Banks run the risk of becoming funding vehicles, ceding primacy during payment and control of the customer experience to others wallets
As digital wallets gain momentum among shoppers, a new report from Forrester Research warns banks that the bevy of new technology providers will put roadblocks between them and their customers.
While consumer adoption of digital wallets is slow, it is steady and growing as smartphone adoption increases and more shoppers become aware of mobile products that not only allow for mobile payment, but manage loyalty programs, coupons, electronic receipts and a number of other products typically found in a physical purse or billfold.
The report says that merchants will likely build payment options into their offering based on what’s popular among shoppers from the dozens of services already on the market (and the hundreds that will likely appear in the coming years around the world).
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Whichever companies win that market will become the stewards of a remarkable volume of customer data, information the banks have historically owned and managed to great business effect and now stand to lose.
“Banks run the risk of becoming funding vehicles, ceding primacy during payment and control of the customer experience to others wallets,” the report says. “The current fragmentation of the digital wallet landscape obscures the scale of the threat.”
Digital wallets are being developed by a number of companies across a number of business sectors; aside from the traditional big banks (all of which in Canada have some form of mobile payment product), tech giants such as Apple, e-commerce companies such as Amazon, telecommunication companies and startups are all vying for market share.
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Forrester says the three largest players in the space have already accrued millions of users: China’s Alipay was the country’s fourth most-downloaded app and reports 400 million active users. WeChat says 200 million of its 650 million chat users have registered a credit card with the app to enable payment transfers. In North America, PayPal reports 179 million active users, and enjoys a high degree of trust among consumers.
“When asked whom they trust to provide a mobile digital wallet, U.S. online adults named PayPal (43%), with Amazon and banks/credit card issuers in joint second place (29%), followed by payment card networks (27%), Google (22%), and Apple (20%),” Forrester says.
Forrester’s report, Disrupting Finance: Digital Wallets, matches global trends with aggregated data from a number of European and North American Forrester surveys, including its “North American Consumer Technographics Online Benchmark Survey,” conducted in April 2015 among more then 32,000 Americans and more than 3,000 Canadians.
