I’ve been thinking a lot about how payments and payment-related technologies fit into the emerging world of multi-channel commerce or omni-commerce as some people call it. When a lot of companies describe their omni-commerce strategy, they are usually talking about recognizing customers across channels and being able support a sales cycle that starts in one channel and finishes in another.
Instead of parallel channels (store, online, call center) I think a better metaphor is to imagine a funnel where customers move through a wide area, near area, and localized experience right up to the point where it gets personal. At any point along the journey they can consummate the purchase and move on. But often times, one step leads to the next.
Here’s how I think about each stage cut by some of the relevant disciplines that are being brought to bear in the stage. The related technologies and techniques are not exhaustive. I’m sure I’m leaving off your company or your favorite payment method. I’m just trying to illustrate what fits where. It’s one of the things that consultants compulsively do!
Wide Area Retailing – Customer is at home or work
Near Area Retailing – Customer is on the move or in the neighborhood
Local Area Retailing – Customer is in the store
Personal Area Retailing – Customer is ready to checkout
* New POS (EMV, Contactless, Bluetooth LE, QR Code, NFC, Pay by Face, etc.)
* New Cash Register (tablet as cash register, mPOS, clerk in aisle)
* Kiosks (Order entry, bill pay)
* In-aisle checkout (mobile based, self-scan and pay-in-aisle)
* Digital receipts (emailed, archived, offer enhanced)
* Payment methods (Cards, Private Label, Gift Cards, PayPal, ACH Cards)
* POS Checkout (Cards, PayPal, Google Wallet, Softcard (Isis), Apple Pay, CurrentC (MCX))
Does this framework make sense? Did I miss any big areas of discipline? Drop me a line and let me know what you think.
We’ll be talking about a few of these emerging technologies and techniques at our next “Innovation in Payments” workshop being held December 11th at the Computer History Museum in Mountain View, CA. See the agenda here. I’m particularly excited about what we’ve pulled together on Tokenization A-Z, Apple Pay Tear Down, and Beacons.
Please join us if you can. It should be fun!
This piece was written by Glenbrook’s Russ Jones.]]>
Like many payments industry insiders, we have been following the recent impassioned industry dialog about the relative merits of Apple Pay and MCX’s CurrentC wallet with a combination of amusement and despair. The barbs and accusations being exchanged by the rival camps in this technological holy war between NFC and QR codes suddenly reminded me that many years ago I invested a big part of my academic career to the field in social psychology. I had a particular interest in the sub-discipline of Attribution Theory, which “deals with how the social perceiver uses information to arrive at causal explanations for events.”
In layman’s terms, attribution theory is concerned with how and why ordinary people explain events as they do. Two major areas of contention between Apple Pay and MCX reveal interesting lessons about the way information is released affects the perceptions of observers. Let me explain.
Case 1 – Watching the Clock. An initial coalition of merchants first announced the formation of MCX publicly just over two years ago, promising to bring to market a mobile payment and marketing system built directly by and for merchants. I think it’s fair to say that MCX has been the object of a good amount of scorn and skepticism over its “failure” to release a tangible product since that time (though we are assured that employee testing of the CurrentC wallet is now underway and that a full release is planned for the first half of next year). Changes in its management team and vendor set probably played a role here – and coalitions are never the fastest way to market – but the passage of time has led many observers to question the commitment and capability of MCX.
By contrast, Apple Pay sprang to life in September, seemingly without warning. The product arrived rather fully formed, with a nearly comprehensive roster of credit card issuers and networks on board, and with acceptance in place at a significant and growing list of merchants (thanks to its use of contactless/NFC technology). Only after questions were raised did we learn that Apple Pay had, in fact, endured a gestation period of about two years in stealth development, almost the same time period that MCX had been working on CurrentC. Perceptions were clearly shaped by this difference in announcement strategy – Apple appeared to be performing magic in real time, while MCX’s publicly ticking time clock seemed to cast doubt on the seriousness of its intentions. Yet both had been hard at work for about the same two years.
