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.


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.

Why Walmart Execs Are Smart To Stay Off Twitter

The Harvard Business Review thinks that Walmart senior execs should be on Twitter. It wrote:

“Last week, Walmart found itself in a Twitter tussle with actor Ashton Kutcher over the company’s controversial low wages. Kutcher tweeted at the company, saying “Walmart is your profit margin so important you can’t Pay Your Employees enough to be above the poverty line?” with a link to a post on The Wire about the employee food drive. The Walmart PR account tweeted back, saying, “It’s unfortunate that an act of human kindness has been taken so out of context. We’re proud of our associates in Canton.” Throughout the back-and-forth, Walmart came off as defensive and tweeted facts that some have recognized as a bit murky: ‘We think you’re missing a few things. The majority of our workforce is full-time and makes more than $25,000/year.'”

The author of the blog post went on to say:

“Think how differently this might have unfolded if a senior executive actually responsible for labor practices had read and responded to Kutcher’s comment — and all of the other tweets that stemmed from the exchange.”

My take: I am thinking how differently things might have unfolded — and can only conclude that nothing would have been different. 


Social media gurus cling to this notion that all senior execs at companies need to be on Twitter. Nonsense. Debunked that bad idea here

In this particular example, however, there’s one overriding reason why Walmart senior execs were wise to stay out of the Twitter fray (and it’s the reason why the PR person should have stayed away, as well):

The cards are stacked against a controversial company. 

By “stacked” I mean, the Twittersphere has already decided innocence or guilt long before the firm in question says anything on Twitter in response to an attack or challenge. 

Other people have observed how left-leaning the Twittersphere is. But even right-leaning, hard-core free-market capitalist tweeters aren’t going to come to Walmart’s defense on Twitter. 

Defending Walmart on Twitter is like rooting for the New York Yankees at Fenway Park. 


At the recent BAI conference, former Walmart CEO Lee Scott told a story about how, back in 2008, he met (secretly) with a Democratic presidential candidate (whom he would not mention by name). 

Scott told of how he came armed with employment statistics disproving the candidate’s public statements regarding Walmart’s employment practices.

According to Scott, the candidate asked “Why are you showing me all of this?” To which Scott reportedly replied “So the next time you say what you said in public both you and I will know you’re lying.” Little surprise that the data presented to him did nothing to change what he said about Walmart. 


Social media gurus preach about how social media can help companies connect with customers and prospects. But they apparently ignore the downside of this proposition.

Namely, that participating in social media may do nothing to improve a controversial reputation, and that, in fact, may actually harm it. 


The author of the HBR blog concludes that:

[T]he key is not immediacy, but seniority.

I see absolutely no evidence supporting this claim.

Did the Twittersphere assume that the Walmart PR response to Kutcher came from low-ranking employees? Doubtful. I would bet that a lot of Tweeters, as I do, assume that the Walmart PR account follows guidelines established by senior execs. And that, possibly, the response was actually vetted with senior execs before it was tweeted.

Ask Brett King, whose blog post about how his travails regarding how his HSBC account was closed, whether or not he cares whether or not the CEO of HSBC responded on Twitter or not. Betcha $5 he says he would have appreciated a timely response from anyone at HSBC over a late response from a senior exec. 

The general public doesn’t know most Fortune 500 execs from Adam. They want a response — which they interpret as being the “official” response — regardless of who at the company comes from.

And in the Walmart/Kutcher case, I would argue that Walmart’s best response would have been “@Ashton We believe your stats are off. But this is not the most effective place to have this discussion. Let’s meet in person.” 


The author of the blog goes on to say:

“We are left with half-truths driving the corporate use of social media. Nominally employed to foster transparency, frontline communicators are actually there all too often to form a barrier between the public and corporate executives.”

Funny, because it’s blog posts like the one in HBR which create the half-truths (like the key is not immediacy, but seniority). 

Again, I see little evidence supporting this claim. I certainly can’t speak to anywhere close to a majority of firms, but the financial services firms I’ve spoken to are hardly creating “barriers” between the public and their senior execs. 


