Obopay/Mastercard

http://www.americanbanker.com/issues/175_107/mastercard-offers-cash-transfer-app-1020320-1.html

Am I the only one that thinks this is a little sad? Why would you roll out a service that can’t be used (no banks signed up for it)? Obopay has built an iPhone app for the Money Send service.. the only way to make it work is for both the sender and reciever to have a Bancorp pre-paid card.  They should have probably sit on this until they get a bank signed up.. ? Given that Obopay has MSB licenses in 48 states.. recievers could get notified, registered, link bank accounts and get cash 3-5 business days later after they validate bank account? sound convenient to you?

Mobile Advertising Battle: Beyond the Internet

10 June 2010

Apple is brilliant!

Having just read today today’s WSJ Article- Google Blasts Apple on iAd Rules, a few random thoughts started to coalesce (which doesn’t happen as often as it used to) into a new ‘‘investment perspective’ on mobile advertising.

Yesterday Magna estimated that online advertising will climb 12.4% in 2010 to $61.0B and surpass $100B by 2013. For perspective, AFP reports that advertisers will spend $59.6B on TV ads and around $600M on mobile advertising (eMarkerter, $1.3B by 2013). The growth here is just astounding, there is little wonder for the transactions over the last 3 years:

  • MSFT aQuantive $6B (May 2007)
  • Google DoubleClick $3.2B (April 2007)
  • Google AdMob $650M (May 2010)
  • Apple Quattro Wireless (Jan 2010)

In my experiences as global buyer, online was by far the most cost effective way to acquire a customer (with SEM the most cost effective). From my perspective, Online Advertising brought a solution to the challenge faced by marketers for decades: data. Finally I could relate marketing spend to customer acquisition. Marketing went from throwing a blanket.. to a shotgun.. In 2005-2007 this shotgun was very hard to use.. particularly outside of the US. Although most agencies were well versed in spending through Ad Networks for display ads, few had any experience in SEM across search providers. Those Agencies that did still did not provide tools for my teams (buyers) to calculate CPA (determining which ads resulted in customer acquisition). Hence, large companies had to develop their own internal expertise or manage their spend directly with a chosen few suppliers (eg. GOOGLE). Internal marketing thus took on the form shown below.

The Ad industry recognizes that the ability to track a customer is key to measuring effectiveness, target ads and thereby key to greater marketing spend. There are a number of technical solutions which have developed over the last 3-4 years, tagging customers with cookies is all something we are familiar with.  Apple’s strategy in defining standard for “tracking” is challenging Google’s unique position as the “starting point” of a customer’s online activity. It moves the starting point to the iPhone device. This is a brilliant move by Apple given its 50M iPhones (and 30M iTouches), particularly when you look at the demographic of the owners and the media capabilities of this killer mobile appliance.

Apple’s plans to take ownership of the iPhone’s “Ad Ecosystem” will not end with these standards. In the online advertising model, the objective was an online acquisition. In the mobile ad model the objective is for either an acquisition online or at a physical point of sale (POS). The mobile device is in a unique position as a point of convergence between the virtual and physical world. In this model the iAD/mobile market expands from mobile advertising (as a sub category of online advertising) to generating store traffic at the POS. The challenge for a iAD at POS is similar to the “customer tracking” challenge described above.. how do I know the customer went to the store? Answers: coupons, payment, geolocation, …

Expect Apple and the MNOs to become very active in linking mobile advertising to these activities (ex Apple’s NFC patent, MNO prepaid consortium). The linking of card data to mobile advertising (consumer behavior and preferences) also provides a tremendous opportunity Banks/Issuers to monetize consumer information (see Googlization of Financial Services).

We may be seeing the beginning of a seismic change in advertising spend, and the way consumers are tracked and targeted. The “addressable market” for mobile advertising should not be viewed as a subset of online spend, both because of POS opportunities and the media richness (and now multi-tasking) of the iPhone. Apple’s strategy is brilliant, I would imagine them taking a regulatory position that all ad networks are welcome to work through their standard…. Apple is protecting customers’ privacy.

