PHOENIX – Rather than simply support Apple Pay, banks need to go a step further to develop their own mobile wallets that interact with merchants for rewards and offers.

Apple Pay could be a payment option in a bank-branded mobile wallet or, at the least, the engine that drives consumer interest in mobile payments, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.

"This is a race for consumer enrollment, and financial institutions and merchants have a stake in it," Crone said during a presentation Oct. 21 about the roles banks and merchants play in mobile wallet development at SourceMedia's PayThink conference.

Apple Pay presents a confusing proposition to banks. It could be the long-awaited catalyst for mobile payments at the point of sale, and was developed with a bank-friendly model. But there is a cost to participate, and a bank's decision to join Apple Pay doesn't guarantee that its card will be the default payment option for every purchase.

"We don't know the costs completely on Apple Pay yet, though it could end up we will have to support it, but lose money on the marketing end," said Tom Ormseth, senior vice president of retail strategy for Chicago-based Wintrust Financial.

Wintrust Financial finds itself trying to determine whether to simply support Apple Pay for its customers, develop its own wallet or continue to promote other payments technologies, Ormseth said.

The bank most recently rolled out cardless cash access at the ATM with a mobile phone using QR codes, Ormseth said. "We can present the offers of merchants through the ATMs, and that's where we are heading. The data on the customer is the most important."

BBVA's approach to Apple Pay is based on a strategy it developed for Android phones in Spain. Its app provides notifications and account management features meant to set the bank's cards apart from other Apple Pay-compatible accounts, BBVA said in a separate presentation at PayThink.

It is now even more important for banks to spend less time and money on card-based products and begin focusing on a whole new business model of customer relationship management, Crone said.

"You need a branded app for the bank, as well as for letting new entrants like Apple or PayPal to be part of that app," Crone said. "Both the banks and the merchants should prefer a wallet from the bank."

The customer relationship management model is a significant challenge for banks, Crone said. "It is not easy and it is a lot of work, but the banks and merchants have to come together on it."

Marty Boyer, director of marketing for Cincinnati-based Tom + Chee restaurants, said his small franchise is looking to new payment methods as a way to keep relevant his company's culture of "loyalty beyond reason."

Boyer is known for obtaining an investor on TV's "Shark Tank." His restaurants operate under a point of sale strategy that stresses cloud-based security, an open application interface and real-time reporting of customer data, Boyer said.

A high percentage of the restaurant's customers will be Apple Pay users, Boyer said. "It represents a big opportunity for us."

Boyer's restaurant chain would be a perfect candidate for a bank seeking partners in a mobile wallet project because Boyer understands the need for modern payment technology, Crone said.

After several retail data breaches, banks are probably in an even better position to offer merchants a spot in a bank mobile wallet, Ormseth said. "Banks are the more trusted source for consumers and we can tell merchants that we can protect the data here," he added.

Mostly, banks and merchants can no longer wait to see how the mobile wallet competition shakes out in the marketplace, Crone said. Many third-party disruptors want a place in the race for consumer enrollment and they are not likely to wait for banks to make their moves, he added.

"Get a mobile wallet now and ride Apple Pay's tide of deals and consumer appeal," Crone said.

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