Bottom line: HBR got it wrong. Walmart senior execs shouldn’t be on Twitter. They were wise to stay away.

Lessons For Banks From A Walmart CEO

At this year’s BAI Retail Delivery Conference, I had the opportunity to moderate a closed roundtable discussion of the Marketing Leaders Circle (thank you Deluxe!), and as an added bonus, got to interview Lee Scott, the former CEO of Walmart.

As the session was a closed session for senior marketing execs from large FIs, it would be inappropriate for me to share a lot of what was discussed (sorry!). And I will leave it to Deluxe to share what it wants to share publicly about both the CMO discussion and Lee Scott’s comments.

But I will share one takeaway from Mr. Scott’s comments as a key lesson for banks to learn:

Tell a better story.

After apologizing to attendees for the insult I was about to hurl at them, I mentioned to Mr. Scott that it was my opinion that the strategic planning process in many banks was a farce, little more than a budgeting exercise geared at trying to hit some artificially-established financial target.

The heads nodding (no, not nodding “off”) in the audience told me I wasn’t too far off.

I asked Mr. Scott, who is a member of the strategic planning committee on Walmart’s board, “if you were on that committee at a bank, what would you do to ensure that the process dealt with truly strategic issues?”

He then proceeded to tell the story of his experience of when he was on the board of directors of a “bank” — or in this case, Goldman Sachs (sorry, can’t tell you the details of this story, but it was good).

After making a couple of more comments, Mr. Scott summed up his thoughts by saying “I’d make sure the bank was telling a better story.”

A great question came from one of the attendees: “Do you mean telling our story better or telling a different story?”

The answer: Telling a different story.

Lee went on to explain that this didn’t mean doing a better job of advertising.


Financial services marketers need to be honest with themselves about this. They should — honestly — place themselves on the following matrix:

marketing story telling

Too often, marketers try to change or tweak the story they tell. Ad agencies love that: “Sure, we’d love to take your money to dream up new ways of telling your story.”

But what Mr. Scott is saying is that — for many banks at least, and maybe for the banking industry as a whole — the story itself isn’t that good. Fixing the “telling” of the story isn’t as important as fixing the story. 


And by the way: If you buy me dinner and drinks at a really fancy, expensive restaurant, I might — just might — tell you what Mr. Scott said about MCX and why Walmart doesn’t try to steal Target’s customers. 

My Take: Walmart’s Pay With Cash

Walmart recently announced a new capability on its website to allow customers shopping online to Pay With Cash. The way it works is:

“During checkout, shoppers select the “cash” option and their shipping preference. They immediately receive an order number on the confirmation page and an email receipt. Shoppers have 48 hours to take the printed order form to a checkout lane at any Walmart store or Neighborhood Market. Once the cash payment is completed, the customer’s order is shipped to the store or to a preferred address.” (The Salt Lake Tribune)

According to a Walmart executive:

“Many of our customers are looking for more ways to purchase items online but don’t have a credit, debit or prepaid card.”

The article goes on to say:

“One in four U.S. households fall into the unbanked and underbanked categories, where they don’t have a bank account or credit card or have limited banking options, and often rely on cash as a form of payment for purchases, according to the FDIC.”

My take: PWC = PFG (Pure ‘effin Genius). The rationale from the Walmart exec — supported by the FDIC statistics — is misguided, however.

There is a lot of confusion regarding the terms unbanked and underbanked. Per the FDIC’s definitions, the unbanked are consumers without a checking or savings account, and the underbanked are consumers who have a checking and/or savings account, but use “alternative” financial products like prepaid cards, check cashing services, or payday loans.

Also per the FDIC, only about 7% of US households fall into the unbanked category. So when the article cited above says that “one in four U.S. households fall into the unbanked and underbanked categories” keep in mind that the vast majority are in the latter, not the former, category.

