Bankers Look Beyond Apple Pay for an Answer to Mobile Commerce

As new technologies like Apple Pay spark fresh interest among consumers in using smartphones for payments, and more banks throw their support behind Apple's payment model — SunTrust, Barclaycard, USAA, TD Bank North America, and Commerce Bank are among the latest wave of adopters — bankers are keeping their mobile payment options open.

By most estimates, about 75% to 80% of mobile payments are remote, meaning person-to-person or person-to-merchant, said Niti Badarinath, senior vice president of mobile and payments for Minneapolis-based U.S. Bank.

Since the primary point of interaction is not a retailer's store, banks have many more touchpoints to engage with their customers through the institution's mobile app.

"We want mobile pay to be a piece of a larger value chain that is tied into merchant-funded offers, coupons and rewards," Badarinath said. "We will start to see banks stepping back and relooking at the entire shopping experience."

But that shouldn't downplay the role Apple had in "kick[ing] the industry into gear" in mobile wallet development, said Jeff Kaufman, president of retail services at Denver-based FirstBank.

Despite the effect Apple has had in its few short months as a mobile wallet provider, there is still no clarity on whether its model, which relies on contactless near-field communication, will last. The retailer-driven Merchant Customer Exchange's CurrentC wallet is being developed to use smartphone cameras to scan QR codes, a system used by many other mobile wallets worldwide.

"We are expecting others in the market, like CurrentC, to move forward in 2015 and we expect to see the use of the camera far more in terms of inserting credentials into the wallet," Kaufman said.

There is a clear short-term benefit to NFC adoption, he added. NFC is a key element in the ongoing transition to EMV chip-based cards in the U.S. because card networks encourage merchants to add both technologies when upgrading terminals for EMV acceptance.

Regardless of which mobile wallet merchants and consumers ultimately embrace, banks will gravitate toward the technology that helps them improve credit card adoption in 2015, said Mike Diamond, chief revenue officer at San Diego-based Mitek, a mobile imaging company.

Some retailers are starting to understand how Apple Pay and other mobile technology can entice customers to apply for and immediately receive a virtual credit card, Diamond said.

"Think of a big box store on a busy weekend, and you are likely to see people at a card table trying to get people to sign up for payment cards," Diamond said. "It's pretty backwards."

Instead, Diamond predicts retailers will start using Bluetooth beacons and mobile imaging to quickly send offers and virtual card applications. Beacons are small, nightlight-like devices that detect a mobile app's proximity and can send targeted messages.

"Imagine looking at high-end appliances and you get a note on your phone that you can save money on those items by applying for a card right now," Diamond said. "You receive an in-store credit vehicle right on your device."