What Should Be Inside Your Mobile Wallet (Strategy)

Whereas mostly a concept only really understood by early adopter and tech enthusiasts a few years ago, these days mobile wallets have gone mainstream enough to feel a bit commonplace to consumers. Most people have at least heard of mobile wallets at this point — driven in part to the ever-lengthening list of retailers that are offering them in some form or other.

Merchants are thinking about mobile wallets. According to the team at Rambus, that is good news, because it’s also time for retailers to take control of their payments destiny with one, says Chakib Bouda, CTO of the payments division within Rambus.

The driver, not surprisingly, Bouda told PYMNTS in a recent conversation, is that brick-and-mortar retailers must seriously rethink their approach to remaining competitive in the digital age as mobile and online eCommerce channels continue to consume a larger portion of consumer spend.

“[Retailers are] seeing it not just as a process to be managed, but as an opportunity. Indeed, 80 percent of merchants now see payments as a fundamental part of their business strategy, with 92 percent expecting to maintain or increase investment over the next 12 to 18 months.”

Rambus believes that mobile wallets are increasingly becoming an excellent tool for taking on that digital future.

“Every retailer is different, so they need to build a wallet that is completely tailored to the needs of their customers. That’s the beauty of it,” Bouda noted of the power of each individual retailer to customer-create their own digital payments experience.“They can go all in and deploy a full digital wallet right away. Or they can adopt a phased approach.”

But whatever approach they chose, Rambus says that retailers must take those first steps for five major reasons — here are three that pop to the top of that list …

Improving Security and Lowering Costs

As goes digital commerce, so goes fraud.

“Data breaches are a grim reality of the 21st century,” Bouda noted.
Grim and expensive, with the average breach running around $4 million for the retailer.

The era of the branded mobile wallet, however, gives retailers a new opportunity to bring payments in-house and in-app.

“Mobile has the power to help retailers to avoid theft of customer payment credentials, transaction histories and identities. Retailers get there by layering security methods to meet their requirements, while maintaining simplicity and convenience for consumers.”

Those layers are the current and emerging form factors present in the marketplace today for digital payments — including app security, device authentication, biometric authentication and tokenization, among others.

“Thinking about digital wallets, the retailers still don’t need to be security experts. They need an appreciation of their own attitude to risk. The right platform will allow them to combine layers of security — like tokenization, biometric authentication, PINs and back-end fraud management — to achieve the right balance of security and usability. Choosing the right platform will also allow them to rely on a system that is constantly maintained and updated by security experts in line with evolving standards to mitigate against the latest threats.”

Moreover, he noted, while most security upgrades are a cost generator for merchants, mobile payments actually have the potential to bring the cost picture down by quite a bit, as retailers can capture their customers in a more store-controlled closed loop.

“Doing something simple like digitizing a branded store card within a mobile wallet has several benefits, for example, they can reduce costs by making fewer transactions subject to fees. The retailer can also incentivize use of the store card by pushing in-app discounts to encourage adoption and drive brand engagement and loyalty.”

Which, Bouda notes, is the most powerful of mobile use case — particularly in an era when old school brick-and-mortar players are working overtime to re-invent themselves for the digital future.

Easier Engagement, Digital Advantages

It might be a concern that consumers, inundated by mobile wallet offerings from merchants of all stripes, might simply start turning out. After all, there is only so much memory in any individual phone — and consumers have long since moved past the relationship with the app economy where they were inclined to download anything and everything.

Which, Bouda notes, is why it isn’t just about rolling out any digital experience that enables payments, because at the end of the day, payments alone aren’t enough to get most shoppers really excited. Instead, it’s the one that actually speaks to the customers’ needs.

“It’s all about value. The Starbucks app is arguably the most successful mobile wallet to date. Why? Because they made their customers’ lives easier with added value through features like ordering ahead and simplistic payments. Essentially, people need a reason to do something, and payment is not strong enough to change habits. Retailers should be looking to bring together everything to make a better in-store experience. This could be ‘mixing’ credit, points and vouchers in a single payment, the ability to order ahead, discounts for users of the app and tailored deals and digital receipts, to name just a few.”

And digitizing receipts, Bouda noted, is something that retailers have an incentive to do and is in and of itself a reason to move to mobile wallets, as paper and plastic have costs seen and unseen for merchants.

“Plastic cards, cardboard coupons and paper receipts have an environmental impact. For retailers, a mobile wallet is a vehicle to [a] considerably more cost-effective and sustainable future, while delivering increased consumer engagement and insights.”

Re-Imagining Checkout

Apart from digital wallets’ ability to drive engagement or leverage consumer data to provide smart recommendations, according to Bouda they also offer a unique opportunity to fix one of retail’s leading pain points: checkout.

That can mean faster motion at the POS today — or in the future, a world where the point of sale is the consumer’s phone itself.

“Making the jump to in-aisle brings a range of benefits. Customers can tally their choices as they go along (engaging with an app will also stop most people from searching for deals at other stores online!), pay for their goods once they are done and head for the exit. A big saving comes from reduced infrastructure as checkouts cost money to install and maintain. Fewer checkouts also mean staff can be redeployed in-store to support customers.”

Moreover, he said, while some merchants might think that fraud will go up — as self-checkout seems to lend itself to shoplifting — that behavior can be dissuaded with simple door-checking practices.

“And we’re getting feedback that the savings that going digital realizes (through increased revenues and decreased spend on infrastructure) far outweigh any increase in shoplifting,” Bouda said.

Because, at the end of the day, what makes or breaks an outcome for retailers is their customers’ experience — and digital wallets allow them to provide one that is more focused, more tailored and ultimately more secure.

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