By Rube Huljev
Former Sales Director, CardMobili
“Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.”
Thomas Jefferson
It was 13 February 1601 when James Lancaster slowly raised the anchor of the Red Dragon, drifting out of Woolwich to begin a journey that he never thought would change the world forever. The first step in the globalization of trade had begun with only four modest ships. At the time, valiant men had understood what connects the world – it was the ocean. The ocean allowed for the flow of goods, trade, and information. The ocean was the first internet. Unevenly distributed goods were the opportunity that these original global entrepreneurs had sensed and had the courage to act upon. Their unfair advantage was their hard-to-find knowledge of the world, long-range navigation, and willingness to face the overwhelming odds where the ultimate price was one’s life. A group of London-based merchants that acted as their angel seed investors never dreamed of the outcome that would result from this initial experiment.
Today, over 400 years later, we are experiencing an almost identical moment, where the opportunities and the promise of riches abound and are even greater. The flow of spices and goods is not the big opportunity of today – the flow of data is. The internet, and more specifically the mobile internet, is the new ocean connecting different shores. The information, once a prized possession in the hands of a select few, is now at the fingertips of anyone who wants to use it and act upon it. The trouble today is that there is too much information coming from many different sources. Thus making sense of it all, correlating and putting it to a good use has become an art – not the information gathering process itself.
The merchant’s situation has changed too. Once those with the biggest warehouse commanded the markets, today it is those with no warehouse or stock at all. Physical store locations are threatened and are becoming a burden and a liability. Pure play digital merchants of goods and services are slowly creating a perception that it is the only way to go, and bricks-and-mortar enterprises could soon become extinct (or could they?). Many things have changed due to technology: from consumers getting used to ever more evolving convenience, to shorter delivery times, and lower margins and prices.
But one thing is constant and it is hard-wired from the trade of ancient times until today – human psychology. What consumers and customers really want is the experience. Whether it is exclusivity, craving something first and then bragging about it to their network, or the dopamine rush caused by the unpacking of a box whose arrival was expected. The surprise effect of receiving something unexpected. The overwhelming feeling of warmth when sending a gift to a friend. The experience of how something feels at the moment you buy (and pay for!) it. The experience of a trade, goods and money exchanging hands, changing owners. There is something incredibly personal in any trade, which is becoming lost in these digital times. People do not buy goods, but instead they buy an experience, a ritual.
Emotion. That is what people give away their hard earned money for, the feel-good effect that follows or is part of the ritual of exchange. Do you go to restaurants to end your feeling of hunger? Yes, also. But what you’re really looking for is to feel good, to be served with a smile, to be recognized and pampered. To feel good and experience a great service, which also includes food.
Humans are wired for social interaction, which does not end in a digital world. The technology of today has allowed for a relationship of any type (merchant-to-person, brand-to-person, person-to-person) to start in the digital world, but the real, complete effect of that relationship is unleashed in the physical world, between two human beings. If one of them is a customer and the other is a merchant, so much the better.
And here we come to the main reason why pure play digital merchants are not a match for merchants that have both a physical and a digital presence. When the consumer walks into a bricks-and-mortar store, the opportunities to enhance and personalize the customer’s experience are exponential. When a sales assistant knows the correct information about the preferences of a customer, maybe even their name and the actual context of their visit, the customer feels personally served and treated. The customer feels like a king. No pure digital play can extract that smile and that kind of bonding between a brand and a consumer.
And this small unrecognized fact is a saviour of the smart banks. Real-time personalization of customer experience, based on the best, ubiquitous, and most frictionless touch-point available anywhere – a point-of-sale terminal. Can you imagine a better point for customer acquisition and evolution of the relationship? While the whole industry is reinventing new ways to pay and creating technologies and competing standards for payments, customers do not have a problem with payment. They insert their card and can walk away in under 10 seconds with the goods under their arm. But give them something more, incentivize the customer, surprise them, offer a better personalized experience, become more human – you as a merchant will reap the results, unexpected ones. Try it on a small scale and you will be preaching this yourself in no time.
As a bank, you hold the ownership of the single most important touch-point in a consumer–merchant relationship, with emphasis on the relationship – not a transaction. Evolve your business models to sell services which bring additional value to merchants (and in turn the “kings”, customers) on top of your transactions processing. Sell relationships, walk-ins, connect customers and businesses in a meaningful way. Help merchants construct a long-term value exchange with their customers, help brands construct an ad network out of their current convinced customers. Make the customers their digital word-of-mouth, a marketing channel every type of merchant has sworn by since the dawn of time. Help businesses get more smiles and referrals.
