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Mobile wallets and current accounts: Friends or foes?
Journal of Payments Strategy & Systems,
8
(3),
289-299
(2014)
Abstract
A recent study by Commonwealth Bank of Australia predicts a tipping point for the future use of mobile wallets, saying that smartphones will replace physical wallets by 2021 and that one in two people questioned expect that the majority of payments will be made via a mobile wallet in the future. Internet and smartphone technology have revolutionised a number of industries and changed whole ecosystems in today’s economy. Nevertheless, for the payments industry some essential questions lack closer discussion: the different roles of, and relation between, mobile wallets and current accounts are somehow opaque. Based on a review of the introduction of the current account as an essential part of the business model of German banks in the late 1950s, this paper analyses the future relation between wallets and bank accounts. For a future payment ecosystem, four dimensions will be characteristic: trust, security and stability, clearing based on interoperability, and the ‘shopping experience’ of the consumer. Payment messages can be expected to be exchanged by various channels and/or clearing systems. But providing current account and settlement with irrevocable transfer of liquidity are, sui generis, features to be provided by banks. Cooperation and coexistence of different players in a two-sided/two-layer market will be key factors to provide a trusted basis for a payments ecosystem.
Keywords: development of payment systems; mobile payments; current accounts; cooperation and coexistence; clearing of payment messages; settlement of liquidity
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Author's Biography
Jürgen Bott is a professor of finance management at the University of Applied Sciences in Kaiserslautern. As visiting professor and guest lecturer, he has associations with several other universities and business schools, such as IESE in Barcelona. He studied business administration at the Julius Echter University of Würzburg, and statistics and operations research at Cornell University (New York). He received his doctorate degree from Goethe University, Frankfurt. Before he started his academic career, he worked with JP Morgan, Deutsche Bundesbank, and McKinsey & Company. He was involved in projects with the International Monetary Fund and the European Commission (EC) and is an academic adviser to the EC, helping to prepare legislative acts or policy initiatives on banking issues.
Udo Milkau is Head of Strategy and Market Development in Operations/Services, the transaction banking business segment at DZ BANK. His responsibilities include the ‘quantitative’ strategic development of DZ BANK’s transaction banking. After his academic education in physics, he worked as a research scientist and performed experiments in large collaborations at major European research centres, including CERN, CEA de Saclay and GSI. He received his PhD at Goethe University, Frankfurt. Thereafter, he held management positions in the automotive industry and consulting firms before joining DZ BANK. He is also a part-time lecturer at Goethe University Frankfurt, where he delivers courses in transaction banking, and is a member of the Payments Services Working Group of the European Association of Co-operative Banks in Brussels.
