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The Transaction Banking Advantage: The Path to Profitable Growth How Banks Can Take the Lead in Mobile Payments Mobile payments and mobile wallets—when they come into full force—will affect a wide variety of stakeholders: mobile network operators, handset makers, operating-system providers, retailers, consumers, and of course financial institutions. Yet many banks are in a quandary about how to position themselves to participate fully in this opportunity. Despite heightened excitement in the payments industry and media about m-payments, strong growth is not yet around the corner. M-payments are not likely to become mainstream for more than a decade, and even then, credit and debit cards will still be widely used. Moreover, the growth in discount deals and offers sent out to consumers via their smartphones is likely to far outpace the adoption of m-payments, generating significant value over the next five years and potentially representing the largest revenue pool in the payments arena. See Exhibit 1. Banks need to start developing their mobile strategies today, well in advance of the time when it becomes as common for someone to make a purchase at the point of sale with a smartphone as it is with a credit or debit card today. Indeed, banks need to play a leading role in addressing issues such as security and the development of standards that can accelerate adoption of m-payments. Otherwise, nonbank players will forge ahead with deals and offers, pushing their m-wallets at the point of sale and eroding banks’ interchange revenues and the integrity of the payments system. But before banks can take meaningful steps, they must be able to separate the hype surrounding m-payments from the realities. A Few Realities Amid the Hype Both our client work and our research have revealed some clear truths about m-payments that banks and other payments players should consider. The value will be in deals and offers, not in payments. The main reason for the slow progress of m-pa