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Electronic coupons appear to be all the rage at the moment, with the rush to the front seemingly being led by Groupon. Throwing themselves in to the fight now are Google (with Google Offers) and Facebook (with Facebook Deals) - so there might be an assumption
that there is scope for considerable growth in this market. Do banks need to keep a wary eye on the activity in this space? In short, yes.
Banks shouldn't be looking at how they can enter this market itself, but do need to consider how they can ensure that their customers involve the bank in the purchase process. I've previously blogged about how I believed that both Google and Facebook would
enter the payments market (Google have since launched an NFC trial, and Facebook has extended its Credits coverage). This means that we potentially have a large volume of customers searching for offers and then paying for that spend through alternative payment
methods. I'm sure this type of spending is what banks would rather their customers use their credit cards for, but now risk losing this to the new behemoths.
How long will it be before Google, Facebook or even Apple start offering credit, rather than just acting as the payment aggregators, and why white-label when you've got the muscle to issue?
GroupOn doesn't disclose its revenues, let alone the mix of payments methods used by its customers. For all we know, John Doe might continue to use his bank-issued credit / debit card while paying US$ 25 to buy a pair of GAP jeans worth US$ 50 via GroupOn,
and banks would've nothing much to fear from the growing trend toward social buying.
The fact that there's a bank behind the popular Amazon-branded credit card suggests that card network agreements still only permit banks to issue open-loop credit / debit cards. While Apple and other merchants can and do issue closed loop cards (e.g, Apple
iTunes card), Apple's announcement that it has around 200M accounts of bank-issued credit and debit cards on its file indicates that banks are very much still in the loop here.
Of the lot, PayPal-to-PayPal transfers and Gen Y / Telco-billing Mobile Payments (e.g., Zong, Boku) have the greatest potential to disintermediate banks in retail payments. The former faces increasing regulatory scrutiny in many parts of the world. The latter
is used largely for micropayments at this point. So, it will be interesting to watch how much sleep banks will lose over them.
29 Jul 2010
This post is from a series of posts in the group:
A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.