Q&A: Fintech expert: digital wallets need this tech 'magic' or they'll fail

Wells Fargo & Co., Bank of America, JPMorgan Chase, and four other financial services firms plan to launch a new digital wallet in 2023. But a long-time fintech expert said there's little chance of success if they don't embrace the new technology that could make the difference.

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So, what would be sexier — more magical — than what’s being offered by the digital wallets of today? “Remember Zelle said they’re focusing on online commerce. There is new technology; it doesn’t have a sexy name like biometric authentication, but it’s called authentication via mobile app or third-party app authentication.

“It’s a method that’s different than trying to verify someone’s identity by logging in and then using two-factor authentication — where the person gets an SMS message and then verifies it on their mobile device. That’s a pretty clumsy experience.

“What we can do now with this third-party authentication [is] you can create a magical experience on a merchant’s website. You click ‘Pay with my mobile banking app,’ and the phone gets an alert saying, 'Will you confirm you want to pay this amount? Yes or no.' You’re essentially replicating the same experience you have in a store on the register.

“This technology is commonplace in the UK for different use cases. In the UK, they have this concept of open banking, where you can link your bank account to other banks and share all your data with them. As part of that flow, the customer decided to transfer their Barclay’s data to Lloyd’s. So then, the Barclay’s app opens up the Lloyd’s app and asks if you want to do this and you confirm it and it then goes back to the app.

“So, authentication through third-party apps exists today and in my opinion would make it a magical experience for the user. It would make the experience much more consistent with in-store experiences.”

So, why don’t you think the new bank consortium will do that? "Well, that’s not the description printed in The Wall Street Journal article. And, secondly, it’s because it’s a consortium of banks. They have to solve for the least common denominator. They’re going to obsess over edge cases, such as what if a person has more than one banking app on their phone, which one takes priority? ...They'll obsess over security, which is correct. But the way to solve security issues is what is the attack vector I’m trying to solve for and how to I mitigate that?

"[As an analogy,] does having a door without a bolt lock create a risk. Sure? But, do you really need that door lock if you’re in a building with a doorman and there’s only five tenants?”

Copyright © 2023 IDG Communications, Inc.

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