I have attended several Finovate events over the past few years in their exotic 🙂 locals of San Francisco, New York, London and Singapore. As a denizen of the south end of the San Francisco Bay Area, I was surprised and excited to see that the next FinovateSpring event will be hosted in San Jose at the City National Civic.
San Jose is roughly 50 miles south of San Francisco and has long time positioned itself as the capital of the famous (if not infamous) Silicon Valley. San Jose is home to many tech giants including eBay/PayPal and Cisco. Apple, Google, Yahoo and Facebook are located in cities just 20 minutes up the 101 or 85 freeways. San Jose is also home to the San Jose Sharks who are snapping at the heals of the LA Kings in divisional play offs.
Even though the San Jose area is home to many world famous brands, technologies and teams, it is NOT a booming cultural mecca of historical sites, tourist attractions and a bustling night life. In fact, the downtown San Jose area rolls up the sidewalks after work hours and most restaurants close down around 9pm. Unfortunately, any nightlife is limited to the standard “boom-chickaboom” type clubs that blare “Rhythm of the Night” on a speaker turned up to 11.  Yes, I’m aware that I’m mashing together several pop culture references here.
So where to go and what to do when we all descend on San Jose for FinovateSpring on April 29 and 30? For starters, I’ve listed below a series of local restaurants that are great to host business dinners at and are within walking distance of the Civic.
Original Joe’s – Does not accept reservations and good for smaller parties.
Il Fornaio – Accepts reservations and hosts larger parties.
The Grill – Accepts reservations and hosts larger parties.
Firehouse – Accepts reservations and hosts larger parties.
There are a few options for after dinner entertainment…but they are limited. The San Jose Sharks will be in Los Angeles unfortunately. However, there may be something happening at the SAP Center worth attending. The nearby Hotel De Anza and the Fairmont Hotel hosts jazz musicians in their lobbies most nights for something more low key.  However, avoid the bars and club scene in downtown San Jose.  There was a fatal stabbing at a bar just last week…and it even happened on a night early in the week.
As a resident of the south bay area, I recommend visiting the nearby town of Los Gatos. Los Gatos is a small town tucked to the side (map) of the Sillicon Valley and is a 15 min drive or cab ride South/West of San Jose. There are several great restaurants in the downtown area and many interesting bars for after dinner drinks and strategy sessions. “Rhythm of the Night” is seldom heard.
I’ve listed my favorites based on personal experience. I recommend making reservations at all restaurants for each is well known in the area.
Cabs can be hard to find in the area so ask the restaurant/bar host to call one for your party.  Keep in mind that Los Gatos is also a great town to just walk around in too.  If you are into exotic cars, the Los Gatos Luxury Cars  dealership has a store on Main St where one can drool over Aston Martins, Bentleys and Lamborghinis.  There are also several gift shops and clothes boutiques to purchase a peace offering for the home front. There is an Apple store too in case you forgot your iPhone charger at home.
I hope you enjoy FinovateSpring and have a chance to explore the Silicon Valley.
Like a good citizen of the FinTech community, I downloaded the major payments apps to my iPhone including PayPal, Square and Dwolla. I also searched for opportunities to add loyalty cards to my phone’s Passbook. I deposited a small amount in each payments app and added my Starbucks card to Passbook eager to make a payment with my mobile device. Unfortunately, each of these payments apps and features remain unopened after a year from downloading. I have not been successful in finding stores in my local area that accept payments from Square or PayPal or have a loyalty card compatible with Passbook, aside from Starbucks.  To make matters worse, I typically just open up the Starbucks app directly and avoid Passbook all together!  Clearly the mobile payments or wallet value chain is broken and innovators are struggling with defining how customers and businesses want to use the mobile device to drive their purchases.
Those of us who follow FinTech closely are well aware of the struggle for defining the mobile wallet correctly. “Wallet” is a loose term these days.  Most people believe payment apps are wallets even though a wallet typically includes feature or cards beyond just payment tools.  If this wallet perception is true, then why are apps like Square and PayPal NOT the driver of mobile wallet ubiquity? I think getting closer to the correct definition of the mobile wallet requires us to pay close attention to what’s happening at retail…specifically at the fast food franchise level.
