TomTom… Urbanspoon… Foursquare… and in the not too distant future, your mobile banking and mobile payments applications. What’s the connection? Location-based services. First we relied on GPS to get us where we needed to go in the car, then on services like Urbanspoon to tell us what Thai joints were moderately priced and nearby. We got more social with Foursquare so we could let our friends know we were hanging out at the Laundromat and find out where we could get good deals nearby. But are we ready for our financial institutions to know where we’re visiting?
Financial institutions haven’t really been playing with location based services, other than branch and ATM locator applications built into some of their mobile banking offerings. There are some exceptions, such as Citi‘s standalone mobile shopping application, but there aren’t many other examples in the wild today. The cocktail of smart phones, location awareness (GPS, etc.), marketing, mobile payments, and social networking is going to make for some nifty applications in the coming years.
Let’s take a step back and look at some of the technologies that are converging:
Social Networking and Location Awareness: Services like Foursquare allow users to “check in” at venues. Friends in the user’s network are able to see where the user is and can receive a text message if they are in the same location. The user that checks in the most at a given location can become the “mayor.” Competitors including Gowalla, Facebook Places and Google Latitude emerged as user interest increased. Some merchants reward the mayor with special benefits, perhaps a discount or a free drink. Marketing functionality now enables visitors to see merchant deals, and a user can claim a deal by showing the merchant her phone’s screen.
Marketing: In the marketing space today, group buying is red hot – everybody loves a good deal. Groupon is the darling of the venture capital world with skyrocketing user adoption, and LivingSocial sold 1 million amazon.com vouchers last week. These services sign up local and national merchants and present a new offer to users each day. Beyond the marketing opportunities in social networking, augmented reality and location based services are being employed to market to users looking for nearby points of interest with their smartphones. In the United States, we haven’t yet embraced the more aggressive mobile marketing seen overseas, with offers automatically text-messaged to people when they’re in the vicinity of given merchants.
Payments: Multiple shots in the mobile payments war have been fired over the past several months, with announcements of bank/telco alliances in the mobile payment space, Android support for Near Field Communication payments in its next release and Apple‘s support for the same. Closed-loop payment systems such as those created by Starbucks, FaceCash and Bling Nation have also received attention. Once some winners emerge and merchant acceptance becomes material, look out. We might finally be at the point where we can start parting with the plastic (making the assumption that an interchange cap doesn’t stifle mobile payment development, but that’s a different story).
As these technologies converge, it seems natural for vendors and financial institutions to take advantage of them in a way that benefits the customer, the merchant and the financial institution. Once the payment technology is embedded in the mobile device firmware and/or operating system, why shouldn’t it be possible to present special offers to holders of a given financial institution’s credit or debit card?
There’s no doubt this sort of mobile marketing will find its way into mobile banking and payment applications, but could banks and credit unions find some neat ways to combine socials networking, payments and marketing in the meantime?
Stop here if you’re not into the crazy, but why couldn’t a financial institution – let’s call it Acme Financial – create a Foursquare (and/or Facebook Places, Gowalla, etc.) profile and use that profile as a vehicle to offer merchant rewards to its customers? As with the old Bling Nation model, this would work best for financial institutions with a strong retail presence. The idea would be to encourage merchants to use their Foursquare or other location-based social network presence to provide special offers to Acme’s cardholders in exchange for using their cards at the merchant.
When an Acme customer checked into a merchant that was tied into the program, the customer would be presented with the offer. The reward would be based on the Acme customer using his card at the merchant. Either the merchant could give an immediate discount to the customer when he presents the phone’s screen, or (more complicated) Acme could reward the customer based on transaction history. Acme could also use the Foursquare history of customers signed up for the service to understand what merchants are most frequently visited and target them for deposit, loan and merchant services (within the acceptable use guidelines of Foursquare or other service provider’s API, of course).
In the more complicated scenario, rewards could be more flexible. A combination of merchant-sponsored rewards (this would require a merchant account), bank promotional rebates, or even loyalty points could be offered if Acme were willing to review the transactions on the back-end. The customer gets the coveted “great deal,” the merchant gets increased volume, and the financial institution gets increased interchange income and loyalty. From a technology perspective, I’ve certainly seen more complex implementation efforts – the activities around making customers and merchants aware of the new service are the most involved piece here.
Maybe someone is already doing this and I’ve just missed it. Or maybe some patent troll has already beat me to the punch Or maybe it’s just a crazy idea. Regardless, you have the benefit of what I scribbled in my notebook last week after I checked into a local eatery on Foursquare and was wondering why this couldn’t be done.
As mobile banking and mobile payment applications evolve, the kind of functionality I describe above will be offered in a more prepackaged way. These solutions likely won’t mandate check-ins to social network intermediaries for customers to receive offers, but optional check-in functionality might be coupled with the purchase so Gowalla junkies don’t have to check in separately. Location-aware mobile payment applications and the merchant terminals that accept them along with offer dashboards for banks and merchants will make offer presentation and acceptance simple. These benefits will show that mobile payments are an opportunity that involves more than just getting rid of plastic.
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