Startup Watch: Qonto Launching European Direct Business Bank out of Paris

qonto home

When it comes to startups, it seems that consumer services get all the attention, while the enterprise plays get the revenue. Or so Qonto hopes as they target business customers for their new direct bank opening in second quarter. The Paris-based startup (with an .eu web address) is targeting business with their more intensive expense-tracking needs and promises “easy business banking,” a compelling slogan.

The startup is not technically a bank, chartered under the French payments company regulations, but it offers debit cards, current accounts, and international transfers. The only big thing missing are commercial loans, and no doubt those are on the product roadmap, once they get some traction on the expense management side.

Qonto is currently concentrating on the front-end customer experience, off loading the nuts and bolts of payments to Treezor, a French white-label payments provider. Treezor is able to provide instant MasterCard numbers to Qonto customers, with the plastic arriving within 5 days. That helps get the new business customer onboarded immediately, a great first impression.

A few Finovate alums are pursuing this market, but none in France.

The company was in the news last week with their first fundraising, snagging $1.7 million from Alven Capital and Peter Thiel’s Valar Ventures, which also invested in N26 and TransferWise.

Bottom line: Supplying businesses, even smaller ones, is a lucrative proposition. They are not as price sensitive as they appear, because few owners have the time or patience to shop for banking services. Once they settle on a provider, you have a good chance of keeping them for the life of their business, IF you can meet their needs as they grow, especially credit. And startups are uniquely positioned to appeal to small business customers, because as a small biz themselves, they understand the customer like no large bank can.

Lessons from Startups: Leveling Up the Waitlist at Zero Financial

nytimes_yourmoneyOn 8 Oct Ron Lieber’s NY Times column Your Money discussed alternatives for consumers looking to move from major banks (thanks, Wells Fargo). He started with credit unions, touched on community banks and then finished with a major shout-out to an unlaunched fintech startup Zero Financial.

Not being familiar with Zero (other than its recent $2.5 million funding), I visited online, taking the bait to sign up for early access. This is a now-familiar ritual for me. During the past four or five years, startups have made a game of the launch process. Here are the primary elements:

  1. New visitors willing to provide their email address (and sometimes more) are entered into the queue and informed of their numerical spot in line. In my case, I was #26,405 on Friday afternoon (shortly after the Saturday column was made available at NYTimes.com).
  2. Newly wait-listed customers are invited to move up the queue by tweeting, posting on Facebook or otherwise driving signups. I posted a message to Facebook and was immediately moved up 18,000 spots to #8,506.
  3. To supercharge the viral nature, prospective customers are given something of value to incent them to drive referrals. Coin famously offered $10 off the price of the hardware (which otherwise cost $50) for each referral. It worked almost too well as Coin amassed a 6-figure wait-list that grew pretty feisty as the hardware was delayed for a year. Zero’s twist is to boost the level of your cashback rewards. Everyone starts with 1% (called Quartz level), but if you tweet or post the offer on Facebook, you move to the 2% cashback level (Magnesium level). Then, if you get 3 people to sign up with your referral code, you move to the maximum 3% level (Carbon). Apparently, my posting on Facebook drove one referral, because today I’m up another 4,000 spots to #4,099 and have to get only 2 more to move up to the 3% cashback level. (Side note: The total number in the queue rose 6,600 over the weekend, to 33,023 as of 2:00 p.m. Pacific Time, Monday, 10 Oct 2016).

 

Spot in Zero Financial's waitlist after moving up via Facebook post
Spot in Zero Financial’s waitlist after moving up via Facebook post

 

Lessons for FIs:

  • Gaming is a great retention device: Across all demographics, consumers like to win. And it’s been proven time and time again, they’ll go out of their way to earn points or even extra chances to get points. FIs have a built-in scoring mechanism, the dollar value of accounts or transactions, so it’s pretty easy to build games with those inputs.
  • Scarcity/exclusivity are powerful marketing tools: Although your FI is unlikely to be a startup, you could play the same game with a snazzy new account or special offer.
  • Pay attention to Zero’s credit/debit card hybrid. Unless (until?) this type of interchange arbitrage is outlawed, look for credit-card sweepstakes-type accounts to gain popularity (read about it near the bottom of last week’s post).