National fast food chains such as Burger King and Wendy’s are launching mobile apps that enable customers to order and pay for food using a credit card.  These apps are retailer specific mobile wallets that will enable the brands to build deep customer relationships by understanding buying patterns to then reward customers with specials offers and discounts. Frankly, I’m a little surprised it has taken the fast food guys so long to build and launch these apps. Starbucks has been doing this for over two years. Over the past few years Starbucks has clearly won my loyalty as they guide my purchasing through bonus star offerings. There are significant implications for mobile payments innovators if the Burger King and Wendy’s apps are widely adopted and are successful in generating more revenue and creating deeper customer relationships.
First of all, consumers are saying they want brand specific apps that enable them to pay and reward their loyalty. Think the Starbucks app.  These mobile applications are essentially loyalty cards. Secondly, consumers are also saying they are willing to pay with their credit card through the application…and don’t need a new payment platform. For example, the Burger King and Wendy’s applications require the consumer to enter in credit card information upon sign up to make purchases. The consumer makes purchases on the same Visa, Mastercard or AMEX platform used to make all their online and offline payments. These mobile payments will also be covered by the policies defined by each credit card to protect against fraud. Given the entrenched credit card payments system and fraud protections, there is really no consumer need to sign up and manage another payment platform.
Brands and retailers will be monitoring closely the success of these fast food applications. If these applications continue to be effective payment empowered loyalty cards, what role does the mobile device play?  Similar to a real wallet, the mobile device is the holder of the many branded loyalty and payments apps.  Does this put the mobile devise in a unique position should these retail brand specific apps be successful?  Yes, for the mobile device IS now the mobile wallet.  No one should have a heart attack and die from digesting this concept.  It’s nothing new and is a recurring theme a several mobile payments conferences.  Daniel Mattes, the CEO and founder of Jumio, articulated his vision for the mobile device as a wallet at Money2020.
However, there has been such focus around the mobile wallet being an individual application that many people think of Square and a few others as being wallet innovators.  This is starting to change as people digest what Apple may be doing in the payments space.  Thinking this through, Steve Jobs may have had a similar vision. Passbook is a feature to store tickets and loyalty cards. It’s not a stretch to envision storing encrypted credit card information and ID on the device. I think it’s safe to assume that Apple will not be entering just the payments business….but will most likely be defining and enabling the iPhone to be a true digital wallet. Expect Samsung to follow a similar strategic path.
The big question will be how long it will take for the mobile payments vertical to evolve to this point. A lot of money has been invested in Square, Flint and PayPal to invent another platform. However, Visa and Mastercard will be active and well funded suppliers in the mobile payments war. It will be a matter of time until the right mobile device features emerge that enable the major credit cards to easily plug themselves in to mobile transactions. Once the right device feature emerges, the mobile payments vertical will be locked up quickly. Â Unfortunately, this means many payments apps will become part of those “hey, do you remember….” so common at cocktail parties.
Last week Moven announced an expanded strategic partnership with MoneyDesktop.  The two companies have been dancing together for a while. However, this recent move changes their dance from a waltz to a passionate tango. To refresh memories, Moven is a disruptive and leading innovator in the mobile banking space. MoneyDesktop is a cutting edge developer of personal finance management (PFM) tools and eye-popping UI. Together, Moven and MoneyDesktop bring unique and compatible assets that when combined will ignite the FinTech “dance floor.” Vavoom.
The recently announcedpartnership is focused less on providing a dazzling user interface and more on a back-end feature that will make the Moven value proposition even more relevant for consumers. Moven will use MoneyDesktop to aggregate financial information from external accounts. Conversely, MoneyDesktop will gain access to a growing consumer audience who is willing to leave their current bank for a financial institution that provides a better mobile banking experience.
