A Lesson In Mobile Banking Economics

A Wall Street Journal article titled Mobile’s Rise Poses a Riddle for Banks is so off the mark, I simply can’t let it slide. According to the article:

“A waitress from Queens, NY, Ethel Bueno keeps her phone close at all times and frequently logs on to her bank account to check her balance. But for bigger and more-complex transactions, which often require fees, Ms. Bueno prefers to visit a bank teller in person. That means her digital devotion to the bank doesn’t actually generate much revenue, a puzzle firms across the industry are still trying to solve. According to a new study by Bain, mobile [bank] interactions are now 35% of the total, more than any other type. A 2012 Fiserv report found that digital transactions cost on average 17 cents each, compared with 85 cents for an ATM transaction, and $4 for an interaction with a bank teller.” (italics added)

My take: Blind faith in the contention–and numbers–thrown around in this article is sheer stupidity.


If you read the full WSJ article, you’ll find that the two bank execs quoted are anything but puzzled about mobile banking. So how the author of the article concludes that mobile banking is a “puzzle” that banks “are trying to solve” is beyond me. Did anybody mention to the WSJ that the transactions being conducted on a mobile device for free were actually free when they done in a branch or ATM?

If anything, it’s a gift on a silver platter. Who cares if it doesn’t generate revenue? The cost savings that are implied by the channel transaction costs should more than compensate for the fact that the mobile transactions don’t generate revenue.


Assume for a moment that there’s a bank whose customers conduct 1,000,000 transactions per year. The WSJ article didn’t include estimates for call center transaction costs, so let’s assume they’re somewhere between the ATM and branch, at $2.50 per transaction.

Now assume the following transaction allocation, first before the implementation of digital banking (online and mobile) banking, and then now, with 35% of the transaction volume going to mobile (and for argument’s sake, another 15% coming from online transactions).

    Before After
  Per transaction cost Transaction allocation Channel costs Transaction allocation Channel costs
Digital $         0.17 0% $                  – 50% $        85,000
ATM $         0.85 10% $        85,000 8% $        68,000
Call center $         2.50 25% $      625,000 10% $      250,000
Branch $         4.00 65% $  2,600,000 32% $  1,280,000
TOTAL     $  3,310,000   $  1,683,000

In the Before scenario, based on the assumed transaction allocation, total costs are ~$3.3 million. In the After scenario, with digital transactions at 50% of all transactions (35% for mobile, 15% for online), the increased allocation had to come from somewhere, so ATM and call center percentages declined slightly. And with the impending death of branches (hey, that’s what all of you think, not me), the % of transactions going to branches declines from 65% to 32%.

Overall, the cost reduction from this jump in mobile transactions–based on the lower cost per transaction–should produce a 50% reduction in transaction costs. Good luck finding a bank whose has reduced their operating costs by 50% because of this explosion in mobile banking transactions.


But clearly, what’s happened, is that digital transactions have not fully displaced transactions in other channels, but have added to the overall transaction volume.

Now here’s what’s important, and what way too many bankers either can’t understand, or refuse to understand: It doesn’t matter how much less expensive digital transactions are than transactions in other channels if the digital transactions don’t displace those other channel transactions.

If digital transactions are additive, then even at just $0.17 per transaction, every digital transaction adds to the bank’s cost structure and is a drag on profitability. Conclusion: Per transaction costs by channel are meaningless if channel migration doesn’t occur.


There’s another problem with those channel transaction costs: They’re averages of all the transactions that occur in the channel. Some branch transactions will cost much less than $4 per transaction, and some will cost more.

If the branch (as well as call center and ATM) channel transactions that are displaced by digital transactions are the lower cost transactions, then the potential cost savings is even further reduced.


From a cost perspective, there are two key elements in mobile banking economics: 1) How many transactions are displaced from higher cost transactions, and 2) How many new transactions are added?

If the migration from higher cost channels doesn’t occur, of if the migration is from online to mobile (which is entirely possible), then there’s little economic benefit. If many new transactions are added, then even with a low cost per transaction, overall costs go up.

