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Must haves in a digital wallet strategy




Thought Paper




www.infosys.com/finacle
Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
Must haves in a digital wallet strategy
             Will the digital wallet sound the death knell for   •	 Near Field Communication (NFC) is becoming
             cash and credit cards? Many experts seem to            a favorite technology and according to one
             think so. Research also seems to agree – in a          estimate global NFC payment transactions
             recent report, a research organization that            are expected to reach US$ 50 billion worldwide
             studies the impact of the Internet, says that          by 2014
             consumers will not need to carry credit cards
                                                                 •	 Social commerce sales will more than double
             or cash as early as 2020; another survey by a
                                                                    to GBP 3.3 million in the next five years. By
             leading mobile audience media firm states that
                                                                    2012, 41% of UK consumers will use social
             37% of mobile using consumers used a mobile
                                                                    media or at least be influenced by it while
             wallet in the last three months, a sure sign of
                                                                    purchasing. This figure rises significantly to
             increasing adoption.
                                                                    73% for 25-34 year olds, as 45% of this
             The vendor action has already heated up in             age group is already utilizing this platform
             anticipation, and a wallet war is on between           while purchasing.
             mobile operators, card companies, device
                                                                 In a report on multi-channel shopping released
             manufacturers and financial service providers.
                                                                 in December 2011, a global consulting firm
             Wallet providers need a sound strategy to hold
                                                                 reveals many insights about changing consumer
             their own in a competitive marketplace, with
                                                                 behavior. The most significant finding was that
             the ability to provision digital money seamlessly
                                                                 customers were consolidating their ‘retailer set’.
             across multiple touch points, being one of the
                                                                 Over half of respondents in the study shopped
             key imperatives.
                                                                 on different channels with less than five
             Why is it so important that a digital wallet be     retailers; most of the chosen retailers stood
             usable across all consumer touch points? These      out for their integrated management of the
             numbers do the talking:                             business and the delivery of a high quality
                                                                 buying experience – backed by seamless
             The number of touch points is increasing rapidly
                                                                 execution – across all touch points.
             as evident from the following research:
                                                                 What this tells us is that customers expect to
             •	 People are increasingly buying smartphones
                                                                 transact on multiple touch points as well as
                over feature phones thanks to greater
                                                                 enjoy a shopping experience – promising the
                affordability
                                                                 same convenience, ease of use, commercial terms
             •	 Tablets are fueling the trend of multiple        and security – on each.
                devices; they are not replacing, but are
                                                                 Since mobility is at the heart of digital wallet
                instead supplementing smartphones. The
                                                                 commerce for reasons that are well known –
                iPad 3 sold three million units in the first
                                                                 ubiquity, convenience and adoption, a multi
                weekend after it was launched. That’s 42,000
                                                                 touch point strategy must necessarily factor
                per hour or 694 per minute! Another estimate
                                                                 this in to have any chance of success.
                says that more than 81 million tablets will
                be sold in 2012, up fivefold from the
                approximately 16 million sold in 2010




