Banks test mobile payments to improve customer loyalty in banking
2010-08-24
Smartphones have revolutionized the way consumers and businesses bank - allowing them to pay bills, transfer funds and check their accounts with the touch of a finger. Some banks, including Bank of America, are now hoping to improve customer loyalty in banking by getting rid of plastic credit cards and allowing members to swipe with their smartphones.

Bank of America, the largest U.S. lender, has announced that it is partnering with Visa to begin testing a pilot system next month. The system would allow New Yorkers to make payments through their mobile phones at select retail establishments. New York City taxis, Walgreen's drugstores, Home Depot, Burger King, CVS and McDonald's can already accept mobile payments, according to Michael Upton, senior vice president of emerging capabilities for the bank. U.S. Bancorp will work with the credit card company to test a similar program later in the fall and other major banks are also working to bring the technology to the market in the near future.

The bank hopes that with the test program, it will "gain a better understanding about how customers perceive these types of services with new technologies that are changing people's lives," Upton told Bloomberg.

The program will require smartphone users to insert a microSD card that can handle payments into their mobile devices. Texas-based DeviceFidelity developed the technology that allows smartphones - including Apple's iPhone - to store multiple card accounts and be used as a "digital wallet," the source writes.

Currently, Bank of America has 98.1 million credit and debit cards in circulation in the U.S.

However, the bank will face tough market competition from both credit card companies and wireless carriers that are developing their own payment technology. AT&T and Verizon Wireless, the two largest mobile carriers in the U.S., were the first to announce an intention to begin testing mobile payment solutions in the hopes of drawing customers from card companies, including Visa and MasterCard.

Unlike Bank of America's chip insert, phone companies would embed chips in handsets.

Altogether, the new technology could render more than 1 billion plastic cards extinct.

Bank of America introduced mobile banking in 2007 and has seen its popularity grow. Now, approximately 5 million customers use mobile payments, conducting $15 billion in transactions, Reuters reports. The bank hopes that this new technology will allow mobile use to reach the same figures for online banking, which 29 million customers use.

Recent Marketing Strategy and Planning News

Make Every Staff Member a Marketing Ambassador
2011-06-16
No matter what the business or how diversified its products and services, all employees need to act collectively toward the common goal of meeting customer needs and ultimately boosting profitability.
Targeted ads help FIs reward consumers
2011-03-07
Major financial institutions are adopting measures that both increase customer retention rates and improve revenues, and one way they are doing this is by partnering with marketers and companies.
Customers would desert online banking if it weren't free
2011-03-02
Major financial institutions enacted a customer loyalty coup when they hit upon online banking.