Commentary

Main St. vs. Wall St. – Which Does Online Innovation Hurt Most? (Answer May Surprise You!)

San Diego was the host to WesPay’s annual payments forum this year, appropriately themed “Payments in Transition.” The ballroom at the Westin Hotel was packed, as members from the nation’s oldest and largest regional payments association gathered to soak up the latest and greatest on a variety of topics, including the future of branch banking, ACH, POS and payments in general. I was lucky enough to have been asked to speak to the group on two topics: trends and drivers of innovation in payments and the what’s and wherefores of social commerce.

The two-day forum included a lot of really interesting sessions, but the topic explored in the kickoff keynote was particularly fascinating. It was focused on the relationship between ePayments and Retail Banking (aka Branch Banking) and reminded me of the discussions taking place in payments around the notion of on- and offline convergence and the challenges associated with making physical bricks and mortar relevant in an increasingly online world.

Michael Croal, whose business is advising retail bankers on how to crack this code, showed a bunch of data that offered some good food for thought. Bottom line is that banks with more branches take in more deposits and have stronger customer relationships than those that don’t. That is sort of a no brainer, when you think of it, but hard sometimes to convince those ops and finance guys and gals who are looking at the costs of operating branches and want to lose headcount and shutter branches. One of his solutions to getting on their good side was to deploy technology (VoIP Phone systems) that essentially incents branch personnel to handle call center queries during down time. He mused, “branch personnel will do anything for an incentive… you offer a CSR $10 to open a $10,000 CD, and if some guy walks into the branch with $100,000, I guarantee he will walk out with 10, $10,000 CDs!.” He suggests that if banks were to incent CSRs with something that rewarded them for minutes online or calls handled, they would jump at the chance. Now, I have to admit that as fancy-schmancy as VoIP phone systems are (we have one ourselves), they can be finicky. I would caution that buyer beware, but it makes sense. CSRs can log in and out at will, minutes on “duty” can be accurately logged and call volume can be smoothed. And, bonus, you actually have people talking to customers who know a thing or two about the bank and banking services. How’s that for a novel customer service concept!

I followed Michael and hit on the multi-channel theme a bit in my own presentation, which focused on the drivers of innovation in payments more broadly. I used a few examples of how technology is both disrupting and complementing the traditional payments experience for merchants and consumers. The example that everyone latched onto was Amazon Price Check, which stimulated a bunch of questions, most notably, how that could destroy (further destroy?) Main Street merchants. It was an interesting observation, I thought, since that suggests that people are only motivated by a better price and not the intrinsic value of having their hometown merchants alive and viable, too. The general takeaway was that it is probably the larger merchants who are more “vulnerable” than those where there is a relationship (personal and community) at stake, but only time will tell. Certainly, there are a lot of plays like Groupon, LivingSocial, Foursquare, Gilt, Google – and the list goes on and on – designed to drive business to local merchants. I did have a rather large merchant approach me to confirm that they have been impacted by the “Amazon” factor and are vigorously working to devise strategies to countervail it. It will be interesting to watch this unfold again this holiday season.

The social commerce prezo was fun in part because EVERYONE can relate to being on Facebook as a user, but that VERY FEW can relate to the notion of commerce on Facebook, since it is still so new. I get the impression still that many people need to be convinced that Facebook will be an important commerce hub. Well, all I have to say is we’ve called stuff way early before (like NFC would not drive 50% of payment spend by 2010). So, we will just have to see how this all plays out. The point that I made is that it is still very early days, BUT, it’s coming. It’s just a question of how and when. There are just too many “stars” aligning that point in that direction, including the unadulterated cannibalization of time on the Internet that Facebook is now responsible for (25% of all time on the Internet, and since there are still only 24 hours in the day, other stuff like visiting merchant websites is taking a real beating). There’s also the fact that 50% of users check their Facebook page daily, the fact that more and more people share what they see in their news feed, and when they do, that also not only gets shared further but acted upon by those to whom it was shared – the list goes on. Several people raised the “security” issues associated with doing business on Facebook and even on mobile. My view is that there will be an educational effort required but not the same one that was required to get people to use their card online eight or nine years ago. People are over that fear and paranoia now, in part because the banks have done such a good job of convincing people that they are protected if their card is lost or stolen. I actually think that the mental leap may be harder on the mobile front, since people may not have completely made the mental leap that the cards in the digital wallet are the same cards that are in their leather wallets today, but we shall see.

Anyway, it was all great fun, and the WesPay team got a lot of well-deserved kudos for putting together a great forum. For more information on the program and who spoke, check out the agenda here.


Karen Webster is the CEO of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.


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