Brett King

Posts Tagged ‘Google Wallet’

Mobile Banking versus the Mobile Wallet?

In Customer Experience, Mobile Banking, Mobile Payments, Retail Banking on February 23, 2012 at 06:16

With recent news that Barclays Pin-git (or is it Ping-it) has had 120,000 downloads in 5 days, that Square has 1m merchants on their payments platform (1/8th of all US card merchants/retailers) and Starbucks is doing 25% of it’s North American payments via a cardless App – it seems like Mobile Payments are taking off like the H1N1 virus. The interesting thing is that many bankers are looking at all of this activity as if it has little meaning or impact on their business at this point in time. I think part of that may be that there is a fundamental misunderstanding of how the mobile can be utilized in the banking and payments space.

120,00 downloads in 5-day for Barclay’s PingIt

When showing glimpses of Movenbank’s Mobile App I often get asked by bankers whether it is a mobile wallet or a mobile banking app? It’s as if the two worlds of cards/payments and banking are destined never to meet when it comes to a conventional view of the banking world. In banks today, we even institutionalize this by having cards as a separate division or business unit, separate from the retail banking function. The only time they ever seem to meet is in the form of a debit card or within internet banking. But the cards business, while being a strong revenue earner generally for banks because of credit card fees and interest margin, philosophically is not really considered banking per se by most die-hard bankers.

In fact, I’ve known banks where if you walk into a branch, the teller needs to call the call centre to find out any information about your credit card, even your balance. With many of the banks I work with, in-branch or in the contact centre, CSRs/Tellers need to navigate between separate screens to see your credit card details and activity versus transactions in your checking account.

For a long time these two worlds have remained largely operationally separate. The popularization of the smartphone is destined to destroy that division of labor.

The world of Two Channels

Today retail banking is emerging out of the hyperconnected, digital transformation age as not much more than a collection of channels and utility. In the past, you had branches which were THE distribution channel, but that has rapidly fragmented. You also had cheques and cards which provided you a mechanism, or utility, for moving your money around. Historically banking was really about two primary things – storing or protecting assets, and helping in the conduct of trade and commerce. Rudimentary cheques (or bills of exchange) were around almost 800 years before physical currency, and prior to bank branches ‘assets’ were often stored in temples and palaces. At the core of banking was assets that you either kept safe, or moved around to effect trade. In many ways, that’s still at the core of the bank value proposition.

As some of you may have noted in BANK 2.0 I call out bankers for calling digital channels ‘alternative’ or e-channels because of the psychology internally within banks that tends to put these channels in a subordinate role to the branch. Recently I was approached by a recruiter looking at placing a global head of ‘E-Channels’ into one of the big global brands and asking me for my input into how could take on the role. I told the recruiter that any digital guy worth his salt would immediately stay away from this major banking brand, largely because the decision to classify the role as a head of ‘E-Channels’ already told me everything I needed to know about the brand – that they still thought of digital as ‘E’ rather than mainstream, everyday banking. That told me that anyone taking on this role would still be faced with massive inertia around branch networks and would be fighting everyday to justify budget, investment and mindshare in the total channel experience – and that is why I said this brand was not ready.

With Internet Banking being the primary day-to-day channel for banking in the developed world, and branch frequency/visitation off 90% from it’s peak in the mid-90s, the branch is really ‘alternative’ banking today, rather than pride of place at the core of banking behavior. So the pendulum has shifted.

So what are the two emerging channels?

If you characterize banking today from a day-to-day perspective, you’ve really got two core classes of activity. Payments AND day-to-day banking based on your assets, including applying for new products, wealth management engagement, etc. If you look at either customer engagement, transactional activity or the role of an advisor in respect to your assets, you’d be hard pressed to identify activities that aren’t done through either Payments Channels or Delivery Channels (credit to Terence Roche @Gonzobanker for this insight).