MoneyDesktop continues to win awards at several FinTech conferences for their innovative solutions and clean functional user interface design. The primary buyer groups of their technology are online banking executives at mid and small tiered financial institutions. MoneyDesktop is boasting that over 400 financial institutions and 29 online banking, core and payment network providers use their technology. However, each of their clients is an “old school” FI striving to update their online and mobile banking experience to avoid losing customers. A relationship with Moven enables them to partner with an innovator who is proactive in acquiring new customers by building a strong mobile banking experience from the ground up. MoneyDesktop is well positioned to benefit from the mobile banking revolution.
Moven also continues to win awards and provide groundbreaking mobile banking technology and services. Moven’s solution is driven from the mobile device and offers features of major banks….without the fees. However, like the other mobile bank innovators, like GoBank, they face the hurdle of acquiring enough users to scale their business. Let’s face it,  all of us have accounts with the major banks. Telling a customer to drop any current banking relationships they have to join a mobile driven bank is a tough sell. Moven’s partnership with MoneyDekstop helps address this hurdle.
MoneyDesktop’s aggregation technology is as much a product feature improvement as a customer acquisition tool for Moven.           Consumers can now join Moven and use the solution to track their banking activity with all financial institutions. Moven becomes the financial hub. Well-planned cross-sell marketing from Moven will inform users of other great features and tools. Eventually, the consumer will start to fall in love with the Moven solution and will depend on it more as a primary banking tool. Well, at least that is the goal.
The key for this strategic partnership will be how well both parties can execute and take advantage of the open opportunities to deliver customer value. If they do it right, their tango will catch the attention of the millions of unsatisfied big bank customers. I hope Moven and MoneyDesktop have a big dance floor.
Financial technology bloggers have written a lot recently about the implications of BBVA’s acquisition of Simple and Facebook’s acquistion of WhatsApp. I know, what does the WhatsApp acquisition have to do with FinTech? Industry pundit, Jim Marous, points out that the WhatsApp acquisition points to an ENORMOUS industry trend that sends a huge warning signal to all financial institutions.  That trend, and this should be no surprise, is the significant shift for consumers from the desktop to the mobile device in not only social media, but in banking too.  The warning signal? Consumers want to engage with their bank through the mobile device as the primary channel of engagement.  Banks need to get their mobile house in order or customers are headed out the door, through the windows and maybe even through the ATM.  The most salient mobile app feature that banks must get right to address this trend is account creation.  Banks who make account creation easy from the mobile device will turn the tide …and will attract more customers away from banks who do not embarce mobile.
Marous sites, “While Facebook was built for the desktop and migrated to mobile, WhatsApp was built for mobile first, giving the network an advantage in today’s marketplace.”  Similar to Facebook, a bank’s consumer products and user experience has been desktop based and is gaining momentum to migrate to mobile devices. I am a Wells Fargo user and have downloaded the mobile app that offers a snapshot into my bank account online. Aside from remote deposit capture, the application offers very little additional value that leverages the power of my mobile device. As I’ve mentioned in previous blog posts, there are many FinTech innovators who are creating banks and banking technology that put mobile first. GoBank, Moven and Simple are prime examples.
The most significant opportunity to drive mobile banking adoption is to fully leverage the camera feature on a  smartphone.  Yes, most banks do utilize the camera by enabling mobile deposit capture and photo bill pay. However, the camera needs to be enabled for a much more significant  functionality: The ability to capture the PII needed to open a bank account without asking the consumer to key it in using a device key pad.   Without this feature, the mobile channel will always be secondary to the online banking channel where consumers create and manage banking relationships.
Financial technology innovators Jumio and Mitek  are making great strides in leveraging the device camera to capture customer data. Jumio recently launched at FinovateEurope a technology that uses the device camera to scan an ID and extract the needed PII to open up a banking account. The technology then “deposits” this needed data into a bank account registration form. Wow. Cool. The technology addresses the significant consumer pain point of using a tiny device keyboard to open up an account ….which is a process filled with typos, frustration, and high abandon rates.  The Jumio platform makes opening a bank account fast and easy.
The mobile camera ID scanning technology sounds great…however, from the consumer perspective I can identify several potential hurdles or concerns that have to be addressed. Where does the picture of the scanned ID go? Is the image in my device photo stream? If I lost my phone, could the thief see this data? If the ID image lives in a cloud, who’s cloud is it? What happens if the cloud provider is breached?  There are so many questions here that need to be addressed! One thing is for sure, innovators need to have the data security technology locked down and messaging at the ready to educate customers on why this ID verification technology is safe.  After all, consumers don’t readily distribute copies of their ID to just anyone offline…and it’s no different in the online world.
