How super wallets can turn banks into digital stars

Trends

6 Mins.

To counter disruption from innovative challengers and meet the new demands of customers, traditional banks need to view digital wallets as much more than just places to process payments. By creating compelling “super wallets” that support an array of complementary services and tools, they can be present across many more aspects of their customers’ lives.

Customer attitudes to how they manage their finances and what they expect from financial services providers are changing fast. Whether online or on a smartphone, they expect an experience where services are designed around their core needs and fully personalized, rather than simply being presented with a menu of conventional banking services. This has significant implications for how traditional banks should be thinking about how they position themselves with their customers and the breadth of the applications they offer.

A fast changing landscape

In an increasingly crowded and competitive market, the banking sector is in a new age of digital Darwinism. As customers are fast adopting mobile wallets, BigTechs and Fintechs are wasting no time in offering an enhanced customer experience.

If traditional banks cannot provide the high-quality customer experience that modern consumers expect, then they stand to lose their central role in the financial ecosystem to new players.

The scope for the disruption is best seen in China, where 9 in 10 people already have a digital wallet and around 90% of all wallet payments are via AliPay or WeChat apps² and not through traditional financial institutions. Whilst these numbers are unlikely to be directly replicated in other markets due to different data privacy and ownership laws – as well as the position of incumbent banking services – they do show what can happen when traditional providers do not innovate fast enough to provide customers with the breadth of services they want.

Banks need to put the customer at the center of their action and adapt to societal and industry changes accordingly, enabling them to succeed in reasserting their relevance to consumers.

The next battleground

A Woman using the smartphone for checking the balance of the internet online wallet.

This makes the digital wallet the key battleground where the future dominance of consumer finance will be determined. And given the pace of digital wallet adoption, that future is not far off. According to Juniper Research, the total number of digital wallet users will exceed 5.2 billion globally in 2026, up from 3.4 billion in 2022, and it is expected that $12 trillion will be spent annually through electronic wallets by this time³.

Not only are people using digital wallets more, but they are also using more mobile wallets. Consumers in high-growth markets such as India and Indonesia use an average of 3-plus wallets each.⁴ In such a competitive environment, financial institutions need to reinvent themselves to stay relevant and competitive. And that means going beyond payment processing.

Banks have some options about how to position themselves in this competitive market. They can:

Try to stay competitive by promoting primarily their own offerings
Become the engine room for financial services being offered under different brands by third parties (so-called Banking as a Service)
Put the bank brand in front of the customer and build an applications platform offering a wider range of services.

Of the three options, the last one has the greatest scope for growth and added value. Traditional banks are in a strong position to become the cornerstone of a rich services ecosystem as they have two significant competitive advantages: a good baseline level of customer interactions and trust.

The average customer interacts with his or her bank at least twice a day for payment-related matters and payment processes. That engagement represents more than 80% of customers’ interaction with banks, making payments a good strategic place from which to offer other services.⁵

Added to this is the high level of trust that many people have in “traditional” banking – more than three-quarters of consumers in key European markets say that their main financial relationship is with a traditional bank.⁶ All this means that creating an ecosystem is not only desirable but viable too.

“In this fast-paced world, many customers already use digital wallets in their daily lives and now expect their bank to follow suit and offer a corresponding range of digital products and services, compactly brought together in the form of an app“

Tobias Ott
Member of the Management Team, Secure Digital Payment Division, Netcetera

Payments and financial services should not be the limit of banks’ ambition. If a digital wallet is predominantly about payments, then a “super wallet” is a one-stop shop for many of life’s needs, especially those that come with a price tag, whether that is investment, insurance, e-commerce or travel (and much more besides).

Banks have diverse customer bases who need a lot of different services, which is why the super wallet needs to have a broad offer. However, the needs of an 18-year-old and an 81-year-old customer will be very different. This is why personalization is crucial to ensure what is on offer to each customer feels relevant and useful.

There is a set of core functionality that any digital wallet must have – payments, card and account management. However, there is much more that they can encompass besides, and customers are increasingly expecting to see these additional services offered and are willing to pay or share data to access them¹.

Building a customer-centric ecosystem

Super wallets are not limited to pure financial services, such as transactions, but can cover the entire lifestyle of a varied customer base. They enable banks to offer a wide range of services: from traditional banking services and payment offerings to loans, investments, insurance, and cryptocurrencies, as well as travel services.

The banking solutions of the future meet the demands of customers who want to use digital solutions quickly and easily, providing one app for every situation.

In this way, traditional retail banks can survive in the competitive financial services market and secure a firm footing in their customers’ digital universe through genuine added value. G+D, together with its strategic partner, Netcetera, supports banks in this endeavor with expertise and experience in delivering these solutions.

China Cards and Payments – Opportunities and Risks to 2025, Global Data, July 2022
Digital Wallets, Accelerating to a Cashless Society, Juniper Research, April 2022
Mobile Wallets Report, Juniper/Boku, 2021
The digital battle that banks must win, McKinsey, 2014
NextWave Global Consumer Banking Survey, EY, 2021

Published: 29/11/2022

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