Mobile, Big Data and Credit Steal Show in Vegas (November 2013)
By Loraine DeBonis, Editor-in-Chief
Las Vegas hosted the 21st Annual ATM, Debit & Prepaid Forum last month, where industry stakeholders were abuzz about monetizing mobile and big data and, surprisingly, credit.
“We have to think about mobile phones in a totally different way,” said Michael Strange, chief technology officer at Mitek, which is known for its patented image-capture technology. “Don’t make parity with your Website the goal. Think about mobile first and reinforce the mobile channel throughout the relationship,” he suggested. He went on to describe a consumer spectrum, from users who are skeptical of mobile to those who are mobile-only. “We need capabilities to address the full spectrum,” he said, noting that skepticism is being replaced by expectations. “Consumers will expect [mobile technology] to work like electricity,” he said.
Jon Rosner, vice president of new product development, global prepaid, at American Express, told attendees the company is excited about technology and the role it can play in helping consumers who may not have been American Express customers in the past (86 percent of Bluebird account holders are new to the brand). But he agreed with Strange, that the technology has to work seamlessly for consumers.
Bluebird, which was an early adopter of mobile deposit capture technology, initially experienced a few glitches when some cardholders’ apps crashed when trying to use the service. “It seems simple—and we want it to look simple to the cardholder—but the technology is actually complex and getting it to work is tough,” he said. The challenge for everyone is making sure their technology works because—particularly in prepaid—the cost to switch to another card is not that high.
Early technical difficulties aside, mobile deposit capture is a feature that has caught on with Bluebird’s 1 million cardholders, 47 percent of whom are under 35, according to Rosner. And, while Bluebird was one of the first to offer MDC, it’s becoming table stakes in the industry, he said.
|Mobile deposit capture is a feature that has caught on with Bluebird’s 1 million cardholders, 47 percent of whom are under 35.|
The technology, which enables consumers to snap a picture of their checks and deposit them into an account, has gotten a lot of attention over the last few years, and adoption among prepaid providers should pick up steam now that Ingo Money Inc. is going live with its service, which had been in pilot with Visa since last year. Dozens of Visa prepaid card providers are joining Ingo Money beta participants AccountNow, BankingUp (formerly Plastyc), FSV Payment Systems and RushCard in the full commercial launch, which will enable the Ingo service for the majority of Visa prepaid consumer reloadable card programs, according to an announcement made at the show.
“I am very pleased with the results of the beta,” said Drew Edwards, founder and CEO of Ingo Money. “We achieved our customer, operational and servicing goals and outperformed on internal risk management forecast projections.” Nearly 25,000 customers have enrolled in the service in the last few weeks, according to the company, which offers the service directly to prepaid cardholders through a mobile app or as white-label commercial solutions that power delivery across branch, ATM, kiosk and mobile.
“Visa’s interest in the Ingo service is that it addresses the critical consumer cash flow issue, making it easier and, in many cases, less expensive, to cash a check and load funds on the card,” Lisa McFarland, head of consumer prepaid, Visa, told Paybefore at the event. “What we learned from the beta test and what consumers told us effusively was that they love this service for the difference it makes in their lives.”
While risk management related to cashing checks is something new for Visa, McFarland said the network is happy to be working with a partner with deep experience and risk management tools for this area. Although it’s still too early to know the potential impact of mobile deposit capture on cardholder retention, McFarland says Visa’s predictive models suggest that offering mobile deposit capture will increase the cardholder life cycle.
Tim Sloane, director of the prepaid advisory service at Mercator Advisory Group, said in a keynote address on the economics of prepaid that MDC could lead to increased spend and card life, something all providers want as competition intensifies and margins are threatened by more potential cuts to interchange. “If you have the right product that delivers funds at the right time for the consumer, they will continue to use the card,” he said.
Pass the Data, Please
|EMV Sound Bites EMV was another hot topic at the show. Here are two sound bites from a presentation on making your prepaid program stand out and a Merchant Customer Exchange (MCX) panel:When asked about whether prepaid issuers will start moving to EMV, Tim Attinger, senior vice president of strategy, financial and digital services at Blackhawk Network, said, “The incremental cost of a chip card is so high and the average life of a GPR card is so short, that it’s tough to make the case for EMV.” Attinger noted that he had purchased a number of prepaid chip cards for travel, but “unless there’s some sort of fine associated for not issuing EMV cards, I don’t think we’ll see a lot of prepaid issuers moving in that direction,” he said.Merchants also seemed less than enthusiastic about the prospect of accepting EMV cards at the POS, particularly while there’s still uncertainty around debit network routing on chip cards. “It’s pretty unfair the situation we’re in with EMV,” said Sandy Estep, vice president and controller, Publix Super Markets Inc., who spoke during an MCX panel that covered similar territory as the one at Money2020. “It will take us a full two years to be ready,” she added. “Already, we’re going to miss this proposed liability shift. … Either figure out what’s going to happen [with debit network routing] or postpone the date please.”|
Sloane also challenged attendees to use data to pinpoint opportunities to provide better service. “I believe we have missed the boat on all the opportunities we have to integrate to our cardholders,” he said. “When you think of a mobile app, you think of balance checks and maybe looking at the last five transactions, but that’s not enough. There’s more in their lives than looking at their balances,” he continued. For example, if you notice a cardholder has a lot of holds put on their funds because of paying at the pump, send an SMS or email that explains how to avoid the holds by paying inside, or partner with a gas station like Mobil that doesn’t place holds on funds at the pump and drive cardholders there, he suggested. If you have cardholders who take mass transit, consider offering alerts through your mobile app that show them when there’s a problem on their route or include maps or locators to help them find nearby stations.
