VendorDirt: Gonzo Goes to the BAI Payments Conference

Ah, yes, nothing like a hometown trade show to get you out of the office without the related travel burden! Such was the situation I found myself in this week for BAI’s  Payments Connect Conference and Expo right here in milquetoast Phoenix. I mainly attended to catch a glimpse of the rumored rumble between execs from BAI and rival CBA, which was hosting a concurrent conference in nearby Scottsdale. Alas, there was no trade group mano-a-mano or even a nasty smack-talking session, but the BAI show proved the one thing we ALL know about the future of payments in banking: No one knows what the hell is going to happen with payments in banking.

 

 

 

 

 

 

 

 

 

I thought I’d start by laying some knowledge on you that I picked up during a few of the better sessions I attended. Wanna hear it? Here it go:

Insight from the Outside – Consumers from the Retailer View
Lisa Hake, Best Buy’s  director of customer insight strategy, walked the group through Best Buy’s methodology for collecting, analyzing and reacting to customer expectations. Lisa did a great job of describing what is truly a fascinating approach to measuring consumer motivations, beliefs and attitudes, not just steel-cold preference stats. The bad news is that it takes a Best Buy budget to even approach what the retailing giant does with customer analytics. That said, I did find a couple great GonzoNuggets in Lisa’s presentation:

• Best Buy’s biggest customer complaint? How to manage the three dozen or so remote controls each household has lying around. Just like bankers struggle with branches, the retailer’s biggest problem comes from managing the meat and potatoes of its business.
• Best Buy trains its employees – HARD – on how to detect tech savvy in its customers and change their sales approach as a result, something banks could mimic in selling online banking, bill pay, mobile banking, P2P, etc.

Mobile in Context – A Longitudinal Look at the Impact on Financial Services
This session, led by some real pros from AlixPartners and BAI, was one of the many that was long on stats but dreadfully short on tangible advice. Don’t get me wrong, the stats were interesting and entertainingly presented, but I think we all get the message now that mobile is growing quickly, even geezers use mobile banking, but young people value mobile the most. A clear message from Alix was that banks have to Go Big or Go Home when it comes to digital wallets, but no one really knows how exactly to define digital wallet yet. When I asked what, therefore, should banks do in a big way or face being sent home when it comes to digital wallet, they basically just said it doesn’t matter – consumers just want to feel like they’re getting value from their phone for banking. Just start doing something – anything – and promote the hell out of whatever you decide to do. Yeesh. GonzoNugget:

• All age groups use teller more than any other channels for deposits. Despite the many warnings that remote deposit capture will be THE game changer for branch networks, RDC remains the least utilized channel by far for deposit taking.
• Customer use of online banking actually increases after mobile adoption. My take is that this is because, no matter how intuitive mobile banking is, you’re dead if you need to ask for help about using you mobile app. So, users go online to get their questions answered.

Driving DDA Profitability Through Payments Optimization
Ben Colvin of MasterCard moderated a two person panel – Chris Dods from First Hawaiian Bank ($16B) and Geoffrey Brown from Sovereign Bank ($80+B) – in discussing how to go deep on customer analytics to increase debit card usage. It was a glorified MasterCard consulting advertisement, but it did reinforce the importance of the debit card in consumer banking relationship (and revenue) management. GonzoNugget:

• Heavy debit card users actually use ATMs, especially non-on-us ATMs, more often than light debit card users. Why? They love using cards so much that they are caught off guard in situations where they must have cash. As a result, they go to the ATM more often and withdraw smaller amounts with each ATM visit.

Mobile Payments: Where Do Banks Fit In?
The affable Lee Manfred from First Annapolis Consulting led a panel of experts from VISA, Paydiant, Cap One, and US Bank to discuss exactly what the title of the session implies. The frustrating answer to that question: We have no idea, but you better not wait around until the answer emerges.

I can’t really cry foul over anyone’s current inability to predict the uncertain future of mobile payments at banks. No, the exasperating element of the panel was their advice to try a bunch of different technologies and hope one sticks. That’s great advice if you have an 8- or 9-digit disposable technology budget.

