Go Time for Mobile Wallets?

Go Time for Mobile Wallets?

Introduction Despite a clear desire for the ability to make payments without carrying a conventional wallet, for half of all consumers the concept of a mobile wallet remains a mystery. What is the current and projected status of mobile wallet adoption? What features matter most to credit union members who already are aware of the potential of this technology? And how can Sprig by CO-OP help you meet these expectations and position your credit union for a market that s evolving as it s growing. These pages will provide a concise overview of the state of the mobile wallet, and an introduction to the ways in which Sprig by CO-OP can engage your members with the capabilities they desire. Go Time for Mobile Wallets? 2

Contents Mobile Insights CUs Can t Afford to Take a Wait-and-See Approach to Mobile Wallets 4 At a Glance Opening Up About Mobile Wallets 6 Go Time for Mobile Wallets? 3

Mobile Insights CUs Can t Afford to Take a Wait-and-See Approach to Mobile Wallets Digital wallets are a hot topic in financial services and with good reason. According to a 2013 Global Study conducted by PayPal, a whopping 86 percent of us would rather leave our traditional wallets at home, if we could, in favor of a mobile alternative. Consumers may like the idea of a mobile wallet, but awareness of existing products is unclear. There is no dominant brand or category-defining product. For credit unions, the challenge is making sure that member engagement with mobile wallets is part and parcel of engaging with their credit unions as the market evolves. Unpacking the Mobile Wallet Mobile wallets represent the area of greatest potential growth for the financial services industry, including credit unions. Before we delve into the mobile wallet, let s define its more familiar predecessor: the online digital wallet. BusinessDictionary.com defines digital wallet as Software that resides on a buyer s computer and holds digital cash, and a digital certificate with a digital signature, as well as billing, shipping and payment information for online transactions. Mobile wallets offer some of the same functionality by using a smartphone instead of a computer. Moving the wallet to a mobile device offers more portability and creates interactive shopping experiences, along with providing basic functions such as payments and identification. For example, a mobile wallet might use geolocation to determine where a consumer is shopping, pull relevant coupons and loyalty cards for that store, present cardless payment options, and even facilitate the transaction. Another commonly cited mobile wallet feature is person-to-person payments. Friends attempting to split a dinner check no longer have to reach for their cash or ask the server to split the bill between different credit cards. They simply exchange money via their smartphones, using their mobile wallets. (PayPal s study found that 54 percent of Americans say they ve been stiffed by someone, most often by friends who intended to split a restaurant check with them. Mobile wallets may provide the immense service of reducing social bad debts!) For a mobile wallet to be useful, of course, it has to connect with merchants and other wallets. A mobile wallet isn t really working at optimum capacity if it doesn t connect with a wide range of merchants and the individual people with whom the user wishes to exchange money. Expectation: What do Consumers Want? Now that we ve seen how mobile wallets might work, let s consider what consumers expect from mobile wallets. First, a question: Is there actual demand for mobile wallets, or is this a solution in search of a problem? Answer: As stated in the beginning, 86 percent of Americans would prefer to leave their wallets at home. Top places they want to go wallet-free: the beach, the gym (or wherever they re exercising), the laundromat, the grocery store and restaurants. Consumers might want the utility of a mobile wallet, but they re unsure how to get it. According to a Spring 2013 CMB Consumer Pulse study, The Mobile Moment: Barriers and Opportunities for Mobile Wallet, only 50 percent of consumers surveyed even knew what a digital wallet was. This lack of awareness leads to lack of usage. Thus, mobile wallets haven t really exploded on the scene yet. Only 16 percent of CMB Consumer Pulse respondents had used a mobile wallet in the past six months. continued... Go Time for Mobile Wallets? 4

Apparently, there is a gap between the large number of consumers who expect to abandon their regular wallets and the minority who are ready to try one out now. What s the problem? A raft of concerns (led by security), spotty awareness and current low usage stand in the way of more robust adoption. But this is a growing market. In its report, Mobile Money Transfer & Remittances Business Models & Monetisation Opportunities 2011 2016, Juniper Research expects the average number of active mobile wallet users making domestic transfers in the U.S. and Canada to more than double between 2011 and 2013 going from 2.3 million to 5.4 million. Gartner, Inc. produced its own report, Forecast: Mobile Payment, Worldwide, 2013 Update, and predicted 245 million people worldwide will use mobile payment technology this year, generating 235 billion in transactions. By 2017, Gartner expects the ranks of mobile payment users to reach 450 million, with 721 billion in transactions. These bright predictions assume that the gap between consumer expectation and experience will narrow, making customers more comfortable with the technology and paving the way for its growth to reach its envisioned potential. Credit unions obviously have their work cut out for them as they try to close the gap through information, education and marketing. For credit unions specifically, the best mobile wallet is one that works as part of the financial services package. Credit unions need to embrace this technology or risk losing wallet share entirely to competitors. It will be time, resources and management energy well spent. About the Author Amanda Smith is Senior Technology and Innovation Manager for CO-OP Financial Services. She can be reached at amanda.smith@co-opfs.org and 800.782.9042, ext. 1222. Mobile Wallets Average number of active mobile users making domestic transfers in the U.S. and Canada is expected to more than double between 2011 and 2013. 5.4 Source: Mobile Money Transfer & Remittances Business Models & Monetisation Opportunities 2011 2016, Juniper Research 2.3 million users 5.4 2011 million users 2013 Go Time for Mobile Wallets? 5

At a Glance Opening Up About Mobile Wallets Many credit union leaders already have recognized the potential of mobile wallets. They ve also been hearing from their members about the features that are a priority. Sprig by CO-OP offers the mobile convenience to meet these expectations. In flash polls taken during CO-OP s webinar Go Time for Mobile Wallets? credit union leaders showed their enthusiasm: 44 % of 75 credit union members request P2P Mobile PAYM ENTS TO ANYON E % currently use a MOBILE WALLET 68 % say Me-to-Anyone payments will be IMPORTANT FOR THE NEW Sprig by CO-OP What is your members top request when it comes to mobile wallets? * 44 % 28 % 16 % 4 % 4 % 4 % P2P mobile payments to anyone Pay at a wide range of retail locations Mobile account aggregation & access Mobile rewards/loyalty Other None Which wallets do you use personally? ** Other Don t currently use a digital wallet 5 % 8 % 12 % 11 % 3 % 25 % 35 % 0 10 20 30 40 50 48% What s the most important feature of the new Sprig by CO-OP? * 68 % Me-to-Anyone Payments 14 % RDC (Remote Deposit Capture) 13 % Real-Time Transfers 5 % Account Aggregation Webinar: Go Time for Digital Wallets, December 10, 2013 *Participants selected one response. **Participants selected more than one response. CLICK HERE To learn more about Sprig by CO-OP, arrange a conversation with a CO-OP Sales Representative. CO-OP Financial Services 9692 Haven Avenue Rancho Cucamonga, CA 91730 CO-OPFS.ORG 01142014CF1426 Go Time for Mobile Wallets? 6