a case for mobile wallets in uk

A CASE FOR MOBILE WALLETS IN UK

“When you look at the real pain point for consumers…they

don’t want a wallet, they just want to pay and be done”

Senior Executive at Visa

Document Classification: Internal

Authored by Deepthi Rajan

June 2016

Table of Contents

Executive Summary….……………………………………………………………………………………3

Introduction………..………………………………………………………....…………………………….4

Definition of Mobile Wallet, Types of Mobile Wallets and Technology…………………………........6

Mobile Wallet Services…………………………………………………………………………………….9

Payment Channels…………………………………………………………………………………….….10

Payment Trends…………………………………………………………………………………………..12

Mobile Wallet Adoption…………………………………………………………………………………..14

Awareness, Perception, and Adoption………………………………………………………..14

Socio-Demographics’ Influence on Adoption…………………………………………….…..15

Benefits / Features Sought in Mobile Wallets in the US…………………..........................17

Security concerns, Loss of privacy and Ability to use……………………………………....18

Interoperability issues due to silos created by various mobile wallet providers………….19

Addressing the concerns……………………………………………………………………….20

Managing the Wallet…………………………………………………………………………….21

Snapshot of Mobile Wallet Providers and Payment Channels

Supported…………………………………………………………………………………….......22

Case Study – India……………………………………………………………………………….36

Potential Game Changers……………………………………………………………………….40

Bringing it all together…………………………………………………………………………….41

Executive Summary

Would customers demand for a mobile wallet the way they have come to expect online or

mobile banking from their banks? Most likely, no.

What about seamless customer experience during checkouts both online and at in-stores?

The problem of plenty still besieges customers when they have to choose among the many

mobile wallets and face the concomitant interoperability challenges. Customer experience

suffers when the mobile wallets are exclusive to select retailers, as is the case today. Lack of

universal acceptance is one of the biggest banes of mobile wallet’s existence.

Should banks then consider offering mobile wallets to customers? Absolutely yes.

Traditional business models of established industries are getting disrupted by new age

players whose focus is on redefining customer expectations. Banks should provide mobile

wallets not just as an alternative payment mode that is both secure and convenient but also

to avoid ‘commoditisation’ battling for the mind share and thereby, wallet share.

And that is not all. Mobile wallets have the potential for banks to propagate their brands

offering an unprecedented opportunity to reach out to consumers and providing a persistent

messaging channel on their smartphones.

Mobile wallets assume a different meaning in the context of the UK, which has the strongest

E-Commerce market in Europe, the third largest in the world, and is expected to grow to

£148 Bn by end of 2016.

With 51% of the online sales taking place on mobile devices, the need for conveniently and

securely paying across payment cards, loyalty programmes, and devices has become more

pressing than ever before.

Mobile wallets help address all these aspects when it comes to both payments and non-

payments. Mobile Wallets are broadly categorised as remote and proximity wallets. Remote

wallets enable customers to purchase online whereas proximity wallets facilitate in-store

transactions.

Key enablers of mobile wallets are money saving incentives, security, and widespread

acceptance.

Based on our evaluation of over 10 mobile wallet solutions, we think the bank should adopt

Chase Pay’s strategy and roll out the bank’s branded mobile wallet in addition to having tie-

ups with Apple Pay and Android Pay, to retain control over its brand and to maximise its

reach.

Both Visa and MasterCard offer white-label solutions to help banks deploy branded payment

solutions across online and offline channels.

Visa, in addition to Visa Checkout, has recently introduced Visa Digital Commerce App, a

mobile platform to build highly customisable mobile wallets with a wide range of value added

features to choose from.

Furthermore, Visa has announced a well thought out roadmap of planned innovations.

Most importantly, partnering with Visa or MasterCard will help banks retain their respective

brands and customer wallet share without being relegated to the side lines.

Introduction

While mobile payments are gaining in popularity, they still have a way to go before they

reach critical mass, especially when it comes to mobile wallets.

The success story of mobile wallets has not been a consistent one across geographies. In

this report, to understand more about mobile wallet acceptance and usage, we have also

looked at countries such as US and India where the wallets have been adopted with varying

success.

Mobile wallets have seen huge success in India, a country with far more mobile and internet

connections than bank accounts. Clearly, there was a gap that mobile wallets helped bridge.

