Device-based applications that recommend the most appropriate payment product for a purchase – so-called “digital payment advisors” or DPAs – will transform the mobile payments landscape, claims research firm Gartner.

“By encouraging the use of alternate currencies — loyalty points and social currencies — for purchases of day-to-day products and services, DPAs may start to alter the very subtle psychological balance in place when customers make purchases using cash and payment cards,” said Alistair Newton, research vice president at Gartner.

Spending money feels different for consumers compared to spending loyalty points that may have been allocated freely by retailers or airlines, added Newton.

The research firm does not foresee, however, customers using DPAs for every single payment application. Many of these applications will offer actionable and useful advice as to when their use will benefit the customers, says Gartner, meaning that DPAs will initially be used mainly for higher-value transactions.

“DPA applications will not initially be offered directly by mainstream banks or payment card companies, because by their nature they require brand independence to function effectively and deliver perceived independent advice to customers,” said Newton.

“However, a longer-term opportunity may emerge for financial services institutions [FSIs] that wish to establish a role in the management, exchange and disbursement of loyalty points and social currencies for their customers.”

By offering the customer a clear indicator of the most cost-effective or profitable payment application to use for a particular transaction – when factoring in aspects such as potential loyalty rewards or “cash back” options — Gartner says that digital payment advisors can cut through many of the marketing and pricing issues that plague today’s payment market.

“Banks and financial services companies cannot ignore the advent of digital payment advisors,” said Newton. “They must adapt their strategies to recognize the impact that the open availability of such information and advice will have on the payment market. Equally, retailers need to monitor the impact of DPAs on the purchase value chain that their customers will engage in.”

More detailed analysis is available in Gartner’s report “Future of Money: Digital Payment Advisors Will Transform the Payment Landscape.”