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How to Make a Powerful Mobile Wallet Application?

I’ll go straight to the point.

Mobile payments are among the hottest industries today.

The global mobile payment revenues will top $780 billion by the end of 2017.

Also, consider this: in 2015, 39% of all mobile users in the US had made at least one mobile payment.

Of course, when there is a steady flow of mobile payment transactions, there should be a payment method and a secure storage for it.

That is a mobile wallet.

What is a Mobile Wallet and Why You Should Develop One

Up to date, there’s no precise definition of what a “mobile wallet” is in the first place.

In the US alone, over 200 banks, retailers, and other service providers claim to offer a some sorts of “mobile wallet service”.

But here’s one broad definition of a mobile wallet we’ll be using in this post

A mobile wallet is an app that allows linking and storing different types of payment methods like credit/debit cards or digital currencies (e.g. bitcoin), along with additional stuff like loyalty cards, coupon codes etc. The app may feature additional functionality as well.

When you approach mobile wallet application development, you should first decide whether you plan to offer just one feature e.g. storing and using loyalty cards/coupons. Or build a more advanced custom solution that would also allow users to pay for goods, conduct P2P payments and so on.

Let me help you pin down the right answer.

Conditionally all mobile wallets can be grouped into three categories:

A retailer app with a mobile wallet capacity, which allows users to store and redeem coupons, loyalty cards, and bonuses. It can come as a standalone solution or as part of your branded online shopping app. The development costs would be in $25k-$65k range.

A mobile wallet app developed specifically for cardholders of a certain FI (e.g. bank, credit card issuer). This option would be slightly cheaper – between $20k-$45k

An intermediary mobile wallet and online payment app that allows users to store and use a variety of cards. Think PayPal, Apple Pay, Android Pay or Samsung Pay. The development price tag goes up here and expect to cash between $70K-$250K.

To get an accurate cost estimate, get in touch with our team directly!

When you create an app project brief for the developers, clearly outline the type of mobile solution you are interested in. You should realize that mobile wallet app development costs will vary based on your indication.

Now, let’s dive deeper into mobile wallet development.

What Kind of Payments Do I Plan To Support?

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Ok, so you know the type of app you want to build.

Now let’s see what kind of transactions it could handle and how to design the ultimate UX based on users needs.

The good news is that modern smartphones have plenty of inbuilt features that mobile wallet app developers can take advantage of. For instance:

  • Camera
  • Bluetooth
  • GPS modules for determining location
  • Fingerprint scanning for authentication
  • Real-time connectivity to the users FI through Wi-Fi/cellular data.

Now, let’s take a look at the common use mobile wallet use cases:

  • Online commerce payments – when users choose to pay online for goods/services and are given a receipt.
  • Mobile P2P money transfers – for instance, the kind of payments Venmo app offers. They reported sending over $1 billion in January 2016 alone. ClearXchange (a joint venture by major US banks) also offers instant money transfers from a linked user’s bank account to another one.
  • Point of Sale (POS) payments occurring at the storefront, where consumers can use mobile/contactless technologies to finalize the operation.

Let’s focus on POS payments in terms of mWallet app development.

There are four ways to enable POS mobile wallet payments:

  • NFC (near field communication)
  • Bluetooth and iBeacon technology
  • QR codes
  • Payment App

NFC

Near field communication protocol enables secure, contactless payments between an NFC-enabled smartphone and a transmitter attached to a POS device. The cardholder has their card stored in a digital form in their mobile wallet on the device or in the cloud using the Host Card Emulation (HCE) technology, which was largely adopted by Google for Android devices.

When the payment occurs, the consumer’s payment information is automatically retrieved from their gadget and transmitted via NFC to the payment terminal. If the app supports HCE, users should be connected to the Internet to finalize the transaction. This is not required if the data is stored on the device.

If you plan to create a mobile app for iOS, mind that iPhone 6 has become the first Apple device to have an inbuilt NFC chip and supporting HCE.

However, unlike Android, the company mentioned that this chip will only be used for one technology – Apple Pay.

Bottom line: If you choose to develop a mobile app for Android, taking advantage of the NFC and HCE technology is among the best options. Building an iOS mobile wallet app will require using either EMVCo payment standards and tokenization, or opting for one of the next routes instead:

Bluetooth and iBeacon

The iBeacon technology is another way to transfer data without using the Internet connection. Bluetooth 4.0-based smartphones (and other gadgets) can communicate with an external BLE-transmitter called the Beacon.

Here are some ideas of how you can use this technology within your mobile wallet:

  • An iBeacon-enabled POS can instantly “read” the user’s details, meaning they don’t need to swap/scan their card or coupon during checkout. All their data will be automatically visible in the clerk’s POS terminal.
  • You can enhance in-store customer experience by sending personalized deals and real-time recommendations as they move along the aisles. Additionally, you offer indoor navigation with this technology.

To learn more about iBeacons, check out this post.