Given the way retail banking is structured today, this means that many banks look at a mobile wallet as an instantiation of payments – the ultimate, downloadable payment channel ‘function’ or utility.  However, they look at Mobile Banking as a mobile-enabled version of the Internet banking platform, which is ultimately just channel migration of transaction activity from branch to digital – hence, a delivery utility. Some progressive banks are even looking at onboarding customers entirely electronically through the web, mobile, ATM or call centre – without a signature. More delivery channels. The branch is the premier delivery channel still, and more so as transactions shift out of the branch, and it becomes about high touch sales and service (delivery of revenue and service).

When two worlds collide

The problem philosophically for retail banks is that the mobile device is collapsing this view of the world. Payments and traditional day-to-day banking utility will be packaged into one portable, handheld ‘channel’. It doesn’t make sense to have one app for ‘banking’ and one app for ‘payments’ or the wallet, you must have the utility of both the bank and payments capability in one.

That presents an organizational shift because it merges the two disparate parts of retail banking, but it also presents massive opportunities.

What is possible is that my day-to-day connection with my money is far tighter than it is in a traditional banking relationship. Whether it is simply the fact that I can see my balance before and after I make a payment (not possible with plastic, cheques or cash) or whether you can start to advise me day-to-day on how to utilize my money better – the opportunity for mobile is not the wallet, and not mobile banking. It is re-imagining the utility of banking from a mobile perspective.

Customers will never use Facebook to login to their bank!

In Engagement Banking, Future of Banking, Groundswell, Mobile Payments, Social Networking, Twitter on December 7, 2011 at 07:16

We’re experiencing a massive shift in consumer behavior right now with the explosion of Facebook, Twitter, YouTube, and other community collaboration and social media platforms. A world where Facebook has 800 million inhabitants and a President who is a college dropout (albeit Harvard).

We’re seeing the global domination of mobile across the entire world, where before long every person on the planet will have a mobile phone – and soon that phone will be a wallet. Smartphone owners will be the majority in just a few years as smartphones are virtually free on contract, and unlimited data is bundled free. Already the average smartphone user spends more time using Apps than they do using an Internet browser on their computer.

The traditional players amongst us say that such things don’t really change the fundamentals, that “it will take time for people to trust these new mechanisms”.

I’ll never login with Facebook to my bank.

I won’t pay with my mobile phone unless I understand how secure it is. This NFC technology is too new and there’s no common standard.

Huh?

The same people who said this probably said…

I’ll never use email, there’s nothing like calling someone or a face-to-face discussion to solve a problem

I’ll never use an ATM machine, I don’t trust a machine to give me money.

I’ll never get a cell phone – I don’t want people to be able to call me whenever and wherever I am.

I will never put my credit card details on a website online – are you crazy?

I’ll never bank online. Not in my lifetime…

I’ll never need a Facebook account – it’s a waste of time, it’s just for college students.

Really?

If you are saying you won’t do something that millions of other people are already doing, that’s a sure sign that it’s going to disrupt the hell out of your business and you’re in trouble.

If you’re not planning to work differently, if you’re not thinking differently, then you’re just out of touch, you’re just one step away from irrelevance. You’re fighting the flow upstream and getting pushed towards disaster.

The one constant of the internet-enabled world is that you have to be ready to change constantly. Resistence is not only futile, it’s stupid and very costly in the long run. It’s cheap and easy to be social right now, same for mobile – it won’t be in the future.

Right now you have two choices.

Start experimenting with how to adapt to these new methods

Start figuring out what people want to talk about on social media. When they’re using their phones at a store, for searching on products, when they check-in, tweet or update their facebook status.

Start talking to them. Start sharing content that isn’t marketing messages pushed down their throat, but helps them.

Start trusting consumers to talk to you about your brand, your products and about what they want from their bank or services provider. Understand you can’t control the conversation, but you can and should participate in it.

Open up new products and services based on social media. Get consumers to give voice to their needs and help you form those ideas. OCBC, DBS, First Direct, ASB, Comm Bank are all trying different types of crowdsourcing to develop better relationships with their customer base.

