Credit/Debit Cards Archives - Page 2 of 13

Feature Friday: Capital One Helps Users Identify Recurring Charges After Card Reissue

By Jim Bruene Posted on June 19, 2015
Categories: Capital One, Credit/Debit Cards, Security & Privacy, Service

Card reissues after a data breach, or lost/stolen situation, are annoying for cardholders. But it’s even worse for the issuer who has to pay for a new card, hound the customer to activate it, handle customer-service calls, and then risk losing recurring revenues from now-broken automated pre-authorized charges.

So kudos to Capital One for taking an important step in solving this problem.

Earlier this week I received a new card and number from Capital One, presumably because my card had been involved in a breach. I am not aware of any unauthorized attempts to use it.

In a followup email this morning, the giant issuer reminded me to activate the new card. That’s a fairly typical technique these days. But the help didn’t end there. The bank provided a list of likely merchants where I may need to update card info to avoid the charge being denied (see screenshot below).

That’s great customer service and something I’ve not seen before. But of course I want more. The list I received was primarily merchants where I made one-off payments. Who has a recurring charge with United Airlines? So it needs to be scrubbed better. And it would help to include the most recent charge amount and number of charges to help identify actual recurring charges.

And ultimately, it would be even better if the process was semi-automatic. Let me respond to the email with a simple yes/no response for each merchant indicating if I wanted them to continue the automatic billing under the new card number. Or at least provide links to reduce the friction of the task.

But all-in-all, a welcome improvement.

———

Capital One email to cardholder (19 June 2015)

Share this:

Send Post Twitter LinkedIn Facebook

Riding the Uber Wave: Capital One Rebates 20% for 1 Year

By Jim Bruene Posted on April 27, 2015
Categories: Advertising & Promotion, Capital One, Credit/Debit Cards

Last week, Capital One launched a national marketing promotion with Uber that provides a 20% rebate on rides for one year. And unlike many (most?) card offers, it’s good for both new and existing Capital One customers. However, the ride-rebate applies only to the bank’s Quicksilver cash-back card, so I’m out of luck with my Capital One Venture card.

But they did throw us non-Quicksilver customers a bone yesterday, with an email (see below) offering two free Uber rides (up to $30 each). For me, that’s probably about the same as the 20% rebate, so I was ready to fire up the app and swap out my Bank of America card. But wait, there’s that pesky fine print again. It turns out the free rides are only for new Uber customers. Out of luck again.

Analysis
Overall, this is a great promotion. The bank gets both new cardholders plus a pile of Capital One cards stored in Uber’s app, a great retention tool (the primary goal?) along with a long-term revenue stream (albeit, not enough to recoup the cost of the 20% rebates, unless Uber is picking up a big chunk of the rebate).

The only thing I don’t like is the disingenuous email to non-Quicksilver customers. Capital One alludes to the fact that the free rides are for new Uber users (see highlighted body copy in screenshot below). But that statement is easy to overlook or misinterpret. It’s only when you get to the tiny type below, which is further hidden in a gray background (see highlighted fine print below), that the “new Uber customer” requirement is explicitly stated.

Why not just come out and say it clearly in the body of the email (or even in the subject line)? Existing Uber customers are going to find it anyway when they try to redeem. Just be clear up front and save everyone the hassle! Better yet, don’t send the email to cardholders who are already using Uber (that could have been determined with an email match for me).

Final thought. Why not provide all cardholders an incentive to enter any Capital One card into the Uber app? Remind rewards cardholders that Uber rides can be paid with points (e.g., Purchase Eraser). Or how about a sweeps? For example, one out of every 100 rides (or 1,000) are free to Capital One cardholders until May 30, 2015. That could be funded through interchange alone.

——-

Capital One email to its Venture cardholders (23 April 2015)
Note: Highlighting mine

Share this:

Send Post Twitter LinkedIn Facebook

Wallaby Launches Wise Bread Rewards Maximizer

By Julie Muhn (@julieschicktanz) Posted on March 31, 2015
Categories: Credit/Debit Cards, Wallaby Financial

Wallaby Financial, a company that focuses on helping consumers maximize their credit card rewards, and Wise Bread, a website that focuses on frugal living, have partnered to launch Wise Bread Rewards Maximizer, a tool that helps users maximize their credit card rewards.

