• Cognizant Reports
Digital Payments Strategy for U.S. Retail Banks
The digital transformation of payments has put power in the hands
of the customer and allowed nimble-footed nonbank competitors
to create a potential threat to retail banks’ domination by providing mobile apps to carry out transactions. Banks will not only need
to provide strong payments offerings, but do so by embracing a
mobile-centric app and open API-based approach.
cognizant reports | september 2015
• Leverage
Executive Summary
Digitization is transforming banking products and
services that have remained unchanged for several decades. It can be argued that no other service has been impacted as much by this phenomenon as payments, a traditional stronghold for
retail banks. By empowering the consumer, digitization has allowed nonbank players to threaten
banks’ hegemony in the area.
Digital payments are a direct result of the digitization of almost all types of payments. They cover all
payments and transfers made through electronic
formats, including online payments, mobile payments and crypto-currencies through instruments
such as mobile wallets, digital wallets and contactless cards. These innovations are fairly recent and
consumer adoption levels in the U.S. are low as of
now but are expected to grow. A surge in nonbank
activity in the digital payments arena has meant
that the marketplace is currently characterized by
a fragmentation of solutions and platforms, with a
clear winner yet to emerge. Banks, however, seem
to have taken a wait-and-watch approach to digital
payments. This will need to change, as millennials
and gen-X-ers emerge as the leading adopters of
mobile payments; banks need to be prepared to
attract and retain this key demographic. To this
end, they need to adopt technologies and strategies that will allow them to maintain their relevance in the payments market.
At the heart of the digital revolution in payments
sits the smartphone. With its pricey real estate up
for grabs, nimble-footed nonbank players, unhindered by legacy systems, have been quick to seize
the opportunity. Along with successful disruptors
such as PayPal and Square, tech giants such as
Google, Apple and Facebook have made inroads
into the payments landscape and are looking to
push banks into the payments back office. Banks
need to catch up with the nonbank competitors.
However, they can build on the inherent strengths
of the banking system. These include extensive
infrastructure, deep customer relationships, multichannel capabilities and a strong focus on data
security and privacy. The go-forward strategies of
banks need to consider crucial strategic and technological aspects of the digital transformation:
• Make payments a key part of the larger digital
transformation initiative.
• Create
payment offerings based on an
open API infrastructure and a collaborative
approach.
cognizant reports
social, mobile, analytics and cloud
(aka SMAC Stack) capabilities.
• Focus
on understanding customer payment
behavior.
• Create a secure payments environment that
also protects consumer privacy.
• Embed Code Halo
TM
1
thinking to derive unique
customer insights from multiple channels and
differentiate offerings.
• Employ an agile approach to product development to enable fast and continuous evolution.
Digital: The Threat and Opportunity for U.S. Banks
Digital’s Impact on Payments
Smartphones have changed the banking habits of
Americans. This is especially true for the younger
demographics. The Federal Reserve found that 22%
of all mobile users made a mobile payment. Among
the age groups of 18-29 and 30-34, mobile payments
were made by 34% and 31% users, respectively, in
2
2014. These numbers are impressive, but mobilebased payments currently represent a minuscule
portion of the mammoth $16 trillion U.S. consumer
payments market. Nevertheless, contactless payments are the fastest growing mobile payment type,
set to grow at 56% annually between 2014 and
3
2019, according to Forrester. Mobile in-store payments are expected to grow at 154% CAGR between
4
2013 and 2018, reaching $189 billion.
Smartphone makers head the nonbank segment in the mobile payments landscape, led
by Google (Google Wallet) and Apple (Apple
Wallet). Given their size and reach, Apple and
Google have been able to recruit a large number of consumers in a very short time. The bustle of activity (see Figure 1) in the mobile wallet
space shows how serious these companies are
about digital payments.
Digital’s impact is pervasive across payment
types. In digital bank transfers, for example, digital technology is allowing start-ups to reduce the
5
time taken for check transfers. Meanwhile, U.S.
households are increasingly using e-bill payment
systems, which accounted for 23% of total bills
6
presented in 2014.
Social payments are the best example of how
digital has transformed payments. By allowing
people to transfer small amounts to each other
through their mobile phones, digital has revolu-
2
A Flurry of Activity in the Mobile Wallet Arena
Apple Pay Goes
Live
Google Acquires
SoftCard Technology
October ‘14
Enables
proximity
payments,
biometric
authentication,
network
tokenization
service, in-app
payments.
