Emerging mobile wallets may pose a bigger risk to banks than many realize.
Nearly half of U.S. consumers are interested in using a mobile wallet to help them manage card payments, and many of those would consider a provider that is not a bank, new survey data from the financial consulting firm Carlisle & Gallagher Consulting Group suggest.
Among consumers interested in mobile wallets, 80% said they would consider PayPal as their primary bank if it offered banking services, and 60% said they would consider Google, according to the survey. Apple won over 60% of respondents, even though it does not currently offer a digital wallet.
"These alternatives and tech titans pose a real threat [of] taking customers away from banks for mobile wallet services and possibly more," says Peter Olynick, practice leader for Carlisle & Gallagher's cards and payments area. The Charlotte, N.C.-based firm surveyed 650 U.S. adults in April.
Within five years, most consumers will routinely initiate most shopping and many transactions on smartphones, Olynick says.
"As mobile wallets take off, alternative providers will have the opportunity to steal market share from banks," he says.
For consumers, mobile wallets could help ease their frustration with keeping track of loyalty programs, coupons and other perks payment cards provide, Olynick says.
Banks still have customers' loyalty and the opportunity to continue delivering all banking services to consumers, but because such a large portion of consumers is receptive to using other providers, banks need to act fast.
Many banks may have even been dragging their heels in meeting the challenge from mobile wallets, assuming that the U.S. would first need to build a mobile-payments infrastructure using Near Field Communication or similar technology, Olynick says.
"Less than two years ago, banks thought the threat of mobile wallets was far off, but mobile payment technology is moving fast, taking different forms than NFC, and consumers are very interested in it," he says.
Banks should act now before they lose too much ground, Olynick says.
"Get a core wallet strategy in place and have a full range of offerings ranging from managing mobile banking and payments to mobile shopping and loyalty," he says. Covering all of those areas should "satisfy a broad range of consumers," he says.
Consumer behavior, rather than demographics, is crucial in developing such offerings, he says.
Mobile wallets primarily intrigue certain customers as a way to shop (including tracking loyalty programs and coupons), while others are mainly interested in using mobile devices for faster and simpler payments, Olynick says.
"Capturing both segments will require some customization of mobile-wallet offerings," he says. "No die is cast yet, but there is new urgency for banks to take action because the threat from alternative rivals is real."