The tool is powered by Wallaby’s algorithms, along with CardBase, Wallaby’s database of more than 2,500 credit card programs.

The user experience is quick and straightforward. Users first answer a few questions regarding their credit card use. Next, the Rewards Maximizer analyzes patterns and recommends new credit cards that offer higher savings and more rewards compared to the cards they currently use. If they like what they see, users click through to apply for the new card.

In December of 2014, Wallaby was acquired for an undisclosed amount by Bankrate.com, an online publisher of personal financial advice.

Pasadena, California-based Wallaby debuted Wallaby Wallet Boost at FinovateSpring 2013. Check out the live demo video.

Share this:

Send Post Twitter LinkedIn Facebook

First Look: Square’s New Cashtags for Small Business & Non-Profits

By Jim Bruene Posted on March 25, 2015
Categories: Credit/Debit Cards, Square

There has been no shortage of major announcements in the payments space in the past few weeks.

Facebook added a “send money” option to its messaging service
Starbucks added pre-ordering into 650 northwestern U.S. locations in advance of a national rollout
PayPal acquired the platform upon which MCX is built on

And yesterday, Square launched an SMB version of its Square Cash, brilliantly named Cashtags. Any person, business, or non-profit can create a cashtag out of its name (first-come, first-served) at cash.me/$yourname. Then to pay by debit card, users click on your cashtag, enter their debit card number, postal code, CVV and amount to pay. Space for an optional message to the business is also included. First time users also have to confirm their email address or mobile phone number, before the payment is sent.

For businesses, it’s not much different than using PayPal. But the setup is slightly less intimidating Square onboards new merchants gradually, so as to not scare them off before finishing the process. When I set up my original cashtag, all they asked was my email address or mobile phone number, which was subsequently verified. It was only later when I was playing with that app, that they hit me up for my full name and last 4 digits of my social security number.

The big difference is in pricing. Square Cash business recipients pay a 1.5% transaction fee (with no per-transaction flat fee), undercutting PayPal business account fees by about 50% (both Square & PayPal have free options for non-business person to person transfers). I sent a few bucks off to Wikipedia and it worked perfectly (see screenshot above). As it should, the debit authorization showed up right away in online banking (see below, from U.S. Bank).

FI Opportunities & Threats:

For financial institutions not actively involved in the acquiring business, here’s a chance to build ties between your business debit card and your small-business (SMB) customers, at little cost and with no cannibalization of existing revenues. The zero-cost approach is to simply educate your customers about this new option from Square. Since cashtags are available on a first-come-first-served basis, it would make a timely subject for an email, blog post, or online article.

A more involved strategy would be to incorporate Square Cash and Cashtags directly into secure online banking. While Square has not published an API to make integration easier, access to Square Cash could be added to your dashboard, even though it would still run through the Square UI.

The main downside for at least endorsing Square, and it’s potentially a sticky issue, is that Square Cash/Cashtags is part of a larger payment and lending business being built by Square. It’s possible, but not all that likely, that at some point Square could be considered a material competitor to your core business. However, if you are not in the acquiring business, you have already opened the door for others to provide payment services to your customers. Square is probably less of a direct threat than Chase, Wells Fargo or other major merchant acquirers.

And regardless of whether or not you steer customers to Square, you can mine debit card transaction history. Personal checking accounts with numerous Square and/or PayPal transactions are likely being used by someone with recurring revenues. That’s your first clue there is a potential new business banking customer in the mix.

Share this:

Send Post Twitter LinkedIn Facebook

Launching: “Final” Credit Card with Integrated Disposable Card Numbers Captures Imagination of Product Hunt Geeks

By Jim Bruene Posted on October 9, 2014
Categories: Credit/Debit Cards, Launches, Security & Privacy

Product Hunt is the newest website catering to tech enthusiasts. Each day 40 to 50 new products or new product features are featured on the site. Anyone who has registered is allowed to upvote any of the submissions and a continually updated leaderboard surfaces the hottest products of the day. Then at midnight, the whole thing resets, and 40 to 50 more products get their 24 hours of fame. I’ve been following it for a few months and have seen that while only two or three fintech entries appear each week, they tend to be popular (which could be a function of their scarcity). But rarely, if ever, do they climb to the top. And this week, not one, but two companies have dominated their day on Product Hunt.

