Category Archives: Payments

Stop Spewing Mobile Wallet BS

If I’ve learned anything about doing consumer research it’s this: You can’t ask consumers their opinions about things that they don’t know.

So, feel free to publicize your research about which mobile wallets are most popular with consumers, if you want, but I’m not buying any of it.

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comScore recently conducted a study regarding consumers’ awareness of mobile wallets and found the following (chart pulled from a Venture Beat article):

According to the study, nearly half of all consumers (assuming the study was a study of all consumers) have used PayPal’s digital wallet. That would mean that pretty much everybody in the US who owns a smartphone has used PayPal’s digital wallet.

I can hear the PayPal people laughing at that all the way here on the other side of the continent.

I find it funny, too, because, until recently, PayPal didn’t even have a digital wallet. According to articles published last March, May 2012 was the expected launch date for the Paypal digital wallet. (p.s. I can’t find any articles that confirm that it was launched last May).

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Well, hold on a second here. Maybe our terminology isn’t accurate.

Maybe Paypal has a digital wallet, but not a mobile wallet. Yes, that must be it.

But if that’s the case, then Amazon’s one-click buying should be considered a digital wallet, too. And since you can make P2P transactions from many banks’ online banking platforms, that’s kind of a digital wallet, too, no? But comScore didn’t ask about the awareness of either of those wallets.

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If you’re confused about the difference between a digital and mobile wallet, or what a mobile wallet exactly is, welcome to the club. According to the Venture Beat article (citing the comScore study), less than half of the respondents really understand what a digital wallet is.

But, if that’s the case, then I have a question for Venture Beat: Why would you title the article “PayPal destroys Google Wallet, MasterCard, Square, and Visa in digital wallet study”?

Total BS. The comScore compared apples to vaporfruit, and VB — which acknowledged the consumer confusion — runs with a bogus headline.

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Let’s take a look at some of the other numbers.

According to the comScore study, 1% of respondents use (or have used) the Lemon Wallet and 2% use LevelUp.

The companies, themselves, report quite different numbers.

A Mobile Commerce Today article from December 2012 stated that LevelUp had reached the 500k user mark. Meanwhile, a Bank Systems & Technology article from November 2012 said that Lemon Wallet had 2.5 million users. 

My calculator says the number of Lemon Wallet users are 5 times the number of LevelUp users. Yet the comScore study reports that LevelUp’s market penetration is double that of Lemon’s.

Maybe my calculator is broken.

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What should we make of all this?

Simply, that the mobile wallet space is one messy pile of you-know-what at the moment, and that any claim about who’s winning or losing is: 1) bogus, and 2) the work of a fool.

The Importance Of Disney’s MyMagic+

Disney announced that it plans to introduce something called MyMagic+. The company calls it a “vacation management system,” incorporating rubber bracelets encoded with credit card information. The bracelets would enable alerts to be sent to guests, as well as — you guessed it — offers to buy things, and (very importantly) the ability to pay for things.

My take: Disney is legitimizing the notion that Payments is the new 5th P of marketing. 

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To refresh your memory, some time ago, someone came up with the notion that there are 4 Ps of marketing — product, place, price, and promotion. These 4 Ps are the levers that marketers can pull or adjust to influence marketing performance. 

These 4 Ps have survived many changes in the world of marketing. Some folks have tried to introduce new Ps — like “people” or “personality” or “personalization” — but none have stuck (rightfully, so) because they don’t really clear the bar of being a lever that marketers can adjust. People, personality, personalization — and other Ps — are simply not part of the marketing mix.

Last August, I tried to argue that Payments were emerging as the new P in marketing. That, in effect, changing how someone paid for a product or service could influence their choice of product or service in the first place. 

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What Disney is doing with its MyMagic+ bracelet is changing the customer experience by changing how the customer pays for something. 

Disney is rumored to be spending $800 million to $1 billion on MyMagic+. 

There are a lot of ways Disney could be spending that money. It could build new rides (Product), it could build a new park somewhere (Place), it could provide $800 million in discounted prices to lure more people to visit (Price), or it could spend that money on advertising (Promotion).

But its not. The company is spending it on changing the way guests pay for things. And by doing so, changing what people buy, and changing the overall customer experience.

