NFC mobile payments continue to grab headlines, but to really drive uptake and ensure full market coverage, combining contactless cards with next-gen mobile banking apps is surely the right way to go for 2016’s challenger banks.
Much has already been said about the opportunity for challenger banks—smaller retail banks set up to compete with large, long-established national banks—to disrupt the traditional banking system. These next-gen financial institutions have a very different view of the world and are, in the main, also quite different from one another. What unites them, however, is the belief that they can deliver a more convenient, value-oriented and better contextualized banking experience than their bigger, traditional counterparts can.
No challenger bank would disagree that mobile is a key weapon in their fight to disrupt the market. Virtually everyone today supplements some form of daily activity with a mobile service, and few of them attract such close scrutiny as those that support the business of spending. In the post-Apple Pay world, therefore, it is little wonder that NFC mobile payments remain central to mobile fintech industry dialogue.
NFC: More than Mobile
But NFC payments would be nothing without contactless technology. And, while whole-of-market NFC payment solutions remain waylaid by their issuing stakeholders’ divisive battle for market supremacy, contactless card issuance and use has absolutely exploded. Some stats from the U.K. alone (courtesy of UK Payments Council): In October 2015, there were a total of 76 million contactless cards in issue (that’s comfortably more than one each for the whole population), representing a year-on-year hike of 39.7 percent. As well, 120.5 million contactless transactions were made in that month alone, each worth an average of £7.72 (US$10.92) and total contactless spending was up by more than 213 percent year on year, to almost £930 million (US$1.31 billion).
What does this signal for the coming year’s mobile oriented challenger banks? We know that enabling customers to track their transactions and account balances throughout the day in real time will be a major proving ground for them in 2016, not least because traditional banks’ legacy systems just can’t deliver this level of agility. This real-time transaction data also can help them provide handy location-based information on retail offers, for example, or the whereabouts of the nearest ATM. The key point here is that contactless cards can provide this data right now, in real time, working in tandem with mobile apps, and regardless of which handset the customer uses. This means challenger banks hell bent on positioning themselves at the heart of the customer’s spending experience can, via a contactless card, deliver the exact same tap-and-go, value-added service-enabled, location-optimized experience as mobile NFC-payment services, only they can deliver it to everyone right away, not just those with a premium NFC-enabled handset.
So, my message to challenger banks gearing up for 2016 is this: By all means, get stuck into the mobile channel, just don’t get hung up on NFC payments. In contactless cards, you have an uncomplicated and proven route to market which your customers already use and love, and which will deliver you the data you need to create the disruptive customer experience you seek. So why wait around?
Paul Underwood is managing director of Thames Card Technology. Paul was recruited to manage and develop the sales activity of Thames Estuary Plastics. After becoming group managing director in 1993, Paul established a separate company in 1994 to focus on the production of plastic cards for U.K. and overseas markets—Thames Card Technology. Paul can be reached at email@example.com.
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