Category Archives: Financial Technology

Apple Pay is great but I will still need to carry my wallet

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I have to admit that I was GLUED to my computer screen this morning during the Apple announcement. It still blows my mind that technology and bandwidth can’t deliver a smooth online feed to a live event. What was up with the live translation feeds being clearly audible to online viewers? ANNOYING! Fortunately the live stream technical team saw the multiple tweets and fixed the problem.   Unfortunately my viewing experience was very choppy and I got word of the announcement in real time more from Twitter.

As predicted, Apple entered BIG into payments with Apple Pay and into wearables too with Apple Watch too.  Apple’s recent announcements around partnerships with Visa, Amex, MasterCard etc were clear leading indicators of the entry into payments. I am very excited about Apple’s payment system and how it will help drive mass consumer adoption of a true mobile wallet. Yean! However, we are a ways away from Apple driving mass adoption of their wallet.

Screen Shot 2014-09-09 at 4.14.30 PMApple Pay will be available on the iPhone 6 and Apple Watch devices for it requires technology included only in this hardware. Yes, the iPhone 6 and Apple Watch will set sales records and proliferation will be fast across the globe. However, Apple Pay will not be available on legacy devices that will slow down the adoption rate. Additionally, Apple Pay will be limited to major retailers including Whole Foods, Macy’s and Toys R Us. Yes, over 200,000 stores will be accepting contactless payments through Apple Pay. I’m sure Apple is busy negotiating partnerships with several other major retailers as well and the footprint will grow even more.

Apple Pay will not be available to stores outside of this Apple negotiated big box retailer network. Consumers will not be able to truly leave their wallet at home. Apple’s partnership with IBM, though, will help Apple Pay expand its footprint to more business….but it will take time. As I mentioned in a previous post, the IBM partnership provides Apple access to many banks and financial institutions. These FIs have business banking customers and frequently provide merchants with POS payment systems. Now that the iPhone 6 includes the NFC chip, Apple will be hot to engage IBM on pushing the distribution of NFC enabled payment terminals to their banking customers. Only until NFC enabled payment terminals are more widely distributed will Apple gain ownership of the mobile wallet.

Clearly Apple has the hardware, technology and strategic partnerships to create the closed loop necessary to build a ubiquitous payment system. It’s a matter of time before this happens. However, NFC technology and devices are not Apple technology and can be easily licensed by competitors. Yes, Apple has leap fogged into the lead on building a mobile wallet, but the competition did see this coming. Apple must continue adding nationwide retailers to their network to enable consumers to use Apple Pay. The first mover advantage will be key and the network affects will take hold. If a competitor is to provide another offering for consumers and merchants, they better act FAST. Samsung and Loopt I’m sure are having lunch right now.

On a side note, I am amazed by the level of talent Apple employs for their advertising and marketing efforts; JT, Jimmie Fallon and U2. A list talent meets A + list company. I’m sure Apple pays a large portion of the marketing budget for these names. Or maybe it’s vice versa! Let this be a reminder of the high margins Apple receives on every product they sell. Impressive.

 

 

 

 

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Apple poised to deliver mobile payment system that just works

Screen Shot 2014-09-04 at 9.06.31 PMI started off my week with a trail run and then a quick stop off at a downtown locally owned coffee joint. The coffee shop is filled with laptop toting Silicon Valley types, local Lululemon wearing trail bunnies and a myriad of salon and spa employees on their way to bill $150 for a 1-hour deep tissue massage. I stood in line and waited to pay for my overpriced cup of coffee. I’m an old school guy and paid in cash while most people paid using their debit/credit card. It seems strange to me to pay for something so cheap with plastic…but, hey, I AM old school right? However, of the 10+ payment transactions I saw, no one paid with his or her phone using the NFC feature of the payment reader. Now don’t panic…you are not the only one who has not seen the NFC technology in action. Very few merchants even have a card reader that includes NFC technology. Forbes magazine ran a piece in mid 2013 that asked the question if NFC payments were dead. After all, the only major retailer to include NFC technology at checkout is Walmart…and adoption is LOW. However, this will most likely all begin to change on September 9.Screen Shot 2014-09-04 at 9.01.31 PM

Apple yet again has the media and its loyal customer base all in a flutter with what will be announced at their big event on September 9. Of course everyone is super excited about what’s happening with the iPhone 6 and the expected announcement of their first wearable device. There is also buzz around a key feature of the iPhone and wearable – will these devices enable customers to make payments for goods and services at retail? Will Apple finally break into the payments space and push mobile payments into the mainstream? This buzz, of course, is mostly coming from technology people, but will have massive implications for consumers and merchants now and in the future. A big shift is coming.

