Should Louis Vuitton-s and Gucci-s worry about THIS?

Pratima H

MUMBAI, INDIA: This may sound a tad surprising. But who would have thought that one outcome of P2P payment technology would be a dip in social awkwardness.

Yes, 71 per cent of peer-to-peer payment app users as tapped by a Nielson study in 2014 said that using these types of payment options reduces tension around splitting the bill and there were as many as 73 percent who liked the convenience of not having to split checks or find an ATM with 49 per cent here using peer-to-peer payment apps while dining.

Wallets – the digital ones, yeah; they are not a fancy, improbable, exotic concept anymore indeed.

Look around you, in India too. The likes of Ola and Snapdeal are introducing digital wallets and alongside, retailers like Shoppers Stop are making handshakes with FreeCharge Wallets for omni-channel payments. Names like Paytm, Airtel Wallet, Oxigen, QuikWallet, MobiKwik and even bitcoin siblings Zebpay are floating around our TV screens and shopping carts with more frequency now even as Apple, Amazon and Google are trying their bit to shake up the industry ‘their’ way.

Back in 2012, in the 'Mobile Wallet Reality Check: How Will You Stay Top of Wallet?' study, Carlisle & Gallagher (CG) Consulting Group threw up some daunting signs. As 48 per cent of survey participants looked interested in a mobile wallet, there were some eight in ten who agreed that they would consider using PayPal if it offered banking. Consumers interested in mobile wallets were considering using alternatives to their primary bank for banking.

These wallets hold space and promise both, it appeared here. There were 65 per cent who rated the ability to make better payment choices – such as maximizing loyalty programs or minimizing interest payments – the most valued mobile wallet service.

By 2014, Juniper Research augured that one in five mobile handsets will have mobile wallet functionality by 2018, and as per Gartner, when it comes IT spending in the retail sector, technologies that help understand customers better, improve engagement through multichannel experience and facilitate the buying process are going to emerge as high-priority areas. It is very likely that within stores, creating IT infrastructure to accept various mobile payment systems and digital wallets will be high-priority items in the second half of 2015.

Use of cash, checks, and plastic has been anticipated to decline as digital frenemies gain traction. CG had expected that within five years 50 per cent of smartphone users will be using their phones and mobile wallets as their preferred method for payments. As to the adoption curve, it reasoned that the way we have seen with the trend in mobile technology, from smartphones to tablets, once the technology is accepted the adoption curve would only spike.

Whether as contactless payments or SVAs (Stored Value Accounts); the space that these digital wallets are taking in everyday lives, is showing a gradual but marked shift. From what can be gauged from Nielsen’s Q2 2014 Mobile Wallet Report, 40 per cent of mobile wallet users are embracing mobile methods as their primary mode of payment.

Yet, there is a Yankee Group report outlining that just 16 per cent of consumers used their phones to make an in-store purchase between December 2013 and February 2014.

Our teledensity may have risen in last five years from 55 per cent to over 78 per cent as e-tailer InfiBeam argued recently but TrendMicro 2015 predictions also pointed that new mobile payment methods will introduce new threats.

82 pc Techno Shoppers count making shopping easier as valuable

If we take Forrester’s word, plastic EMV will not achieve broad adoption in the US until 2020, and only more secure forms of payments - tokenized transactions on digital wallets, contactless EMV payments can have a larger share of transaction volume by 2025.

There is something blurred that remains to be learnt from stories like Square Wallet.

Something is stopping or slowing a feisty consumer interest level to be translated into actual adoption.

Consulting firm Chadwick Martin Bailey (CMB) throws in one more twist. While it shows that familiarity and usage have doubled since 2013 and more 22 percent users are likely to join in the months of 2015, it also puts forth that as many as 40 percent of those highly likely to buy wearables in the coming year want it to come with mobile wallet functionality.

CMB’s report 'The Future of the Mobile Wallet 2015' reveals that concerns over identity theft and fees as top barriers remain, and that 100 per cent fraud protection is by far the most effective security measure mobile wallet providers can offer non-users. It also highlights another crucial element in this chain when it says that among mobile wallet users, over a quarter would switch merchants based on mobile payment capabilities. Look at how a high number of today’s mobile wallets are linked to debit or checking accounts rather than credit cards.

Coming to banks in particular, CMB report had cautioned that the ones more likely to consider alternate mobile wallet providers other than their primary bank are Techno Shoppers and Payment Optimizers and it’s time to address these segments who are attracted to an enhanced shopping and social experience. After all, 82 per cent Techno Shoppers rated making shopping easier as valuable and 62 per cent leaned towards making shopping more fun was very valuable.