Another interesting practice was of heavily incentivising consumers to use mobile wallets by

offering cashbacks, discounts and reward points. This has resulted in intensive marketing by

the providers in their attempts to grab a share of the mobile wallet market pie. However, this

is not a sustainable practice as many of the wallet providers are burning through their cash

piles and taking massive hits to their bottom lines, with an increasing number of providers

starting to scale back their offerings.

However, an upside has been that mobile wallets adoption has soared and consumers have

increasingly grown comfortable with mobile payments.

In the US, where contactless technology is not as prevalent as it is in the UK, mobile wallets

have struggled to gain traction with customers. For mobile wallets from leading companies

such as Apple and Google, to become the preferred payment mode, the fragmented

ecosystem has to converge and act in unison. This will lead to the emergence of clear

market leaders.

Of the three, the UK has the most mature mobile payments ecosystem. Unlike a mobile

banking app, a mobile wallet is not a must have for customers when it comes to payments or

managing finance. It has been observed that UK consumers are comfortable using

contactless cards for offline transactions and use a mix of bank issued cards and digital

wallets such as PayPal when shopping online.

UK therefore, also faces the biggest challenge in terms of offering a strong value or benefit

proposition for customers to switch to mobile wallets.

Consumer Reasons for Not Adopting Mobile Purchasing

Retailers are both in favour of and

against mobile wallets.

While the wallets help in faster

checkouts, merchants find the

tokenisation feature, employed by

proximity wallets, highly limiting when

it comes to getting access to

customers’ data.

The uprising of major US retailers

(Walmart, Target, Best Buy) against

Apple Pay and endorsing Apple Pay’s

rival Chase Pay is a case in point.

On the other hand, banks also find

the charges levied by wallet providers

such as Apple Pay to be exorbitant.

The other major concern banks are

struggling with is the

‘commoditisation’ of banking

products and services. While mobile

wallets become the focus of

customers’ experience, banks have

to battle it out to remain at the “top of

the wallet”.

In addition, banks also risk losing out

cross-selling opportunities when the

bank’s brand is no longer at the front

of the customer’s mind; it becomes a

much harder sell and translates into

higher conversion costs

OTHER SIDES TO THE CONUNDRUM

Evangelising mobile wallet usage presents unique but

surmountable challenges.

Customers are unsure of how mobile wallets differ from a credit

or debit card. Mobile wallets are often promoted as being a faster

and easier mode of payment. In reality, the time saved with a

digital wallet (i.e., tapping a button on the phone and holding it

near a scanner) versus pulling a card out of a wallet and swiping

it, isn’t discernible. And a digital wallet is certainly not easier than

a physical card if the digital wallet is not accepted at the point of

sale.

Many consumers are holding back from using mobile wallet

because of security and privacy concerns. Even when customers

understand the benefits of tokenisation (a security measure

adopted by mobile wallets for masking bank accounts or payment

cards details), there remains a significant proportion of the

customer base that is not convinced about switching to mobile

wallets.

The long-term viability of mobile payments therefore, is about

more than just overcoming technology constraints. It’s really

contingent upon the entire ecosystem to deliver much more of a

demonstrable value-add for the consumer above and beyond the

traditional physical card payments.

‘Know me, Understand me, and Reward me’

Consumers want their banks to provide solutions that are

contextually relevant.

Mobile wallets need to differentiate themselves by tracking

customer spending across both physical and online retailers

and across all payment methods while providing basic

budgeting tools. The need to track and encourage loyalty

through tangible rewards is perceived by customers as an

important incentive.

Control and preference management options are of particular

interest when provided via the mobile channel. Receiving alerts

each time a transaction is made with a card or the ability to

temporarily disable an account to prevent unauthorised

transactions are other examples of features valued by

customers.

What is a Mobile Wallet?

A mobile wallet is a mobile-based virtual wallet, the digital equivalent of the physical wallet. It

is a container (or vault) to store digitised valuables for authorisation.

These valuables grant permission for usage or access to goods, services or places. Users

can preload a certain amount in one’s account created with the mobile wallet service

provider.

Depending on the service provider, one can also pay through app, text message, social

media account or website.

