Through their efforts to develop virtual wallets – the consolidation of credit/debit cards into one account that can be accessed through various channels such as smartphone apps or e-banking – Canadian banks are proving that they aren’t afraid of innovations that promise to better align their services with real customer needs, and to improve user experience. The idea at the core of the virtual wallet is not new (internet electronic payment, e.g. Paypal, has been around for years), but moving the transaction away from the desktop and out into the real world, and consolidating a transaction mechanism, will give customers what they want: fewer cards, and more efficient expense management.
In addition to more satisfied customers, the virtual wallet will translate into more transactional data for financial institutions and retailers, which, properly managed, will mean more informed and thus better decisions. Until now, banks only knew about the transactions on the cards they operated. Clients with multiple cards might use them for different things (one for groceries, another for entertainment, another for bills and large purchases). As result, each institution operating only one of those cards would each have access to a distinct and incomplete picture about their client's spending habits. Marketing segmentations and connected strategies based on such an incomplete picture would be less than efficient and of limited strategic value.
Virtual wallet service providers will gain an enormous advantage over their competition. They will be able to gather complete information about clients, regardless of which card or account a client decides to use for each particular transaction, and they will be able to achieve much better segmentation, and better, more informed and more accurate decisions.
From an Information Management perspective, virtual wallets offer yet another reason to build an effective integrated data infrastructure and incorporate high quality Customer Value Management solutions in order to be able to effectively work with the data.
Virtual wallets are just the beginning. Connections between virtual wallets and modern mobile applications, closer working relationships between financial institutions and retailers, as well as greater individualization of retail experience mean real-time marketing (the subject of a future post) is just around the corner.