A part of yesterday’s big news was the Google Wallet Near Field Communication (NFC) mobile payment service. Knowing it was coming, and being passionate about personal finance and the abysmal retail banking experience (in part due to a total lack of innovation), I’ve been wondering if I’d use an e-wallet.
And, more importantly, if I were a bank, what would I do with an e-wallet/mobile-wallet service?
I’m going to put this out in the universe and hope a bank implements this. Because I’m going to switch right over to that bank (assuming they let me1).
Coincidentally, an article on the divergent strategies between Google and RIM around mobile payments caught my attention. Honestly, I’ve not even read the full article yet… I stopped after the 3rd paragraph to write this post. The author writes:
Call me a hopeless Luddite or a skeptic, but I feel like I’m missing something here. Of all my desires in life, being able to pay for my coffee by swiping my smartphone at a box on the Starbucks counter does not register in the top 100.
I can’t say I disagree. However… I can think of a lot of ways this could be used by banks to differentiate and innovate. Valuable ways that would attract profitable customers.
As a side note, there are certain ways the world works. One of those ways has to do with customer acquisition. Banks, mobile phone companies, cable companies… they know what their customer acquisition cost is. And, they can use that money a lot of different ways to get new customers. An example we’re all familiar with are subsidies for mobile phones. Banks do the same thing. They’ll pay you, as a new customer, to open a new checking account. Personally, I believe that it’s lazy marketing to pay customers to switch.
It would be much more interesting to invest in innovation to win new customers. Of course, it’s much harder to measure the results.
Investing in innovation adds long-term value to the market, and also reduces customer churn. Pay me $50 to open a checking account, and I will. But, I may not use it. I also may not have much bank loyalty. But, give me a truly valuable service and I’ll be an active consumer. Be innovative, and I’ll have fun being a customer.
[Total aside, but imagine what happens when the first retail bank figures out how to make personal finance into a game/app. Won't it be fun to bank, to save, to learn?]
Back to the mobile wallet and banking innovation.
Being able to pay with a mobile phone, instead of a credit card. Not so interesting.
Creating a “closed loop” on business spending and expense reports by capturing business expense info at the point of sale so that expense reports are automatically generated is a whole other story.
Imagine swiping your mobile phone, selecting a “thing or two” (maybe a charge code, or an expense type, or quickly jotting a description), and having your expense report automatically generated. You want to capture high-value customers as a bank? Capture the business traveler. For those of you who don’t travel a lot for business, let me tell you about the cost of doing expense reports.
- They’re a pain in the ass.
- They take a lot of time.
- There’s never enough time to do them.
- The more time goes by, the less accurate they are.
- Business travelers who don’t do expense reports on time disrupt accounting. I know people who’ve done months of reports at once. Crazy to “loan the company so much money” but it happens.
- Expense reports are often overnighted back to accounting once they are done; postage costs add up.
What if there were a way for the bank to offer IRS-acceptable receipts sent directly to the company (or downloadable, or whatever), making it easier for small companies to accept emailed copies of the expense report and eliminating the shipping of the physical receipts?
What if a sales person who submitted expense reports this way could be guaranteed a very rapid payment?
Sort of like the Elance’s WorkView guaranteed payments feature if you use their Tracker app. While you work, Tracker takes screen shots which automatically become your timesheet. Payment is streamlined so that you get paid almost immediately instead of waiting for your timesheet to be reviewed. Progress Software was great at paying expenses, but there was still a minimum 2 week turn around. Two weeks really eats into the 30 day credit card billing cycle, so you always end up needing to float the company money or have some cash around in order to cover the delays between getting paid and having to pay your credit card2.
The same very compelling story can be told for small business banking.
Imagine every expense made by swiping a mobile phone (and again, perhaps a couple of quick taps to categorize at the point of sale, or at another time from a queue of transactions that you can access from your online banking account) just automatically being accounted. No more downloading statements from your bank account into your finance package. No more setting aside an hour at the end of the week to keep track of your finances.
Accounting becomes a simple, end-to-end experience, and just happens as a natural extension to the way money is used.
Both these use cases are highly compelling to me, a great place to start, and would attract very valuable customers (though I don’t have research to backup that last point, I suspect small business owner and business traveler personas to be very profitable target demographics).
Here’s another good article on the size of the mobile payments market in case you wonder what’s going on in mobile payments around the world.
Last point. For the life of me, I can’t figure out why (to my knowledge) not a single bank has challenged PayPal. It doesn’t make sense to me. Here’s their chance to really innovate and change banking in a positive way. I hope to see some interesting stuff happen, but have really little hope that it will.
- When I was opening an account for Where’s Your Heart? Citibank literally wouldn’t let me.
- This is true even if you have a corporate card that you pay the bill on.
