Podcast: Crone Consulting, LLC’s Take on The Payoff of Bank-Branded Mobile Wallets With Tender Reciprocity

In this podcast, William Mills Agency’s Charlyne McWilliams interviews Richard Crone and Heidi Liebenguth from Crone Consulting, LLC. They discuss key insights from their article in the 2016 Bankers as Buyers Report titled, “The Payoff of Bank-Branded Mobile Wallets With Tender Reciprocity.” For the full transcript of the interview, see below.


Bankers as Buyers 2016
Interviewer: Charlyne H. McWilliams
Interviewee: Richard Crone & Heidi Liebenguth
Interview Topic: The Payoff of Bank-Branded Mobile Wallets with Tender Reciprocity

[Start of Interview]

CM:  This is Charlyne McWilliams with the William Mills Agency. We’re joined by Richard Crone and Heidi Liebenguth with Crone consulting LLC. They authored an article for us for the 2016 Bankers as Buyers. The name of the article was “The Payoff of Bank-branded Mobile Wallets with Tender Reciprocity.” Today they’re going to tell us a little bit more about that article. Guys thank you for joining us.

RC:  Our pleasure. Crone Consulting LLC is an independent advisory. We don’t have a product or software development axe to grind one way or the other. We pride ourselves in helping financial institutions, retailers and all of the stakeholders within the mobile payments food chain devise strategy and tactics for winning the mobile moment.

CM:  Fantastic. Guys thank you again for joining us. We wanted to find out today’s if you could tell us a little bit more about why bank-branded mobile wallets are so important in today’s marketplace?

RC: Heidi you want to cover that first?

HL:  Well you know what we’re seeing is that mobile is becoming the primary point of contact for banks and their customers and it’s there at the point of presence.

RC: We have 12 years of longitudinal data where we measure service interactions at every touch point within the financial institution. Their branches, their ATMs, their contact center and their voice response unit.  The wired desktop experience, the mobile experience, the mobile app. And if you look across that you can see that mobile is growing five times faster than the Internet did and it is their primary touch point in the future. If you add payment to that, it adds a component and a launch pad for rendering new services in context because payment is a personalized in-context service today. The consumer picks where they’re going to pay, what they’re going to pay, how much they’re going to pay; if they’re going to pay it back, if it’s a credit card, and how and so forth. And so if you can gain a mobile moment in context, in the wild. That’s an opportunity for rendering a whole new suite of services and what we call customized code and personalize payments in the future.

CM: Fantastic! And guys how should retailers go about building relationships with financial institutions to gain acceptance of their mobile payment products?

HL: Well what we’re seeing is that mobile is a new pathway for banks/ financial institutions and retailers to work together. It really aligns their goals right because the retailers want to make the sale, they want to serve the customer, but so does the financial institution, and the financial institution is generally the holder of the accounts and they want to facilitate payments and offer new services. So what we’re seeing here is that in the mobile payment arena both retailers and banks can meet customer needs more fully and more completely by personalizing that payment experience.

RC:  And integrating with the retailer right. The retailers are using mobile as their new front door to enhancing the in-store experience. Take for example Wal-Mart, they have 22 million customers walking into their stores every month opening up the Wal-Mart app. The Wal-Mart app has the shopping list in certain stores where […] are installed. It can navigate the customer to make sure they get everything on the shopping list. And so here’s an opportunity for financial institutions to embed payment into that already enhanced experience to the member’s and customer’s benefit.

CM: Great. That’s good information and guys in your article you mentioned the term “tender reciprocity”. Can you provide us a deeper explanation as to what that means and it’s important to ROI?

HL: Right. So obviously retailers have developed their own preferred payment tenders right, private label credit cards, gift cards, so forth. And financial institutions have their preferred tenders, generally the credit cards and debit cards that people use. What we can do in mobile though is we can enable tender reciprocity between the mobile banking payment app and the retailer’s mobile app. And so that retailers can put their private label cards into the bank-branded wallet. The banks can also enable retailer cards in their branded wallets so that the customer, when they’re at a point of sale, when they’re shopping in the retailer, obviously the retailer has that customer experience in the store but the financial institution could put that tender into their own wallet and enable a more financial services view of how that payment fits into their budgeting, how it works in their life and their goals. And so there’s a big opportunity for banks and retailers to work together.

