Monthly Archives: June 2012

MSFT has a Wallet too?

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23 June 2012

From the Window’s Team Blog

Wallet: Windows Phone 8’s new digital Wallet feature does two great things. It can keep debit and credit cards, coupons, boarding passes, and other important info right at your fingertips. And when paired with a secure SIM from your carrier, you can also pay for things with a tap of your phone at compatible checkout counters.

From PC Magazine

Microsoft is taking a somewhat unusual approach to a digital wallet by introducing a Wallet hub app and APIs that let third-party developers build applications to process transactions. What makes this so unusual is its use of “Secure SIM” cards.

Microsoft has some very interesting assets and experience (see Wikipedia on wallet, passport, liveID).

  1. Microsoft has 3 POS systems (see overview) with Dynamics as their “go to”.
  2. Passport “experience”
  3. Phone OS
  4. Developers (will leverage core Win 8)
  5. Cash to compete
  6. Skype
  7.  aQuantive (digital advertising)
  8. MSN Money
  9. Global sales/distribution
  10. Patents

MSFT Hurdles (Wallet focus)

  • No phone OS adoption
  • Brand
  • Consumer Demographics of Phone 8 buyer
  • No “killer” apps/capability compared to Android/IOS
  • Minimal credit cards stored w/ LiveID
  • Current phone “app” footprint
  • Handset manufacturer commitment (See HTC article)
  • Time for Nokia to support
  • How on earth are they going to Sync a card in the NFC SWP SIM with the Wallet Hub?
  • US MNO Support
  • Time to complete large scale pilot
  • Subscale digital Advertising platform

Why announce at the developers summit?  My guess is it has to do more with MSFT’s desire to turn on a developer community for the digital goods. MSFT is in control of the platform here, while the POS and NFC is far in the future. So this announcement is really aimed at competing with Apple’s Passbook in areas such as in app billing and mcommerce purchases.

I will be very impressed if MSFT can get 100k handsets active w/ Orange, and over 20k a month using NFC in a SWP SIM.

MSFT.. are you doing something unique this time? My recommendation: build a Platform team that crosses your organization. Task them to build  end-end reference architecture(s) from phone to POS from mobile advertising to redemption,  … etc. Then give it away… Take a look at what Square Register has done and reinvent the POS experience. Be original.. again.

Nokia and MSFT: 2 Mobile Turkeys?

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Today’s WSJ Article

http://online.wsj.com/article/SB10001424052702303822204577465771376539532.html

My detailed analysis in April

http://tomnoyes.wordpress.com/2012/04/11/nokia-apple-android-and-the-stage-4-value-shift/

Rumor is that when Google’s Andy Rubin was told Elop spurned the Google opportunity he responded: 2 Turkeys don’t make an Eagle.  Nokia is a tremendous engineering organization, just like RIM was, and Apple still is. What sets Apple apart? Marketing Genius and business planning that DRIVES engineering (not the other way around). When the “value” equation shifts from feature/function to “experience” engineering is stuck.. as few companies can lead the vision that excites customers.

Elop needs to be taken out.. 92% of Nokia’s value has been destroyed … he has led them toward a huge miss in perhaps their last opportunity to restructure.  What a shame.  There are many growth opportunities in this market where Nokia could compete (if they still have any of those great engineers left). However the current path for Nokia resembles a HTC style contract manufacturer that only builds Windows phones (and low cost handsets for emerging markets).

What would I recommend? something distruptive.. leveraging existing handsets. Example:

– Leverage MSFT and Skype to create solid urban phones no longer dependent on carriers.  Enable local wi-fi providers to be paid for their bandwidth in early stage to encourage them to set up stations. Create integrated backhaul to ensure that the ISP Carriers to not influence pricing.

– Integrated Retailer. Big stores are a black hole for bandwidth… retailers don’t want to enable 3g/4g services as consumers only use it for price comparison (a slight exageration). How can Nokia/MSFT create integrated retail experiences.. example femtocells in all retailers (Samsung is market leader here), integrated into new mobile POS systems (MSFT does own  RetailDynamics) and some new ad platform.

– Integrated Home.

– Integrated Auto.

Thoughts appreciated.

 

Google Wallet Thoughts

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13 June 2011

Please see my disclaimer at top.. this is a biased blog.. (comment necessary because the PayPal folks don’t like me this week)

The rumors of my death have been greatly exaggerated…

–       Mark Twain

To restate from my tweet yesterday… Google Wallet Dead? Come on.. Just draw a simple chart 50 engineers working on a May 2011 go live.. and now 13 months later Google just stops working on it ?… just goes away? The Wallet team has only gotten bigger.. Do honestly think 50+ engineers are are all working support? Obviously something new is coming up..