We recently refinanced our house to take advantage of a rate one point lower than our current mortgage. Wow, that’s a big chunk of money each month. However, the process to realize that savings was PAINFUL!  We worked through a broker, Finet Mortgage, who we’ve used for several transactions. The team at Finet does a great job finding the best rate and is very helpful in managing the laborious document submission process. Unfortunately, despite Finet’s best efforts, the refinance process is still not pleasant due to the lender’s processes, document requirements and lack of communication… that results in frequent rush requests to find certain pieces of paper. All the back and forth frequently results in a longer time to close…and frequently in increased fees to get the work done.
There is so much room for improvement here. EVERYONE has similar painful experiences. There has got to be a better way!
There IS a better way and the innovation is coming from GoRefi. I spent some time with their leadership and learned more about their product and value proposition. Banks, be ware, GoRefi is well positioned to turn the mortgage lending process on its head…and can pass savings off to consumers at a lower interest rate.
GoRefi takes the friction out of the mortgage lending process by focusing on the major frustration points my wife and I complain about: poor lender communication, long times to close and elimination of exorbitant fees. GoRefi positions itself to:
Provide an interest rate .25% lower than most banks
Provide a 30% savings on closing costs
Close the transaction in 14 days…instead of the industry 60
Wow, this sounds great. So, why did we use our broker and NOT GoRefi?
My wife and I have managed between us over 10 real estate transactions and I have to admit I’m a little hesitant to use GoRefi. I’m sure many others experienced and inexperienced people may be hesitant as well. I think the hesitancy can be appeased if GoRefi:
Articulates their legitimacy as a lender. I’d like to know if GoRefi is the loan originator…or if they also shop around to other lenders for the best rate. If they do make the loan, where does the money come from?  Where do their rate quotes come from?
Communicates their stability as a company. Most people don’t care who originates the loan. However, I personally find it frustrating when our loan is resold…and resold…and resold. This is concerning for it means we need to revise our bank’s bill pay tool to submit payment.
Defines how they treat and protect all the data submitted.  At this point GoRefi does not clearly define what precautions they take to protect our identities and PII. How do we know GoRefi is not a lead gen site that resells the information provided to legitimate and not-so-legitimate companies? Yes, GoRefi does provide this information on a Security and Privacy page…but the links are in the breadcrumbs at the bottom of the home page. This information needs to be FRONT AND CENTER.
Having met these guys it is clear they will have responses and processes in place to address each of my reasons for hesitancy. However, consumers will not ASSUME this and need to be directly informed….or “spoon fed” this information.
Now assuming these concerns are addressed and a consumer does apply for a loan refinance, GoRefi must treat any customer like the Queen of England. GoRefi closes their refinance process definition with a bold statement:
I think this is where GoRefi will win (and win BIG) customers or will crash. As soon as the customer starts submitting the required documents, a GoRefi rep must become the customer’s best friend. The rep must be available to answer any questions and must keep the customer informed of where they are in the process…at all times. GoRefi must over communicate. If not, consumer trust in GoRefi will quickly erode and lender will seem like all the others.
The big question that pops into my mind is can GoRefi afford the headcount needed to bring on these high touch reps? These reps are important hires and they each need to deliver an exemplary customer experience. After all, GoRefi is striving to transform the lending process with consumers…and I think they are well positioned to do so.
The fact that Tim Cook hinted that Apple might be getting into payments is no surprise.  It’s more of a “duh.” Apple has the user accounts, consumer credit cards on file, and millions of iPads and iPhones in market. The launch of Touch ID and the iBeacon sensor only connect the dots even further.
Apple’s Passbook paves the way for expanding the wallet beyond loyalty cards and into the ability to make online and offline payments. The launch of the Touch ID addresses security concerns and helps prevent unauthorized payments should the phone, or “wallet”, be lost.
