Banks are in an ideal position to develop a mobile wallet that could survive in a market that is otherwise "a hodgepodge of various wallets looking to stake a claim in banks' traditional payments industry stronghold," according to a new mobile wallet report from Mercator Advisory Group.
However, many banks are not yet seizing this opportunity.
"Very few banks are being progressive with development of mobile wallets, but they will be, or should be eventually," says Jeffrey Green, director of emerging technologies advisory services for Boston-based Mercator.
Many mobile wallets available today will fade out due to lack of support from merchants or consumers, he says. When that happens, banks need to be established with their own wallets.
The current number of mobile wallets, and the different technologies behind them, is "too much for the industry and the consumers," Green says. "Eventually, it will all settle in and the focus will be on one or two key payment methods."
For the time being, many mobile wallets are built around displaying QR codes at the point of sale, the report states. But as the U.S. migrates to the EMV-chip card standard and upgrades terminals to accept Near Field Communication payments, the technology pendulum could swing away from QR codes, Green says.
QR codes could nevertheless persist as merchants resist the expensive tech upgrades needed to support EMV and NFC payments, the report says.
Though many mobile-wallet providers are putting their own brand first, it is "highly likely that there will emerge some wallets that have successfully partnered with leading issuers to maximize brand recognition or volume," the report states.
While the market factors play out, banks must offer mobile wallets that support all of the functions that consumers and merchants want, the report says.
Financial institutions are not alone in feeling competitive pressures in the mobile-wallet landscape because the card networks are also under fire, the report says.
Visa and MasterCard have developed digital wallets, but they use different strategies. Visa is stressing control of its brand and touting the security of its network with its V.me digital wallet, while MasterCard has taken a more lenient approach in being open to various technologies and co-brands with its MasterPass wallet, Green says.
Ultimately, the banks have garnered the most trust from customers, but also have the most to lose as the mobile wallet landscape evolves, Green says.