The document discusses essential strategies for implementing digital wallets, highlighting the importance of multi-touch point accessibility, interoperability, and security in facilitating user adoption. It emphasizes the rapid growth of NFC payments and social commerce, the evolving competition among various service providers, and the critical need for seamless integration of payment options across different platforms. As digital wallets gain traction, they are expected to transform payment methods significantly, requiring providers to innovate beyond basic transactional capabilities.

1. Must haves in a digital wallet strategy
Thought Paper
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2. Must haves in a digital wallet strategy
Will the digital wallet sound the death knell for • Near Field Communication (NFC) is becoming
cash and credit cards? Many experts seem to a favorite technology and according to one
think so. Research also seems to agree – in a estimate global NFC payment transactions
recent report, a research organization that are expected to reach US$ 50 billion worldwide
studies the impact of the Internet, says that by 2014
consumers will not need to carry credit cards
• Social commerce sales will more than double
or cash as early as 2020; another survey by a
to GBP 3.3 million in the next five years. By
leading mobile audience media firm states that
2012, 41% of UK consumers will use social
37% of mobile using consumers used a mobile
media or at least be influenced by it while
wallet in the last three months, a sure sign of
purchasing. This figure rises significantly to
increasing adoption.
73% for 25-34 year olds, as 45% of this
The vendor action has already heated up in age group is already utilizing this platform
anticipation, and a wallet war is on between while purchasing.
mobile operators, card companies, device
In a report on multi-channel shopping released
manufacturers and financial service providers.
in December 2011, a global consulting firm
Wallet providers need a sound strategy to hold
reveals many insights about changing consumer
their own in a competitive marketplace, with
behavior. The most significant finding was that
the ability to provision digital money seamlessly
customers were consolidating their ‘retailer set’.
across multiple touch points, being one of the
Over half of respondents in the study shopped
key imperatives.
on different channels with less than five
Why is it so important that a digital wallet be retailers; most of the chosen retailers stood
usable across all consumer touch points? These out for their integrated management of the
numbers do the talking: business and the delivery of a high quality
buying experience – backed by seamless
The number of touch points is increasing rapidly
execution – across all touch points.
as evident from the following research:
What this tells us is that customers expect to
• People are increasingly buying smartphones
transact on multiple touch points as well as
over feature phones thanks to greater
enjoy a shopping experience – promising the
affordability
same convenience, ease of use, commercial terms
• Tablets are fueling the trend of multiple and security – on each.
devices; they are not replacing, but are
Since mobility is at the heart of digital wallet
instead supplementing smartphones. The
commerce for reasons that are well known –
iPad 3 sold three million units in the first
ubiquity, convenience and adoption, a multi
weekend after it was launched. That’s 42,000
touch point strategy must necessarily factor
per hour or 694 per minute! Another estimate
this in to have any chance of success.
says that more than 81 million tablets will
be sold in 2012, up fivefold from the
approximately 16 million sold in 2010
02 Thought Paper

3. Other focus areas of a digital wallet strategy
Accessibility payment options like checks and credit cards.
Retailers might be able to deploy it across the
Providers must make their digital wallets
entire transaction cycle using NFC technology,
accessible by ensuring widespread distribution
and enable in-store customers to scan purchases
and acceptance. The nature of distribution
into the wallet, generate an invoice, transfer
varies with the type of provider. For instance,
the information to their POS systems, and finally
the mobile wallet from M-Pesa, Kenya’s iconic
pay, all using the same device or application.
mobile money service is distributed by telecom
And handset manufacturers offering digital
operator, Safaricom, which has built the wallet
wallets can draw upon other device features to
application into its SIM card. It’s a strategy that
enhance the wallet experience: for instance, use
works primarily because of the ubiquity and
augmented reality to indicate which merchant
affordability of mobile phones. On the other
establishments in the vicinity accept their wallet.
hand, growing adoption of smartphones and
tablets among tech savvy populations might Openness
require distribution of wallets through “app”
stores. In future, some handset manufacturers While the wallet war introduces competition
might in-build a wallet into the phone itself. in the market and choice for customers, it also
Whatever the case may be, it is crucial that inconveniences the latter by forcing them to
the distribution be tailored to the needs, behavior maintain multiple wallets from multiple providers
and infrastructure environment of the target user. which are all linked to different cards/accounts.
This is a source of customer dissatisfaction.
User experience It is very important that providers open up their
At the beginning of this paper, there is a mention offerings. The days of closed-loop wallets are
of how customers have started to use more numbered. Retailers must accept a variety of
than one touch point to fulfill their needs. linked cards/accounts, and not just their own.
The implicit inference is that customers expect The wallet should be interoperable between
consistency and seamlessness across each and the touch points of different banks, so that
every touch point. Hence, a mobility device user a customer can top up the wallet with funds
must enjoy the same buying experience as his from one bank, but withdraw cash from the
desktop using counterpart. Going forward, there ATM of another.
must be no boundaries between the physical
and virtual world, so that a customer could well Security
fill a shopping cart online and store the details Studies have repeatedly highlighted security
in the online wallet, only to visit the store later concerns as one of the biggest barriers to
to physically inspect the goods, and finally pay online/mobile payment adoption. Obviously,
from a mobile wallet! Another example could this has a huge bearing on the digital wallet
be that a customer buys movie tickets from especially because there are so many touch
his Facebook wallet and consequently avails points and a gap in any one of these could
discounts on in-store purchases made through a compromise its safety.
kiosk based-wallet. Needless to say, such a cross-
While customers agree that not having to enter
selling interaction requires tight integration
their credit card details for every transaction is
between touch points.
an important convenience offered by the wallet,
Again, different institutions can leverage the they will only embrace it if they are sure that
digital wallet in different ways. Someday not the credit card information, which is now
too far away, banks might offer a catchall ‘digital loaded on to the wallet, is fully protected by the
wallet’ account in lieu of a savings account, and provider. This means that providers must take
thereby eliminate the complexity of multiple adequate measures, such as setting up a layered
Thought Paper 03

