Prepaid spearheads mobile convergence

The prepaid card industry is proving to be a catalyst for the adoption of mobile financial services by banks and others, according to Mobey Forum. The London-based mobile financial services association said prepaid is pushing innovation in the mobile realm because of the perfect marriage between prepaid accounts with mobile devices, and that banks need to adapt to this new reality and offer mobile prepaid services to remain relevant to consumers.

In its June 2014 white paper, The Prepaid Mobile Wallet: Taking Prepaid into Account, Mobey Forum reported that prepaid services and next generation mobile wallet solutions create a cynergy that is driving innovation in both the mobile and prepaid realms. This mutual benefit derived by each segment is threatening to leave traditional financial service providers behind.

“The rapidity with which these solutions are evolving, together with the potential for future prepaid current account services to be offered to mobile wallet users, makes the future for traditional banks in this space unclear,” said Amir Tabakovic, Board Director and Chair of the Mobile Wallet Workgroup, Mobey Forum.

Tabakovic added that banks risk becoming merely back-end processors of mobile transactions if they don’t respond to this shift in the mobile payments market.

“[T]hey must accept that the wider development ecosystem has neither the need, nor the appetite to wait while they find solutions to their problems with regulations, operating procedures and legacy systems integration,” Tabakovic said. “This is especially so when prepaid represents such a familiar and widely deployed model to so many stakeholder groups that are vying for market dominance, including merchants, MNOs [mobile network operators], e-money providers, payment schemes and a whole variety of over-the-top players.”

The white paper noted that host card emulation (HCE) technology is likely to offer mobile payments firms another tool to spur innovation. Mobey Forum believes HCE, which allows in-store, near field communication (NFC) -based transactions to be facilitated in the cloud, will enable merchants and other players to issue closed-loop mobile prepaid solutions via a simplified NFC payments model.

“Indeed, once HCE technology has matured to a state of full market readiness, it may be possible for merchants to disintermediate banks, MNOs and payment schemes from their mobile prepaid products altogether, by offering secure HCE-NFC payments to customers via their own closed loop solutions,” Tabakovic said.

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