(Part of the Payments Redefined series)
I came across an enterprising man who worked as a driver and doubled up as the neighborhood milkman. In the initial months, he found himself collecting and carrying large amounts of money on a daily basis, which became quite unwieldy with his day job. To make matters worse, with outstanding dues, leakages in collections and a host of challenges posed with managing currency, he often wondered if in fact he was making any profits in this enterprise.
A benevolent aunt stepped in and helped him open a bank account in a new age bank. Now armed with a debit cum ATM card, he ventured into this mysterious world of electronic banking and soon adopted a device called the ‘ATM’. Though 24 hour access was the dominant benefit, the ATM allowed him to experiment and learn with his banking relationship without the risk of ‘social embarrassment’ in a branch.
The ATM was soon his new business ally, allowing him to make currency deposits, print mini statements, place requests for cheque books and a host of other essential features that helped run his business. It was his business ledger and he would brave it into the branch once a month to take a detailed printout for the month, tallying the deposits and withdrawals!
I’m not particularly sure if the founders and generations of bankers thereafter had conceived of such benefits, but this enterprising entrepreneur did indeed create some for his use. In an interesting twist however, in this journey, he still hasn’t ventured out to use his debit cum ATM card for making over the counter purchases at retail stores! He just doesn’t get it!
“Why should I use a card, when I have cash in my wallet?”
“Why should I use a card, when I know I may spend more than I should?”
His bank, in the meanwhile, has been pounding him with offers of reward points for using his debit card for POS purchases!
With a debit card population crossing the 200 million mark in India, the industry continues to be challenged with low levels of usage at POS. Furthermore, with a host of new age mobile based banking, payments & transfers services available & being introduced by leading players, it makes one think!
This appears to be a challenge spanning socio-economic segments. PhD yielding professors and rickshaw pullers seem to resonate similar questions!
Hence, though the challenge is universal, is the solution necessarily singular?
The conventional methods of driving adoption of electronic payments, may be broadly classified into the following three categories:
When one operates in an environment of ‘Scarcity’, then the need for safety and trust are sufficient!
But how would it work when alternatives are available? Here…cash is good! It’s worked for centuries, and no reason that it won’t for the ones coming up as well.
As a significant proportion of future growth would emerge from populations that lie below the affluent & mass affluent segments, there is a need to understand and define solutions that address their need states and socio economic environment. Furthermore, one needs to bring in a wave of fresh thought even for those customer segments that we have been addressing in the past.
The challenge that lies ahead for those in the payments industry is to think beyond transaction processing and move towards designing solutions in a segmented manner. Why should financial institutions even consider this approach in a more aggressive manner. Well, let’s do a reality check!
There appears to be a tenable economic argument or justification for banks to consider going down the path of value creation.
What next? Well, banks & FIs may do well in investing greater resources in enhancing both the experience and value generated in the payment process, often the last leg in the buying process. Some brands have however made some interesting forays that should inspire others.
Visa had launched ‘Rightcliq’ in 2010, allowing consumers to shortlist products online and seek feedback from their social networks. This, as a service was made available for non-customers of Visa products as well. Subscribers could also use non – Visa cards to make purchases!
American Express labs had set out on that journey, potentially reaching out to customers and going further back in the purchasing and selection behavior prior to the end payment state.
The fundamental shift lies in the fact that both these brands and a few others have realized the need to develop segmented solutions that address aspects in the buying process, that venture further up the value chain, much beyond the actual act of making payments.
Now, let’s head back to the milkman. What would be a sufficient stimulus or trigger point for him to use debit cards for over the counter purchases. Reward Points? May be or perhaps:
Though there is clearly no scarcity in creativity, a significant nudge is required in the fundamental shift required for payment service providers.
Could these be services that could be charged? Why not? If the bank can establish a comprehendible and coherent value proposition, why not?
The migration to electronic payments would surely need to offer solutions to daily problems and needs of the larger populace. We really need to move past reward points!
Upendra is based in Gurgaon, India. He blogs at http://futureredefined.blogspot.com and loyaltyredefined.blogspot.com and can be reached at un2400@gmail.com or http://twitter.com/#!/upendranamburi