Money Ex Machina
ANZ took three years to get their mobile wallet from concept to market and as such was the last of the big four banks to give their customers digital cards. The bank started by trying to get customers to stick their lovely iPhones into an ugly piece of plastic and were surprised to find no one wanted to. They then tried another hardware based solution through a modified SIM card and finally released an app that utilises access to the NFC chip in Android phones.
There’s a lot worth unpacking here.
Android will pick up share: Apple has ensured that the only way a developer can get access to the NFC chip in their phones is via Apple Pay, thereby controlling the commercial as well as the technology model. Beyond the 0.15% of the transaction amount, Apple is also getting half a cent for every debit transaction. These fees are in addition to the fees MasterCard and Visa are charging to tokenise the cards. Everyone it seems is trying to get their hands into the wallet of the consumer and extract a clip on the transaction. This will lead to more and more developers ignoring Apple and just release on Android, providing consumers in turn with more innovation and choice.
Bank wallets are silly: Many believe that they need to win the wallet so that can control the experience and the clip. As bad as it is for Apple to control the NFC chip and therefore mandate use of their wallet, so too it’s a dumb idea for the bank to try and own the wallet. It’s easy to understand why a bank’s ego may convince itself that it should and must own the wallet in order to build a digital wall around the customer relationship but it belies reality. Most banks miss a significant opportunity for cross selling due to their lack of customer centricity and large product silos. No digital wall is going to help this. On the customer front, the internet is enabling and encouraging customers to do more shopping for their financial products, making it easier to buy from a bank other than your primary provider. According to Bain, about half of customers in developed countries and 84% in emerging countries opened a new bank account over the past year, and fully 1/3 of those products were selected from a bank other than the customer’s primary bank. Customers will have one or 2 phone relationships and many multiple more bank relationships. As Vodafone learnt, building walled gardens around digital consumers doesn’t work. The only way to win is by being a better bank. In digital 2017 this means being better digitally.
Merchant is more interesting: There is a large focus within banks right now around the issuing side of the digital equation with millions being spent on wallets and getting cards digitised. I find this fascinating as there seems little opportunity for value add, especially when compared to the acquiring side. It’s also much more vulnerable and open for disruption. Merchants spend a lot more time drilling into their operating expenses and looking for ways to either strip out cost or bring in more repeatable revenue and customers. It’s why we launched Marrakash and why our roadmap for loyalty, payments instruments and ERP is jam packed for our CX team to test.
Bank Rails Excite: With new payments platforms being launched, some crypto, some IP and all internet ready it’s little surprise that Visa and MasterCard are hustling hard to open up their APIs in a bid for relevance. As account numbers get traded in for mobile phone numbers and ADIs (authorised deposit taking institutes) look to rent their license to others, money will move from phone to phone in new ways that will dissolve the notion of a card and erode the value of the scheme – Look out!
After 3 years building a wallet, ANZ and their ilk will be forced to grok FinTech to get the nuance here, surf beyond the infrastructure (payments), move up the value chain and start thinking about where the money of the machines will reside.