and a means through which payments can be routed (using their existing transaction rails), payments experts like Ainsworth say. Now banks just need to spur consumers and merchants into action.

The power of points

What exactly can inspire consumers, who have been notoriously slow to switch their payment behavior for any new platform, to convert from a physical to a virtual wallet?

“Loyalty points redemption,” answers Dominic Hofer, CEO of Loylogic Inc., a global exchange and clearinghouse for virtual currencies like loyalty points or miles. In a new whitepaper, “Why Loyalty Payment Can Help Digital Wallets to Break Through,” Hofer cites a recent study conducted by his company, which found that consumers judged the ability to use their loyalty points and miles anywhere and at any time as their most important redemption factor. Two-thirds of the consumers polled for the study were willing to accept less value from their points if it meant they could redeem their points more easily.

Since Loylogic’s PointsPay platform allows for widespread loyalty rewards redemption, Hofer argues that it could be the missing piece of the mobile wallet puzzle.

Solutions in simplicity

For those who hate the tedious process of filling out billing and shipping information every time they make an online purchase, MasterCard’s MasterPass solution, which works on computers, tablets and smartphones, or by Visa, a similar multichannel, open-architecture, streamlined checkout process, could be the ticket. Once the cards have been preregistered and related shipping information uploaded, the information needed during checkout goes from roughly 42 fields to two at a participating merchant’s site.

MasterCard’s MasterPass and by Visa are available for community bank configurations. Officials with both payment companies claim those platforms can significantly minimize development and implementation costs for community banks offering mobile wallets. Deploying mobile wallets, they add, can help smaller issuers improve customer retention and profitability through value-added offerings (i.e., real-time transaction or account balance alerts), turnkey marketing (print and electronic), merchant funded offers and consumer spending data for more effective marketing.


“Our premise is simple: to deliver the security, simplicity and personalization that merchants, financial institutions and consumers demand as payment technology continues to evolve,” says Jennifer Schulz, Visa’s global head of ecommerce. Schulz notes that mobile wallets give merchants the ability to:

– deliver a consistent consumer shopping experience no matter how a person shops—via mobile, online or eventually at the point of sale;

– decrease online shopping cart abandonment (67 percent of items put in a cart online are abandoned, according to comScore data) through a streamlined checkout process;

– receive payments via mobile devices with the reliability, convenience and security that they expect from payments companies; and

– increase consumer engagement by offering near real-time promotions and offers.

In the United States, mobile payments are a new phenomenon, but globally there is “a lot of evidence of adoption,” and a demand by consumers for “a new shopping experience,” Ainsworth explains. As the mobile payment landscape continues to evolve, community bankers should not “sit on the sidelines,” he cautions.

“Our feeling is [the mobile] wallet is key, and [community banks] have to make a strategic choice to defend their business,” he says.

Nicole Swann is ICBA director of marketing and brand strategy.