Weighing the pros and cons of bank app-based mobile payments
About a year ago, Citi inserted itself into the middle of the mobile wallet discussion when it debuted an Android app called Citi Pay.
The bank's decision to launch Citi Pay continued the debate about what works best for banks that decide to take their involvement in mobile payments in a direction that does not involve playing with the major "Pays."
Banks had, and still have, two options: a standalone app, such as Chase Pay or Citi Pay, that sits alongside a financial institution's mobile banking app; or an NFC-based mobile payments feature that resides within an Android-based mobile banking app (a setup that Apple doesn't allow for its own reasons, one of them being Apple Pay.)
There are plenty of pros and cons facing a financial institution with plans to forge its own way in mobile payments. Industry executives at last month's Bank Customer Experience Summit in Chicago agreed that before launching such a project an FI should be aware of, and explore, all developments in the industry.
"I think the top pro is that you get to control the experience end to end and not rely on a third party," Sagar Dalal, senior vice president of digital banking and innovation at Barclaycard, said in the panel discussion, Playing with the "Pays": Can FIs win at the mobile wallet game? "You have a much deeper relationship with that customer."
One of the weightier cons for an FI that decides to go down the path of creating a separate app is the cost of development resources, Dalal said.
However, this might be easier for banks now than it was a few years ago, thanks to an assist from the card networks. Last year, MasterCard and Visa both introduced tools that banks can use to more easily enter the mobile payments sphere.
MasterCard enabled banks to add an API to their mobile apps to activate payments capability for Android. Citi Pay is based on an API for Masterpass, the MasterCard digital wallet.
Visa introduced a white-label service that enables financial institutions to offer their own mobile app to customers.
"That helps to get more ubiquity that's needed for mobile payments," said Joseph Walent, associate director of the customer interaction advisory service at Mercator Advisory Group.
Credit unions also are attempting to get into mobile payments in various ways.
While a growing number of CUs make their cards eligible for wallets such as Apple Pay, credit unions still lag behind larger institutions on that score.
"Once you get into the Pays, how do you stay in there?," said Tom Davis, president and COO of credit union service provider CSCU, said during the panel. "We talk about passive and active in our space. These are things where you have to do something.
“There are things that are being done for you — such as Venmo — where you can't control your cards. So, embrace it, because there's little you can do about it. But for the things you can do something about, make sure you're tokenized [for mobile wallets such as Apple Pay]."
Panelists touched upon other issues, as well:
- Walent on mobile payments and security: "The EMV transition was a huge opportunity for the Pays to come swooping in to say, 'Not only are we more secure than EMV, but we're going to be faster.'"
- Dalal on bank innovation: "What they are trying to figure out now is how they are trying to enhance the experience with value and services. There are a lot of these use cases that are being dreamt up and thought of because there is this population of folks that wants to make sure the bank they're dealing with is innovative."
- Davis on another reason for banks to develop mobile wallets: "Amazon didn't get into payments because they wanted to become a payments company. They got into payments because they wanted to improve the experience of being able to check out online. As banks, what do we want to sell? We want to sell financial services. Let's not build a payments app just to have another way to pay. Let's sell something like financial advocacy."
Companies: Bank Customer Experience Summit
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.