Where is my (Digital) Wallet?

Where is my (Digital) Wallet?

If you are a regular reader of this blog you will not be surprised about how much innovation surrounds the banking industry and how technology is reshaping it. There are many examples but today I would like to focus on what mobile means for banks and the different strategies we are seeing including the rise of the digital wallet.

First of all, let me clarify something: mobile banking is not the same as mobile payments. And neither their implications for banks. The latter refers to access to your banking information and making online transfers and bill payments. The former refers to the use of the phone to pay in a shop or transfer money to a friend. So it’s not exactly the same.

Hey, but you may be missing something, you can argue: and such thing is a mobile wallet. I would personally fit it into the mobile payment space. And I also prefer to call it digital wallet, because as soon as the wallet is available not only via your phone but also in other channels (ATM, branch, when shopping online, etc) it is a wallet in the cloud.

Now, if we focus on mobile payments we have a scenario where we have the customer on one hand, and the merchant/retail on the other (being the former the key part to make mobile payments a success, from my point of view). The ideal situation for a company is reaching both parts of the equation of payments, but in practice all attempts for succeeding in this business has been clearly been one-sided.

Banks saw very soon the smartphone as the natural device for a real banking on the go. It wasn’t just about having a 24×7 service as the OLB but having your bank on hand any place, any time. There was the debate (and with HTML 5 persists) about web browsing or app, but all banks understood the need of having an impeccable mobile banking experience for their customers.

But, are banks lagging on mobile payments? Is it important for them? I think that as Sean Gilchrist, MD, Digital Banking, Barclays UK RBB, stated at the Mobey Day in Barcelona a few weeks ago: “We should take payments seriously. We should take anything that threatens core banking seriously, and mobile does that”. So, some banks are launching their own solutions for mobile payments.

Some people argue that separating mobile banking from mobile payments is artificial and comes from banks’ legacy in which retail banking and cards have been historically separated businesses. In my opinion, mobile payments come in dozens of user cases and dependent on which you focus you may find different solutions.

Let’s say that I want to focus on a digital wallet that makes me forget the need for cash. I can pay a friend, take money out or add funds using an ATM, or send money to a business if necessary. Here I am focusing in the customer part of the payment equation (and opening to the bank a door to enter a part of the social life of the customer). In this case, why shouldn’t you separate mobile banking from mobile payments if you were doing so in using your cash?

And even if you have the perfect digital wallet where your customers are happy to use it instead of cash and every merchant/retailer is also happy to accept it, why should I log-in in my all bank products app, if I only need to make a payment for 20 euros? Moreover, expect that bank information as bank accounts or debit/credit card information to stop being the proxy for payments, being replaced gradually by less sensitive piece of information as a mobile telephone number or an e-mail address.

The definitive mobile payment that appeals to customers and merchants alike will take time.  It seems that NFC is positioned to be the standard technology for mobile wallet at the physical POV. But the timing for a mass market adoption still remains unclear, and we are likely to see other cloud-based solutions appear. Another issue to be resolved is who controls the secure elements, and hence controls the data.

Both of them being worked out, I would venture that the winner/winners of this mobile payment space (a space according to Gartner of $426 billion in 2015) will offer a compelling customer experience, a rock solid platform and most importantly, a hard to match ecosystem. What is your bet?