Accenture’s recent report 'Reach' also talked about how banks can address an additional and huge enough $380 billion market in annual revenues by targeting micro-enterprises and bringing unbanked and underbanked adults into the formal financial system.

But can banks do that while crawling on old core application systems? They may be strong on payment choices and management of receipts or documentation categories, but what about the on-ground shopping, social experience? Banks require a significant review of their existing systems and a plan for core systems renewal to keep ahead of competition and be operationally efficient, CMB had suggested.

Unless a bank can afford to lose direct relationships with customers and its role as the primary holder of banking.

Wallets can be an answer but not when they are stuck and struggle opening up smoothly. It can be anything – NFC issues, security worries, privacy ziplocks, loose change of merchant infrastructure spread or the un-opened minipocket of spend management.

The digital payment market, in all candour, looks more of a shake and use instead of a one-tap success. What makes it so knotty?

InfrasoftTech is a player in this very complicated space, and claims wide productised offerings, framework based solutions and specialised services in the domains of Commercial Banking, Microfinance, Wealth Management and Capital Markets, with a report-card of over 300 customers in multiple markets. Like CMB, which noted that extra rewards are a big motivator to encourage mobile wallet use but alternate uses also hold real appeal; Rajesh Mirjankar, CEO, InfraSoftTech also argues fiercely for extras in these wallets if they have to really get heavy. He opens the seams to a wad of issues and drivers that the industry needs to confront candidly.

Let us swipe right then.

Why is the space of mobile wallets not pre-mature for a BFSI player like you?

When it comes to financial inclusion, we have been looking at both sides of the pyramid and that has been evident with what we have done in core banking or anti-money laundering (AML) and now with contactless payment solutions. We have been introducing series of innovative solutions in line with modern challenges faced by the banks. A large part of our drive has been not the traditional IT or license way but the road of enabling clients for a cloud and digital world. In fact, we are about to come with some path-breaking solutions soon. Within a couple of months, we have seen our unique solution catching interest of major banks including PSU space. Imagine a NFC card that can allow a parent’s child to pay for school lunch but not for other activities that may be dubious. We are intensely exploring the angle of sharper spend controls and complete fraud elimination at source itself.

Trust is still an issue with wallets. A PwC survey showed that consumers trust their primary financial institutions the most (50 pc), but retailers mere 1 pc and mobile apps just at 2 pc

Good you mention the word fraud. Don’t mobile payment platforms increase the surface area and hence make security more muddled than ever?

This is an issue that has to be addressed well at design stages. Standards are very important for any application for network security. OTP logic should not be easy to predict for any staff, for instance. Data should not be too open or inter-operable with other applications. Then, it also depends on how a user employs it. These days there are patterns and advanced biometrics that can be leveraged well.

Would payments be the spin that hesitant IT spends in APAC need?

Mobile banking is catching up well but payments would be the revolutionary part. Early adopters would be here too at the start of the curve but people will join at a rapid pace. Optimisation of cost will ensue. This will become a wave. When I look at our BFSI experience, now even nationalized banks have started taking decisions faster and there is clear, visible agility with the digital imperatives coming up.

Why would it be that? An imperative and not an X factor?

Digital is the true equalizer for the market. Now even small banks can offer solutions that large ones are giving. It is a level playing field and if some players do not adapt to and adopt digital, they will be wiped off.

Innovation is what will push wallets further I suppose?

Yes, like we are looking at ways of surpassing PIN, passwords and other forms when it comes to rural areas. Digitisation at the bottom of the pyramid has to be done in new ways.

A Nielsen survey tells consumers're ready to convert (69 pc) to mobile payment methods if merchants were to offer discounts

What’s stopping digital wallets reach the vast potential that awaits them then? Authentication muscle? Application gaps? Ecosystem issues? There was a PwC survey that noted that only if at least 75 per cent of retailers, hospitals and other relevant entities accepted mobile wallets, most consumers would be willing to use them. How impeding is infrastructure as a factor?

We have studied the Indian market and banking ways for long and I surmise that for these wallets to take off, they will have to think past the leather boundaries. Transmitting issues are an issue, and so is clarification of security and other learning curve parts of a customer. But wallets can’t be attractive with just the money inside. Why would a person need two wallets? Offerings therein will have to go beyond money – like discounts, loyalty cards or personal items of utility.