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.