02   Thought Paper
Other focus areas of a digital wallet strategy
Accessibility                                         payment options like checks and credit cards.
                                                      Retailers might be able to deploy it across the
Providers must make their digital wallets
                                                      entire transaction cycle using NFC technology,
accessible by ensuring widespread distribution
                                                      and enable in-store customers to scan purchases
and acceptance. The nature of distribution
                                                      into the wallet, generate an invoice, transfer
varies with the type of provider. For instance,
                                                      the information to their POS systems, and finally
the mobile wallet from M-Pesa, Kenya’s iconic
                                                      pay, all using the same device or application.
mobile money service is distributed by telecom
                                                      And handset manufacturers offering digital
operator, Safaricom, which has built the wallet
                                                      wallets can draw upon other device features to
application into its SIM card. It’s a strategy that
                                                      enhance the wallet experience: for instance, use
works primarily because of the ubiquity and
                                                      augmented reality to indicate which merchant
affordability of mobile phones. On the other
                                                      establishments in the vicinity accept their wallet.
hand, growing adoption of smartphones and
tablets among tech savvy populations might            Openness
require distribution of wallets through “app”
stores. In future, some handset manufacturers         While the wallet war introduces competition
might in-build a wallet into the phone itself.        in the market and choice for customers, it also
Whatever the case may be, it is crucial that          inconveniences the latter by forcing them to
the distribution be tailored to the needs, behavior   maintain multiple wallets from multiple providers
and infrastructure environment of the target user.    which are all linked to different cards/accounts.
                                                      This is a source of customer dissatisfaction.
User experience                                       It is very important that providers open up their
At the beginning of this paper, there is a mention    offerings. The days of closed-loop wallets are
of how customers have started to use more             numbered. Retailers must accept a variety of
than one touch point to fulfill their needs.          linked cards/accounts, and not just their own.
The implicit inference is that customers expect       The wallet should be interoperable between
consistency and seamlessness across each and          the touch points of different banks, so that
every touch point. Hence, a mobility device user      a customer can top up the wallet with funds
must enjoy the same buying experience as his          from one bank, but withdraw cash from the
desktop using counterpart. Going forward, there       ATM of another.
must be no boundaries between the physical
and virtual world, so that a customer could well      Security
fill a shopping cart online and store the details     Studies have repeatedly highlighted security
in the online wallet, only to visit the store later   concerns as one of the biggest barriers to
to physically inspect the goods, and finally pay      online/mobile payment adoption. Obviously,
from a mobile wallet! Another example could           this has a huge bearing on the digital wallet
be that a customer buys movie tickets from            especially because there are so many touch
his Facebook wallet and consequently avails           points and a gap in any one of these could
discounts on in-store purchases made through a        compromise its safety.
kiosk based-wallet. Needless to say, such a cross-
                                                      While customers agree that not having to enter
selling interaction requires tight integration
                                                      their credit card details for every transaction is
between touch points.
                                                      an important convenience offered by the wallet,
Again, different institutions can leverage the        they will only embrace it if they are sure that
digital wallet in different ways. Someday not         the credit card information, which is now
too far away, banks might offer a catchall ‘digital   loaded on to the wallet, is fully protected by the
wallet’ account in lieu of a savings account, and     provider. This means that providers must take
thereby eliminate the complexity of multiple          adequate measures, such as setting up a layered




                                                                                                    Thought Paper   03
security mechanism and making sure that              they are to win market share. For instance,
             sensitive data is not stored on the devices.         banks could offer personal financial management
                                                                  tools along with the wallet, which would
             Regulation                                           automatically access its data to draw up
             Digital wallets, like all financial products, are    budgets, expenditure patterns and so on and
             likely to be regulated. However, the extent of       save customers the inconvenience of trawling
             control may differ from country to country.          through multiple bank or credit card statements
             For instance, M-Pesa does not need a banking         to find out what they’ve spent. Banks could
             license to operate, but in other countries,          also tie up with the social security payment
             wallet providers might need to procure one. In       agencies to drop pension payments and other
             some countries, collaboration between multiple       subsidies directly into beneficiaries’ wallets.
             stakeholders can be perceived as being anti-         Merchants could add useful features, such as
             competitive which may impede the launch of           advance order booking of products, or the
             digital wallet initiatives.                          ability to compare prices of competing brands.
             Recently, the Canadian Bankers Association           In fact, in Canada, a leading department store
             has decided to replace debit cards with mobile       recently announced the launch of a fully
             wallets, and is preparing secure but open            transactional mobile website and mobile apps
             guidelines towards that goal. The extent of          that enabled customers to make purchases using
             openness (permitted in a wallet) is a very           their smartphones; could such features become
             significant consideration for an institution that    regular add-ons in future digital wallets?
             wishes to enter a new market.                        The digital wallet has the potential to be the
                                                                  next big thing in payments. Indeed, experts
             Value added content                                  believe that it could handle transactions worth
             The breadth and variety of a wallet service also     tens of billion dollars as early as 2015. Banks,
             determines the quality of user experience. A         merchants, telecom companies and other service
             payments-only offering is not likely to find favor   providers must put a robust multi touch point
             with customers. Providers must build additional      strategy in place in readiness for when the
             value on top of the basic payment offering, if       opportunity opens up.




