For those of you who may have missed it, Amazon is the latest brand name to step gingerly into the mobile transaction arena with the quiet introduction of its new Amazon Wallet.
Offered both through Amazon and the GooglePlay store, the new Amazon Wallet app provides a central location to store loyalty and gift cards in a digital format, as either a bar code, QR code, text, or image that can be stored on your smartphone. The idea is to “reduce the clutter in your wallet or purse” and to give users a means to shop at supported merchants, including the ability to check their card balances. The Amazon Wallet is also being included pre-installed on Amazon’s new Fire handset.
Consumers can add gift cards to their Amazon Wallet mobile account online through their Amazon account. While Amazon users can buy gift cards online using their credit cards or bank accounts, i.e. the transaction methods associated with their account, they can’t directly access their bank account or credit card via the Amazon Wallet, but that capability can’t be far off.
Amazon Wallet is still a poor competitor to Google Wallet and other mobile competitors, but Amazon has its sights on expanding support for its local merchant base. The company has been offering Amazon Local for some time, sending email subscribers coupons and special deals from local merchants. With the new Amazon Wallet they now add easy gift card and payment options to support local merchants.
And Amazon clearly has its eye on the larger mobile transaction market. Once the company lets users manage store cards, credit cards, and debit cards they will become a viable competitor for PayPal and Google. Amazon is also looking seriously at expanding its capabilities for peer-to-peer payments.
Mobile wallets are the new form of transaction, like it or not. Research shows that 44 percent of smartphone users want to use their handheld devices for person-to-person payments. Researchers also have found that only 27% of all consumers and nearly half of smartphone users (44%) report overall interest in being able to use their smartphone to process in-person payments. Only 12 percent of consumers surveyed say they are ready for mobile payments (although this number is probably higher today since the data is more than 12 months old). The biggest obstacle to mobile payments is a concern about having sensitive personal data stored on a device that can be stolen or lost.
What is driving mobile wallet adoption, however, is shopper loyalty programs. According to Yankee Group, 61 percent of consumers say that receiving coupons and special offers are enough of an incentive to use their mobile wallets. And 53 percent said that receiving reward points would compel them to use their mobile wallets more frequently.
So how is the mobile wallet boom going to affect banks and credit unions? If mobile payment options like Amazon Wallet and PayPal continue to thrive, then credit cards and bank accounts will be the invisible back end that powers transactions. The brand name associated with the transaction, however, will be whatever service provides the mobile wallet. And if consumers are clearly looking for incentives to adopt mobile payments, then perhaps some of the reward points associated with credit cards could migrate to bank-owned mobile transaction systems.
In any case, for financial institutions it looks like a case of “if you can’t fight them, join them,” either by partnering with mobile transaction providers to support smartphone transactions, or developing a mobile transaction offering that is attractive enough that it will give consumers incentive to adopt the banks’ mobile wallet instead of Amazon Wallet, PayPal, or Google Wallet.
Do you see banks and credit unions taking a more aggressive approach with mobile wallet adoption? Does it make more sense for banks to offer their own mobile wallet solutions or to defer to the name brands like Amazon?