Samsung
Launches Samsung Pay
Google Launches PayPal Acquires
Android Pay
PayDiant
Apple Watch
Released with
ApplePay
MCX CurrentC
Wallet Rollout
February 23rd, ‘15 March 1st
March 2nd
March 2nd
April 24th
Upcoming
Enables secure
SIM-based NFC
payments over
and above HCE
for Google
Wallet.
API layer
enabling
developers to
build payments
into their apps.
Provider of
technologyagnostic, white
label wallet for
prominent banks
and retailers
including MCX,
BarclayCard,
etc.
Enablement of
proximity
payments on
wearables.
Bypass the
network rails.
Merchant
discounts and
offers for
customers.
Proximity
payments,
biometric
authentication,
backward
compatibility
and network
tokenization
service.
Figure 1
tionized peer-to-peer (P2P) payments. P2P payments have attracted large tech companies such
as Google and Facebook. In the U.S. alone, these
transactions are expected to reach $86 billion by
7
2018. Combined with crypto-currencies (see side
bar, page 8), P2P payments hold the potential to
transform this segment.
Another area that continues to attract nonbank players is cross-border digital remittances.
Increasingly strict global regulations and compliance requirements and banks’ lack of interest in
8
small-scale transfers have meant that banks have
charged higher fees than the competition. This has
allowed digital start-ups such as Ripple and Xoom,
with their innovative mobile and digital-based
approach and freedom from overhead from legacy
infrastructure, to cut processing cost and time
significantly. As a result, they have been growing
exponentially, at the cost of banks’ and financial
institutions’ market share. In 2014, U.S. consumers
used Xoom to make $6 billion worth of remittances
9
to 32 countries.
Digital Payments: Initial Hiccups
The digital payments market is fragmented, with
multiple types of platforms and solutions. This
is understandable given the nascent stage of
the market, but it has also made the adoption of
mobile payment at crucial touchpoints such as
a merchants’ points-of-sale slower, which in turn
affects consumer uptake. As of April 2015, 25%
of smartphone owners expressed a likelihood of
using mobile payments over the next 90 days, an
increase of merely 1% from December 2014 (but
a gain of 6% over year-ago numbers), according
10
to 451 Research.
Concern over data security has emerged as the
primary reason for the low uptake of mobile pay-
cognizant reports
ments. A survey by PunchTab found that 62% of
consumers consider security to be the top reason
11
for not using mobile payments. The recent incidents of data breaches at retailers, coupled with
12
fraudulent transactions on Apple Pay, have not
helped. There is also a lack of consumer education
with regard to mobile payments. The PunchTab
survey found that 67% of consumers were not
aware of whether their favorite retailers provided
a mobile payment
option. Banks and card
Concern over data
issuers have made
attempts to address security has emerged this issue. One such as the primary reason security feature was
for the low uptake of
introduced by OnDot,
a start-up that works mobile payments.
with card providers,
13
in 2014, through an app called CardControl. The
app gives card holders a variety of controls such
as assigning specific locations to allow transactions, controlling online transactions or turning
off transactions altogether. Widespread adoption
of such features will go a long way in assuaging
customers’ concerns.
Nonbanks Are Upping the Ante
The proliferation of smart devices, especially smartphones, is the foundation upon which nonbank competitors have built their offerings. Large volumes of
data, combined with advanced analytical capabilities, allow these players to generate helpful insights
and quickly enhance the user experience. The fact
that these competitors use existing banking infrastructure while working from outside the banking
system is also a major strength. Also, these players
tend to have a more personal relationship with their
customers. Take Starbucks for example.
3
Millennials and Gen-X Lead Mobile Payment Adoption
Use of mobile payments in the past 12 months by age
Percentages, except as noted
Age group
2011
2012
2013
2014
18-29
20
26
28
34
30-44
16
18
21
31
45-59
8
9
13
16
60+
5
8
7
7
Total
12
15
17
22
2,002
2,291
2,341
2,603
Number of respondents
Note: Percentages are of those in each group who have mobile phones.