What will the “new” wallet address? Well let’s look at the obvious issues:

  • Consumers don’t use the wallet after an initial “novelty phase”. I could have saved Google quite a bit of money on this one.. this is what my NFC pilots in 7 countries taught me at Citi. This problem is not unique to Google… it effects all NFC pilots.  Customers just don’t care whether they tap or swipe. This is the central problem that must be addressed.. there IS NO VALUE in the payment itself.. but rather the COMMERCE PROCESS. (see my previous posts)
  • Carrier control of the NFC element. This is just a mess, as is the entire supply chain (see 12 party fur ball). It is beyond repair. The carriers want to charge for each and every access of the secure element. That’s right, they want to charge credit card companies $1M a pop to get their cards in, and Hotel room providers for the right to enable phone as door key. This is a replay of their “walled garden” strategy they have tried many, many times (see Carriers as Dumb pipes).
  • Ubiquity (what goes in the wallet). Do Consumers really want to use a wallet that only accepts 3-4 specific issuer cards? Google wants customers to put whatever they want in the wallet, at no cost.. loyalty cards, debit cards, prepaid cards. Their “problem” is neutrality.. they appear to be a competitor to everyone (see related blog). Google wants to “enable” everyone.. if banks can create value… fine.. if merchants can create value.. fine. .but they are not taking sides. After all it is the consumer that chooses what works for them. For example, I don’t use Target’s iPhone app for price comparison inside a Target store…
  • Ubiquity (phone types). There is a limit on number of NFC enabled phones available for consumer use. You can’t create momentum by forcing people to upgrade phones.. that plays into Carrier control. The objective of any Wallet is not to force a phone upgrade, but to deliver consumer value.. to every consumer.. online and offline (my Blog on TXVIA). You must feel sorry for the carriers.. they would love to ship 2M+ SWP enabled phones.. but there is no supply chain cranking them out.. (yet I digress).
  • Ubiquity – Acceptance. The big retailers are not jumping over themselves in a rush to support tap and pay. Who pays for all of this new infrastructure? How can small merchants bypass stand alone terminals from Verifone and specialize cash registers (ex Square’s Register solution is superb)?
  • The most important element:  VALUE PROPOSITION. Take a look at Google’s merchant list for launch (http://www.google.com/press/pressrel/20110526_wallet.html), now take a look at ISIS (http://news.paywithisis.com/2012/05/15/isis-adds-first-merchant-partners/).. Notice a difference? The big retailers are running away from the carrier/bank back mobile payments initiatives because #1 they don’t drive customer acquisition/sales  #2 have higher cost payment instruments (credit only). New value propositions must impact both.. See blog on Retailer’s Wallet plans

As I’ve stated before, pretend you are a retailer and draw a Venn Diagram. Put yourself in the middle. Now think about how you are going to influence customers before (or while) they shop with you. What % of customers does Verizon or ISIS currently influence? How about the banks? PayPal?  Draw a circle for each… base the size of the “influence circle” on number of times these companies influence with YOUR consumers every day. INFLUENCE.. NOT SERVE or INTERACT?

Folks, the challenge is NOT PAYMENTS.. but Value in COMMERCE.. Value requires supporting consumer and retailer interaction in 100s of ways.

I have no idea of what Google will release, or when they release it.. but I do have a great deal of confidence that it will be a major step forward in addressing the issues above.

BAC – Offers Success?

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4 June 2012

I’m using my new BankAmeriDeals and I like it.. really cool. Here is my WalMart redemption. What is success here? For Bank of America? For Wal*Mart?

10 Years ago I was a banker in the room with Wal*Mart and they asked “what justifies any card taking a percentage of my sales”? “What customer have you ever brought me”?

Will Card linked offers be the vehicle by which banks finally deliver value to retailers?

As I mentioned in my previous CLO Blog the average gross margin in Retail (globally) has gone from 4.2% in 2006 to 2.4% in 2010 (ref: IMAP’s Retail Industry Global Report 2010). Given this margin compression, and the fact that retailers spend very little of their own money on marketing, you can see why basket discounts are not widely used, but rather targeted. Given that this Wal*Mart incentive is for 5% cash back, it would seem to be somewhat unsustainable. Even worse.. it was given to every Bank of America Customer.

For this 5% cashback offer, Walmart receive no incremental spend, it was my wife’s normal trip to the grocery store. She didn’t even know I registered for this program.

Quiz time. Who funded the BAC WalMart offer?

1) Wal*Mart

2) Cardlytics

3) Bank of America

Yes it is #3 according to my sources. Bank of America is funding almost half of the incentives in their program, and they are not alone. Retailers are not advertising in the CLO space because of issues associated with “lift”, “reach”, targeting and distribution (outlined in my previous blog). BAC is not alone, rumors are that almost 50% of all CLOs are actually funded by the participating banks or even the venture money received by the “platforms”.  Wow..  I had no idea it was this bad.

My guess is that BAC will now have data to take to Wal*Mart and show what incremental spend they drove. Although 0 incremental spend for me, BAC will be able to show WMT that some consumers chose to switch their grocery purchase because of this 5% incentive. This will in turn lead to “targeting” of incentives to particular audiences and also lead PERHAPS to Wal*Mart participation.  I think this is a very smart move by BAC, and they are 3+ years ahead of this on debit.. all of the other banks are chasing the credit side.

The downside is that the retailers know this is a VERY SLIPPERY SLOPE.  Now that WMT participates.. the banks will go to the other grocers to switch them back.. and then these incentives will be an added cost of doing business for all who wish to influence highly elastic customers. The alternative is to target product level incentives to customer (item level) elasticities. This is what the retailers are planning to do outside of the CLO space, and why BAC will find few “takers” for this. Coupons.com is the leader in grocery space with Safeway and WMT, google is close behind with its recent Zave Networks acquisition and Inmar with recently purchase mdot.

Outside of grocery the same dynamic exists.. cards can indeed motivate a switching behavior with some customers.. but is this a Faustian bargain for retailers?

Take aways:

  • Card Linked Offers have a very long way to go
  • CLO Companies and the banks are paying for the incentives
  • BAC is only bank active for CLO on debit
  • … all of the other issues on value proposition mentioned in previous blog