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Most banks don't have the IT infrastructure to support the flood of payments data that will come with mobile payments, analyst Brian Riley warned at a conference today.
May 23
Banks need to get their acts together if they're going to offer consumers mobile wallets that can compete with user-friendly offerings from savvy alternative providers such as telecom companies.
Wim Pardon, the managing director of OpenWay for the Europe/Middle East/Africa (EMEA) region, thinks his company has the answer – mobile wallet technology that includes broader marketing and transaction capabilities.
OpenWay, a Brussels-based payment processing technology company, plans to demonstrate its WAY4 Wallet at the Cartes show this week in Paris. Equity Bank, which has partnered with OpenWay to allow M-Pesa mobile money account holders to withdraw cash from ATMs in Kenya, will demonstrate the mobile wallet with OpenWay at the conference. The WAY4 Wallet is designed to provide access to financial services via the web, mobile device or social network without requiring visits to a branch.
The services include what the company is calling a "virtual personal office." That includes mobile payments; funds transfers; prepaid, debit and credit card management; the ability to create payment templates for mobile and web bill presentment and payment; as well as enhanced data-driven communication capabilities between the consumer and the acquiring financial institution.
The "data driven communication" refers to a link to CRM and account management tools that can be accessed through the same log in and user interface as the mobile payment app.
While at a store deciding on a purchase, for example, a consumer could look at bills due and special offers, check balances on different debit, credit or loyalty cards, and make adjustments (such as move the payment for a bill back a week or so or make an account to account transfer in order to make a purchase) on the fly from the mobile wallet app.
Pardon argues the competitive landscape in mobile commerce is requiring more of banks in terms of user experience and functionality, particularly since telecom consortia are building mobile wallet networks that threaten banks' ownership of the payments relationship. In the U.S., the largest telecom group is Isis, which includes AT&T, T-Mobile and Verizon. Isis is testing its services at transit systems in Salt Lake City and Austin.
"What the telcos are doing is more advanced than what the banks are doing," Pardon says. "There are a lot of payment services that telcos can offer. The telcos are not financial institutions, but it's not that difficult to create some financial services."
By offering access to a broader mix of card payment options added to bank transactions and services, OpenWay hopes to make bank-led mobile commerce more attractive. The software, which would typically be licensed by a bank and delivered to consumers via a mobile banking app or online banking, includes an integration between payment processing, bank accounts, and marketing and CRM systems. It ties together mobile banking and transactions with data management and analysis. That would in theory allow banks to combine transaction data with existing customer data to deliver targeted marketing at the point of sale, via the web. "With [an integration between mobile banking and payments] you can combine prepaid with credit card and other accounts to enable a larger range of [higher value] payments with more options," Pardon says, adding the WAY4 Wallet still has payment limits set by the card acquirer as a security measure.
Pardon says there is a huge potential market in North America for bank-led mobile payments, with use cases including the prepaid salary cards that are common in the underbanked segment and point of sale payments that comply with Europay, MasterCard and Visa (EMV) chip-based security standards. As merchants and acquiring banks migrate cards and point of sale terminals to accept EMV payments, a parallel migration toward contactless mobile payments is also expected to take place. "Are we looking to enter the North American market? Yes," Pardon says, adding OpenWay has one financial client in North America and is currently developing a business case for further expansion.
Pardon acknowledges that North America will be a tough market to crack, since many banks such as PNC are developing or have built mobile wallets of their own. "We'd have to answer the question of why they would go with a third party vendor," he says.