According to the Bain study, mobile transactions now account for 35% of all transactions. In other words, a minority of consumers (what, ~25%?)–who presumably are not mobile-only customers–are now accounting for a hugely disproportionate percentage of all banking transactions. That tells me that this minority must be adding a huge number of new transactions to the mix. Which implies that mobile banking isn’t saving banks anything, even with the huge disparity in per transaction costs.


The riddle (i.e, the challenge) that banks face–if there is one–has nothing to do with mobile banking. It has to do with the other channels. What can banks do to drive transactions out of those channels and into the lower costs channels?


Putting The Fizz In Apple Pay

In an article titled Why Apple Pay Is Fizzling and What It Means for the Future of Mobile Payments, MPD founder David Evans writes:

“Apple Pay is fizzling. And unless it drastically changes course Apple Pay will follow the hundreds of other attempts, made around the world in the last seven years, that have sputtered along at low levels of use or, much more frequently, have just flat-out died. The evidence from Black Friday confirmed my fears. InfoScout did a survey of 400+ people who (a) had IPhone 6s and therefore could have had Apple Pay on their phones who (b) were paying at stores that had NFC terminals that accepted Apple Pay. So these are 400+ people who could have paid with Apple Pay. Less than 5 percent did.”

My take: It’s way too soon to be calling the death of Apple Pay.


Take a look at the following charts showing iPod sales.

Pronouncing the failure of Apple Pay in December 2014 is akin to proclaiming in Q1 2002 that the iPod would be a failure.

And there were plenty of reasons–two-side reasons as Mr. Evans might call it–to support an iPod death notice in Q1 2002: Consumers didn’t know what it was, there was no music no buy online, anyway, they were perfectly happy buying CDs (and certainly wouldn’t want to have to throw away all those CDs they had amassed). On the other side of the coin, music publishers and the stores that sold those CDs certainly had no vested interest in supporting the sale of iPods.

I would imagine that a survey of 400+ people who bought music back in Q1 2002 might show little interest in something called an iPod.


The InfoScout survey may very well be a representative sample of iPhone6 owners, but are existing iPhone6 owners representative of the overall public?

In addition, it seems very unlikely to me that a primary reason for those people who rushed out to get an iPhone6 was the Apple Pay feature. So what should we expect from the 400+ iPhone6 owners who were surveyed?


The point (put forth by Mr. Evans) that Apple Pay can’t be used at 98% of merchant locations isn’t a compelling death knell, either. Last I checked, both American Express and Discover were not accepted everywhere. They’re not dead.

It doesn’t matter how many places accept Apple Pay–it matters which places accept it.


Payments isn’t really a two-sided market. It’s more of a three-sided market: consumers, banks, and merchants (and I can’t help but wonder if, when talking about mobile payments, I need to throw in the telcos, and make it a four-sided market). All of which just makes any change in the market harder–and slower–to come by.

The “hundreds” of other attempts that have sputtered or died had, or have had, insufficient support from the constituents in the market. Many have tried to simply garner consumer support without sufficient support from the banks or merchants. Or have presented delusions of interchange reduction to the merchants, without any game plan for winning over consumers, and figuring the banks would roll over and play dead.

Sure, Apple Pay hardly has the support of many merchants–at the moment. But the lack of merchant support isn’t the same across the board.

A large percentage of the 98% that don’t currently accept Apple Pay may never accept any form of mobile payment, and who really cares, since a large of percentage of that 98% represent maybe 0.1% of all sales.

The “merchants that matter” fall into two (overlapping) categories: 1) Those that represent a good percentage of retail sales, and 2) Those where current and future iPhone6 owners shop at and buy from.

It’s the latter category that I don’t hear a lot of the pundits talk about. Everybody wants to focus on the MCX merchants not accepting Apple Pay. But Apple Pay can drive payment volume by following the Amex strategy–not accepted everywhere, but by enough of the places where Amex cardholders shop at. Case in point: Whole Foods.


Bottom line: I hate bad analogies, but I won’t let that stop me from giving one. Apple Pay isn’t a carbonated beverage losing its fizz. It’s more like a wine that needs to be aged.

The “aging” process for Apple Pay does involve a lot of moving parts: iPhone6 adoption, changing consumer behavior, bank (and credit union) support, and merchant acceptance (reluctant or not). In a three-sided market, strong support from two of the sides will probably be enough to bring along the third (even if it is kicking and screaming).

