That’s the advice from Richard Crone, chief executive
officer (CEO) of Crone Consulting LLC, and Heidi Liebenguth, Crone Consulting
managing partner. Crone and Liebenguth discussed mobile payments strategies for
retailers at the recent AFP Treasury Advisory Group (TAG) meeting. After
performing due diligence on more than 100 mobile payment providers worldwide,
they told attendees that the one mobile payment solution merchants should be
concerned with is the one that enables them to enroll customers for their own
preferred payment tenders in their own mobile shopping app.
Many treasurers in attendance expressed general interest in
where the mobile payments and mobile banking industry are headed in the US and
internationally. “What, within the next three years, are the viable applications
that are going to change and improve the work experience of the people in this
room?” asked one attendee.
Crone explained that most banks originally got
into mobile banking as a way to the reduce cost of doing business. “But what
they found was, consumers that interacted electronically, were actually more
loyal and stayed with the bank longer, bought more product and were more
profitable,” he said. “So it’s an expansion opportunity if you do this right
because you’re managing a contactable user interface (UI).”
“live and die” by whether they can improve their UI, Crone said. “If you do make
these connections with customers, there’s actually an opportunity to create new
lines of business by turbo-charging what you already have today,” he said.
Crone illustrated the three “waves” in mobile commerce: mobile banking and
retailer apps, mobile payments and wallets, and self-marketing and actionable
offers. There is a substantial return on investment (ROI) in mobile banking and
retailer apps – generally, they pay for themselves in less than three months.
However, that ROI is dwarfed by the opportunity in mobile payments and wallets.
If businesses can enroll their customers for in either one of those functions,
they’ll have a monopoly on self-marketing and actionable offers.
“Merchants are pursuing more than an interchange opportunity worth around
US$31bn,” said Crone. “The big money is going to be made in self-marketing and
actionable offers. The one who enrols is the one who controls. The one who
enrols the customer in anything mobile, will have the upside for self-marketing
and revenue that comes from increased sales and advertising.”
Attendees admitted that mobile payments present a
conundrum for retailers. No retailer wants to make the investment, even if it’s
a small software upgrade or point of sale (POS) upgrade, until customers can
actually use it. “But people aren’t going to use it until retailers make the
investment” said one attendee. “So which comes first?”
In reply, Crone
stood firm in his belief that “all new payment types start with merchant
acceptance.” Crone stressed that if retailers enroll their customers directly in
their own mobile payments service, they could achieve “tender steering”
benefits. “Your leading indicator is what Starbucks has done. More than 25% of
their sales are on the Starbucks card, and the interchange on that is zero,” he
Consumer time spent using retailer mobile apps is growing by 530%
year-over-year, noted Crone. But retailers are not concerned with simply
creating mobile versions of their websites. “The lion’s share of these mobile
apps are used in the stores,” he said. “The single greatest influence of the
mobile shopping app is to amplify the in-store experience, using location- and
customer-specific interaction capabilities only possible through a mobile app.
They want to improve the in-store experience by providing a service that they
never could before.”
And in exchange for providing a better customer
experience, retailers receive the most valuable chip: customer information.
“Let’s say I download the Wal-Mart app, and as I go through the week, I dictate
my shopping list to the app. They have my shopping list, so when I walk in the
store, the shopping list organizes and directs me by aisle. And Wal-Mart now has
a forward view to what I intend to buy. That’s pretty valuable information that
Wal-Mart might sell back to another product manufacturer because I’m enrolled.”
The data is especially valuable to third-party intermediaries like Google,
Isis and PayPal, which are attempting to position themselves between banks,
merchants and consumers. “Their business model is not built on loyalty for a
particular brand or retailer,” said Crone. “It’s built on rendering competitive
ads and offers.”
System of record
Crone noted that the
majority of internet bill presentment and payment is performed today on biller’s
websites (biller-direct) rather than through a bank website. Biller-direct has
surged dramatically since it was first introduced. “Bank bill-pay has been flat
for three years,” he said. “Biller-direct has continued to grow at double digits
because the millennials only pay one or two bills per month, and they go
The rapid uptake of biller-direct payments
illustrates why businesses would be better served to develop their own mobile
solutions rather than relying on one provided by a third-party intermediary.
Crone stressed that businesses need to build an enrollment base to get as close
to core processing as possible. “Bankers have always had to bolt on to something
outside of core in order to get there,” he said. “If you’re driving the UI
directly from the mobile app, you’re the core. You want to be the system of
record. If you’re evaluating some mobile payment option, ask yourself, ‘Who is
the system of record?’ If you’re not the system of record, you’re always
struggling for relevance.”
Crone stressed that the safest bet for
retailers is to develop their own UI and link their customer relationship
management (CRM) directly to their own app. “Regardless of what happens in this
market, every penny spent on your brand, your tender and your app will never be
wasted,” he said. “If someone injects themselves between you and your customer,
you will have to pay that third-party intermediary in order to access your
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