Mobile wallet developers need only look to the prepaid card business to find a suitable partner, one that has already been down a path mobile has just started.
Payments executives and analysts often refer to the mobile payment evolution as being in "the first inning" in terms of consumer and merchant adoption. Several years ago, prepaid cards were in the same spot, seeking consumer adoption and merchants that would accept them. In time, the proliferation of gift cards and other prepaid products has benefited from lower fees and more merchant acceptance.
The first wave of prepaid users were those considered underbanked, including younger consumers who have not yet entered the mainstream banking system. And today, the product is maturing and attracting a wider audience.
"Prepaid adoption at one time was similar to where Apple Pay is now," said David Prochnow, vice president of prepaid products for MB Financial Bank N.A. "I can see that it [increased adoption] will happen with mobile as well."
Prochnow spoke during a panel discussion during SourceMedia's annual Card Forum and Expo, taking place this week in Chicago.
If mobile takes off as a ubiquitous payment option, consumers who use prepaid cards on a regular basis may play a key role, experts say. Many unbanked consumers rely on their smartphones to access financial services or the Internet, so mobile wallets would be a natural fit.
Adding mobile apps to a prepaid card product can extend the life of that card, said Madeline K. Aufseeser, senior analyst with Aite Group Consulting. "A connection to mobile makes those products stickier,'" Aufseeser added. "You can also attach rewards products or loyalty points on prepaid cards."
American Express buys into the notion that mobile and prepaid are perfect bedfellows. The card brand adapted its Serve digital wallet into a prepaid product based on its observations of the market.
"Mobile impacts every way we think about prepaid," said Courtney Kelso, vice president of business development and strategy for American Express Enterprise Growth. Prepaid card users are "the population to be aiming for" with mobile technologies, she added.
Rather than tying mobile into payments, it should be viewed as a tool to engage consumers with the goal of encouraging purchase. Successful mobile payment systems such as M-Pesa prove that mobile wallets can serve a need even without making changes to the point of sale.
"Mobile payments are about financial inclusion in so many countries, but it has also brought about social inclusion," said Vivek Dwivedi, client partner for Infosys. "This shows the power of prepaid, where stored values and mobile technology make so much of this possible."
Any mobile wallet developer working with a prepaid card provider will enter a market that has finally matured.
About 196 million active debit, payroll debit or prepaid debit cards are in the hands of U.S. consumers, said Aite's Aufseeser. When considering 246 million U.S. adults are at age 18 or older, one could argue that prepaid vehicles have 80% of the market. "That means maturity," Aufseeser said.
Because an array of prepaid products overlap demographics to target the same consumers, prepaid essentially moves on different distribution channels to bring a similar product to market, Aufseeser added.
Still, banks and credit unions "can still jump in" with prepaid debit products that offer various other services, including mobile functions or attached savings accounts, Aufseeser said.