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Banks Have Many Reasons to Build Their Own Mobile Wallets

How can banks benefit from a spurt of mobile payments innovation that is enabling faster checkouts with the advantage of greater security for customers?

Given the steady increase in smartphones and the number of merchants accepting mobile payments, it has become imperative to have a virtual wallet strategy.

As previously discussed, tokens are critical to mobile payments. In turn, the provisioning of tokens is dependent on the type of wallet used. Essentially, there are two types of wallets: the first is on the device itself and the other is in the cloud.

The device wallet has either a hardware secure element or a software secure element. Tokens are stored on the device itself. Here, the wallet is controlled by either the device manufacturer or the network operator.

The emergence of Host Card Emulation (HCE) protocol has given rise to cloud-based mobile wallets. With HCE, card information is stored on cloud servers and tokens are provisioned to the device on request or at the time of transaction. This enhances security several times over.

The cloud wallet can be either a full cloud solution or a partial cloud solution. In a full cloud solution, no payment information is stored in the device—the card is emulated by the cloud. In this scenario, the device has to connect to the cloud for every transaction.

A partial cloud solution is an alternative in times of limited or absent connectivity. In this solution, the phone application stores tokens pushed to it from the cloud at periodic intervals.