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Helping banks overcome the fragmented mobile payment market with tokenisation

Pierre Lelievre, Marketing Communications, Vice President - Asia Pacific, Gemalto | July 3, 2015
Tokenisation will allow banks to expand their user base while evolving their mobile services solutions, empowering them to deliver a future-proof best-in-class mobile payments experience.

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

By 2020, the number of digital banking consumers will increase from 670 million to 1.7 billion. This trend can be attributed to the rise of the new generation of banking consumers, digital natives who prefer the use of the Internet and mobile devices. This has already resulted in market demand for digital banking services to increase by more than 35 percent in the past three years. Branch usage, on the other hand, has dropped by 27 percent.

As consumers' preference shifts from physical transactions to online and mobile platforms, banks will need to tailor their services in order to stay relevant. As smartphone adoption in this region is high and mobile is the only connected devices for a significant number of users, many banks are focused on expanding their mobile banking services. With a sound mobile services strategy, banks will not only have an optimal channel to engage the new generation of consumers, but also effectively capitalize on growing trends such as e-commerce.

Challenges of Launching Mobile Services in a Fragmented Ecosystem   

To fulfill all the requirements of their customers, banks will need to support an extensive array of handsets while keeping up with security needs that are constantly evolving. This increases the complexity of mobile services implementations. It also prevents banks from deploying their solutions quickly, efficiently and securely to as many users as possible. With so many considerations and challenges to address, it is a daunting task for most financial institutions to manage the mobile market fragmentation on their own.

Overcoming Mobile Market Fragmentation and Increasing User Adoption with Tokenisation

Tokenisation is an increasingly popular way for banks to address the mobile market fragmentation, raise user adoption and accelerate the deployment of secure mobile payment. Tokenisation consists of replacing card credentials such as the Primary Account Number (PAN) with a substitute value -- a 'token PAN'. This enables banks to deliver payment credentials without issuing new cards, minimising the impact on the banks' back-end systems. Tokenisation can also be effortlessly integrated into existing network infrastructure, thus simplifying and accelerating the implementation process for mobile services.  

Besides easy integration and implementation, tokenisation has also been adopted by Apple as one of the underlying technologies behind Apple Pay and is seen as a next step in securing Android HCE-based payments. This enables banks to roll out tokenisation-based solutions that are compatible with the two largest smartphone operating platforms. As such, banks can greatly maximise their end-user reach and overcome the challenges posed by the fragmented mobile market. 

Banks can also boost user adoption by providing their customers with a familiar enrollment process. They can readily get their current users to try out their new tokenisation-based solutions by leveraging existing communication channels, such as current banking apps and m-commerce portals. In addition, tokenisation enables immediate card activation on mobile once the cardholder is verified. By allowing consumers to receive and use the payment credentials instantly, banks can enhance the mobile payment experience they offer and garner more user acceptance for mobile service applications that use tokenisation.


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