Blog

How Software Development Platforms Will Drive Innovation and Transform Payments

November 10, 2010

The use of software platforms to drive innovation and transform industries has exploded since the 2006 publication of my book Invisible Engines with MIT Professor and former Sloan School Dean Richard Schmalensee and Harvard Business School Professor Andrei Hagiu. Around the globe, invisible engines are ushering in a new era of technological change based on software. (more)

 

Jump Start Double Digit Domestic Payment Growth

November 10, 2010

Over the past several years the acquiring industry has experienced a period of stagnation or decline as measured by transaction growth and margin compression.  With the exception of a few segments such as, debit and B2B, this downward spiral continues to be a cause for concern. In recent years acquirers have come to expect and have had to live with the reality of single digit growth, particularly for credit transactions.  However, it is my opinion that there is a real opportunity to reverse this trend. (more)

 

Intelligent Payroll Cards for Banks and Businesses: It's What's Coming...

September 22, 2010

 

The Aite Group recently put out a report examining open loop prepaid cards and payroll cards and I can't agree more when Aite Director Gwenn Bezard says, "Many banks still fail to recognize the formidable threat and opportunity represented by prepaid debit cards".

We're talking about a market that will be growing an estimated $35 billion over the next few years.

I believe there's tremendous opportunity for progressive banks to cozy up to business customers to learn and better understand the types of nuanced payroll card services their business customers and employees of those customers need.

There is a lot of oil in those wells that's currently not being tapped. 

Forward-thinking banks won't simply deliver payroll cards through an issuing partner. That's leaving way too much opportunity on the table. 

Progressive banks will differentiate by offering specialized services driven by intelligent payroll card technology that simplifies card issuance, delivery, customization, and management. 

Above all, these banks will seize more than their fair share of that $35 billion by enabling and selling the substantial cost savings and other bottom line benefits of switching to intelligent payroll cards versus old paper checks (a market that's not so lucrative anyway).

Specific capabilities that forward-thinking banks will offer employers include self-management of employee accounts, including granular control over how funds are distributed and advanced exception handling (i.e. sales commissions, promotions, contest rewards, bonuses, etc.).

But it's not just employers that need intelligent payroll card technology, their employees need it too. Employees want more control and expect it to be available 24/7 online. By giving employees more control online, employers should see reduced costs and higher satisfaction because employees can sign up for the cards, personalize them, manage transfers and switch automatic deposit accounts, all on their own. And of course there are substantial costs eliminated when paper checks and postage are eliminated.

And why stop there? Banks that resell payroll cards should enable employees to transfer funds to other cards (a child or spouse for example) and create upsell opportunities with the employer AND the employee AND the employee's fund recipient on seasonal prepaid cards. Why sell just one payroll card when you can potentially sell a Christmas gift, Birthday Gift, and a Mothers Day present too, right?

 

 

Silly Bandz! Lessons from Micro-Currencies

August 23, 2010

by Shawn Barrieau, CEO

In the third grade it was stickers. By fifth it was baseball cards. I haven't thought about collecting things as a kid until I recently saw my own children trading the newest fad; Silly Bandz. You know, those colorful rubber bands that come in all different shapes? They're everywhere.

As assistant coach for my six year old’s t-ball team, the biggest challenge used to be keeping players from building sand castles on the field. But the last game was quite different. Most of the kids had Silly Bandz and while one kid was batting, the rest were huddled in near the bench trading Silly Bandz!

I'll trade you a blue seahorse for a red pirate hat

In just a few short months these little rubber bands have become a new currency for kids, and it’s made me think about lessons for the payments industry.

Silly Bandz represent the "whole" trading of goods – kids enabling trades on their own after agreeing to terms -- while players in the payments industry typically handle just one part of the full trade. Some companies enable monies to transfer, others confirm transfers at an agreed upon price, and still others record the transactions.

If the payments industry were handling the trade of a Silly Band from one kid to another, the kids would stand at either end of the field and one company would communicate a kid’s desire to trade a blue seahorse for a red pirate hat; another company would confirm the second kid’s desire to trade the red pirate hat; and yet another company would actually transport the bands from one kid to the other.

In fact, the payments industry charges quite a bit for this type of service. Sometimes we even broker a piece of the price (albeit small) that may affect human trading behaviors. For example we influence spending through things like interchange fees, or points on debit or credit card, loyalty credits, or fees on a prepaid card -- thereby influencing what payment mechanism is chosen to make the exchange of goods possible.

Where's the value?

As a payments professional, I spend a lot of time thinking about the ways in which our industry adds value to transactions. With Silly Bandz, all of the value is bound up in the product itself. The process of transferring the band from one 6 year old to the other creates no value outside of the transfer. But in the payments industry, we strive to add value during the transaction. Examples of value created during the transaction includes enabling the exchange of products and currency over long distances, moving products store to store, or enabling payments from the Web.

Sometimes the value we bring is hidden from consumers, such as providing a payment gateway on Amazon.com. Sometimes it is quite visible, such as when we enable buyers to add a photo of little Sally proudly wearing her Silly Bandz on a gift card – and thereby influence how the funds on that gift card may be spent or even the addition of more funds to that payment mechanism.

Our challenge as an industry, and my challenge as CEO, is to get out in front of customers and look hard for new ways to add value in either highly visible ways that impact consumer purchasing, or more obscure ways that impact top and bottom line merchant performance. Sometimes the value we bring to consumers is hidden (streamlining and not interfering with the purchase). Sometimes of the value is highly visible (letting customers personalize their gift card orders).

When we succeed in adding value to the transaction for consumers, we deliver a seamless and delightful experience that exceeds their expectations.

And when it all comes together, the result can be almost as much fun as kids trading Silly Bandz.

 

Hyper-Localization Customization

August 04, 2010

When it comes to card customization the opportunities are endless, but some smaller financial institutions need to think outside the boundaries when it comes to customer acquisition and custom photo or co-brand cards can be a powerful tool.

When it comes to marketing locally, esp. for smaller banks, it is difficult to assess to the target demographic. For most small banks, it is simply “the community”. But it would not be wasted effort to carefully look at the surrounding community at large and look for targeted pockets of consumers that really work well for your bank. I call this hyper-localization.

For example, if you have a custom card program one way to really make it work beside allowing people to place their photo on the card is to co-brand the card with another affinity-based community segment. For example, high schools in most towns tend to be a community hub for sports, theatre, kids (of course), but also parents. A high school may in fact be an awesome place to run a custom card campaign because it touches so many prospective customers. Rather than putting a big ad in the Sunday paper imagine posting a bulletin with a debit card that had the High School logo on it? Even better allowing cards for each major sporting and extra cirricular activity the school offers and making an offer to both the kids and their parents. Kids with active involved parents are no-doubt going to want to show off their pride for their son or daughters activity.

This may sound like a lot of work, but it isn’t really and the potential results could be fantastic. First of all, creating the templates should be a snap. Get the schools permission to use their logo and market in the allowed school venues and then create a handful of card designs (digital of course) that are only printed when ordered through your custom card utility. No inventory to carry, but a powerful impact.

This type of marketing may in fact hit your target demographic and the future up and coming generation of local customers too, but don’t stop there. Your community is full of pockets of folks you would like to have as customers. Find them by using the thoughtful people in your bank and make a small effort to reach these people with the right tools and you will find you’ve got a card for card for everyone and happy new customers!