Source: Consumers and Mobile Financial Services 2015, March 2015, Federal Reserve
Figure 2
Going by the latest numbers, 13 million of its
customers are using the company’s mobile app,
14
with 7 million mobile transactions per week. Its
recent pilot for mobile order and pay in Portland,
OR, was also a success and is expected to increase
its reach in mobile payments and customer loy15
alty. Starbucks’ success was a bolt from the blue
for industry observers; but it is due mainly to two
crucial factors: its technology infrastructure that
supports mobile payments and a loyal customer
base. Retail giant Walmart now offers inexpensive full service prepaid accounts from American
Express aimed at more than 70 million unbanked
16
and underbanked Americans.
Although mobile payments uptake is slow, customers have shown a positive attitude toward
nonbanks. A survey by Cisco found that, on average, 80% of respondents would trust a nonbank
for traditional banking products such as checking
17
accounts, credit cards and mortgages. A survey of
18
senior banking executives by Temenos found that
23% of respondents believe these data-driven and
agile competitors from outside the financial sector
are banks’ most significant competition. Yet, banks
have so far adopted a wait-and-watch approach
to nonbank competition. This may be due, in part,
to the fact that the digital payments ecosystem is
crowded at present and it is uncharted territory for
banks. However, such an approach does not bode
well as it increases the threat of disintermediation
and the possibility of nonbanks becoming the face
of consumers’ financial activities, while banks are
pushed to a less lucrative, back-office role.
Nonbanks do not face the handicaps of growing
regulations, legacy systems and processes, and a
multiplicity of systems and processes. As a result,
they are better placed to focus on improving customer experience on mobile devices and online. It is
cognizant reports
striking then that 53% of respondents in the Temenos survey said that an overhaul of IT systems was
unlikely at their organizations unless regulators
19
forced their hand. Nevertheless, some banks such
as JP Morgan have acknowledged the threat posed
by the digital disruptors and are looking at ways to
20
improve their services and offerings.
Why Digital Payments Matter and How Banks Can Stay Relevant
The fact that banks need to compete to hold on
to their payments revenue base is a given. However, digital will open up a host of possibilities if
banks are able to get it right. To begin with, the
ubiquity of a mobile device will increase the number of interactions customers have with banks,
allowing banks to understand their needs better.
By offering a bouquet of payment services such as
mobile, mobile wallets, P2P transfers, PoS mobile
card readers and international remittances, banks
stand to unlock new high-growth opportunities
through increased transactions, in the form of
fees charged. Creating tailored payment solutions
will also allow banks to reach out to the unbanked
and the underbanked, thus increasing their reach.
These could include mobile money transfer services – such as M-Pesa – which have been success21
ful in the developing world. Another example is
the American Express Bluebird GPR cards aimed
at the unbanked population, which have been sold
22
at Walmart since 2012. Simultaneously, banks
should look to understand their customers’ digital
behavior and extend value-added services to meet
specific needs across the banking value chain.
Start Competing
If banks are to win against nonbank players,
they need to create compelling and competitive digital payment offerings. The building
4
The Mobile Wallet Advantage
Cross-Sell/
Up-Sell
Mobile Key
Component
of Digital
Banking
Strategy
Access to New
and Richer Data Sets
Compete with
Digital
Disruptors
Mass
Personalization
Why a Bank
Mobile Wallet?
Offer True
Omnichannel
Experience
New Revenue
Streams
Realize True
360o View of Customer
Enable Data-Driven
Contextual Services
Win Over
the Millennials
Source: Cognizant
Figure 3
blocks of such an offering will have to be part
of banks’ broader digital-first strategy, with
a focus on creating an omnichannel banking
experience. For competing with nonbanks,
banks’ greatest strengths will be their customer relationships, focus on security and multichannel capabilities.
If banks are to win against
nonbank players, they need to
create compelling and competitive
digital payment offerings.
Demographic Factors
One key feature of the U.S. payments landscape
is the deep penetration of debit and credit
cards. The U.S. has more than 160 million card23
holders. This adds to retailers’ disinclination
to move to a new form of digital payment, and
in turn affects customer uptake. However, the
leading adopters of mobile payments are the
millennial and gen-X demographics (see Figure
2, previous page). Going forward, these will be
the customers shaping digital payments. Moreover, this demographic is also more digitally
inclined, craves personalization and is more
likely to be frustrated with their primary banks
24
than other age groups. Very soon, these
customers will form the largest share of
banks’ revenues.
cognizant reports
Focus on Creating a Delightful Customer Experience
The entry of the new competitors makes it imperative for banks to focus on creating a banking
experience built around their customers’ payment
behavior. To this end, banks need to eliminate process silos to create a unified view of every customer’s activities across channels. Banks need to
realize that their success in the battle for digital
payments will depend on their ability to match the
seamless, elegant and simplified user experience
offered by the likes of Google and Apple.