With no intention on calling the Walmart exec quoted in the article a liar, it really isn’t true that “many” Walmart customers don’t have a credit, debit, or prepaid card.

So why is PWC PFG? It gets people into the store, having already committed to purchasing something.

If you were a Walmart customer using PWC, wouldn’t you look for that product in the store when you went in? You wouldn’t? What kind of moron are you?

Of course you would. Why would you wait for Walmart to ship the product to you (or to the store, requiring another trip) when you could pick it up right then and there?

Walmart’s PWC option has little to do with serving un- or underbanked consumers, and even less to do with cash. It’s about driving store traffic and driving sales.

I don’t expect that the PWC option will be widely used on Walmart’s site, but it doesn’t have to be widely used for the tactic to be successful. Any use of the PWC button that results in store traffic and sales is smart marketing.

Nice work, Walmart.

[For more details on Walmart’s PWC option, see the NetBanker article Feature Friday: Paying Online with Cash]

Quantipulation: The Impact Of Website Errors

According to an eConsultancy blog post:

Website errors seriously undermine the user experience, erode trust and confidence, and impact return on marketing spend. When asked what these errors were likely to include, respondents cited a range of issues, including inconsistent branding, spelling mistakes, poor usability and accessibility compliance errors. The group of website owners polled estimated that, on average, errors of this kind put 18% of their company’s revenue at risk, a figure that’s hard to ignore, especially in today’s economic climate.

My take: Quantipulation at its finest.  To refresh your memory, quantipulation is the “art and act of using unverifiable math and statistics to convince people of what you believe to be true.”

You really want to tell me that Walmart is in danger of losing $73 billion in revenue because of spelling mistakes on their website or because of “poor usability”?

According to the US Census Bureau, as a percentage of all retail sales, the online channel accounts for 4 to 5%. So even if all of your company’s revenue were at risk from speling mistakes and inConSisTenT branding, then — on average — we’re nowhere close to 18%.

Now, I’m a big believer that the online channel influences offline sales. Positively influences, that is.

The “18% of revenue at risk” statement is one of those claims designed to support purveyors of site design and customer experience services who can’t tie their efforts to bottom line (i.e., ROI) impact. So they resort to quantipulation like this in order to…to what? Scare executives into hiring them to check the spelling on their websites lest they forego $75 billion in revenue?

Beyond the math, there are a couple of qualitative reasons why the claim doesn’t hold up:

  1. People often miss spelling mistakes. How do spelling mistakes on web sites come about in the first place? Somebody makes a mistake, and misses finding it when (or if) they proof-read the copy.  So, if they miss it, isn’t it quite likely that site visitors will miss it as well?
  2. People don’t care that much about it. Scenario: You’re shopping online for an Xbox (pepper spray in hand), you find the best price online at Walmart’s site, but there’s a typo on the product page. You really abort the purchase and go to another site to pay more just because there is no typos?

Did you stop reading this because of the grammatical error in the previous sentence?

Here’s the point: If “poor usability” prevents a site visitor from accomplishing their interaction, transaction, or goal, then yes — it might have a revenue impact. But when customer experience transformists use the term “poor usability” they’re referring to lots of things, including inconsistent color or navigation schemes — which may be a minor nuisance, but don’t necessarily prevent site visitors from accomplishing what they came to the site to do.

Bottom line: Spelling mistakes and typos on your website aren’t going to put 18% of your revenue at risk. Poor usability will have more of an impact if it prevents people from doing what they’re trying to do (or if it significantly adds to the time it takes them to do those things). But the reason for fixing that poor usability can’t be justified by “saved sales.”

I’m not trying to diminish the importance of the online customer experience or usability — just the quantification of it. Asking 20, 100, or even 1,000 execs to pull a number out of thin air (and then averaging that number) doesn’t legitimize that number or give it any credibility.


For previous posts on Quantipulation, see:

Quantipulation in Action: Inbound Vs. Outbound Marketing

Quantipulation in Action: More Likely To Purchase

Quantipulation: ROI Vs. Success