Reports from the Financial Times and tech bloggers indicate that the iPhone 6 will include a near field communication (NFC) chip to enable mobile payments. Adding fuel to the mobile payments speculation, CNET recently reported that Apple has forged partnerships with all the major credit card providers and payments networks including American Express, Visa and MasterCard. Wow, these relationships are great leading indicators that Apple is poised to bring a true mobile payments tool, or wallet, to the mainstream audience. Color me stoked.*

Looking at this a little more closely, however, the media focus is on the consumer side of Apple’s payments technology.   But wait…I thought NFC payments was dead with very few retail shops and big box stores offering this form of payment? Is Apple setting itself up for a black eye if their payments tool is not accepted at most locations? Did Apple only think of the consumer side of this equation and totally miss the merchant? Not at all. Apple thought through this quite nicely and I’m surprised there is not more technology media focus on this strategic partnership that ties it all together. Once again, Apple has proven the importance of controlling the complete ecosystem to create products that revolutionize consumer behavior. Here’s how.

Screen Shot 2014-09-04 at 8.55.09 PMApple announced a few months back a strategic alliance with Big Blue. I provided my point of view in an earlier post on how the Apple/IBM partnership will affect the banking industry. This partnership will also affect the technology these banks provide their business banking clients (merchants) at point of sale. For example, the infusing of Apple technology into the bank provided payment terminals will enable merchants to collect payments using NFC in addition to accepting card swipes. Apple strategically addressed the biggest roadblock in enabling adoption of mobile payments – how can merchants accept payment from a mobile device without undoing the POS payment system that is already in place.

The Apple/IBM relationship enables Apple to create the complete system required to connect consumers with merchants through a single payments technology. No other technology provider can do this. However, Samsung sees this happening and is quickly putting together their “me too” plan for the Android market. There are rumors flying around that Samsung is partnering with Loopt to connect consumers to merchants through one payments system as well.

There will be a lag between what Apple announces around payments and the launch of the complete ecosystem.   However, given the amount of iPhone users who already have their credit card on file in iTunes, the major credit card providers will be HOT to get the NFC card readers in place to enable card use in the online and offline world. We can expect a lot of pressure on the banks to get the NFC enabled payment terminals out to market quickly.

How we pay for things will be very different a year from now. Now if Apple can solve how to securely store my driver license, loyalty cards and annual memberships cards as well, I can finally stop carrying around my wallet!

* I’ve sprinkled many “Easter Eggs” through out my posts to make reading more fun. These eggs include cultural references from the ‘80s, ‘90s and present day. If you get the reference, send me a tweet (@ericdunstan) with the answer.


Marketing Advice for Start-ups: Know your customer first

An e-commerce start-up asked for my thoughts on how the company should be thinking about marketing and what could be done with almost no marketing budget to drive acquisition and purchasing activity. I had to chuckle when I was asked for this input for yet again it demonstrates where in the priority list most business people perceive marketing to be….at the bottom. Most start-ups build a product, get it up and running and have a rough idea of how it will generate money. Unfortunately, most business leaders look to marketing as the tool to help grow the business…after the product is launched.

4PsGraphicI am using the term “marketing” very loosely here. Marketing is mostly understood as all the tangibles – online, website SEO, paid search, social media, etc. Little regard is given to the core marketing principals of the 4 Ps, for example. When most people hear the words “the 4Ps” they think about the OPP song from the mid 80s and NOT the critical marketing concepts of Product, Price, Place, Promotion. Clearly most people get stuck on the Promotion part….which is putting the cart before the horse.

