Mobile wallets are coming – that is a certainty, some experts say.
But just about everything else around this issue remains uncertain as credit unions, banks, and merchants scramble to attempt to keep pace with a fast evolving marketplace.
For some, the idea is captivating: replace cash and leather wallets with a mobile phone that, increasingly, many of us carry just about everywhere. More tantalizing still is that a phone has intelligence a leather wallet never could. It knows with precision where it is and when properly programmed, can become a vehicle for delivering targeted offers and deals.
Mobile wallets are also capable of tracking rewards points, loyalty programs, and the rest of the analog marketing tools now typically scattered across multiple membership cards.
With a smartphone, this all can become one-stop purchasing and that may be why many leading financial institutions are eyeing the possible emergence of the so-called mobile wallet.
"A mobile wallet is in our plans. But we are not there yet," said Tim Grove, vice president of system development at the $1.4 billion EECU in Fort Worth, Texas. "There is more talk than action in this market. We are watching for where the market moves."
The paradox, however, is that the urgency around mobile wallets is growing, said Peter Olynick, a practice leader at consulting firm Carlisle & Gallagher in Charlotte, N.C., which recently completed an in-depth survey of consumer attitudes about mobile wallets. Forty-eight percent of the respondents indicated a desire for a mobile wallet.
"We are seeing strong interest in digital wallets from the young and the affluent," Olynick said.
Amid the uncertainties, he pointed out that momentum is growing for digital wallets. Olynick pointed to the Isis pilot, which involves large banks, Verizon, T-Mobile, and AT&T, that will put Near Field Communication (NFC) wallet modalities to the test in Austin, Texas and Salt Lake City this summer.
Olynick also underlined that the stakes for financial institutions, including credit unions, may be high and perilous. According to the Carlisle & Gallagher survey, traditional financial institutions are at risk of losing the mobile payments space to nonbank competitors such as PayPal, Google and Apple.
Similar findings emerge in a recently announced study by financial services firm Sterne Agee. "It is inevitable that we will be using mobile phones as wallets," said Greg Smith, an analyst with the firm. "We are at a pivotal time. Everybody wants to own this space: financial institutions, wireless networks, credit card companies."
He added that the question in his mind is: "Will financial institutions be disintermediated?"
That question is exactly why EECU, for instance, has decided to stake out a vantage point to closely eye mobile wallets, Grove said.
Likewise is heard from John Worthington, a senior vice president at Security Service Federal Credit Union, a $6.7 billion institution in San Antonio. He admitted that, for the present, SSFCU is focused on rolling out a conventional suite of mobile apps but it is doing so with its eyes firmly on a later introduction of advanced mobile wallet capabilities.
"A mobile wallet will be very beneficial to us and our members down the road," said Worthington who declined to fix a precise timetable for debut of these services. But he stressed that for SSFCU, the appeal is that a mobile wallet will let the credit union get involved in in-store payments.
One complication in embracing mobile wallets is that, right now, there is a significant lag in smartphone adoption of NFC chips, which most experts had touted as the probable winning technology. Theories abound with some experts suggesting that the battery drain exerted by NFC has persuaded Apple and other leading phone makers to back off deployment (assertions neither confirmed nor denied by Apple). But the plain reality is that NFC no longer can be seen as the anointed winner in mobile wallets, according to some experts.
Javelin researcher Mary Monahan, an executive vice president at the San Francisco firm, recently reported on what she said was as a very successful test of a cloud-based mobile wallet – from FIS – at the $2.4 billion State Employees Federal Credit Union in Albany, N.Y.
Instead of relying on information stored on an NFC chip, this wallet, where SEFCU employees paid for food at an employee cafeteria, consummated its purchases via QR codes, Monahan said.
Until more NFC phones and merchant terminals are available – and that timeframe is unknown, Monahan said "we will see more cloud-based wallets and this will get people more used to paying with their phones."
As mobile wallets prep for entry, it's still the when and the format that are open questions. In the meantime, some credit unions and other financial institutions are anxiously eyeballing the fluid terrain, industry watchers confirm.
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