On Tuesday, the Plastc Card (yes, spell check, no “i”) garnered 545 votes, almost 200 more than runner-up Student Developer Pack. Plastc is similar to Coin, a computerized credit card that can hold multiple mag-stripe cards in a single piece of plastic, planning to ship to pre-order backers in the first half of 2015. Plastc holds more cards, has an e-Ink display, and at $169, costs more than three times the pre-order price of Coin.

On Wednesday, fintech ruled Product Hunt again, with new security-minded credit card Final gaining more than 900 upvotes, 600 more than the next-closest newcomer, Clearbit. I believe it’s the record for a financial product, eclipsing Plastc’s from the day before.

What is Final?
Final is a standard mag-stripe (and chip) credit card with a companion mobile app and desktop dashboard. The card is upping the security ante by incorporating easy-to-use disposable (aka temporary) card numbers for ecommerce (card not present). It allows users to designate a unique number for every online merchant, that way it’s easy to shut that merchant off, if you don’t want them to be able to charge your card again. Users can also set transaction limits by merchants to make sure there are no overcharges.

Final also plans to offer advanced controls for brick and mortar purchases. Purchases could be allowed at only certain merchant categories, for example. And Final’s card will be able to be tethered to your smartphone allowing chip-and-pin purchases only when the two are in close proximity to each other.

The card-management app features PFM features not unlike what Moven and Simple offer today. But there is more emphasis on fraud controls and ridding yourself of “gray charges” ala BillGuard (see inset). In fact, the best way to think of Final is a credit card version of a Moven/BillGuard mashup. It is to credit cards what Simple was to checking accounts. A winning combination of good design, consumer advocacy and a bit of tech flair.

The startup is still looking for a credit card issuer-partner (attention Capital One, this could be your 360 credit card), so pricing is not available. However, CEO Matt Rothstein told me yesterday that they plan to make the card fee-free. In fact, they are looking at the business as much more than just a security play. They are focused on consumer advocacy and helping consumers reign in their spending (see first screenshot).

Final Thoughts
Final is part of the current batch at TechStars Boulder and is pitching at its Demo Day today. The company has 2,200 people on its waitlist (Update: As of noon Pacific on 10 Oct 2014, the number has jumped to more than 21,000). Not a bad first-24-hours out of stealth. There is clearly consumer demand for more card controls, to avoid outright fraud, fight merchant overcharges and reign in overspending.

Most of the newcomers that have gone down this path have used prepaid debit cards and/or account aggregation. We haven’t seen an ambitious startup credit card play since well before the 2008 meltdown. Final will benefit from substantially higher interchange (albeit shared with its partner), but will also have to deal with rejecting the credit applications from a significant portion of its waitlist. That will not be easy to explain to the early adopter crowd, who will likely take their case to social media (note 1).

But overall, I’m a big fan of what they are trying to do, and expect to be following Final for a long time, unless they get swooped up by a large issuer right out of the gate.

———————————-

Final desktop card management area: Transaction view (9 Oct 2014)
Notes:
A.) Current balance and monthly goal dominate top of page.
B.) Customer service, and a log of recent inquiries, appears in right sidebar

Final desktop card management area: Budget view

——————————-

Note:
1. I’d advise having a prepaid card backup to mitigate the rejected applicant backlash.

Share this:

Send Post Twitter LinkedIn Facebook

Why (Most) Banks Need Not Worry About Apple Pay (Yet)

By Jim Bruene Posted on September 15, 2014
Categories: Apple, Chase Bank, Credit/Debit Cards, Mobile Payments, Strategic Planning

I’ll admit to being caught up in the hype. The 48 hours after Tim Cook revealed Apple’s long-rumored foray into payments were some of the most exciting times in fintech since the 1995 to 1997 period when most of the online “firsts” happened (see note 1).

And we’re seeing more thoughtful fintech posts in the past week than we used to see in an entire year. Thanks especially to Tom Noyes, Cherian Abraham, Brian Roemmele, Celent’s Zilvinas Bareisis and finally today from Gonzo’s Steve Williams for helping me see beyond the hype.

I can add little that hasn’t already been said to the discussion about NFC, payment ecosystems, or the future of mobile payments. Clearly, it marks a turning point for mobile payments and improved U.S. security, and the play-out will be fun to watch.

