Playing with the ‘Pays’: The bank approach to mobile payments

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About a year ago, Citi introduced itself into the mobile wallet discussion when it debuted an Android app called Citi Pay.

At the time, Citi’s decision to launch Citi Pay continued a debate about what worked best for banks as far as how they handled their involvement in mobile payments outside their participation with the major Pays.

Banks had, and still have, two options — a standalone app, such as Chase Pay or Citi Pay, that sits alongside a financial institution’s mobile banking app, or an NFC-based mobile payments feature within an Android-based mobile banking app.

While there are pros and cons to a bank forging its own way with mobile payments outside the Pays, industry executives on a panel last month at the Bank Customer Experience in Chicago agreed financial institutions should be aware of, and explore, all developments in the industry.

“I think the top pro [for a bank to go outside the Pays] is that you get to control the experience end-to-end and not rely on a third party,” Sagar Dalal, senior vice president of digital banking and innovation for Barclaycard, said during the panel. “You have a much deeper relationship with that customer.”

One of the bigger cons is the cost to the bank as far as the resources needed to develop a separate app should an FI decide to go down that path, Dalal said.

But that might be easier for banks today with an assist from the card networks.

MasterCard and Visa last year each introduced tools banks could use to more easily get involved with mobile payments.

For MasterCard, it enabled banks to add an API to their mobile apps to activate a payments capability for Android. Citi Pay is based on an API for Masterpass, MasterCard’s digital wallet.

Visa introduced a white-label service that enables financial institutions to offer their own mobile app to customers.

“That helps to get more ubiquity that’s needed for mobile payments,” Joseph Walent, associate director for Mercator Advisory Group’s customer interaction advisory service, said about the card networks’ offerings.

Credit unions also are attempting to get into mobile payments in different ways.

While more of them continue to make their cards eligible for wallets such as Apple Pay, credit unions still lag behind in that area to the bigger banks.

“Once you get into the Pays, how do you stay in there?,” Tom Davis, president and COO for credit union services provider CSCU, said during the panel. “We talk about passive and active in our space. These are things where you have to do something.

“There are things that are being done for you, such as Venmo, where you can’t control your cards. So, embrace it, because there’s little you can do about it. But for the things you can do something about, make sure you’re tokenized [for mobile wallets such as Apple Pay].”

The panel touched upon some other issues including:

Walent on mobile payments and security: “The EMV transition was a huge opportunity for the Pays to come swooping in to say, not only are we more secure than EMV, but we’re going to be faster.”
Dalal on bank innovation: “What they are trying to figure out now is how they are trying to enhance the experience with value and services. There are a lot of these use cases that are being dreamt up and thought of because there is this population of folks that wants to make sure the bank they’re dealing with is innovative.”
Davis on another advantage for banks and mobile wallets: “Amazon didn’t get into payments because they wanted to become a payments company. They got into payments because they wanted to improve the experience of being able to check out online. As banks, what do we want to sell? We want to sell financial services. Let’s not build a payments app just to have another way to pay. Let’s sell something like financial advocacy.”

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