Highlights
– How consumers decide what to buy and how to pay
– What influences those decisions
– Why that is changing and how payments providers need to adopt
– Who’s capitalizing on those trends
After an enlightening and entertaining presentation in which Yale University Professor Shane Frederick explored the impact that wording and display have on consumer product perception, Mario Shiliashki, (SVP & Group Head, U.S. Emerging Payments Lead, MasterCard) addressed the company’s work in the area of mobile and contactless.
“This is coming, no matter how long it takes,” Shiliashki said. “It is the consumer and merchant preferences that will make this happen. What are the fundamentals that need to be in place to spur that growth?”
In the clip below, Shiliashki shares his thoughts on the impact youth will have in driving mPayments ignition:
Like previous presenters, Shiliashki agreed that it would take more than just payments functionality to ignite mCommerce. He stated his belief that mobile drives richer merchant/consumer interaction, which will in turn drive adoption.
“MasterCard is good at running a fast secure network around the world and invites willing partners to that ecosystem to foster innovation,” he said, noting the company’s involvement in the Google Wallet venture. “The mobile phone provides a much richer platform to engage to marry both convenience and security but also provides a really cool platform that is always on you that also lets third parties – Google, banks, merchant, etc. – know how to interact with me.”
He also stressed his opinion that the mobile phone is infinitely more secure than any wallet. He stated that it takes consumers on average eight hours to notice a payment card is missing but only four hours for a mobile phone.
Later in a presentation called “Pay Me Now, or Pay Me Later,” Tom Brown (Partner, O’Melveny & Meyer) examined the legal issues surrounding the business models of daily deals sites, such as Groupon and LivingSocial. Claims have now been filed against Groupon and LivingSocial, stated Brown, including least 12 consumer class actions, alleging violations of state and federal law. Many of the complaints name merchants as well, such as Nordstrom and YMCA.
“If your business is about bringing consumers and merchants together, it’s not a good proposition to bring class action lawsuits,” said Brown. “I do believe lawyers have a role in helping entrepreneurs think about the products and services they want to deliver.”
He suggested that daily deals executives should be asking themselves the following questions: Am I selling a gift certificate and how might regulations from the new Consumer Financial Protection Bureau impact our operations? For example, Brown noted that the CFPB will require that all financial products be disclosed to consumers in a manner that is accurate and straightforward.
The ways people interact with consumer financial services products are unique and vary over time, added Brown, who went on to stress that the CFPB must come to realize this principle or that legal problems will continue to arise with companies like Groupon and LivingSocial.
With regards to Durbin and the CFPB, Brown raised the issue of applying the regulation when the payment is being routed over a mobile device instead of a traditional card network. He urged the industry and regulators to come up with a solution that would make the payment process over any device as seamless as possible.
Following Brown, Gilt City VP Brian Dhatt aimed to distinguish how his company’s daily deals venture differed from the business models of Groupon and LivingSocial. Dhatt categorized Gilt City, which emerged from beta in September 2010, as selling an experience as opposed to just a product, meal or service.
“We try to make the deals inheritably social so it’s not you one person getting a painful procedure, a waxing,” said Dhatt. “We tend to make it dinner for four or a concert.”
He recalled how one time Gilt City organized a well-attended party around a stroller launch, and on another occasion, even had a waiting list after offering a $30,000 all-inclusive wedding package deal at a celebrity chef’s restaurant.
“The vendor was happy ’cause this was unutilized time for them,” Dhatt said of the wedding package deal. “This is was not when they were selling tables. It’s all about bringing together both sides.”
Gilt City runs weeklong as opposed to daily deals and allows businesses to waitlist voucher participants, said Dhatt. Gilt City doesn’t “drain small businesses dry” by having a million people show up at a coffee shop, he joked. The site also incents repeat customers for participating merchants by surveying voucher users after the purchase and then offering additional deals.
Lloyd Wirshba, CEO of customer engagement specialist Affinion North America, discussed how financial institutions could inspire a renewed sense of loyalty among customers at a time when consumer confidence has been shaken. Ninety-four percent of consumers believe trust is somewhat or very important in choosing a financial institute but 39 percent don’t want all of their accounts in one place because they don’t trust financial companies, he said citing a May webinar by Mintel Comperemedia.
“In order to develop trust and deliver value and simplify lives, you need to understand the wide range of needs of consumers,” said Wirshba. “Loyalty started as a special expression of thank you for doing business with me. It has evolved today to loyalty driven by mobility, rewards with relevancy in channels consumers want to do business with and easy access.”
These include consumers’ desire for unrestricted travel options, the ability to use a combination of cash and points and a wide variety of redemption options.
“At the end of the day, it’s connecting on a visceral level that hits on the principles of trust, value and simplicity that inspire loyalty,” he said. “When they know your name or offer your favorite glass of wine, that feels good.”
Wirshba also referenced research commissioned by Affinion that showed more than 40 percent of current checking account customers in America would switch and/or open a new checking account and pay a monthly fee for benefits like payment card protection, cash savings and everyday rebate rewards.
He then spoke to how pending debit card interchange fee regulations might affect bank loyalty programs and relationships with customers.
“Banks are looking for new ways to connect with customers, and of course, recoup some of that lost revenue,” said Wirshba. “FIs need to regain the trust of their customers by providing value in the form of desirable products and services that consumers will gladly adopt.”
| This article is part of the Innovation Rumble at Harvard Round 2 Briefing Room. See the rest of this briefing room |
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