Chatbots And Commerce

Is It 'A Bot Time' For Payments To Jump On The Bot Bandwagon?

Is It “A Bot Time” For Payments To Jump On The Bot Bandwagon?

Bots are in, and apps are out, says the media. And that fire was stoked further when Messenger’s David Marcus announced that 30K bots inside of Messenger will soon enable payment. Yet, even he said that the hype machine has been in overdrive over bots, since most of them are too primitive to be useful now. That prompted Karen Webster to dig into the whole notion of bots inside of messaging as the commerce layer that will rule them all. She then wondered — is it “a bot time” for payments to get on the bot bandwagon? Um, probably not now — and maybe not ever.

The media has declared chatbots the digital version of the little black dress: a technology staple that every brand must now have and every payment type must now commerce-enable.

Technology enthusiasts draw pictures on whiteboards showing bots as the new king of the stack, out-stacking the last great stack — apps, which sit on top of the next-to-last great stack — mobile operating systems, which sit on top of the next-to-next-to-last great stack — the web.

VCs tout bots as commerce’s next big frontier, one that can make the notion of contextual, conversational commerce real inside of the app where consumers now spend 75 percent of their time: messaging. The big bet is that bots will make it possible for brands to indulge the every digital whim of this group of consumers without them ever having to leave their digital home away from home.

Facebook Messenger’s announcement last week that 30,000 bots would soon be payment-enabled for the 900 million people who hang inside of its messaging ecosystem only stoked that fire.

It even prompted Bloomberg to all but declare apps — that ancient, nine-year-old digital artifact — an endangered digital species.

Its declaration that apps are “so 2015” cites as evidence that it took only six months for 34,000 bot developers to emerge, compared to the 12 months it took 12,500 app developers to do the same. Bot factories appear to be in full swing, cranking out bots that feed consumers news, give them the weather and even let them send a message to President Obama (the White House bot inside of Messenger says he picks 10 a day and reads them).

The unspoken advice to digital players: If you’re not botting, you’re rotting.

The role model that everyone points to as proof of bots-gone-big is WeChat.

Messenger Chief David Marcus has even said publicly that his inspiration for Messenger is, in fact, the ecosystem that 860 million Chinese use to do everything from text friends, to hail a taxi, to pay bills, to make a reservation at a restaurant, to book a doctor’s appointment, to use QR codes to shop at their favorite physical stores.

But even Marcus last week characterized bots as “overhyped and underpowered” — suggesting that the hype machine has gotten way out in front of the reality of where we are today and perhaps even how our bot-filled future will evolve. His criticism of bots is that they are quite primitive — the fact that 34,000 developers have popped up to create tens of thousands of them in six months suggests that they aren’t that hard to develop and only raises questions about whether their simplicity is adding any real value to consumers. And whether these primitive and simplistic experiences will poison the bot well.

So, what gives? Is it "a bot time" for peeps in payments to get on board and confront the reality that bots are today what apps were in 2007 and 2008?

Or is this just another shiny new toy that people are throwing money at but won’t ever get any traction?

Or is there another layer waiting in the wings to emerge as the king of that commerce stack — the bot to end all bots?


The Case For Bots: WeChat

Since WeChat is the ecosystem that everyone has inducted into the Messaging Bot Hall of Fame, let’s first make sure we all understand what makes WeChat, WeChat.

WeChat was launched in 2011 by Chinese internet giant Tencent. WeChat started life as a PC-based instant messaging platform — QQ — but the impending competition from other mobile-based messaging platforms was the Kik in the butt Tencent needed to create its own. It did — and WeChat was born.

WeChat wisely greased the ignition skids by letting anyone with a QQ account instantly have a WeChat account on their phone, essentially porting their entire desktop social network to mobile in more or less one easy-to-enable fell swoop.

Over the next year, teams worked day and night to add new features to the platform to keep users sticky — like games, games and more games. Games were easy to play — and play with friends — and there were plenty to choose from. Mobile gaming also introduced users to the notion of paying for things inside of WeChat.

