Your view on whether Labor Day puts you in the Sizzle or Fizzle mood depends on whether you are a summer or a winter person. Summer people are definitely spiraling down into a Fizzle frame of mind, since, after everyone’s favorite season, fall, there’s Old Man Winter. Eck. On the other hand, if you are a winter person, then you’re already licking your chops over a pair of those new All-Mountain Frontrunners and dreaming of lots of fresh powder.
To take your mind off the Fizzle or stoke up your Sizzles even more, we present our payments and commerce weekly rundown.
Global Fraud Attacks
We hate it when we have to tip our hats to the bad guys, but they’re nothing if not persistent. Our latest Global Fraud Attack Index, a collaboration with Forter, shows that our resident cybercriminals are leaving no fraudster stone unturned. Fraud attacks are up 137 percent over the last four quarters, hitting hardest in the luxury goods and digital sectors. What’s worse, $7 out of every $100 in sales are now going into the fraudsters' pocketbooks, and that’s definitely a Sizzle for them.
Uber and Visa rolled out a program earlier in the week that gives Uber riders points for buying stuff at local merchants using the same Visa card that is attached to their Uber app and can be redeemed for cash off an Uber ride. This loyalty double-header creates affinity to Uber (who doesn’t want $10 off a ride every now and then?), as well as an incentive to patronize local businesses that have opted in. At the moment, Visa accountholders get one point for every $1 they spend and are sent a push notification each time such a purchase is made, along with a running tally of their total points. Uber Local Offers leverages Visa’s Commerce Network, which leverages the TrialPay platform that it acquired a couple of years back. The underlying hypothesis is that consumers will mostly likely try a new place if they get rewarded for something they know and already do — with the hope that the new place becomes a new favorite place. Visa and Uber said that this will help unlock the $2 billion of commerce potential that exists each time a rider steps out of her Uber-enabled ride. Sizzle for local merchants and Uber and Visa, too.
Online Checkout Conversions
Our latest look at the 750 merchants that drive more than 70 percent of merchant spend revealed a couple of interesting new insights. First, merchants are definitely experimenting with new ways of making the online visit worthwhile. We’re seeing a variety of things taking place across a number of merchant segments that are improving segment scores as individual merchant scores rise. Apparel and accessories merchants, in particular, seem to have put their best foot forward last quarter, making great strides in getting shoppers in and out of their virtual store fronts with goodies bought and paid for in their basket. The number of merchants who beat the overall industry benchmark rose 300 percent, and more merchants got out of the failing grade territory into the middle of the pack. A Sizzle for them, as well as the consumers who shop them — just in time for the holiday.
SWIFT Member Banks
SWIFT released news that more of its member banks (who shall remain unnamed) suffered breaches. The news was accompanied by a threat and a warning. The warning — that fraudsters are actively targeting the member banks that have less-than-buttoned-up security protocols around the SWIFT platform and access to it. The threat — that it will not only take names but release them if security protocols, including stronger passwords (passwords, seriously?), are not met by the date that it has imposed: Nov. 19. Slackers will be reported to banking regulators and partners. SWIFT is obviously pretty serious about getting this situation under control and making sure that its banks — and not it — take the hit if things go wrong. Fizzle that could get much worse.
Hotel POS Security
We’re starting to sense a trend here. Intercontinental, Marriott, Hyatt, Hilton, Trump(!), Starwood. And now? Kimpton POS systems have been hacked and customer data, including card and verification information, was stolen. It used to be that the only hotel security concern was the creepy person who might be standing next to you in the elevator on the way to your room. Not anymore.
Apparently, haute couture breeds haute contempt for the fellow man — well, at least in Paris. A recent controlled study of shoppers on the fancy shopping streets of Paris showed that only 35 percent of shoppers refused to stop to help a passerby in need compared to nearly 80 percent of folks in the more mainstream shopping areas. The experiment included normal-looking people (actors, of course) falling down and needing help, in obvious distress, asking for help to make a phone call, as well as a variety of other things. Apparently, the mere sight of seeing those red-soled Louboutins caused them to see red. Fizzle of the worst degree.
FIZZLE OF THE WEEK
Amazon And Wells Fargo
Some ideas look brilliant on paper only to fizzle when released into the wild. In fact, there is a rich and fascinating history of said Fizzles.