The one area I haven’t seen covered: What does all this mean for the 10,000 U.S. banks and credit unions not on the 11-name list at launch (note 2)?

So here’s my take on the impact of Apple Pay on small- and medium-sized FIs over various time horizons:

In the short term (2014): ZERO

In the medium term (2015-2016): ZERO

In the long run (2017+): Something, but impossible to quantify at this point
(it could even be net positive)

Here’s why bank/CU execs (outside the top-20 credit-card issuers) should not lose sleep over what Apple is doing:

1. Apple Pay (in the physical world) can be used only at contactless terminals
Supposedly, there are 220,000 contactless terminals in the United States. But if you’ve ever tried to use one, you know that 200,000 of them are either not working or are buried behind beef jerky on the counter. This will change rapidly as merchants upgrade during the next few years.

2. It’s complicated to use (at first)
First, you need an iPhone 6, then you need to figure out how to use Apple’s Passbook program, log in to iTunes or take a picture of your card, successfully authorize it, enable TouchID and so on. Millions of early adopters will figure all that out, but then they won’t be able to find a working contactless terminal (see #1) and then they’ll forget all about it.

3. The number of your customers that care enough to move deposit accounts for NFC payments is near zero (for now)
Let’s do the math. Assume that a year from now there are 5 million Apple Pay active users (making at least one transaction per week) or 2.5% of U.S adults. If you have 20,000 customers, that means 500 will be active users of Apple Pay. Most will be happy to use their existing Capital One, Citi, and other rewards credit cards for the transactions. Very few will care that your debit card doesn’t work on the system. Let’s say it’s around 25%. That means you have something like 125 customers who are disappointed with your mobile payment capabilities. If they like you otherwise, how many will move their checking account to get an Apple Pay-enabled version? While the number is probably zero, let’s say it’s 5% to 10%. That means you could lose 6 to 12 customers. Using the 80/20 rule, only one or two of them are profitable. Will it hurt to lose two profitable customers? Sure, but it’s not going to be on your top-10 or top-25 list of worries.

4. There are ways to mitigate any lost wallet share to Apple-Pay issuers
Even if my math in #3 is way off, or you are concerned that you will take a material hit to the bottom line, or you just want to be part of Apple Pay, easy routes will undoubtably be built to get your cards enabled into Apple Pay. Maybe not in 2014 (or even 2015), but certainly within the next couple years. And even if I’m wrong and you are locked out of the iPhone indefinitely, you can create an Apple Pay poaching program where your customers make their charges on a bigco bank card, then you automatically pay those charges off and essentially transfer them to your customer’s checking account.

So my final advice. If you have an employer (or spouse) that’s been reluctant to fund your iThings, now is the perfect time to do an upgrade (just don’t show them this post).

——————-

Chase homepage shown to existing customers (15 Sep 2014)
Note: All three links on bottom of page go to the iPhone6 “Apple Pay” features page at Apple.com which leads with Chase (link)

——————————–

Notes:
1. Or perhaps 1999 when Paypal/X.com made P2P payments happen or even 2005/2006 when Zopa/Prosper/LendingClub launched consumer credit exchanges.
2. See Apple Pay launch event clip here, complete with transcript.

Share this:

Send Post Twitter LinkedIn Facebook

Capital One Uses Email to Request Cardholder Income Update

By Jim Bruene Posted on September 3, 2014
Categories: Capital One, Credit/Debit Cards, Email Samples

I’m always on the lookout for digital process improvements, from the major to the minor. And this one definitely falls in the latter category. But in my 22 years of banking online, I don’t recall ever being prompted to update my income so that my card issuer could reconsider my line size.

But that’s exactly what I received this morning. At first blush, it almost sounded like a crafty fraud attempt. But Capital One wisely inserted my full name, the last four digits on the account, and promised to handle it in just 60 seconds (see first screenshot), so I’m pretty sure it’s legit. They also reassured me that it won’t require a credit bureau inquiry.

Clicking through the email places the cardholder onto the normal online banking login screen. After logging in, you are sent directly to an account-update page (screenshot 2) to update income and employments status. After completing the two fields, you are thanked and can navigate to other areas or logout (screenshot 3). Total time expended = 87 seconds (Internet times were a little sluggish late afternoon on the West Coast).

