Mobile Wallets and Loyalty: New Frontiers in Profit

2017 will be a race to the top for loyalty integration into mobile payments. Due to the coming wave of branded mobile wallets, Apple and Android Pay’s days as top wallet are numbered. Banks and financial institutions in the US are aggressively rolling out branded mobile wallets. Heavy competition means that these platforms will need to get creative in order to differentiate their product. Research shows that 94% of customers “would use mobile wallets more often if they were able to earn and redeem loyalty rewards through the platform1.” Integrating loyalty features into mobile payments is a smart strategy for FIs.  

Status of the Market

Up to this point, the mobile wallet market in the US has been the exclusive domain of the Big Three: Apple Pay, Android Pay and Samsung Pay. Financial institutions haven’t had much incentive in developing a branded product, largely due to a lack of demand. While money was being left on the table, it wasn’t much. Bank of America research shows that in July 2016, mobile wallet payments accounted for less than 1% of transactions2. However, that tide has turned. As consumers become more and more dependent on their cellphones for transactions of all kinds, especially mobile banking, payments via mobile wallets are becoming mainstream. It’s estimated that mobile payments are trending upward at a rate of 258% year over year2. At this exponential rate of growth, mobile wallet payments will soon become a major contender.

FIs are realizing the enormous potential of branded mobile wallets. And they’re working hard to get their products out into the market. So far, in the US we have a handful of branded wallets from major FIs - Citi Pay, Chase Pay and Wells Pay. The great news is that mobile wallet functionality is available to FIs of all sizes. Visa has debuted a white label mobile wallet platform, Visa Digital Commerce. This platform allows FIs to offer their customers a fully featured, competitive mobile wallet, without the heavy lifting of developing a proprietary platform. Visa Digital Platform launched last summer, with 40 banks signed on as initial customers.

Developments To Expect

Truly, the mobile wallet industry has been upended. Instead of only three players, there will be countless options. Each of these products will allow customers to pay at the point of sale either via NFC or QR code, as well as pay within apps. In addition, standard features for all mobile wallets will include viewing account balances, making transfers, and other common mobile banking functions. So how will these mobile wallets differentiate themselves from the crowd? We can look at the top wallets in the market for a few hints.

Chase Pay promises to offer lower pricing to retailers. It’s able to do this because Chase Pay runs on its own closed-loop platform, Chase Net, licensed through Visa. Thus, it’s not bound to Visa’s interchange fee schedule. Capital One has obviously spent some time thinking about consumers’ needs, and it shows in their finished product. Capital One Wallet allows the consumer to digitize gift cards from many merchants. As $1 billion in gift cards went unused in 20153, this feature will provide a great aid to consumers in organizing and managing their balances. Capital One also provides photo receipt capture, to easily link a paper receipt to online charges.

Connectivity: the Loyalty Bullseye

While these features are useful, they miss the bullseye. The greatest opportunity to win customer loyalty is by connecting mobile wallets to store loyalty programs. Research shows that 73% of adults are more likely to participate in loyalty programs if “points and rewards are automatically updated and immediately visible on mobile wallet loyalty cards4.” Integrated loyalty solves many of the pain points of loyalty programs. With digital loyalty, there’s no need to keep up with membership cards, coupons, points or promotions. These benefits are available to the consumer via smartphone, and are applied seamlessly at checkout.

Prepare Your Retailers

Payment service providers are in a prime position to help merchants get ready to meet the developments in the payments industry. What can you do?

  1. Prepare the equipment. Provide your merchants with future proof equipment that can accept NFC payments and updated QR code formats, as well as display loyalty information.
  2. Prepare the staff. Train your merchants in how to handle these payments at the point of sale. As mobile wallet payments are faster, more secure, and easier to handle than traditional POS payments, this should be an attractive prospect.
  3. Most importantly, prepare the program. Urge your merchants to take advantage of the many service providers available to develop fully featured loyalty programs.Your merchants will be ready to step to the next level of customer engagement, as FIs bring payment integration with mobile wallets to market.

2017 is a great time to be a retailer. Retailers can expect banks and financial institutions to come courting, with new options to increase customer engagement through loyalty integration, competitive fees via proprietary payment platforms, and opportunities for branding and partnerships. It’s a win for the financial institution, a win for the retailer, and above all, a win for the consumer.


  1. “State of the Mobile Wallet 2016.” Accessed 12-04-16.
  2. “August 2016 Consumer Spending Snapshot.” Bank of America. Accessed 12-06-16.
  3. “$1 Billion in Gift Cards Go Unredeemed.” Market Watch. Quentin Fottrell. 12-02-13.
  4. “2016 Retail Loyalty Statistics.” Access Development. Accessed 12-01-16.

in Industry News, Technology, Best Practices

Get Social
Access Payment Industry Info
& Merchant Insights.