4. security mechanism and making sure that they are to win market share. For instance,
sensitive data is not stored on the devices. banks could offer personal financial management
tools along with the wallet, which would
Regulation automatically access its data to draw up
Digital wallets, like all financial products, are budgets, expenditure patterns and so on and
likely to be regulated. However, the extent of save customers the inconvenience of trawling
control may differ from country to country. through multiple bank or credit card statements
For instance, M-Pesa does not need a banking to find out what they’ve spent. Banks could
license to operate, but in other countries, also tie up with the social security payment
wallet providers might need to procure one. In agencies to drop pension payments and other
some countries, collaboration between multiple subsidies directly into beneficiaries’ wallets.
stakeholders can be perceived as being anti- Merchants could add useful features, such as
competitive which may impede the launch of advance order booking of products, or the
digital wallet initiatives. ability to compare prices of competing brands.
Recently, the Canadian Bankers Association In fact, in Canada, a leading department store
has decided to replace debit cards with mobile recently announced the launch of a fully
wallets, and is preparing secure but open transactional mobile website and mobile apps
guidelines towards that goal. The extent of that enabled customers to make purchases using
openness (permitted in a wallet) is a very their smartphones; could such features become
significant consideration for an institution that regular add-ons in future digital wallets?
wishes to enter a new market. The digital wallet has the potential to be the
next big thing in payments. Indeed, experts
Value added content believe that it could handle transactions worth
The breadth and variety of a wallet service also tens of billion dollars as early as 2015. Banks,
determines the quality of user experience. A merchants, telecom companies and other service
payments-only offering is not likely to find favor providers must put a robust multi touch point
with customers. Providers must build additional strategy in place in readiness for when the
value on top of the basic payment offering, if opportunity opens up.
04 Thought Paper

5. References
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channel shopper is changing the global retail mobile-wallet-tech-save-retail-stores/22139
landscape, December 2011, PWC
11. Forget The Mobile Wallet, Just Take The
2. Fighting for Position: The Mobile Wallet Wars, Mobile Store With You, April 3rd 2012, http://
http://www.mercatoradvisorygroup.com/ www.techvibes.com/blog/forget-the-mobile-
index.php?doc=Emerging_Technologies& wallet-just-take -the -mobile -store -with-
action=view_item&id=643&catid=5 you-2012-04-03
3. Is Mobile Wallet Technology Secure, May 9th 12. Second Google Wallet Security Vulnerability
2012, http://www.idt911blog.com/2012/05/is- Confirmed, Affects All Users, February 9th 2012,
mobile-wallet-technology-secure/ http://www.theverge.com/2012/2/9/2787758/
second-google-wallet-security-vulnerability-
4. Consumer’s Use of Mobile Wallets Increasing,
confirmed-affects-all
May 8th 2012, http://www.screenmediadaily.
com/news-jiwire-location-based-mobile- 13. Banks and PayPal Are Winning the Trust Battle
audience-insight-report-mobile-shopping- for Consumer Digital Wallets
behavior-0014001861.shtml
14. April 17th 2012, www.gartner.com/id=1986418
5. `Mobile Wallets’ Will Soon Replace Credit Cards,
15. 2011 Mobile Payments Outlook – A
May 14th 2012, http://www.canada.com/Mob
Golden Opportunity for Cross-industry
ile+wallets+will+soon+replace+credit+car
Partnerships, http://www.kpmg.com/Global/
ds/6619809/story.html
en/IssuesAndInsights/ArticlesPublications/
6. Google Wallet Issues: Why Losing Your mobile -payments/Pages/2011-mobile -
Smartphone Could Mean Losing All Your payments-outlook.aspx
Money, February 11th 2012
16. Tablet Sales Expected to Quadruple by
7. technorati.com/technology/article/google- 2012, December 9th 2010, http://mashable.
wallet-issues-why-losing-your/#ixzz1vrxfT2Aa com/2010/12/09/tablet-sales-2012/
8. technorati.com/technology/article/google- 17. In Five years S-Commerce Will More Than
wallet-issues-why-losing-your/ Double, May 27th 2012, http://netbiznews.
galanter.net/2012/05/27/in-five-years-s-
9. Can Mobile Wallet Tech Save Retail Stores?,
commerce-will-more-than-double/
January 30th 2012
Shekhar Kapoor
Senior Consultant, Finacle Product Strategy, Infosys
Thought Paper 05

6. About Finacle
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