Which is why MCX is DOA. It’s all about one side of the market–the merchants. It can talk all it wants about how it’s supposed to be good for consumers, but that message has little meat to it.

Apple Pay, on the other hand, will provide additional convenience to some consumers and may provide other benefits in terms of yet-to-be developed features (for examples, see The Mobile Moments of Opportunity), gives a huge boost to banks (i.e., keeps them in the game), and is promised to benefit all parties in terms of reduced fraud.

That said, just because you let a wine age a few years doesn’t necessarily make it a good wine. But it’s simply too soon to say Apple Pay is “fizzling.”

NOTE: Thank you for reading this post. If you work at a financial institution, please help me out and take just a few more minutes of your time to complete the 2015 Financial Brand Marketing survey. For your time, you’ll receive at least two reports that I know you’ll find interesting and helpful. And you’ll get a discount on the registration fee to the 2015 Financial Brand Forum. Thanks!

Why Consumers Should Fear Mobile Banking

The Financial Brand recently reported on a study conducted by GOBankingRates which found that a little more than half of consumers–56%–indicated that they have a “main concern” about mobile banking.

My take: The survey really goes to show how clueless people really are.


Let’s take a deeper look into some of peoples’ “concerns” with mobile banking.

Less than a handful (3%) of respondents cited “no paper documentation.” I’m sure these people don’t buy anything online, either, because there’s no paper documentation with those transactions. If there are 3% of people in the world who will only transact face-to-face so they can get a paper receipt, so be it. I think banks can live without having these folks as mobile banking customers.

Seven percent of respondents listed “misuse of personal info” as their main concern. Apparently, these people haven’t heard about any of the data breaches that have hit Target, Home Depot, and the gazillion other merchants who have been hit. Bet these 7% still have no problem using their debit and credit cards when they make those face-to-face purchases.

Nine percent said “technical errors” were their main concern with mobile banking. These people are actually on to something. Fear of technical errors is my biggest concern with banking–not “mobile” banking, but banking altogether. Of course, the last time I had a problem with my bank, it was a matter of “human” error–not technical error–and I was the human who made the error.

Far and away, the largest percentage of respondents with a main concern regarding mobile banking was the 37% who cited identify theft as their concern.  Identity theft? How’s that going to happen? These people clearly don’t have a clue what the most common causes of ID theft are. And I can’t help but wonder how many of these 37% are banking online. Checking your account balance and moving funds between accounts is OK to do on a PC, but not a smartphone or tablet? 


The reasons people are giving for “fearing” mobile banking are baseless. If you need a reason to fear mobile banking, I’ll give you some good reasons:

3) Snakes will come squirming out of your smartphone when you use a mobile banking app. I’m not saying this has ever happened before, but it could. And that would be a helluva lot scarier than not having paper documentation of the transaction.

2) Your mobile banking app will access the naked pictures of yourself you keep on your phone, and post them on Facebook. And I’m sorry to tell you this, but that’s scarier for the rest of us than it is for you.

And the #1 best reason for fearing mobile banking….

1) You will give your ID and password to a phisher and try to use a mobile banking app to change that password before the hacker gets into your account–but the mobile banking app won’t let you do it. Sadly, this is true, and I learned it the hard way.

Of course, it hasn’t stopped me from continuing to use my bank’s mobile banking app. But at least my fears of mobile banking are grounded in reality.


Merchants’ Payments Pipe Dreams

To put it mildly, Tom Noyes’ post What Do Retailers Want? elicited a few reactions out of me.


TN: “A top 5 merchant told me a few months ago “Retailers like Starbucks have proven that we are best placed to deliver value and influence consumer behavior. I don’t want to force my consumers to do anything, but similarly I want to networks that let me play on an even field. These next 5 years are going to be complete chaos for consumers. What do we want them to do? Swipe, dip, chip, pin, tap, QR…? We have been planning for EMV for 3 years… am I really supposed to jump to Apple in 4 weeks?”

