The Benefits of Mobile Wallets Part II
This is the second part in a series discussing the benefits of one of the most important, but least understood technologies in the parking industry: the Mobile Wallet. You can find Part I here.
In part I our focus was strictly on the benefits of the mobile wallet with respect to merchant processing savings. Those savings are significant as we showed. Merchant wallets can save operators upwards of 27 cents a transaction, which accounts to millions in savings for some parking operators. Those numbers are significant, making merchant savings the primary benefit to the mobile wallet. But, that savings is just one part of their benefit, and the design of the wallet impacts this merchant savings benefit significantly.
In this post we’re going to cover the 2 designs we commonly see in the parking industry. The provider mobile wallet and the operator mobile wallet. Each has different pros and cons which we will touch upon in this article.
Provider’s Mobile Wallet
With a provider mobile wallet, you will be using what we at Passport call an ‘open loop’ wallet. This ‘open loop’ wallet acts much like a credit card, as it can be used with multiple parking operators rather than just one.
With a provider wallet, the funds flow into the provider’s bank account and are held there so they can be used with any number of parking operators. When a parker parks at an operator facility and utilizes the provider wallet, the provider remits funds to the operator equal to the amount used by the parker at their facility.
Because the funds initially flow to the provider and stay with the provider, they end up paying the merchant processing fees on the wallet load. On each usage, they need to determine what to charge the operator (or the parker) in order to get that merchant processing cost back. We will call this a “Wallet Processing Fee”. The way this works is the provider charges something similar to a normal credit card merchant processing fee, with some sort of discount. By charging a wallet processing fee, the provider can make back the credit card merchant fees with additional revenues while the operator still saves with a discounted rate.
The major benefit to the provider wallet is that the ubiquity of the wallet, and thus its increased availability create more utility for the parker. In short, it allows the parker to use the wallet more often. The negative side to this wallet is that the savings are generally not as good for the operator and it is difficult to distribute the benefit evenly across different operators because of different average rates. Because of these aspects, the provider wallet is commonly preferred by smaller operators.
Operator’s Mobile Wallet
An operator wallet, on the other hand, is what we at Passport call a ‘closed loop’ wallet. A ‘closed loop’ wallet acts more like a gift card rather than a credit card. You can’t use that Target card at Walmart, right? The same is true here. When you create your wallet with operator A, you generally can’t use it with operator B (we at Passport allow for this, but it requires the finance departments at operator A and B to work together).
In this closed wallet scenario, the operator bears the burden of all of the wallet load credit card fees, but they also bear all of the benefit of the successive uses of those funds, which are free.
The downside is that the decreased availability and utility of the wallet (ie limited locations) means that less parkers are likely to choose to use the wallet. But, in large installations, where parking is already ubiquitous the utility to the parker remains. You will find that the operator wallet is preferable for large installations.
These explanations cover the basics of the provider and operator wallet – two wallet implementations that create slightly different benefits to the operator and the parker.
In the next parts of our series we will touch on the next benefit of the wallet – customer loyalty.