I believe MCX is playing a “long game” and there are likely good reasons for its deliberate pace, but the lesson here is that in the court of public perception, credibility is boosted by the timely fulfillment of one’s announced intentions (by the way, has anyone heard a firm release date for that new Apple Watch I’ve been craving?).
Case 2 – The Takeaway. Another public dust-up illustrates the importance of managing perceptions and the fact that “how you do something” can be more important than “what you do.” It came to light recently that MCX member merchants have agreed to focus on the CurrentC application and not engage with other digital wallet products (including Apple Pay) for a period of time. We had noted that in recent months (or even earlier) that MCX members like 7-Eleven and Best Buy had ceased their acceptance of contactless cards and tokens in their stores; it is that same contactless technology that allows the acceptance of NFC-based wallets like Apple Pay (and others including Google Wallet and SoftCard). Following Apple Pay’s launch, Walmart (another MCX member) confirmed that it would not be supporting Apple Pay in its stores.
However, MCX members CVS and Rite Aid, which had been accepting contactless card transactions for several years, continued to support contactless transactions and thus actually accepted Apple Pay transactions in the first few days after its launch (inadvertently, I suspect). Once aware of the situation, the two drug chains disabled their contactless functionality, eliciting ridicule from the Twitter-verse, and eventually the popular press, for what appeared to be a hostile action against customer choice and Apple’s noble crusade to address the electronic payments plight of mankind.
Striking to me is the intense focus of this criticism on CVS and Rite Aid, while little has been said about the merchants who previously disconnected (Best Buy, 7-Eleven) or even publicly voiced their opposition (Walmart). Likewise, dozens of others MCX merchants have largely escaped attention, although MCX’s exclusivity provisions have been widely discussed. What of the hundreds of merchants who support neither Apple Pay nor MCX? They are simply not in the discussion (gratefully so, I’m sure).
The lesson to be gleaned? I think the act of disconnection is being judged as far more aggressive, hostile and anti-consumer than the passive act of non-participation, even though the user impact is identical. In other words, “we haven’t put it in” is viewed in an entirely different way than “we pulled it out” even though the customer impact is the same (“Please just swipe your card”).
* * *
My instinct is that this discussion is mostly an inside debate among a group of obsessive payments professionals who have waited most of a decade for this moment of mobile payment epiphany (my kind of people, to be honest). While CVS and Rite Aid clearly endured one difficult 24-hour news cycle, payments really is a “long game” and the ultimate success of Apple Pay and CurrentC (and other digital wallets) will likely be determined by their ability to assemble a value proposition that offers a high quality shopping experience, delivers value for money, and provides noticeable convenience in the checkout process. Still, the events of the past couple of weeks represent a useful reminder that perceptions truly matter and are usually worth managing.
This post was written by Glenbrook’s Bryan Derman.]]>
Last week I was in Victoria, British Columbia doing one of our Glenbrook Payments Assessments. In anticipation of my trip to the North American Land of Chip andPIN, I had both a Visa and an Amex card reissued in the chip format. Neither of my issuers supported PINs on my credit cards, so I was informed by both of the issuers that I’d be in chip and signature mode.
When in Canada, I used my cards many times and my main impression was that this chip and signature stuff was stupid, and it would have been so much easier to have been assigned and using a PIN!
Had I had a PIN, I would have been handed a terminal (which had my card inserted by the clerk and an amount keyed in), accepted the payment, keyed-in a PIN and handed the terminal back to the clerk — done! As it was, we instead had to go through this awkward protocol of me receiving the terminal, handing it back then receiving another slip of paper and pen, finding a free surface on which to sign it, then handing it back to the clerk. To me, that felt like twice the work of the PIN transaction!
I’m sure there’s some system preparation required, but I think that for the most part, U.S. issuers are going with chip and signature in the near term to help customers make the transition to chip cards feel as familiar as possible.