OR… Ignore the obvious, get ready to be displaced

Our customers don’t feel safe using Facebook for login!

But some of them might… how long before most of them will? How do you meet your KYC requirements and keep customers safe when allowing them to do this? Are you going to wait till everyone else is doing it, or are you going to learn how to do it properly and securely now. Are you asking your compliance teams to find ways of figuring out how to do this stuff safely?

It will take years for the mobile wallet and NFC to take off!

Right now Google and Apple are eating your lunch and you don’t even know it. You are getting ready to write off the one device that is most critical for connections and context with your customers in the later part of this decade. Someone else is going to own your customers, and as banks we’re going to be paying the likes of Google to include our branded card in their wallet, or our products and services and messages on their platform.

We already have to ask permission from Google and Apple to give our customers our App.

Don’t want to change! You will…

The fact is most of the last two decades we’ve been facing constant change, and no one organization has been able to resist the shift because customers decide how and when you’ll engage with them.

Customers have already decided they want their mobile device to be their bank. They’ve already decided that they want to discuss your brand and your service capability in the open community of social media.

Now it’s time for you to decide that you want to stay relevant to your customers. Or ignore the obvious and go away.

Transparency, Broken Risk and the Loss of Physicality

In Bank Innovation, Customer Experience, Economics, Engagement Banking, Future of Banking, Strategy on October 19, 2011 at 12:33

Recently I’ve been discussing with bankers, economists, strategists and futurists the future of the banking industry. At a time when we’ve got the likes of the “Occupation of Wall St” (#OWS) through to discussions in various camps about the very survival of banking as we know it, a question you might ask is how did we get here so quickly? 10 years ago, discussing the collapse of the modern day banking system and widespread loss of trust in bankers, might have been ludicrous, unthinkable – but today it is happening.

The New Normal is inherently unstable
As bankers most of us would have preferred if things had just stayed the same as they were, or at least returned to the ‘good ole days’ once the dust from the global financial crisis had settled. Instead we’re faced with talk of a “New Normal”, of increased volatility and of sustained uncertainty. There’s now a growing concern that a Greek default will trigger a crisis in the Eurozone, which in turn will bring on a new ‘great depression’. It is not lost on the public at large that this is a financial crisis we probably didn’t need to have. It is a financial crisis that was bought on by the ultimate in speculative investment behavior, the creation of financial instruments designed to create wealth and trading momentum from underlying, sub-prime debt that really should never have been readjusted as collateralized ‘AAA’ rated securities. So here we are today with so called blue-chip or developed economies which have higher volatility and risk, than so-called emerging markets. Since when did China and Brazil become better bets than the US as investments?

The perfect storm for a financial system in crisis is not just the failure of the banking system to self-regulate, or the default of sovereign nations in respect to servicing their national debt. The perfect storm is driven by three primary mechanisms that aren’t normally discussed as macro-economic factors, but are critical as part of a discussion around reforming the banking industry. They are:

1. Increased Transparency and Visibility
2. The Reassessment of the role of Risk and Regulation, and
3. The Loss of Physicality

Adjusting to a Transparent World
The response to bailouts, banker bonuses, new rates and fees structures, and to the financial crisis itself is indicative of the fact that bankers can no longer just assume that the public at large will trust that banks know what they are doing. How has the industry at large responded to this increased transparency? At first with incredulity, then with a defense of the indefensible, and finally with begrudging acceptance.

There are still many banks today, for example, who not only prohibit the use of social media in the bank workplace, but refuse to engage with end consumers in any really useful way through social media. In a world where dictators can be overturned, where public opinion is expressed in mentions, tweets, likes and fan pages, and where consumers can be as loud and effective as your most expensive marketing initiative – how do you adjust?