I encourage all start-ups who approach me for marketing help to stop, take a deep breath and evaluate their business and product through the lens of the 4 Ps within the context of a few additional guiding principals; defining the target customer segment (s), understanding why the customer segment wants to buy the product and defining how the customer evaluates/buys the product.   Now to the start up leadership who feels time pressed, this sounds like a lot of work to do for marketing.

Working through this process and understanding the customer is CRITICAL to the success of the business. Leaders may find their product does not meet the right customer need or that a different customer segment should be targeted. This can be a tough nut to swallow for it means reworking the product that was just launched. Start up leadership must get these marketing concepts right before any marketing plans or programs can be developed and launched with a successful outcome.

One of my mentors and managers at eBay developed a structured document called a Unified Marketing Brief that helps guide business units and companies through this form of critical thinking. The document requires debate and thinkin around target audience (segmentation), marketing objectives, key success metrics, competitive industry analysis and market research. Once these elements are addressed, discussion is encouraged around brand and how to position and message the product and key benefits. I’ve guided business units in the e-commerce, identity protection and financial technology verticals through this process with very successful outcomes. Yes, it’s a lot of work and it takes time. However, once completed, business leaders now have a road map to guide marketing planning and tactical program development.

Buying Cycle GraphicI found another great example of a structured approach to startup marketing by April Dunford on Rocket Watcher . She provides a great approach to mapping marketing tactics to the buying process of each target segment.

April also takes the concept one step further by discussing the importance of testing, improving and understanding the root cause of the tactical failure. Too often companies don’t get the immediate tactical response rates desired and make the wrong assumptions as to why it happened. Unfortunately these wrong assumptions follow to the next tactical program…that has the same poor results. April makes a great point in encouraging marketers to understand the WHY to improve tactics. Check out April’s recent presentation to learn more at:

Now let’s assume that most of this strategic marketing work is in process and marketing tactics are launched. Is the marketer’s job done? Obviously no. The work has moved into a different phase of continuous improvement based on customer feedback. Start-ups must have a mechanism in place to capture and listen carefully to customer feedback. The mechanisms can be customer support teams accessible by email or online chat, twitter feeds or by call centers.

Listening to customer feedback is critical…but converting the feedback into actionable product improvements is another. This is a topic for another post! Does your start up have these mechanisms in place? I bet your competition does.

 

 


Now hear me out,the Apple/IBM partnership is BIG for mobile payments

Apple IBM PartnershipI have worn many hats working in the financial technology vertical including business development, product, marketing and partnership development. In fact, I managed the IBM partnership for a PFM technology provider I joined in 2010. IBM played an important role for the PFM technology provider for it opened access to many of the financial institutions that run on the IBM technology to support core, online and mobile banking systems. Specifically, the PFM solution ran on IBM’s Websphere mobile software and on the IBM DB2 data base software. The software compatibility proved to be a strong selling point during business development discussions with banks that ran core legacy banking systems on Big Blue.

I learned fairly quickly that one of the biggest objections from mid-tier and larger banking executives was, “love your technology….but it MUST run on our legacy core and online banking systems.” Fortunately for us, we overcame this objection by playing the “we run on IBM” card to continue conversations. Unfortunately for IBM, these legacy limitations prevent many financial institutions from launching new tools and features that help consumers access their money through a mobile device. As we fintechers all know, these mid-tier and large banks are losing customers to the more sophisticated, innovative and mobile centric financial institutions…like Moven, Simple or GoBank.  An April 2013 Forrester study found that nearly 50% of respondents said they would be willing to switch to a bank with a better mobile experience.

The recently announced partnership between Apple and IBM could fix this and will position both companies very well for continued growth in the mobile banking and payments verticals..even with Millennials. I know, this is shocking …but in the words of Kevin Nealon, “now hear me out.”

As part of this partnership, IBM will be launching roughly 100 native mobile apps developed specifically for iOS. These apps are part of the MobileFirst platform IBM launched earlier this year and will adhere to the security, backup and data movement capabilities IBM is known for across the high technology industry. These capabilities are what keep banking IT executives coming back to Big Blue and a few of these iOS apps will strategically address the specific needs of the banking vertical.