In the online world, it’s not a far stretch to imagine a consumer using their Apple ID to authorize a charge to their credit card for a purchase made on an e-commerce site. However, competitive pressures from Visa, MasterCard, and PayPal may make convincing e-commerce sites to accept Apple payments that much harder. One recent article points to Apple making payments as part of the iOS developer kit…which would easily provide code needed for a developer to add a payment feature to their mobile commerce app.
However, the opportunity for Apple gets more challenging in the offline retail world. Yes, iBeacon creates a network to enable mobile payments through detecting and authenticating a mobile device. Cool. However, Apple faces the challenge of convincing merchants to adopt the payment processing hardware, dongles, etc. Google, Stripe, Square, and Dwolla also face this problem, among others. Even with its big brand recognition and marketing strength, Google was not able to grow offline retail adoption of its wallet.
So what are the opportunities for Apple moving forward? Apple could build its payments business through acquisitions, or strategic partnerships. Square has been a leading innovator in the payments space, is building merchant adoption and has a strong focus on UI/design given their recent hardware release. While a Square acquisition may be expensive, Apple would quickly acquire payments processing technology, a growing user base of merchants and a design focused group of developers. Bloggers have also identified Stripe as a potential, less expensive acquisition.
I think Apple can benefit the most, however, from a strategic partnership with PayPal. Recently a LOT has been written about PayPal feeling the heat from Apple and pitching to help build out their payment network. Some people see this as a signal PayPal is feeling threatened. Yes, the competitive threat is there. However, PayPal has many elements that Apple needs to be a leader in this category. I think together, PayPal and Apple can create a break through wallet that defines the mobile wallet.
First of all, PayPal has addressed many of the cross-boarder (currency) trade challenges that Apple will eventually face. Remember, Apple products are ubiquitous and they face hurdles in every new market they enter. We all know that Apple will not want to limit payments to the US market.
Secondly, PayPal has a merchant program in place and is regularly improving the product feature set. This in market learning will only improve PayPal’s ability to deliver a solution merchants actually want and can easily adopt. PayPal is also co-marketing with merchants to drive consumer adoption.
Lastly, PayPal is seen as the “most trusted” mobile wallet brand as defined by a 2013 Javelin study. Why is this important? In light of the recent data breaches, mobile security will be a big factor for not only consumers, but for merchants. Yes, Apple’s fingerprint ID is fantastic to access the device and authorize transactions. However, there is a lot happening in the payment processing back-end that PayPal has focused on securing for almost 20 years. A partnership with PayPal will enable Apple to address this hurdle and avoid a dreaded data breach. Should the unthinkable actually happen, culpability would most likely NOT fall squarely on the shoulders of the world’s number one brand.
Last year my wife and I began our search process to find a new SUV. Our consideration set included Toyota, Ford and Chevrolet. I tweeted out one evening that we were considering the Ford Explorer and asked for feedback from my community. Within 24 hours I received a reply…not only from friends, but also from Ford. The response included a link to the Explorer’s features and an offer to schedule a test drive. Color me impressed. (Tweet me at @ericdunstan with the 80s movie reference)
I responded that we were interested in a test drive. A Ford rep quickly responded and offered to schedule a demo and to provide incentives.
Ford is effectively using social media as a lead generation tool and quickly acquired my information to schedule a test drive. I used all natural language text with no # or handles. Clearly Ford is monitoring the social media channels and has an effective strategy to capture the information and act on it.  Nice work.
I recently blogged about my frustration with the mobile deposit feature of the Wells Fargo mobile application. I tweeted my frustration as part of a theraputic venting processes. Within 24 hours Wells Fargo replied with a tip to address the mobile application #fail and a request for me to call a 1-800 number to address any further issues.
I applaud Well Fargo for capturing or “hearing” my frustration on Twitter and responding. However, given the importance of social media as a marketing channel, Wells Fargo’s response is almost a given. I would imagine that almost all of the Top 100 banks have similar processes in place to monitor and manage the social media channel. However, I believe Wells Fargo’s response falls short of meeting my customer needs and their social media team could learn a lot from what Ford is doing.