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What Disney is demonstrating is that payments — as the 5th P of marketing — isn’t an opportunity for just financial services firms and upstarts. 

There’s a saying that politics makes strange bedfellows. The same is true for profits.

The opportunity to increase profits by changing the payment experience is going to create new partnerships for retailers, merchants, travel providers, etc. and financial services firms. 

The problem — from a financial services industry perspective — is threefold. Many financial services marketers:

  1. Lack the marketing sophistication of retailers and merchants.
  2. Are stuck in “interchange fee maximization” mode.
  3. Think their role in payments is “money movement” not “purchase influence.”

The problem — from a retailer/merchant perspective — is twofold. Many retailers/merchants:

  1. Don’t effectively allocate marketing dollars across the existing marketing mix, so adding a new P to the mix causes confusion, not opportunity.
  2. Partnerships with financial services firms have historically delivered little value, and new ventures (e.g. card-linked offers) haven’t proven their mettle yet, so retailers/merchants are disinclined to shift investments to the new P.

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Disney’s investment in MyMagic+ shines a spotlight on payments as the 5th P.  You’ll see.

The Less-Cash Society

Talk about the death of cash goes back thousands of years. Of course, to many Gen Yers, the world began in 1978, so what ever happened before that is irrelevant.

Recently, talk of a cashless society has grown louder with the growing popularity of debit cards, prepaid cards, and digital wallets. A Barron’s article titled The End of Cash? said: 

“This year, greenbacks will account for an estimated 29% of U.S. retail payments, according to McKinsey & Co., down from 36% a decade ago. Among the wealthy and the upper-middle class, cash is almost extinct in the U.S., having given way to credit and debit cards. McKinsey says that cash comprises just 2% of point-of-sale payments for households earning more than $60,000 a year. Cash’s disappearance has been slow but inexorable.”

My take: We are nowhere — NOWHERE — near a cashless society. 

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First off, if the percentage of retail payments made in cash dropped from 36% to 29% over the course of a decade, that’s not even a single percentage point per year!

Really? You telling me that with the popularity of debit cards, prepaid cards, credit cards, online payments, alternative payments (e.g., Paypal), etc. , these alternatives to cash have only put a 7 percentage point dent in cash-based retail spending? 

I mean, c’mon, now. We know that the use of checks has declined significantly over the past 10 years. But with all these card-based payment mechanisms, the drop in cash has averaged 0.7% per year. Ha!

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The McKinsey numbers also hint at another factor that will keep cash from dying off. 

IF cash will account for 29% of retail spending this year, AND cash comprises just 2% of point-of-sale payments for households earning more than $60,000 a year, THEN cash-based spending among people earning less than $60k must be incredibly high (unless, of course, they don’t spend any money, which doesn’t seem likely). 

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But there’s another big reason why cash is far from dead.

In the US, retail sales (B2C) is about $4.3 trillion, monthly bill pay is about $4.7 trillion, and I have no idea how big the underground economy is. If you want to assert that cash disappears from these categories, fine.

Nearly every article and analysis about the end of cash ignores P2P (person-to-person) spending, however. (That’s because, as far as I know, Aite Group — more specifically, yours truly — is the only company to actually estimate the size of P2P spending in the US, UK, and Australia).

When we did the analysis in 2010, the P2P economy was about $865 billion, 53% of which was in cash. Looking at it from a different angle, cash-based P2P spending accounts for about 40% of the total use of cash among US consumers.

If you think that that $460 billion or so in cash-based P2P transactions has gone electronic or mobile in the past two years, then don’t bogart that joint, my friend, and pass it over to me.

Actually, I’ve sized online and mobile P2P in the US for 2012, and although the growth rate since 2010 is respectable, it’s nowhere near what it could be if financial institutions did a better job of marketing their electronic P2P capabilities.

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When it surveyed consumers in 14 countries last year, ACI Worldwide found that the percentage of consumers who prefer cash for P2P transactions — while declining since 2009 — is still quite high in some countries.

In the US, for example, the percentage of consumers who prefer cash for P2P transactions fell just one percentage point between 2009 and 2012, from 51% to 50%.

