Features or benefits will trump the technology in defining success for mobile wallets and partnerships between FIs and and startups will play a key role, according to a whitepaper released jointly by the Federal Reserve Banks of Boston and Atlanta on May 2.

The paper is an update of a report initially published two years ago. While the previous report focused on the promise of near-field communication (NFC) for mobile wallet, this year’s report highlights the value-adds that can come with mobile payments:

Both NFC mobile and cloud-based digital wallets can allow for the generation of customized coupons, timely discounts, and loyalty and reward program tracking and redemption directly from the mobile device. Value-added services are becoming more important than the actual payment transaction for driving mobile payment adoption.

The successful mobile wallet will be an open model that is built on either NFC- or cloud-based payment capabilities, or preferably, both, according to the report.

Although the NFC/secure element solution remains a viable option, cloud-based mobile services also provide secure storage and access to payment credentials, without the limitations inherent in a hardware model. The open wallet will likely evolve to include some components of NFC with the secure element and cloud, depending on consumer chosen functionality in terms of the type of payment and payment-related apps.

Mobile wallet has been long promised, and the 2013 report shows less optimism than the 2011 version. The authors call for an open wallet as the ideal platform for consumers, but don’t see this happening right now:

As long as wallet participation is bilateral, requiring exclusivity agreements that motivate other businesses to work independently to develop their own versions of the wallet, progress towards a true open wallet will remain slow.

The report also looks at nonbank players in the space, and highlights this as a regulatory and risk management concern.

Without some guidance and direction, mobile payment app developers could potentially create serious consumer payment vulnerabilities. Partnering with industry incumbents could help to educate them and mitigate risk. While innovation is encouraged in the mobile payments marketplace, participation by new entrants, large and small, generates new risk to the ecosystem, along with new opportunities.

Partnership between startups and FIs does indeed seem like a winning recipe. The complete report is here.