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In a mobile wallet world, banks seek upwardly mobile edge


“Top of wallet.” That was always the goal for bank credit card issuers when billfolds were made of leather, cards of plastic. But now that wallets reside inside mobile phones, and the cards are digital, is it still an issue?

Maybe the leather shredding and plastic splitting are quickly going the way of the dodo. But Top of Wallet? Now more than ever, it’s a top priority—maybe even more so given the vast number of virtual cards Apple Pay and the like can hold.

As a priority, “Trying to be top of wallet in the digital world is not all that different from trying to be top of wallet in real life,” says Marianne Berry, managing director with New York-based Auriemma Consulting Group, a payments and lending consulting firm.

Besides Apple Pay, banks can enroll in Samsung Pay and Android Pay so that their customers register their bank credit cards in the mobile wallets. When a customer then uses a mobile phone to pay for an item, the purchase is charged to the registered card—and, more importantly, the selected card.

Just as at the traditional point of sale, banks want to make sure their cards get used. But unlike physical wallets—with customers must make a conscious choice of which card to use, every time—digital wallets are set up with a “default” card, automatically picked if there’s more than one registered card.

“Consumers can change the card they use with these programs, but more commonly, they use the same card all the time,” explains Rick Oglesby, president of AZ Payments Group LLC, a payments consulting firm. “Banks want to make sure their card is that card.”

The question is: How do they pull off that trick?

Though digital wallets are struggling to gain traction, banks recognize the importance of winning this war. And forget the consultant: As any five year old will tell you, first come, first served. That is: If your card gets registered first, it likely becomes the default.

“You want to get in first,” Oglesby says. “Downstream may be too late.”

“Customers are likely to register multiple cards,” says Joshua Gilbert, partner with First Annapolis Consulting of Annapolis, Md. “So at the end of the day, bank issuers need a strategy so that their card ends up on top. “

“It’s always easier to stay someplace than to muscle your way in, later,” adds Berry. “You want to be the first one in the wallet and the first one used.”

Inventive incentives

Getting there first is where incentives come in.

Think of this strategy as a digital variation of tipping the maître d’ to get the best seat. Banks can promote early enrollment by offering cash rewards or extra rewards points when a customer activates and then uses the card.

Being the primary card registered may give banks an advantage, and it’s not too late for banks just signing up. Initially with Apple Pay, the default card was the one customers used with their iTunes account.

But as more banks joined Apple Pay, customers started to change their default card. Getting them to take that extra step, quick as it is, may prove daunting—but it’s far from impossible.

“Our research shows that people are learning how to change their default cards so that they can select the card to be used,” Berry says.

Still, incentives are often limited with programs on closed systems. Rewards already tied to cards in the physical world are automatically honored by banks. But those same banks are limited to working with technology companies to offer joint discounts or extra rewards.

“I urge banks to put pressure on Apple, Samsung and Android to incorporate loyalty and reward programs into their apps as soon as possible,” says Aaron McPherson, a Boston-based independent marketing consultant. “Then banks can drive spending to their cards.”

Decoding the default dilemma

In September, Auriemma interviewed customers eligible for these programs. It found that 87 percent of Apple Pay and Samsung Pay customers knew their default card, while 26 percent have changed—a ratio of more than 3 to 1. Similarly, 80 percent of Android Pay users knew their default card; 30 percent have changed it. Those default-switch numbers rose about 10 percent from six months earlier.

So whether a bank is tries to land the default card right off the bat, or get customers to change it to their card, incentives and branding recognition reign supreme for the moment.

Gilbert notes that American Express came out with a program early on that takes advantage of a customer using Apple Pay in conjunction with an Amex card. The customer gets an alert with a link that directs them to the card issuer’s turf. “A lot of customers might not think about which card they are using,” he says. “This gives them a visual reminder.”

It might not appear to make sense for banks to spend precious marketing dollars that promote Apple or Samsung programs. But experts contend it will benefit banks in the long run.

“Banks don’t want to hear that they have to use their marketing clout to get customers to use Apple Pay,” McPherson says. “But it isn’t Apple Pay they’re promoting. If they give customers $5 to enroll their cards in Apple Pay, they’re going a long way to make sure it’s the default card.”

Top of wallet meets retailer bottom line

While banks cannot offer system-wide rewards on digital transactions, they can cut special deals. “Issuers can partner with companies like Uber,” Gilbert says. “The payments may not be exclusive to the wallet, but those kinds of retailers are likely to have a lot of digital payments.”

And it isn’t just big national banks that wield the power to cut deals with national retailers. Community banks can work with local merchants to set up joint incentives programs.

In the end, the goal for banks is to get customers to associate their cards with digital payment. And if you think of it, that’s not too different from the competitive strategies online retailers play out to gain an edge as the go-to website.

Either way, the name of that game is to win time after time. “If you don’t try to get your customers to enroll and use these programs,” cautions Oglesby, “someone else will.”

Lauri Giesen has spent more than 25 years covering banking technology and payments for numerous business and financial publications. In the 1990s, she founded and edited Financial Service Online, a magazine covering Internet-based forays into banking and investment services.