       % of consumers that prefer to use
           cash for P2P transactions
             2012   2009   Chg
Italy         62%    74%   -12%
Brazil        57%    58%   -1%
Australia     51%    62%   -11%
US            50%    51%   -1%
UK            45%    54%   -9%
UAE           44%    48%   -4%
China         42%    67%   -25%
Canada        41%    46%   -5%
Germany       39%    52%   -12%
Sweden        34%    52%   -18%
India         31%    42%   -11%
Singapore     22%    40%   -19%
South Africa  20%    43%   -22%
France        12%    14%   -2%

Source: ACI Worldwide survey of 4,200 consumers, Q1 2012

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In addition, ACI found that in 2012, 44% of US consumers said they used less cash in than they did in 2009. But nearly one in four said they used more. What might surprise you is that about one in five Gen Yers, Gen Xers, and Boomers all used more cash.

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Bottom line: As we enter the year 35 AM (Anno Millenial), it makes for great headlines to pronounce the death of cash. But in the US, at least, it’s simply not true. Until we crack the P2P nut, cash isn’t going away. 

2013: The Year Of The Digital Wallet

Having named Big Data the most annoying buzzword of 2012, you might be wondering what I think the early candidates for most annoying buzzword of 2013 are.

Actually, I know that nobody is wondering, but that’s not going to stop from me telling you (after all, what is the purpose of a blog, if not to push one’s own ideas on the rest of the world, whether the rest of the world wants them or not).

So, here you go: In 2013, everybody and their mother will launch a digital wallet.

Mass adoption of mobile payments (in the US, at least) isn’t quite here yet, but that won’t stop tons of technology providers, financial institutions, and large retailers/merchants from offering mobile apps that they will call digital wallets.

In fact, I might just refer to my blog as a “digital wallet.” It”s digital, and allows me to store things (ideas), and isn’t that what a wallet does? Let you store things?

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Bank Systems and Technology ran an article on 5 Predictions About the Future of Digital Wallets that bears some analysis. Included in its list of predictions are the following:

“By some estimates, 70% or more of all e-commerce transactions are abandoned at checkout, valued at roughly $18 billion a year. There are many reasons for this … But no one likes the 16-digit hunt-and-peck. No one. Which is why the onramp for digital wallets is likely to come, not in the form of mobile transactions in cafes and gas stations, but rather, online, because, ironically enough, that’s where the friction is.” — Tech writer Jeffrey O’Brien in a recent Mashable.com article

My take: Disagree. First off, people don’t abandon carts online because they have to type in their credit card number. They abandon for a number of reasons, one of which is that many online retailers only show the best price for an item if you put in the cart. Second, if people didn’t want to do the “16-digit hunt-and-peck, they could easily store their card number online, and let it be auto-filled. I’m not doing that, but hey, you can if you want.

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“Banks should think twice before going down the path of launching their own branded independent wallets. For some, it might make sense, but many others will likely be better off focusing on making their payment credentials available and top of wallet in the wallets already out in the market, as well as enhancing and extending their mobile banking platforms with value-added services, including payments.” — Senior Analyst with another research firm.

My take: Damn, I hate to publicly disagree with a competing research firm. But I am.

What value-added do banks provide their customers today? Security? Guarantee that money will be moved when it’s supposed to be, and there in the account when it’s supposed to be?

Those are pretty low on the Maslow hierarchy of banking value. People want added convenience to do the things they do, and help making better financial decisions, big and little. That’s the promise of a digital wallet — convenience and advice. If banks don’t brand their own digital wallets, someone else will — and deliver more value to consumers. I didn’t say that every bank had to build their own digital wallet. But providing and branding their own wallet will be a big battlefield over the next few years.

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“It’s about providing an entire shopping experience and ensuring people get relevant offers for what they are buying. And that doesn’t happen unless you have data.” — PayPal President David Marcus

My take: 99% right. The first and third points (about the shopping experience and having data) are spot on. But people don’t care about getting “relevant offers.” That’s marketing-speak.

People care about getting the best price for what they’re buying, and choosing the best product for them when there’s a choice. That’s the shopping experience. If a better price is available somewhere, people want to know. If the digital wallet offers them the ability to find the better price, then people will use the digital wallet.

