Marina Repo, Co-Chair of Mobey Forum's Wallet Expert Group and Head of Commercial Management at Nordea Bank, discusses the resurgence of digital wallets on the strategic agendas of banks and payment industry players.
First, I would like to start with that the findings in the report are from work done with payments experts from more than 20 banks and financial companies. It is the view of Mobey Forum Wallet Expert Group and not any particular bank’s own view. In this report, I represent Mobey Forum. Having said that and set the scene the report explores the resurgence of digital wallets on the strategic agendas of banks and payment industry players. It attributes this renewed interest to emerging trends like Open Banking, Open Finance, CBDCs, and eID, which foster innovation and collaboration.
It discusses the evolution of digital wallet models, from traditional card payment wallets to account-centric models that offer services beyond payments. These new models directly access account-based rails, reducing reliance on physical and digital payment cards.
Digital wallets have diversified beyond payments to include functionalities like transit ticketing, eID, digital assets, P2P, and lifestyle services. Future focus will also be on merchant wallets.
The report envisions future scenarios for digital wallets, particularly focusing on eID-enabled asset-centric wallets. It suggests that banks, with their trust and governance, are well-positioned to safeguard various assets beyond monetary value.
Strategic recommendations for banks include prioritising digital wallet strategies, collaborating with fintechs, and exploring new areas of business-like custody services.
Lastly, the report emphasises Mobey Forum's role in facilitating dialogue and collaboration among industry players. It underscores the importance of staying ahead of industry developments to navigate the challenges and opportunities presented by the next generation of digital wallets.
The report shows that Banks view the expanding role of digital wallets beyond payments as an opportunity to enhance their offerings and remain relevant in the evolving digital finance landscape. Specifically, in areas like digital identity (eID) and digital assets, banks see potential avenues for innovation and value creation.
Digital Identity (eID): Banks recognise the significance of eID in facilitating secure and seamless digital interactions. eID wallets serve as secure containers for individuals' identity credentials, including driver's licenses, and other official documents. By leveraging eID, banks can streamline customer onboarding processes, enhance day-to-day interactions, and deepen relationships with clients. Furthermore, eID enables compliance with regulatory requirements and can serve as a foundation for Open Banking and Open Finance initiatives. While banks may play the role of ‘verifier’ in the eID ecosystem, they also contemplate the possibility of issuing eIDs themselves, thus strengthening their position in the digital identity space.
Regulated Digital Assets: Banks recognise the rising prominence of regulated digital assets, including tokenised securities, digital currencies and NFTs. There is a need for secure storage and management solutions for these assets, which digital asset wallets could provide. By offering custody services for digital assets, banks can attract customers seeking secure storage solutions.
In summary, the findings from the report suggest that banks perceive the expanding role of digital wallets beyond payments as a strategic imperative to adapt to evolving consumer preferences and technological change. They can find opportunities by leveraging digital wallets to enhance customer experiences, strengthen relationships, and potentially unlock new revenue streams in areas such as digital asset management.
Based on insights from the report, essential elements of a successful digital wallet strategy for banks include:
Adaptation to emerging trends: Banks must adapt to emerging trends in digital finance, such as Open Banking, Open Finance, and Embedded Finance. These trends signal a transformative shift in the financial ecosystem, and banks need to align their digital wallet strategies accordingly to remain competitive.
Collaboration and partnerships: Collaboration is key to success in the digital wallet space. Banks should collaborate with fintechs, industry consortia, and other stakeholders to drive innovation and deliver value-added services to customers.
Integration with regulatory frameworks: Compliance with regulatory frameworks, particularly regarding eID, CBDCs, and data privacy, is essential. Banks must ensure that their digital wallet strategies comply with relevant regulations while fostering an environment conducive to innovation and growth.
Strategic business cases: Banks should explore strategic business cases for digital wallets, such as offering custody services for digital assets.
Interoperability: Interoperability is crucial for digital wallets to seamlessly interact with other financial services and the broader digital economy. Banks should advocate for and adopt standards that promote interoperability, enhancing convenience and utility for consumers.
By incorporating these elements into their digital wallet strategies, banks can position themselves as leaders in digital finance, driving innovation, and delivering value to customers in the rapidly evolving financial landscape.
The growing interest in Central Bank Digital Currencies (CBDCs) provides a significant trend in the financial industry with profound implications.
The growing interest in CBDCs reflects a broader trend towards digitalisation and innovation in the financial industry. CBDCs have the potential to transform monetary policy, enhance financial inclusion, drive payments innovation, and reshape the traditional banking landscape. However, their successful implementation requires careful consideration of regulatory, technological, and economic factors to realize their full benefits while mitigating risks.
Hyperpersonalisation is when you as a customer would get a relevant offer from a merchant at a relevant time. We have seen coffee chains providing offers during morning rush hour when you walk past a coffee shop and the urge for coffee is highest and department stores offering relevant campaigns to selected target groups. Loyalty can be the differentiator to what wallet I as a consumer want to use.
The report should be seen as the first in a series of new Wallet reports from Mobey Forum. Account-to-Account (A2A) functionality is gaining traction among banks, merchants, and Payment Service Providers (PSPs) due to several key factors. The rise of instant payments directly from one account to another is a major driver. Future requests to pay solutions also boost the interest.
Cost Efficiency: A2A payments offer a cost-effective route for processing transactions, particularly for high-volume merchants.
Speed and Real-Time Settlement: A2A payments enable near-instant fund transfers between bank accounts, facilitating fast settlement for merchants and PSPs. This speed and efficiency improve cash flow management and reduce payment processing times, enhancing the overall customer experience.
Modern Approach to Infrastructure: A2A payments allow for a modern approach, leveraging Open Banking initiatives, APIs, and direct bank connections to facilitate seamless transactions in line with contemporary technological standards.
Overall, account to account today have in some cases usability restrictions compared to cards for example in the area of payment authentication. However, the growing popularity of A2A functionality could reflect a focus on digital payments innovation, driven by cost efficiency, speed, security, regulatory changes, and evolving customer preferences. But still, card payments are very trusted and a very well-functioning global payment method that the banks, merchants, PSPs, and customers also prefer and offer. We are not saying that the card transactions should or will be replaced by A2A transactions instead we are saying that a larger variation of payment methods will be offered. It is up to the customer to decide how they want to pay and for the bank to offer a variety of choices. Nobody knows what the future holds. We can only be certain that from a wallet’s perspective, it looks extremely interesting.
About Marina Repo
As an economist with two decades of experience in the financial industry, Marina Repo Co-Chair of Mobey Forums Wallet Expert Group and Head of Commercial Management at Nordea Bank, has focused on growing expertise within Corporate Banking, Cash Management, Mobile Wallets, Ecommerce, and Innovation. Spearheading interesting business development initiatives has always been the most interesting part of working in a bank and in the future, only the technology and imagination will set the limits to what will be possible. New customer-centric journeys are definitely ahead of us all in particular in the Wallet space.
About Mobey Forum
Established in 2000, Mobey Forum is the global, non-profit industry association empowering banks and other financial institutions to shape the future of digital financial services. The Wallet expert group that Marina Repo from Nordea is co-chairing with Kristian Sørensen from Nets/Nexi and Cedric Sieber from PostFinance is consisting of global banking experts who are on strike to publish several reports. Rising from the opportunity within Retail Payments.
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