 

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findevr-sv16Note: Looking for more inspiration for your technology stack? Don’t miss our third annual FinDEVr Silicon Valley next week (18/19 Oct 2016).

Alerts: Discover Card Highlights Merchant Refunds

So much of day-to-day banking is either negative or at best, incredibly boring. I spent too much, my payment is late, I can’t remember where that last $40 from the ATM went, and so on. No wonder consumers are less than enthusiastic with their banking relationships.

What to do about it? For one, when you have good news, CELEBRATE! And one of the easiest ways to do that is when a merchant refund appears on a credit or debit card account. For example, Discover does a great job with its email. It’s personalized, and clearly shows the date, credited amount and merchant name (including hyperlink to Netflix). And there is a huge button at the bottom to check out the transaction online (not that you’d really need to).

Discover Card merchant refund notification email (29 Sep 2016)
Discover Card merchant refund notification email (29 Sep 2016)

 

But after clicking through the email, the user experience (UX) gets a bit gummed up. The first webpage displayed is the main secure homepage (first screenshot below). That makes sense since the email button says See Transactions. However, since my statement cycled since the refund was processed, the $15.34 Netflix credit is nowhere to be seen. (Granted, had I clicked on the message when it first came in, the transaction would have been listed on the lower portion of the screen.)

But now I have to play “guess where to click” with the Discover site in order to find my transaction on the previous statement. Not rocket science, but also not super-intuitive either. The obvious starting point is the big orange “recent transactions” button in the middle. But again, that leads only to the current statement. Astute users will find the link to the previous statement (ambiguously called Current Statement) at the bottom of the page. Clicking that leads to a page with the desired transaction, though it’s not particularly called out, appearing in a slightly different font shade and a Payments and Credits description (third screenshot below).

Bottom line: The email is fantastic (A+). The website has a great layout and look (go, orange). But insisting on displaying transactions on a monthly statement basis is so last decade. For the most part, users want to consume transaction data like email. Make it easy to see everything by paging through them and let me flag, pin, label, and mark as unread, significant transactions. For extra credit, put the most important ones on top like Priority Mail (Gmail) or Focused (Outlook Mobile).

 

Discover card home page (displayed after clicking on link in email above)
1. Discover card home page (displayed after clicking on link in email above)

 

Discover Card previous statement page.
2. Discover Card transaction page (displayed after clicking “Recent Activity” on homepage).

 

Discover Card "current statement" page
3. Discover Card “current statement” page

Email Marketing: Third-Party Offers with Deal-Killer Fine Print

I’ve complained about similar offers before, but since this arrived in my inbox this morning, I figured it’s time to revisit the issue.

———

Today’s lesson is about third-party offers, where an outside company pays to get in front of your customer base. They are relatively rare in financial services these days because banks and card issuers are wary of being tarred and feathered in social media (or the CFPB) if something goes wrong or the particular marketing permissions were later shown to be lacking.

Uber offer from Capital One via email 3 Oct 2016
Uber offer from Capital One via email 3 Oct 2016

 

The offer in question is from Uber. It’s good for $5 off your first 5 rides and requires a Capital One card for payment. That’s a win-win. Uber gets a new customer and Capital One gets its card loaded into the Uber app for years to come.

The problem: It’s only for new Uber customers. I presume Capital One removes cardholders from the mailing who have charged an Uber to its card. But that doesn’t catch people who use another card in their Uber account.

So let’s break down what happens next. Capital One customers get this slick email (see above). They get excited to switch Uber payments over to their Capital One card to grab some $5-off rides. But then, after reading the fine print, or more likely clicking through the message and trying to sign up, cardholders find out they get zip from this deal. Now, they are not happy with Capital One or Uber. What a waste of time and brand loyalty.

Instead, why not give some smaller benefit to existing Uber customers willing to switch their payment card over to Capital One? Even just one $5 off coupon would suffice for most.

Bottom line: Capital One needs to earmark a portion of its commissions from Uber towards existing customers. If there isn’t enough revenue to do that, then it should stop making the offer.

