Payments Resolutions Worth Keeping

Sidelining the sweets? Forgoing the french fries? There are some New Year’s resolutions worth keeping this year and continuing the Resolution Series, Karen Webster shares her 2011 payments New Year’s resolutions.

I will focus on innovation that can be ignited and return a profit (in my lifetime)

I know that VCs have a rule of thumb when making investments in new ventures – they look for aspirins and not vitamins. That is to say that they look for innovation that solves a real problem versus things that are simply an interesting and novel application of technology. I am afraid to say that many of my Ghosts of Christmas Past included investments (time and resources) in stuff that could be done, rather than should be done, in part because the former was a lot more fun to talk about at cocktail parties and around the conference table. This year, I’ll use the “ignition” litmus test for innovation that is, whether my innovative ideas are capable of getting a critical mass of stakeholders on board in a timeframe that is relevant and that can also meet my company’s profit hurdles. I’ll even use it to help define my value proposition and decide who gets incented and how. It’ll be time consuming, hard and tedious, but essential if since the stakes are high this year to implement innovation with a ROI.

I will expand my view of mobile payments beyond only using the handset as a substitute for a card (enabled with NFC technology).

Yes, Virginia there is a Santa Claus, but no, Virginia, he did not bring me a business case for NFC phones in the US this year. I know that mobile payments is the future, but I’ll refrain from putting all of my poker chips on mobile payments and NFC since that will miss the huge value add that mobile can deliver the industry, and everyone in the ecosystem. I take the point that NFC has ignited in places where (a) there is a closed loop environment like transit systems and (b) there is nothing else in place for merchants to rip and replace with NFC readers but that is not the case in the US and in many other places in the world. And, even though ISIS is all about NFC and Google and Apple have hinted at NFC stuff, I will refrain from chucking other mobile payments initiatives unless I hear that one of those players is putting up real money to install new POS terminals and someone is using that technology as much more than a substitute for a card. I also promise not to buy into the hype that “this is the year for mobile NFC”  since I did that 5 years ago, and that did not get me very far, at least in the US. I resolve to take mobile payments seriously but to put pedal to the metal on how  it can be done in a way that uses the power of these super cool, super powerful devices, cloud computing and the investments merchants have made in their POS systems to rock mobile payments in the next year or so. I also promise to acknowledge that when people use their smart phones (and iPads) now for commerce – they shop on line with them today – that will count as part of my definition of mobile payments too. (Related Article: All I Want for Christmas is my NFC?)

I will get more creative about how I motivate customers to use my products.

This might be the easiest resolution to keep, in part because, there may be no other choice but to do so. Durbin has all but gutted debit rewards funding, and the pitter patter of credit interchange regulation’s feet will soon force a wholesale reinvention of credit cards rewards too. But, even if the industry’s new regulation had not thrust this business model hiccup upon it, I needed to think about new ways to acquire and retain customers anyway. I am coming around to the fact that, funding issues aside, consumers don’t want to earn, bank and burn rewards points anymore. They’d rather have the cash back, or use points as cash anywhere they shop (and there are billions of dollars in points values waiting to be redeemed that way). The rise of new advertising platforms and deal sites have shown me that customers want “instant gratification” and offers, and in a way that is most relevant to them, whether that is on social networks, deal sites or via online banking portals. I’ll also a little more attention to the research that suggests that rewards programs tend to incent customers who would be loyal anyway, so add an unnecessary layer of cost to customers who don’t need to be incented anyway. There is one huge data point supporting that research too – Wal-Mart, who has never done anything but offer “everyday low prices” and a set of services to its customer groups to keep its base loyal – resulting in the distinction of it being the world’s largest retailer. In any case, 2011 is a great year for me to do some soul searching on this topic and there are a lot of interesting new options to explore that will make keeping this resolution less onerous than losing those unwanted holiday pounds.

Karen Webster is the President of Market Platform Dynamics (MPD), a management consulting firm that helps companies profit from industry disruption. 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.

Payments New Year’s Resolutions

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