The collaboration between IBM and Apple to build these apps will allow legacy systems written in Assembler or COBOL to run on the iPhones and iPads. Penny Crosmen at American Banker states, “Making existing mainframe applications usable on iPads could help banks bring mobility to old technology.”  This is HUGE for it helps banks easily engage with customers within the branch, through merchants or at home through a mobile device without having to make heavy investments in new technology or go through the lengthy process of selecting a clunky third party provider. For example, a bank will no longer need to license mobile platform technology from a Kony or mFoundry for their IBM partnership will open up mobile functionality through iOS sitting on top of legacy software. This is cool for the banks…but SCARY for mobile platform providers.

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The biggest use cases for the IBM/Apple mobile technology marriage can be seen at the branch and merchant levels. I can easily envision a wealth management representative having an in-branch investment conversation with a client using an iPad. The representative easily accesses a client’s core banking information from the mobile device and displays current balances, checking account activity and recommended investment opportunities right on the tablet. Taking this one step closer to the consumer, I envision the consumer later that evening going back to the banking application and sharing the investment recommendations with his/her spouse. Together the couple reviews the recommended investments, discusses financial goals and asks for further detail from their adviser directly from the iOS application.  Tadaaaaaah! The mobile/table user experience is helping the bank build deeper customer relationships through helping consumers manage their money…leveraging a channel the consumer prefers.

The second benefit of this marriage comes at the business banking level. This relationship should make payment providers pause…and maybe even shit.  Imagine a small retail merchant opens a business banking account that includes the “rental” of a payments tool like a card reader. The Apple/IBM relationship enables the bank to provide payments tools, card processors, etc. through already widely adopted iOS products. The bank may even function as a third party retailer for the iOS hardware and will save money by phasing out those clunky counter top card processors.  Banks will take away a key competitive advantages from payment providers who boast about the ease of use and mobility of collecting payments. Additional benefits for the bank are the ability for business bankers to track small business activity and recommend lower cost banking products, loan savings opportunities based on the specific business activity and transactions. Banks can also FINALLY find the right channel to provide those ever so sought after (and never well executed) locally targeted special offers and discounts to consumers.

For those of you keeping score at home, the consumer will also benefit from the IBM/Apple partnership. The iOS loving consumer will now be part of the same payment ecosystem merchants have with their banks. The iOS system now includes Passbook and it is no far leap to envision this evolving into a wallet that holds bank provided payment cards. This is “duh” obvious. Given that merchants, banks and consumers are all part of the same iOs payment system, consumers can easily continue using their long held VISA and Mastercards on their mobile device.  Continued adoption of the same payment ecosystem may provide opportunities for lower processing fees for all involved. Unfortunately, at this point the mobile payment providers are now banking on lower fees as their main value proposition. However, if banks are able to provide an easily adopted mobile wallet with many iOS supported merchants accepting these payments, even lower fees may be a moot point. Consumers will be able to FINALLY use their mobile wallets at the merchants and service providers they have always used.

Wow, way to go Apple.  You created a true mobile wallet.


Bitcoin self regulation required to increase adoption

Screen Shot 2014-07-07 at 10.09.44 AMI remember debating the benefits and dangers of the Euro during a Macro Econ class just as the currency was being rolled out. One of the benefits of the Euro is the ability for consumers to pay for goods and services with one common currency significantly reducing costly currency exchange fees. Clearly if you are a citizen of a less economically powerful country, like Greece for example, the Euro is a big boon. All of a sudden your previously lower valued currency is a moot point and you know have equal buying power as someone from a strong country such as Germany. However, there in lies one of the biggest problems with the Euro. Countries of lower economic strength are now at currency parity with stronger countries….at the expense of the most economically strong.Yes, I understand I’m simplifying the issue, but therein lies a real economic problem.

The European Central Bank is very busy managing the EU banking system, stabilizing currency value and convincing the English and German bankers to have faith in the Euro. After all, it is their currency reserves that back the value of the Euro. This is no easy task when England and Germany have been asked to fund monetary policy, such as bank bailouts, to prevent the collapse of the system. Faith in the Euro is what is keeping the system afloat. Faith in the currency and system is what stops England and Germany from pushing for stricter regulations to protect the value of their native currencies and their ability to trade.