We live in very interesting times, where technology is changing everything it touches. This has been the case for quite some time, but since the mobile has taken centre stage, the “software eating the world” process has accelerated exponentially. Never before in the history of humankind has the effect of technology on everyday life been so profound or has its impact been visible so fast.
Why is that so? Because mobile is in the hands of every consumer, it is the most intimate and immediate device to reach and influence people, including the magic moment of purchase. And the consumer is, and will remain, the king (or queen, as the case may be). The more technology advances, the more it will become apparent that the real-time feedback of consumers to each other, even if they are strangers, has given them amazing power – a power feared by any type of merchant. Consumers decide the fate of merchants, who in turn decide the fate of banks.
Let us look at these three pillars of a financial transaction: the customer, the bank, and the merchants.
“Swiper, stop swiping.” A favourite quote from lovable Dora the Explorer, is also a looming curse for banks and merchants. Consumers decide where and when to swipe, touch, buy … and sometimes not to swipe at all. No swipe, no transaction fee, no merchant, no bank.
So we do agree that the customer is right at the top of the food chain.
Acquiring banks on the other hand have always been charging their merchants, which many have perceived as “tax” without any perceived value add. Therefore, given a chance, merchants will move to the nearest lower bidder. No added value, no loyalty, no country.
And there are many challengers, pretenders to the banking throne. Established banks face an onslaught of disruptors through blockchain technologies, less complicated processing, lower fees through cheaper technologies, cheaper distribution, lighter or no regulation – and finally no expensive physical and personnel overheads.
Luckily for banks, the challengers (still) compete on lower fees, prices, and no long-term commitments. There will be no winner in the race to the bottom with fees per transaction – learn your lessons from the telecom world.
The real winners will differentiate themselves with services on top of transactions that are perceived to be valuable to both merchants and end consumers. Simple, effective B2B2C services that are activated easily and sold on top of the existing merchant processing and acquiring solutions. No sale needed. Fast and effective upselling.
And finally, the third part of the puzzle. Merchants. All of us involved in financial and tech services need to consider their simple needs and always present burning issues. Now, what is it that all merchants want?
Merchants want more profit. Merchants want new customers. Merchants want to spend less and lower their costs, especially on marketing that cannot be measured. But most importantly – merchants seek and want whatever their customers want and crave, whatever makes their customers happy and turns them into willing, sincere advocates. That something is the elusive smile. Once you have made them smile, you as a merchant, or provider of any kind of service, have done 50% of your work with your customer. You have established an emotional bond. Your customer has become more involved and tolerant. If merchants keep building on that smile, the benefits that come from that particular convinced customer (which are by the way fully measurable if the whole experience is designed well) will astound anyone. That customer experience, perceived through any touch-point, counts and differentiates more than ever before.
With what we understand of the customer experience and touch-points, what can we say about the New Bank?
Banks and processors own the single most important touch-point in a relationship between a consumer and a business, which is also one of the most often forgotten. Make sure you sprinkle a bit of magic fairy dust on top of those devices in the form of services that simply acquire customer identity and can act and react to a customer’s current context, paired with the back-end services that power it. There is a whole range of emerging smart new-generation POS devices (like Poynt) that will be able to make use of these services and present them to the customer in a modern way at that magic moment of contact.
There are many companies that know a whole lot about customer behaviour in the digital world. There are very few that can construct a customer context in the physical environment. Banks are one of those few.
These services, preferably based on a performance business model, should become a core of the bank offering – a missing link that translates the obsolete into the indispensable.
Remember that centuries-old wisdom which still stands and always will in the world of commerce – the mere spot a merchant stands on (his bank and his taxman) does not constitute as strong an attachment as that from which they draw their gains (their customer’s wallet).
And finally we come to an underlying conclusion – he who holds the loyalty and allegiance of consumers will have the attention of merchants too. Banks – wake up, watch your backs, offer transaction-related services to bring in more customers to your merchants. This can become your real, fully measured added value.
Will banks need to transform into technology marketing agencies? Will business models move more towards performance? Most probably. Fast. For if the banks do not do it, Facebook, Google, Apple, Samsung, Paypal, Amazon, and other contenders are surely laying the rails, since they have sensed the opportunity. They are lean, fast, and can get around regulation more easily.
The new Golden Age of Sail has begun. Are you building lean and fast ships?