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Related: At last mfindevr-sv16onth’s Finovate Fall, MX demo’d, and won Best of Show, for an automated solution called Power Switch to automatically enroll your customers’ cards into e-commerce sites such as Uber, Amazon, iTunes, and so on. Get a behind-the-scenes look at how MX produces its award-winning (six consecutive Best of Shows) at FinDEVr in Santa Clara 18/19 Oct 2016 (register here).

Solving the False Positive Problem in Credit/Debit Authorizations

seattle_laFor the third year in a row, I traveled from Seattle to the L.A.-area to drop off my son at college. And for the third year in a row, Bank of America declined my card at Target, buying groceries and incidentals for him. And this time it was an EMV chip-card. Thank goodness I had my trusty Capital One card along, because it seems to do a far better job minimizing false positives (for fraud), at least for my account.

Capital One did have its concerns along the way, though. They sent the following email asking for confirmation that these gas-station authorizations were mine. And even though I didn’t respond right away, perhaps 12 to 18 hours later, they never shut off my card.

capital_one_charge_confirmation

Bank of America also sent a similar email, but it arrived AFTER the card was declined. I understand the bank’s need to terminate suspicious transactions, but is it really that suspicious? For three years running, I’ve shown up in Los Angeles the last week of August (along with visits in between) and gone on a bit of a spending spree to stock my son’s dorm and now apartment (you’re welcome, boys!). Furthermore, I had already used the card to book an L.A. hotel, make some low-level but consistent charges along the way, coffee at Seatac, lunch in West L.A., and so on. But when I try to buy $150 in groceries at Ralph’s or Target, the card is declined, and worse, completely shut off from further purchasing.

Bottom line: My point here isn’t to complain about one issuer’s fraud-handling (although it felt good to get that off my chest), but to implore once again for more integration with smartphones to reduce false negatives. Specifically:

  1. Talk to me on the most immediate channel. Both banks sent emails, but I’m on the road, not checking emails. Pop a notification on the screen and send me a text message. Also, in instances of two account holders, make sure fraud alerts go to both (BofA emailed only my wife).
  2. Know me better. I get that Target in Tustin is outside my normal spending bubble. But I have a history of making charges in that area for 2+ years, so cut me a little slack.
  3. Better yet, know where I am. How many hundreds of millions could BofA save by tracking cardholder whereabouts in the background? I let Starbucks, Google, Yelp, and so on track my location. The benefits of them knowing where I am outweigh the privacy risks. The same goes for my bank.

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iContactHeaderFFNote: Looking forward to seeing everyone at Finovate this coming week. Let me know if there is anything you want to discuss (jim@finovate.com).

Coin Card: A Compelling Package, But Will it Work in Enough Places?

coin_boxI finally received my Coin this week, and I’m about to load some cards and head to the grocery store (or maybe the new Amazon Bookstore). (Update: It worked the first two tries, at a U.S. Bank ATM and grocery store POS. But, alas the third time was not a charm as it wouldn’t read at a hardware store POS despite a valiant effort by the clerk. Attempt #4 with a coffee shop closed-loop card worked, barely, taking 10 to 15 swipes.)

But before I get too disillusioned by the real-world experience, I wanted to pen a column about why, even in a world with Apple Pay, Android Pay and Chase Pay, the supercharged-plastic Coin delivers substantial perceived value on a number of fronts.

Here’s the value for someone like me that typically carries 6 credit/debit cards when traveling (2 personal, 2 business, 1 ATM, 1 AMEX) and 4 or 5 around town:

Extra security (peace of mind): Fewer plastic cards to lose = less worry
+
Simplifies travel prep: Easier to verify your physical wallet inventory before heading out and zero chance of forgetting a card (assuming you don’t forget Coin)
+
More card options: Can store all your cards, including mag stripe loyalty/prepaid cards, in mobile wallet (max of 8 in Coin plastic at any one time)
+
Slims physical wallet: Going from 10 pieces of plastic to 4 (Coin, backup plastic card, driver’s license, health insurance)
+
Reference for online usage: The Coin mobile wallet is a handy and secure place to store card details and customer service numbers
+
Cash backup: I stopped carrying an ATM card years ago since I only used it a few times per year. But every once in a while, I could really use cash. Having Coin in my wallet solves that.
+
X-factor: For early fintech adopters, it’s a cool little package and would make a nice gift for the fintech geek who has everything.

