Introduction

Royal Bank of Canada's executive vice-president (EVP) faced managerial dilemmas regarding a
mobile wallet launch in October 2012. Cloud-based applications offered by RBC were different
from SIM card-based applications. Before making a decision, the EVP compared areas of
contrast between the two models. Disruption was likely caused by the cloud solution.

Problems

As of right now, RBC is facing a dilemma. Either RBC can pursue the current industry standard,
a SIM card solution that stores user information on the chip, which is supported by most telecom
companies, or they can focus on the cloud-based alternative.

Analysis

Banks typically offer the same service rates as their competitors to attract the maximum number
of customers. Banks also try to differentiate themselves by offering unique services to clients.
The first bank operating a mobile wallet would fall under the differentiation category, as it
sought to attract customers from competing banks. Being the first mover in the industry gives
RBC a competitive advantage. Mobile payments could drastically affect traditional payment
systems since smartphones have become commonplace in our society. Additionally, consumers
have medium-high consumer power since they can switch from bank to bank in most cases. In
terms of making a payment using a mobile device, the chip-based and cloud-based solutions
have some similarities.
Both, however, have their distinct strengths and weaknesses. Chip-based solutions are
economically demanding throughout their lifespan. There is a constant competition between
banks for limited chip storage space and telecom companies have to compensate them for renting
SIM storage. With a chip-based solution, customers can tap their phones to complete transactions
immediately resulting in greater customer satisfaction. As a result of the faster execution of a
chip-based solution, RBC will be the first bank to offer mobile payments. Unlike the cloud-based
solution, which is an in-house application, the cloud-based solution will take longer to develop.
Due to the lack of contracts with telecom companies, this will require a higher initial investment,
but will pay off in the near future. Furthermore, the private cloud ensures that consumer data is
more secure as it cannot be accessed by telecom companies at any time.

Recommendations

In the short run, the chip-based solution provides RBC with a competitive advantage since it will
be the first bank to enter the mobile payments market. Any business that wants to stay afloat in
today's market must align their business strategy with their organizational strategy. Considering
the long term, cloud-based solutions have more advantages. It will be cost-effective for RBC to
rent limited amounts of SIM space and RBC will only be able to access confidential user data.
Future predictions of consumer behavior can also be made using this data to target different
market segments. Student mobile wallet users may be able to benefit from special offers such as
cashback if RBC targets a younger demographic. Mobile devices use SIM cards, so the IT
infrastructure exists and data would be secure on the cloud. Alternatively, it would be possible to
develop a debit/credit card with an embedded chip that would communicate with servers to
enable tap-to-pay transactions.