The digital wallet was first popularized by e-commerce giant PayPal in the early

2000s as a way to securely pay for goods online using a credit card

Mobile wallets offer the same security and convenience in addition to being

portable

1. Mobile wallet users first create a digital wallet with MasterCard, Visa, or

one of several other providers

2. All of their credit and debit card information is then available in one place

3. Mobile users then activate their mobile wallet on their mobile device by

downloading the provider's corresponding app

Mobile Wallet or Digital Wallet – What’s in a name?

Source: IBM, Quora

Types of Mobile Wallets

Remote Wallet

With a remote wallet (also called mobile wallet, digital wallet, cloud wallet or e-wallet) the

parties and entities involved in the authorization and transaction process (like payer and

payee) are not physically close to each other. Usually, the sensitive data is stored remotely

on cloud servers (thus the term cloud wallet). Many remote wallets are also equipped with a

central stored-value account (SVA) that allows users to make or receive payments using the

enabled payment methods.

Remote wallets can be connected to loyalty programs and other value-added services.

Many remote wallets are designed and used as a distinct payment method that can be

embedded in merchant websites or apps – masking the payment data details of the

underlying payment method and sensitive customer information from payees like retailers

and financial intermediaries. For example, PayPal or Visa Checkout

Proximity Wallet

A proximity wallet (also called mobile wallet or NFC wallet) is used for authorization and

transactions involving entities that are physically close to each other.

Proximity interaction between the mobile wallet and the control or acceptance entity is based

on card emulation and provides a container where the card data and other information are

digitised.

The digitised valuables contained in the proximity mobile wallet can be exposed to

acceptance terminals or authorities for the control or exchange of secure information

Proximity Wallets further have two sub-types

Light proximity wallets that allow the storage of visual valuables (QR codes, textual codes,

images of documents such as identity cards and so on)

Full NFC proximity wallets that enable card emulation using secure elements and NFC

interfaces.

Source: IBM Blog, Desktop Research

Technology

NFC-based card emulation

Near field communication (NFC) is a means of

communicating data over a wireless connection

across a very short distance.

NFC-based card emulation is the basic concept of

proximity wallets - the emulation of a contactless

smart card within smartphones.

Smartphones therefore must be NFC enabled to

facilitate communication with card readers, and

they need to have a so-called secure element - a

chip based on smart card functions that allows

the secure storage of smart card applications

Note: NFC can also be used as transmission

technology without a secure element, but then features

like card emulation or the reutilization of card-based

infrastructure are no longer applicable

Source: IBM Blog, Desktop Research

Mobile wallet services

5 major types of mobile wallet services and functions are Payments, Coupons,

Ticketing, Access and Identity

1. Payments and cards: Card emulation for contactless cards (credit, debit, prepaid),

e-payments-based services (remote payments) or peer-to-peer payments with or

without a stored value account

2. Coupons and loyalty: Coupons, gift cards, loyalty programs or any other

commerce-based service for discounts or rewards

3. Tickets and transport: Any form of tickets, boarding passes or check-ins for means

of transport or for venues or events like cinemas, concerts and so forth

4. Access and keys: Any type of access or usage allowance, like keys for cars,

buildings, private homes, hotel rooms and so on

5. Identity: Any type of personal identification, like passports, driving licenses,

employee IDs and so forth

Mobile Wallets can hold two types of data – payments data and non-payments data (tickets,

coupons, identity cards)

Payment Channels

At 6.12%, UK has the highest eGDP

in Europe

81% of UK Population shops online

On average, the British online

shopper spent 3,652 euros

Research by Visa found an increase

of 8.4% year-on-year for online

transactions; number of face-to-face

transactions only saw a 0.2% rise

Combined market share of Visa and

MasterCard for web-based payments

is projected around 60%, followed by

eWallets and bank transfers

Visa has the largest share in online

card payments as 3 out of every 4

card payments are done with a Visa-

branded card

Source: Desktop Research

But is E-Commerce always conducted using desktops or laptops?

E-commerce conducted using mobile devices and social media is on the rise. In 2016, 51%

of UK online retail sales took place using smartphones and tablets, significant increase

on the 45% share recorded in the third quarter of last year.

UK E-Commerce Sales by Device

What is M-Commerce then?