The question is: How does that “better price” get into the digital wallet? Well, it could be price comparison functionality. Or someone could make an offer.

The notion of relevance is misunderstood. Marketers have delusions of relevance. Relevance can’t be quantified (and therefore not measured).  It’s a highly subjective, and worse, transient condition.

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So there you have it. My prediction that 2013 will be the year of the digital wallet.

I know I’m going to be right. 

Today, everybody who wants to push Big Data slaps that label on everything that happens (regardless of whether or not it’s really “big data” or not). Next year, I’ll be able to claim that everything that FIs, retailers, and merchants do in the area of shopping and banking falls under the banner of Digital Wallets.

Now, if I could only figure out what the stock market is going to do.

Top Of Phone Wallet

Credit card marketers are well versed in the concept of the “top of wallet” card.  The idea is simple: With so many Americans walking around with multiple credit (and now debit and prepaid) cards, issuers want their card to be top of wallet — the one that consumers pull out most often when paying for something. 

Although current interest in digital wallets among US consumers is pretty low, there’s a new competitive dynamic that will emerge over the next few years: The desire among providers to be the “top of phone” (digital) wallet. 

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Digital wallets will try to influence consumers’ choice of payment mechanism, as well as what they buy and where. The development of the digital wallet ecosystem — the FIs, merchants/retailers, telcos, and technology companies — will be a critical determinant of what functionality will be provided, how effective the wallet is, and who will and won’t succeed with their digital wallet offering.

If you’re developing a digital wallet today and expect that card emulation is the goal here, you should go back to sleep. If your digital wallet simply stores card numbers, and passwords/IDs and things like that, lean in a little closer so I can smack you upside your head. 

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It’s going to take a while for this competitive dynamic to emerge, though.

I already have six wallet apps on my iPhone. Don’t use any of them. Don’t really know what they do, can do, or should be able to do. 

If you’re reading this, it’s a good chance you’re not normal. No wait, bad choice of words — make that you’re not “average.” You’re probably chomping on the bit to use digital wallets. 

You can loosen your grip on the reins, Bucko, because that horse is trotting — not galloping. 

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Digital wallets are to 2012 what account aggregation was to 2002. 

Back then, when we asked consumers if they wanted account aggregation, they said no. What they were thinking, however, was “WTF are you talking about?”

Some FIs (and at least one technology company) thought back then that account aggregation was something they could charge customers for because they (only somewhat correctly) thought it was painful for consumers to get a consolidated view of their financial lives. 

People didn’t know what account aggregation was back then, and they probably don’t know what it is today, either. What do they know, however, is that their bank or credit union offers something called PFM which gives them an opportunity to link some accounts and see their financial picture. 

It’s not account aggregation they’re “buying” into — it’s the ability to see a consolidated picture. Account aggregation is infrastructure. 

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This is what’s going to happen with digital wallets. 

Nobody really knows what a digital wallet is — there is no standard, predefined, agreed-upon set of functionality. 

Sure, the visionary early adopters — like you — think you know what it is, and what you want it to be. 

But the rest of us don’t. 

One flavor of digital wallet may be Wallabyesque and help consumers choose which card — oops, I mean “funding account” — to use for a particular purpose. 

Another flavor of wallet might focus on protecting and securing someone’s personal information when making mobile payments, and sharing only a specified amount of information with the merchant when making a transaction. 

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Bottom line: The key point is that we’re early in the evolution of digital wallets, but as they mature, different flavors will emerge. The battle will focus on getting your wallet to be the one the most consumers use (in practice, they’re not really going to want to use three or four wallets every day — they may download that many, but not actively them). In turn, that will likely drive choice of funding account. Have fun competing. 

Mobile Wallets: Looking For Convenience In All The Wrong Places

Lots of discussion these days regarding the adoption of mobile wallets, and whether or not they provide an added level of convenience for consumers. Writing in American Banker, Daniel Wolfe says:

“Convenience is a tired selling point for mobile wallets. The argument goes that tapping a contactless card or payment-capable phone against a special reader is so much easier and faster than swiping a card that a consumer would be eager to change their habits. In reality, most people, of course, don’t consider plastic cards all that time-consuming. Checks and cash may take a little more time than cards, but not enough to make most people demand some kind of relief.”