Thoughts: This card dates back to 2010, so it’s possible they are on a four-year cycle to update income information; however, I just sent my W2 to Capital One two days ago for a mortgage refinance. So I have to believe this email was triggered by that; if so, it demonstrates solid CRM integration, although it seems curious that the bank wouldn’t just pull my income directly from the mortgage app.

All in all it was a painless experience, and I look forward to seeing whether the bank uses it to alter my credit line.

—————————————

Capital One email asking for an income update (2 Sep 2014)

Online banking page to enter info

After entering info

Share this:

Send Post Twitter LinkedIn Facebook

UX Lessons for Card Issuers from the New Starbucks Mobile App

By Jim Bruene Posted on April 8, 2014
Categories: Credit/Debit Cards, Mobile Payments

When I moved to Seattle, Starbucks had just four locations. So I’ve had a ring-side seat in their climb to worldwide ubiquity. Though not a huge fan of their coffee, I greatly admire their business model, technology, and payments innovations.

I have been paying with the Starbucks mobile app for the past few months (note 1) as have 14% of its customers. It’s great as long as there is a queue. That gives you plenty of time to go through the 9-step mobile payments process (10 steps with tipping):

1. Dig out your phone
2. Enter the smartphone passcode (if applicable)
3. Locate the app
4. Open it
5. Press pay
6. View balance to ensure there is enough cash available
(not applicable if auto reload is enabled)
7. Wait for cashier to press the correct key on terminal
8. Position your phone under the QR reader
9. Wait for cashier to give you the OK
10. (Optional) Dig in your wallet/purse/pocket for tip money

While this process seems ridiculously time-consuming compared to a card swipe (or cash), if you are waiting in a queue (typical), you can take care of all that before your turn to order (especially if you already have your phone out and are logged in).

__________________________

The new Starbucks app
__________________________

The latest version of the Starbucks mobile app (iOS released 20 March 2014) cuts two steps from the 10-step process. More importantly, the crucial “hit pay” (step #5 above) has been replaced by a shake of the smartphone to signal it to display the Starbucks QR code needed at the point of sale. While not a huge timesaver, it pretty much eliminates navigation within the app before payment, quite an improvement in UX once you get the hang of it (note 2).

The new app also offers electronic tipping, a welcome improvement for the staff, since the move to no-signature card-transactions many years ago took away credit-card tips.

The app integrates four components into the homescreen (see screenshot #1 right):

A. Top navigation with choice of:
— Pay: Opens up QR code (in lieu of shaking) (see screen #2 below)
— Stores: Starbucks store locator with map and list
— Gift: Opens to virtual gift-card function with integration to iPhone contacts (see screen #3)

B. Loyalty program: A screen-dominating donut shows exactly where you stand on the path to the next loyalty level.

C. Messages: Links to a “feed” of available offers (screen #4) including:
— discounts
— free iTunes song and app downloads (with integration to iTunes for easy redemption) (screen #5)

D. Account history (see screen #6)
— purchases and reloads
— tipping function allowed for two hours after purchase (screen #7)

__________________________

Lessons
__________________________

There are some lessons here for card issuers:

Focus: Go to Starbucks.com on your desktop browser, and you’ll see about 150 navigation choices delivered via mega-menus across six main tabs. It’s worse than most bank websites. However, the mobile app has just three primary navigation choices (Pay | Stores | Gift), plus rewards, messages and transactions on the main screen. Starbucks rightly chose to concentrate on exactly what customers need when they are on the go.
Integrate rewards/loyalty: Despite the “shake to pay” process improvement, the Starbucks mobile payment experience is still cumbersome and by no means easier than paying by card. However, because the app is integrated with rewards, all of sudden it becomes compelling, both for early adopters (certainly) and the mass market (note 3).
Annotate the transaction: Besides the new tipping function, the transaction history includes both a feed of the transactions (screen #6), plus the ability to click through to a full receipt (screen #7). While not super interesting at Starbucks, when so-called “level 3” data is available for more complex purchases, it becomes an important part of the value delivered.
Mobile first: If you offer information or services consumed on the go, mobile services (app & website) are the key interaction point going forward. Starbucks CEO Howard Schultz understands this (note 4). Does your CEO?