Understanding that you now answer to the public and you need to defend your positions with openness, logic and fair value, Brian Moynihan’s defense of BofA’s recent fee hikes shows a lack of nuance in this new, socially transparent world:

“I have an inherent duty as a CEO of a publicly owned company to get a return for my shareholders,” Moynihan said in an interview with CNBC’s Larry Kudlow at the Washington Ideas Forum… Customers and shareholders will “understand what we’re doing,”… “Understand we have a right to make a profit.”
Brian Moynihan, CEO – Bank of America

As a bank you do have the right to make a profit, but customers now understand more acutely than at anytime in history that they have rights too. It’s not that customers don’t want to pay for banking, it’s not that they are unreasonable; it’s that they now demand value and they are assessing that value, and exposing your shortcomings when you don’t meet up to their expectations.

In this way, what we need to do as an industry is better understand our value in the system. Right now we have trouble articulating that because we’ve become too historically focused on ‘banking’ as the system, rather than banking as a financial service to those that have the right to pay and choose. The balance has tipped in favor of the voice of the consumer.

There are bigger Risks than Risk
I was in a conference in Oslo earlier in the year and talking about the need for retail banks to adjust to serving their customers better, no matter when or where they needed banking, and a banker in the audience defended the need for a strict, traditional approach to physical KYC (Know-Your-Customer) because banking is first and foremost about ‘managing risk’ – at least that’s what he said. With our almost myopic focus as an industry on risk management and risk mitigation, we’ve perhaps missed the biggest risk of all – the fact that we are putting so much of the risk workload back onto the customer and the front-end of the business, that we’re starting to become a problem.

I’ve talked at length previously about the huge amount of time the front-end staff and customers spend in an attempt to reduce the potential legal or regulatory enforcement risk. When I, as a customer, am spending 50%, 60% or perhaps 90% longer doing a simple task like opening an account or applying for a loan than I did 20 years ago – do I see that as progress, or do I feel it a burden? Do I see such moves as a reduction of risk, or do I merely see it as an increase in complexity? In such a risk adverse environment, the bank is no longer serving the customer, the customer is serving the bank – and the customer is increasingly getting intimidated by the thought of having to navigate this complexity before he can get to the actual product or service he wants.

If you look at the biggest consumer shifts in the last 15-20 years, the biggest shifts have been driven around change in process or distribution that makes life simpler and easier. Here’s a few examples:

  • Mobile phone versus Landline
  • Google Search versus Catalog
  • Online Trading/Travel versus Broker/Agent
  • Multi-touch screen versus stylus/keyboard
  • iPad/Tablet versus PC
  • Kindle/eBook versus Paperbook
  • Online News/Streams versus Newspaper
  • Email/SMS/Facebook versus Mail/Telephone

The threat here is complexity, and invariably as we try to manage risk, we’re actually making customer facing processes more complex. This is bucking the trend of almost every other core customer interaction we’re seeing today.

The Loss of Physicality
I recently posted on American Banker | BankThink about my views around branches, checks/cheques and all things physical in banking. I suggest you read that separately, but a key consideration or thought in that article is as follows:

“The bank is no longer a place you go. Banking has becoming something you do. It is now contextual, and measured in terms of utility – how easily someone can use bank products or services to accomplish a task like shopping, traveling or buying a car or a home. The more a bank insists on physicality, the more it risks becoming irrelevant to customers who no longer cherish the traditional processes and artifacts. In just four years, that will be the vast majority of your customer base – not a marginal demographic, as some would prefer to believe.”

Conclusions
In this environment, retail banking is ripe for disruption. Why? Because instead of understanding the shifts around us, we’re digging in – levying fees, increasing complexity, and arguing that customers are just going to have to suck it up. After all, where else are they going to go?

Increasingly customers have a choice. Whether it is pre-paid debit cards, mobile wallets, PayPal, or other challenges to day to day financial interactions, the concept that as a regulated industry we’re protected from having to make the hard decisions and actually reform the way we work, is foolhardy.

