The lack of a universal technology standard, disparate interests of stakeholders, and poor user experience have previously limited the adoption and growth of digital wallet usage. With an ever-growing number of NFC-enabled merchant terminals however, the non-physical card market is now growing fast and the number of transactions is expected to overtake that seen with physical card transactions.
Traditional payment providers, such as MasterCard and Visa, are set to lose out on fees from processing payments via physical card transactions, and as a result have begun to explore the use of their own wallets and devices (e.g. the bracelets launched by Visa and Santander Spain for the Rio Olympics). Security and user experience are the key deliverables from digital wallets. This is where Apple Pay has become the clear market leader. They introduced fingerprint biometrics, on-device storage, and has appealed to banks and consumers by offering a simple, fast and private way to pay.
In an interesting reversal of the trend towards ‘remote’ payments, what we are seeing with wallet and contactless is that ‘presence’ is redefining payments – at least at the low-value, regular transaction level. Perhaps banks and payment service providers can make use of the richer stream of data around customer behaviours that these trends are providing to tailor and adapt services to become even more relevant.
Banks have traditionally been then natural owners of the payments ecosystem, but they must follow clear strategic imperatives in the space if they wish to remain relevant as a broad range of players accelerate innovations and enhanced services (e.g. bracelets, enhanced functionality, greater security, biometrics and deeper customer insights) around how consumers move their money, manage their money and make payments.
Oriol Villalante, Senior Consultant at Axis Corporate