Category Archives: Payments

How Banks Can Prepare for a Mobile Wallet Future

With the proliferation and increased power of smartphones—a recent Pew Research Center survey finding that 56% of adults now own a smartphone—many more consumers use their mobile phones for a wide range of activities, including mobile banking.  The Federal Reserve Board found that 28% of mobile phone users banked with their device in April 2013, up from 21% a year earlier.

Now banks are looking to move beyond basic mobile banking to enable consumers to conduct a much wider array of banking and payments transactions over their mobile phones.  And the banks plan to package this enhanced functionality into a mobile wallet.  According to a recent survey published by Clear2Pay, 43% have plans to deploy a mobile wallet offering in the next 6-12 months. The mobile wallet would provide important customer retention, engagement, cross-sell and ultimately revenue generation benefits.  However, there are significant hurdles to overcome, including technology issues, competitive pressures, and consumer resistance.

With this in mind, the following are some key steps for banks to take to prepare for a mobile wallet future:

  1. Develop a dedicated group. Banks should create a dedicated group to develop and implement a mobile wallet strategy.  This group would include representatives from various bank departments, such as retail banking, payments, channel, marketing, and IT.  This group would also champion mobile wallets to key stakeholders—including senior management—within the bank organization.
  2. Continue to grow mobile banking subscribers.  Today’s mobile banking customers are the most likely segment to embrace mobile wallets, so banks should continue to encourage their customers to try out and continue to use mobile banking services.  Some of the leading U.S. banks have already built up impressive mobile banking user numbers, including Chase (14.0 million active mobile banking subscribers in 2Q13, +32% y/y), Bank of America (13.2 million, +28%) and Wells Fargo (10.7 million, +29%).
  3. Introduce more advanced mobile banking functionality.  As consumers have become comfortable with using mobile banking for basic banking activities (such as checking balances), banks are starting to incorporate additional functionality, such as mobile check deposit and mobile bill pay.  USAA recently introduced voice technology to its mobile banking app.  Consumers’ gradual adoption of more advanced functionality makes the jump to mobile payments less daunting.
  4. Conduct consumer and merchant research.  To get some direction on how to position and market mobile wallets, banks should conduct research into
    1. Attitudes to, and interest in using, mobile wallets
    2. Reasons for using/not using mobile wallets
    3. Preferred mobile wallet components
    4. Most trusted providers
    5. Types and levels of incentives that would drive usage
  5. Distinguish mobile wallets from mobile payments.  For many consumers–and even industry commentators—mobile wallets and mobile payments are the same thing.  However, mobile wallets encompass a wider array of services, including mobile offers and loyalty programs.  For consumers already using mobile banking services, transitioning to mobile wallets may be more seamless than switching to standalone mobile payments.
  6. Promote banks’ perception as trusted providers of mobile wallets.  A 2011 Fiserv research study found that banks constituted the most trusted provider of mobile wallets, far ahead of credit card companies and mobile phone providers.  Banks should leverage this high trust level to position themselves against alternative providers.
  7. Leverage partnerships.  Payments networks like Visa are already leading the way in the development of digital wallets.  Over the past 12 months, Visa has entered in agreements with leading banks like TD Bank, Bank of America and U.S. Bank, to distribute its V.me by Visa digital wallet to their customers.  Entering into such partnerships early in the evolution of digital/mobile wallets enables these banks to get an early start in marketing such services.
  8. Develop mobile wallet offers.  Based on consumer research and competitive analysis, develop a series of offers to drive different mobile wallet behaviors, such as initial trial, continued usage, usage of new functionality, and referral.

Slowdown in U.S. Payment Volume Growth for Leading Card Networks

With Visa and MasterCard reporting their quarterly financials this week, we now have a picture of U.S. payment volume for the four main card networks (Visa, MasterCard, American Express and Discover) in 2012.  These four networks grew volume 5.3% in 2012.  This represented a significant decline from the 10.3% growth rate between 2010 and 2011.

  • Visa reported the largest decline in its volume growth rate, from 9% in 2011 to just 2% in 2012.  While U.S. credit card volume growth remained stable at 10% in both 2011 and 2012, debit card volume fell from a growth rate of 9% in 2011 to a volume decline of 2% in 2012.  This was largely due to new regulations that impacted Visa’s exclusive debit card network relationships with banks.  Visa did report significant improvements in y/y growth rates for both credit and debit volume between 3Q12 and 4Q12.
  • MasterCard credit and charge volume growth fell from 6% in 2011 to 3% in 2012 (although the y/y growth rate improved from 1% in 3Q12 to 3% in 4Q12).  Debit volume rose from 12% in 2011 to 15% in 2012.
  • American Express reported its U.S. consumer payment volume fell from 11% in 2011 to 8% in 2012.  During this period, small business volume slipped from 14% to 12%, while corporate services volume declined from 14% to 11%.
  • Discover reported declines in growth rates for its two main payment volume categories: proprietary Discover Network (from 8% to 5%); and PULSE Network (from 19% to 14%).

According to the U.S. Bureau of Economic Analysis, personal consumption expenditure rose 3.6% between 2011 and 2012, down from 5.0% between 2010 and 2011.  This means that even though card networks’ volume growth slowed between 2011 and 2012, it was still stronger than consumer spending, and so the networks’ share of consumer spending continued to rise.  We expect that volumes will continue to rise at moderate levels in 2013, as the leading U.S. issuers seek to balance volume and lending growth.

“Sincerely, Vice President”: Why Marketing for Sales Is Vital

Since EMI’s founding over 20 years ago, a core focus has been what we call “marketing for sales.”  One of the key propositions of this focus is to bring marketing principles, strategy, and messaging to the point of sale. And it’s obvious that many companies struggle with this, as we often encounter samples of sales campaigns that demonstrate a lack of marketing expertise.  One such example is below.

The goal of this email is to get the target audience to attend these sessions, and certainly there are elements in the email – the prominence given to the information table to attract the eye, the “Last Chance” message at the top of the email – that head in the right direction. However, the ability of email to achieve its objectives as effectively as possible is undermined by execution that fails to adhere to basic principles of email marketing:

  • Having a single, prominent call-to-action. In fact, the only call-to-action in the message is to respond to the email and write a message stating which session is preferable.
  • Facilitating response by offering multiple response channels and making it easy to take the desired action. There is no opportunity to click on a link to respond, no number to call to register, no button taking you to a form on which you could register. Any or all of these additions would have increased response by making it easier and more straightforward.
  • Offering a compelling and prominent headline that draws the recipient in. What is the headline of the email? Is it the small message at the top saying this is the last chance to register? If so, only the more patient readers would find that sentence because it is overwhelmed by the logo immediately below it.

Based on the content and the fact that typically this company is a very effective email marketer, it seems likely that the email was sent not as a marketing campaign, but rather by the sales team. This ineffective email is precisely why “marketing for sales” is so important and represents such a powerful opportunity for many companies.  Imagine how many more prospects would have registered and attended these events if the email had offered large buttons for each event which, when clicked, would have registered the clicker and taken them to a confirmation page that offered them a “save to Outlook” option. Consider how much more compelling it would have been to have a name in the closing, rather than just “Vice President”.  Injecting marketing expertise into sales channel activity means more registrations, which means more attendees, and that means more sales.