Mobile Wallets: Why banks need one of their own (3rd)

Oct 27, 2020

Credit/debit cards have been popular over a decade now and the banks have offered internet banking for the past several years – yet, nothing has matched the popularity of eWallets. What’s more, mobile payments are becoming an integral part of many start-ups that utilize a built-in mobile wallet for daily or frequent transactions. New user trends and demands on the market are shifting to request even more – a better customer experience, more flexibility, better cash management, straight lending, personalization, omni-channel presence, etc.

For many years, banks put their main focus on being a compliant, secure and trusted partner, with decades of experience. Nowadays, however, banks are facing increasing digitalization challenges, originating in organizational structure, culture and core legacy systems, which prevents them from making swift adjustments. Consequently, banks struggle with inefficient sales, ineffective operations to scale and other challenges, and ultimately lose out to the competition.  These are more than good reasons to shift to a customer-centric and modern banking using digital channels.

A PwC research shows that more than 80 % of survey respondents trust their banks with their data, while only a little over 50 % trust fintechs. Local banks are also favored because of their credibility, reliability, competence and reputation.

1.     A Sales Opportunity: Who Owns Customer Data?

Mobile wallets are one of the most popular apps. On a daily basis, users open them for each transaction, to check the executed ones, to check for expected payments, or simply to split bills. This offers a tremendous visibility opportunity to a mobile wallet provider. When users conduct all transactions through a third-party provider, however, visibility of their data and behavioral pattern is lost to a bank. This, in turn, reduces a bank’s ability to cross-sell or upsell other products and they may become reliant on wallet companies for such data. Payment companies, for instance, will be in a better position to judge the credit worthiness of many retail customers that the banks are after.

Digital wallet, on the other side, enable analytics and easy monitoring of all relevant data. This allows banks to react on time, improve existing journey performances and orchestrate personalized omni-channel experiences. With the appropriate orchestration of digital platforms and products, banks can easily improve sales processes and increase efficiency.

By analyzing different metrics and KPIs, aggregating customer data from various sources, improving daily interactions with clients, identifying underperforming journeys and processes, banks can gain more customers and improve the level of their satisfaction.

Mobile Wallet payment
Mobile Wallet payment

2.     Easy Onboarding

The biggest advantage that digital wallets bring is the easy onboarding. The user has to download the app, verify their mobile number and identity, link a bank account through a debit or credit card, and begin transacting. Younger generations like millennials and Gen-Z rely on convenience rather than brand loyalty and they already show their preference by onboarding with Neobanks. Banks shouldn’t ignore demands of younger generations for more convenient banking, since they’re already entering peak spending years.

 

3.     Customer Journey

Digital wallets bring a significant point of differentiation for banks. Their completely new customer journey supports trends and vision of modern banking. The costumer journey means entire end-to-end experience that a customer has with the bank, which became the main competitive differentiator in banking industry. This type of a modern and new management enables banks to measure, monitor and optimize customer experience, in order to achieve internal goals and transform traditional ways of doing business into a modern and straightforward banking.

Focus on your customer, instead of your product

 

4.     Increase Revenue Through Improved Customer Experience

Any revenue growth strategies can only be successful, if you can figure out what exactly is undermining your revenue growth in the first place. Until organizations figure this out, they’ll keep asking themselves the following questions:

  • Is our product performing at the right level?
  • Are we striking the right balance with our onboarding? Or are customers leaving our service before they’ve even used it?
  • Are we pricing correctly?

Today`s digital banking is completely customer-oriented and can make significant improvements in various aspects of business. How do these look like?

For the organization to understand what a customer needs and wants, it has to be able to connect and empathize with situations that their customer is facing. Based on constant analysis of customer behavior and other relevant metrics, banks can recognize “make it or break it” moments in the overall customer journey. Putting the customer at the heart of your organization and having a digital strategy is not only “nice to have” anymore- it’s an entry level requirement for leading a successful business in 2020.

Customer success is everyone’s job, but is challenging to accomplish if there’s no visibility into what customers truly need. It’s important to build a customer-first culture, where there’s radical transparency around customer feedback. Based on those inputs, banks can aggregate customer journey data, coordinate actions to deliver consistent experiences, boost customer acquisition, and most importantly, increase retention and secure revenue growth. Personalized actions, based on each customer’s overall experience, can help banks prioritize underperforming journeys for further investment and set up a solid background for new products and innovations on their digital path.

Unyti mobile wallet
Unyti mobile wallet

5. Privacy Dilemma

Like anywhere else online, we’re leaving footprints with every digital transaction. When it comes to eWallets, your information is not only available to your bank, but also to your service provider – Monzo, Starling, Apple Pay, or any other. And at the moment, the most popular digital wallets worldwide are coming from third-party providers, not banks.

Considering the saying ‘If it’s free, you’re the product’, using Neobank apps does make us feel a bit uncomfortable or insecure since our transaction data can be  used in specific ways, which on the other hand can be incredibly useful for our future actions – they provide a true insight into our behavioral patterns, shopping habits and essentially what kind of person we are. On this basis, merchants & service providers can accurately offer what interest us most. Imagine moving into your new flat and, after buying a doormat and some wall paint, your app categorizes you as suitable for discount furniture adds. That sounds rather convenient and, for this reason, many don’t even hesitate when they choose a fintech provider over anonymity. The possibilities of data usage are exceptional, which Neobanks are already demonstrating.

Young tech companies know what they’re doing, but on the other hand, if we’ve learned anything over the decades, it’s that the banks are the ones we trust with our money and data. And trust is the basis of a relationship when it comes to finance. It represents a significant opportunity for traditional institutions to win market share over non-traditional competitors.

 

 

6. What Does the Future Hold?

Mobile wallets may still be in their early stages in many countries, but the use of technology and features that improve user experience will drive higher adoption and engagement. It’s estimated that by 2022, mobile wallets will become the second most common payment method after debit cards.

Payment is a critical part of the value chain that enables continuous customer engagement. Offering a relevant payment experience to specific user groups helps strengthen brand loyalty and grants numerous possibilities for engaging with a customer, based on advanced analytics. Banks and merchants that succeed in fulfilling such demands can leverage significantly higher customer satisfaction, better user experience and last, but not least, increased revenue.

Maybe leaving your digital footprints with every small daily interaction feels like a “brave new world”. Another reason to choose future mobile payment provider wisely stems from answering this question: when it comes to their personal data, will consumers trust traditional banks or fintechs and tech giants? Either way, the future of payments is easy, convenient and mobile-first.

 

 

Deni Radović
Deni RadovićBusiness Analyst

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