The Wells response was very generic and made me do the heavy lifting. “Try closing the app and restarting your phone. If the problem persists, please call 800….” Duh. Wells Fargo, I’ve been an iPhone user sense the iPhone 3 and know that restarting an app is a quick fix. However, given the Wells app recent reviews, I think this functionality fail is an application problem.  Additionally, the LAST thing I want to do is call your 800 number to then have to dial through a myriad of prompts to eventually talk with a representative after a several minute wait.
The Ford response was very personal, responded to my specific question, and provided a channel to connect with a representative directly. Ford made me feel personally taken care of, listened to and treated as a desired customer. Wells could have worked harder by…
1. Offering to collect my information so an online/mobile customer service rep could contact me directly
2. Having the rep present the option of contacting him or her directly through a Twitter DM to help trouble shoot
3. Providing me a link to their website with a list of known issues
4. Acknowledging my frustration and offering an incentive as a “mea culpa” for their failed application
I feel like my concerns were heard by Wells Fargo, but I don’t feel personally taken care of to ensure my issue was resolved and that I’m a valued customer. This is an example of the difference between just listening to the customer and engaging with the customer. By engaging with the customer, Wells has the opportunity to personally respond to my need to show that my customer relationship is valued. Ford did this so well that we bought an Explorer from them.
Moving beyond just listening to and engaging with the customer may require rethinking how customer support teams are trained and incentivized. Additionally, companies should consider implementing a social media analytics and engagement software solution. These solutions go beyond functionality of Tweet Deck that enable users to track multiple accounts and listen for mentions of their company or brand. The more robust solutions, like Attensity or Nimble, for example, enable companies to listen to the customer, analyze the need and then act on meeting the customer need.
Consumers are increasingly frustrated with their banking relationship. There are a few Internet and mobile only banks, like GoBank or Moven, which take the mobile experience and customer service seriously. Leading banks, including Wells Fargo, will quickly lose customers should they not learn how to actively engaged with their customers through all channels of customer support, including social media.
My family and I received several checks from family members as gifts and as payback for gifts purchased. My wife typically handles the day-to-day checking account and generally handles making deposits at the nearest Wells Fargo ATM. I suggested that she try using the mobile deposit feature on the Wells Fargo mobile application. Being the wife of someone who works in FinTech, she agreed to try out the feature….despite all the negative feedback about the application. Unfortunately,  she successfully validated the negative comments splattered across iTunes.
The biggest disappointment came through the application crashing after each attempt to deposit a check using the mobile deposit feature. What I found most interesting were my wife’s comments after the 3rd attempt. “Well, Wells Fargo, I guess you REALLY don’t want me to use this feature,” was the first comment. The second comment was “What happened to the pics of the checks I took before the app crashed? Are they stuck in the app or are they with Wells? Can someone steal the money?”
Three interesting thoughts came to mind as I digested her valid complains. One, when it comes to getting customers to try new features that involve their money, banks better be sure the feature works for the customer the first time. Yes, app crashes can happen for many reasons. Unfortunately, several reviews reflected the same frustration and experience my wife had…which implies that improvements need to be made to the application. From my wife’s point of view, Wells Fargo implicitly told her mobile deposit is not ready for prime time and to keep using the ATM. Wells needs to track that these customers are and target them with a “mea culpa” CRM program to win back their trust with new technology. After all, according to a recent study, 49% of consumers will change banks for a better mobile experience.
Secondly, I think my wife’s concerns about where the check pictures have gone after the application crashes point to an engrained reaction that stems from frequent e-commerce transactions. I think similar “where’s my money now?” concerns come up when a consumer enters in a credit card number online, presses submit and the site crashes. “Did my credit card go through? Do I need to re-enter my credit card? If I do, will I get double charged? Is my card number safe?” All are common questions following an e-commerce site crash. I think it’s only natural for my wife to ask similar questions after a mobile banking application fails. In-application messaging must be delivered immediately to consumers to quell their anxiety when things don’t go as planned.