Related Content

April 2010 online ad spending report

Thoughts appreciated

Random Thoughts

7 June 2010

Rumor Mill

Paypal’s new virtual terminal may be just in time. Rumor is Visa is planning a slew of new product announcements in next month.. from NFC, to mobile coupons to bringing down the barriers of card acceptance. Perhaps this is the primary driver for the CYBS acquisition, there must have been a dependency given the multiple paid.

Thought for the day: What  is “banking innovation”?

How many times per day do you really want to check your bank balance? From how many different devices? Is comparing yourself to others innovation?

From my perspective a “killer” customer value proposition (in any market) is making “up market” premium services available to the masses. How would you like to be treated like a client of a private bank? Your bills are paid, your lawn is mowed and your dog is walked… You have a relationship with the banker, he is invited to your children’s wedding. He actually knows your name when you walk into the office or call him on the phone…. and he also consistently delivers superior market returns to your portfolio.

As a bank customer.. does your bank know who you are? your history with them? What your goals are? Is it any wonder that bank customers are rate driven? There is no relationship (or trust) in the average mass market portfolio of a large national bank. Why do customers select a bank today? (sorry for stale data)

Banks know that Customer Satisfaction strongly equates to profitability, and retention. Customer focused innovation starts with focusing on what your customers need… I’m surprised at the lack of effort here…. What would my top area be?  That’s easy.. financial education. Banks that help educate customers stand a very good chance of building better relationships, and increasing wallet share. Today I’m left with an “apply” button on my brokerage tab for Wachovia, Citi, Chase, Wells.. the average customer doesn’t want to apply for an account until they understand how this “product” will serve them and gain insight into how BankX’s services compete.

Who will take on financial education 301? I don’t really want banking to be “fun” (aka Virgin).. I want it to be serious and thoughtful.. US retail banking is just plain backward when it comes to innovative products (Foreign currency accounts, structured products, international equities, …). Perhaps there is a “catch 22” with our collective financial literacy.. or lack thereof.

Examples

The banks above have obviously invested time thinking about this, however my guess is that few current customers know about (or use) any of these services.

What would a private banker do for a new relationship? He would probably try to find out my risk tolerance and develop a plan to better manage cash (ex sweep account) and investments with consideration for taxes and personal plans. Why are banks outsourcing this to a CFP?  Of course the answer is that banks are product focused (as opposed to customer focused), there is great margin in that 0.25% CD that grandma buys.. also a great source of liquidity which drives Tier 1 capital and my bond rating (cost of capital).  All of this seems to point to great opportunities for small banks, particularly those that cater to affluent (Aquestabank and their 1.2% CD).

It seems that the ABA and OCC are frowning on deposit competition right now, a heavy price for consumers.. take a look at rates in the UK this week (http://www.moneysupermarket.com/savings/) . The incentives for the large banks is to act as a “late follower”… after all until balance run off occurs there is little incentive to change.. US branches (and their sales teams) continue to excel in generating margin.. with consumers poorly equipped to evaluate options.

Make no mistake, the consumer market will change..  Will banks that depend on customer illiteracy for success will have adapting? US banks are very fortunate that the average consumer is not a British replica… where  consumer “rate hopping” is at an extreme … perhaps Mint, bank rate, and money supermarket will get more traction and bring greater transparency..

Thoughts appreciated.

PayPal Virtual Terminal – Accept Cards at POS

PayPal Virtual Terminal

6 June 2010

Great job PayPal…. bringing down the cost of card acceptance to $30/mo. No hardware, no special agreements.. just add the service to your existing merchant account.

The only downside seems to be for the 5+ Valley start ups like SquareUp that were targeting physical POS acceptance in a “Craigslist” type environment. The head of payment strategy at a top 3 bank told me that making merchant acquisition easier was a priority for driving new card volume. Looks like VT can both drive TPV growth and address potential down market competitive threats at the same time.

I can’t help but wonder how this pricing will effect Chase Paymentech (PayPal’s partner and merchant acquirer). Small merchants may indeed think twice of having their own merchant services agreement and specialized terminals.

Thoughts appreciated