Banks worldwide are in trouble, at least as it relates to their position in providing mobile wallets that rely on a prepaid card as the primary payment instrument. And banks currently lag in that race as retailers and telcos lead the way.
That was one of several conclusions the Mobey Forum made in its new white paper, "The Prepaid Mobile Wallet: Taking Prepaid into Account." Mobey Forum is a global trade industry association meant to help banks lead the changes happening in mobile financial services.
"Prepaid is a major driving force in the near future of mobile wallets," Amir Tabakovic, board director and chair of the mobile wallet workgroup for Mobey Forum, said during a webinar Tuesday that introduced the white paper. "In this future of prepaid mobile commerce, banks will be forced to question their strategy when it comes to mobile payments."
It should come as no surprise to anyone in the industry that prepaid cards, particularly open loop, are growing at a faster rate than credit and debit cards. Mobey Forum cited a MasterCard study that found the compound annual growth rate for open-loop prepaid cards has skyrocketed since 2010 and will continue to do so until 2017. And that growth is not limited to one particular region. It is a global trend and one not limited to open-loop cards.
Closed-loop prepaid card programs from retailers such as Apple and Starbucks, and transportation entities like Transport for London's Oyster Card have made a significant impact on the market as well.
"In the mobile Internet era, we see huge opportunities in prepaid," Tabakovic said. "We believe the emergence of prepaid and mobile will be a powerful catalyst that will push both prepaid and mobile commerce."
One of Mobey Forum's other main recommendations in the white paper is the emergence of Host Card Emulation and how banks can use that technology to make a significant contribution to the mobile payments market.
HCE enables NFC applications on Android devices to emulate smart cards and financial institutions to host payment accounts in a virtual cloud.
The technology received a significant shot in the arm when MasterCard and Visa both voiced their support for HCE. Visa has made available a payWave standard and software development kit for cloud-based NFC payments. MasterCard published a specification that uses HCE for secure NFC-enabled mobile payments.
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