Banks relying on NFC alone for their mobile payments strategy will always invariably fail.
CIBC, one of Canada’s largest banks, has recently removed their mobile payments app from the app store.
They are one of the latest in a chain of banks who have (quietly or otherwise) withdrawn their own mobile payments apps in concession to the supposed dominance of ubiquitous competitors – the likes of Apple Pay and Samsung Pay.
The question people need to be asking is:
How did banks ever expect to compete long-term with tech giants, who are literally in the back pockets of a huge proportion of the population, with a product that essentially mirrors card functionality?
Banks need to understand that a partnership with the likes of Apple, Samsung, Google, Facebook, Amazon or anyone else in this calibre is all about the short-term. Soon enough, PSD2 regulations will mean these companies will gain access to your customers accounts, deal or no deal.
A much better strategy for banks, focused on maintaining longer term relevance, would involve developing a proprietary mobile payments scheme solving real problems for real people and their businesses.
In the Nordics, bank owned mobile schemes are flexible and can be used by everyone – not just the customer of the bank. Any kind of payment scenario can be funded by cards or direct from bank account, and you can do direct P2P, group payments, remote, pre-pay. Basically, transactions can occur in whichever way the customer (whether that be merchant or individual) finds most value in.
What we’re talking about is very different to near field communication (NFC) which is only a very basic replication of regular card payment. When in line at the grocery store, holding a card or a device in front of the terminal and being able to pay seems like magic.
But other than that – the ability to perhaps pay a little quicker – it doesn’t add any value to either the customer or the bank. It’s the same card (only digital) and the same rails (expensive card based transactions). It’s the same merchant, queue, cash registry and point of sale. You are bound to all the same things as you were prior to NFC.
Swipe, insert or tap… it makes no real difference in most scenarios. But being able to order from your phone, pre-pay, skip-the-queue, delivery and being able to interact with merchants for free from any given physical location is what has proven to be high in demand. Alipay in China does it, too – it’s not just a Scandinavian phenomenon.
Mobile payments done right enable commerce, simplicity, ease of use and desirable customer experiences.
So, as we see banks around the globe continuing to launch NFC wallets or scrap their efforts to focus on offering a third-party owned rudimentary payments functionality, we’re reminded that doing the same thing over and over again, but expecting different results, is a waste of… time, money and intelligence.
Banks: use this opportunity to innovate, problem solve and give your customers the power of flexible payments. Right now you have what some might call an unfair advantage (which is arguably what the likes of PSD2 is set to change) in trust, established relationships, financial knowledge, financial muscles and legislation in place.
So, if you don’t do something now, come January 2018, someone else will – and that someone is probably the tech giant you’re currently considering a partnership with.