04   Thought Paper
References
1.	 Customers Take Control: How the multi-             10.	www.smartplanet.com/blog/smart-takes/can-
    channel shopper is changing the global retail          mobile-wallet-tech-save-retail-stores/22139
    landscape, December 2011, PWC
                                                       11.	 Forget The Mobile Wallet, Just Take The
2.	 Fighting for Position: The Mobile Wallet Wars,          Mobile Store With You, April 3rd 2012, http://
    http://www.mercatoradvisorygroup.com/                   www.techvibes.com/blog/forget-the-mobile-
    index.php?doc=Emerging_Technologies&                    wallet-just-take -the -mobile -store -with-
    action=view_item&id=643&catid=5                         you-2012-04-03

3.	 Is Mobile Wallet Technology Secure, May 9th        12.	 Second Google Wallet Security Vulnerability
    2012, http://www.idt911blog.com/2012/05/is-             Confirmed, Affects All Users, February 9th 2012,
    mobile-wallet-technology-secure/                        http://www.theverge.com/2012/2/9/2787758/
                                                            second-google-wallet-security-vulnerability-
4.	 Consumer’s Use of Mobile Wallets Increasing,
                                                            confirmed-affects-all
    May 8th 2012, http://www.screenmediadaily.
    com/news-jiwire-location-based-mobile-             13.	 Banks and PayPal Are Winning the Trust Battle
    audience-insight-report-mobile-shopping-                for Consumer Digital Wallets
    behavior-0014001861.shtml
                                                       14.	 April 17th 2012, www.gartner.com/id=1986418
5.	 `Mobile Wallets’ Will Soon Replace Credit Cards,
                                                       15.	 2011 Mobile Payments Outlook – A
    May 14th 2012, http://www.canada.com/Mob
                                                            Golden Opportunity for Cross-industry
    ile+wallets+will+soon+replace+credit+car
                                                            Partnerships, http://www.kpmg.com/Global/
    ds/6619809/story.html
                                                            en/IssuesAndInsights/ArticlesPublications/
6.	 Google Wallet Issues: Why Losing Your                   mobile -payments/Pages/2011-mobile -
    Smartphone Could Mean Losing All Your                   payments-outlook.aspx
    Money, February 11th 2012
                                                       16.	Tablet Sales Expected to Quadruple by
7.	technorati.com/technology/article/google-               2012, December 9th 2010, http://mashable.
   wallet-issues-why-losing-your/#ixzz1vrxfT2Aa            com/2010/12/09/tablet-sales-2012/

8.	technorati.com/technology/article/google-           17.	 In Five years S-Commerce Will More Than
   wallet-issues-why-losing-your/                           Double, May 27th 2012, http://netbiznews.
                                                            galanter.net/2012/05/27/in-five-years-s-
9.	 Can Mobile Wallet Tech Save Retail Stores?,  
                                                            commerce-will-more-than-double/
    January 30th 2012




                                                                                     Shekhar Kapoor
                                                          Senior Consultant, Finacle Product Strategy, Infosys




                                                                                                         Thought Paper   05
About Finacle
Finacle from Infosys partners with banks to transform process, product
and customer experience, arming them with ‘accelerated innovation’
that is key to building tomorrow’s bank.

For more information, contact finacleweb@infosys.com                                                                                                            www.infosys.com/finacle
© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys
acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.

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Finacle Thought Paper - Digital Wallet Success Strategy