M-Commerce stands for mobile commerce, and it’s the browsing, buying and selling of

products and services on mobile devices. In other words, it’s a complete online shopping

experience, but with all the convenience of being on a cell phone or tablet.

Over the past year smartphones have really

started to become a major component of the

checkout process - sales via smartphones

grew 95.6% year-on-year, over 7x the rate of

those via tablets.

Another key difference between E-

Commerce and M-Commerce is that

internet is mandatory for E-Commerce

transactions whereas it’s not mandatory

for all types of M-Commerce transactions

At 55.9%, iOS is the most-used operating system on mobile devices, followed by Android

with 34.8% share of the mobile OS market

iPhones have now leapfrogged iPads as the UK’s primary device for mobile commerce

39 percent UK E-Commerce transactions now involve multiple devices along the path to

purchase

The most advanced UK retail industries in the journey towards mobile commerce are fashion

and luxury (55 percent of all ecommerce transactions took place on mobile), mass merchant (50

percent) and home (46.8 percent)

Apps continue to be the main force driving mobile commerce, constituting 65 percent of

transactions on mobile devices around the world, with 35 percent taking place on the mobile

web.


PAYMENT TRENDS2015 VS 2025

Debit cards will remain most preferred payment option, while cashwill decline in usage

By 2025, contactless payment mode will grow by 600% , comingthird after debit card and cash

Over a third of credit card holders were aged 55 and over in 2014,reflecting stronger preference for debit cards among youngergenerations

CASH VS OTHER PAYMENT MODES

Debit cards popularity as a payment method will be aided by thecontinued rollout and adoption of contactless payments

Payment choices when making regular bill payments may not changegreatly but spending habits when making day-to-day purchases willcontinue to evolve

BILL PAYMENT VS OTHER PURCHASES

Source: UK Card Payments 2015, UK Payment Markets 2016

BEING CONTACTLESS

Contactless terminals in 2015

Growth in contactless payments

Growth in debit card payments

Mobile Wallet Adoption

Awareness, Perception, and Adoption

Strong correlation observed between awareness and usage. Sustained usage however, still

depends on perceived convenience and other benefits to customers

Consumers are most willing to use a mobile wallet to store

loyalty cards,

value added services (reminders, notifications, alerts), and

paper based documents such as coupons, boarding pass, event tickets, which are

otherwise easy to misplace

Source: Data from an independent research carried out by CMB in USA in 2015

Mobile Wallet in UK

Mobile Wallet Adoption High Among Millennials

• In the last three months, 60% of millennials have used mobile wallets compared to

40% of respondents who are between 35 to 54

• The top three mobile wallet items U.K. consumers have used the most are loyalty

cards, boarding passes and coupons

• 68% of U.K. respondents and 82% of millennials, are more likely to use mobile

payments if loyalty rewards and discounts are automatically applied

Socio-Demographics’ Influence on Adoption

Number of mobile wallet POS payment users by age group

The number of mobile wallet POS payment users between the age of 25 to 34 in the UK is

expected to grow from roughly 1.5 million in 2015 to roughly 4.5 million in 2020

Younger customers are

likely to be early adopters

but once tipping point is

reached, older customers

are likely to become avid

users due to spend and

tracking capabilities

combined with usage

convenience

Source: Statista.com

Number of mobile wallet POS payment users by gender

Few likely inferences from the above graph -

Female users in the age group of 16-44 are far more inclined than male users to

adopt mobile wallet

The trend appears reversed in the 45+ age group where male users appear less

averse than female users when it comes to using mobile wallets at physical stores.

Number of mobile wallet POS payment users by income

Middle income group are likely to have access to NFC enabled phones and perform

grocery and other essential items shopping themselves

It appears that middle income group would prefer value added services that help

them save more and spend prudently

Source: Statista.com

Benefits / Features sought in Mobile Wallets in the US*

Saving money remained the persistent theme from 2012 to 2015 while preference

for storing loyalty cards/coupons declined

On the other hand, loyalty reward points issued by banks and FIs for mobile wallet

usage linked to payment cards improved, indicating customers saw clear benefit

proposition in using wallets issued by their financial services providers

Tracking money remained towards receiving transaction and balance alerts. On the

other hand, reluctance to share or receive information based on physical location has

given way to demand for location specific information albeit in non-intrusive

and relevant ways

2012

2015

Source: PwC Research, CMB Research, Desktop Research

Security concerns, Loss of privacy and Ability to use

Identity theft tops the list of concerns across four years though

it has been progressively diminishing over the years

Retailers gaining access to personal information and exploiting

the data to send invasive or irrelevant marketing offers is a

growing concern

Ubiquity of contactless payments – support for the technology

by relevant entities such as retailers, insurance, utility

companies will speed up adoption

Connectivity, mobile battery, and other technology failures are

viewed as other major hindrances to mobile wallet usage

UK banks were slow to

take mobile banking

seriously. The iPhone

launched in 2007.

