Today’s banks are using convenience to compete for new customers, and mobile banking is bringing more convenience to bank customers than ever before. Using a smartphone to manage bank deposits, transfers, and transactions eliminates trips to the local bank branch and waiting in line. And new mobile payment systems are starting to replace debit cards. Mobile technology is changing the face of banking, but with new technology comes a need for new infrastructure and strategies to manage new risks.
Forrester Research reports that one-fifth of Western European Internet users are using mobile banking. While SMS messages are commonly used in many places, more banks are developing their own mobile banking apps so that the smartphone is becoming the preferred platform for mobile banking. Today’s mobile banking platforms are creating a launch pad for next-generation mobile payments where consumers pay using their phones rather than a debit or credit card.
Juniper Research confirms that there is a growing trend in mobile transactions. Juniper predicts that the number of mobile wallets will increase 100 percent from 2015 to 2016, growing to 200 million. Juniper also predicts that the value of mobile transactions will reach $1.3 trillion annually by 2017, with most of that growth from peer-to-peer money transfers using services such as Venmo as well as mobile retail or “couch shopping.” Mobile money is becoming more popular with the advent of mobile wallet services such as Google Wallet and Apple Pay. In fact, JPMorgan Chase recently launched its own mobile wallet called Chase Pay.
Whether consumers are using apps provided by the bank itself or third-party applications such as PayPal and Apple Pay, real bank accounts are still needed to power transactions. Links to those bank accounts make attractive targets for hackers and cybercriminals, so as new mobile payment strategies emerge, banks are taking extra steps to make sure mobile transactions are flawless and secure.
Retail Will Shape Mobile Banking
Retailers are driving demand for mobile bank transactions. According to a study by ACI and Ovum, 84 percent of banks and retailers plan to invest in mobile transaction technology in the next 18 to 24 months, and 86 percent are planning to invest in new online technology. The research also reveals that banks are believed to be the most capable providers of new payment technologies such as contactless cards (67 percent), mobile apps (45 percent), and QR codes (48 percent).
New technologies and new industry standards are changing the alliance between banks and retailers, including their approach to mobile transactions. This is the first year that U.S. retailers have had to assume the risk of credit card fraud at the cash register. Adoption of the EMV (Eurocard, MasterCard, and Visa) technical standard for credit card payments now calls for retailers to support smart payment cards or chip cards as well as contactless cards, including mobile payments. Transactions are more secure, requiring a “chip and PIN” or “chip and signature” for authentication. Any losses due to credit card fraud are now the responsibility of the retailer rather than the credit card company.
As retailers work to create an omnichannel sales experience that brings together the in-store, online, and mobile shopping experiences, omnipayment channels are likely to follow. Consumers will be making purchases using the same mobile payment system whether it’s in the store or online, which creates more risk and more opportunity for cybertheft.
Many retailers are still upgrading their point-of-sale systems and struggling to find secure ways to integrate shopping transactions, which provides value-added resellers (VARs) with real opportunity.
Mobile Payments Create New VAR Opportunities
Even with all the analysts predicting an ongoing boom in mobile payment systems, the mobile transaction market is still in chaos. There are competing technologies and platforms and multiple mobile wallet vendors all striving to win market share. This chaos creates opportunity for VARs.
Transaction security is everyone’s greatest concern. The card-and-PIN security model of the EMV card is designed to be more secure, and two-factor authentication is becoming the norm in data security. To hack a two-factor authentication system, the hacker must either acquire the device or the token for authentication in addition to the password. With mobile security, if you have possession of a lost or stolen smartphone, you are more than halfway there, especially because many password recovery systems provide a text-to-phone authentication option.
These are the areas where a VAR’s security expertise can prove invaluable. When designing mobile payment systems, there are multiple security considerations such as authentication, encryption, and tokenization. VARs can help banks and retailers develop and maintain hack-resistant mobile payment systems. Retailers are still upgrading their point-of-sale systems to accommodate EMV cards, and many retailers are adopting handheld transaction devices (e.g. equipping sales associates with iPads to handle purchases). Secure, reliable wireless transactions are today’s retail priority. Those systems also have to be compatible with the latest mobile payment systems.
Demand for mobile payments continues to grow, which means there will be more demand for expertise in secure point-of-sale and transaction systems and secure wireless communications. VARs with the expertise to develop and fortify mobile payment systems are going to be in demand for some time to come.