In this interview with Australian Banking + Finance Magazine, I explained my take on the digital wallet – one of the tools that banks have or will have at their disposal very soon, to enable great customer experiences. Will they use this chance?
Finsia: For those of us who don’t know, what’s a ‘digital wallet’?
Tymula: A digital wallet is a broad concept, but in essence it is an ecosystem of front and back-end systems that allow you to not only make payments to merchants through a myriad of potential options, but also interact through it with either the retailers you’re doing business with or your financial institution.
Finsia: What are the factors underpinning increased use and development of digital wallets from both the consumer and business perspective?
Tymula: The answer for both is because technology has progressed so far, it’s an obvious opportunity to make everybody’s life easier or, in other words, provide a step change in the level of functionality.
On the consumer side, it allows people to aggregate forms of payment and loyalty memberships in a single place like, for example, a mobile phone.
On the other hand, it allows the merchants to communicate differently with their customers, to gather new types of data about consumers, and to build targeted offers. Overall, it’s a large opportunity and it affects change in the value proposition for both merchants and the consumers.
Finsia: What’s one of the best examples of a digital wallet you’ve seen?
Tymula: One of my favourite cases is Starbucks. They’ve built an app which connects to your credit card to pull the money from it, and then layers the loyalty card onto it.
It is a closed loop system, meaning that you cannot pay anywhere else with it, but it is incredible how a thoughtful combination of simple functionalities can drive great customer engagement. Starbucks on the other hand manages to get a ton of data about their customers’ behaviour.
Finsia: Can you share some of the insights from the work you’ve done on what consumers value most when it comes to digital wallets?
Tymula: There are three major needs that consumers have. The first one is replacing their current payments mechanism, like a traditional plastic credit card, potentially also with the redemption of reward points.
The second one is need for traditional financial services; for example, bill payments, receipt management and budgeting tools.
The third set is value-added services that traditionally haven’t been handled by your bank or your payment provider. For example, you can imagine that your digital wallet is also going to include your weekly bus ticket or a driver’s licence.
Finsia: In your presentation, you pointed out that Australia was the country best positioned for rapid adoption of digital wallets. Why is this?
Tymula: Australia has all the key ingredients in place: market opportunity, readiness, structure and regulation.
If you look at the levels of penetration of current technologies like mobile, broadband or NFC (near field communication), and also the proportion of banked population, all of these are quite high in Australia compared with other places we’ve examined.
In addition the relatively consolidated financial sector means less customer confusion about what digital wallet is and what is the value proposition of each of the handful of flavours it is available in.
It might also be easier for a smaller group of institutions to align on terms of an ‘industry utility’, like EFTPOS.
Originally posted in Finsia Passport
I predict 2014 will be a year of continuing innovation in the customer banking experience, and in all layers that underlie it. We will see this most prominently in customer facing scenarios, but the lesser visible areas of technology and organisation will be experiencing a flurry of activity to support such innovation.
First, I expect that the banks will continue to improve their customer engagements, mainly by leveraging digital channels. The range of opportunities for customer contacts will continue to expand as an increasing number of customers leverage multiple forms of digital communication with their banks such as email, website, mobile website, and mobile apps.
Banks will start to focus on the opportunity to deliver on consumers’ rising digital expectations, where the bar is set by the likes of Amazon and Apple. Instead of employing disconnected campaign strategies or relying on functional contact methods, banks will start to create an experience that has more consistency across the various channels, to deliver the right message to the right customer at the right time.
Done correctly, this in turn will enhance their ability to manage their customer relationships to a higher lifetime value.
Second, we are likely to see more attempts to crack the mobile wallet market, with a high number of new entries into the market — not only from the banks, but also from non-bank players and startups.
I look forward to seeing which combinations of priority customers and features offered to those customers will be chosen by the industry players to best position themselves for the future growth. At the end of the day, those choices will determine the shape of adoption curves in the coming years.
At the same time, the banks will become better at leveraging data to optimise their customers’ journeys. This will be achieved not only by realising the value of the data they already have and acting on it, but also by ensuring that every customer interaction is treated as a new piece of data, and by subsequently building an arsenal of behavioural triggers, content libraries, and new contact opportunities.
Such a level of data-driven customer centricity will require heavy analytics, and we can expect that it will be progressively more difficult to acquire talent in this space. At the same time, the analytical solutions and self-optimising platforms will continue to become more popular among all customer-facing functions.
In order to enable these developments, and also to cut costs and drive down the time to market, banks will continue to rethink their technology architecture landscape. As a result, we are likely to see more adoption of Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS).
Lastly, the banks will continue to innovate their internal processes — becoming more agile in the delivery of solutions in response to the new expectations of customers, and new products and ideas from competitors large and small.
We are likely to see more and better quality internal cross-function collaboration, enabled not only by technological solutions, but also by changing mindsets.