My take: The industry needs to redefine its perspective on mobile wallets’ convenience.

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Daniel is totally right that swiping a plastic card isn’t all that time-consuming. And even if checks and cash do take longer, let’s get real here: The heavy check writers are not the people who will be adopting mobile wallets because of its promise added convenience.

But I disagree with the point regarding mobile wallets’ selling point. Convenience is not a tired selling point. In fact, more broadly speaking, added convenience is usually the best selling point — or reason for adoption — for new technological innovations.

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The problem with the mobile wallet convenience story is that many people aren’t looking at it broadly enough. The real added convenience for mobile wallets isn’t at the point of tender transfer (I’m trying to avoid saying “point of transaction” because there are multiple steps in the transaction process, of which “tender transfer” is one).

Mobile wallets will prove out their convenience advantage in three aspects:

1) Receipts. Even though swiping a card is fast and easy, credit and debit transactions still produce a paper receipt. And if that transaction occurs at a Staples, Best Buy, or CVS, it produces about 3 pounds of paper receipts.

There is a growing segment of the population that wants to go paperless — not just for monthly bills and statements, but — for everything. It’s not a “green” thing. It’s a convenience thing. Managing all this paper is a huge hassle.

Personally, when I travel now, after making a reimbursable purchase, I take a picture of the receipt, email it to Xpenser, and throw the stupid piece of paper away (on the ground, of course, because I don’t want to be confused for some Green-weenie).

2) Rewards. Reward redemption is a real pain-in-the-you-know-what. Redeeming rewards at the point of sale using mobile wallets will become a key selling point for consumers to shift their behavior.

3) Coupons. Is there anything more 1980 than seeing someone in the supermarket scanning a ton of coupons at the register? Eventually, even the least likely candidate to adopt mobile wallets will recognize that the technology’s ability o to store and use digital coupons is way more convenient than what they do today.

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One last question to consider: Why is the industry’s view of mobile wallet convenience so limited?

I have a theory, and it has to do with organizational structure.

In many banks and card issuers, mobile payment (and wallet) initiatives are still led by, and perhaps even limited to, the payments group.

What that means is that marketing’s, and maybe even the online channel group’s, level of involvement is limited.

No offense to the payments people, but I find that their focus is often limited to the payments transaction and how it’s processed and cleared. And not on how it impacts consumers.

Time to move over (Payments) Rover, and let (Marketing) Jimi take over.

What Consumers Really Want From P2P Payments

BAI Retail Delivery’s P2P (person-to-person) payments panel — consisting of PayPal’s Arkady Fridman, Fiserv’s Sanjeev Dheer, and ClearXchange’s John Feldman — produced some interesting perspectives on the state of the P2P payments union.  The critical question: Do consumers want a bank-centric P2P solution?

According to CU Times:

“Dheer and Feldman unsurprisingly thought so. Fridman unsurprisingly thought not – “they want a customer-centric solution,” he said. Dheer added, “They see this as a core banking function.” Fridman countered …“What does a bank centric solution mean? Feldman noted that “the banks have a strong view that this has to be bank centric.”

My take: Consumers don’t want an “anything”-centric solution.

“Centric” isn’t even a real word, let alone one that enters into the minds of consumers. What consumers want is very simple: Stuff that works, when and where they want it, at a reasonable price, and from a provider they can trust.

As it applies to P2P payments, consumers do not have a preference for one type (bank or non-bank) of provider over another.

Relative to non-banks, banks have some potential advantages: An existing relationship, and a platform (i.e., mobile banking) for providing P2P services to consumers.

But, for the most part, banks overestimate the advantage they have in being the P2P payment provider of choice. Why? Because bank interactions predominantly occur in a branch, a call center, an ATM, or the online banking platform. P2P transactions — transactions between two or more non-business entities — occur predominantly everywhere but those four touchpoints.

Mobile banking (and, ultimately, payments) will help banks create an “anywhere” touchpoint to provide P2P convenience, but, as we speak, mobile banking adoption is still relatively low.

And that opens the door for non-bank providers like PayPal, as well as plenty of other potential providers of P2P payment services.