Now, as we say in our boot camps, those of us in payments need to exercise caution when extrapolating our perceptions to the wider population as a whole, but my advice to issuers is: let’s make the full leap now — chip and PIN — and get it done with. I think consumers are quickly going to tire of this fumbling around with pens and signatures stuff!
This post was written by Glenbrook’s Jay DeWitt.]]>
In this interview with Glenbrook’s founding partner Carol Coye Benson, we discuss the prospects for a faster payments system in the US. Responding to the October 22 announcement by The Clearing House, Carol expresses her caution and hope for ways to accelerate replacement of today’s system for credit push payments.]]>
Wikipedia says, “Bitcoin is a software-based online payment system.” But what sort of payment system is it? We get this question all the time when we talk about Bitcoin in our workshops.
At Glenbrook we like to start each Payments Boot Camp talking about payments systems fundamentals and the common attributes that can be used to understand and position any payments system. In every workshop someone will raise their hand in the first ten minutes and ask about Bitcoin. They are always thinking that Bitcoin is so revolutionary it must somehow invalidate how to think about payments systems. We love this because Bitcoin doesn’t refute how payments systems work — it illustrates and reinforces how all payments systems work. Let’s look at some of the specifics:
Sender and Receiver. Slide one in our workshop defines a payment as an exchange of value between a sender and a receiver, denominated in a currency. So far, so good for Bitcoin. Not a government-backed (or “fiat’) currency per se, but a currency nevertheless.
Virtual, Not Centralized or Distributed. We go on to define a payments system as what manages payment between end parties. Payments systems are usually characterized as centralized (e.g., Visa), distributed (e.g., checks), or virtual (e.g. cash). Designed as a form of digital cash, Bitcoin is clearly a virtual payment system — one that lies on top of the global Internet instead of laying on top of the local economy.
Open, Not Closed. We also talk about the importance of distinguishing between open loop and closed loop payment systems. Here, Bitcoin is best described, I believe, as an open loop system. It is not a bank transfer system (which is sometimes a synonym for an open loop system) but it uses the same relationship model as an open loop system –– meaning that end parties can exchange value in the payments system without sharing common relationship with an intermediary. I can use my favorite Bitcoin provider, you can use your favorite Bitcoin provider, and we can exchange Bitcoins without anything else in common. There may not be an actual “loop” involved but it still sounds open to me. Plus participation in Bitcoin is open to anybody or any business that wants to provide services within the ecosystem.
Glenbrook likes to stress that all payments systems can be defined by three core groups of functions – transaction processing, brand management, and rule making.
Bitcoin’s rules are fairly straightforward and include simple ideas like:
It would be interesting to actually write out the Bitcoin operating regs! They wouldn’t go on for a thousand pages, for sure, but there would be more rules than you might think. And in contrast to most payment network rules, every Bitcoin rule is inherently enforced in software.
When Glenbrook talks about payment systems, we also differentiate between “push” payments and “pull” payments as way to indicate whether funds transfer is initiated by the buyer or the seller. Bitcoin clearly is a push payment system with no way for sellers to pull funds out of Bitcoin wallets on a pre-authorized basis. There are lots of other parameters that can be used to compare and contrast payment systems – ownership, control, regulation, processing model, settlement mechanism, economics, liability, etc. More than we can possibly get into here.
So back to that original question. What sort of payment system is Bitcoin? I’d say it is most similar to an open loop payment system that uses the push model. It offers close to real-time processing between end-parties and uses real-time gross settlement to complete each transaction. It is a virtual payment system with no centralized ownership or point of control. The rules of the system are expressed and enforced through software. Within the ecosystem, system economics are based primarily on currency conversion and secondarily on transaction fees. The periphery of the ecosystem is regulated on a country-by-country basis, the actual Bitcoin payment transaction is not.