But it wasn’t until 2010

that UK had the first

mobile banking app from

NatWest.

Barclays and HSBC, two

of the biggest banks in

Europe, let alone the UK,

didn’t release apps until

2012.

In 2011, 10% of

customers used mobile

banking.

By 2012, 21% of

customers were using the

mobile channel.

The number continued to

rise, growing to 27% in

2014.

Among user behaviours,

about 14% of users used

mobile banking on weekly

basis in 2014, increasing

from 4% in 2011

MOBILE BANKING REACHES TIPPING

POINT

2012

2015

Interoperability issues due to silos created by various mobile wallet providers

Users start experiencing problems when they have to start choosing which wallet to use at a

certain POS. Then the loop takes them to the initial problem - several plastic cards and the

necessity to choose the right one. In case, there are more than one or two wallets that are

relatively exclusive to a POS, mobile wallets stop solving any problems

Even though some of the merchants are overlapping for different wallets, each wallet creates

a proprietary island, out of which the wallet would be irrelevant.

The mobile wallets ecosystem has two major problems—it’s fragmented and it’s

incomplete. Mobile wallets have torn payments apart with their islands instead of

streamlining payments.

Incompletion is coming from an islands of merchants. Each wallet has a certain part of the

user base depending on the merchants that accept the wallet.

Disconnected islands of merchants create disjoint purchasing experiences. Each store

could be accepting different payment options, which create an inconvenience of storing a

variety of wallets and the necessity to put some thought and effort in choosing the right one

for each merchant.

Source: LetstalkPayments.com

Addressing the concerns

The ability to prevent fraud remains the most important way to mitigate concerns followed

by remote wiping of mobile wallet data if phone is lost or stolen

In 2012, high-end technology security mechanisms figured high on customers’ preference

list. However, by 2015, demand for other measures such as alert notifications and security

pin along with finger print authentication has gained precedence over sophisticated bio- or

behaviour- metrics (retina, voice, facial and so on)

2012

2015

Managing the Wallet

In 2012, credit card companies were perceived as most capable and banks were considered

most trustworthy by consumers. Other institutions or entities such as telecom players were

not broadly viewed as trusted or capable.

By 2015, many of today’s mobile wallets are linked to debit or checking accounts

rather than credit cards.

2012

2013

2015

Wearables set to pave the way for mobile wallet adoption

Nearly 40% of those highly likely to buy wearables in the coming year want it to come with mobile wallet functionality. And the majority of likely wearable buyers claim that the presence/absence of a mobile wallet has a major impact on their purchase decision.

Source: CMB Research

Snapshot of Mobile Wallet Providers and Payment Channels

Supported

Wallet Name Wallet Type Payment Channels

POS In-App E-Commerce

M-Commerce

Apple Pay Proximity Wallet

NFC Yes No No

Android Pay Proximity Wallet

NFC Yes No No

Samsung Pay Proximity Wallet

NFC/MST Yes No No

Microsoft Wallet

Proximity Wallet

NFC Yes No No

MasterPass

Remote Wallet - Yes Yes Yes

Visa Digital Commerce App

Platform NFC No No No

Visa Checkout

Digital Payments Service

No Yes Yes Yes

Zapp Pay by Bank

Digital Payments Service

No Yes Yes Yes

Chase Pay

Light Proximity Wallet and Remote Wallet

QR Codes Yes Yes Yes

Capital One Proximity Wallet

NFC Yes No No

Tesco PayQwiq

Light Proximity Wallet

QR Codes Yes No No

YoYo Light Proximity Wallet

QR Codes Yes No No

Vodafone Wallet

Proximity Wallet

Yes Yes No No

Wallet Name – Apple Pay

Available in UK – Yes (Since 2015)

