Several major national and international banks are planning to launch their own mobile payments apps next year.
The banks would be major competitors to handset makers Apple and Google because unlike others pushing mobile wallet technology, such as mobile phone carriers and retailers, they already have an intimate relationship with consumers and know their spending habits.
“Banks all around the world are working on this right now,” said James Anderson, senior vice president for mobile and emerging payments at MasterCard.
Anderson didn’t name any of the banks, but said MasterCard is already in conversations with them on how to add mobile payment capability to the existing apps that millions of consumers already have on their phones.
The most likely way will be through a technology called host card emulation, that was introduced in Android 4.4 “KitKat” and allows software apps to emulate the secure element chip found on some bank cards and the iPhone 6. Using software means wider compatibility with phones than if a dedicated chip was required.
The mobile payments market had been relatively quiet until recently. Google Wallet and Softcard, a competitor backed by cellular carriers, were in the market but consumer awareness and interest appeared to be low.
That changed with the launch of Apple Pay on October 20. A million cards were activated in the first three days of use and early adopters have praised its ease of use: users just need to hold their thumb over the iPhone 6 fingerprint reader and bring the device near a terminal for payment to be made.
As a result, competitors are planning their attack. Next year CurrentC, backed by some of the biggest retailers in the U.S., will launch and companies like PayPal are also hoping to expand their footprint in stores.
No third-party fears
But an app from a bank might have an edge because it removes a potential hurdle to adoption: unease among consumers that at a third-party is getting access to details of purchases they make.
Apple has stressed that it doesn’t see any of the purchases made by its users but Google’s system is set up so that all payments run through the company’s servers—giving the company an additional layer of information into the lives of its users.
A bank already has access to this information because of its nature and is presumably trusted by its customers. If a customer has a banking app on their phone, it would suggest they also have faith in the bank’s online security system.