Bitcoin

Faith plays a strong role in any currency. The faith is in the government issuing the currency to back up the value with sound monetary policy, a centralized bank, and financial assets. However, I think FAITH plays an even BIGGER role in the latest currency innovation, Bitcoin. Bitcoin is known as a “cryptocurrency” and its origins are mysterious. So mysterious, no one really knows who created the currency.  Not even Jack Bauer can uncover his identity.

Bitcoin is not backed by any bank, can be used to buy/sell merchandise or services, and can be used to transact anonymously. Wait, what? Without the banking system, how can this currency be valued? Bitcoins are bought and sold on an exchange…and forces of supply and demand move the currency value up and down. To further complicate the value, Bitcoins can also be  “mined” through solving complex mathematical equations using certain software programs. I can’t help think that Bitcoin is very similar to how gold nuggets were mined and valued during the California Gold Rush. The big difference, though, is that gold is a precious metal, is tangible and has had value for thousands of years. Bitcoin “gold nuggets” have been created by someone, buried in mathematical equations and has no historical context for valuation.

Clearly this raises the question of how many Bitcoins are out there. If it’s unlimited, Bitcoins will have little value. Whoever invented Bitcoin has limited the amount of available coins to 21 million. According to a recent article, 12 million Bitcoins are in circulation and 9 million remain to be “found” or “mined”. How the Bitcoins got there is still not clear and there does not seem to be a mechanism in place to prevent more Bitcoins from being anonymously created.

Wow. The entire Bitcoin currency concept blows my mind. An anonymous person created and launched a currency. Enough people have enough FAITH in this currency that it will retain value, will remain in a limited and finite supply and will continue to be an emerging form of payment. Faith in Bitcoin sounds INSANELY risky to me….but e-commerce giants such as Amazon and eBay have been considering options to accept it as a form of payment. Strange. However, there clearly remains a high level of suspicion of the cryptocurrency in the Banking industry.

Maintaining customer faith in Bitcoin is the number one priority for all Bitcoin providers, exchanges and related companies. Without a tangible asset and historical context for value, Bitcoin will collapse immediately if people lose faith in its legitimacy. Legitimacy will be lost if a number of factors occur: buying/selling illegal products or services, money laundering, currency value manipulation, counterfeit currency. Yes, EVERY currency and monetary system faces these challenges…but the challenges are addressed through a well established banking and regulatory system. Bitcoin, and other cryptocurrencies, does not have this.

Cryptocurrency providers, platforms and related services must push to self regulate to protect their value and legitimacy. The self-regulation must happen FAST for there is a lot of interest and concern building within governments and monetary systems. Establishing standards that are easily adhered to and adopted will be critical. Providers must engage in conversations to define standards and hold each other accountable in very much the same way Truste worked with websites to define consumer privacy and data usage standards.

Screen Shot 2014-07-03 at 4.47.20 PMJumio, a leading provider of identity verification products, is taking the lead in creating such a compliance network. The network is called Bitcoin Identity Security Open Network (BISON) and it’s targeting Bitcoin and Bitcoin related providers to join by agreeing to a set of standards of authenticating the identity of users they are establishing transactional relationships with. This is a great first step in building a compliance standard that is not a stretch for major platforms. The growing incidents of fraud and other criminal activity is the result of anonymous transactions. Requiring user identity authentification will help make the Bitcoin platform much safer.

The big hurdle for Jumio is the willingness of these Bitcoin providers to comply, participate and implement authentification technology.  No easy task.  Jumio is addressing this marketing challenge by building a consumer technology to pull participation by providers. The technology will enable Bitcoin consumers to verify their identity only once and carry these credentials across all Bitcoin platforms. The technology reduces the barrier to use the cryptocurrency and is designed to increase Bitcoin platform registration and trial. Will this consumer benefit increase a large enough lift in a Bitcoin provider’s business? That remains to be seen. But as we all know, the easier a product is to adopt and use, the more likely the consumer is to use it.   Currently eight Bitcoin providers are part of BISON at launch. It will be interesting to track who joins next and if there is enough consumer demand for one-time consumer identity verification. Of course, this will all depend on consumers using multiple Bitcoin platforms.