My take 1: Delusional thinking on the part of that Top 5 merchant (regarding the Starbucks comment). Starbucks proved that Starbucks could deliver value and influence consumer behavior. Starbucks did what it did with its customer base–which, while large, is not necessarily representative of the general population. Other merchants don’t have the same (loyalty-driven) relationship with their customers that Starbucks does, nor do most other merchants (with the exception of groceries/supermarkets) represent the transaction frequency of a Starbucks (who has many customers making daily purchases).

My take 2: The “next 5 years are going to be chaos for consumers” is overstating the situation. On one hand, yes, the payments world is asking US consumers to make behavioral changes with the distribution of chip and PIN cards. And yes, “we’ve been planning for EMV for 3 years.” One would think that was sufficient time to educate consumers on the requisite behavioral changes, no? Did the move to EMV cause chaos in Europe? (I honestly don’t know). For other payment-related changes, like mobile payments, consumers have a choice–if they wish to change their behavior, they can.

So the comment regarding chaos may be overstated. But it’s also disingenuous. If the quoted merchant is so worried about causing consumers chaos, why is it supporting MCX, which is not only a very different way for consumers to pay (they have to first link their bank accounts to the merchants), but, arguably, more chaotic than Apple Pay, which is really little more than a new method of paying with existing cards.


TN: “What do merchants want? A neutral broker!! [Regarding MCX:] I think their business vision is well placed. They want a network where they can play on an equal footing. A neutral broker.. or at least one where they can have a seat at the table when rules are set. Will MCX be a massive success? It depends on the consumer value proposition. Are the merchants motivated to work together in creating a neutral broker? Hell yes.

My take 1: Please believe me when I say that Tom Noyes is one guy I don’t want to challenge (most of my other comments here address what the merchants said, not what Tom said). But Tom’s view that merchants’ “business vision (re: MCX) is well placed” needs to be backed up better. What exactly does “well placed” mean?

MCX’s business “vision” is fuzzy, at best. My rough estimates suggest that MCX won’t succeed, from an economic perspective. And while it’s open for debate and interpretation, my take is that, regardless of what the CEO of MCX says, the real reason for the consortium is avoiding paying interchange fees. Anything resembling “customer value proposition” is a distant second, at best.

My take 2: I also have to take issue with Tom’s contention that merchants are “motivated to work together in creating a neutral broker.” What merchants are motivated to do is make more money. One way they see to do that is to avoid paying interchange fees. Fair enough. But let’s call it for what it is. This talk of a “neutral broker” and a “network where they can play on an equal footing” is nothing more than spraying the dung pile with perfume.


TN: “One merchant said it this way “Tom I didn’t think we would ever have someone more difficult to work with than Visa and Mastercard, but I was WRONG. Apple is a nightmare! At least we knew what was coming with Visa and Mastercard, with Apple they don’t talk to us, respond to our letters, or offer any kind of value proposition. Why on earth would I want to let another brand in my store without understanding what it will do for me? They are a great company, with great products, and certainly have a much better approach to data than Google.. but anonymity is NOT a value proposition, in fact Apple makes our efforts to deliver value to the consumer even harder as we have no defined way of using Apple to engage our consumers.”

My take 1: At this point in Tom’s post, I’m beginning to feel sorry for him. Must be a bitch spending all day talking to whiners. As for the whining merchant, I feel bad that the rest of the business world doesn’t roll over and play dead and let that merchant do what ever it wants. I can’t help but wonder if that merchant has never talked with some  of Walmart’s suppliers who–I would bet–don’t have a lot of nice things to say about the way Walmart’s policies strong-arm them into doing business Walmart’s way.

My take 2: Considering the number of large retailer data breaches that have occurred in the past year, listening to a merchant whine about Google’s approach to data is precious.

My take 3: The comment “why on earth would I want to let another brand in my store without understanding what it will do for me?” is puke-inducing. First of all, for MCX merchants like Walmart, Target, Best Buy, and (I’m guessing) Sears and Kmart, Apple is already in the store.

Second, if a merchant already accepts an American Express or Bank of America credit card, then why would it care if the transaction was done by having the customer swipe a plastic card or letting the customer hold her smartphone up to a reader? If the reader is already there, there is no difference in the cost of the transaction to the retailer.