Build on Core Competencies
In a digitized payments landscape, banks will
have to adopt a start-up-like approach to understanding the customer, building compelling customer experiences and offering value-added
services. The key here is customer data, which
banks are uniquely placed to derive insights
from. They are in a position to offer personalization of experience, and contextual offers and
coupons. Banks could also generate new revenue streams by extending data services leveraging aggregated anonymized data and by building
new and innovative products through big data
analytics-enabled insights.
A comprehensive mobile wallet strategy will fit
neatly into a bank’s digitization strategy and provide substantial benefits (see Figure 3). Such a wal-
5
Domestic and International P2P Offering
Focus Area
Key Use Cases
Improve Ease of
Use
• In-app calculator to split the bill and add a tip.
• Pay phonebook contacts or social media contacts.
• Pay nearby recipients not in contact list.
• Initiate money transfer in social media.
• Request money from friends.
• Enable B2C payments through P2P platform (Example: Bank of America –
Digital Disbursements).
Embed Social
Experience
Security and
Control
• Personalized messages while sending or requesting payments (ability to
comment, send a thank-you note or a personalized e-mail).
• Buy e-gift vouchers and send to friends.
• Donate to charity.
• Secure access using biometrics.
• Limit-based security features.
• Security PIN/OTP for redeeming money.
Figure 4
let would need to be open, modular, flexible and
scalable to add card products from issuers and
merchants and adopt new payment methods. Banks
should also use in-house capabilities and partner
with external service providers to add new features
and value-added services. Apart from providing
their own mobile wallets, banks should also consider
actively participating in prominent e-wallets in the
market. This would ensure that they do not lose out
on a share of the digital payments traffic coming
through these wallets. More importantly, a mobile
wallet allows banks to embed more digital touchpoints in the mobile commerce experience, which in
turn will create opportunities for:
• New data sources.
• Better understanding of the customer, leading
to better servicing and selling capabilities.
Money and clearXchange for enabling seamless
domestic fund transfers. U.S. Bank’s partnership
26
with Western Union is an example of how banks
can tackle the regulatory maze of international
payments. The service is available to customers
who meet the eligibility criteria set by the bank
and allows money transfers to over 200 countries.
Figure 5 (next page) gives a view of what banks can
gain by providing international P2P transfers.
The key considerations for banks can be summed
up as follows:
• Although at a nascent stage, the digital pay-
ments market is growing fast. The time is right
for banks to start considering strategic options
to tackle nonbank competitors.
• In the face of growing nonbank competition,
banks must strengthen relationships with the
younger generations.
•
• New services.
• New revenue streams
• For a quality digital payments offering, banks
Similarly, a simplified, cost-effective and fast
domestic (see Figure 4) and international P2P
offering will allow banks to gain a greater share of
digital payments. A strong P2P offering will allow
banks to reach out to a large base of domestic and
immigrant populations looking to transfer money
25
to their friends and families overseas. So far, very
few U.S. banks have been willing to use mobile as
a channel in transfers. For domestic P2P transfers,
banks could leverage P2P networks such as Pop-
• Banks should leverage social media capabili-
Richer customer experience.
cognizant reports
should enable big data analytics capabilities by
leveraging existing data sets, tapping into new
data sets enabled by mobile and the Internet
of Things, and purchasing external third-party
data to deliver contextual and real-time customer experiences.
ties into the payment ecosystem to develop
new payment products; and then tap into the
treasure trove of information offered by social
media platforms to enhance payment experiences and promote and market these products.
6
International P2P Transfers: Opportunities For Banks
Opportunity
Benefits
Partner with a P2P
Currency Exchange
Platform
• Banks will get access to the currency matching platform. Banks can expose
these platform services on their digital channels.
• Banks can offer P2P international transfers for a lower fee.
• Building the sophisticated, fully automated matching platforms in house will
take considerable time, diverting the focus from the core digital agenda.
Partner with a P2P
Money Transfer
Company
Improve Mobile
Experience
• Banks can build a referral-based partnership for low-value transfers.
• Attract transfers to unbanked
• Attract transfers to unbanked
recipients.
recipients.
