The difference between a money pit and a long-term investment is often a case of semantics, and that's the territory mobile banking has straddled the last few years. Just about every bank is either on the road, or has the journey planned out. But how, or if, the technology will be transformed into a revenue-generating business is still an open question. Proponents argue the financial value from cost savings in the call center and a revenue stream from expedited payments. Both show small promise, but not enough to turn the mobile investment into a profit center.
But Visa and JP Morgan Chase, along with mobile technology vendor ClairMail, have recently pushed the channel to the next level, unveiling a mobile coupon model that finally provides a customer-focused value proposition that should actually build revenue for all the parties in the value chain.
Both Visa and ClairMail offer the ability for banks to partner with merchants and use the vendor's technology infrastructure to send retail customers a coupon via SMS message to their phone. When the customer goes to that merchant and makes a purchase using the issuing bank's card, the back end system recognizes the transaction and applies the coupon value as a statement credit.
There's something for everyone: The merchant funds the offer and gets the customer sale, the bank gets the interchange on the transaction, and if applicable, the technology vendor gets a cut from the merchant.
"I think it will take off because it adds value to the client," says Brandon McGee, a banker and author of the Mobile Banking blog. "It adds another opportunity to monetize the channel. We want mobile banking to generate revenue, and the more different components we can layer on, like mobile coupons, payments and reducing volume to the call center-each of those is going to build the business."
The mobile coupon strategy is akin to the evolution of direct mail, but cheaper for everyone involved. And, at this stage anyway, it offers merchants a much higher response rate. A great direct mail solicitation might yield a one or two percent response rate; recent figures from comScore found that of 47 million people who received an ad via SMS in October, almost 8 million responded to it, a whopping 16.5 percent response rate.
Visa's mobile coupon partnership with Chase is initially only available as an application for Chase Visa customers that use an Android phone. That pool of users is currently small, and only 14 merchants are on board so far; the biggest names include Jos. A. Bank, Lenovo and Overstock.com. The capabilities will be opened up to other banks, more merchants, and other phones later in the year, Visa says. And eventually the discount will applied at the point of sale, rather than as a statement credit, says Pam Zuercher, global head of product innovation at Visa Inc.
The Chase/Android application follows a small-scale pilot that Visa and Chase conducted in Phoenix that required consumers to physically hand their phone over to the cashier to record a coupon code. Chase is uncharacteristically mum on the topic, declining to talk about either the Phoenix pilot or the Android capability.
The Phoenix trial, and now the Android offering, are components of Visa's long-evolving channel strategy, which will eventually include contactless payments using NFC, mobile person-to-person funds transfer, locator services, and customizable alerts on consumer accounts, Zuercher says.
Proponents say the Visa and ClairMail SMS mobile coupon model beats out other nascent mobile offer schemes because it focuses on the consumer, and utilizes existing infrastructure. "In the past couponing has been used to get you to switch from Ivory to Dove," says Joe Salesky at ClairMail. "This is much more about knowing the customer better and trying to treat them uniquely."
For banks, implementing mobile "offers" is a natural follow-on to offering customers SMS alerts about other account activity. "Mass adoption is coming because every banking customer wants alerts," Salesky says. "At this point it's just getting expanded to not just account activity but account incentives, or new value. It really is about delivering new value to the consumer."