Will Mobile Wallets make UAE cashless?

Last year the United Arab Emirates Banks Federation – incorporating the leading banks of the country – announced the launch of a Mobile Wallet project.  The project is part of the UAE’s Smart Government initiative, which helped to identify a range of governmental services requiring electronic payments.  The Mobile Wallet project also incorporates the facility for smart phones to be used for cashless payments at merchants and retailers in the UAE.

Besides the UAE Mobile Wallet project, mobile wallet initiatives have gained momentum all over the world, with varying levels of success. By assessing different projects around the world, what can banks do to implement a successful mobile wallet strategy?

There is a lot of potential for a mobile wallet initiative in the UAE: the country has one of the highest mobile phone penetration in the world at nearly 193%, while smartphone penetration reaches 78%. As many consumers are not aware of the benefits of cashless payments or may not trust the security of electronic payments, the country heavily relies on cash transactions: according to MasterCard, an estimated 8% of consumer payment transactions are done using non-cash methods in the UAE.  However, cashless payments are gaining traction largely due to governmental initiatives such as the Smart Government initiative.

One of the main challenges in implementing a successful mobile wallet project is to achieve the required level of consumer adoption, especially in the Middle-East, where electronic payments are not widely used. Many mobile wallet initiatives have failed due to low adaption rates and usage, as it turns out that the convenience of replacing a physical wallet with a mobile payment service might not add enough value to achieve high adoption rates. If consumers don’t see significant advantages in using the mobile wallet instead of cash or a credit card, or if they have any security concerns, consumers might be reluctant to change their existing habits.

To achieve the desired level of adoption, mobile wallets have to offer significant benefits to the users that cannot be achieved using cash or credit cards. One such benefit can be receiving offers, discounts or loyalty program benefits from merchants, retailers or the bank itself. Therefore, mobile wallets offered by banks should be designed to enable easy enrolment of merchants and retailers, enabling them to easily offer their content and services to consumers through the banks’ mobile wallet.

Mobile wallets can provide in-depth customer data, such as spending habits, preferences, location information. This information can be used by banks, merchants and retailers to better understand their customer’s need, and to deliver personalized offers tailored to individual consumers. This can help increase sales, customer retention and satisfaction. To deliver personalized offerings, the mobile wallet has to be integrated with sophisticated data analytics, segmentation and campaign management tools.

Personal financial management tools can also offer additional benefits to mobile wallets users:   interactive graphs and charts can provide reports about the user’s expenses and incomes, or indicate predicted future cashflow based on historical spending patterns. Users can receive advice or warning related to their budget and spending before making a purchase.

Mobile wallets can also offer innovative payment methods, allowing easier and quicker payments, such as taking a photo of a paper bill or reading a QR code that automatically loads the required bill information to the mobile wallet enabling an instant payment.

Social media can also be integrated to a mobile wallet, enabling the users to recommend products, discounts or loyalty program benefits to friends and family. Banks and merchants should motivate their customers to make such recommendations by providing additional incentives to the mobile wallet users.

As many consumers don’t trust the security of electronic payments, banks have to make sure that their mobile wallet is designed to meet the highest security standards. It is important to note that no matter how strong the security of the mobile wallet is, consumers will not use the mobile wallet if they do not feel secure or trust the mobile wallet application due to lack of knowledge, therefore banks have to educate their customers about mobile wallet security, and about the additional benefits of the mobile wallet.

By integrating these methods as part of the mobile wallet offering, banks can largely increase the successes rate of their mobile wallet projects. While not all banks will choose to come up with a mobile wallet offering, they can be at the risk losing revenue due to competition from other financial institutions, mobile network operators, device manufacturers and alternative providers. Therefore, it is essential for banks catering to the retail customer segment to carefully assess and review their mobile wallet strategy, or risk being overtaken by competition.

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