  • 1. Must haves in a digital wallet strategy Thought Paper www.infosys.com/finacle Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
  • 2. Must haves in a digital wallet strategy Will the digital wallet sound the death knell for • Near Field Communication (NFC) is becoming cash and credit cards? Many experts seem to a favorite technology and according to one think so. Research also seems to agree – in a estimate global NFC payment transactions recent report, a research organization that are expected to reach US$ 50 billion worldwide studies the impact of the Internet, says that by 2014 consumers will not need to carry credit cards • Social commerce sales will more than double or cash as early as 2020; another survey by a to GBP 3.3 million in the next five years. By leading mobile audience media firm states that 2012, 41% of UK consumers will use social 37% of mobile using consumers used a mobile media or at least be influenced by it while wallet in the last three months, a sure sign of purchasing. This figure rises significantly to increasing adoption. 73% for 25-34 year olds, as 45% of this The vendor action has already heated up in age group is already utilizing this platform anticipation, and a wallet war is on between while purchasing. mobile operators, card companies, device In a report on multi-channel shopping released manufacturers and financial service providers. in December 2011, a global consulting firm Wallet providers need a sound strategy to hold reveals many insights about changing consumer their own in a competitive marketplace, with behavior. The most significant finding was that the ability to provision digital money seamlessly customers were consolidating their ‘retailer set’. across multiple touch points, being one of the Over half of respondents in the study shopped key imperatives. on different channels with less than five Why is it so important that a digital wallet be retailers; most of the chosen retailers stood usable across all consumer touch points? These out for their integrated management of the numbers do the talking: business and the delivery of a high quality buying experience – backed by seamless The number of touch points is increasing rapidly execution – across all touch points. as evident from the following research: What this tells us is that customers expect to • People are increasingly buying smartphones transact on multiple touch points as well as over feature phones thanks to greater enjoy a shopping experience – promising the affordability same convenience, ease of use, commercial terms • Tablets are fueling the trend of multiple and security – on each. devices; they are not replacing, but are Since mobility is at the heart of digital wallet instead supplementing smartphones. The commerce for reasons that are well known – iPad 3 sold three million units in the first ubiquity, convenience and adoption, a multi weekend after it was launched. That’s 42,000 touch point strategy must necessarily factor per hour or 694 per minute! Another estimate this in to have any chance of success. says that more than 81 million tablets will be sold in 2012, up fivefold from the approximately 16 million sold in 2010 02 Thought Paper
  • 3. Other focus areas of a digital wallet strategy Accessibility payment options like checks and credit cards. Retailers might be able to deploy it across the Providers must make their digital wallets entire transaction cycle using NFC technology, accessible by ensuring widespread distribution and enable in-store customers to scan purchases and acceptance. The nature of distribution into the wallet, generate an invoice, transfer varies with the type of provider. For instance, the information to their POS systems, and finally the mobile wallet from M-Pesa, Kenya’s iconic pay, all using the same device or application. mobile money service is distributed by telecom And handset manufacturers offering digital operator, Safaricom, which has built the wallet wallets can draw upon other device features to application into its SIM card. It’s a strategy that enhance the wallet experience: for instance, use works primarily because of the ubiquity and augmented reality to indicate which merchant affordability of mobile phones. On the other establishments in the vicinity accept their wallet. hand, growing adoption of smartphones and tablets among tech savvy populations might Openness require distribution of wallets through “app” stores. In future, some handset manufacturers While the wallet war introduces competition might in-build a wallet into the phone itself. in the market and choice for customers, it also Whatever the case may be, it is crucial that inconveniences the latter by forcing them to the distribution be tailored to the needs, behavior maintain multiple wallets from multiple providers and infrastructure environment of the target user. which are all linked to different cards/accounts. This is a source of customer dissatisfaction. User experience It is very important that providers open up their At the beginning of this paper, there is a mention offerings. The days of closed-loop wallets are of how customers have started to use more numbered. Retailers must accept a variety of than one touch point to fulfill their needs. linked cards/accounts, and not just their own. The implicit inference is that customers expect The wallet should be interoperable between consistency and seamlessness across each and the touch points of different banks, so that every touch point. Hence, a mobility device user a customer can top up the wallet with funds must enjoy the same buying experience as his from one bank, but withdraw cash from the desktop using counterpart. Going forward, there ATM of another. must be no boundaries between the physical and virtual world, so that a customer could well Security fill a shopping cart online and store the details Studies have repeatedly highlighted security in the online wallet, only to visit the store later concerns as one of the biggest barriers to to physically inspect the goods, and finally pay online/mobile payment