If you are interested in learning more about Bitcoin, we have a full-day workshop coming up this fall. Our “Bitcoin: Basics and Beyond” workshop will be offered November 19th in New York. It will be a great opportunity for you to learn more about Bitcoin and the use case specifics that we see across all the major payment domains. We also plan to spend a lot of time in the workshop positioning and handicapping the major players in the Bitcoin ecosystem.
Please join us. These workshops are designed for interaction. It should be fun!
This post was written by Glenbrook’s Russ Jones.]]>
Realtime, consumer-facing authorization of card payment transactions has been available for some time but few of us have it offered to us by our issuers. Today, there’s a number of technology providers selling truly realtime notifications and two-way approval requests based on the live authorization stream. Glenbrook’s Russ Jones takes us through what’s on offer while George gets grumpy over what he’s got today. As more consumers become thorougly alarmed over data and privacy breaches, this could be the time for issuers and independents to offer the “worried” consumer more control and a strong role in fraud management.
Companies mentioned in this episode include:
TSYS Spend Controls for consumers and corporate card administrators
Red Giant Mobile]]>
Ecuador’s Central Bank has embarked on an ambitious course to launch an affordable and widely available mobile payment scheme. In fact, it will be the national wallet. With some uncertainty, it appears that Ecuador’s initiative may be the second central bank effort to enter this space. Jordan’s central bank has launched “JoMoPay”, but for those of us who don’t read Arabic, details on the initiative are less than sparse.
But as I return from Quito and the M2Money Andean conference, there are details to share on Ecuador’s effort. The central bank will be both the owner and the operator of the scheme. They chose a proven mobile payment platform that will lend both capability and experience to the new initiative. The vision includes building out an ecosystem that includes P2P, top-up, B2B, cash in and cash out, in-store purchases, and electronic receipts. The plan is to link the mobile payment platform with the banking platform so that mobile accounts can receive funds from and send funds to bank accounts.
The central bank doesn’t have a retail presence so it is inviting commercial entities with large networks to become “macro agents” in the distribution network. They will receive a fee for specific transaction activities. We’re likely to see large retail chains sign on as this will encourage customers to visit their stores and lower the retailer’s cost of payment handling especially with respect to cash.
Some readers will note that I have mentioned neither the banks or the telcos so far. Most mobile payment schemes have either a telco or a bank, sometimes as partners, as the scheme owners. In Ecuador, however, mobile payments will be carrier agnostic. The central bank is purchasing airtime from the three networks in order to process the USSD-based text messages employed by the mobile payment platform. The smaller cooperative banks seem to be open to acting in the macro agent role but I’m not aware that any bank has signed on.
There isn’t a great deal of opportunity for either the mobile operators or banks in the new scheme. The carriers do not have a large retail footprint of their own, relying on affiliate agent networks to sell their air-time plans. And while the banks do have branches, the revenue and the cross-selling opportunities are barebones. Regulations also prohibit any other party from issuing e-money.
What’s truly impressive here is the cost structure for most payments. Sending a transfer below $10 will cost $0.02, and a transfer up to $50 only costs $0.04 (all figures are USD, the official currency in Ecuador). And as the only wallet in the country, all mobile payments are interoperable.
This is pretty heady stuff. You’ve got national regulatory support for a mobile payment initiative that is truly affordable – even low income segments should feel comfortable paying dos centavos to make a payment that might otherwise have been made in cash. It should be easy to use and, because it’s interoperable, ubiquity should be reachable.
These are early days, of course. The new wallet is just emerging from pilot testing. Perhaps the real test here is whether or not participation by the telcos or banks is a necessary ingredient for a successful mobile payment implementation. Will this be a recipe for lackluster use? Or might the top down, single source approach be a viable path to affordable mobile payments? Is a program with such low fees sustainable? For sure, Glenbrook will be following how this program develops. Fascinating stuff!
