Could mobile wallets be used by banks to stay competitive against fintechs? This post is going to answer that question by looking at the potential benefits that banks could gain by offering mobile wallets.
Why Consumers are Taking Advantage of Mobile Wallets
When considering the prediction that “mobile payment apps are likely to reach a transaction value of a whopping $14 trillion by 2022” it quickly becomes apparent that consumers do like the idea of using mobile wallets to make payments.
But what makes mobile wallets so appealing to consumers? It probably has something to do with our daily lives. We are a bustling society that is constantly on the move. The ability to make mobile payments is a convenient option that fits in nicely with a busy lifestyle.
Some benefits associated with using mobile wallets include:
- Ease of use
- Quick transactions
- Bill splitting
- On-time payments
- Earning rewards points
- Little to zero transfer fees
- Instant transfers
Furthermore, there is no need to carry a physical card that could get lost, stolen, or damaged.
According to Deltec Bank, Bahamas, “These wallets are more secure. Data encryption protects information while customers are making payments. This may prevent cases of fraud.”
Plus, payment authorization can be given by biometric methods that maximize the wallet’s level of security.
In addition, identical security and privacy protection measures that cover transactions made with physical cards also cover transactions made with mobile wallets.
Shopping online is also quicker and safer because using mobile wallets for online purchases doesn’t require card numbers that get stored on websites.
Some mobile wallets offer storage for loyalty and gift cards, which reduces the number of physical cards that need to be carried.
So, from a consumer’s perspective, mobile wallets are extremely secure and convenient. When looking at it that way, it’s easy to understand why more consumers are using mobile wallets.
How Banks Can Use Mobile Wallets
Younger generations are not keen on dealing with traditional bank branches. They typically prefer digital services. But banks do not have to give up hope of winning over those younger customers. Instead, they can offer mobile wallets that attract them.
But traditional banks need to get on board with this before they lose the younger crowds to other companies that are more open to innovation. Banks that offer mobile wallets may stand a chance of successfully competing against those companies.
But that is not the only reason mobile wallets are a good idea. Banks can also use them to reach unbanked people. Many of these individuals have mobile devices. So, rather than issuing expensive cards to the unbanked population, banks can offer cost-effective wallets.
But in order to be successful, a mobile wallet needs to be very well-designed. Fintech Futures says that mobile wallets must, “securely store and manage multiple sources and stores of value and applications in one place,” which, “allows for…multiple payment instruments, multiple stored value accounts in one, or more currencies or multiple coupon schemes to complete one transaction.”
Users are also attracted to applications that support their efforts to improve their spending habits. For example, some mobile wallets can be set to limit how much money a user spends each day.
Although it may be in a bank’s best interest to offer virtual wallets to customers, these wallets do come with the challenge of complying with applicable regulations.
Taking the appropriate compliance measures might be costly and time-consuming but failing to comply will result in serious legal consequences that are best avoided.
Despite compliance challenges, making payments with mobile wallets is growing increasingly common and this trend will probably continue. If that is the case, physical cards may soon become obsolete.
That’s why it would be smart for banks to get ahead of the game by offering mobile wallets now. Not only will this gain new customers and keep current customers, but it will also help those financial organizations keep their products up to date.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.