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Arguing whether or not consumers want a bank-centric solution or a something-else-centric solution misses another important aspect to this potential market: If the marketing of the service isn’t effective, it doesn’t matter if consumers want a bank-centric solution or not.

Mr. Dheer said he was “taken aback by the breadth of what people are using this for.” Perhaps. But, in practice, there are some uses that account for a lot higher percentage of electronic P2P transactions than others. Splitting restaurant bills, other bills (e..g., rent) and providing financial support, for example.

But banks, to date, have marketed electronic P2P services as….well, electronic P2P services. Their marketing hasn’t been use case specific. And that has opened the door for non-bank providers who focus on a narrow range of use cases.

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Another problem: Contrary to what the digerati might believe, electronic P2P transactions aren’t clearing the convenience and reasonable price bars. Among consumers that don’t make electronic P2P transactions, about half say that cash is more convenient, and half also mention that they don’t want to pay a fee. Even among consumers who have made electronic P2P transactions, in the instances when they make a non-electronic P2P payment, many cite the convenience of cash, or the avoidance of a fee.

Source: Aite Group survey of 1,115 consumers, Q2 2012

What catches my attention in the chart above is the high awareness that consumers of alternatives to making P2P transactions using something other than cash or checks. So the challenge for the industry is not awareness, but driving utilization, and demonstrating value.

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Bottom line: So what do consumers really want regarding P2P payments? The best solution. Not a bank-centric, not a non-bank-centric, not an anything-centric solution. So far, cash is winning.

Payments: The 5th P Of Marketing?

Marketers, and perhaps those of you who took Marketing 101 back in college, might remember the 4 Ps of marketing — product, place, price, and promotion. The concept (which I think was originated by a Northwestern marketing professor) describes four “levers” that marketers work with, adjust, or alter, in order to influence marketing results.

In the past few years, there have been numerous articles proclaiming the death of the 4 Ps. All of these assertions, however, have failed to disprove that product, place, price and promotion are no longer relevant. For sure, service and service-related factors like information regarding product usage has become important, but these factors simply expand our definition of product. Place used to mean the store, but again, with the advent of the Web, and now mobile, channels, the definition of place is simply expanded.

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In addition, there have been numerous attempts (usually from bloggers and social media gurus) to add a 5th P to the mix. I’ve seen articles claiming that people, personality, personalization, and productivity are all the new 5th P. One article said that the new 5th P of marketing was Peter (can you guess the name of the author?).

None of these articles deserve a link here because they’re either an element of the existing 4Ps (e.g., packaging and personalization are really about the product) or they’re simply not a lever (personality? really?) that can be managed by marketers to influence marketing results.

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I’ve been debating (with myself) whether or not Payments (or more exactly, influencing consumers’ use of payment methods) rises to the level of a 5th P.

On one hand, payments could be seen as simply an element of price. Incentivizing (not a real word, but go with me on this one) a customer to pay cash instead of credit because it’s beneficial to the marketer could just be price manipulation.

But there’s growing evidence that the choice of payment methods available for a particular product can influence a customer’s choice of product — regardless of the price.  And this would qualify Payments as a lever — or 5h P — that marketers can manage.

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This is old news for the auto industry. Auto manufacturers have made Payments (e.g., leasing vs. financing) a part of the marketing mix for a while now. In this case, I would argue that Payment is not an element of price. In fact, I’d bet most car buyers don’t even realize exactly what price they’re really paying when they accept a lease or financing offer for $250 per month for 24 or 48 months.

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For other industries, however, the choice of payment methods is just beginning to influence choice of providers. Having processed some 42 million (and counting) mobile payment transactions between Jan 2011 and Q2 2012, there’s a strong case to be made that Starbucks has engendered customer loyalty through its mobile payment capabilities.  Offering prepaid debit cards has also helped to keep Starbucks’ customers loyal to the company.

Both of these capabilities — mobile payments and prepaid cards — are examples of how Payments have influenced marketing results without changing the product, price, place, or promotion mix.

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The original concept behind the 4Ps was that the elements were part of a marketing mix — and that marketers had to allocate resources between the elements of the mix to influence marketing results.

