By Jerome Nadel, CMO & SVP @ Rambus.
It’s an exciting time to be in Fintech and specifically within the transaction space. According to a report by McKinsey, transaction-related revenues will continue to rise through 2019, contributing $360 billion to global payments revenue growth in the period between 2016-2019. The reason that transaction-based revenue is growing is, in large part, due to the digitisation of cards through digital wallets that enable better ease-of-use and new services for the consumer.
Bridging the mobile wallet awareness and adoption gap
Many payments players, including banks, have not been able to provide enough of an incentive for consumers to use digital wallets over physical payment cards. However, a new breed of non-traditional payments providers are developing ways to fill the gap and drive adoption. For example, OEM payment methods such as Apple Pay and Android Pay, as well as other mobile incentive services, have emerged and are extolling the virtues of their own services on popular smart devices.
Yet consumers are expecting more as they look beyond a payments experience to a buying experience. Which is why, in part, a study by Accenture found that while 52% of respondents are “extremely aware” of mobile payments, only 18% use them on a regular basis. By taking a ‘walled garden’ approach to working with partners, OEM payment methods have slowed down their ability to react with agility to consumers preferences and needs, which hinders services innovation on the various platforms.
A more complete digital consumer experience will accelerate adoption
The good news for banks who want to avoid the transactional fee related to providing services through OEM payment methods is the opportunity to move closer to the consumer and contribute to the acceleration of digital payments. So, how do they do succeed? Banks and merchant acquirers can provide a more rounded consumer and mobile experience — one which combines multiple forms of digital value, whether payment, loyalty, discounts or coupons from favourite brands,all in one easy-to-access digital wallet. When integrated with beacon and geo-location technologies, these digital wallets can offer consumers real-time, personalised offers that enable strong relationships with the consumer over time.
Popular services could also include the ability to buy and send digital gift cards through an app, support in-app payments for in-aisle shopping to ultimately enable payments anywhere, anytime, which is a huge advantage over physical payment methods. These services can also offer a history of transaction receipts, using data analytics for the consumer, visually depicting how and where they spend their money which helps better manage bank balances and payments.
The case for an open, modular and scalable platform
To do this, banks can offer an open, modular, and scalable platform to enable them to work with partners and integrate multiple APIs across the ecosystem. In doing so, banks have access to the transactional data that informs the new products and services. The benefit of an open platform is that it can integrate with existing systems so that banks don’t have to replace their infrastructure if they choose not to.
Robust security is the bedrock on which the digital wallet should be built
While providing an open platform enables innovative offerings,consumers also want to know that they are using trusted services and security is a key element that should be baked into the foundation of the platform. While banks are already familiar with tokenisation technologies, they now have the opportunity to extend the registration, authorisation and secure provisioning capabilities to additional features that mobile wallets enable.
When deploying mobile payments, banks needs to consider investing in open platforms that can cater for varied customer needs and offer functionalities that complement the total user experience by digitising items of value from the physical wallet. By combining this capability with robust security, banks and merchant acquirers can become a powerful enabler and accelerator of mobile payments, giving them the ability to seize on the transactional revenue promised by industry analysts.