Enabled by an interoperable tokenization platform, Samsung Pay, Microsoft Wallet, Android Pay and Apple Pay are expanding their participation in mobile payments across markets around the world. As Latin America and the Caribbean will inevitably participate in this expansion, banks in the region are assessing the potential of mobile payments and making their moves – including the introduction of mobile wallets by many of them.
The “pays” and the issuers’ wallets provide an enhanced consumer experience and will change the way consumers use their devices to pay in a cardless environment. The unsung heroes of the transactions are the tokenization platform and contactless acceptance. Tokenization ensures that devices are provisioned with payment credentials that are limited to each device and specific payment scenarios. The actual consumer credentials are never present in the secure element of the phone nor in the data sitting online in a cloud.
This is an advancement that will allow the industry to gain the scale it hasn’t been able to reach with previous security standards, and it is also opening many possibilities to provision payment credentials in almost any device: wearables, cars, household appliances and office equipment, among others.
However, this is just the beginning. Banks and card issuers will need to quickly evolve the mobile banking experience and leverage technology to provide a full banking solution integrating all financial benefits to their customers.
These are the top five tactics banks will need to work on:
1. Re-invent digital issuance. The current acquisition and underwriting model will soon become obsolete. Banks will need to re-think the application process and migrate their capabilities fully to mobile. Some banks in the region are already experimenting with instant issuance in their own Mobile Wallets. Even the most efficient online application process and instant issuance at branches will need to migrate to a mobile environment and integrate flows with first-time provisioning. The mobile browser is quickly being replaced by Apps, so new application processes will need to operate as an App or in emerging platforms like chatbots, combining risk scoring, credit bureaus APIs and instant credit decisions.
2. Integrate rewards, loyalty and incentive marketing. The “pays” and the issuers’ wallets today operate in isolation of the full consumer experience. Banks will need to integrate the entire consumer engagement to their payment tools. Offers, hotel perks, miles, rewards points, privileged access… all will need to be seamlessly integrated with the “pays”, HCE (Host Card Emulation) Wallets and others. Failing to do so will affect ongoing consumer adoption.
3. Enhance the transaction experience. The act of payment is surrounded by multiple events that facilitate a frictionless experience, and banks will need to evolve the risk prevention methods defined for a plastic card-present environment. Visa is offering banks multiple APIs that minimize risk and the chances of declined transactions. With Visa Developer, banks can build better consumer experiences with solutions like Mobile Location Confirmation, Visa Transactions Alerts, Visa Risk Manager, Visa Travel Notifications, and many other APIs designed to integrate into the overall digital banking and payment experiences.
4. Re-define cross-selling. Payment platforms have historically been one of the most technologically advanced products in retail banking interaction. Mortgages, lending, checking and other banking products rely on robust back-end infrastructures, but limited in frequent consumer interaction. The consumer experience gap will widen if the back-end processes supporting other products do not keep up with the front-end experience provided by mobile payments. Banks need to find ways to be able to cross-sell their products, and this will require the adoption of similar technologies to provide a bank-wide digital experience to their customers. Perhaps this is the largest task in the next few years.
5. Think IoT banking now. We are in the early days of the Internet of Things (IoT). There will be a hyper-adoption of digital technology where a myriad of devices might interact with financial institutions. The space is getting crowded fast with players whose core business is different from banking and payments. The absence of solid banking partnerships will force these players to create parallel industries. Tokenization allows banks to participate in that ecosystem, and making the right investments in talent and technology now will accrue future economic benefits from IoT automated transactions.
Yes, almost every single industry, from agriculture and space science, is being affected and enhanced by digital technology adoption. The financial industry is not an exception – we need to operate in this new digital ecosystem and quickly evolve technologies to connect better with consumers.
This is a huge transformation for the industry in Latin America and the Caribbean. We need to collectively build the foundation for this new ecosystem, where tokenization and contactless capabilities are key to unfold new use cases and reach more consumers. This is a huge opportunity for the banking industry, as the penetration of electronic payments in the total volume of Personal Consumption Expenditures for this region is still one of the lowest in the world.