Five years later, WeChat is a commerce ecosystem that boasts a number of apps (bots wasn’t a vocabulary word back then, but that’s what they are) WeChat has deemed “official.” Being official means that these apps/bots can access any number of WeChat APIs that add functional bells and whistles to those apps: payments, location, push messaging, voice messages, etc. Adding an official account to any user’s WeChat network is as easy as adding a friend, and once that app/bot is added, just like when any friend is added, that user is always connected to them.

The WeChat Wallet within WeChat is where consumers store the payments credentials that power commerce inside of those apps. Nearly 40 percent — 300 million — of all WeChat users have stored a payment method inside of their WeChat Wallet. And WeChat does a bunch of things to get even more users to want to do that.

Giving users lots of ways to use those credentials inside of WeChat is one way. But the most effective strategy for getting credentials registered was the launch in 2014 of its digital P2P scheme: Red Envelopes. Consumers were incentivized to send (and receive, of course) Red Envelopes with small amounts of cash to each other to celebrate the Chinese New Year. This year, 8 billion Red Envelopes were sent within the WeChat ecosystem over an eight-day period — eight times as many as were sent in 2015.

So, if one were writing a WeChat ecosystem cookbook, it might read something like this:

Start with a massive user base. WeChat made it easy for its existing base of users to move from their desktop digital home base to the same one on mobile. Users moved to a new platform — mobile — with their existing social networks intact.

Add some sizzle. WeChat knew that its first year had to rock to keep WeChat users in the boat and coming back for more — that’s what it did. Games were the hook and the bait.

Add more seasoning. As users became more engaged, more developers found its ecosystem an attractive one to become a part of. More than 10 million official accounts have been established on WeChat, and WeChat’s massive base of users gives app developers an incentive to build apps and join the network.

Turn up the heat by adding payments. WeChat’s decision to create a separate mobile wallet to store consumer credentials that also exposed an API for any other app to grab made it easy for retail and commerce apps to live inside of the ecosystem. WeChat’s payments network powers all of the apps inside of the ecosystem, which makes it easy for developers to add payments functionality to their apps. And the more cool apps that live inside WeChat that require payments, the more consumers will want to store their credentials and the less likely they’ll ever leave since the friction of leaving becomes way too high. The number of consumers who have credentials now stored inside of WeChat doubled from 2015 to 2016.

So, for any other messaging platform with bot ambitions, it seems relatively straightforward:

Take a massive messaging app user base: Messenger, iMessage, WhatsApp, etc.

Throw in a little sizzle to get users doing stuff besides talking to each other: Have bots that deliver the news and weather, ask friends to vote on their favorite restaurant via OpenTable.

Add more seasoning: Let users call for an Uber, order a Domino’s pizza, throw in business-sponsored threads as a test, order ahead at Burger King.

Turbo-charge with commerce: Align with a payments network or gateway that allows users to book a flight or hotel room on Expedia, book a flight on JetBlue, buy new shoes.

Certainly seems like it’s "a bot time" to get on the bot-boat.

Maybe, in developing economies like China, where digital ecosystems are primitive and bots inside of messaging apps add access and value through that access.

But maybe not in developed countries. The nine or 10 years that smartphones and apps have existed is a digital lifetime in developed markets like the U.S. and the U.K., where digital habits have been formed and expectations of app functionality have been formed to.

What worked in China for WeChat at a much different point in time in a much different market may not be the copy/paste solution for these markets. And then, we know that China is, well, China. Things that work great there don’t necessarily work great elsewhere. Which is one reason WeChat has had trouble getting non-Chinese users outside of China.


The Case Against Bots: Timing Is Everything

The stars were really aligned for WeChat.

It already had a massively successful messaging ecosystem, called QQ, which Chinese people used intensively for everything. It was already sort of a cross between WhatsApp and Facebook and was used for commerce and lots of other stuff. Then, it managed to get the timing exactly right. Just as everyone in China was moving to smart mobile phones, it had a killer extension of its QQ platform that was just right for them. And then, in China, PC and internet penetration was still low. Sure, a lot of people were using the internet and had PCs, but as a fraction of the population, it was tiny. Making WeChat available on the phone extended Tencent’s footprint to many millions more people. Finally, the mobile app ecosystem in China is a lot messier than in developed countries because of massive security and quality control issues inside of app stores. For instance, Google Play doesn’t operate in China, and Apple has had relatively few users until recently.