“It wouldn’t be something they’re necessarily going to pay you for, but it’s a value to the cardholder,” Sloane said. “We have to be thinking outside the box and using what we know about the cardholder. We need to have a platform that can look at transactions and be able to do the ‘big data thing’ and then get specific deliverables back to cardholders.”
Hamed Shahbazi, CEO at Vancouver-based TIO Networks, echoed that idea during a panel on prepaid innovation. “Not a day goes by that I’m not talking about data,” he said, urging processors to invest in self-service reporting that can help program managers improve the customer experience.
The problem with big data is that providers are trying to figure out what they should be looking at and how to take action based on what they see.
“When you start analyzing data, it leads you to more questions,” said Visa’s McFarland. “A lot of our focus is on how you can better understand and interpret data and make more meaningful decisions,” she said, predicting that in 12 to 18 months we’ll see the launch of services “that are going to change the nature of customer interaction.”
Consumer engagement will happen when providers take a cue from the late Steve Jobs and create “compelling, beautiful experiences,” Shahbazi added.
What about Credit?
In a session on separating your prepaid card from the pack, Blackhawk Network’s Tim Attinger, senior vice president of corporate strategy, financial and digital services, said prepaid access to services, whether mobile top-up, retail gift or reloadable debit, is becoming a mainstream consumer activity. To become the mainstream financial accounts for underbanked and “underwhelmed” consumers, GPR programs need to provide five things: control, convenience, cost-effectiveness, complementary services and offers, and credit access.
The final piece may be the hardest one to put in the puzzle. Prepaid providers have been looking for a way to provide access to credit for years, but regulators and consumer advocates continue to scrutinize those efforts, with some calling for a complete separation of prepaid and credit, including overdraft. Attinger suggested that such scrutiny stems from critics who don’t understand why consumers would want a short-term loan. But the reality is that many consumers need access to short-term credit to make ends meet. “Why can’t we look at spending behavior on a [reloadable] prepaid card and provide some data that would help make a credit decision?” he asked.
Given the current environment, however, he suggested that program managers/issuers partner with others instead of trying to extend credit themselves. “We’re trying to find a way to thread the needle,” he said. “Consumers value access to credit. The challenge is doing that in a way that works for regulators,” he said.
|SOURCE: MasterCard Global Insights|
While Attinger suggested a partnership approach for issuers/program managers to help their cardholders get access to credit, MasterCard’s
Ted Iacobuzio, vice president, Global Insights, suggested that financial institutions issue prepaid and credit. Presenting research from the payment network’s Global Insights division, Iacobuzio emphasized the symbiotic relationship that has emerged between credit and debit(prepaid) for consumers.
Comparing figures from 2008 to 2012, MasterCard Global Insights found that debit is growing but it did not take much volume from credit. Debit and prepaid took more volume from cash and checks, Iacobuzio said. “What happened in 2009 was qualitatively different from what we’ve seen before. U.S. consumers changed diametrically. I think the U.S. consumer has fundamentally changed how he views his household finances—now he looks at it like a small business.”
The average transaction size for credit has leveled off and people aren’t using credit to splurge like they were before the financial crisis, Iacobuzio said. Now they’re using credit to give them flexibility to manage their cash flow. For example, if they need new tires on the SUV, they’ll dip into credit but they’ll use their deposited money (debit/prepaid) to control staples.
Financial institutions, including prepaid issuers, have an opportunity to take advantage of this new consumer attitude and desire to have all their payment relationships in the same place, Iacobuzio added. “There’s no reason payroll or GPR couldn’t be a springboard into a credit relationship as well. Become symbiotic because that’s what consumers want,” he continued. The full financial relationship becomes even more powerful if financial institutions can show a consumer his position [across all his financial relationships] either at the end of the day or at the moment of purchase. The best way to do that? “All roads lead to mobile,” he said.