cardspayments

&INTELLIGENCE

WHY APPLEWILL NEVER GO NFC

NFCSPECIAL

ion........ special edition........ special edition........ special edition..

........ special edition........ special

BitcoinWhat is it about?

BitcoinWhat is it about?

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

2

In this issue . . .3 Letter from

the Editor

Looking to the

future: Apple

won't be using

NFC

How to get

consumers using

NFC

Collections have

turned digital

The key to NFC

success is

consumer

education

4 Why crime should

be accounted for

in the cards and

payments industry

26 Europe's top card

fraud victims

mapped out

30 Bitcoin:

The open

source P2P

digital currency

7

22

11

15

33 Links & Resources

36 Back Issues

15

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

Customerengagement in

a digital world –the big opportunity

by Eoin Whyte

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

16

Value-added services simultaneously help to solve

merchant and acquirer problems. They help both

parties to find and keep customers for longer, to

make them more profitable over a longer period of

time. However, all too often VAS products are

positioned as financial products when they would

be better understood by merchants if they were

positioned in the context of the problem the

merchant can use them to solve.

Merchants have two key problems that value-added

services can help solve. Firstly, how do I engage with

my existing and prospective customers across so

many channels and partners? Secondly, how do I

manage this engagement cost effectively and

without losing control?

He wants to sell gift cards in-store, on his website and in

gift card malls. He also wants to send coupons to customers’

smart phones and promotions via social media and email.

That’s a lot of partnerships, systems and technology to run,

manage and report on.

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

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Let us look at the customer engagement problem

first. How do I engage with my existing and

prospective customers across so many channels

and partners? Retail is now multi-channel. Whether

we call it omni channel or multi channel (what a

jargon filled industry we have) today’s ‘connected

consumers’ require merchants to create a seamless

engagement experience across every channel. This

seamless experience must extend to the products

and services that merchants use to engage

customers pre-purchase, during purchase and post-

purchase, a selection of which are detailed in the

table.

Today, acquirers and value-added service providers

all too often productise and pitch these products

and services individually when they should be sold

collectively, and they are presented as financial

products when they would be better packaged as

tools to help merchants recruit and retain

customers in today’s “connected consumer” world.

Instead of thinking of them as value-added services,

acquirers and value-added service providers need

to think of them in the context of a Customer

Engagement Toolbox.

Starbucks lead the wayBy now, you’re possibly thinking it’s a lovely idea

but the real messy world of merchants and

technology tends to get in the way. The truth

though is that the evidence for this holistic view of

customer engagement has been field tested to

spectacular success in the form of Starbucks.

Not much of what Starbucks Marketing folks do

would seem to make sense in isolation. A high

profile campaign example is where they sell $10 gift

cards for $5 on Living Social who themselves take a

nice cut of the $5. Seems kind of crazy on the face

of it right? Let alone repeating it which they have

done.

However, a December 2012 presentation

published on the Starbucks Corporate by

Starbucks Chief Digital Officer Adam Brotman

perhaps reveals the deeper strategy. They invest

significantly in a digital marketing capability to

drive down the cost of customer acquisition

while simultaneously increasing the

relevancy of the customer offers and

improving the bottom line. In practice, this

means they close the loop on their digital

dollars by tracking the offline

redemption in store of their online

digital offers. And even though they

have huge brand awareness, they still

wholeheartedly embrace a channel

strategy (e.g. Living Social). Their phenomenal

loyalty programme via the Starbucks Card forms

part of a wider customer engagement strategy and

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

18

is one of the supporting customer recruitment and

retention tools – it’s not a financial payment

product. In this light, the success of the Starbucks

Mobile wallet can now be better understood – it’s

part of a wider customer engagement strategy as

opposed to being a payment product led initiative.

With 25% of their annual sales volume now being

delivered through the Starbucks Card programme,

the logic of this strategy has never seemed more

compelling.

How does this apply to the payment

acceptance community?In my view, the industry needs to move from the

traditional transaction centric value-added services

model to a more consumer centric model. This is

not a marketing exercise; it needs to be

organisation wide. From the executive level, to

research and development, through product

management and out to sales and marketing.

Acquiring is a utility for most merchants. How do I

accept card payments is not a difficult question to

answer. Customer engagement is going to be the

new battleground and a key opportunity for

differentiation. Effective selling will increasingly

require more of a consultative skill set than

traditional acquiring. You need to place yourself in

the mindset of the merchant. They are rarely asking

“how do I roll out NFC?” or “how can I launch a gift

card utilising my terminals?” They want to know

how to engage with their existing and prospective

customers across so many channels and partners.

By positioning as an enabling partner for customer

engagement, the relationship changes from being

a commodity provider to a vital partner.

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

19

Customerengagement isgoing to be the

new battleground

The rise of the channelOnce the merchant has a

customer engagement strategy

prepared, their next question will

be “how do I manage the

programme cost effectively and

without losing control?” The explosion in digital

customer engagement over the past three years

has given multi-channel merchants a new set of

opportunities, but also brings with it some new

problems which acquirers and some value-added

service providers are uniquely positioned to solve.

