Arkansas Banks Signing on to Mobile Wallets

Mike Whited with Arvest Bank holds his smartphone displaying the bank’s version of Apple Pay.

Most people’s smartphones already serve as camera, watch and music player. Now smartphones are increasingly becoming wallets, too.

Arvest Bank of Fayetteville has supported Apple Pay for its debit and credit cards for almost two years and last month added Samsung Pay and Android Pay. Simmons Bank of Pine Bluff also supports Apple Pay, Samsung Pay and Android Pay.

Bill Holmes, president and CEO of the Arkansas Bankers Association, said he doesn’t have specific numbers of how many Arkansas banks support mobile wallet payments. He said he uses his bank card and American Express through a smartphone payment app.

“It is probably even wider spread than I know,” Holmes said. “I haven’t polled our banks to see. It is a matured product for our banks. I think many times we are ahead of the customers. We think they’re going to want digital wallets or mobile banking, and we go out and get it and put it in our banks; then we have to train our customers how to use it. I think we are ahead of the curve with the number of banks in the state doing it.”

The mobile wallet apps allow users to pay for products and services — at participating retailers, of course — by registering their debit or credit card on a payment app then connecting their phone to the checkout register with a tap or a wave. The apps do not store card information on the phone itself, and the use of “near field communication,” which limits the range of connection between phone and payment reader to an inch or so, adds to the security of the transaction transmission.

“It’s a consumer tool, and we want to strive to bring the products our consumers want,” said Mike Whited, a senior vice president with Arvest in Bentonville. “This is something they want because of the convenience and the security.”

Apple announced its Apple Pay system in September 2014, along with the agreements of several nationwide banks to participate. Arvest’s technology team began working with Apple shortly thereafter to validate the system for use with the bank’s cards.

“Apple Pay, when it was released, was one of the cutting-edge things that we needed to participate in,” Whited said. “There has been a pretty quick adoption rate on banks — and us being one of them.”

Whited said Arvest saw its customers make 3,007 transactions in the first month after it rolled out the Apple Pay service in October 2015. In March of this year, that number had grown to more than 24,000 transactions.

“Now we can support both of them, which is huge,” said Whited, referring to Apple and Android phone systems. “We have a large segment of our customers who are Android, and they’ve been wanting access to it.”

Phoning It In

Simmons Bank also joined forces with Apple Pay in fall 2015 and has since added the other two payment ap- plications, Samsung Pay and Android Pay.

For Simmons, using smartphone technology to connect its bank cards with today’s consumer spending habits was an easy decision.

“We’re always looking for ways to stay ahead, and I felt this was a really good opportunity to offer this solution as a service and product that would be positive,” said Karla Dial, manager of bank operations for Simmons. “From a consumer experience, everyone always has their phone on them, always. You can use your phone to pay rather than get into your wallet and get your debit card. It’s a tool that, for people who use their phone, it’s great to have.”

Dial said there has been a 20 percent adoption rate for Simmons customers with the mobile payment system. She said the bank sees approximately 10,000 to 15,000 monthly transactions through mobile wallets.

The encryption and fail-safe storage process of the wallets make it appealing to banks, Dial said. The NFC inhibits the chances of someone intercepting the transaction, and if the phone is stolen, consumers can wipe the information.

Most smartphones with NFC technology and payment apps require a personal identification number or thumbprint to access the phone and then another code to access the payment app. That makes a stolen phone a pain in your day but not necessarily a financial catastrophe. The security is also a huge positive for the bank.

“From a financial institution standpoint, it’s the security,” Dial said. “The consumer sometimes doesn’t see that, but, from a transacting standpoint, it is more secure. When you use a mobile wallet, it creates a token. It doesn’t use your card number when transacting.

“You don’t have to worry about your card number being compromised from that point of sale terminal. If it’s something you want to use, don’t be afraid to use it from a security standpoint. It’s not a huge security risk.”

Most analysts seemed to think that mobile wallets would be the next big thing in the marketplace, but one recent study seemed to throw some cold water on that idea.

PYMNTS, an online platform that covers the payment industry, released a study in March showing mobile wallets were not growing as robustly as some had expected. The study showed that Apple Pay use had decreased in the past year, and fewer than one in 20 people with mobile wallets used them.

Wal-Mart Stores Inc. of Bentonville, which released its Walmart Pay app after rejecting Apple Pay, is used by 3.3 percent of consumers, the report said. Walmart Pay can be used only at Walmart stores and works along the same principles as the other mobile wallets.

The reasons given for the lack of heavy use by consumers is that they either prefer another payment method — cash, debit or credit card — or they were worried about security issues with a mobile wallet. Another hang-up: The payment app must be accepted by the store where the consumer is shopping.

“It doesn’t do us any good if there are not Apple Pay machines in the stores to be used,” Holmes said.

Mobile wallets aren’t going away despite the hesitation in their adoption.

“For our customer base that is interested in the mobile solution, they love it, but it’s not for everyone,” Dial said. “As merchants make it more available at their locations, we expect to see more growth.”