Crystal Pepsi doubtlessly sounded like a brilliant idea the first time someone ever brought it up in a meeting. Who wouldn’t want to drink something that tasted like Pepsi but was clear? Then, Pepsi released it and got the answer: Crystal Pepsi turns all humans into the antagonist from Dr. Seuss’ "Green Eggs and Ham," meaning that consumers did not like it here or there, they did not like it anywhere. Pepsi, as it turns out, should never be clear.
MCX seemed like another brilliant concept when presented on expensive consultant PowerPoint-enabled paper. Merchants all agreed they hated the card networks. So, what could be better than building a merchant payments network free from interchange? As it turns out, almost everything else.
Google Glass, Apple’s Newton, the Fire Phone, Facebook Shops — the list goes on. But unlike the obvious Fizzles — like the gravity-powered generator that would run infinitely — these are Fizzles that sounded like they might have a shot but never quite made it.
And this week, into that glorious pantheon of the Great Surprise Fizzlers of All Time, we have Wells Fargo and Amazon, who announced that they will be tossing their joint attempt at student loan innovation onto the scrap heap of FinTech history.
The dissolution alone likely would have meant Wells and Amazon would have been taking a Fizzle award no matter when it happened, but in this case, we would be remiss if we didn’t also credit them for their extreme efficiency in getting this Fizzle to market.
A mere six weeks ago, John Rasmussen, Wells Fargo’s head of Personal Lending Group, was publicly lauding the pair-up.
“We are focused on innovation and meeting our customers where they are, and increasingly, that is in the digital space,” said Rasmussen in a statement at the time. “This is a tremendous opportunity to bring together two great brands. At Amazon and Wells Fargo, delivering exceptional customer service and helping customers are at the center of everything we do.”
A tremendous opportunity that is apparently over. Catherine B. Pulley, a Wells Fargo spokeswoman announced on Wednesday (Aug. 31) that the "promotion for Prime Student members has ended." Deborah Bass of Amazon emailed the same statement in response to questions.
So, what happened, and what does it mean?
Unfortunately, this is a Fizzle that leaves behind more questions than it answers at this point. Questions like...
That is the big question and the one with the vaguest of answers at this point, as both Amazon and Wells Fargo have declined further comment.
Why they got into the partnership is a bit clearer. Wells Fargo is the third-largest student loan underwriter in the U.S. and has been working hard to expand that business. Access to millions of potential customers who shop on Amazon certainly aids in that project. As a bonus, Amazon’s customers are rather fond of Amazon, and a shot of goodwill would also be useful to Wells these day. More on that in a second.
Amazon, for its part, got to add a pretty sweet perk to its Prime Student program — a half-percent reduction in the interest rate on student loans taken out through the program. Considering that college education is, at this point, a six-figure investment for most students, that half-percent might represent an awful lot of money.
Both brands thought the program was a good way to expand their base, and it certainly wasn't something rushed to market. According to Wall Street Journal reports at the time the student lending program was announced, the two firms had been at work designing the program for over a year.
But, for reasons to be determined, it didn’t work out. As of today, Amazon no longer features Wells Fargo on its student-focused website, and the bank's Amazon-focused site now redirects visitors to Wells Fargo's general student loan section.
So, Who Is It A Bigger Fizzle For?
While both brands will certainly log a Fizzle here, it seems that early perception makes Wells Fargo the bigger loser.
What hasn’t helped is its recent run-in with the CFPB. Last week, it was dinged for deceptive student lending practices and had to drag out its checkbook and pay a $3.6 million fine. The charge? That it misled borrowers, illegally charged fees and processed payments in a way designed to maximize late fees. Wells wrote the check, as most banks do these days, without admitting to any wrongdoing.
But the backlash once the program was announced was pretty palpable. Wells seems so unpopular with certain consumer groups that Amazon actually started feeling some of their criticisms when the partnership was first announced. One such advocate called the partnership — and the alleged 0.5 percent savings on loans — “the kind of misleading private loan marketing that was rampant before the financial crisis" and "a cynical attempt to dupe current students."
Those criticisms stem from complaints about the costs of Wells Fargo’s loans — which, on average, clock in at 10.93 percent, as opposed to the federal rate of 3.76 percent (federal student loans are capped, hence why many students have a mix of government and private loans).
And if you’re Amazon, who needs the hassle? And who needs any more reason to invite the CFPB into your house when your intention was only to extend a perk to Prime members?
What this means going forward also remains unclear. Wells Fargo will obviously continue lending to students; Amazon will continue to sell lots of stuff to them online.
Will Amazon ever look at lending again? Why would it want to when there’s Amazon Air ready to take on FedEx and UPS and no CFPB waiting in the wings?