• Reduce transfer cost.
• Expand distribution network.
• Help customers transfer their funds
abroad on the go.
• Meet customer expectations to
• Reduce transfer cost.
• Expand distribution network.
• U.S. Bank and Barclays enable
international transfer from all digital
channels including mobile app.
engage via mobile, a necessity in the
digital era.
Figure 5
• The
approach to digital payments should
not be only about building a new front end
for service delivery. Instead, it should also
entail end-to-end digitization of processes and
systems to improve cost efficiencies, reduce
processing times, streamline business processes and enhance fraud and risk management capabilities.
• The digital payments offering, for which the
digital wallet forms the core, should handle the
bank’s own cards, partner banks’ cards, loyalty
cards and other closed-loop card offerings.
• A
successful digital payment strategy would
require that coupons, offers, loyalty and
rewards capabilities are integrated throughout
the payment and shopping experience across
all touch points and channels.
• Mobile payments should be part of the larger
effort of digitizing banks’ operations.
• Banks
should provide interoperability and
seamless omnichannel experience across digital channels whether the customer is shopping
from a desktop, mobile or in store. This calls for
the transformation of current organizational
and operational frameworks and the enhancement of the payments infrastructure.
• An ideal digital wallet offering would include
payment cards, coupons, loyalty cards, etc.
offering a unified mobile payments channel/
product across business lines.
cognizant reports
Technology Imperatives
Mobile-Centric Open API Infrastructure
The age of connected devices has created a multitude of new digital touchpoints for enterprises
and customers – from Internet TVs to connected
cars. Understanding customer behavior in such
a scenario requires banks to work on a platform
that is not restricted to just two or three channels. This is important in order to gain deep
insights into customer behavior at each touchpoint. We believe the future of digital banking
will be a marketplace enabled by open APIs, with
services delivered via apps. This means banks’
core banking capabilities, such as bank accounts,
payment processing, card processing, etc., will
be exposed through an open API framework, and
the APIs will be used by banks and third-party
entities to create apps that deliver services to
the customers.
An open platform allows banks to pursue a collaborative approach with third-party developers and
merchants, which makes it scalable and acceptable
to partners. Such an approach helps banks stay
nimble, enabling them to rapidly innovate as well
as catch up with new innovations happening in the
marketplace. The insights gathered from digital
touchpoints will allow banks to sell new products/
services tailored for these touchpoints, and as a
result generate new revenue streams. The open
API approach makes it possible for developers to
integrate payment products across the multitude
of touchpoints and hence establish the bank’s
credibility as an innovator willing to partner with
7
Crypto-Currencies
Despite the mostly negative coverage they
have received in the past few years, cryptocurrencies are among the top disruptions in
the payments landscape – and they are gaining
popularity. A survey by Ponemon Institute
and HP found that 79% of U.S. consumers
planned to support digital currencies such
27
as Bitcoin in the future. Moreover, 80% of
the respondents expect digital currencies
to overtake paper currencies in the future.
There are more than 580 different cryptocurrencies on the market right now vying for
28
the top spot, with Bitcoin leading the pack.
A few prominent banks have taken an
interest in Bitcoin’s distributed ledger-based
approach known as BlockChain technology
for generating efficiencies and security
29
improvements in payments. Crypto-currencies hold the potential to transform payments,
especially when combined with mobile P2P
payments. The Bank of England observed
30
as much in its recently published analysis.
Given this untapped potential of cryptocurrencies, U.S. banks will do well to make
provisions for supporting these currencies in
developers among millennials and gen-X customers used to the experience offered by Google and
Apple.
In an open ecosystem, it will be up to the customer
to choose the servicing apps of the bank or a thirdparty provider. The open nature of the ecosystem
means banks will have to compete harder to retain
customers, but it also gives them the best chance
to fight the constantly innovating digital disruptors. Banks will be able to launch their own app
stores, driving traffic away from the Google and
Apple platforms. Early successful adopters of open
APIs include Visa, MasterCard, PayPal, Dwolla and
the payments gateway, Braintree. Some banks
have gone a step further. For example, in 2014
Spain’s Banco Sabadell invited developers to a
“hackathon” to create apps for managing personal
31
finances and initiating payments.
Enable Code Halo Thinking
The growing number of digital touchpoints, combined with advanced analytics, allows banks to
create unique profiles of their individual and institutional customers based on their Code Halos. As
customers become more socially connected, the
cognizant reports
their future digital payments offerings. They
are also in a position to provide value-added
services in the crypto-currency ecosystem.