Firsthand: Small Business Payments Needs
Hope Felton-Miller of Felton Willis led a panel of four small business owners – whose businesses ranged from under $100,000 to $3 million in revenues – thorough a series of questions regarding banking and payments needs. It was the most pragmatic, eye-opening session of the conference. What struck me was how little the business owners understood about the products and services that are available to them (one didn’t know there was a way to link QuickBooks to online banking) and how few are ever contacted proactively by their banker or a competing banker. This just adds fuel to my theory that banks are way more talk than walk when it comes to small business. GonzoNuggets:

• By far the biggest banking need for each of the busy business owners: Save us time! As an illustration, the responses were hilarious when asked whether they use merchant capture technology:
  • “Why should we pay money to the bank to do their work for them when we can have a clerk drop off deposits on her way home for free?”
  • “We tried it, and it took longer to scan and re-key the errors than it does to just drive to the bank. And driving to the bank is free.”

Best quote of the conference? This came from an almost straight-faced Dan Schatt of PayPal: “We want to enable commerce, not compete with banks.” No one – and I mean NO ONE – in the room laughed or threw a rock.

The 2013 BAI Payments trade show was packed full of great speakers and excellent information, but it was ultra light on practical advice.

There is no shame in an inability to predict the future. The truth is, the pace of change with payments products, vendors, delivery channels, etc., is so rapid that no one really even knows where we are with much certainty, much less can they predict what will happen or give bankers sound advice about what to do. What left my fellow attendees and I so consistently frustrated at the end of most of these sessions was the speakers’ meaningless advice to just do something, anything, so you don’t “get left behind.” The advice felt like a massive cop-out. Any attempts to get specifics from the speakers got shut down with zeal and spite.

It’s fine to tell bankers to just lay down a small bet on each spot on the roulette table and hone your bets with each spin. That works for the Top 20 banks that can afford such a strategy, but it’s certainly not going to fly at a mid-size bank. Hell, mid-size banks are lucky to find enough budgetary open-mindedness to place the minimum bet on one number for one spin of the wheel.

But have no fear, GonzoBanker is here. What did we do 15 years ago with Internet banking or 30 years ago with ATMs – the last two technologies that threatened to shut down our branch systems forever? We stuck with well known vendors and/or vendors with whom we were doing other types of business. Then, as the market matured, we ventured out with the specialist vendors who established niches in the areas that were important to us.

And that is exactly what mid-size banks and large credit unions should do now. Noted payments expert and fellow GonzoBanker Terence Roche and I devised the following advice regarding payments if you happen to find yourself in a bank or credit union with somewhere south of $100 billion in assets:

• Standards Schmandards – Let the vendors and techno dorks sweat and sort out the standards question. You really won’t have much say about which standard emerges victorious anyway, so don’t waste your time here.
• Who’s Your Go-to Guy? – Based on their track record of hitting development deadlines, generally keeping promises, influence in the banking industry, etc., decide who your go-to payments provider will be among your list of existing vendors. Likely candidates will come from your bill pay, debit or mobile vendors.
• Follow – Do what your go-to vendor supports. This will rankle your entrepreneurial tendencies and might not be your permanent solution, but you and your clients will be gaining much-needed experience. If that solution doesn’t work, you can blame your vendor (and I’m only kidding a little here). Your go-to vendor will no doubt move you into something that does work relatively quickly with minimal cost, and no one will get fired as a result. (Can I hear an Amen, all you former ZashPay users?!)
• Relax – If nothing your go-to vendor has is palatable to you now or if the risk is just too high, wait a while. As fast as things are moving, nothing is really sticking right now. I promise you won’t be the last bank in your peer group to finally be able to shut down your branch system if you’re two quarters behind in implementing mobile payments!

All for now, GonzoBankers.
 – Hodgins

 

Footnote:
Number of free GonzoBanker t-shirts surreptitiously handed out at the Vendor Expo: 47
Run-ins with BAI security goons: O

---

How’s the ROI on your delivery channel investments?

A Delivery Channel Assessment and Road Map from Cornerstone Advisors will paint a clear picture of the state of the organization’s delivery channel initiatives – including branches, mobile banking, debit and credit cards – and identify areas of opportunity to better leverage these investments. Contact us today to talk about shaping and monitoring your institution’s long-term technology future.

---