Technology

Operating System – iOS

Compatibility – Newer versions of iPhone, iPad, and Apple Watch

Security – Tokenisation and Fingerprint authentication

Communication technology – NFC

Value Added Services – Stores boarding passes, tickets, rewards, and payment cards

Customers - Apple Pay supported by major UK banks

Positives

Apple Pay’s in-app feature has simplified the online purchase experience

Apple is planning to roll out support for E-Commerce and M-Commerce channels by

late 2016

Customers can use the feature through the Safari browser on iPhones, iPads and

Macs

Every payment transaction has to be authenticated using Touch ID or passcode

Fingerprint sensors planned to be added to newer versions of certain Macs

Negatives

Apple Pay available only to Safari browser users means users who use browsers

such as Chrome, Firefox, IE will be excluded

Apple Pay in-app only works on iPhone and iPad

Wallet Name – Android Pay

Available in UK – Yes (Launched in 2016)

Technology

Operating System – Android

Compatible with – Android KitKat 4.4 or higher versions

Security – Tokenisation


Value Added Services

Built-in loyalty card support

Customers - Android Pay supported by major UK banks

Positives

Built-in loyalty card support means when customers want to pay for something,

Android Pay will know which store they are at and automatically process their loyalty

points without the need to separately scan the rewards cards

Performs limited number of transactions even in absence of internet – the app will tap

into a limited number of stored tokens on the device

Supports fingerprint authentication

Available on any NFC enabled phone

Negatives

Android Pay does not require biometric ID and can be used just by unlocking a

phone. In case, mobile PIN is compromised or the phone doesn’t need a PIN to be

unlocked, chances of unauthorized use increases

Wallet Name – Samsung Pay

Available in UK – No (Planned in 2016)

Technology

Operating System – Android

Compatibility - Requires Samsung phone - compatible with Samsung Galaxy S6

smartphone and later models

Security – Fingerprint authentication, tokenisation, and Samsung KNOX - defence-

grade mobile security platform (containerisation technology -securely separate your

personal and professional data)

Communication technology – NFC and MST (Magnetic Secure Transmission)


Gift cards, integrated loyalty programme

Customers - NA

Positives

Utilises both NFC and MST technologies, allowing acceptance at locations that have

contactless payment terminals or traditional magnetic stripe terminals

With terminals that aren’t capable of accepting contactless payments, Samsung Pay

emits a magnetic signal that allow a phone to be used like a traditional magnetic

stripe card by sliding it above the magnetic stripe reader

Requires fingerprint authentication

Negatives

Samsung Pay does not work at payment terminals that require a push/pull card

swipe — like in ATMs, metro station ticket machines and gas stations

Wallet Name – Microsoft Wallet

Available in UK – No

Technology

Operating System – Windows 10

Compatibility - Lumia 950, 950 XL and 650

Security –Tokenisation



Stores reward and membership numbers so all customers have to do is reference or

scan them right from their phone

Negatives

Windows Phone has captured only 0.7 percent of global smartphone market share

last quarter. Only available in US

Name – MasterPass

Product Type – Digital Payments Service

Description –

MasterPass Checkout Services – Provides merchants a consistent way of accepting

electronic payments, regardless of the consumer’s location.

For the online payments, MasterPass provides the users a simple checkout process

which eliminates the need of entering the card and shipping details with every

purchase

Available in UK – Yes


Real-time alerts, account balance, loyalty programs and offers

Channels Supported –

Web browser-based channels (desktop, mobile web)

Android and iOS apps

Positives

Aside from their MasterCard cards, consumers can also use other credit, debit and

prepaid card brands because the wallet is open

Consumers have the ability to use the connected device of their choice to make

payments online or in-app via MasterPass, not being restricted to specific operating

systems, device manufacturers or device models

Additional Notes

MasterCard plans to roll out an enhanced version of its MasterPass digital payment platform,

adding in-store NFC mobile payment capability. The service will be available in Europe by

end of 2016.

