My Thoughts
What Apple's Passbook means to payments, loyalty and you
On Monday, Apple introduced Passbook, and my take is that it's the most important new feature in iOS6. Apple bills it as a way to store boarding passes, movie tickets, retail coupons and loyalty cards in one place, which seems simple, but the execution is elegant. Key winning points:
- Gives brands access to the lock screen - coveted space that Apple controls completely.
- Knows where you are, so it can have the right card or ticket ready.
- Push enabled so updates such as account balances, coupons and gate changes are always current.
- Is part of the OS and doesn't require the user to download an additional app.
- Uses a simple API making it straightforward for any developer to offer the service.
Payments
Apple does not provide payment functionality of its own and some are critical of that. American Banker characterizes Apple's actions as dipping their toe into payments and call Passbook "Mobile Wallet Lite." They note the crowded payments space and the various (unsuccessful) partnerships banks have created with Google & Sprint. NetBanker shows more awareness and suggests that proprietary payments are making a comeback, and perhaps that banks will need to take a second seat and partner with retailers to become a preferred Passbook card.
This response seems typical of banks and card issuers -- they have been working tirelessly to defend their business model that is just too expensive, while startups like LevelUp have been chipping away with non-traditional, low-cost payment systems. Now, Apple enters the market. They have 400 million credit cards on file, which is more than Amazon. While people trust MasterCard & Visa most for mobile payments, Almost two thirds of iPhone owners trust Apple to manage their mobile wallet -- more than any other financial institution, carrier or entity. It's clear that if Apple wanted to enter into payments, they could.
Even if Apple doesn't enter into payments themselves, Passbook's architecture makes it easier for retailers to offer (and consumers to use) their own low transaction cost systems. Aside from driving more prominence in the already strong and growing gift card space, reducing friction and cost from payments makes it feasible to offer economical micropayments at vending machines and other non-traditional locations.
And really -- if MasterCard and Visa wanted to, they could also support Passbook by creating a QR code payment method. The challenge continues to be existing point of sale infrastructure, just like it is for NFC.
Loyalty & Coupons
Passbook will give loyalty programs a needed shot in the arm by keeping brands top of mind through geolocation, micro-marketing and targeted offers. Using push, a company could send you an offer if you're in the vicinity of a store location. Or maybe at a competitor's location. Imagine Target being able to send an offer to you when you're approaching a Wal-Mart -- an offer that arrives in time to change the consumers's mind.
Apps like CardKing do a fine job of storing card numbers, but since I have to find the app, I generally just recite my phone number at purchase. And since the data is static, I miss important information like points balances, current member-only specials and other dynamic information.
Loyalty is something that Foursquare promises, but has been unable to deliver, due to the difficulty of setting up and running a campaign using their tools. Potentially, Passbook also saves companies from the expense of developing and convincing consumers to use single-brand apps, opening up robust loyalty programs to small business. Instead, developers can focus on the infrastructure needed to make offers, which may or may not be coupons, at the right place & time. Further, segment the offers by demographic, last visit, and prior orders -- Starbucks probably wouldn't want to make a coffee offer to a chai drinker.
Basic oupons also get a lift. My birthday is coming up and my email has been filled with free offers. I think it would be very interesting to have those presented in Passbook. Passbook could even give visibility to and remove friction from things like daily deal redemptions. I also expect coupons to be trackable, allowing merchants to understand redemptions and the effectiveness of their campaigns on a granular level.
I also expect we'll see some campaigns originating from non-traditional marketers, such as tourism bureaus. Maybe a city could link to its tourism pages as tourists enter the area, like Capetown does.
Tickets
I think tickets will be a hit. The premise of taking e-tickets and putting them in one place is so simple, but also compelling. I really like the thought of having my tickets in one place and I especially like the fact that the ticket I need right now (selected by time and location) is the one that's displayed. The fact that alerts for updated information can be pushed is just a bonus.
Merchants should like them too, as the codes are pushed from a server and can be dynamic, which gives the opportunity to ensure that the ticket is not a fake. Implemented the right way, the remaining risk comes from device theft.
What about other smartphone platforms?
I don't think it's likely that Apple will make the Passbook infrastructure available on other platforms. This does leave open the opportunity for competing comparable, superior or traditional services.
I'm sure that an Android update will offer something at least comparable, but Google's challenge will be Android's upgrade rate. Only 7.1% are using Android 4.0 or later, which suggests that even if Passbook-like functionality were incorporated into Android, it would take years to get widespread adoption. In comparison, 75% of Apple users are on iOS 5 or newer, so expect most iPhone users to have Passbook within weeks of release.
Microsoft, on the other hand, has the expertise to execute something similar and has the right control over handset manufacturers. Though it's a smaller installed base, I would expect rapid adoption of such a platform with WindowsPhone 7 users. I also think the Microsoft product would be in collaboration with traditional card issuers and banks.
What do you need to do to get ready?
The first part is easy. Apple has released iOS6 to developers and published the API. Existing app developers will have no problems adding Passbook functionality.
The bigger benefit will come from integrating Passbook to a company's digital strategy.