__________________________

Screenshots
__________________________

2. QR code (scanned at POS) 3. Virtual gift cards

4. Offer stream 5. iTunes integration to redeem

6. Transaction history &nb
sp; 7. Transaction detail with tipping

—————————–

Notes:
1. Previously, I was paying with Square Wallet since no reloading is required. But now I’m on the quest for Gold Status at Starbucks, so Square will have to take a backseat.
2. Since users are not accustomed to shaking their phone to make it do something, it may take a while for everyone to figure out this shortcut. Luckily, the Pay button has been moved to a position of great prominence, for those that prefer to use the old navigation process.
3. The Starbucks app is now on my wife’s iPhone. Besides the map, weather, Yelp, and French translations, it will be only the fifth app she uses frequently.
4. Starbucks CEO Howard Schultz is a genius and seems to genuinely care about his employees and the world. If he had only stayed out of pro sports ownership (go Sonics!), his record would be virtually untarnished.

Share this:

Send Post Twitter LinkedIn Facebook

BillGuard Brings Email-Like UI to Mobile Banking Transaction Flow

By Jim Bruene Posted on January 22, 2014
Categories: Credit/Debit Cards, Mobile Banking, Personal Financial Management, UX

The ink wasn’t dry on my 2014 wishlist, when I got a message from BillGuard founder Yaron Samid, informing me that its new mobile UI was already doing what I’d most hoped for:

Wish #1: A Gmail-like priority inbox/feed for my financial transactions.

It’s as yet not quite Gmail-level functionality — for example, I’d like more tagging options than just “flag for later” — but compared to the state-of-the-mobile-art today, it’s pretty awesome. Thanks to BillGuard for getting the year off to a great start (note 1).

__________________________________

How it works
__________________________________

BillGuard aggregates credit and debit card transactions and flags suspicious items for review (see previous posts). So in that way, it has always acted like the Priority Inbox function within Gmail. However, its desktop UI looks more like a traditional PFM than an email inbox.

But for the smartphone, BillGuard has dramatically changed the interface. As you can see in the inset, they use “Inbox” as the name of the transaction register. There is even a red bubble showing how many new charges are available for review (see inset right).

The five primary items on the main screen:

Large green “card” >> Summarizes current month’s spending across all aggregated cards (you can also swipe through the individual cards)
Inbox >> New transactions and any that you’ve flagged for followup
All >> All transactions in a single infinitely scrolling list (I have 1,000+ transaction going back three years, and I can scroll through all of them in less than a minute). You can look at all transactions or just the recurring ones.
Analytics >> Month-over-month spending graphs
Savings >> Merchant-funded offers

___________________________________

More on the UI
___________________________________

1. Inbox view (click screenshot for a larger graphic):

Transactions are sorted with suspicious and unknown merchants listed on top and new, unviewed transactions below
Users can choose the right “Follow Up” tab to view only those transactions they have flagged for followup (see #x below)
User can swipe the transaction right to move it out of the new transaction inbox, as shown in the green “Metropolitan Market” transaction at right

2. Transaction detail

The transaction “card” contains expanded info on known merchants such as full name, location, and URL
There are three key buttons:
A. Green checkbox to okay the transaction, removing it from the inbox
B. Orange “followup” button to keep the transaction in the pending list for later review
C. Small gray box in upper right with a number that indicates how many transactions you’ve had with this merchant; clicking it brings up the list of all (10 in this case)

3. Merchant offer

Based on my transaction history, a discount offer from Target is displayed; clicking the green button brings up redemption options, in this case:
– Email offer
– Shop now

———————————-
Notes:
1. The mobile UI was actually released in the latter part of 2013.
2. Screenshot at top of post is an iPhone notification.

Share this:

Send Post Twitter LinkedIn Facebook

New Y Combinator Fintech Grad, Coin Begins Pre-orders, Tech Press Goes Crazy

By Jim Bruene Posted on November 14, 2013
Categories: Credit/Debit Cards, Mobile Payments

It must be a slow news day. Two years ago, fintech barely got a mention in the mainstream tech press. Today, Coin, a stealthy "credit card 2.0" startup backed by Y Combinator and K9 Ventures, was covered almost immediately by 21 tech blogs (and counting). VentureBeat appears to have broke it first.

My favorite headline:

Master card? ‘Coin’ combines, debit, credit and others into one
– by Devin Coldewey, NBC News

It’s currently the fourth highest ranked article on Techmeme and it’s the number 1 trending startup on Crunchbase today, beating Snapchat, which just turned down $3 billion from Facebook (bubble maybe?).

