Banking is one of the fastest growing and evolving industries. A few years ago, branches were the sole place to go when customers need a banking service. Later on by development of the digital conversion most of the customers started using internet banking and mobile banking for banking services and transactions. And the next stage is conversion to mobile wallet solutions.
In recent years, smart phone usage has been increased up to 2.1 billion according to the stats of 2016 and the expectation at 2020 is 2.87 billion smartphone users. As per most of the mid-aged and young generation customer’s lifestyle and expectations from their banks are becoming more future oriented, technology friendly and innovative. Researches show us that increase in smartphones and the number of merchants that are accepting mobile payments, it has become vital to have a mobile wallet strategy for banks.
That totally changes the rules of the play for banks as digital conversion competition is not restricted to powerful brand names or the best interest rates any longer. The definition of competition is all about bringing value added services to the customers with seamless experience. That is why competitors in the industry urgently need a mobile wallet of their own instead of using a partner’s mobile wallet like Apple Pay or Samsung Pay.
To provide an umbrella offering in purpose of mobile financial services by taking care of:
• Peer to Peer payments, money transfer services including cross-border remittance
• Card present transactions and card not-present transactions
• Payments to merchants directly from the wallet
• NFC payments with smartphone (Host Card Emulation)
• Foreign currency exchange
• Loyalty services and Real-time campaign management
• Personal budgeting
• Utility payments
• Digital identity management
Mobile wallet is the new banking trend
Mobile wallets play a crucial role in the banking industry because it is easy, fast and secure. Today most of the customers make online payments and buy most of the goods online. It’s always become such a difficult job to find your purse, pick one of the cards, try to enter all card credentials, address and shipping information. Instead, most of the customers would like to create their own profile in their mobile wallets, manage their payment cards and loyalty cards, store their address and contact details and complete the checkout just scanning a QR code and complete one click payment.
In addition, unlike internet banking apps, mobile wallets are seamless and empower quick transactions. Internet banking apps could be slower in a way that these applications manage a large number of transactions with a wide range of transaction pools, additionally they manage customer’s monthly, twelve-month reserve funds among different administration subsidies. Though, mobile wallets handle smaller transactions such as secure card store, online payments, money transfer transactions and loyalty services which can be handled in a matter of seconds rather than days.
Last but not the least; mobile wallets are secure and safe. Generally application based security is as follows, after end users download the mobile application, there has to be a sign up process upon the requests from the clients. Mobile wallets support 3 different Tiers for security of the cards and application to fulfill the security requirements of Visa and MasterCard because of including sensitive card data: Tier 1, username and password to open the application; Tier 2, MPIN before card listing in payment process; and Tier 3, 3D Secure which refers to the SMS OTP from the bank to authenticate end users before making any payment.
Definitely comprehensive security measures are important, as they mean that the trust in your bank, which is a very valuable asset in today’s digital world, will not be damaged. For instance; there has been a new way of credit card fraud which is phishing. There are lots of new web shops currently and customers don’t have much idea about how to select the secure ones. Therefore, there is a potential risk that these shops can be fishy portals to capture customers’ card credentials. If a customer uses a Mobile Wallet, then the only thing she need to do is to use her payment tokens for payments. So that even if these sites are phishing sites the only thing they get will be the one-time payment token which could not be used again for payment purposes. So payment tokens are critical for mobile wallets. The provisioning of tokens is related with the type of wallet used. Currently, there are two types of well-known wallets simply defined as on the device and the other is in the cloud. The mobile device based wallets have either an actual secure element or a software secure element.
Moreover, in most of the cases, customers use PayPal, Venmo or Square for payment. Customers can link their mobile wallets to these accounts and for the payment purposes they can choose one of them. This can provide customers to feel flexible in payments.
Additionally SDK security countermeasures are various including white box cryptography, device fingerprint, anti-tempering, certificate pinning, authentication code, cloud server communication, anti-debugging, anti-decompilation, string encryption, code shrink protection, and device binding.
Mobile wallets can be even more popular
The announcement of Host Card Emulation (HCE) protocol in 2013 has given new opportunity to mobile wallets. Customers can use their HCE enabled mobile wallets for remote & in-store (tap and pay) payments.
Secure element is also another way of doing the payment and store the card credentials securely, if we keep this SE outside the device, the solution becomes more useful, letting more freedom to the banks that want to own mobile wallets also support wearable devices. These devices are connecting with the smartphones via BLE (Bluetooth Low Energy) so that there is no more dependency on the mobile device manufacturers or network operators. Once customers provision your wearable device via your mobile wallet, they just tap and pay with their wearables.
In near future, two major advantages come up for banks that have their own mobile wallets. First, they will be able to innovate faster to meet customer needs, second, further innovations, such as co-branding, card consolidation and loyalty/reward schemes will help creating richer relationships with customers.
All banks will try to accomplish their digital conversion but, the ones that gain control over customer data, the ability to offer high–margin services, capture and leverage the context of their customers to offer them relevant services in correct time will be the winners.