That looks quite different in developed markets and even in developing markets outside of China, today.

Over the last nine to 10 years, consumers have developed a robust digital portfolio that works for them thanks to the vibrant apps and apps ecosystems that have emerged — you know, the stuff that is now suddenly SO last year.

Social networks, like Facebook and Instagram, are the one-to-many networks consumers use to brag about the things they want their friends to know. Messaging apps are what they use to communicate one-to-one and, for now, even getting updates from retailers when orders are shipped or appointments made. Retailer apps, like Amazon and, are go-tos for buying things — not to mention the mobile-optimized sites retailers have and consumers are using. Apps like Chrome and Pinterest are used by consumers to discover things and then punch out to retailers to buy. Uber, OpenTable and hotel and airline apps provide booking and payment functionality for those who want and need those services. Payment options are embedded inside of those apps to, in theory, make checkout online and in-app efficient and fast (even though our work via the Checkout Conversion Index shows a very different reality for most retailers). P2P networks, like Venmo and Square Cash, are used to send money to and from friends inside of those social payments platforms.

Stepping back and comparing what consumers use in developed countries and what WeChat users are accustomed to, this appears to be a hot mess of apps and steps that creates a ton of friction for the consumer who should want to have everything neatly accessible inside of one single ecosystem, like messaging, where they spend most of their time anyway.

But that would mean that the consumer would have to make the big mental leap to thinking that their starting point each day is their messaging app, instead of their mobile phone’s home screen.

That’s a pretty big leap.


The Case Against Bots: Is Your Bot Smarter Than A Sixth Grader?

Mostly because bots inside of messaging today are really not that good.

Messenger’s Marcus is absolutely right that chatbots are primitive. In fact, many of them are primitive to the point of being annoying, if you can figure out how to use them in the first place.

Most of the time, I just want to punch Poncho the Weather Cat since all I want is the weather when I ask about the weather. Spare me the cutesy icon that tries to make a joke about it. We take our weather very seriously in Boston.

Shopping with a bot is tedious — it takes 20 exchanges to finally get a link to a just-OK pair of black pumps that you have to then go outside the bot to the retailer site to buy.

Trying to book a trip on Hipmunk seems primitive to the point of being useless. After asking for the airline city code — even many experienced travelers don’t know that — the message is that it could take an hour to get a response. I tried last night to make a reservation from Boston to San Francisco, and it told me that I had presented it with a first: There were no flights between those two cities. At least that response only took a few seconds to get.

Trying to make a dinner reservation on OpenTable via iMessage requires first downloading the app from the App Store, and then, it’s unclear what functionality is actually available. The functionality that seems to be advertised the most is to vote on a restaurant with a friend, but it’s not as obvious how to actually make a reservation, which, of course, one can do easily via the app itself that sits on the home phone screen.


The Case Against Bots: Pretty Stiff Competitive Headwinds

Betting the farm on bots inside of messaging means betting that same farm against apps and other digital ecosystems in which consumers have put down their digital roots and ecosystem enablers have invested billions to keep them from jumping ship.

Betting the bots farm on Messenger, for example, means betting against a few well-entrenched ecosystems that aren’t likely to take a Facebook-branded bot-takeover lightly. If Messenger and Marcus are taking a page out of the WeChat cookbook, a Facebook or Messenger wallet in which consumers can store payments credentials, and bots can leverage, can’t be far behind — Braintree is already powering the few bots that are inside of Messenger. Messenger and Facebook are hoping to use their sticky social network assets to become a cozy and comfy one-stop social commerce network.

That doesn’t sound like something Google would be too enthusiastic about.

