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The Green Sheet Online Edition

May 28, 2018 • Issue 18:05:02

57 mobile channels and nothing on

By Dale S. Laszig
DSL Direct LLC

Have you ever looked for a movie on Netflix and ended up merely scrolling through your playlist? After considering hundreds of titles and trailers, you decide there's nothing on. You clean up your list, delete movies you've already seen ‒ and those other ones your parents recommended. Then you exit the app. Like thousands of consumers and merchants in the app marketplace, you shop, browse and leave without buying.

Having too many apps on the menu is one of many holdups for mobile wallets in the United States, according to a January 2018 study by the U.S. Payments Forum. The white paper, titled Mobile and Digital Wallets: U.S. Landscape and Strategic Considerations for Merchants and Financial Institutions, lists numerous impediments to widescale mobile wallet adoption, including the following:

  • Cost barriers: One-time implementation costs may include software development, software and hardware deployment, training, and promotion. Ongoing costs may include maintenance, hosting costs, licensing costs and transaction fees.
  • Transaction fees: Many mobile payment schemes, other than contactless, are priced as card-not-present transactions, which are generally higher than card-present transactions.
  • Fraud liability: Although more alternative fraud mitigation and prevention practices are available in the digital space than previously, they require merchants to incur additional investment costs and deal with ongoing risk considerations.
  • Credit and debit mix: A merchant's mix of credit and debit payments may be different for digital transactions than for card-present POS transactions, which may impact costs due to varying credit and debit transaction fees. Debit transaction routing, which may involve network payment tokenization and the digital channel, may also impact transaction pricing.
  • Alternative payment methods: Mobile wallets don't support all alternative payment methods, such as the automated clearing house, closed loop and private label options. Merchants who switch from these lower-cost payment schemes may incur higher costs at the POS.
  • Hardware and software requirements: Merchants need to adapt POS systems to support near field communication (NFC). While many device manufacturers have incorporated EMV (Europay, Mastercard and Visa) contactless acceptance into merchant terminals, merchants must activate this capability.
  • Lack of universal NFC protocol: NFC-enabled POS systems do not currently enable merchants to select mobile wallets they want to accept. There is no standard identifier or protocol (such as a wallet ID) that supports acceptance selection.
  • Debit routing complications: Debit routing alternatives must remain intact in NFC-enabled terminals. This may involve certification and deployment challenges.
  • Earning consumer trust: Merchants may implement open wallet models, but they and mobile wallet providers need to earn consumers' trust.

Remove barriers, improve security

"Card issuers are pricing transactions on some types of mobile wallets as CNP, and many apps require complete Social Security numbers during registration," stated Sandy Travers, co-founder and co-CEO at DigiPay Solutions Inc. "Until we solve these problems, we'll continue to see delays in mobile wallet adoption."

Travers understands the need for proof of identity to satisfy know your customer requirements but said mobile wallet providers can request the last four digits instead of the entire primary account number. "The recent rash of security breaches has made consumers wary of sharing personally identifiable information, even with trusted parties," she said. "CNP pricing and PII requirements are inhibiting wide-scale mobile wallet adoption. Until we remove these barriers, we may see increased mobile wallet usage in select verticals, but not on a national scale."

The U.S. Payments Forum confirmed merchants are usually liable for fraud in CNP transactions but noted they can shift liability to card issuers by implementing 3D Secure and other security tools in smartphones that include device ID, geolocation and biometrics. "By leveraging these tools, merchants can improve their customer authentication decisions and better manage risk," they wrote. "However, any fraud that does occur will predominantly be passed on to the merchant in the form of chargebacks. Effective fraud mitigation efforts and chargeback management require a combination of staff and tools."

Increase appeal, utility

Will Hernandez, Editor at Mobile Payments Today, said mobile wallet providers need to improve product appeal and utility. "Apple Pay and Samsung Pay do one thing well, which is paying," he said. "But Samsung Pay just announced a cash back option for Samsung rewards, similar to what you'd get with a credit card issuer reward system. I give them credit for making the Samsung Pay wallet more attractive."

Alipay and WeChat do more than process payments, Hernandez noted. Consumers use the apps to buy things, transfer money, book travel and ridesharing services, order from restaurants, and schedule doctor visits. He suggested PayPal may be the closest equivalent to Alipay in the United States. Hernandez commended the company for integrating third-party apps like Acorns into its user experience. Acorns, a mobile investing app, similar to Bank of America's Keep the Change, rounds up consumer purchases and deposits change in an investment account, he said.

Where's the remote?

More companies are entering the mobile wallet space, creating a surplus of payment options for consumers. Merchants who try to steer customers to their preferred payment methods are quickly learning it's all about the consumer. Loyalty and cash discount programs may entice some buyers, but consumers expect their preferred currencies and payment methods to be easily accessible at the POS and on their connected devices.

Wells Fargo created a mobile wallet app with an array of payment choices on its home screen. Avid Modjtabai, Senior Executive Vice President of Payments, Virtual Solutions and Innovation at Wells Fargo & Co., said Pay with Wells Fargo is designed to help customers simplify and control their financial lives. "The enhancements we are making in mobile are an example of how Wells Fargo is innovating based on customer needs and feedback about how they want to manage their money," she stated.

Pay with Wells Fargo users can select Google Pay, Samsung Pay, Visa Checkout, Apple Pay, Wells Fargo Wallet for Android and online bill payment from the app's home screen. Aggregating payment methods adds convenience, security and simplicity, Modjtabai said. But will consumers be able to choose? Or will they, like Bruce Springsteen's song, switch 'round and 'round 'til half-past dawn, finding "fifty-seven channels and nothin' on?" end of article

Dale S. Laszig, Senior Staff Writer at The Green Sheet and Managing Director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at dale@dsldirectllc.com and on Twitter at @DSLdirect.

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