Are banks adopting wallets and contactless the right way

NFC contactless and m-wallets have a significant role to play in the future of mobile financial services and mobile commerce. As much as we know this for a fact, banks have been sceptical in their minds and slow in their approach to embrace contactless payments while being much slower on wallets. The million dollar question is whether they are doing enough and doing it right to augment the rate of adoption and sell the value of wallets.

Most arguments around adoption and acceptance issues centre on immaturity of the partner ecosystem and their infrastructure, the most common one being the lack of readiness of retailers with contactless POS reader terminals. With most of the popular devices also being used for enterprise businesses, whether this is a difficult thing to achieve is a different point of discussion. To be fair to banks, a good number of them have either already launched or are currently piloting their wallets and NFC payments. Most of them have banked on the reach and network of retailers to see success. However, a lot many of them seem to market their wallets using NFC payments and this does not appear to be the best value sale for wallets.

Of late I have been using the wallet being piloted by one of the leading banks in Netherlands in partnership with a local retailer, large enough in this country to trigger a viral adoption. NFC stickers are sold free at the retailer which is advised to be attached to the phone. A pre-paid wallet can be downloaded into your device and loaded with money from your bank account through iDeals, the most ubiquitous payments gateway used by the Dutch on e-commerce portals. A self service POS terminal with a bar code reader and an NFC reader complete a DIY purchase and payment. Fast and good but was it good enough.

There are some broad-as-daylight issues here. For starters, there is no perceivable connection between the contactless payment and the wallet – surely no pre-purchase connection or any perceived post-purchase connection. The only connection is the obvious transaction statement view in the wallet which is shown only on login into the wallet. The NFC sticker works with or without the phone. Stick it on a piece of wood and it still works as good and therefore is no different from a contactless payment card. The wallet itself has nothing more to offer than a transaction statement like a bank account. Neither was any offers notified to me nor was a post transaction alert given to me with a balance or a statement. All in all, a bad advertisement for both contactless and the wallet. The payment experience itself is no better than what my chip card offers – it is pre-loaded with money and does not require a pin either.

The retailer has a brilliant mobile app on the store (discount deals, geo-location features, shopping cart and the likes) which could have been leveraged in this case and integrated with the wallet itself. One can only hope that such value adds are on its way since most banks are in a pilot stage with wallets. Understandably most banks are testing the infrastructure behind the new payment method through such pilots but in the process are probably not helping the cause for adoption.

The truth is that mass adoption of wallets and contactless payments through retailers will take off only when they are complemented with each other. Until then why should I throw away my contactless card yet.