Fitness apps are great model to help consumers talk about money

Eric DunstanThis past weekend I attended a beach wedding in Santa Cruz, CA. I played the role of husband to the matron of honor and father to the ring bearer. I spent a lot of time with the groom and groomsmen as we waded through the schedule from taking pictures to the bride walking down the sandy aisle. Having never met 90% of these people, most of the idle conversation topics focused on how long we’ve know the groom/bride, where we’re from, the weather, sports and physical fitness.  The wedding party was a very physically fit group and a lot of time was spent discussing work out routines, fitness goals, injuries, metrics for measuruing those goals and what mobile fitness applications were used. One groomsman was a tri-athlete, another a cyclist and several runners…me included. Even though we all did different sports, we all shared a common language around how we set goals and measured success; how many reps/sets, timed distances, time splits, calories burned. Of course, as the day wore on and the drinks flowed, these reported metrics achieved super human status. “I ran a marathon in under two hours, backwards…uphill both ways. In the snow. Waiter, can I have another Grey Goose?” The common interest and shared vocabulary of fitness enabled 8 guys to have a great time at a wedding.

There continues to be a lot of media coverage about our lack luster economy and the fear that many people have about their financial fitness. The fear has grown to a level where many books, websites and personal finance management services have emerged to meet the demand. Clearly, money and sound financial management is top of mind for most people. Unfortunately, talking about ones financial health is a taboo that it is never discussed openly even with close friends or a spouse. I openly discussed my physical health at the wedding last weekend…but it would be WEIRD and AWKWARD if I discussed my financial goals and health with the other groomsman. Why? Isn’t financial health just as important as physical health? We ask others for suggestions on improving our physical fitness.  Why not our financial fitness?

Alexa von Tobel, CEO of LearnVest, addresses the taboo of talking about personal finance in her book, “Financially Fearless“. “We openly talk about everything else, from sex to diets to politics, yet when was the last time you spoke with your friends about money?” I think Alexa is spot on. We as a US society DON’T talk about money and how to manage it well. Most Americans prefer to put their heads in the sand and not think about financial planning for it’s too scary or confusing. One of the biggest reasons we don’t talk about money is that we don’t know how and we don’t have a common vocabulary or framework to pull from.

Eric Dunstan

Flexscore is working to provide that financial framework to enable the conversation. They have developed a methodology that helps consumers assess their financial health through a score and provides support for how to improve. The score measures factors including assets, debt, savings, cost of living, retirement savings…and weights them against a goal. Goals include by what age to retire, buying a vacation home, or sending a kid to college. Flexscore users can compare their goals, expenses, and scores against others within their peer group.

What Flexscore is developing sounds a lot like a fitness app! I am an avid user of the Nike+ iPhone app where I set goals, track fitness activity, achieve milestones…and compare against others. The Nike application also let’s me challenge others to a race or to ask others for coaching advice. Wow, this is a fun way to track fitness activity and engage with friends. Can the same level of engagement be achieved with a financial fitness application? Through the right approach, I think a financial fitness application can be very powerful in helping others discuss money, goals and questions they may have about improving compared to their peers. A scoring system, such as Flexscore, will be a key engagement element that makes measurement informative, fun and something that can be easily discussed with others.

I don’t think it’s a stretch to envision similar personal finance discussions happening with the right measurement tools and applications developed on mobile devices. Going back to the wedding I attended, the wedding party was quick to whip out their phones and show off their fitness data on Nike+ or RunKeeper. The application UI makes the data visually fun to show off and discuss. I can easily envision the same conversation happening around finance applications. The conversation could start with a groomsman saying, “We are really trying to pay down our credit card debt, but it’s not happening fast enough.”  Another groomsman could respond, “I’ve been using this great finance app that scores my financial health. It’s helped me A LOT.”  The conversation goes on from there.

Driving adoption of these finance apps by going direct to consumer will be quite expensive and the marketplace is crowded. However, I think the right strategy for Flexscore is to white label their solution to financial institutions and advisors. A similar platform, Set for Life,  takes another approach by white labeling financial education and money management tools to corporations as a benefits program to get employees to start talking about their money. Flexscore and Set for Life hope to pull through a solid customer base through these white labeled partnerships …while receiving a monthly per user fee. Smart…and this strategy does not require aggressive and expensive direct to consumer acquisition programs. The right clients and partnerships will build a large and highly engaged consumer base for both companies.

