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MasterCard's recent decision to enable banks to add an in-store payments element to their mobile banking app for NFC-ready Android smartphones has rekindled an industry argument about what works best for financial institutions and proximity mobile payments.
Banks today have two options: Go the Chase Pay route with a separate app that sits alongside the mobile banking app; or make NFC-based mobile payments a feature within a mobile banking app.
Over the past nine months, Mobile Payments Today has conducted several interviews on this topic with industry observers, and it's clear that an enhanced mobile banking app is a more desirable option than a standalone app.
"In the short term, maybe they sit side-by-side and maybe there's going to be a little bit of redundancy," Daniel Van Dyke, a mobile research specialist at Javelin Strategy & Research, told Mobile Payments Today in an interview. "But long-term, I think the trajectory is an integrated mobile app where purchases at the point of sale are just one function of many within a mobile banking app."
Even before MasterCard's recent announcement, banks already were moving in this direction.
BBVA, Capital One and U.S. Bank were among the first FIs in the U.S. to test and launch NFC-based mobile payments through their Android apps thanks to Google's introduction of host card emulation in November 2013. Once Visa and MasterCard started to support cloud-based mobile payments in early 2014, banks in the U.S. sprang into action.
Wells Fargo recently became the latest major U.S. bank to add a proximity payments feature to its existing Android mobile banking app. The San Francisco-based FI officially launched Wells Wallet nationwide this week.
Van Dyke and others believe that the inclusion of an in-app payments feature will entice consumers to use mobile payments more often at the physical point of sale.
"Consumers started using [mobile remote deposit capture] as an experiment, they liked it and started using it more," Ed O'Brien, director of the banking channels advisory service at Mercator Advisory Group, told Mobile Payments Today. "If something like payments is tied to a mobile banking app, consumers might be more inclined to use mobile payments. My sense is, that might be a way to grow adoption."
That's not to say that a solution like Chase Pay will be unable to spur consumer adoption as a separate app from mobile banking. In fact, Chase Pay will have greater reach than the mobile banking and payments apps on the Android side.
Chase Pay is a QR code-based mobile wallet that will be available for both iOS and Android platforms. The bank is using the same technology that the Merchant Customer Exchange had intended to use for its now-defunct CurrentC mobile wallet. Wal-Mart Pay also uses this technology.
Chase Pay should have legs based on what banks want to do with mobile payments.
"I think [Chase Pay] is an indication that if you're going to play in this game, you can't do it through a third party and you have to get out in front," Michael Carter, co-founder and chief marketing officer at Prairie Cloudware Inc., told Mobile Payments Today in an interview earlier this year. "What I tell banks is that you're not late to the party, but you could get late really quick — you want to control this. I think the consumers are waiting for you to step up."