Lastly, the low application star rating and poor review indicate that mobile is NOT a big priority for Wells Fargo. In an effort to win customers, I would imagine that the mobile team would quickly iterate and redeploy an application as quickly as possible. Unfortunately, Wells Fargo is not the only major bank that appears less focused on winning customers through mobile. Chase and Bank of America have similarly low rated mobile applications. If these major banks do not step up their focus on mobile, the door will remain WIDE OPEN for innovative mobile banks like GoBank and Simple to entice customers through compelling mobile banking experiences.
I was at one of many Christmas parties and conversation topics, of course, covered “where will you be for Christmas” and “are you done with your shopping.” Almost everyone was done with their shopping, but the big follow up question was “Well, did you end up shopping at Target?” There were a handful of people at this gathering that did shop at Target over the ill-fated shopping period.
The conversation very quickly involved everyone around the buffet table and included comments like, “I can’t believe hackers actually were able to break into a huge chain like Target” and “your credit card information is not safe anywhere!” Clearly EVERYONE at this party will be checking their credit card statements very closely in January!
However, one comment made really grabbed me. “If my credit card can be swiped by hackers at Target, I’m sure as hell not going to want to use my phone to pay for stuff.” Obviously this exclamation sparked another round of fervent debate and discourse. A few well-known coffee and pastry shops in the area were called out in conversation as using new mobile payments technologies and were “flagged” as potential places to monitor for card fraud.
The implications of the Target data breach on the mobile payments vertical are HUGE. There are serious challenges that must be addressed both on the consumer and business side of the equation for the many emerging mobile payments technology providers.
First of all, consumers have the perception that it’s no longer safe to use even debit or credit cards at physical retail stores. According to one account of the Target breach, a security analyst at a major bank was made aware that cybercriminals were planning to sell online a new stock of stolen credit/debit cards. The analyst bought the stolen card numbers of his/her bank customers using Bitcoin. Presumably, these transactions lead to the discovery that these card numbers were stolen from Target.
One could easily make the assumption that Target was not even aware of the breach until the bank analyst made these card number purchases from the cybercriminals. Yikes! This lack of awareness of the problem scares me deeply at the consumer level. Would Square be able to quickly inform a merchant that consumer’s payment data has been swiped and is being sold by cybercriminals? Could Square inform users that their data was stolen?
Secondly, business and IT executives at Target and all major retailers are wondering how and why the Target payments system was hacked. Obviously, there are fast and furious internal investigations within Target as their legal and technical teams prepare for a barrage of lawsuits coming their way from banks and consumers. These Target executives will be pounding on the doors of their payment system providers and their 3rd party vendors as well.
The discovery phase of these lawsuits will get UGLY FAST. Moving forward post breach, all physical and online retail payment platform providers will be evaluated with much greater scrutiny with a focus on platform security, ability to detect a data breach and processes to quickly inform users that data has been compromised.
Emerging payment providers such as Square, Dwolla and PayPal need to address these implications head-on to address consumer and business needs in a post Target data breach world.
Platform security is now a big focus. Yes, each provider does have website messaging that talks to how secure their platform is. However, security requirements and technology must be increased especially as the payments platforms are being sold into individual SMBs and at the enterprise level that use multiple mobile devices to process transactions.
Mobile payment providers can quickly equip themselves with cutting edge mobile platform security technology through strategic partnerships. Industry leaders include MobileIron, Good Technology, or AirWatch. For example, by partnering with MobileIron, Square can provide a layer of mobile platform security to their SMB customers who use the payment platform across multiple mobile devices (payment terminals).
Addressing the mobile platform security needs will help address consumer concerns as well that their payment data and money are safe at the payment platform level. Square, Dwolla and PayPal must educate consumers on WHY their payment data and money are safe. Providers must clearly explain what happens if a Square account is hacked and the PIN number and cash balance is stolen. Can these providers stand behind a guarantee that transactions are safe?  Can they back up consumers’ cash balances if the money is stolen?  These are all key concerns that must be addressed for consumers to feel safe in using mobile payments technology to pay for items at physical retail.
Personally, I keep a very low balance in my mobile PayPal account that is connected to a low balance bank account. Why? I still don’t trust that the receiving terminal is that secure and nefarious code could somehow steal my account numbers and distribute across the world…all through an unsecured wireless connection at the SMB’s business location. Maybe I’m just paranoid and uneducated.
