Mobile technology needs financial institutions

by. Jim Ghiglieri

Tech companies of all sizes are moving into the nation’s payments business, putting pressure on financial institutions (FIs) to innovate. In the ever-evolving world of payments, it’s essential for FIs to position themselves as strong competitors against these non-traditional players.

Much of the innovation emerging in the payments space centers on the ability to make payments from mobile devices. Without a doubt, the technology to power these innovations is not a core competency of many community FIs. However, these FIs have one traditional and potentially powerful weapon in their arsenal, the advantages of which cannot be ignored ― the checking account. Sometimes referred to as the “Holy Grail” of financial services, the checking account remains consumers’ main deposit account, and for many, continues to be the account from which they most often fund everyday purchases.

Current mobile payments offerings that have enjoyed a great deal of success have generally involved payments services tied to a consumer’s checking account. This is due in part to the fact that consumers largely do not have the desire or the time to set up separate deposit accounts or open lines of credit to utilize mobile payments technology. The convenience, ease of use and security of using their checking account to fund mobile payments is a big draw for consumers. PayPal, which consumers have generally tied to their checking accounts, has inarguably enjoyed enormous success, with 117 million active accounts and 6 million transactions processed daily.

Another factor that makes FIs attractive as a mobile payments provider is trust. In an early 2013 Accenture survey, 45 percent of smartphone users named security as their number one concern regarding mobile payments. FIs have strong bonds with their customers. Beyond the ties that bind, however, is the fact that the FI owns and manages what is today’s consumers’ most secure form of authentication – the personal identification number (PIN). It’s the one authentication type that can consistently cross channels and maintain its flexibility, its dynamic ability, and consumer control.

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