Current Trends in Crypto-Currencies
• Slow but steady progress in adoption.
• Prone to price volatility.
• Regulatory uncertainty as regulators
continue to debate.
• Alternative applications being researched.
Risks and Challenges
• Consumer adoption: Price stability, trust
in service providers and a compelling
value proposition will be the keys for
boosting adoption.
• Regulations: There is a need for a univer-
sally defined regulatory framework and to
address concerns over money laundering
and customer protection.
• Technological innovation: Information
system risks are currently very high;
transactions cannot be reversed; and the
current technology architecture is prone
to phishing and malware attacks.
need for a Code Halo approach becomes more
important. The proliferation of wearable technologies such as smartwatches, glasses and health
tracking devices will allow banks greater insights
into their customers’ lives than ever before. At
present, running algorithms on customer payment data is allowing banks to identify patterns of
32
spend behavior. CapitalOne uses algorithms on
customer card transactions to determine where
else customers of a given retailer are most likely to
33
spend money. Similarly, American Express uses
data from 90 million cards in over 125 countries
to gauge the spending behavior of consumers and
businesses and track developing trends. Going forward, Code Halos will allow banks to track evolving customer habits and preferences. These will in
turn enable banks to offer personalized products
and services based on channel usage and payment
behavior. Importantly, this will allow banks to compete on code and differentiate their offerings from
the digital disruptors.
Focus on Tokenization, Security and Privacy
To address the security concerns related to digital payments, it is imperative that the two primary
members of the ecosystem, merchants and con-
8
sumers, feel secure in accepting and making digital
payments. From a merchant’s perspective, tokenization and encryption of the payment information
has helped mitigate breaches while the payment
information is at rest and also while it is in transit
to the payment processors. While tokenization and
encryption is considered a niche add-on feature,
we believe very soon it will be commoditized and
become the norm. For consumers, a multifactor
authentication mechanism could be the one thing
that expands the size of the digital payments pie.
The authentication product from Encap Security is
a solution that seems to have found the sweet spot
between security and user experience.
Focus on User Experience Design
One of the key differentiators for digital disruptors
is the user experience that they provide across
touchpoints. Achieving an engaging, personalized
and contextual digital user experience requires
banks to approach design from an end-to-end –
people, process and technology – perspective. To
this end, banks will have to reimagine how they
interact with customers, using the possibilities
generated by next-generation digital technologies and the associated business practices. Importantly, the digital experience should be designed
to seamlessly engage the customer across banking channels without any kind of rework or loss of
information. A poorly designed authentication system with a bad user experience, for example, could
boomerang.
• Employ an agile approach to product develop-
ment that allows for quicker market feedback
and continuous evolution.
• Design the mobile wallet strategy considering
millennials and gen-X-ers as primary target
customers.
• Embed touchpoints throughout the payment
experience to increase customer engagement
and create monetization opportunities.
• Create well-defined authentication capabilities
and risk-management strategies.
• Privacy
of information – in the apps, in the
cloud and with partners – should be accounted
for throughout the product lifecycle and the
partner selection process.
• Develop a clear tokenization strategy keeping
in mind its future implications and potential
future use cases.
• User
experience design should be simple,
intuitive, clutter-free, frictionless and uniform
across channels.
• Build big data analytics capabilities that leverage structured and unstructured data to generate useful insights and enhance risk management.
• Enable
mass personalization and rich data
visualizations leveraging analytics capabilities.
Looking Forward: Recommendations
• Adopt
an open-platform approach to digital
payments that allows for easy integration with
service providers, banks and merchants and
makes the platform(s) scalable and acceptable
to partners.
• Future-proof
• For
a mobile wallet, build an effective and
contextual coupons, offers, and loyalty and
rewards strategy to increase customer engagement and market share.
• Develop
a social media roadmap to engage
customers, provide new value-added services
and enable payment touchpoints in the social
media platforms.
the platform(s) by designing
them to be flexible, scalable and modular to
adapt to a continuously changing landscape.
• Pursue a collaborative approach as more part-
ners mean more value-added services, broader
market acceptance and a deeper set of features.
cognizant reports
9
• Quick Take
A Framework for Prioritizing Mobile Wallet Features
Base Features are the hygiene features that every wallet will have and do not require significant sophistication.
