Financial institutions can play a key role in mobile wallet adoption


July 08, 2019

From eWallets like Apple Pay to Android Pay, the “Pays” are a hot topic in financial circles these days. But questions continue to swirl around mobile wallet adoption rates. With the 2015 EMV liability shift long past, more merchants are equipped with terminals for contactless payments, but many haven’t enabled the functionality. And it’s unclear whether consumers are ready to replace their physical wallets with their mobile devices. How do financial institutions fit into the evolving scenario of mobile wallet adoption? Let’s take a look.

Mobile wallet adoption rates are high, but usage remains mediocre

Data from the PULSE Network’s 2018 Debit Issuer Survey reports that while cardholder mobile wallet enrollment has doubled, mobile wallet transactions accounted for only 0.6 percent of in-store debit volume. 

Experts point to three main reasons why mobile wallet debit volume is so low: security concerns, lack of acceptance among large retailers, and confusion about the acceptance process. Worldpay research into the topic reveals that four out of ten non-mobile users don’t believe mobile wallets are secure; 20% don’t use mobile payments because the retailers they shop at don’t accept the payment type; and one in five consumers don’t understand how mobile payments work.

On the issuer side, 86% of issuers surveyed by the PULSE Network have implemented at least one mobile wallet. But issuers are ambivalent about the outlook for mobile payments, citing concerns with low adoption rates, complexity in implementation, and disintermediation of the issuer brand. 

Advantages and opportunities for financial institutions

Despite these concerns, financial institutions hold three key advantages when it comes to mobile wallets.

The first is cardholder trust. Financial institutions have a distinct advantage because their cardholders already trust them with their finances and their personal data—something not many other players can claim. According to a Worldpay survey, consumers have been with their primary financial service provider for 7.5 years on average, and 73% report being highly satisfied with their choice. Furthermore, 75% trust that their primary financial institution would resolve a fraud issue in an exceptional manner, and 70% are highly likely to recommend their primary financial institution to others.

The second advantage is debit, which remains the top payment choice for US adults, with debit transaction continuing to grow 5% year-over-year. And adding debit cards to mobile wallets holds the potential to increase cardholders’ engagement and usage.

The third is an established cardholder base, which financial institutions can leverage if they decide to launch their own mobile wallets. Visa’s Digital Commerce App makes it easier for financial institutions to develop their own branded mobile wallets. The platform allows financial institutions to introduce mobile payments to their cardholders, and further position themselves as a trusted financial provider. 

Entering the mobile payment space

How can financial institutions leverage these three advantages with regard to mobile payments? It depends on the institution’s goals. To begin with, an institution can position itself as the trusted advisor for all things payments—including mobile wallets. Institutions looking for even bigger impact could do a lot more.

Visa and Mastercard both allow banks and credit unions to add in-store payments functionality to their mobile banking app. Several large institutions have launched NFC-based payments for Android apps with the hope of encouraging consumers to use mobile payments. Wells Fargo tested the waters with remote deposit capture, and after seeing a good measure of success, expanded to a mobile wallet, the Wells Wallet

Card brand and card issuer wallets are not enabled on iPhone mobile devices, since Apple has restricted third-party access to its mobile payment platform. Whether that will become a hindrance to Apple or to financial institution remains to be seen as the great wallet race plays out.

Leveraging goodwill

Whether or not your institution is moving toward enabling mobile payments on a mobile banking app, making an effort to capitalize on the trust to deepen cardholder relationships makes good sense. Taking on a larger advisory role is a great way to stay relevant in today’s disruptive payments market. And making data security a priority across all touch points will help build cardholder confidence. Engaging a trusted payments partner like Worldpay is a good way to stay ahead of the curve with access to mobile wallet insights, tools, and expertise.