Payments meets this criteria, especially in a retail context. In an article title in Retail Info Systems News, a comment on the site makes a great point:

“Though the benefits of having a mobile POS is surely directed towards improving customer service, it also frees up store space occupied by cash registers, typically in the range of 30-40 % of the total numbers on weekdays. This space can be effectively used to display/sell merchandise.”

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Bottom line: When the 4Ps of marketing were conceived in the early 1960s, the choice of payment methods boiled down to cash, check, and credit card (and I’m not even sure how many people had a credit card back then).

But today, there are more payment methods available, and the list is growing. And because of the importance of technology to many people (e.g., there is a segment of people who like to be seen as early technology adopters), the choice of payment methods available for a growing number of products makes Payment a legitimate element in the marketing mix. In other words, there’s a new 5th P to marketing.

Facebook Does Not Want To Be Your Online Bank

CNNMoney recently published an article titled Facebook wants to be your online bank. The article has garnered more than 1,000 tweets and more than 900 people clicked on the Facebook Recommend button.

Given many people’s habit of clicking on these buttons based simply on the title or after having read just a paragraph or two (recall that TV commercial where the girl says “I read an article online — OK, I read part of an article…”), I can’t help but wonder if many really knew what they clicking about.

My take: The title of the article is way off the mark. The article isn’t about Facebook becoming an online bank, and I find it hard to believe that Facebook harbors delusions of becoming one.

The article is about Facebook becoming a platform for banks to provide transaction and interaction services. According to the article:

“There are certain things, whether itʼs financial services, or banking where I donʼt necessarily want my friends to know exactly what Iʼm doing, right?” David Robinson, Facebook’s director of global marketing solutions, U.S. financial services, asked a crowded room of bankers at a SIFMA seminar in New York last month. “I want to be able to go in and have an experience with my advisor or my bank and have that be a one-on-one experience.”

Facebook is quietly planning just such an offering with Australia’s Commonwealth Bank. Currently in an internal beta, with the first version built in March, the application is expected to launch sometime this year to customers. It will allow Facebook users who are bank customers to make payments to third parties as well as Facebook friends through the social media channel, according to the bank. Commonwealth will secure transactions with its own authentication system — similar to how payments are secured on its online and mobile banking site, a spokesperson says.”

There’s a lot wrapped up in those two paragraphs, but none of it points to Facebook becoming an online bank.

If Facebook wants to become a platform where investors can  have a “one-on-one experience” with their advisors, it should think again. In the research that I and my colleagues have done on investors’ needs, desires, and preferences, never have any meaningful percentage expressed an interest in engaging in “one-on-one experiences” with their advisors on Facebook. And by “meaningful” percentage, I mean ONE percent.

Considering what Citibank has heard from its customers, the prospects of Facebook becoming a platform for banking transactions doesn’t look too promising, either. According to an article on the Bank Innovation site:

Citi asked consumers through its official Facebook and Twitter channels: If you could do your banking on Facebook – Would you? As of 2:30pm ET July 16, the majority of commenters wrote that they would be reluctant to do Facebook banking because of security concerns.

I particularly like the response from one Eric Bathke, who said “over my dead body.”

What’s important about these responses is that the sample is skewed. Remember, these are responses from people already interacting with the bank through social media channels. If the people who interact with the bank today through social media — and the number is pretty small — don’t want to bank through Facebook, what do you think the chances are that people who don’t currently interact with the bank through Facebook want to use the social network for banking transactions?

Bottom line: Three conclusions here:

1) If a bank marketer’s rationale for developing capabilities for its customers to conduct banking transactions on Facebook is “we want to be where our customers are”  then s/he should be fired for gross stupidity.

2) Facebook doesn’t want to be an online bank. ING Direct is an online bank. It offers banking products and services primarily (but not exclusively) through the online channel, and there’s no way in hell that Facebook would place that kind of business opportunity high on its list of opportunities. NOBODY wants to be a regulated financial institution in this environment. 

3) CNNMoney needs a new editor, a new writer, or both. The title of its article is so misguided that it makes me wonder if anyone there has any real knowledge of the financial services business. The lack of detail about the payments (retail and P2P) prospects for Facebook is where the real story is. 

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]