Mobile wallets are the hot trend these days, but there is still no killer app for this type of digital innovation. Reward schemes may not be the way to go, as they are far too expensive and may not be worth the effort.
When consumers use a digital wallet, they usually do so out of convenience. Rather than dealing with cash or even plastic cards, customers take out their phone to make contactless payments. While this also requires retailers to upgrade their payment terminals, mobile wallets are becoming more common every year.
But industry experts are still waiting for the killer app to put mobile wallets into the hands of many more consumers. Up until this point, reward programs were touted as the potential solution to this problem. Though as it turns out, this is a very expensive solution that may not even warrant the cost.
Can Rewards Work For Mobile Wallets?
Most credit and some debit cards provide consumers with reward incentives already. Whether it is in the form of cash back services or additional loyalty bonuses, the concept has taken root in our society. In most cases, these rewards are usually subsidized with interchange, which allows for issues to offer a 1-2% reward. At the same time, these issues have to keep a healthy profit margin, and it’s hard to walk this fine line.
When trying to translate this concept to mobile wallets, however, the situation becomes very different. To boost adoption of mobile solutions, issuers would need to offer equal or better rewards compared to payment cards. However, there are looming concerns over the interchange rates in the US, which may fall spectacularly. If this were to be the case, it would no longer be financially viable for issuers to offer any form of reward on traditional payment methods, let alone in the mobile space.
In the world of Bitcoin and cryptocurrency, the real reward comes in the shape of a discount when buying goods or services. Given the lower transaction cost for the retailer, they can offer lower prices when consumers pay in bitcoin. They do not always employ this strategy, though, as adoption rates of cryptocurrency remain somewhat small for the time being.
Payment Account Optimization an Alternative
Another area issuers are exploring is giving consumers an option to optimize which payment account they use for particular transactions. Having mobile wallets determine how consumers should pay for a transaction seems to be a step backward. It is still possible to override the suggestions, though.
Applications such as Spendee and Cash Droid offer such features. At the same time, it also shows how fractured and complicated traditional finance can be. When consumers have to consider how to pay for purchases and which account to use, planning expenses is becoming a second job.
Bitcoin provides customers with one simple solution that works the same way every time. Users control their funds at all times, and they have multiple merchants to choose from. Anyone in the world can sell products and services in exchange for bitcoin, and accept payments from customers on a global scale without extra fees. Since there are so many Bitcoin mobile wallets available, it seems the cryptocurrency world is far ahead of traditional finance in this regard.
What are your thoughts on the future of mobile wallets in traditional finance and cryptocurrency? Let us know in the comments below!
Source: Bank Innovation
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