Since the release of the first iPhone in 2007, smartphones and other mobile devices have been rapidly replacing other common things consumers use—like landline phones, cameras, computers, calculators, music players and, increasingly, brick-and-mortar retail.
We’ve recently reached a point where mobile is increasingly changing the customer experience. We’ll look at the various ways your mobile device is replacing your wallet and also discuss why it’s more important than ever for businesses looking to leverage the mobile channel to invest in best-in-class authentication to secure the mobile device.
The most obvious thing in your wallet that the mobile device is poised to replace is your credit card. While the ability to shop and pay for goods with your smartphone or tablet has been a staple of modern consumerism for years now, mobile wallet adoption is just at its early stages.
Mobile wallet transactions currently make up about $300 billion of payments in the U.S., according to McKinsey & Company, but they are projected to reach $1.2 trillion by 2020―or up to 20 percent of all retail spending in the U.S.—not including other types of mobile payments, like in-app purchases—or those made within a mobile app.
The ability for consumers to load their payment details onto the mobile device to pay for goods and services over the air is a game-changer for improving the customer experience. So-called “xPay” providers, banks and other businesses are scrambling to add their own branded mobile wallet capabilities to strengthen relationships. And while mobile wallets open up new opportunities for engagement, they also open up new opportunities for fraudsters.
As a natural extension of the mobile wallet, a number of the megabanks are offering or piloting cardless ATMs. Cardless ATMs allow consumers to withdraw money from accounts using a mobile device rather than an ATM card.
How banks are rolling out cardless ATM technology varies. One method involves a customer loading debit card details into an existing xPay mobile wallet and then using near-field communication tap-and-pay technology at the ATM in conjunction with a PIN. Another involves providing a customer with a one-time code via the mobile banking app, which the customer then enters into the ATM along with their card’s PIN. Some banks allow a one-time code to be sent to friends and family to withdraw cash.
Financial institutions view cardless ATMs as a way to improve the customer experience by eliminating the need to carry and replace cards, which can be easily lost or stolen, as well as potentially mitigating fraud through the use of strong device ID and authentication measures, along with security best practices.
Cardless ATMs are very much in their infancy and financial institutions will need to proceed cautiously and remain nimble in order to close security gaps that fraudsters are actively seeking to exploit.
In one early instance, a bank customer was defrauded as a result of cybercriminals gaining access to her mobile banking login credentials, which they then used to register a new mobile device for cordless ATM access.
A number of operational policies and procedures, along with multi-factor authentication and device intelligence could have potentially averted such a breach. This incident and others like them underscore how rapidly fraudsters jump in to abuse emerging technology to defraud consumers and businesses.
Always looking for new ways to ease operational costs and boost profit margins, airlines have been leveraging mobile apps for everything from flight booking, to seat selection, to managing upgrades, to check-in and boarding, for years.
On the horizon will be the ability to combine the check-in and identification functions needed to pass through airport security. The increasing ubiquity of biometrics technology involving both fingerprints and facial recognition embedded on the mobile device will facilitate its full transition to one-device-for-everything in your pocket.
The ability for agents to view, record and confirm travelers’ identities digitally offers heightened levels security over today’s manual methods for verifying that a traveler’s ID matches their boarding pass, which is subject to human error.
As the battle for consumer mind, and wallet, share continues to play out, retailers remain on the lookout for new ways to engage customers in order to increase stickiness.
Many are following leading retailers like Starbucks by offering mobile-only exclusives, like the ability to order ahead, as well as automatic, in-app rewards tracking and redemption.
And, for retailers that don’t offer mobile rewards program management, third-party apps are available that offer consumers a single, virtual place in which to store and use all their rewards and loyalty cards, thereby freeing up wallet space.
As retailers and banks alike leverage their own branded mobile wallet offerings to retain ownership of the customer experience, the industry will experience an influx of players, along with increased opportunities for disintermediation from other mobile wallet providers. For businesses to stay in the game, they will have to incorporate creative value-added features to keep consumers engaged. Mobile rewards management and redemption, along with mobile-only exclusive offers and features, are a couple of ways in which businesses can keep customers engaged and loyal.
Hotels are also rolling out ways to leverage mobile access, while at the same time creating value for loyalty program members.
Many hotels are using apps to allow guests to do a variety of things right from their device, such as checking in, selecting their preferred room, even choosing the floor they want.
Once the room selection has been made and the customer arrives at the hotel, they either approach an express lane at the front desk to acquire their key, or increasingly, may use their digital device as a smart room key. Other services hotels are leveraging through their branded app including ordering room services, setting up dinner and spa appointments, and interacting with the concierge’s desk. In some cases, biometric authentication has also been incorporated in order to authenticate the guest with the device.
These are just a few ways in which businesses are seeking ways to engage consumers via their mobile devices. No doubt the march toward making the mobile device the only thing we carry will continue to gain speed exponentially, but in every case, instituting ironclad device security and authentication will be the key to successful implementation. Conversely, failure to properly secure devices and transactions could spell disastrous results for consumer trust and adoption.
With digital device security in place, “mobilized” businesses of all types can perform device recognition and advanced fraud detection in real time to more accurately associate customers to devices, distinguishing trusted purchasers from potential fraudsters. This real-time risk assessment allows businesses to make more confident transaction decisions, and this security is most often invisible to the customer.
Implementing best-in-class digital security empowers businesses to balance the job of continuously combating suspicious transactions in order to head off fraud, while continuing to provide a frictionless experience for their trusted customers, using their preferred device.