Endpoint: Doing Wallets Right

Too many mobile-wallet approaches exclude ISOs and other merchant acquirers, to the detriment not only of the acquirers but also of merchants and even of the wallet providers themselves, says Paul Coppinger.

Paul Coppinger is president of Apriva, Scottsdale, Ariz.

 

There can be little doubt that, while there are many definitions of a mobile wallet and of how the technology should work, by and large the mobile wallet represents the next significant paradigm shift for the payments industry.

But for those immersed in this industry, some of the approaches bandied about—particularly from newer entrants—are fraught with risks that have the potential to limit adoption, cause havoc among merchants, and cripple already-under-stress merchant acquirers and independent sales organizations (ISOs).

From a 30,000-foot level, the mobile wallet has the capability to really fulfill the potential that smart phones represent in terms of delivering utility, functionality, and simplification in the payment process. The ability for consumers to make purchases using the phone is appealing and elegantly simple. Just as important, mobile wallets should greatly assist merchants, which can use the technology to track sales, get better insight into customer propensities, and enable loyalty programs to their fullest advantage.

And when you factor in the potential of new technologies such as near-field communication (NFC) and how it can streamline the payment process even more, the acceptance of mobile-wallet downloads should only escalate.

But when we peek under the hood of different wallet offerings, we see a stark reality: There are a number of wallet providers with perhaps only a rudimentary understanding of the payments landscape. Many of these wallet solutions have only limited feature sets, or require that their solutions be tied into proprietary infrastructures that will limit choice and ultimately inhibit growth.

Some providers only offer mobile loyalty or payments programs, while others focus only on features tied to location-based services. Still other solutions only work with certain handsets or operating systems. Each of these limited offerings translates into islands of functionality that represent only a sliver of what a mobile wallet should deliver.

These marginal solutions have the potential to confuse consumers and lock merchants into a narrow solution. Ultimately, they detract from the true vision of what mobile wallets should be. These narrow and limited solutions are, in reality, manifestations of the unfamiliarity and inexperience that some of these new providers have with regard to the payments business.

While limited feature sets may be disappointing, what is even more troubling is the fact that many of these most recent wallet entrants do not recognize the intrinsic role that merchant acquirers, ISOs, and other channel providers play.

With a long history of helping merchants navigate the changing directions of technology and consumer preferences, these providers should be the staunchest allies of those looking to monetize their wallet technologies. A logical approach would bring the sales channel into the wallet ecosystem and let it do what it does best: educate merchants on new technology and how it can help the merchant grow and operate its business.

Resellers know their customers—the merchants—better than any other provider. They can readily recognize the needs and expectations of each merchant, and have built their businesses around being that high-touch provider that merchants need.

Building on their trusted relationship with merchants, resellers can not only guide them through the transition to wallet programs, but they can also find new ways to add value for the merchants while establishing new revenue streams from expanded services.

Dramatic Negative Impact

And make no mistake: selling wallet services to a merchant does indeed require a level of sophistication. The most attractive wallet solutions offer a plethora of robust consumer-oriented services that go far beyond a plug-and-play payment-acceptance mechanism. It is incumbent on acquirers to assess wallet offerings, become expert in the benefits and potential minefields facing merchants, and ensure that they continue to be the trusted resource and guide merchants need to navigate this new technology landscape.

Rather than let wallet providers dictate the terms of engagement, traditional merchant acquirers would be well-advised to develop partnerships with the experienced wallet providers that have the merchants—and their own best interests—at heart.

If experience is any guide, merchants, which are often resistant to change, will most likely see the emergence of wallet technologies as a bit overwhelming. But that’s where the channel partner plays a crucial role by providing the guidance that merchants need to make the most of wallet programs.

Yes, selling through a network of channel providers is a more expensive go-to-market strategy for a service provider, specifically when compared to just robotically sending downloads to merchants and consumers. But it’s the right way to do business.

Savvy technology providers that have earned their stripes by bringing previous solutions into the payment space understand that the most important variable in determining the success of wallet technologies lies in the go-to-market strategies. Bringing the knowledge, skill, and experience of merchant acquirers, ISOs, and other providers into the wallet ecosystem makes enormous sense if the objective is to satisfy merchant needs and gain market traction.

In contrast, excluding merchant acquirers and ISOs from the wallet environment is a myopic, pennywise, pound-foolish approach that can eventually inhibit adoption of these technologies. Few merchants would want to touch a mobile wallet program unless they know precisely how it will benefit their businesses. Technology vendors with only a peripheral understanding of the sector—and structured to serve customers from arm’s length—are not particularly suited to fill this fundamental role.

It is clear that unless acquirers actively engage in the emerging wallet landscape, they could easily lose relevance in the payments process and ultimately fade from the picture. This can have a dramatic negative impact on the retail economy and the manner in which commerce is conducted.