Third, here’s a possible answer to the merchant’s question: Because Apple has a stronger brand than you, and aligning yourself with a stronger brand might strengthen your brand, Einstein! And in fact, that’s exactly what is happening–or, at least, could happen–with the banks and Apple (for example, Chase bringing breakfast to people waiting outside for the Apple store to open on the first day iPhone 6 sales). 


Am I afraid Tom Noyes is going to rip my arguments to shred? Hell yeah. But he did say something that makes me think my views aren’t too far off from his:

“Getting a card number from consumer to merchant is NOT innovation. There is just no problem here.”

Totally agree. In fact, that’s why I would argue that MCX isn’t about providing more value to consumers. If that’s what MCX really wanted to do, it could work with MC, Visa, Amex, and Discover–or other firms–to do that.

But the large merchants have set up the payment networks as their adversaries, not partners. Why? Because they lack negotiating power. Much like the situation many smaller suppliers to MCX merchants face, who don’t have much negotiating power dealing with these giant merchants.

Bottom line: Live by the sword, die by the sword. MCX has no future.

Adventures At The LoopPay Mall Kiosk

You probably think I spend my Saturday nights out at fancy dinner parties, going to the Symphony, or attending high-society social events. I do. It’s good to be me.

But this past Saturday night, the two older girls were home for the weekend, which put a crimp in my typical Saturday. So I took the family out for dinner to a restaurant close to the Burlington (MA) Mall. Needless to say, the Shevlin women had to go shopping after dinner.

After agreeing on when and where to meet up, I started walking around the mall. Outside of the Apple store (hardly a coincidence) was a kiosk selling LoopPay fobs and phone cases:


I started looking around the kiosk, so the woman manning the kiosk (or “womanning the kiosk,” to be PC) asked “Are you familiar with Loop?”


Sorry to say, but I lied, and said “no.” I figured, let me hear the pitch. I thought you’d be interested to hear how the conversation went. For the purpose of this post, I’ll refer to her as “Ms. Loop” since I didn’t catch her name.


Ms. Loop: Loop lets you store your credit card information on your smartphone, and pay directly from the phone, using existing card readers. Come around over here and I’ll show you how it works.

[I go over to where she’s sitting, holding a smartphone with a case around it].

You open the app, hold the phone over the card reader, and then select the card you want to use to pay for the transaction.

[Ms. Loop presses the American Express card icon, but nothing happens. Ms. Loop presses the American Express card icon again, but again, nothing happens. Ms. Loop presses the American Express card icon a third time, and still nothing happens. Finally, Ms. Loop hands me the phone.]

Here, you try. I have circulation problems, so sometimes it doesn’t work when I hit the icon.

[I press the icon, it blinks, indicating it was selected. The card reader (can’t remember if it was a Verifone or Ingenico unit) flashes “INVALID SWIPE”]

Try again.

[I press the icon again, it blinks again, indicating it was selected. And again, the card reader flashes “INVALID SWIPE”]

Me: That’s ok. I trust it works in a real setting [yep, lied AGAIN]. Isn’t Apple Pay going to make this obsolete?

Ms. Loop: Absolutely not. Apple Pay works with only a fraction of merchants. Most don’t have the readers needed to accept Apple Pay payments.

Me: I thought I read somewhere that that was going to change, that they were going to issue new cards, and that retailers had to upgrade their card readers.

Ms. Loop: They are updating the cards. They’re called chip and pin. I lived in the UK for 5 months last year, and they work great. But a lot of mom-and-pop shops in rural areas aren’t going to upgrade their equipment.

[Do I blow my cover and argue this? No…I move on]

Me: How well are these selling here?

Ms. Loop: Not real well on a Saturday night. They sell much better on weekday afternoons, when the businessmen are here for lunch. I would say that a disproportionate percentage of sales go to young Asian or Indian men.

[Note: The Burlington Mall is on the Route 128 stretch outside Boston, where–probably literally–hundreds of high tech companies reside].

Me: Is that consistent with Loop’s overall sales?

Ms. Loop: I’m not sure, but it is different from what we found in New York City. One of the big demographics buying the product in New York were yummy mummies.

[Note: I think this is what she said. I’ve never heard that term before, but, upon reflection, I’m guessing she was referring to YUMmies (young urban moms). I’m pretty quick, no?]

