Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewsquare wallet, coin card, brett king and payments channels
Brett King, of Bank 1.0, 2.0 etc. fame, recently blogged about the demise of Square Wallet and prophesized about other products that captured some buzz in the payments space in recent months. I thought his comments were spot-on, and wanted to share some of them with you, adding my own "color" to the mix.
Mr. King's thesis is summarized in one key sentence from the blog, with which I agree wholeheartedly: "The value of the Square Wallet experience versus the card swipe wasn't enough of an improvement to warrant a behavioral shift in payments."
The conversations I hear at our forums about payments revolve around incremental improvement of pure functionality and do not focus on achieving a meaningful change in the overall customer experience.
King continues, "Google wallet has faced a similar hurdle. Shoving a plastic card proxy in a mobile wallet is not enough. Offering me an iteration on swiping card, or offering me a better card proxy doesn't change my behavior".
King cites Starbucks as a successful behavior change model. "Starbucks, who theoretically was going to be Square's next big break as a US retail partner, hasn't ended up rolling out Square across North America because their own solution to the mobile payments problem has been far more successful at changing behavior than Square Wallet's approach.
Today 10 million customers use Starbucks' mobile payment and loyalty app program with more than 5 million transactions every week in the US. This has resulted in billions of dollars of funds deposited onto Starbucks cards (or their app) annually and Starbucks claiming they made $1billion in margin just off mobile payments alone last year. But the Starbucks App offers a more compelling reason to switch payment behavior then just a bar code/app triggered payment.
The Starbucks app, while allowing a frictionless in-store payment, also rewards loyalty, provides access to free deals in-store (like music and app downloads), and has a regular enough use case that if you frequent Starbucks it is an easy enough adjustment to make. The value exchange or trade-off is clear. Your coffee doesn't cost you any more. In fact, most probably it will cost you less over time, but while you're standing in line waiting Starbucks is engaging you with other elements via the app and giving you a number of strong incentives to use it.
The key is that Starbucks' mobile app value exchange is part of an overall brand engagement model, and not just about the payment. This is where the future of payments behavioral shift lies - in engagement. There needs to be more incentive than just an easier payment, because the current payment models aren't that significantly broken in-store."
King concludes: "Engagement is the future of the day-to-day payment experience for merchants, issuers and banks... The likes of Square and Coin Card are not trying to solve the engagement problem, they were/are trying to solve a payments friction problem - a problem that realistically isn't bad enough to warrant a behavioral change for most consumers."
Wise words... For years brands such as Wells Fargo, Frost and Umpqua were touted as examples of banks that focus on the experience. As we transition to different payments channels we need to reevaluate the implications on our customers' experience and solve for customer engagement in a different way.
Starbucks gives you many reasons to use their app, including music downloads and other content that has nothing to do with coffee and has everything to do with the brand. Any bank in the US, large or small, can shoot for the same goal and achieve it IF their brand experience is crisply defined and the app is designed to achieve that very experience on the customer's terms, while providing value-add well beyond the functionality itself.
Case in point: credit cards have now proliferated way beyond the traditional plastic and into stainless steel and even titanium. While durability is a factor, many customers simply like the feel of the card, its strength and smoothness. So they take it out of the wallet first. This tactile experience has nothing to do with payments - and everything to do with the customer experience. It's also a perfect example of an edge that any bank, regardless to size, can achieve. I believe community banks are waiting for their larger brethren to innovate and then be "quick followers." Whereas, in my opinion, they can and should work with innovators outside our business to give their customers a valid reason to change their behavior and utilize their bank's self-service channels. It wouldn't be prohibitively expensive in many cases, and it's a space where creativity rather than muscle can make all the difference.
Phone apps have changed the world. They have brought back incredible specialization, a move away from aggregation. Apps are incredibly specific; for example, there's one just for pastry shops in Paris. The person who initiated it used this app as a launching pad to a host of apps, all highly specialized. He found his niche and started playing in it. You should do the same. Become digitally relevant. Start small and give it a try; see how customers react and modify until you hit it right. Even a specific feature such as the ability of the customer to turn a card on and off can make a meaningful impact on customer behavior and bank selection. There is no need to over-engineer the product. Make it simple and they shall come!
By improving the customer's entire experience in creative and innovative ways, community banks can provide incentives for consumer's to interface with them again and again.