OP Financial Group: More than a digital wallet - Kristian Luoma

As developers around the world rush to deliver the definitive 'digital wallet', Kristian Luoma, head of new business development at OP Financial Group, explains why the bank's own offering, Pivo, has been such a hit with customers in Finland and how creating a worthwhile customer experience requires more than simply converting the physical to digital.

What is Pivo, what does it offer to customers and why did you create it?

Kristian Luoma: Pivo Mobile wallet is a mobile app designed to be the definitive companion application in Finland for making purchases on the go or online. We didn't want to create just a wallet that does payments, but something that would be useful even if the transaction is completed with regular EMV (Europay, MasterCard and Visa) cards. By tying in the transaction on the mobile display, we've been able to focus on creating value-addition. Our goal was to help customers to understand their consuming habits and personal finance in an easy manner.

Pivo Mobile wallet is created by the market-leading Finnish bank, and it combines a minimalist Finnish design style with clean, bright typography. Featuring intuitive user guidance, Pivo is designed to be an everyday companion for mobile banking.

As a quick overview, it displays users' account balances and spending in simple, easy-to-understand graphs. Furthermore, the app can also learn spending habits, and display purchase patterns and actual places where the money is spent, complemented by a purchase history and any related loyalty programmes.

The term 'digital wallet' actually encompasses a number of different payment options. What is Pivo's definition of it?

Our viewpoint is that a digital wallet connects everything related to a transaction. A true digital wallet should make it easier to complete and keep track of transactions.

To take the approach of simply converting what was physical to digital wouldn't work in our opinion. Digital wallets will not be about storing library cards, driving licences and everything else in the wallet that we're used to carrying around, but it will certainly empower us when we're shopping. Obviously, payments and identity-related services are an important part of the value proposition.

Handling money and paying are important features of the digital wallet, but it can offer a lot more to its user. Personalised retail content, spending analysis and electronic identification are some possible functionalities.

The digital wallet concept has been around for a while. What do you think have been the major barriers to its development?

The main obstacles to digital wallets becoming mainstream products have been digital wallets themselves. We've been too fixated on building them from a payments-first mindset, when actually payment has never really been a problem. Most wallets that we've seen are not easy and simple enough to use, and as a result people will not adopt them in daily use.

Successful innovations are designed to make people's lives easier. Upgrading your mobile phone, changing your operator and downloading money to a prepaid account - in some cases even paying to use your money - doesn't make anybody's life easier.

The problem is that everybody wants to provide their own application that works within certain conditions - you have to have this phone, or this operator, or you to be a customer of this particular bank. The key is to develop a mobile wallet that actually adds value, rather than fulfilling one engineer's idea of secure mobile payments.

When it comes to banks, they have done business in a certain way for a long time, and have generally been successful. But when a big change like digital transformation comes along, the old ways of doing things are not enough anymore. Competitors come from unexpected industries, and new products and innovations emerge faster than ever. It is hard for banks to stay one step ahead in this constantly changing environment.

Banks need to break away from old habits and see their business from a boarder viewpoint. What are the possibilities and what could bank services be like ten years from now?

What are the key aspects that define a successful digital wallet?

A digital wallet needs to create value during the transaction to be valuable every day. It needs to balance usability and security, but ultimately it is the content and services it offers that will lead it to success or failure.

It needs to work without much effort as soon as the customer starts using it, to be easy and intuitive to use. Nobody wants to spend time trying to figure out how an app works. If it doesn't work how users expect it to, they simply won't use it.

Finally, mobile wallets should look appealing. Design is important when it comes to apps. Mobile phones have relatively small screens, and too much text displayed at once makes it hard to read. The information must be presented in an interesting and exciting way, and be easily readable.

Why should banks consider having their own mobile wallets, and how can these benefit them and their customers?

In the past, nearly all interactions with a bank were with a payment card. With mobile payments now disrupting the way we pay, banks should be very concerned about the impact this has on their relationship with the customer, and make sure that they are not left behind.

Mobile wallets are also able to capture payment data, which is extremely beneficial for creating a great customer experience, and they can harness it to create value better than any other payment method.

From a tactical point of view, providing a great user experience can deliver a short-term competitive advantage; for example, the Pivo wallet helps our bank to stand out from the competition. We've measured up to five times higher recommendation ratings for our customers that use the Pivo application compared with those that don't. It just proves that mobile wallets have great potential to improve banks' customer experience and customer satisfaction. It is a core part of a modern service offering.

The Pivo wallet incorporates services such as loyalty, budgeting and spend-tracking. Why are each of these elements so important?
When we began our project, we conducted extensive studies into actual consumer needs. Surprisingly, being able to pay with mobile wasn't among the top pain points. Things like understanding consumption and reducing the amount of loyalty cards consumer needs to carry around were at a higher rank.

With this in mind, we set out to create Pivo as a mobile wallet that focused on providing other valuable features for customers, such as account balance, daily transactions, consumption analysis, budgeting and several retail services like mobile coupons. All these services were designed to be compatible with existing payment methods, in practice giving previously 'dumb' plastic cards a digital interface.

What sets Pivo apart from the other digital wallets out there?

There are multiple mobile wallet applications in the market, but the core feature is usually mobile payments based on prepaid accounts. Pivo's approach is different: by entering their online banking credentials, the user can connect their bank account with the application. Pivo automatically retrieves the user's data and creates a visualisation of their spending and transaction history. Once connected, every transaction made on the account gets tracked in the application. Pivo also assigns all payments to the right store and location based on the payment terminal merchant category code (MCC).

The app is accessed very frequently due to the push notifications it enables. Approximately 33% of application registrants access the application every day. Net promoter score (NPS) for the bank's offering is five times higher for the users of this app. Pivo has over 3,000 reviews, with an average 4.5 rating, which is not usual for banking applications. Thus, Pivo sets customer expectations high for future banking applications.

It is also beautifully designed. This has been proven by the customer feedback we've received as well as the awards we've won.

With the security of mobile payments being questioned in recent months, should consumers and banks be concerned?

Yes, of course. Consumers should always consider the safety of a new service when it relates to personal finance and paying. Laws and regulations provide a framework for better future, but are not enough to secure payments. As mobile payments and digital payments mature, we'll see new attack angles arising.

The balancing act of usability vs security makes things even more challenging, because customers might opt for a less safe product that is more user-friendly.

We're committed to making sure the solutions we produce are safe but still simple to use.

It seems like 2014 was the year that things got very serious very quickly in regards to mobile payments. What do you think is in store by the end of 2015? And in the years to come?

This year, mobile payments will certainly cross the tipping point towards mass adoption. With Apple Pay on the block, it is clear that near-field-communication (NFC)-based solutions will be the way forward for proximity payments. This will certainly lift all boats, as merchants will feel that much safer in investing payment systems that support NFC.

More interesting however, will be the progress we'll be seeing in remote payment methods. That will enable us to purchase services and products on the go using just our mobiles - creating true value-addition.

I would say 2015 is the year of mobile payments, for real this time. We've been saying that for ten years or more as an industry, but now, for once, it is actually true.

Further into the future, we will see mobile transforming payments, but not only by making the card obsolete. We predict that most of the new value will be created on the display, not the radio interface of NFC. We will have to remember less as consumers - but we'll be more equipped to understand our consumption and therefore to make better choices because of that real-time view through the mobile display to personal spending. Payments overall will be safe, secure and simple.

Kristian Luoma, head of new business development at OP Financial Group.
Competition is fierce for the definitive ‘digital wallet’.