Me: Really? Why would they like it so much?

Ms. Loop: They carry around big bags and don’t like to hunt all over their bag to find their cards. They keep their phones handy.

Me: Who’da thunk? [Still holding the smartphone in the Loop case]: This case really adds a lot of bulk and weight. Must be a real deterrent to sales, no?

Ms. Loop: Just the opposite. A lot women like that because it’s easier for them to find the phone in their bags.

Me: Oh, puh-leeze. I know I look like a moron but you don’t really expect me to believe that, do you?

[Note: I didn’t actually say that. I thought it, but it didn’t come out of my mouth]

Ms. Loop: So what do you think? Want to get one?

Me: Can’t. I’m still using the Motorola DynaTAC 8000.


p.s. As this was exchange was clearly work-related, I think I’m entitled to expense that night’s dinner, don’t you agree?

Failed CurrentC

According to an article in NFC World about MCX’s mobile wallet (to be named CurrentC):

“Consumers will benefit from using CurrentC in four main ways: 1) Save money with valuable coupons and offers; 2) Earn rewards from participating merchant loyalty programs; 3) Pay simply; and 4) A more secure way to pay.”

My take: In September 2013, I predicted that MCX’s plans for a mobile wallet were flawed. Based on my calculations and estimates, the cost of driving adoption of the wallet (through marketing and discounts) would offset any reduction in interchange fees the merchants realized. I’m sticking to my guns:MCX’s mobile wallet is doomed to fail.

Let’s look more closely at some of the supposed consumer benefits.


According to the NFC article, “CurrentC will store and automatically apply offers, coupons and promotions from participating merchants during the payment process.”

No doubt that will be helpful. But how many coupons that a single consumer tracks and manages are from MCX merchants? Don’t you think consumers want an app that helps them manage all their coupons?

And how will MCX determine which (and how many) coupons to offer CurrentC users? Surely, every one of the participating merchants will want to push their coupons out to users. Do you really think consumers want a gazillion more coupons pushed out to them? And if the only way to get a coupon pushed is when a consumer is already in a merchant’s store, that doesn’t really help that merchant with new customer acquisition, now does it?

Furthermore, let’s review again the impetus behind the MCX consortium. If merchants simply needed a place to push out more coupons and drive more business, they could have partnered with Google or Apple. But they didn’t. They set up their own payment processing capabilities, because the real impetus here is avoiding interchange fees.

Interchange fees vary greatly, of course, but it’s fair to estimate that, at a transaction level, the fee ranges from 1% to 5% of the transaction value. Not only will MCX need to offer coupons to drive additional revenue, it will need to offer coupons–above and beyond what’s already available–to drive adoption of the CurrentC mobile wallet.

With a 10% discount on a transaction, MCX will need to drive an additional two to 10 transactions on the mobile wallet in order to recoup the promotional costs. Good luck with that, merchants.


The NFC World article also says that “CurrentC will offer customers the freedom to pay with a variety of financial accounts, including personal checking accounts, merchant gift cards and select merchant-branded credit and debit accounts. Additional payment options are to be made available in the coming months.”

Raise your hand if you want to give up on the rewards you’ve been earning on your Amex, Visa, or MasterCard credit or debit cards. I don’t see any hands in the air.

Consumers are not going to give up their existing cards–on an on-going basis–in order to use this mobile wallet.

I recently purchased an oven/stove at Sears (OK, *I* didn’t buy it, my wife did. But she bought it with my money. OK, it’s not really *my* money). To get a discount on the oven, we opened a Sears credit card. When the bill comes, we’ll pay off the balance, and discontinue the card.

Now, with the introduction of CurrentC, how will this transaction work? I would imagine that the salesperson will tell me I could qualify for a discount if I download the mobile wallet, and use it to make some specified level of future purchases at Sears. Really? I’m not going to agree to that. And neither will anyone else. If I can get the discount for just downloading the app–and not committing to future use–then sign me up, baby!

I shouldn’t be giving MCX any advice here, but if they were smart, they would do this payment thing the other way around: START with Amex/Visa/MC cards and, over time, wean users off those cards onto merchant gift cards and merchant-branded credit and debit cards. But what do I know?


