How to reach the top of the digital wallet

4 minute read

With Samsung Pay, Google Pay and Apple Pay, three tech heavyweights have gained a hegemonic position in the European digital wallet space - and they are here to stay. With their existing hard- and software empires, they have the direct interface to the consumer, not to mention a significant head start. It would and will be difficult for new wallet providers to stand a chance when stepping into the ring.

However, that does not mean that there isn’t still plenty of space for competition within a wallet.

After all, you can have any number of virtual payment cards digitally stored in your wallet – and it’s becoming increasingly valuable for providers to be on top of that virtual pile of cards.

Since the beginning of the pandemic, consumer payment habits have changed immensely. According to research published by Paysafe, digital wallets are emerging as the most popular alternative payment method. Therefore, it is paramount that providers muscle themselves to the top of the wallet if they intend to benefit from this trend and become their customers’ card of choice for mobile payments.

However, the wallets are getting more and more crowded with new players joining the market.

With the development of “Embedded Finance”, namely, the integration of financial services into the product offering of non-banks, any business can now offer physical and virtual cards in their own branding at low cost. Especially so-called “decoupled cards” that can be linked to the customer’s existing bank account are an attractive option, as it avoids forcing the user to open multiple bank accounts.

Banking-as-Service players like Solarisbank make this possible by taking over the payment processing and the associated regulatory duties in the background.

But why should brands bother with offering a card in the first place?

For banks and non-banks alike, a payment card can function as powerful means of establishing and maintaining an ongoing connection between the customer and the brand. The customer always carries the card with them and interacts with the brand every time they make a payment. The more unique and tailored the branding and functionality of the card, the better it can serve as a lifestyle item.

What’s more, payment cards are also the ideal vessel for loyalty programs. Gone are the days of paper loyalty cards that always seem to get lost before the last stamp. By linking loyalty rewards directly to a payment card, the user can make use of them instantly and with a far greater range of use cases.

In addition, providers can use push notifications that engage their customers immediately after a purchase is made with the card. Further, card-based loyalty programs not only support the core business by incentivizing further purchases, they also generate additional revenue streams through the interchange fee earned with each tap of the card.

There are many examples of this on the German market alone. Lufthansa, for example, offers a credit card linked to insurance products through its frequent flyer program „Miles and More”. Deutsche Bahn offers a similar model with its BahnCard credit card.

Another perfect use case for branded cards is membership models such as sport clubs, as demonstrated by the partnership of VR-Bank Bad Salzungen Schmalkalden e.G., finleap connect and Solarisbank.

Together, we brought the “VR-Perfekt Fankarte” to life – a decoupled debit card plus the according mobile application branded in the design of your favorite football club. The card is currently available to be branded under the design of SV Wehen Wiesbaden and 1. FC Union Berlin under fankarte.de.

VR-Perfekt Fankarte SV Wehen Wiesbaden & 1. FC Union Berlin

Football fans can use the Solarisbank-issued card for their day-to-day payments and cash withdrawals, but also get to benefit from discounts and raffles. With the mobile App, users are not only able to manage their card and spending in a state-of-the-art experience, but also have the latest news of their soccer club always at hand.

This is a prime example of how embedded finance can enable brands to create a tailored payment experience for their customers.

“Strong customer loyalty is both a prerequisite and a result of embedded finance. Football clubs in Europe are predestined to offer their fans a white-labeled card with additional benefits. For example, the club could pay them rewards whenever they use the cards at the home stadium,” says Leif Wienecke, Managing Director Digital Banking & Cards at Solarisbank.

“Connecting a modern payment experience with the emotional relationship of fans and their soccer club, allows the new offering to become a seamless competent of the overall fan world and ecosystem,” adds Carlotta Mondino, Business Unit Head of the Digital Bank Product at finleap connect.

For non-banks, embedded finance creates new revenue opportunities at low marginal cost. This applies not only to new customers, but equally to existing customer relationships. Customer loyalty and repeated purchases are encouraged. At the same time, it is precisely these characteristics – loyalty and frequent contact with the provider – that act as an incentive for customers to adopt integrated financial services to ease their customer journey. Check out Solarisbank’s embedded finance study for an in-depth look at the different use cases that Banking-as-a-Service enables.

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