Banks and Merchants Must Have Their Own Payment Apps

Banks and merchants are under threat to lose millions of dollars in investment in their apps by allowing them to become obsolete because they don’t provide the most desired functionality of all: Payment.

The reason is simple. A mobile app that offers a new and better way to perform a task that literally occurs multiple times in a day for each of us, payment, is destined to be on the welcome screen of every smartphone out there. If that app is a mobile wallet that also offers loyalty, coupons and other value added services, where will that leave the branded bank and merchant apps?

The competition for user loyalty to a particular mobile app is fierce and functionality is essential to make an app a daily part of a consumer’s life. The fact that on average a whopping 80% of mobile apps are downloaded, used only once and eventually deleted, demonstrates the difficulty of giving a mobile app the functionality that makes it relevant to consumer behavior. This challenge is across the board for all apps, including well financed apps from banks and merchants. Payment is a repeat use tool that can keep bank and merchant apps on the first touch, top-of-the screen status as has been so aptly demonstrated by Starbucks.

Starbucks recently announced that 16% of their sales volume came through Starbucks own mobile wallet; a number likely to have been growing since. This represents a tremendous transaction volume through this channel for a single retailer, about four million mobile payments per week, with around eight million consumers using mobile apps to pay. Giving customers a payment option creates a repeat use channel of communication with consumers is priceless for Starbucks.

Starbucks leveraged this customer touchpoint to integrate loyalty and offers into the same mobile app to create an excellent all around consumer experience. Simple and convenient mobile payments became the channel through which loyalty, offers and rewards are delivered to customers, making the mobile app a key retention and loyalty tool for the retailer.

Outside of the example set by Starbucks, it is purpose-built “mobile wallets” that deliver that key payment functionality to consumers. Mobile wallets from multiple industry players are proliferating everywhere and delivering compelling consumer experiences to consumers by offering this one key feature.

Banks, merchants, and other players in commerce have a lot to gain by turning their apps into a mobile wallet for transactions in the physical world. By turning their app into a wallet, a bank or merchant can control all aspects of consumer experience end-to-end. Communication with consumer can start at home, before they even leave for the store.

These wallet apps can also deliver additional value to consumers. They can check-in at retail locations via Bluetooth Low Energy, receive personalized offers inside the stores, and make “one tap” NFC mobile payments that send payment, coupons, and loyalty information to the merchant POS system in a single tap of a phone.

Convenience and savings can drive consumers to regularly use the enhanced mobile app. Consumers can forget clipping coupons, carrying loyalty cards, or bringing catalogs to the store. Everything can be in the app and synchronized with the wallet for easy redemption at the point of sale.

Beyond enabling their own apps for payment, banks also have the option grant use of their credentials to other trusted apps in the mobile phone for payment. We call this “card federation” and it allows banks to increase card distribution and usage while achieving the objective of being “top of app,” not only “top of wallet.”

The bottom line is that banks and merchants have grown to rely on their mobile apps as a key channel of communication with consumers. If banks and merchants don’t keep adding the desired functionality consumers want, other apps will and they may never get that usage and engagement back. Functionality is key to keep consumers engaged in your mobile app, and payments, offers and loyalty are probably the most important functionality there is for commerce-related companies to get and keep their attention.

David Brudnicki is the Chief Technology Officer of Sequent.