Sunday, October 19, 2008
Learn to read between the lines...
I was just reading my daily Finextra newsletter and came across an article with the following headline - "WorldPay merchants to offer PayPal and RevolutionCard". (http://www.finextra.com/fullpr.asp?id=24007) Of course Marketing 101 says this is what you should do, create a provocative headline. However, the devil is in the details. Many people would read this and assume that automatically and overnight tens of thousands of merchants are all of a sudden going to be taking these new payment types. In fact that is not even close to the truth. The article itself actually was reasonable about this by saying "allows WorldPay clients to offer" but to someone not close enough to understand, even this can often be taken out of context. There have been dozens of articles about Revolution card that claim they are getting close to a million merchants. In fact, I doubt there are even 10% of those that are actually accepting it. For any merchant, both ecommerce and retail, to take a new payment type, they have to seriously consider a lot of issues such as; cost, reconcilement issues, shopping cart abandonment due to confusion or access, customer service training, programming costs, etc... It is really challenging to create a new payment brand. I have witnessed both success and failure such as Discover Card, BillMeLater and PayByTouch, BitPass respectively. It is very hard for any company trying this type of endeavor to avoid the tendency to create smoke and mirrors during the chicken and egg phase but this lack of transparency has led to a lot of skepticism. My advice - make sure you do a little deeper investigation before you leap.
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2 comments:
Starting a new payment system is hard. The author is correct when he says that cracking the chicken and egg problem of getting consumers and merchants on board the new payment platform is the devil in the detail here. But we shouldn’t make the merchant’s the fall guys. Merchants will happily take new payment types if enough consumers want to use them. And, most of the time, there isn’t enough of a compelling case for consumers to want to try something new. PaybyTouch spent millions upon millions installing terminals and POS devices in grocery stores; consumers weren’t given a good enough reason to use them so that $300 million investment went up in smoke in a few years. Discover is a successful payment platform today because it gave consumers a compelling proposition to try the card – cash back – but it still took $500 million dollars and 10 years for them to become a profitable payments platform (not to mention starting with a base of 25 million Sears cardholders which they used to persuade merchants that they had a bunch of consumers running around with their card). Perhaps the fine print that should be read is that many consumers don’t perceive the current payment system to be broken and until they do, merchants won’t be rushing to add new payment types to their Point of Sale line up.
Thanks for your comment! With regard to PaybyTouch, a big issue of why they failed was that the business model was based on consumers linking their identity to their DDA account rather than their Credit/Signature Debit card. This was good for the merchant and drove most of the cost benefit but as you say, the consumer wanted their Miles/Points/Cash Back, etc. and the economics went out the window. Beyond that, there were plenty of other issues with management and the technology but if the ROI had played out, in theory this might have worked out differently.
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