As Gen X , Gen Y and Millennials age, the greater the momentum around having financial oriented conversations. The key play for companies like Flexscore or Set For Life is to be the platform that these users engage on to discuss and engage with their finance. Consumers will benefit and so will financial institutions and advisors who are looking for opportunities to engage customers. Consumers will be drawn to the banks and providers who do this best.  Those who don’t engage at this level will watch  their consumer base walk out the door.


eBay cyber attack highlights value of card on/off tools

eBayEbay is yet another giant consumer brand that has fallen victim to a cyber attack. Like many of us, I raced to change my password when I heard the news break early Wednesday morning. Of course the news media and many eBay users assumed the worst had happened and that personal and financial information had been breached. Fortunately, the attack was limited to a corporate network and only a small amount of employee login credentials were breached. EBay’s PayPal business unit did not show evidence of user personal or financial information being exposed. Few.

Given the frequency of these high profile breaches, it seems like only a matter of time before hackers are able to break into the networks of the most trusted consumer brands and financial institutions. Target experienced a massive breach late last year that many consumers are still dealing with today.   High-end retailer Neiman Marcus experienced a breach as well. Larry Ponemon, chairman and founder of the Ponemon Institute, which specializes in data-security issues, said “It shows that even the best of Internet sites are vulnerable to cyber attacks … you can’t stop this tidal wave.”

Yikes! What are consumers to do?! Even the perceived most secure websites, businesses and financial institutions are vulnerable to cyber attack. I think the best form of protection is to empower consumers to control when, how and where their credit or debit card data is used. If consumers can limit the use of, “turn off” or block the use of a card, they are empowered to protect themselves from any resulting damages from these cyber attacks.

Ondot Systems provides one of the most compelling solutions to help consumers take control of their payment cards.  The Ondot solution lets consumers…

  • Turn a credit card on or off
  • Limit the use of a card to a specific retailer or spend category
  • Limit card use to an area near them or to a specific geographic region

Ondot SolutionsThe eBay cyber attack highlights the consumer value of Ondot solution    Imagine that you were a victim of a data breach and that your credit card information may have been sold on the black market. Sadly, this is the case for millions of US consumers. The Ondot solution empowers you to prevent any fraudulent transactions should a fraudster purchase your data and attempt to buy things on or offline. For example, upon hearing about the breach you could easily turn off the card immediately giving you extra time to determine if it’s necessary to cancel the card. Or, if you limit card use by geo proximity to you, use of the card will be denied to any cyber criminal across the world attempting to purchase items. You are empowered to protect yourself from fraudulent payments BEFORE they even happen. That’s cool.

Ondot Systems does not provide a direct to consumer solution. They are actively pursuing relationships with the major payment processors and financial institutions to white label the technology. I’m wondering though if this technology is relevant enough that consumers could actually ask their bank card providers for it….or be willing to switch to a card provider who has this technology deployed already. The Ondot solution could prove to be a strong differentiator that may attract many new customers to a bank’s credit card offering.   With the increase in data breaches, I’m hoping my bank will provide this functionality soon. If not, I am open to learning more about who does offer this technology.

Ondot has the wind at its back now. However, this technology is not new and competitors have built similar solutions. From what I understand from my patent attorney friends, this technology is not particularly defensible for there are many ways to skin that technology cat.  Meow.  Ondot must build strategic partnerships with the largest payment processors first to grow market share…and do it quickly.  These processors will pave the way to deploying to small and mid tier banks.  Ondot’s big hurdle will be in how easily the solution is deployed at the bank.  As we know, these smaller banks get heartburn if a solution integration requires a big internal commitment.  However, it appears they have addressed this hurdle with seamless integration into the universally accepted payment standard and with deployment support. Once deployed, Ondot’s next challenge will be in how well they engage these banks in co-marketing the solution to the consumer.  Many mid and lower tier banks run lean on marketing so the key here will be how to take advantage of current marketing channels to drive adoption.  However, I have a feeling consumer word of mouth may be the most effective channel.

Ondot is a formidable competitor and is well positioned to be the market leader.  Now it’s about how well they execute.


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