Name – Visa Checkout

Product Type – Digital Payments Service

Description –

Visa Checkout service speeds up online payments on both phone and PC by eliminating the

need of entering the card and shipping details with every purchase



Real-time alerts, account balance, loyalty programs and offers




Positives

Aside from their Visa cards, consumers can also use other credit, debit and prepaid

card brands

Consumers have the ability to use the connected device of their choice to make

payments online or in-app via Visa Checkout, not being restricted to specific

operating systems, device manufacturers or device models

For users who have Visa Checkout account, when they are on a website that

supports Visa Checkout, they can simply tap or click the Visa Checkout logo in order

to pay for products instantly

Supports tokenisation - requires only username and password to authenticate

Negatives

Visa Checkout is only used for making purchases; it cannot transfer money between

accounts

Additional Notes

Visa has launched a new ‘Digital Swipe’ feature for its online payment service, where users

can authenticate a transaction by swiping an image of the card on the system. Customers

need to swipe an image of their cards and feed the password or the pin code in the button to

authenticate the transaction.

Name – Visa Digital Commerce App

Type – Issuer branded digital commerce platform

Description –

Visa Digital Commerce App enables financial institutions to offer their own mobile apps to

customers with card management services


Technology

Operating System – iOS and Android

Security – Tokenisation, Fingerprint authentication




Contactless POS terminals


Account and balance information, card controls (on/off), transaction alerts, and

advanced fraud services like mobile location confirmation

Positives

With the app, issuers provide their branding and select the specific features to

deploy, including tokenized contactless payments, fingerprint authentication, card

controls, alerts, account balance, transaction history and more

Once the app is customized with features that issuers know are most important to

their cardholders, the issuer then simply launches the app to the appropriate app

stores for cardholders to download

Enables banks/ FIs to maintain control over their relationships with customers,

especially helpful in capturing the “top of the wallet” position

Additional Notes –

More than 40 financial institutions in the US have already signed up and are implementing

the Visa Digital Commerce App to expand their mobile capabilities. Many of the financial

institutions will enable app-to-app linking with their current home banking app as part of a

multi-app strategy.

Keeping up with Visa’s strong emphasis on innovation, the roadmap for the Visa Digital

Commerce App includes person-to-person payments, digital card issuance as well as offers,

rewards, and loyalty.

Name – Zapp’s Pay by Bank app

Type – Mobile payment service

Description –

Pay by Bank enables real-time online payments on customers’ mobile phones through their

existing mobile banking app or Pingit, allowing secure payments to happen between

consumers and merchants.





Consumers will be able to see their account balances before they pay and choose

different accounts to pay from, thereby staying more in control of their finances

Positives

Pay by Bank app transactions are protected by a consumer’s existing bank app

security and because the payments use secure digital tokens, customers don’t need

to reveal any of their financial details to merchants when they are shopping

Transactions fees for merchants will be reduced because Zapp involves Faster

Payments Network and therefore, does not need to rely on the traditional card

networks such as Visa or MasterCard like Apple Pay does


Pay by Bank app will be initially launching with E-Commerce and M-Commerce payments.

In-store payments will be rolled out early next year

Wallet Name – Chase App

Type – J.P. Morgan Chase’ Digital Wallet

Description -

Visa Digital Commerce App enables financial institutions to offer their own mobile apps to

customers with card management services


Technology



Communication technology – QR codes




Positives

Chase incentivises merchants to accept Chase Pay. Merchants have to pay lower

transaction fees on Chase Pay purchases than they do on purchases made with

other payment methods

Use of QR codes on phones means it should work with most Android and Apple

phones

Supports tokenisation - requires only username and password to authenticate

Negatives

Customers’ experience when paying using a QR code is often not quite as easy as

tap-to-pay methods


J.P. Morgan Chase supports Apple Pay, Android Pay and Samsung Pay in addition to

providing its own branded wallet Chase Pay.

Chase Pay allows only Chase Visa consumer credit cards, debit cards and Chase Liquid,

and has plans to add additional cards in the future. Business credit cards, business debit

cards and MasterCard cards can’t be used with Chase Pay at this point.

Wallet Name – Capital One Wallet

Type – Capital One’s Mobile Wallet

Description -

Capital One Wallet is a free mobile wallet app that can be downloaded on Apple or Android

phones and used with credit and debit cards from Capital One Bank and Capital One 360


Technology







Instant purchase notifications

Receipt capture

Digitise gift cards

Purchase transaction details

Positives

Capital One wallet shows for each transaction, the merchant's name, contact

information and address with a corresponding map

It has a useful budgeting and expensing feature which allows photo receipts and

tagging of the receipts to the appropriate transactions

Negatives

Only works with credit and debit cards issued by Capital One Bank and Capital One

360.


