You open up Glamour magazine at the dentist's office and spot a green leather tote you desire to buy then and there. So you fire up a mobile app that detects the product and directs you to purchase and ship the accessory within a couple of taps. The app is not from Amazon or ShopBot it's powered by a bank.
That's the future of shopping U.S. Bank is envisioning.
The Minneapolis bank is creating technology that allows consumers to quickly purchase via a mobile app a product they see in print or on television or hear on radio. The broad idea is to make shopping quicker for on-the-go consumers and for the retailer partner to know who bought what and why.
"Don't think of us as a bank," says Dominic Venturo, chief innovation officer for payments at U.S. Bank. "Think of us as commerce. We are experts in payments and enable commerce."
Venturo expects Peri, the name of the software the Minneapolis bank is developing with U.K. vendor Monitise, to be piloted by a brand partner by year end in a bid to let the marketer sell products in a more data-driven way and to ensure the bank's place in a smartphone-driven shopping future.
To deliver on the vision, Peri uses digital watermarking software to detect information embedded in audio, images and printed materials. The app can read a digital watermark the way many apps today scan quick-response codes. (Peri also supports QR codes.) The app also collects and presents the retailer with data about which advertisement triggered what sale.
Mobile commerce "is a huge problem that nobody has solved well," he says. "It's very difficult to come up with a Swiss army knife that does everything everyone wants it to do."
The initiative is one of the more recent experiments in which banks are trying to simplify shopping and, in the process, generate new streams of revenue. Some, like U.S. Bank, are experimenting with technology to gain advertising dollars through partnerships with retailers. Others are hoping that making e-commerce easier will make them the bank of choice tech-savvy consumers.
"You will see more and more different types of pilots in the space," says James Plath, senior director in Gartner's consulting group. "What works ultimately is a question mark, but if you are not testing and learning and piloting along the way, you will be left out of the future."
Indeed, a recent study from fintech vendor Accenture predicts that U.S. banks could lose 35% market share by 2020 to new competitors ranging from small payments firms to Internet giants, like Google, to retailers.
Certainly, banks are making moves to broaden their businesses to avoid becoming irrelevant as more newcomers are slicing and dicing data to better determine what consumers want and when they want it. Current commerce pilots by banks, which won't always have clear business objectives other than to learn, range from streamlining mobile shopping to injecting m-commerce tech into physical stores.
Financial institutions, which have been pressed for profits and growth since the credit crisis, are motivated to try services that could uncover new revenue streams associated with mobile banking, a channel they are under constant pressure to update.
Some banks, including U.S. Bank and Regions Financial, already charge customers for mobile deposits. But forward-looking banks are experimenting with a range of new smartphone technology that they see as crucial to attracting and retaining customers especially as visits to traditional retail outlets decline.
Still, "at the end of the day, banks can't keep investing," says Haridas Nair, vice president of mobile commerce and multi-channel banking for SAP. "They have to monetize."
Monitise, which acquired U.S. mobile banking vendor ClairMail in 2012, has a bold vision that includes integrating a shopping catalog with discounts attached into mobile banking apps. In this scenario, a consumer could get pitched on relevant goods he can buy without having to key in payment data while a bank could get interchange revenue, more customer data, and money coming in from partner retailers that sell products through their bank apps.
Perhaps a checking account reveals a person bought a ticket to Tahiti, the app might feature sunscreen. The idea is to turn what banks already do facilitate payments into what consumers actually want to do: shop.
"Consumers don't think of payments," says Lisa Stanton, president in the Americas for Monitise. "They think about shopping."
Merchants only pay up when something is sold. "It's a different way for [merchants] to spend their ad dollars," Stanton says.
There's some precedent for this in digital banking. USAA, for example, lets members buy certain products through the direct bank while Bank of America distributes discounts for goods via customers' digital accounts. Citibank blogged in early March that it identifies itself as both enabling mobile retail and acting as a mobile retailer.
Still, expanding mobile banking apps into product storefronts requires fresh thinking from most financial services executives, who could feel wary of selling, say, toilet paper, and consumers who aren't used to buying nonfinancial products from their bank.
"Shopping through a mobile banking app is a great idea, but we are not traditionally retailers," says John Schulte, senior vice president and chief information officer of Mercantile Bank of Michigan, an innovative community bank that is a participant in V.Me, Visa's initiative to simplify online shopping.
These efforts pit banks against major ecommerce providers like Amazon and eBay, which already have mobile apps that let consumers more easily buy what they see in the physical world using stored card data.
In-Store Mobile Marketing
Community banks may have more success helping local merchants facilitate in-store marketing, says Schulte.
Beacons, location sensing devices that are plugged into stores to communicate with nearby shoppers' smartphones, are one type of technology banks are experimenting with. The Bluetooth low-energy signal transmitters are designed to let retailers pitch personalized deals to consumers walking down, say, the deodorant aisle and can also facilitate payments. "The banks play a role in helping a retailer do this," Schulte says. "We help install merchant equipment all the time. It's not an unnatural fit or a new thing. It's next gen. As always, you have to see what's in it for the consumer."