We need to start working very differently…

Mobile Payments: More than P2P and NFC…

In Customer Experience, Mobile Payments on June 29, 2011 at 10:37

Today I’ve been in Beetsterzwaag, Opsterland, Netherlands, about 150 kilometers from Amsterdam at an offsite strategic retreat with the ICS (International Card Services) team. Initially part of Bank of America’s presence in the Netherlands, ICS today is an independent subsidiary of ABN Amro NV, but works in the provision of a range of card services around issuance, promotion, processing and so forth. ICS has around 3 million customers today, and the session we had was around the implications of mobile payments in the form of NFC, P2P and other initiatives such as cardless loyalty program implementations.

What emerged was a very interesting realization in respect to opportunities in the mobile payments ecosystem that hadn’t fully occurred to me until this planning session.

More than just a payment

While I’ve often discussed the contextuality of payments and the massive opportunities that companies like Google are trying to leverage in respect to messaging around payments (before, during and after the payment event), it is interesting to think about different payment executions. We need responsible partners in the ecosystem to start handling not just straight through payments, but multiple variations on a theme, understanding the various parties and implied contracts involved.

P2P Direct or Merchant one-off payment

The simplest payment journey to conceptualize is when you walk into a retail store and pay a merchant according to the cost of the purchase, or when you have a service event where you simply take your NFC phone and execute a live person-to-person payment. Today you can already use PayPal Bump to execute a live phone to phone or person-to-person payment, but in the future, I’ll just put my phone into send or receive mode for an NFC payment and the respective individual’s wallet will do the rest (discounting all the back-end complexities, of course).

PayPal is slated to do $3.1 Billion in Mobile Payments in 2011

This is a fairly simple execution – take a payment from one person, send to another via either NFC, bump or a wallet. We can use location services, authentication and NFC to simplify and secure the phone to phone interaction, or we can use an App like PayPal to transfer to a unique individual via their phone number, email address or similar. The ability to split payments amongst a number of individuals, such as paying for a bill at a restaurant would also fall into this category.

The value here is the simple execution of a person-to-person transfer without requiring adherence to the current bank-led wire transfer or ACH equivalent which requires a routing number, an account code, the bank address, etc, etc. The opportunity for NFC phone to an NFC POS or another NFC phone is also obvious.

The credit facility or installment plan

Another powerful in-store implementation will be the ability to offer a real-time credit facility to back a payment. It might be a line of credit, a personal loan facility or a 12-month, low-interest payment plan with regular monthly payments. The ability to offer you real-time finance options that are more competitive than using a competitors hefty credit card APR program is pretty compelling at the point-of-sale, and can steal you away at the most critical moment – when you are about to pay for a big ticket item.

Mobile offers payments providers this sort of contextual opportunity, which currently is too difficult or erroneous to do with a plastic card and traditional advertising offers. Give me an offer in-store and help me execute the line of credit in real-time. Powerful enough to get me to change payment partners right in the midst of a transaction.

The Contract Payment

In this scenario we may have an upfront payment, but the full transaction is only effected with completed, successful delivery of the required goods or services. In business we have constructs like an LOC (Letter of Credit) which facilitates such payment contracts, but in the individual merchant/service provider and consumer space, these sorts of payments contracts are implied and managed informally. However, there may be an opportunity for this to be managed in an semi-automated fashion through the payments ecosystem.

Whether it is time based for hurdle payments to occur as specific milestones are reached, when physical goods are delivered, or when a contracted service is rendered – there is an opportunity to simplify the payments journey by authorizing the subsequent payments via a mobile device or online.

Facilitating the platform

As we move increasingly to person-to-person electronic payments, the ability not only to execute an individual one-off payment, but also variations on a theme with either a payment agreement/plan or a underlying credit facility adds value to the P2P ecosystem.

Today we have the likes of PayPal working on P2P, individual merchants offering some payment facilities, but we don’t have an emerging player combining these different capabilities and relationships to create journeys supported by a range of more flexible, automated payment variations.

