By Fiserv - Preparing for The Fourth Pillar of Mobile Payments: Payments to Merchants and Retailers

After years of hearing that the era of the “mobile wallet” has arrived, bankers have become weary of reports that are more hype than substance. While it’s true that an increasing number of consumers are using mobile devices to pay bills, each other and move money among their own accounts, mobile payments to merchants and retailers are still in the development stage due to market fragmentation, competing business models and an uncertain value proposition. Until the market matures, financial institutions should seize the real opportunities that exist in the mobile payments space today, while laying a foundation that will allow them to benefit from future opportunities.

Consumers have become increasingly comfortable using their smartphones for bill payments and other financial transactions, and experts predict that mobile devices are well on their way to becoming a primary tool for managing banking relationships. What the future landscape of mobile payments will look like, however, remains unclear – particularly in the area of mobile payments to merchants and retailers.

Even the definition of “mobile wallet” is still evolving. For financial purposes, it can be defined as functionality that allows consumers to store credit, debit, prepaid and loyalty card information on a smartphone and tap or swipe their phones to make point-of-sale purchases or payments. This definition is sometimes expanded to include the personal information consumers carry in physical wallets today – government-issued IDs, driver’s licenses, health insurance cards and the like.

These uncertainties leave financial institutions wondering how to develop a holistic mobile payments strategy.