On the other hand, I’m toast if I go “Coin only” and lose it or it doesn’t work at a particular terminal. Most bloggers are reporting 80% to 90% success rates. So in reality, you need to carry at least one credit card as emergency backup.

Bottom line: It’s a nifty device, but the swipe success rate is crucial. If Coin can get to a 95%+, I think it will be worth the $100 to a sizable group of fairly well-heeled techies. However, sub-90% success rate makes it much less interesting since on one wants to be that guy holding up the checkout line with his fancy black card.

Assuming it works, there is no single Coin benefit worth $100. But the combination of seven makes it compelling (though it would be MUCH easier to sell at $30 or $4o; no one paid over $50 in the pre-order frenzy two years ago). Coin could bolster its security positioning by partnering with BillGuard or others to scan card transactions looking for fraud.

Success in Financial Services Starts with Trust

bank_vault

There is a reason why startups have captured approximately 0% of bank deposits a full two decades into the internet era. TRUST. Anyone hoping to get consumers to transfer thousands of dollars their way, must first win the trust battle. That means a killer combination of brand name, convenience, service, transparency, performance guarantees or measurable price/performance advantage.

I’m not saying you need to max out on all those variables, that’s not sustainable cost-wise. But you need to get to minimum levels on all and excel in one or two.

This isn’t news to anyone who’s been involved in the financial services space for more than a few months. But I was reminded of how newcomers are their own worst enemy sometimes when I got the following message from Coin today.

Now don’t get me wrong. I am a huge fan of the space (Dynamics is the pioneer in advanced cards, taking home yet another Best of Show award at Finovate two weeks ago, and we watched Stratos unveil their card at FinovateSpring). And I can understand that there will be delays when 400,000 people preorder your new hardware when you were expecting a tenth of that. But if you want me to entrust my cards to you, be forthcoming in all your communications.

Apparently, I’ll be getting my Coin in October, the last of the original 2013 preorders to ship (Coin’s website says new orders will begin shipping in November). The good news after the long wait is that I’m getting the next-gen EMV version, an important improvement over what I paid $50 for 22 months ago.

But I don’t think the company is doing itself any favors with the disingenuous FAQ on the email:

Q. Why am I receiving Coin 2.0 if I never received Coin 1.0?
(My translation: Why has it taken almost two years to get this thing?)

A. Your first generation Coin was scheduled to arrive next month. But as we just announced, Coin 2.0, we have given you a free upgrade!
(My translation: It took so long to manufacture this thing, the world moved to a new standard, so we had to ship you the new one even though it cost us a bunch more to make.)

Bottom line: Coin has had a tough two years dealing with unprecedented demand (as far as new fintech is concerned) and not uncommon hardware delays. Now, they need to get back on track by telling their mostly patient customers the whole truth and nothing but the truth.

—————

Email from Coin to the last of its preorder customers (30 Sep 2015)

coin_email

Photo credit: Flickr

Features: Capital One to Add Receipt Capture to Mobile App

capitalone_reciept_capture

Capital One sent an email (see below) to customers two days ago promoting a new version of its Wallet mobile app. Although it’s not mentioned in the email copy, when you click “Get Started” the resulting webpage (see above) reveals that the bank is about to add receipt-capture to its app.

Normally, I’d save this news for a Feature Friday post. But I’m so excited to finally have integrated receipt capture on one of my cards, I just had to hit publish. Of course, it’s “coming soon” so I can’t give you any insight into how it works, or if there is an OCR component. But the website copy does mention some level of integration, just not whether it’s automatic (OCR) or manual:

Simply snap a photo to connect a receipt with a charge in the app.

American Express offers this capability, Chase on its Ink small-biz app, as well as Expensify and a few other fintech startups. But Capital One is the first big Visa/MasterCard consumer issuer (that I know of) with the feature. I’ll let you know how it works.

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Capital One email announcing the remodeled native Wallet app (31 Aug 2015):

capone_email_redesigned_app

 

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Update (3 Sep 2015): I omitted the Chase Ink card in the original post.