A proliferation of 3rd party channels to market is

emerging positioned between merchants and

customers effectively seeking commissions for

connecting merchants to their ‘closed pool of

customers’. Groupon and Living Social are high

profile examples but there are many

others. This channel fragmentation is

likely to be a feature of the merchant

landscape for some time to come. The

vast majority of players in the digital

customer engagement space are

relatively new players. They bring excellent

products and services designed to open up new

sales channels and markets for merchants. There is

social gifting, mobile gifting, mobile couponing,

social marketing and more. There are a lot of buzz

words, a lot of potential customers and a lot of

players. Each player is competing for the

merchant’s attention and the merchants marketing

dollars. Each provider has a stand-alone solution

covering issuance and broadcast, but to a lesser

extent redemption.

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

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Virtually all of these channels

deliver unique digital codes on

behalf of the merchant to the

end customer. Value based codes

or product discount codes, they

are unique codes issued digitally.

So far so good. But - redemption

of these codes is haphazard, inconsistent, often

manual, sometimes overlooked. Fraudulent

multiple redemptions are a financial drain on the

merchant who carries all of that commercial risk.

The more channels the merchant uses, the bigger

the problem becomes because bespoke

administration processes per sales channel doesn’t

scale. Eventually the merchant decides enough is

enough and has to walk away from legitimate new

customer opportunity because he can’t control the

processes.

Where does that leave the multi-channel retailer? A

pretty complex customer engagement eco-system

with multiple providers across their in-store, digital

and third-party sales channels, all operating on

independent systems, with no thought given to the

centralised reconciliation and reporting across the

merchants customer engagement programme. The

answer is a common redemption strategy

irrespective of the issuing channel or partner.

Acquirers are uniquely positioned to simplify the

process of interfacing innovative digital services

with the traditional POS payment environment, in

the process staying relevant and central to the

merchant’s customer engagement strategy.

I would contend that acquirers

and traditional value-added

service providers have largely

missed this digital customer

engagement wave thus far.

Neither can they keep pace with

the level of innovation as part of

a catch up strategy. Rather than compete, they

really need to embrace each other – why? The

traditional acquiring business revolves around

secure and simple transaction management

aligned with comprehensive reporting and control.

The new digital world-order still needs this. Most

participants in the digital space are focused on

consumer sales (voucher and coupon distribution

or broadcast) with little regard for a coordinated

issuance, processing and redemption function.

There are many distributors, but all too few

processors. A centralised processer provides the

multi-channel retailer with control.

The payment acceptance community can resolve

this processing and redemption challenge and

transform the nature of their merchant

relationships. This will allow acquirers and

traditional value-added service providers retain

their competitive edge against the many

newcomers looking to disrupt the payment space,

defending margins and protecting against attrition.

And of course, help sell more value-added services!

A centralisedprocesser provides

the multi-channelretailer with control

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

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In summary; to sell more value-added services,acquirers and traditional value-added providersneed to:

• Think of value-added services in the context of

the problem the merchant is looking to solve –

how do they recruit and retain customers?

• Take a more holistic perspective on value-added

services. They are not stand-alone financial

products. Collectively they provide multi-channel

retailers with a customer engagement toolbox.

• Ride the digital wave. Digital customer

engagement is cheaper for the merchant. Don’t

try and compete with the new providers,

embrace them. Acquirers and traditional value-

added providers cannot keep up, simple as that.

By the time traditionally structured and funded

organisations bring a competing product to

market it is already out of date.

• Focus on what they do best. Secure transaction

processing, strong reconciliation and reporting

and centralised compliance and control. This will

drive operational efficiencies for the merchant

and significantly lower the overall programme

cost while allowing the merchant remain in

control of their customer engagement

programme giving them the ability to respond

quickly to market needs.

Eoin WhyteEoin Whyte is Sales Director of Card Commerce who provide customer engagement technology that helps

merchants, businesses and communities recruit and retain customers. Our solutions span in-store, digital

and third party channels and include gift card, promotions cards, savings cards, eVouchers, eCoupons and

mall cards. Our UK customer base includes the 2nd largest University, the largest pub & restaurant chain,

the largest independent coffee house chain, the largest specialty retail jeweller chain in the UK, and one of

the largest independently owned restaurant operators. Our products and services are available through

our reseller channels, including Barclaycard and Elavon Merchant Services, as well as via our direct sales

channel.

For more on Card Commerce, please visit our website www.card-commerce.com.

If you are interested in partnering with us, or if you just fancy a chat about your possible

requirements feel free to contact us on 0870 735 2829 (UK) or 01 617 7980 (Ire).

Or you can email ewhyte@card-commerce.com

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

ISSUE 1 ISSUE 2

Last year TFL debuted a new contactless payment

system on their bus network. Dave Birch of Consult

Hyperion, the consultants behind the system,

suggests that this change in the way TFL customers

pay for their travel is paving the way for contactless

payments to become the norm for consumer

behaviour. Dave guides us through the ins and outs

of implementing the scheme, and explains the

challenges faced by TFL in a complex operation like

this.