Anyway, for anyone who’s missed it, Coin is planning to release a programmable mag strip card along the same lines as Dynamics. Coin says its plastic card will hold up to eight distinct card details at a time, all accessible via a button and miniature LED screen on the card. The card syncs with your smartphone so you can swap out the eight cards anytime, for an unlimited number stored in the phone. It even beeps at you if you walk away from the Coin card.

Coin announced a pre-order today. At 2:15 PM PST, the company said it had reached it’s pre-order goal in 40 minutes, selling more than 1,000 at its website today (cost = $50 + $5 shipping). That in itself is a sign of the times. An unknown startup (albeit with YC alum cred) crowdfunding on its own site and raiding $50k in less than an hour (see note 1).

For those concerned about the card’s potential use by credit card thieves, Coin requires the mag strip to be read via a Square-like dongle AND a photo of the front/back of the card which must match the mag stripe info AND your Coin profile.

The 2-minute video showing how Coin works has already been viewed more than 250,000 times. That has to be a single-day fintech record.

Video link

Bottom line: Some day, plastic cards will be relegated to the Smithsonian and the auction pages of eBay, but that day is many, many years in the future (see note 2). So the multi-card "plastic 2.0" concept from Dynamics, GoNowCard, Escardgot, Protean and others, could be a viable transitional technology.

At $50 a pop (scheduled to double next summer to $100), Coin will clearly occupy a relatively small niche. However, if the price comes down to something closer to a burger and beer in NYC/SF ($15 to $20) or better, the startup uses a monthly freemium subscription model, it could take off.

—————————————-

Notes:
1. I snagged one of them, so check back next summer for a report.
2. For more info, see our recent Online Banking Report: Digital & Mobile Wallets(published Feb 2013, subscription).

Share this:

Send Post Twitter LinkedIn Facebook

Thoughts on Perkstreet’s Demise

By Jim Bruene Posted on August 14, 2013
Categories: Credit/Debit Cards, Rewards Programs, Strategic Planning

If you follow U.S. virtual banking (see note 1), you have likely heard that one of the biggest, at least in terms of venture funding ($15 mil), is closing its doors. Boston-based Perkstreet Financial is shutting down Sep 26 and will not be able to pay out the accumulated rewards balances held by its customers (rumored to be about $1 million, see note 2).

While I thought the startup had a great team (ex Capital One), I did not follow it as closely as Simple/Moven because it was not really a technology innovator. It was all about the rewards, which seemed like a good plan, especially since the money was paid out on merchant gift cards, presumably acquired below face (see our post on its launch). I never saw their business plan or heard their investor pitch, so this is all speculation.

I tweeted that they were done in by low interest rates, which made all those high balances (it took $5,000 on deposit to earn the top rewards tier) practically worthless. But they were founded in 2008 with $5 mil of VC funding in 2009 and $9 million in 2011. That was all done in the midst of the ultra low-rate environment, so clearly the low-rate deposit environment was no surprise to the bank and it’s investors. They were banking on rates going up, but like traders who place big bets on corn, oil or currency futures, commodity trading is a high-risk business.

Falling debit interchange rates didn’t help, but they were Durbin exempt, so that wasn’t as dramatic of a revenue hit as it was at the big banks. In fact, CEO Dan O’Malley told the NY Times last year that their interchange had remained unchanged.

My guess is they were done in by the problem that every financial startup faces: It’s really, really, really hard to get customers to send money to a web-based startup, especially when there is no immediate short-term gain. Their acquisition costs, especially in a low-rate environment, must have been unsustainable. ING Direct (which wasn’t really a startup) was able to attract billions of deposits, but that was because customers were transferring in $30,000+ balances in order to immediately gain $500+ in annual interest (back in the 5% APY days 10 years ago).

Also, while Perkstreet had a great consumer-advocacy positioning, “use debit, avoid credit,” that was a bit of a mis-match for the customers they were targeting, big-spending rewards junkies which could afford to park $5,000 at the startup. Most existing big spenders are fond of using credit card programs with similar rewards, so changing their behavior was a continual challenge.