QR Codes

QR codes are often used as an alternative to NFC. Here are the two companies successfully leveraging this approach to mobile payments:

Starbucks’ mobile wallet app (which accounts for 21% of all it’s US in-store transactions) allows customers to link their payment methods, encrypt them into a secure QR code that is stored in the cloud and then simply scan the code at the checkout.

LevelUp apps also support QR payments for registered users along with NFC and iBeacon technology functionality.

Payment Apps

Established businesses like financial institutions and mobile payment providers may want to consider partnering with local merchants and support checking out through their app.

Payments through PayPal are already supported in a number of storefronts. Apple Pay and Android Pay are also working on strategically expanding their network offline.

If you are one of the dominant banks in the market, you may want consider this route.

Mobile Payments and Wearables

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The wearable market keeps growing steadily over years and is expected to hit $19 billion by 2018. For mobile payment providers, that stands for another lucrative market opportunity to tap into.

Apple Pay is already supported on Apple Watch through NFC chips, meaning we should see more wallet apps design for this gadget specifically quite soon.

Square – a popular credit card processing provider, has recently launched a mobile payment app for Apple Watch – Cash – which allows users to send and receive personal and business payments through their smart watch.

TD Bank Group and MasterCard recently teamed up with Nymi – an innovative wearable manufacturer and authentication solution developer – to build the world’s first wearable gadget that will biometrically authenticate user’s payments through heartbeat rate. They have already piloted with the first successful payment.

While the concept is still being tested and is far from going mass-market, it’s an interesting route to consider for the future.

How To Make a Mobile Wallet App That is Secure

Security concerns slow down the adoption of mobile wallets.

According to a recent survey by Gallup, 55% of respondents said that certain security issues prevent them from using mobile wallets and mobile payments. Some mentioned losing their phones, while others referred to getting their device hacked or payment data stolen during a transaction.

Yet the majority of modern mobile payment methods (Apple Pay, Android Pay, and Samsung Pay) already come with multiple layers of security. Incorporating these payment methods and allowing to use them in-store do not carry any additional risks neither for merchants, nor for consumers.

The majority of current POS systems, which support NFC payments, are EMV compliant by default too.

When it comes to building the mobile wallet app, there are established security standards and protocols as well such as:

Tokenization

A user gets assigned a onetime number that represents the actual credit/debit card number in the payment transaction. This token can only be “detokenized” by the respective service provider.

There are three common types of tokenization:

  • During online transactions the merchant can never see the customer’s full PAN as it’s immediately tokenized (meaning fewer chances of getting it stolen).
  • POS terminal tokenization occurs immediately after the card is swiped or tapped against it.
  • Mobile payment providers tokenize user’s PAN by default and store the information either on device (Apple) or in the cloud (Android).

Additional security methods can include:

  • Point-to-point encryption, which additionally secures the payment transaction during the interactions with a POS terminal.
  • Additional mobile device identification, which pairs a user’s mobile wallet with a certain smartphone.

Tips For Building a Mobile Wallet That Consumers Actually Use

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While the stats imply a rapid growth of mobile payments, consumer enthusiasm, and adoption rates still remain a bit low.

A recent survey conducted by Accenture revealed the following tendencies:

  • 52% of US smartphone users are “extremely aware” of mobile payments,
  • But only 18% use them regularly.
  • Millennials and higher-income households are among the most active adopters (23% and 38% respectively) who are using contactless payment options at least once a week.

A lot of people feel reluctant about picking up new habits and using new payment methods opposed to the traditional ones.

But there’s more to that.

As Teri Llach, CMO at Blackhawk Network, noted:

“We believe that most digital wallet players to date have been focused on the wrong objective – speedier payment – not on an improved mechanism for consumers to shop, spend, save and engage with their favorite retailers”

After all, taking out your credit card and swapping it isn’t that hard.

A lot of people choose to use a mobile wallet for other reasons e.g. to avoid carrying loyalty cards or coupons, getting paper receipts or to reduce the wait time in the line.

In fact, solutions that offer additional features such as P2P payments, special loyalty deals prove to become more popular with the consumers.

To build a powerful and popular mobile wallet application you may want to consider including the next functionality:

  • Reward points tracker and aggregator.
  • Immediate access to coupons and personalized deals, rebates and rebate submission options.
  • Budgeting tool, which would allow customers to see how much they spend per month and where do that money goes.
  • Personalized in-store deals through iBeacon technology.
  • Digital receipts.
  • More secure authentication e.g. through fingerprint scanning.

If you are building a mobile app for your business always think what the customer wants.

As for the general growth of mobile payment ecosystem, it is said to be driven by the next determinants:

  • Linkable payment options (credit/debit cards, online payment systems)
  • Special wallet-linked offers and coupons.
  • Specific brand/retailer loyalty programs.
  • Timely reminders about the in-wallet offers.
  • Retailer adoption rates.

Keep those in mind when working on your mobile wallet concept.

And if you need help with choosing the best tech stack and mapping out the essential features, get in touch with Alty. Each of our project gets started with a target market and competition research to help you create a wallet app that your target audience wants to use!

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