The future of mobile wallets: world practice and Ukrainian realities

I’ve already touched the topic of mobile wallets in my blog. For example, according to the analysis of the Juniper Research report, the contactless payments will exceed $1 trillion in 2018 and $2 trillion by 2020. In one of the latest publications, I’ve mentioned that the growth in the number of mobile wallets will exceed 15% from the mentioned $2 trillion, which is approximately $3 billion and will be generated by Apple Pay, Google Pay and Samsung Pay.

Thanks to the technological solutions of the abovementioned companies, the use of mobile wallets will be growing and the number of users will exceed 450 million mark and a half of the transactions will fall on Apple Pay. All this leads to one thought — mobile wallets will come back to the use in all markets, including Ukrainian.

Mobile wallets — a modern trend

According to TSYS research, 68% of the respondents, who have already connected a payment card to their mobile wallet or plan to do so in the nearest future, have indicated that within 2 years from the date of such a registration they will make more than 50% of purchases through a mobile wallet.

Of course, there is a difference between intentions and actual use. However, the market trend can be traced based on the statistics. Wallets from the main techno-giants, Masterpass wallet from Mastercard cover the most active segment of clients — men and women at the age of 25–34 who are already actively using contactless payments and p2p-transfers.

Strengthening of these trends forms the remaining features that create a functional ecosystem of mobile wallet. It includes biometric authentication, and new methods of data encryption, and tokenization etc.

Mobile wallets trend- how about Ukraine?

The history of the use of mobile wallets in Ukraine is closely connected to electronic money, and to the products previously developed in the Russian Federation that are now banned in Ukraine. WebMoney, Qiwi Wallet, Yandex.Money — they all had a Ukrainian audience and were a popular method of mutual settlements between users of different countries in certain areas (for example, freelancing). Due to a completely logical ban of these brands, this audience was reduced by about 95–97% and these customers went to banks or continue using these wallets illegally.

As to the mobile wallets solutions from Ukrainian developers, we also have a rich history. It includes Global Money, which is actively used in b2b-sphere, Maxi wallet and the successful product MoneXy, created in a close cooperation with Fidobank (the bank issued electronic money), but was closed after the introduction of the temporary administration to the bank.

At the moment we can divide the significant players of the market into two categories: wallets with a binding card and with electronic money. In the first case we are talking about Apple Pay, Masterpass Wallet and Google Pay. In the second — we can talk only about GlobalMoney. In other words, there is room to grow.

Mobile wallets in 2018: how, why and for what?

As the impulse begins to shift around the use of contactless payments and mobile wallets, the task of most financial institutions is how to convince customers to add a card or use electronic money?

It is easier with the cards — banks integrate wallets and their developers invest money into communication and popularization among the audience of these financial institutions. The experience of Ukrainian leading banks with Apple Pay shows good results. But when it comes to electronic money issued by domestic banks, it is more difficult to “sell” it to the users as they have already forgotten what it is and what it is used for.

Nevertheless, for both wallet cases, communication based on “simplicity, convenience, security” is relevant. These are not just marketing slogans, but real benefits of mobile wallets.

Simplicity: customers use smartphones in almost all aspects of everyday life — and therefore they need a universal payment tool in it. After all, there is no reason to pull out your wallet, when you have a smartphone in your hand.

Convenience: the development of mobile banking determines how people will pay. To compete with them, you need to make the payment process as simple as possible. This is a good argument for electronic money as you do not need a passport, no long registrations and it provides a certain anonymity.

Security: for a modern client, the security and reliability of a payment application is not an advantage, but a basic feature. As the biometric protection spreads, the advantages of a mobile wallet comparing to the piece of plastic in the form of a bank card will continue to grow.

Loyalty first or why it is important to reward the wallet users

Integrated loyalty programs in fintech products are a must-have not only for promotion but also for getting a client community. How to stand out from the crowd of competitors? Just give the client more than others do.

The scheme here is simple and popular in other products: wallet users can earn extra points or get a part of the funds back (yes, again, cashback) every time they make purchases using their mobile wallet. Thus, the more a client uses it, the more points or cashback gets. The basis of this concept is a constant increase in a consumer value, and the advantage — card loyalty programs do not offer cashback in real time.

Conclusions

The popularity of mobile wallets seems to be rapidly growing. Therefore, changing consumer behavior becomes more important than ever. Ukrainian realities now demonstrate freedom, but quality requirements are pretty high. Who will be the ones to find the “golden mean” between these two parameters?

CEO of the international payment system LEO, the shareholder of IBOX Bank