Help, My Apple Pay is Not Working

applepay_launch_bofa

The last few times I’ve tried to use Apple Pay, it’s not worked. And when that happens at the POS, you pretty much look like an idiot waving your fancy phone around and smacking it against the terminal (as if that would help). So yeah, I’m that guy holding up the line, although in my defense, not nearly as long as that person that still uses paper checks.

When Apple Pay is on the fritz, besides my looking like a fool, I’m at a bit of a loss as to what to do next. I tweeted this today:

While it may appear snarky, it’s a serious question. When Apple Pay doesn’t work, there is no clear path to resolution. So here is what happened when I tried the various methods in my tweet.

A. Google it

At first glance, there seems to be promising results, including Apple Support. But alas, its FAQ makes no mention of it “not working,” but it does offer a way to get through the help topics and to an online/phone support area (see C below). And while there is much discussion on the Apple forums, the best advice was to “reboot” your phone, which is surprisingly effective for many.

Grade: Incomplete. While I was able to find Apple support within a few minutes, I had to go to the chatbot for a full diagnosis (see B below)

B. Contact Apple

applepay_support_choicesDuring my Google search, I stumbled into the correct area to get to Apple Care support (see A above). While I had to go through a few screens in the self-service area, it took only about 30 seconds to get to the one that offered a choice of online chat, call center (with 2-minute estimated wait time), or alternatively, I could schedule a call (see inset).

As always, I chose online chat. The chatbot was good (not sure if/when a human stepped in), but it took a full 13 minutes to diagnose the problem (including looking up my serial number at the outset). Apple suggested I delete the existing payment card and add the new one, which was the right answer.

If you try to figure out the problem directly on your phone, a search for “Apple Pay” within the phone, i.e., Spotlight Search, directs users to the Passbook app. If you select the “i” button for more information, you are directed to the bank’s call center (see C below). Alternatively, you can navigate directly to Settings, find Passbook & Apple Pay (below the fold), and locate the bank contact number.

Grade: C >> for the 13 minutes it took through Apple Care chat support

C. Call the bank (BofA)

I had just a single card, issued by Bank of America, hooked to Apple Pay. Although I try to avoid call centers if at all possible, I have been very pleased with BofA call center support in the past, so I called the number on the back. And while SIRI, or whatever their voice recognition is called, was not able to understand Apple Pay questions (“I hear that you want to make a payment, is that right?”) I had passed authentication and was put through to a live operator in about 3 minutes. I’d already figured out the problem during my 13 minutes with Apple Care (old card number), so I didn’t torture BofA and play dumb. But had I not known the answer already, the CSR was prepared to get Apple Pay support on the line for help.

Grade: B- >> for being able to get to Apple Pay phone support within 4 to 5 minutes (though did not test their diagnostic skills)

D. Use the mag stripe

Honestly, if I wasn’t into this stuff for my job, I would have just started using the mag-strip card and forgot about Apple Pay until v2.0.

Grade: A >> for the 5 to 7 seconds it took to get the plastic out of my wallet, swipe, and stop holding up the line

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The fix

bofa_applepay_dontuseAs mentioned in B above, my Apple Pay problem could be solved either through the Passbook app itself or through the Passbook settings within the iPhone Settings area.

Here’s what I saw when clicking on my “card” in Passbook (see inset).

And that was the reason why Apple Pay had stopped functioning. Bank of America had revoked my card a few months prior during a breach-related reissue.

But I’m not sure how I was supposed to know that I needed to update my Apple Pay card. I’ve searched my email from Bank of America, but I see no message from them on the subject. While it could have been trapped by the SPAM filters, that would be unusual for messages from my card issuer.

It’s completely understandable why the bank would pull my card out of Apple Pay if it was cancelled and replaced by a new number. But they either need to inform me, along with good instructions on what to do next, or better, simply replace my old card with the new one within Apple Pay, with notification of course (see update below).

But that’s probably v2.0 customer support. Until then, I’m glad there’s still a mag-stripe as backup.

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Update 19 Aug 2015: Apparently, Citibank is automatically replacing new card numbers into Apple Pay when the old one is canceled. Not sure if this applies to its entire portfolio or selected customers. Thanks to Ian Kar for the pointer.