Capital One wallet has been developed using MasterCard Digital Enablement Service

(MDES) and Visa Token Service (VTS) platforms for secure tokenisation when used for

transactions at in store or in app.

Wallet Name – PayQwiq

Type – Tesco’s Mobile Wallet

Description -

Tesco’s standalone contactless payment mobile app PayQwiq allows shoppers to connect

debit and credit cards to the PayQwiq app and pay for items on mobile by scanning QR

codes that display on-screen


Technology


Communication technology – QR Codes




Integrated loyalty programme

Positives

Customers can store their debit card and Tesco Clubcard details and pay for baskets

worth up to £400

Instantly add loyalty points to a customers’ Clubcard accounts when they pay using

the app

Negatives

Can only be used at Tesco

Wallet Name – YoYo Wallet

Description -

YoYo wallet distinguishes itself with its narrow focus – corporate and university campuses -

and its ability to offer deals to its customers and marketing data to retailers


Technology


Communication technology – QR Codes




Offers additional point of sale or loyalty services

Positives

Retailers can accept mobile payments and automate loyalty and rewards programs,

create their own flash sales and receive data on purchases made through the app

Wallet Name – Vodafone Wallet

Type – Vodafone’s Mobile Wallet

Description -

Contactless card payments using Vodafone Wallet require a Vodafone NFC SIM and are

supported on more than 60 Android smartphones


Technology

Operating System –Android



Android apps


Offers a digital card to make payments less than GBP 30 using tap and pay

Integrated Vodafone loyalty programme

Positives

Supports both Visa and MasterCard cards

Auto top feature to automatically top up accounts

Negatives

Only supports Android


Case Study


Fighting Fraud

Companies are

experimenting

with various

options like face

recognition, iris

authentication,

thumb print and

so on to address

fraud and theft in

the mobile wallet

payment space.


Bringing it all together

UK’s robust E-Commerce market and the fragmented ecosystem for proximity wallets means

that banks should consider offering a remote wallet in addition to a proximity wallet to its

customers

Digital payments services offered by Visa and MasterCard would provide

customers the ease and convenience they have come to associate with shopping

at online platforms such as Amazon

Payment related challenges in terms of handling cash, choosing the right payment card,

keeping track of multitude of loyalty cards – at the checkout counters are all major pain

points for customers. Add to this, the ubiquity of mobile devices means there exists

considerable opportunity to offer superior customer experience at the POS terminals by

offering a proximity wallet

Visa and MasterCard offer issuer branded mobile apps which can in fact double

as both proximity and remote mobile wallets, making it convenient for consumers

to use at both offline and online stores

Proximity wallet providers such as Apple Pay or Android Pay have announced

plans to roll out online payments which would effectively render them with

capabilities of a ‘hybrid wallet’

Given the strong presence of Apple and Android devices, banks should definitely

partner with the major wallet providers in addition to having their own mobile

wallets

Both Visa and MasterCard offer white-label solutions to help banks deploy bank-branded payment solutions across online and offline channels

Visa has announced a well thought out roadmap of planned innovations

Most importantly, partnering with Visa or MasterCard will help banks retain their respective brands and customer wallet share

Socio demographics of UK are important indicators for addressing the diffusion curve for

mobile wallets

Younger consumers, in the 18-34 age group are helping drive up the usage rates

Higher proportion of female consumers in the above age group demonstrate

greater willingness to adopt the technology

Middle income consumers see more value in using mobile wallets especially if

consumers are given timely and relevant information on saving and spending

prudently

It appears that many of the concerns consumers today have about mobile wallets especially

those around security are similar to the ones when mobile or even internet banking was

introduced

Simple yet effective messaging around security benefits of mobile wallets vis-à-

vis payment cards will help improve awareness levels and inclination to use

Key to success of mobile wallets will be the ability to integrate payment, loyalty, and

contextual engagement

Providing customer value through personalised offers by combining payments,

loyalty and contextual insight