Before about a month or so ago, whenever wallabies came up in any conversation, it was in the context of those cute little kangaroo-like critters native to the regions down-under. In addition to rating high in the cuteness category, these agile and resourceful creatures were known for their smarts and resourcefulness, often traveling vast distances in search of food and water, as well as their powerful hind legs that helped keep predators at bay.
Now, thanks to the marvels of modern payments technology, there is a new species of wallaby. This one, though, is plastic. It, too, is described as smart and resourceful since it is said to search far and wide to match consumer transactions at the point of sale with the right consumer credit, debit, and rewards programs. This Wallaby is hoping that the promise of optimizing a consumer’s fat wallet onto a single plastic mag stripe card will give it the kick that it needs to compete in the now enormously crowded wallet space. (Sorry, I couldn’t resist that one.)
I was recently asked by a reporter to comment on this new species of card product and proposition. Since the result of my 25 minute interview was about 10 of the most uninteresting words I uttered, I thought I’d give you the benefit of my thoughts on this product.
First off, it’s a very clever concept. The idea that a single plastic card could be smart enough to direct my point of sale transactions to the appropriate credit or debit card in real time in order to optimize my reward benefits seems like manna from heaven. Not to mention, all of the help with the fat wallet dilemma made famous by George Costanza. The fact that Wallaby does all of this via a mag stripe card that is the accepted standard at all merchants today is also pretty clever. It seems like an interesting way to mash up data and the cloud to solve a problem.
Or does it?
The problem that the Wallaby founders set out to solve is the alleged consumer frustration associated with keeping track of the various rewards and loyalty schemes that are attached to card products today. So, if Card A offers X% cash back on groceries and Card B offers Y% cash back at gas stations and Card C offers Z% cash back on office supplies, the Wallaby card basically makes sure that the right card is always used for the right transactions. So, even if Card A decides to offer a super duper cash back proposition on gas during the summer months, Wallaby will be smart enough to route gas transactions to Card A for that time period rather than Card B.
All of this, of course, assumes two big things: that consumers don’t do that mental bucketing already and they’ll trust that one card that does all of that “in the cloud” will always get it right. I admit that I haven’t talked to hundreds of people about this, but the handful or so I did query seem to know pretty well which cards do best at which merchants and simply whip that card out of their wallet at that merchant. It doesn’t seem like such a big deal. On the “just how smart is that card?” notion, the worry is that the only way the consumers will know how smart it really is to check up on it to see if the transactions were routed appropriately. That sounds like more work when things, more or less work pretty okay now.
Having all of this on smart card auto pilot also seems like it would come with a double edge. Suppose there are other reasons associated with wanting to use Card A over Card B that has nothing to do with a cash back propositions. Suppose a consumer is trying to optimize some other value, like paying off a balance or only wanting to use a certain card for certain types of purchases (not atypical). I suppose that card could be taken out of the Wallaby database but then it sort of eliminates the value proposition of only having to carry one card.
I thought about a few other things too.
The concept around multi-purpose cards isn’t really all that new, but is a concept that has never really ignited. Interestingly, this concept was introduced in Australia (how coincidental – I wonder if that is the origin of this card’s name!) about a decade ago but today accounts for less than 1% of all cards outstanding. In the US, there have been multiple attempts to issue similar cards over the last several years but without much traction. The theory for the lackluster performance is that most consumers have mentally bucketed spend according to certain types of cards for their own reasons – certain things always go on debit, or credit, and then the rest is variable based on a lot of other things that may change month to month (or week to week). The ability to pluck a card from a wallet, or in the digital world, scroll down to the appropriate card, keeps the consumer in control. As a consequence, it seems odd/weird/unnatural/unnecessary – you decide which word fits best – to have a single plastic card that can (a) toggle back and forth automatically and/or (b) trust that a single plastic card is smart enough to know what to do all of the time. On the merchant and issuer side, I can imagine that Wallaby may not be perceived as all that cute. Card A might offer cash back at groceries, but Card B might be linked to a special merchant funded rewards program at that merchant. How does Wallaby decide how to route the transaction? And where is the opportunity for the consumer or merchant to influence/decide preference at the point of sale? Seems like this could become a complexity for the merchant, and the consumer, a real unintended consequence of relying on algorithms to route transactions instead of good old fashioned merchant and consumer interactions at the point of sale.
For any of this to happen, merchants have to do something at the point of sale to accept a Wallaby card. That something may be insignificant in the scheme of things, but something has to be programmed at the POS that upon the swipe enables the transaction to route transactions to Wallaby before it gets switched to the relevant network. That means merchants have to agree to do whatever that something is. And, with the bombardment of requests coming their way for everything from NFC to mobile payment apps to loyally schemes, unless there is a boatload of consumers running around with Wallaby cards, the value proposition for them really doesn’t seem all that compelling. From the issuer’s standpoint, in order for any of this to work well, they have to keep their data sources up to date so that whatever feeds Wallaby is using are also up to date.
Oh, I almost forgot to mention, consumers have to pay a $50 annual fee for the Wallaby card, as well as any annual fees for the cards that are linked to their Wallaby account.
The reporter also mentioned the iCache product in this article. I’m an advisor to iCache so know it and the story of its evolution very well. The iCache Geode product has mashed-up the concept of multi purpose mag stripe card with digital wallet that puts the consumer in control of deciding at the point of sale, which card to use. This iPhone wallet application (now approved by iPhone and in the market) is a case in which the iPhone sits and which holds a reprogrammable mag stripe card. The app allows a consumer to load cards into that digital wallet and then to select which card to use at the point of sale. The plastic mag stripe card that ejects from the back of the case is reprogrammed to become that card. I thought it was an interesting compare and contrast point to Wallaby.
In any case, the upshot of my conversation with the reporter was that I thought Wallaby, in its current form, was a tough slog. Clever concept, made possible by technology and cloud computing, but an innovation in search of a problem. And, boy, we’ve seen lots of those movies before in payments. There is no shortage of cool things that technology can do, and apparently, no shortage of money to fund getting them into market. Ignition is fleeting unless merchants and consumers find real, sustainable value.
So, in spite of how smart and resourceful this Wallaby might be, I don’t think it will kick it at the point of sale for either consumers or merchants.
What say you?