Quick wins are the features that typically most wallets will have as they have high business value and
require low platform sophistication.
Differentiators are the features offered by market leaders, which require mature and sophisticated processes, technology and infrastructure capabilities. The greater the number of differentiators, the better
the product value proposition.
Money pits or future winners are the features that require high platform sophistication and do not
offer immediate significant business value. Market leaders will look at features in this quadrant and try
to come up with ways to offer them so that their business value is unlocked and thus transition them to
the differentiator quadrant. Such transitional features could establish market leaders as true innovators
and grant them significant competitive advantage.
Money Pits or Future Winners
Ticketing
Wearables
Sophistication & Maturity
Video Chats
Differentiators
Real-Time
Rewards
Redemption
3rd Party
Expense
Reporting
Card-less Cash
Budgeting
Tools
Warranty
Tracking
Dispute
Transaction
Bill Payment
(Basic)
Account
Servicing
Alerts &
Notifications
Social
Integration
Mass
Geo-fencing
Personalization
Contextual
Data
Offers
Visualizations
Add Loyalty
Receipt
RDC Bill Pay
Cards
Social
Capture
Payments
Add Other
Biometrics
Branded Cards
Tokenization
Out of Band
NFC
Auth.
M-Coupon
Redemption
Pattern Based Card
Auth.
Controls
Rewards
Management
Transaction
History
QR Code
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Footnotes
1
For more on Code Halos, read “Code Rules: A Playbook for Managing at the Crossroads,” Cognizant
Technology Solutions, June 2013, http://www.cognizant.com/Futureofwork/Documents/code-rules.pdf,
and the book, Code Halos: How the Digital Lives of People, Things, and Organizations Are Changing the
Rules of Business, by Malcolm Frank, Paul Roehrig and Ben Pring, published by John Wiley & Sons, April
2014, http://www.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.
2
Consumers and Mobile Financial Services 2015, March 2015, Federal Reserve, http://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201503.pdf
3
“Mobile payments to tally just 1% of all U.S. consumer spending in 2019,” Computerworld, November
2014, http://www.computerworld.com/article/2848836/mobile-payments-to-tally-just-1-of-all-us-consumer-spending-in-2019.html.
4
“When Will POS Mobile Payments Go Mainstream?,” FinancialBrand, October 2014, http://thefinancialbrand.com/42760/mobile-payments-report-pos-trends/.
cognizant reports
10
5
“Coaxing U.S. Banking and Payments Into the 21st Century,” TechCrunch, February 2015, http://techcrunch.com/2015/02/25/coaxing-us-banking-and-payments-into-the-21st-century/.
6
“It’s Time To Accelerate e-Bill Adoption,” FinancialBrand, March 2015, http://thefinancialbrand.
com/50604/ebilling-billpay-banking-opportunity-research/.
7
“THE PEER-TO-PEER PAYMENTS REPORT: The exploding market for smartphone apps that transfer
money,” Business Insider, May 2015, http://www.businessinsider.com/growth-in-peer-to-peer-paymentapps-report-2015-4#ixzz3bQlikF2p.
8
“Over the sea and far away,” Economist, March 2012, http://www.economist.com/node/21554740.
9
“Why 2015 Will Be the Year of Remittances,” BankInnovation.net, March 2015, http://bankinnovation.
net/2015/03/why-2015-will-be-the-year-of-remittances/.
10
“ Apple Pay Outperforming PayPal in Mobile Payments, According to New 451 Research Survey,” PRWeb.
com, April 2015, http://www.prweb.com/releases/2015/04/prweb12667796.htm.
11
obile Payments: Consumer Insights & Recommendations, PunchTab Consumer Research Series, OctoM
ber 2014, http://engagement.punchtab.com/mobile_payments_consumer_insights_whitepaper.
12
“Retail security breaches come back to haunt Apple Pay,” VatorNews, March 2015, http://vator.tv/n/3c70.
13
“Ondot Launches Remote Control for Credit Cards,” Mashable, April 2014, http://mashable.
com/2014/04/24/ondot-cardcontrol-app/.
14
“ Starbucks’ Mobile Payments Jolt,” PYMNTS.com, January 2015, http://www.pymnts.com/indepth/2015/starbucks-mobile-payments-jolt/.
15
Ibid.