This will require evaluating the existing infrastructure and looking at the customer's experience at the point-of-sale. Although technology makes it easier for customers to respond to offers, the experience they have at the final inch of the transaction will determine its success. Do not underestimate the difficulty the operations teams will have in executing these transactions flawlessly. Expect the human issues to be as difficult as the technology issues.
Rick Bollar is a digital strategy executive with experience in hospitality, lodging, healthcare, education, and global facilities management. Specializes in delighting digital consumers by delivering innovative experiences in areas such as mobile commerce, local commerce, payments, nutrition, social media, micromarketing and customer loyalty. Engineers processes to allow enterprise systems and human assets to successfully execute a digital strategy. Brings a quantitative approach to digital marketing, ensuring digital, e-commerce and social initiatives have a measurable ROI. Background includes financial leadership, technology deployment, and enterprise-wide reengineering accomplishments.
Digital Marketing is not Digital Strategy and here's why
I have had the opportunity to talk about digital strategy with a lot of interesting people lately and I find that the common theme is that most think that digital marketing is digital strategy. My view is that they are not the same.
Yes, it's true that customer-facing technology and marketing campaigns run on social platforms are visible and potentially key parts of a digital strategy. I also think that a CMO and CIO working closely together can execute a great marketing strategy. But on their own, they can't execute a digital strategy, and they miss the true opportunity.
A digital strategy requires aligning the company's resources to delight their digital and traditional consumers across multiple channels and platforms. It has front-of-house and back-of-house implications. It is almost certainly disruptive to the company and needs to be led by the CEO in cooperation with the company's leadership. It also must be integral to the corporate strategy. The change will be transformational and will need to be managed by the entire C-Suite. Here are some key stakeholders:
Operations -- Digital consumers do not have the same service and satisfaction expectations as traditional consumers. The COO's team will need to navigate significant change management as people and operational processes are redesigned to delight the digital consumer. Operations can also use consumer data to inform product development decisions.
Finance -- Sure, Finance controls the pursestrings, but beyond that, the CFO's team is interested in ensuring the success of the digital efforts. I have been fortunate enough to visit with many CFOs recently and they mostly understand the fact that digital implies a need to be agile; that ROI is uncertain; that significant IT investments may be short-term or "throwaway." They do want to understand how success in the future is measured in financial or non-financial terms. This team may also be responsible for managing risk introduced through non-traditional payment systems.
Information Technology -- The CIO's team may bear the brunt of executing a digital marketing campaign and perhaps they have the resources needed to be successful. However, most companies have legacy IT infrastructure to consider. They may be able to write interfaces for "today's hot app," but this isn't feasible as more and more apps and interfaces will be required. The corporate win in IT is first fixing the legacy problems either through APIs or an enterprise service bus, then making granular data available in near real time across all systems and to all stakeholders. Short term, these solutions are more expensive, but long term, dramatically improve an enterprise's ability to be agile.
Supply Chain -- A digital strategy opens up new avenues in the procurement process and the CSCO's team can use data to optimize inventories and appropriately share with vendor partners. I know there is extreme interest from manufacturers in getting better data on what consumers like and I believe they are willing to pay for it, opening up a new revenue stream.
Risk Management -- Even without a strategy, new technology introduces questions of privacy, data security, liability and maybe even workers' compensation. The CRMO's team can proactively protect the company against these risks.
Strategy -- The agility digital strategy requires means strategists must change as well. Instead of preserving an existing culture, CSOs will need to help lead the company through significant change management. As has been covered in hundreds of "culture eats strategy" articles, this difficulty can't be underestimated. But it's true now more than ever that "what got us here, isn't going to get us there."
Marketing -- I don't list marketing last to be disrespectful, as it's quite possible that the CMO would be responsible for a digital strategy effort. However, there's a significant difference between traditional marketing and digital marketing. The job description is shifting from creative to data centric. The CMO's team needs to master the obvious aspects of social marketing and apps, but they also need to learn how to use the enterprise infrastructure to delight consumers with multi-channel marketing and commerce, as well as micro-marketing and "surprise & delight" loyalty programs.
I haven't mentioned other stakeholders, such as Human Resources and Sales, but it's clear that they also own key pieces of the digital strategy.
Agencies and Marketing Consultants have a huge opportunity here by looking beyond the campaign and their existing relationship with the CMO and into what's really driving the company. If they don't have the expertise to help with the significant change management requirements, I suggest they could outsource that skill and maintain the client relationship.
Companies interested in resolving these issues could create a position and hire an expert to lead them through creating and deploying a digital strategy. I have found only the most forward thinking companies ready to commit at that level. Alternatively, there are a handful of consultancies that I would recommend who would able to lead enterprises through this process.
I would be interested to hear your comments!
Rick Bollar is a digital strategy executive with experience in hospitality, lodging, healthcare, education, and global facilities management. Specializes in delighting digital consumers by delivering innovative experiences in areas such as mobile commerce, local commerce, payments, nutrition, social media, micromarketing and customer loyalty. Engineers processes to allow enterprise systems and human assets to successfully execute a digital strategy. Brings a quantitative approach to digital marketing, ensuring digital, e-commerce and social initiatives have a measurable ROI. Background includes financial leadership, technology deployment, and enterprise-wide reengineering accomplishments.