As I walked through the Financial District in San Francisco last week I came across one of the oldest forms of marketing  promoting the newest way to pay for something; a sandwich board offering $5 off for customers who pay using PayPal.
I did a double take when I saw the PayPal logo for most restaurants promote their relationships with Yelp, Foursquare or OpenTable…let alone promote the use of a mobile payment tool.  I’ve seen very minimal payment tool promotion beyond what Peet’s is doing to promote their relationship with Google Wallet.  As we all know, Google Wallet has gained little traction.
I ducked into the restaurant, Bamboo Asia, to get the special offer that required me to pay with the PayPal mobile app to receive $5 off my purchase. I ordered a Bhangra Bowl and a tea. I opened the app on my phone, paid and received the discount. Cool. It was easy.
Clearly Bamboo Asia is part of PayPal’s merchant payments pilot program and has been provided incentives to generate consumer awareness and drive app downloads. PayPal has an up-hill battle here for there are other payment solutions, such as Square and Dwolla, who are competing for awareness and consumer wallet adoption as well.
The $5 off purchase offer may help PayPal increase trial, but it falls down at driving repeat use. This week I went back to Bamboo Asia and used the PayPal app to pay. The restaurant manager said, “Oh, the discount is one time only.” “No worries…I still want to pay using PayPal,” I replied. The manager looked at me like I had a booger hanging from my nose. “Why would you want to use the app again without the discount?”  That statement points out the importance of not only increasing adoption, but also providing reasons why consumers should continue paying with the mobile wallet.
Unfortunately this store manager was only focused on the immediate discount offer and didn’t really see a benefit if his customer base continued to pay with PayPal.  Bamboo Asia customers were also not provided a reason to pay with PayPal either.  This should be concerning for PayPal for two reasons. First of all, the merchant will see a spike in sales for the short term, but will not see a continual lift from repeat customers.  In this case, consumers downloaded the app just to get the discount. The merchant may wonder why he participated if none of the PayPal app users become repeat customers. Secondly, PayPal is driving downloads, but not demonstrating to customers the value in continuing to pay with PayPal…which leaves the consumer mind share WIDE open for a competitor to tell consumers WHY they should pay with a mobile payments tool.
What do PayPal and the merchant need to do as a follow up to the “download the app” discount program? Offer incentives for consumers to continue to pay with PayPal. Maybe Bamboo Asia offers special deep discount offers to users who use the app to pay 10 times? Or, maybe PayPal creates a consumer loyalty program that offers points every time a consumer uses the app to pay for anything at a restaurant? OpenTable followed a similar strategy by rewarding their customer base with 100 points for each reservation made through their service. I believe the customer is sent a check or discount coupon from OpenTable to spend at a restaurant of their choosing.
Given how crowded the mobile wallet space has become, it’s clear that consumers need an incentive to adopt a solution. PayPal has the right brand awareness in the B2C and B2B space.  The big question is how PayPal can make it easy for merchants to use their mobile payment tools. A second factor to success will hinge on what co-op marketing programs PayPal can build out with merchants to provide incentives for consumers to pay with PayPal.  PayPal, the field is wide open now.  You’d better act fast or the teams at Square and Dwolla will get there first!
San Jose is roughly 50 miles south of San Francisco and has long time positioned itself as the capital of the famous (if not infamous) Silicon Valley. San Jose is home to many tech giants including eBay/PayPal and Cisco. Apple, Google, Yahoo and Facebook are located in cities just 20 minutes up the 101 or 85 freeways. San Jose is also home to the San Jose Sharks who are snapping at the heals of the LA Kings in divisional play offs.
As a resident of the south bay area, I recommend visiting the nearby town of Los Gatos. Los Gatos is a small town tucked to the side (map) of the Sillicon Valley and is a 15 min drive or cab ride South/West of San Jose. There are several great restaurants in the downtown area and many interesting bars for after dinner drinks and strategy sessions. “Rhythm of the Night” is seldom heard.
Eric Dunstan 