adoption. Obviously, from a mobile wallet! Another example could this has a huge bearing on the digital wallet be that a customer buys movie tickets from especially because there are so many touch his Facebook wallet and consequently avails points and a gap in any one of these could discounts on in-store purchases made through a compromise its safety. kiosk based-wallet. Needless to say, such a cross- While customers agree that not having to enter selling interaction requires tight integration their credit card details for every transaction is between touch points. an important convenience offered by the wallet, Again, different institutions can leverage the they will only embrace it if they are sure that digital wallet in different ways. Someday not the credit card information, which is now too far away, banks might offer a catchall ‘digital loaded on to the wallet, is fully protected by the wallet’ account in lieu of a savings account, and provider. This means that providers must take thereby eliminate the complexity of multiple adequate measures, such as setting up a layered Thought Paper 03
  • 4. security mechanism and making sure that they are to win market share. For instance, sensitive data is not stored on the devices. banks could offer personal financial management tools along with the wallet, which would Regulation automatically access its data to draw up Digital wallets, like all financial products, are budgets, expenditure patterns and so on and likely to be regulated. However, the extent of save customers the inconvenience of trawling control may differ from country to country. through multiple bank or credit card statements For instance, M-Pesa does not need a banking to find out what they’ve spent. Banks could license to operate, but in other countries, also tie up with the social security payment wallet providers might need to procure one. In agencies to drop pension payments and other some countries, collaboration between multiple subsidies directly into beneficiaries’ wallets. stakeholders can be perceived as being anti- Merchants could add useful features, such as competitive which may impede the launch of advance order booking of products, or the digital wallet initiatives. ability to compare prices of competing brands. Recently, the Canadian Bankers Association In fact, in Canada, a leading department store has decided to replace debit cards with mobile recently announced the launch of a fully wallets, and is preparing secure but open transactional mobile website and mobile apps guidelines towards that goal. The extent of that enabled customers to make purchases using openness (permitted in a wallet) is a very their smartphones; could such features become significant consideration for an institution that regular add-ons in future digital wallets? wishes to enter a new market. The digital wallet has the potential to be the next big thing in payments. Indeed, experts Value added content believe that it could handle transactions worth The breadth and variety of a wallet service also tens of billion dollars as early as 2015. Banks, determines the quality of user experience. A merchants, telecom companies and other service payments-only offering is not likely to find favor providers must put a robust multi touch point with customers. Providers must build additional strategy in place in readiness for when the value on top of the basic payment offering, if opportunity opens up. 04 Thought Paper
  • 5. References 1. Customers Take Control: How the multi- 10. www.smartplanet.com/blog/smart-takes/can- channel shopper is changing the global retail mobile-wallet-tech-save-retail-stores/22139 landscape, December 2011, PWC 11. Forget The Mobile Wallet, Just Take The 2. Fighting for Position: The Mobile Wallet Wars, Mobile Store With You, April 3rd 2012, http:// http://www.mercatoradvisorygroup.com/ www.techvibes.com/blog/forget-the-mobile- index.php?doc=Emerging_Technologies& wallet-just-take -the -mobile -store -with- action=view_item&id=643&catid=5 you-2012-04-03 3. Is Mobile Wallet Technology Secure, May 9th 12. Second Google Wallet Security Vulnerability 2012, http://www.idt911blog.com/2012/05/is- Confirmed, Affects All Users, February 9th 2012, mobile-wallet-technology-secure/ http://www.theverge.com/2012/2/9/2787758/ second-google-wallet-security-vulnerability- 4. Consumer’s Use of Mobile Wallets Increasing, confirmed-affects-all May 8th 2012, http://www.screenmediadaily. com/news-jiwire-location-based-mobile- 13. Banks and PayPal Are Winning the Trust Battle audience-insight-report-mobile-shopping- for Consumer Digital Wallets behavior-0014001861.shtml 14. April 17th 2012, www.gartner.com/id=1986418 5. `Mobile Wallets’ Will Soon Replace Credit Cards, 15. 2011 Mobile Payments Outlook – A May 14th 2012, http://www.canada.com/Mob Golden Opportunity for Cross-industry ile+wallets+will+soon+replace+credit+car Partnerships, http://www.kpmg.com/Global/ ds/6619809/story.html en/IssuesAndInsights/ArticlesPublications/ 6. Google Wallet Issues: Why Losing Your mobile -payments/Pages/2011-mobile - Smartphone Could Mean Losing All Your payments-outlook.aspx Money, February 11th 2012 16. Tablet Sales Expected to Quadruple by 7. technorati.com/technology/article/google- 2012, December 9th 2010, http://mashable. wallet-issues-why-losing-your/#ixzz1vrxfT2Aa com/2010/12/09/tablet-sales-2012/ 8. technorati.com/technology/article/google- 17. In Five years S-Commerce Will More Than wallet-issues-why-losing-your/ Double, May 27th 2012, http://netbiznews. galanter.net/2012/05/27/in-five-years-s- 9. Can Mobile Wallet Tech Save Retail Stores?, commerce-will-more-than-double/ January 30th 2012 Shekhar Kapoor Senior Consultant, Finacle Product Strategy, Infosys Thought Paper 05
  • 6. About Finacle Finacle from Infosys partners with banks to transform process, product and customer experience, arming them with ‘accelerated innovation’ that is key to building tomorrow’s bank. For more information, contact finacleweb@infosys.com www.infosys.com/finacle © 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.