This post was written by Glenbrook’s Elizabeth McQuerry.]]>
Join George Peabody in a conversation with Stockpile’s Dan Schatt on virtual banking, innovation, and the future of PayPal. Dan is former GM of Financial Innovations at PayPal and the author of Virtual Banking: A Guide to Innovation and Partnering, a new book that includes a chapter on Bitcoin and math-based currencies by Glenbrook’s George Peabody. We also discuss Stockpile’s innovative approach to equities ownership, a business model that will be fascinating to watch develop.]]>
I’ve been thinking about what the future of the point of sale environment will look like from a consumer perspective. Of course, 10 years ago, we all knew what it was going to look like: consumers tapping their mobile phones to Near Field Communication (NFC) equipped POS terminals, transferring card data that looked a lot like magnetic stripe data. The card issuers loved the vision, the card networks loved it too, and the phone providers (who owned the space on the phone) were dreamy-eyed just thinking about all the new revenue.
Google, and its Android phone operating system (53% U.S. phone share) even signed up — first with an approach that aligned with the original Secure Element based design and later with the Host Card Emulation approach, which wrested NFC from the sole control of the carriers. But Apple (42% U.S. phone share) remained silent.
And our belief in an NFC future waned.
In the meantime, the Merchant Customer Exchange (MCX) conceptualized CurrentC, a QR code-based solution supported by the very largest merchants in the U.S. And some MCX merchants, like 7-Eleven and Best Buy, were rumored to disable NFC functionality at their POS. All the while, a whole ecosystem of wallet providers emerged, using a variety of technologies to fuel merchant and third party apps like the Starbucks wallet, TabbedOut and Level Up.
So we hedged our bets on NFC.
And then Apple spoke: ApplePay.
In a shining example of what Apple does well — making complex things easier — Apple deftly orchestrated the existing payments ecosystem to embrace their new wallet design and to pay for the privilege! Suddenly, NFC was back, in a big way!
So, storyline aside, what will the payments environment look like in the future?
First and foremost, it will retain all the basic functionality we know today — supporting a card swipe and, increasingly an EMV read. The card acceptance environment will need to be “backwards compatible” for a long time, and most people will still be carrying cards to make purchases (with estimates of about 10% mobile payment penetration in 5 years).
The big question is, will we have two main mobile wallet camps (NFC and Non-NFC, championed by their respective camps), a single payment environment, when one or the other technology “wins” the wallet wars via consumer adoption, or a new omni-environment, where acceptance of many wallet types and technologies is enabled? My bet is on the last option. Here’s why the omni option will prevail:
As my colleague Carol has pointed out, the topic at hand is mobile commerce, not mobile payments. Consumer adoption of any wallet approach is going to be driven in part by convenience (and ApplePay wins here, with their Touch ID phone unlock), and by the ability of the wallet to drive compelling, timely, relevant ads and offers to consumers. No one has gotten that right yet. That means there is going to be a lot of consumer experimentation, testing which wallet and approach best works for them. We are very early into the hard work needed on ads and offers to make this thing really shine. (In the meantime, by the way, the credit card issuers will continue to play the customer loyalty game via the card-based swipes, taps and EMV “dips” where their interchange-based rewards programs attract the mileage and cash-back hounds.)
And lastly, don’t forget that just because MCX/CurrentC is saying “no” to NFC now, doesn’t mean they can’t change their mind and reconcile with the NFC crowd if consumers flock to that technology.
If you’re a merchant, I think it’s a tough time to be making POS decisions; NFC and contactless seem a no-brainer, but do I bet on QR-code solutions too and spend the extra bucks now? Maybe the other big event in POS solves that question for me: as merchants increasingly want to serve customers in aisle or tableside, we’ll see the emergence of general use tablets (iPads and Android) as well as special use devices (like Ziosk) that will have the flexibility to handle — or at least add on — new payment technologies as they get served out to consumers far and wide.]]>
Apple Pay’s announcement has brought attention to biometrics and their role in payments security and to the broader, if amorphous, concept of online identity. Steve Wilson of Constellation Research and Glenbrook’s George Peabody discuss local and cloud-based biometrics, identity attributes, and the vexing challenges of privacy.]]>