How is a regulatory data project like a Swiss cheese?

Confused? Regulatory data projects often appear

achievable, but they face systemic challenges from

the start. Expert consultants from Elucidata reveal

how data projects can be more complex than you

think, exposing the pitfalls of small errors or issues

aligning to make bigger, more catastrophic

problems. With real life examples as case studies,

the team of experts explain how easily a regulatory

data project can go wrong.

As mobile NFC services are becoming more and

more attractive to businesses, is it time that it

became more standardised and industrialised?

Mobile technology expert Martin Price from Price

Project Solutions suggests that mobile NFC strategy

isn’t being taken into full scale NFC commercial

deployments. Martin argues that there is a distinct

“gap between the conceptualisation of the NFC

‘strategy’ and the ‘reality’ of delivering service to a

market.” Why is there a gap?

Not since the invention of e-mail have we seen a

technology that could revolutionise the way we

work and live. Until now. This piece suggests that we

are on the brink of a mobile payments revolution.

Expertly guiding us through the technological

basics of mobile payments and showing us via real

life case studies, readers are treated to a true insight

into an exciting area of the cards and payments

industry.

Dave Tod MD of Baobab Brands, explains that the

key to this is divided into 3 stages. First, you have to

understand your market and search out the gaps

and opportunities. Next, you must choose your

brand strategy and finally Tod advises to be

adaptive and responsive once you’ve “crossed the

line.” All this is explained in the first issue of Cards

and Payments Intelligence, a new magazine for

those working in the cards and payments industry.

Are those 3 stages any different from building a

regular brand? Yes, says Dave Tod.

Neil Russell and Sinéad Jefferies from Opinion

Leader talk about the importance of the idea of trust

as a cement to re-build brand reputation. This article

explores the ways in which disgraced organisations

like Starbucks have to work hard to re-build their

reputation, and looks at what banks will have to do

to get this trust back post economic crisis.

This piece focusses on looking at the evolution in

mobile payments technologies in Sweden – a

country that is often at the forefront in innovations

within the payments field. Using Sweden as a start

point to predict how mobile payments technologies

will roll out globally, the article tracks the

development of these technologies and theorises

how they will manifest themselves in the Swedish

payments industry.

Making cheese with regulatory data part 2 is a

follow on article from the first part featured in the

February issue of Cards and Payments Intelligence.

Last month our experts introduced the idea that the

difficulty of undertaking a regulatory data project

can be likened to a Swiss Cheese (if you’re confused

then we’d advise to download the first article!) and

this time they explain how to avoid the common

pitfalls and challenges of such an undertaking via a

step by step guide.

Martin Jukes talks about gauging customer

experience across all KPI’s and how measures are

often measuring the wrong things and driving the

wrong behaviours.This article explores all the varied

and generally accepted techniques that companies

are currently using to assess customer satisfaction

experience. As managing director of a customer

service consultancy of experts, Martin is well placed

to give recommendations that are essential to any

company or organisation wanting to improve their

customer experience.

Since the introduction of multi-bureau decisioning

in recent years, it’s become apparent that a

consumer’s credit rating can differ significantly

across the 3 credit bureaux. This article is an

extensive analysis into credit risk, looking at the

variables that can sway a decision on a consumer’s

credit one way or another.

BACK ISSUES

36

June 2013

Issue No. 4cardspayments

&INTELLIGENCE

ISSUE 3

Not a day goes by without another announcement heralding the

launch of a new and innovative mobile payment product or service.

But are consumers actually interested in mobile payments? This article

focuses attention on those who have used a mobile phone to

purchase goods or services and shows what we can learn from their

behaviour.

In an opinion piece, Dave Birch from Consult Hyperion talks about his

experience at this year’s Mobile World Congress in Barcelona where

BankInter announced a new NFC product. Dave reflects that though

there is much talk about NFC, nothing much has advanced since its

inception. A great insight into what other industry professionals are

encountering!

This article highlights the main differences between mobile payments

in emerging and developed markets, how they add value to the

checkout experience and how companies can learn from success

stories in specific markets. It also looks at how the speedy

advancement of mobile payments technologies is changing the way

that merchants do business, and at the challenges they face whilst

exploiting the new opportunities they bring.

As a younger generation, generation-M has often been at the

forefront of the mobile and technological revolution. So, it only

follows that in order to find out what people really want from their

mobile payment technologies, we should be asking generation-M.

This article discusses the main concerns that generation-M have in

terms of mobile payments, and looks at the barriers currently

preventing them from using mobile payments more regularly. With

the belief that mobile payments have the ability to achieve

mainstream status by 2015, this article is a timely analysis of what it

will take to convince the general public to start using the technology.

One of the casualties of the global economic downturn has been the

public’s confidence in banks – especially in the EU. Discussing the

credit gap in the EU, this article looks at the latest findings from the

European Credit Risk Managers Survey, conducted by FICO and Efma

and released in early April.

BACK ISSUES

37