RC:  In both cases they want to make a sale. They want to complete the transaction. They want to fulfill the customer or the member need and the key here is with a mobile wallet, we’re not just looking at the spend on a particular debit or credit account. You’re looking at the total purchase value or the gross merchandising value that might be facilitated either through the retailer’s app or through the mobile banking app, but neither need to be islands. They can be integrated and open up functionality across each other’s applications through a technology known as deep links, where a mobile banking app with that payment capability may come and open up functionality inside the retailer’s app and vice versa so that in the future we’ll be looking at the gross merchandising value facilitated on either platform for building the case for the return on investment for anyone that issues a mobile wallet. Tender reciprocity is just one of nine elements that go into this, and it’s really the user interface that’s facilitated through either one of these apps. And what we’re calling embedded payments, where you embed the payment in either one of those apps.

CM: Guys what can we expect to see more of in 2016 when it comes to being branded mobile wallets?

HL: Well we know that Chase is planning to launch Chase Pay and that’s really going to shake up the market. No I think that banks that have been waiting on the sidelines to see, you know, what’s going to emerge as a winning approach are going to risk losing customers if they just sit and wait. They’re going to have to move forward if they want to engage their own customers and not lose them because you know we saw what happened with mobile remote deposit capture right when Chase launched that several years ago. That was a huge mover of customers from banks and credit unions that didn’t have that functionality to Chase and other banks that did launch that. So we’re saying it’s going to be an enormous year for bank-branded mobile wallets.

RC: Yes and I think Chase pay will be a seminal moment in the mobile wallet lifecycle. If they pull off the integration with the Merchant Customer Exchange they will have more “every day spend” merchants in more categories and locations than anybody else. And so what they do is they leverage the fact that they have one in every two households with a Chase credit, debit, or general purpose reloadable card that will be preloaded into the Chase app and they’ll benefit on a number of fronts.

First off, they’ll have the Chase mobile banking app with a very unique feature. The most ubiquitous and voluminous feature in the service relationship and that’s payment that happens 60 – 120 times per month. So they have a branded experience with that.

Second, they know that this will move market. In fact, more than 50 percent of the millennials say that they will switch banks for a mobile payment capability at the physical point of sale from their primary financial institution. So just as remote deposit capture moved market, right it was the number one reason for switching banks, and along with that promotion it was the number one attrition event in the history of financial institutions. We think this will be ten times more impactful for Chase.

Additionally, they will have the advantage of all that data, and be able to customize code, personalize the payments and render new services in context like no one else can. And then combine that with the fact that they’re the largest merchant acquirer processor in the country through Chase Payment Tech, they’ll have a unique offering on both sides of this two party market. They can go to merchants and they have already in their press release said that they’ll have no network fees, no merchant fees, zero liability on the transactions and flat processing fees with quantity discounts that will give them a very unique value proposition along with being able to go to a merchant and say “we’ve got 94 million households pre-populated with credit and debit cards ready to go. Do you want to play?” And so it will be very hard for the others. And so if you’re a financial institution you have to have a strategy, and you have to have it in place by mid-year when this launches– where it’s going to move the market at least the 10 percent that we know that are always in flux, which are predominantly Millennials, which are your most transaction rich customer base.  And just signing up for Apple Pay or Samsung Pay or Android Pay or any other Pay without your branded offering,  is not a mobile payment strategy because the safe bet here regardless of what you do is always betting on your brand, and mobilizing your accounts in your own app.

CM: Wow that’s great information guys. Is there anything else you’d like to add and provide for us today?

RC: No that’s it. Thank you Charlyne for interviewing us and we look forward […]

HL: Thank you for your time.

CM: Great! Thank you guys for taking the time to talk with us today.

RC & HL: Thank you.

About Crone Consulting, LLC

Richard Crone and Heidi Liebenguth lead Crone Consulting LLC, an independent advisory firm specializing in mobile strategy and payments. Crone Consulting has helped define the mobile commerce and payments strategy for all sizes of financial institutions, large merchants and specialty retailers, restaurants, recurring billers, core processors, payment networks, telcos, consortiums and investors. The firm’s payments optimization services have achieved 10 to 30 percent cost reductions and revenue increase through innovative self-service, alternative and mobile payment strategies.  Richard and Heidi can be reached at www.croneconsulting.com.

Leave a Reply