Injecting such data-collecting tech into physical stores could help mitigate the so-called showrooming trend of consumers price checking and then buying the goods they see in-person on Amazon.com.
PayPal and Westpac New Zealand are among the financial services businesses already piloting beacons, which are largely in their infancy.
Whether or not such technology takes, of course, would also depend on what the consumer gets in exchange for his location data.
"It's still awful hard to get consumers to download an app and use it," Schulte says. "There are a lot of neat ideas that haven't taken hold in a mass-market sort of way."
His point is of the utmost importance.
Turning mobile payments into a mainstream reality has been like trying to get Matt Damon to divorce his wife and marry you instead. There are merchant partnerships to forge and terminals to update. (Terminal upgrades should become more common in coming months, as liability for fraudulent point-of-sale transactions shifts to merchants that have not adopted EMV-compliant equipment.) There are app software modifications required. There are partnerships to form outside of the banking industry. There's giving consumers reasons to switch from paying with plastic. There's also the decision of which company provides the customer interface.
"There's an open question of what is banks' role in a fully digital future," says Gartner's Plath.
Simplifying Digital Shopping
New bank-branded checkout experiments, positioned as secure portals customers trust, are emerging to vie for interchange and advertising revenue tied to digital purchases.
Some of the pilots hinge on simplifying website shopping and trying to eliminate the problem of consumers abandoning their shopping carts because of cumbersome checkout experiences on smaller devices.
An emerging PayPal competitor, for example, is expected to launch later this year in the U.K. with five major financial services providers participants: HSBC, First Direct, Nationwide, Santander and Metro Bank.
Zapp, the name of the emerging checkout technology that connects merchants directly to banks, plans to initially improve tablet and desktop shopping. Say a consumer shops on a tablet device and chooses Zapp at checkout. The tap will fire up the Zapp-branded bank app to complete the transaction without handing card data over to the merchant, while also displaying a salient data point: his bank balance. Zapp reduces checkout time to eight seconds for registered customers, according to Peter Keenan, chief executive officer at Zapp.
Like U.S. Bank's Peri, Zapp also plans to develop software that lets consumers more easily buy items they spot in print magazines. But that has a 2015 launch date, as do Zapp's plans to enter physical stores.
Nationwide Building Society, one of the first Zapp participants and a top-three provider of household mortgages in the U.K., views Zapp as an extension of its existing strategy to provide faster payments.
"It's a bit of a table-stakes thing," says Paul Horlock, head of payments at Nationwide, a company that sits on the board of Zapp's parent business.
Then, there's the constant pressure to improve an app before customers "lose interest," Horlock adds.
Zapp is not the only bank-branded checkout experience coming.
JPMorgan Chase plans to introduce a digital wallet later this year that will let cardholders checkout with merchants on online and mobile websites. Chase said it can quicken payments to 30 seconds from two minutes, and offer better fraud protection as its wallet will use secure tokens to replace account data.
V.me by Visa, meanwhile, offers an existing example of how a network aims to simplify online shopping (Mercantile Bank of Michigan and Nationwide are both participants). The payment method, available with select retailers like LivingSocial, lets a user checkout using an email address and password linked to a V.me account that in turn is linked to one or more payment cards.
Digital Financial Advisor
Be it m-commerce, e-commerce or physical store shopping upgrades, banks will vie with merchants, card networks and digital media companies that are privy to what consumers are searching for in the ongoing messy mobile commerce world.
"Banks have an important role to play," says Silvio Tavares, president and chief executive of CardLinX Association, a new non-profit organization working to bring interoperability among companies that provide card-linked offers, such as Facebook and Bank of America. "But to think [m-commerce] could only be successful with banks is probably a mistake. We believe collaboration is important because of scale."
That's also why financial services companies are making multiple bets on the future of digital shopping, which Nationwide's Horlock describes as "a frictionless process [that's] the simplest way to finance something but in a way that I can keep myself safe and secure."
The notion of consumers taking out cash to feel in control is becoming "a fantasy," Horlock says. "Information at [our] fingertips helps us shop more informed."
One advantage financial services firms have in this area is the ability to display financial data including spending forecasts and discounts to help consumers decide whether to buy something at the point of sale. Younger companies like Wallaby, Numbrs, Level Money, Moven and Simple, now owned by BBVA, offer this capability, too. "It's not just, 'I want to buy something' but 'should I buy it' and 'what's the best deal on it,'" says Gartner's Plath. "It's a smart extension."
As banks keep experimenting with mobile commerce, they will clearly need to keep the end-user in mind.
"It has to be a logical extension," says U.S. Bank's Venturo. "We might think it's interesting [but] we could get carried away. There becomes a point where things don't make sense for customers."