The NFC World article goes on to say “CurrentC will provide a more secure payment experience than traditional methods by storing users’ sensitive financial information in its cloud vault rather than locally on the mobile device. Furthermore, the application uses a token placeholder to facilitate transactions instead of constantly passing the data between the user, merchant and financial institution.”

Translation: Oh, the hell with it…I have no idea what this means. And neither do millions of other consumers out there.

Remember, this was positioned as a benefit to consumers. But few consumers will have any idea what this means, and very likely, will feel less confident about “storing sensitive financial information in the cloud vault” than they do about current methods of storing data.


At last year’s BAI Retail Delivery conference, I hosted a meeting of CMOs from large FIs, which featured Lee Scott, the former CEO of Walmart (who is a member of MCX). I asked Mr. Scott why, in the face of so many failed consortia before it, would MCX succeed?

He said: “I don’t know that it will, and I don’t care. As long as Visa suffers.”


Bottom line: I don’t know if MCX will succeed, either. But I’m betting against it.

Never Say Never (To Mobile Banking And Payments)

We’re going to survey like it’s 1999. According to an article published on CBS News‘ website:

“In a poll conducted for the ID security firm Intercede, 48% of U.S. consumers surveyed said they would never use bill payment apps, and 44% said they would never use mobile banking services. One in five said they did not feel safe shopping on their smartphone. And 63% said they worry about security on their mobile device.”

Substitute “PC” for “smartphone” and “online” for “mobile” and this survey could have been conducted in 1999.

And although online banking, bill payment, and shopping aren’t quite ubiquitous today, the fact is that a lot of people who once said they would “never” do those activities online (or using a PC) do those activities online (or using a PC) today.

But you wouldn’t expect a news organization to report that, would you? Because that would just deflate the newsworthiness of the findings.


The article goes on to say:

“With so many recent security breaches in the news–from Target to the Heartbleed bug to Russian hackers stealing passwords–Intercede’s CEO said it’s not surprising that consumers just don’t trust mobile security.”

There’s no mention (of course), that few–if any–of the data breaches making the news today have anything to do with mobile devices. Mentioning that would deflate the newsworthiness of the findings.


I don’t care what this survey found. I’m sticking by my prediction that 96 million Americans will use a smartphone or tablet to do their banking by 2016.

Is that everybody? Of course not. Is that everybody that matters? Well, that’s a good question, no?

My forecast could be significantly off, but regardless, the reality is that many people who, today, say that they will never do mobile banking, will do so at some point in the future.


The rate of adoption of new technologies is always impacted by a confluence of factors that are nearly impossible to predict. Factors like personal influences, incentives/disincentives, and unforeseen circumstances:

  • Twenty-five years ago, I consulted to a very large company whose CEO didn’t quite get PCs. Didn’t want one in his office, and couldn’t understand why any of his direct reports needed one on their desks. The IT department wanted to compile statistics on PC adoption and develop models of productivity improvement to persuade the CEO to invest in PCs. My firm’s suggestion was less “scientific.” We said: Give the guy’s grandkids PCs. Which they did. And it worked. The CEOs grandkids pressured Grandpa to get a PC and communicate with them through email. Which became a gateway to him using the PC for other things.


  • Ask some of the large banks about what helped them drive up online bill pay use. Don’t be surprised if they say things like “we paid people to try it” or “we charged people to not use it.” Incentives/disincentives work. Funny thing is, when it comes to mobile banking, the rate of adoption seems to be pretty rapid, so I don’t see many banks or credit unions needing to incentivize/penalize anyone. Maybe Intercede’s survey found something I don’t know.


  • In a survey I conducted a while back, I asked consumers who paid bills online what got them started on that behavior. A fair number responded that they “needed to make a payment to avoid a late fee, and was able to do so online.” So…how many of those people who say they will never make a mobile payment will do so when they need to get on a train, don’t have cash, but could use that MBTA app to easily buy a ticket? Yeah, a bunch.


The lesson here is to take what consumers say (especially in surveys) with a grain of salt. We’re not very good at predicting our own behavior (or explaining why we did what did, for that matter).

Am I damning my own profession? No (freaking) way. The value of what we researchers do is in the analysis of the data, not the data itself. Asking the right questions helps, too.