Ceding bot-ground to Messenger means ceding advertising revenue to it, too — a problem it's been dealing with ever since Facebook got its mobile advertising act together. It’s also why Android Pay is popping up inside of Chrome and is making payments and commerce more seamless inside of Google apps, like Google Now and YouTube and Google Shopping. Google is using its sticky search platform to embed payments inside the moments that consumers have signaled an intent to buy — and also across both platforms inside of their various apps, like Maps and Chrome.

Apple has its own iOS turf to protect and a reputation for not playing very nice with others who don’t support that point of view.

Since bots have to be apps on its platform, it's interested in building up more apps inside of the App Store for use inside of iMessage. This could also be where Apple may be thinking about making Apple Pay the de facto method of payment in order to drive more Apple Pay adoption. Apple is using its sticky iOS operating system and devoted user base to bring commerce functionality inside of its own messaging ecosystem — at the same time, hedging its bets on apps by making bots the flip side of its apps/App Store coin.

Venmo’s mobile P2P ecosystem shares many of the same characteristics of WeChat and its Red Envelopes — using the sending and receiving of money to build a peer-to-peer payments network that accumulates payments credentials that can then be extended into more commerce-related use cases down the road.

Down the road has arrived since Venmo now enables commerce inside of its social P2P network to capitalize on the things that friends might do together or chat about before buying: ordering online for delivery that evening, buying vintage clothing (the advantage to doing that socially is that the risk of someone turning up wearing the same thing is nil — there’s only one to buy!). Venmo is hoping that its roots in payments give it an advantage in adding more commerce capabilities inside of an app that consumers use anyway to transact, also across any operating system.

Then, there’s Alexa.

Alexa is both its own ecosystem and a lot smarter than a sixth grader. She’s also been in the market a lot longer than most bots and has evolved to become something that can make recommendations based on context — you bought this book, would you like that one, too? — and do it easily and simply, just like one is talking to a personal assistant. Clearly, Alexa, in those scenarios, she’s leveraging the rich buying history of consumers inside of the Amazon commerce ecosystem, but that’s not her only port of call. Alexa can also order an Uber or a Domino’s pizza using the embedded payments credentials inside of those apps. And developers are building lots of skills (1,900 and counting) for her to voice-activate any number of activities from bill payment to buying things online from any merchant, to banking — and all using voice and not text and now across a variety of channels, including cars and web browsers. Alexa is using the power of software and AI to establish a social relationship of another kind — with her — which the consumer then feels comfortable extending into commerce across operating systems and even connected devices leveraging the skills that developers contribute to her knowledge base.


Whither Bots?

Here’s the politically correct response.

It’s early days and too soon to make a call one way or the other.

Here’s the one to kick around in your meetings this week.

In developed economies, it’s a much tougher hill to climb.

Expecting consumers to be happy with the primitive version of app functionality inside of an app will seem like a few big steps backward. And the longer it takes for bots to get smarter and less tedious to use, the greater the risk that consumers will decide that messaging apps are best suited for their stellar core functionality — sending messages and responding to them and adding emoticons when appropriate. Unless, of course, that’s what bots evolve over time to become: relevant calls to action sent to consumers rather than ecosystems designed for consumers to start their search for the things they want to buy.

In the meantime, like we’ve seen with other new technologies, such as NFC for mobile in-store payments, we could find another innovation set to emerge to take its place as king of the stack — the intelligent “commerce aggregation” layer that bots were envisioned to be. My money is there — and I think it almost has to be, given the proliferation of connected end points that consumers now use to enable payments and commerce transactions and the heavy lift it is for consumers with well-formed digital habits to change almost any habit that they’ve perfected over nearly a decade, especially when it comes to how they buy and pay for stuff.

So, right now, the jury is out on whether bots are (a) just the latest technology frenzy that will fizzle out, so stay away; (b) a great technology that isn’t ready for prime time and won’t be for a long time, so sit back and watch; or (c) a great technology that you better start investing in if you don’t want to be caught with your pants down at the next board meeting.

Right now, I think the answer is probably (b), but it might be (a). Today, I’d also even run the risk of saying, "No way, it’s (c)."



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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