Mobile payments are creating both opportunities and strategic challenges for banks as technology companies introduce new wallets and payment platforms. The arrival of Apple Pay, along with competing offerings from Google and Samsung, is increasing pressure on financial institutions to determine what role they want to play in the emerging mobile payments ecosystem.
Banks must decide whether to primarily support third-party wallets, develop their own branded capabilities, or pursue a combination of both approaches. These decisions could ultimately influence how much control financial institutions retain over customer relationships as mobile payments become more widely adopted.
The launch of Apple Pay late last year was bound to shake up the crowded and fragmented mobile payments market. Banks now face more pressure to make the right plays in this space or else lose their customers.
As things stand, Apple shows strong numbers in both iPhone 6 sales and usage of Apple Pay among its early adopters. Competitors are responding with new partnerships and products. Samsung introduced Samsung Pay at Mobile World Congress, with LoopPay’s magnetic swipe technology enabling mobile transactions on credit card readers. Google acquired mobile wallet Softcard and partnered with AT&T, Verizon and T-Mobile to preload Google Wallet on their handsets, and will also launch a new mobile payments application program interface later this summer.
How these new developments will impact banks and the rest of the mobile payments market isn’t clear. Questions and barriers remain for Apple, Samsung and Google. And the Merchant Customer Exchange lurks in the background with the anticipated launch of mobile wallet CurrentC later this year. There’s a great deal of customer education that needs to be done for any option to gain wide acceptance. This is still a murky landscape for banks to navigate.
Banks Weigh Their Mobile Payments Strategies
As banks and other financial institutions assess their customers’ and members’ appetites for mobile payments options, some are straddling the line between being an enabler of other firms’ solutions and keeping their options open to be able to offer their own, branded solutions some time down the road. While many of these FIs intend to offer open access to several mobile payments and mobile wallet options, some are trying to figure out how and when they could offer white label solutions to their own clients at some point in the future, to allow greater interaction and deeper relationships with them.
The expanding number of mobile wallets makes it difficult for banks to commit to a single strategy while consumer preferences are still developing. Supporting multiple platforms can give customers greater choice, but it could also place technology companies between financial institutions and their customers during everyday payment interactions.
Developing branded or white-label solutions offers another potential path for institutions that want to maintain a more direct relationship with customers. As the mobile payments market evolves, banks will need to balance openness to third-party platforms with their desire to preserve their own brands and customer relationships.
Overview by Edward O’Brien, Director, Banking Channels Advisory Service for Mercator Advisory Group
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