16
“ American Express Expands Its Serve Prepaid Card to Walmart,” Forbes, March 2014, http://www.forbes.
com/sites/tomgroenfeldt/2014/04/21/american-express-expands-its-serve-debit-card-to-walmart/.
17
The Advice Advantage – How Banks Can Close the ‘Value Gap’ and Regain Customer Trust,” Cisco,
February 2015, https://origin-www.cisco.com/c/dam/en/us/solutions/collateral/executive-perspectives/
ioe-financial-services-white-paper.pdf.
18
“ Banks see Amazon, Apple and Google as growing threat, report claims,” ComputerworldUK, October
2014, http://www.computerworlduk.com/news/it-vendors/banks-see-amazon-apple-google-as-majorthreat-3580074/.
19
Ibid.
“ The CEO of America’s biggest bank is worried about Silicon Valley and Bitcoin stealing his business,”
Mashable, April 2015, http://mashable.com/2015/04/10/jp-morgan-ceo-letter/.
20
21
-Pesa helps world’s poorest go to the bank using mobile phones, Christian Science Monitor, January
M
2014, http://www.csmonitor.com/World/Making-a-difference/Change-Agent/2014/0106/M-Pesa-helpsworld-s-poorest-go-to-the-bank-using-mobile-phones.
22
“ American Express Expands Its Serve Prepaid Card to Walmart,” Forbes, March 2014, http://www.forbes.
com/sites/tomgroenfeldt/2014/04/21/american-express-expands-its-serve-debit-card-to-walmart/.
“ U.S. Expected To Lag China In Digital Payments Growth As Plastic Stays Popular,” Forbes, September 2014, http://www.forbes.com/sites/russellflannery/2014/09/24/u-s-expected-to-lag-china-indigital-payments-growth-as-plastic-stays-popular/.
23
24
eimagining the Digital Bank – How U.S. Banks Can Transform Customer Interactions To Increase ProfR
itability,” Cisco, 2014, http://www.cisco.com/c/dam/en/us/solutions/collateral/executive-perspectives/
Internet-of-Everything-executive-summary.pdf.
“ Marketplace Lending: A Maturing Market Means New Partner Models, Business Opportunities,” Cognizant Reports, http://www.cognizant.com/InsightsWhitepapers/Marketplace-Lending-A-Maturing-Market-Means-New-Partner-Models-Business-Opportunities-codex989.pdf.
25
cognizant reports
11
“ U.S. Bank integrates with Western Union to simplify mobile money transfers,” Mobilecommercedaily,
September 2013, http://www.mobilecommercedaily.com/u-s-bank-integrates-with-western-union-tosimplify-mobile-money-transfers.
26
27
“ Security & Compliance Trends in Innovative Electronic Payments,” Ponemon Institute, October 2014,
http://www.nfcidea.pl/wp-content/uploads/2014/12/hp-ponemon-payments-white-paper.pdf.
“ Crypto-Currency Market Capitalizations,” coinmarketcap.com, http://coinmarketcap.com/all/views/
all/.
28
“ Why Banks Are Testing Bitcoin’s Blockchain (Without Bitcoin),” June 2015, http://www.americanbanker.
com/news/bank-technology/why-banks-are-testing-bitcoins-blockchain-without-bitcoin-1074622-1.html.
29
“Bitcoin revolution could be the next internet, says Bank of England,” Telegraph UK, February 2015,
http://www.telegraph.co.uk/finance/currency/11434904/Bitcoin-revolution-could-be-the-next-internetsays-Bank-of-England.html.
30
31
“ Banco Sabadell’s Hackathon Asks Developers to Imagine the Future of Digital Banking,” ProgrammableWeb.com, September 2014, http://www.programmableweb.com/news/banco-sabadells-hackathon-asks-developers-to-imagine-future-digital-banking/2014/09/11.
32
“ 10 Payments Companies Competing in Analytics,” letstalkpayments, January 2014, http://letstalkpayments.com/10-payments-companies-competing-analytics/.
33
Ibid.
Author and Analyst Author and Analyst
Akhil Tandulwadikar, Senior Researcher, Cognizant Research Center
Subject Matter Experts
Ratish Gopal, Manager – Consulting, Banking & Financial Services Projects, Cognizant Technology Services
Anang Mankad, Manager – Consulting, Banking & Financial Services Projects, Cognizant Technology Service
Design
Mary McBride
About Cognizant
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