When you mix analytics, always on IP layer or the cloud, a mobile device, location and the ability to offer a variety of payment mechanisms, the future of payment journeys looks very, very interesting. Payment journeys offer massive opportunities for reinventing and simplifying the way we currently interact in this space.

Google Wallet is not about Payments

In Engagement Banking, Future of Banking, Media, Mobile Banking, Mobile Payments on June 6, 2011 at 02:27

Last week Google announced their long awaited NFC-trial for mobile payments. On the face of it, many perceive that Google’s play is an attempt to cannibalize the lucrative payments market, but if that was the case, why has Google not taken a share of interchange fees from Citi and Mastercard? In addition, Google is supplying contactless point-of-sale units to merchants participating in the upcoming NFC trial free of charge. Why on earth would they do that?

It doesn’t make sense

In early May the Smart Card Alliance conference held in Chicago, Wal-Mart’s Jamie Henry was asked directly about the retailers plan in respect to point-of-sale. His reply was telling:

“We’re interested in helping to migrate EMV to the U.S. market. We view it as a much more secure transaction, and we want to provide our customers with the most secure transactions in the market place,” Jamie Henry, director of payment services with Walmart treasury organizations (source: NFC News)

Henry has said that 100 percent of Wal-Mart’s terminals already support EMV cards. However, when asked recently at the Smart Card Alliance Annual Conference about the role of NFC or contactless technology in the greater POS environment in the US, Henry was reported as saying

“There’s no business case for NFC yet”

Many bankers take a similar stance in respect to mobile payments support for NFC phones, stating that until contactless point-of-sale terminals have broad enough distribution, customers won’t be able to make use of their NFC phones and thus the expense of rolling-out a trial and investing in the supporting technology would be premature.

So why would Google, who admittedly have some pretty smart people in their team, not only invest in an NFC-trial, but also give away NFC point-of-sale terminals free of charge to partner merchants?

Maybe it does make sense

The thing is, Google sees the big picture.

NFC is not about payments modality alone. It’s not simply the shift from chip and PIN or contactless plastic to contactless mobile payments. It’s about what the mobile phone can do as a payment device that a plastic card can’t – it can give you context.

For example. The number one enquiry to retail banking call centers today is still “What’s my account balance?” Combining that piece of information with a payment device gives you a very powerful context for your everyday personal financial management.

If you are focused on a savings goal, I can show you the potential negative effect of making a big ticket purchase.

If you are at a retailer about to use a competitor bank’s credit card, I can offer you a no-interest payment plan through my bank.

I can tell you if you purchase that big flat screen TV that you won’t be able to make your mortgage payment due in the next 3 days.

I can offer you a really great deal at a retail outlet that you just walked into or you are walking past.

Google Wallet is simply a platform for Payment-based marketing

Google has worked out that the context of payments is perhaps the biggest advertising market ever to emerge, far more impactful and lucrative than search-based advertising. This is about offering you compelling, relevant and timely messages that improves your service experience in-store. This is about positive behavior on the part of your service providers that produces extraordinary loyalty through relevancy and responding to your behavior in a way that benefits you day-to-day, not just when you go to the bank to ask for something.

The future won’t be written by banks and marketing organizations that are passive. It won’t be written by marketers who broadcast message after message hoping you remember a brand when you want to make a purchase.

The future will be written by organizations who know you so well that they anticipate your needs, make it very simple for you to capitalize on the relationship, that saves you money and respects your time and privacy. Trust can be earned back, but it is about me trusting you enough to receive your offers and you not burning that trust with irrelevant direct mail, newspaper ads and TV commercials.

The future is messages wrapped around the context of a payment, and Google wants to own that space. It doesn’t look as if there’s really anyone ready to challenge them on that front.

Whatever you think of Google Wallet, it’s clear they have probably the most compelling business case of all for pursuing NFC payments, and it has nothing to do with competing with banks, but everything about owning the customer.