Winners:

Traditional banks: They have one less aggressive online competitor to worry about. It also could put a damper on VCs future bets in this area.
Perkstreet customers who cashed out their VC-subsidized rewards prior to the Aug 12 shutdown.
NY Times personal finance columnist Ron Lieber who was was skeptical in mid-2010 about the long-term viability of Perkstreet’s then-2% rewards rate.

Losers:

Perkstreet customers who had yet to cash out a significant chunk of their rewards balances.
Other virtual (aka neo) banks (Moven, Simple) may face increased skepticism from investors and prospective customers. However, their business plans are much different (no rewards for one thing), so this is probably a temporary setback.
The personal finance gurus who recommended Perkstreet (see Dave Ramsey ironic “companies we trust” screenshot below), especially those that pulled in affiliate dollars from the startup.

Bottom line: Perkstreet was a $15 million interest-rate bet that didn’t pan out (note 3). While I feel for their team, they are sharp and connected and knew they were in a high-risk business. For the most part, they will move on to next challenge with new-found insights. Had rates gone back to 3% or higher, Perkstreet would have likely been in good shape, enjoying its position of being highly recommended by Dave Ramsey and the other personal finance sites.

————————————-

DaveRamsey.com homepage (29 July 2013)

————————————–
Notes:
1. Our term for third-parties that function similarly to banks, but don’t hold the deposits, instead passing them through to FDIC-insured banks. We covered Perkstreet’s launch in 2009 here. We took an in-depth look at truly virtual banks (Personal Capital, Bank Simple, and PerkStreet) in our Oct 2011 Online Banking Report.
2. The $1 mil number was mentioned on Twitter from an unconfirmed source, so no claim to its accuracy. The company said previously it had paid out $4 mil in rewards. All deposits are held in FDIC-insured banks, Bancorp Bank or Provident Bank, and are safe and available to all Perkstreet customers. In better times, someone might have stepped in to honor the rewards and buy the company at a fire-sale. But paying $1 mil+ for a group low-margin customers was obviously a tough sell.
3. I’m sure the failure was a combination of hundreds of things and is way more complicated than I’ll ever know. I’m just addressing the big headwinds facing financial institutions, especially startups.

Share this:

Send Post Twitter LinkedIn Facebook

Financial Innovation Marches On, Even in July

By Jim Bruene Posted on August 1, 2013
Categories: Credit/Debit Cards, Launches, Prepaid/gift cards, Real Estate, Security & Privacy

I subscribe to about 800 blogs/alerts and usually find one or two new fintech companies, potential Finovate presenters, every single day. But July was slower, with the pace of new companies dropping to a few per week. Even though I know summer tends to be quieter, I always start wondering if we’ve finally invented everything…then I wake up to my RSS feed this morning and find two clever new services launching today:

Crowdsourced home values: Everyone who owns a home wonders how much it’s worth. But unless you have a real estate agent in the family (and even then, they are probably biased to the high side), it’s a time-consuming and not-so-exact science to get a professional appraisal. Enter Redfin’s “home price whisperer” service. Participants simply submit their house address and target price, and the company will have 250 others users give the valuation a thumbs up or thumbs down. While it won’t put realtors out of business, it’s a great way to get a quick handle on where you stand on what can be a key part of your financial security. (Another new startup, Trov, just landed $6.8 mil to help value less liquid assets).
Scam-protection geared to the elderly: Ever since Y-Combinator (YC) spawned a pair of billion-dollar companies during the Great Recession (AirBnB, Dropbox), I’ve been watching closely to see what its graduates will offer up to the financial services world. At FinovateSpring last May, we saw 2012 YC graduate LendUp (watch its Finovate demo here) wow the audience (and win Best of Show) with its service to lift consumers out of the payday lending cycle into less-expensive bank credit products. In a similar vein, 2013 YC graduate True Link Financial just announced a service to protect consumers, especially the elderly, from getting scammed by misleading or downright fraudulent charitable solicitations and other gray charges (it’s like BillGuard, but trying to block the questionable charges first, rather than dispute later). It’s basically a $20/yr prepaid card with customizable spending controls.

So, it looks like we have officially moved into the second half of the year and all the fintech excitement that will bring. I’d be remiss if I didn’t put in a plug for the upcoming FinovateFall, where we’ll have 72 demos (full list here) offering up a plethora of new ideas. The early-bird deadline is Aug 2. So register now and save.

Share this:

Send Post Twitter LinkedIn Facebook