I read an interesting article in The Wall Street Journal last week on the increasing adoption of digital wallets and found it interesting that a concept designed to promote convenience, accessibility and revenue is sparking concerns among payment networks. At a high level, and as Reporter Andrew Johnson (@andrewrjohnson) explains in the article, digital wallets allow consumers to pay for purchases with their mobile devices. So what’s the problem?
I thought this was a great opportunity, therefore, to expand on the value digital wallets deliver…to banks, credit card companies, consumers, technology firms and more. It all starts with understanding the importance of good recommendations and delivering a very personalized approach. There’s more to a digital wallet than just money and account information. A digital wallet should include items like coupons, loyalty cards and points, air miles, other current existing card schemes (e.g. travel agencies) and more to provide the best overall experience for the consumer.
Another critical component to understand is that the companies providing the digital wallets can keep the wallet very ‘clean’. This means that if you start to send coupons for products to the wallet, these coupons need to be useful to the consumer. Imagine receiving a Groupon type of deal/recommendation in your wallet every day. It would likely drive you up the wall and turn you off of the digital wallet concept—because the wallet, a service designed to make your life easier, would just make it difficult to manage and keep ‘clean’.
Big Data, Big Opportunity
Everything going into a digital wallet needs to be personalized for the consumer. So if banks are looking to start a mobile wallet, they need to have Big Data (or, as we like to call it, a customer intelligence management solution) powering it. The models and learning algorithms from a CIM solution ensure that banks deliver a completely personalized customer interaction that provides the right recommendations based on individual preferences, time, and location of the consumer.
By combining geo-location with historical data such as purchase history, social media interaction, and loyalty program transactions, banks are able to identify consumers’ preferences and propensity to buy certain types of products and brands, and take advantage of their location to near-by retailers—improving the buying experience for consumers and increasing sales for both merchants and banks.
Digital wallets also need to have capabilities to filter and connect to different systems. As an example, if a consumer wants to buy a certain product, the wallet should automatically detect what types of coupons or loyalty points can be used in that case. These capabilities have a direct impact on consumers, providing them with real-time, targeted and applicable offers for the products/services they like—delivering the convenience they want and value they expect. And while discussions on digital wallets have largely centered around the benefits for banks and financial services firms, the end goal is consumer satisfaction and digital wallets do just that—improve the consumer experience by making the life of the consumer easier.
Big Data is a key component to maximizing the value digital wallets offers and let this be a message for Visa, MasterCard and American Express—the bottom line is to know your customers. That means understand your data and once organizations know their data, they increase service, revenue and profitability.
