A recent white paper by NACHA, the mobile payments alliance, developed in tandem with the Payments Innovation Alliance Mobile Wallet Team, found significant value in the cloud for emerging payment solutions.
The current outlook for adoption of mobile wallets solutions may be a muted one, but there is hope on the horizon – if hardware manufacturers provide truly open and robust access to storing credentials and to interacting with the physical point of sale.
One spur to more widespread adoption comes with the continued growth of the cloud as it enables access to all types of transactions across all devices across all venues. The mobile wallet is “more than just a payment method,” according to the white paper, which means that the stakes are high for both financial institutions and retailers, as they need to include mobile shopping in their basket of shopping and banking technology and payment options. The choice is a simple one: to innovate or be disintermediated. The quickest path is to link up in interoperable partnerships that will in turn lead to success at the point of sale.
The in-store experience can be enhanced whether mobile wallets are used as part of a standalone payments app – ranging from PayPal to Samsung Pay – or are tethered to a “plus one” feature that can be integrated into branded bank mobile apps, such as Capital One, to name just a single example, or via retailers (where Starbucks is a marquee name, but hardly a monolith among choices). Buy buttons are options, as are seamless/automatic transactions that may not need a human digit swiping across screens at all. It is the flexibility of the payments function itself that can help a retailer become ready to offer up consumers a true omnichannel experience. For financial institutions the digital wallet is the fastest growing and is among the most important touchstone with customers, cementing loyalty.
One way to bring both retailers and financial institutions on board with mobile wallets is to examine the positive returns on investment that may accrue with the processing, acquiring and cost efficiencies with the payment methods, complimented of course by new revenue opportunities. On this latter point, it is estimated that gross revenues that can be generated through mobile wallets are estimated to be as high as $300, incrementally, per additional user on an annual basis. That certainly outpaces the demand deposit account incremental benefit, and can be twice as much as might be seen in a DDA, and it can be roughly equal to the gross revenue derived from a credit card account – and a staggering 10x the typical search engine-based gross revenues added.
But in order to achieve these revenue benefits, the ROI must be secured through the enrollment of disparate accounts, said the white paper.
Beyond the acceptance of retailers and FIs, merchants are another hugely important part of the puzzle. No merchant acceptance means no consumers can use the wallet, after all. As such, merchants must be made aware of the ability to add, without much additional effort, one more item to the sale and one more visit – both of which increase top line torque.
Technological concerns and considerations stretch across closed, hardware-based payments models or open, more cloud-based adoptions. In the case of the latter, mobile devices can function with payments to use barcodes, cameras and other options as conduits to transactions, with pre-authenticating features built in, which as noted by the Alliance are relatively more flexible and intuitive than hardware-based solutions. Working in tandem with Same Day ACH, noted the research, cloud-based solutions offer up an “attractive clearing and settlement mechanism for mobile wallets.”