White-Label and Smart Card Vendors Fully Diversify into the Mobile Wallets Space

The global adoption of mobile wallets has seen a drive throughout the COVID-19 pandemic as masses of end-users switched to using alternative forms of contactless payment methods and moved away from physical cash. As it stands, some of the most prolific forms of mobile wallet include OEM wallets, such as Apple Pay, Google Pay, and Samsung Pay, enabling users to use select payment cards from a huge variety of banks and connect directly to the customer’s account.

Now, OEM wallet providers are beginning to develop and expand solutions into multipurpose digital wallets by increasing the portfolio of cards, tickets, and passes that are supported by the solution, joining forces with cryptocurrency providers to introduce digital-first cards that permit end users to store crypto assets while still making payments in typical currencies. There have already been moves in the market increasing the number of payment features to include search and shopping functionalities; such examples include consumer loyalty cards and personalized discounts.

The current offerings in the core mobile wallets market can be seen as a bifurcated approach.

• OEM wallets: These are widely known offerings from device manufacturers like Samsung, Google, and Apple that permit users to choose cards from multiple issuers in the wallet application, but they are individualized to specification and not customizable.
• White-label wallets: Financial institutions and issuers are producing market offerings allowing customers to customize their own branded wallet with appearance and feel. In this way, the financial institution or card issuer has the benefit of synergizing the same branding and user experience across its entire portfolio of financial products—critical for reinforcing customer confidence in using the wallet—as it represents an image that consumers are comfortable and familiar with.

Functionality-wise, white-label wallets are typically identical to OEM wallets as they relate to core functions, such as payment capabilities and storage capacity. In this way, white-label wallets provide a benefit to banks and financial institutions by strengthening relationships with clients, providing payment solutions to everyday problems, and ensuring better customer retention. Indeed, as a software-driven platform, any financial organization could theoretically create their own digital wallet solution, but this is only viable for organizations with the available resources.

The current focus for many white-label wallets is that of transaction enrichment, with future possibilities presented by open banking, expanding the allowance of current regulation for third parties to directly interact with banks. Once banks were concerned about divulging customer data, but this is now viewed more as a selective process by delivering those services and data only needed to provide customers with expanded services. ABI Research believes that the next step beyond this will be the expansion into a banking-based ID system—an idea that is in its early stages in Nordic countries—that will expand use cases into age verification for restricted purchases, for example.

An example of the role that white-label providers can play in the current market is that of Netcetera. Netcetera’s ToPay mobile wallet offers a solution for issuing and managing debit, credit, and prepaid cards. The company has entered into a partnership with Deutsche Kreditbank (DKB) in October 2022 to launch its Visa Debit One, supporting DKB in its transition to a one-card strategy. This is an example of the role white-label providers can play in expanding a bank’s portfolio and improving customer experience.

Vendors that continue to have a strong presence in the issuance of physical payment cards also have a key role to play in the adoption of mobile wallets, either by offering their own wallet solution, providing cloud-based or decentralized solutions for the digitization of cards, or assisting central banks with launching digital currencies. Some of these solutions are as follows.

• Thales Gemalto TSH Pay cloud platform: This solution—to enable the digitization of cards in the customer’s payment wallet or banking app—is delivered with a cloud offer and a payment software development kit or a white-label wallet, offering choices to the customer. Further, smart card vendors find themselves in the position of incumbency with the market, enabling partnership opportunities with other ecosystem players, and Thales is no exception, with the Gemalto TSH Pay cloud service preconnected with major international and domestic payment networks.
• G+D Filia: This company has a compelling and innovative Central Bank Digital Currency (CBDC) offering that replicates the characteristics of a typical currency in a digital format. The Filia solution offers central banks looking to deploy a CBDC a high level of security, a decentralized framework with no single point of failure, and a balance between transparency and privacy. G+D’s approach observes a two-tier CBDC model with the currency itself issued by the central bank, but the distribution is handled by commercial intermediaries. The Digital Ghana Agenda has become the Filia flagship project, directly expanding the level of financial inclusion and the role of digitization in Ghana’s economy to help build an efficient and secure payments system.
• IDEMIA’s secure offline CBDC payment solution: IDEMIA is moving into the CBDC space and partnering with ConsenSys to provide an inclusive wallet solution compatible with a wide range of consumer devices, such as smartphones, feature phones, biometric payment cards, SIM cards, wearables, and Internet of things devices. IDEMIA’s offering is constructed around ConsenSys’s Ethereum blockchain and leverages an IDEMIA-led private and secure contract with the central bank policy. The solution is designed with security as a focus, enabling market entrants to develop a secure offering with a huge range of connectivity choices, including contactless, email, QR code, and incumbent POS terminals, with offline CBDC payments also able to be received by any device without connectivity to the ledger.

ABI Research believes that, instead of seeing a few larger-scale mobile wallets gaining significant market share and establishing themselves as dominant incumbents, the market is forging a path toward one that echoes the smartphone market itself—a significantly fragmented ecosystem that enables transactions across many platforms and services simultaneously. In this post–COVID-19 age, as many economies move to cashless, mobile wallets, both OEM and white-label wallets are proliferating, and financial organizations and governments must weigh the requirements they have for their mobile wallet platforms and what it will achieve for them.