Mobile wallets are on the march, so to speak, and what happens with them in their next phase of development — in 2020 and beyond — will say much about what happens to broader areas of payments.
That’s a bit of a mouthful. But it stands as perhaps the main takeaway from a recent, turn-of-the-year PYMNTS conversation with Kevin Fox, executive vice president of NovoPayment, a banking as a service (BaaS) provider with a large presence across the Americas.
The conversation happened as digital payments and multi-issuer mobile wallets become more popular, not only for that large, fragmented, highly populated region, but also for other areas of the globe — in some cases, as part of broader financial inclusion trends tied to the rise of mobile commerce and digital payments in less developed markets. Indeed, a multi-issuer mobile wallet can, in theory, almost serve as a unifying force for diverse players in regions such as Latin America, according to Fox’s experience.
“There is some need for localization of services and the creation of collaborative ecosystems between payments systems,” he said. “Creating a common platform is really the foundation of these mobile wallet offerings.”
Conversation Topic
Multi-issuer mobile wallets seem to be a more frequent topic of conversation these days in emerging markets particularly as local acquiring networks look to create new value, new rails emerge, transactions need to become quicker and more secure, mobile commerce gets deeper into the consumer mainstream and peer-to-peer (P2P) payment offerings gain more traction.
All wallets, however, are not created equal — and not all of the nearly 200 on the market today will exist in five years. Consolidation and dropout are inevitable, though forecasting who will stay and who will go is beyond anyone’s predictive powers. The state of play remains too much in flux in too many parts of the world.
There are, as of the last count, about 170 mobile wallets of various descriptions worldwide. Some are massive and deep-pocketed with active user counts in the billions, while others are incredibly small, local and regional, and familiar to almost no one outside a narrow pocket of users.
Other challenges abound when it comes to multi-issuer mobile wallets, as Fox pointed out. The legacy acquiring networks, often owned by local bank consortiums, are not well equipped to deploy capabilities like tokenized payments and digital onboarding — features of enhanced wallet offerings. But there are ways around that, he added — paths that can lead to innovation within mobile and digital financial services.
Digital Ambitions
For one, Fox said, local acquiring networks can serve as a foundation for multi-issuer mobile wallets, helping local financial institutions (FIs) and merchants to advance their digital initiatives via a common, application programming interface- (API) enabled platform through which they can employ things like secure card on file for e-commerce, and P2P — backend capabilities that are key to new user experiences.
That can bring or encourage broader collaboration and richer user experiences. “In Latin America, mobile penetration is high,” Fox said, “which makes new banking services possible.” As well, financial inclusion can increase as a result of all these factors, including more deployment and use of multi-issuer mobile wallets as result of things like digital onboarding and mobile account creation.
Nothing comes easy, of course, and that holds true for multi-issuer mobile wallets. Simply having an offering is not enough, as Fox noted. Efficient digital onboarding, effective consumer engagement and the assurance and reality of security — as anti-fraud efforts tend to get more complicated with more players and moving parts — are all essential to furthering the spread of multi-issuer mobile wallets.
One solution, at least to the security challenge, is the tokenization of payments, Fox said. That way, criminals don’t gain access to the full set of consumer data in the event of a breach. NovoPayment deals with that issue in part through Visa Token Services and its broader relationship with Visa to enable instant payments, P2P and person-to-merchant (P2M) payments, account-to-account payments, fast funds and mass payouts, all embedded and orchestrated by a common platform used by participants via APIs.
Other players will have to find their own ways forward, but you can bet on more innovation in this space over the next year.
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