Matt Wilcox Pro

Originally posted February 18, 2016

Four years later, and privacy is still a battleground.

A fact of digital life is that the harder we work to keep data secure, the harder bad guys will work to break in.

But what happens when government wants to break in?

The FBI has been trying to break into the iPhone owned by Syed Rizwan Farook. You will recall that it was Farook and his wife who, two months ago, shot 14 coworkers in San Bernardino, California, before being killed by police.

To date, Apple’s encryption, which Apple itself has not devised a means of breaking, has proved sound enough to foil even the FBI.

Two days ago, magistrate Judge Sheri Pym of the Federal District Court for the District of Central California ordered Apple to create a way for the FBI to break in.

Yesterday, Cook replied with a resounding NO. Some excerpts from his open letter:

Up to this point, we have done everything that is both within our power and within the law to help them. But now the U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create …

Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing several important security features, and install it on an iPhone recovered during the investigation. In the wrong hands, this software — which does not exist today — would have the potential to unlock any iPhone in someone’s physical possession…

Opposing this order is not something we take lightly. We feel we must speak up in the face of what we see as an overreach by the U.S. government …

… ultimately, we fear that this demand would undermine the very freedoms and liberty our government is meant to protect.

Cook raises real concerns. On the other hand, the FBI’s interest in thwarting future potential attacks is not to be lightly dismissed. How will this play out? Stay tuned.

The digital payments business didn’t start in the late 19th century. But that’s when events were set in motion that would eventually bring us to last week’s press release from Fiserv, which happens to be where I’m employed. More on the press release in a moment.

In 1884, coal merchant John Henry Patterson bought the company that was making them-thar newfangled mechanical “incorruptible cashiers,” as they were called at the time, and founded the National Cash Register Company, better known as NCR.

Basically an adding machine with a cash drawer, the cash register’s initial, principle benefit was fraud detection: owners now had a way to tell when employees were helping themselves to the till. Notwithstanding the machine’s utility, initial sales were slow. For one thing, the machines weren’t cheap. For another, they required owners to make procedural changes, and the roadblock known as human inertia is not to be underestimated. But in time cash registers became not just common but needful for the sort of recordkeeping increasingly required by law.

For the next 80 or so years, cash registers changed in materials and ornamentation, some becoming collectibles, but the basic adding-machine-with-cash drawer concept remained static. In the 1970s, electronic cash registers ushered in a period of rapid evolution. Various scanners appeared and disappeared. Some read product and coupon codes, others read credit cards—and now NFC readers have gone from novelty to near-necessity. (“I can’t tap and pay here?” I recently overheard a Kroger customer say. “What century is it here?”) 

Today we see cash registers that, instead of adding machines, look like tablets on a swivel stand mounted atop a cash drawer. I suspect that the main reason they look like that is that, well, that’s what they are. And with the “cash” in “cash register” fast becoming obsolete, “terminal” has all but taken over as the new term.

Every advance that takes hold in point-of-sale technology benefits merchants directly, or indirectly by benefitting their customers. Otherwise, Adam Smith’s invisible hand would brush them aside. But they also represent something of a burden to merchants, for every advance requires a capital investment either to replace or upgrade equipment.

Which brings me back to Fiserv’s press release:

In a move that is expected to boost the worldwide use of smartphones and tablets as point-of-sale terminals, First Data, now part of Fiserv (NASDAQ: FISV), is enabling merchants to use their own devices to accept payments of any amount without any additional hardware. 

… This simplifies payment acceptance by allowing merchants to accept PIN-based contactless transactions without the need for a separate card reader or PIN-entry device, opening new market opportunities for merchants and allowing even micro-businesses to accept non-cash payments.

I can only imagine the relief this promises for merchants beleaguered by the costs of upgrades and replacements. 

The Fiserv product was “developed jointly with Visa, Samsung, and PayCore.” If you’re eager to give it a try, you’ll need to wait until it emerges from testing. Either that, or add to your travel plans. I hear Poland is nice this time of year:

Fiserv, a leading global provider of payments and financial services technology solutions, recently completed the first PIN on mobile payment via the app-based solution. Following security testing, the solution, developed jointly with Visa, Samsung, and PayCore, is being piloted in Poland, with plans to expand in the EMEA and APAC regions.

Should Poland prove too daunting a detour from your daily commute, there are myriad places at home to experience other varieties of Fiserv technology. Trouble is, Fiserv tech tends operate to several layers behind the scenes, so end users don’t know it’s there. Neither do most merchants. Fiserv is one of one the most relied-on payments facilitators you’re never heard of.

Permit me to tip Fiserv’s hand just a little more. Next time you dine out, if the check arrives bearing a QR card to pay from the table using Apple Pay, chances are you’re using Fiserv’s Scan to Pay. It is …

… a first of its kind feature available with the Clover® platform from Fiserv, Inc. … Developed to expedite the payments experience in response to consumers’ increasing expectations for speed and convenience, Scan to Pay … [allows] a guest to pay a bill and tip within seconds using their iPhone and Apple Pay. Scan to Pay … does not require the download of an additional app.

It makes sense for Fiserv to lead the charge (pun intended) at both ends of the digital transaction. There’d be little point to keeping financial institutions and other verticals on the cutting edge of digital payments without keeping merchants on their customers on the cutting edge as well. Something about ensuring the chain has no weak links.

Originally posted Feb 12, 2013. Facebook had just acquired Instagram—and PR mayhem had ensued. I suggested five takeaways from the experience. Seven years have passed, and Facebook is still tripping on its untied PR shoelaces. I guess Zuckerberg doesn’t read my blog. Especially as regards Lesson 5 below.

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You know the tale: Facebook acquired Instagram; members inferred from the revised agreement that advertisers could use their photos without paying or obtaining permission; Facebook replied, in essence, “No, no, no, you misunderstand, we would never do that”; Facebook changed (“clarified”) the user agreement; Instagram subscribers left en masse; and pretty much no one blamed them.

A modicum of common sense PR-wise should be required for anyone working in any area of marketing communications. This should be especially true in interactive marketing, given its pervasiveness. But apparently someone at Facebook was running a modicum or two low at the time.

I offer the following lessons from the Instagram fiasco:

Lesson 1: When you acquire a company with high customer involvement, hold off on making changes for awhile. Customers don’t experience much angst when you acquire a coin-op laundry. When you acquire a company like Instagram, which people love as-is, and you’re Facebook, which has a reputation for pushing through unpopular changes, customers might just need time to develop a little trust that you won’t rush in and spoil their fun.

Lesson 2: Don’t expect people to believe the unbelievable. For all I know, Facebook really didn’t intend to let advertisers use member photos. Trouble is, the masses didn’t seem to buy the denial. Facebook would have done better simply to say, “We hear you, we’re sorry, we made the change you asked us to make, and we learned our lesson.” (More on showing “lesson learned” in a moment.) Recall that when the Coca-Cola Company unleashed fury upon replacing Coke with New Coke, they didn’t waste time whining about being misjudged. They apologized and brought back the original—with lightning speed. Only later, to the suggestion that they had masterminded the whole thing from the start, did they reply, “We are not that dumb, and we are not that smart.”

Lesson 3: Imagine possible consequences before you act. On the other hand, suppose Facebook truly had intended to let advertisers use member photos. Not much genius would have been required to anticipate objections, re-think the decision and avoid a mass member bailout.

Lesson 4: Find a smarter way to the same end. Throngs routinely and willingly plaster their mugs all over the web. If Facebook really, really wanted to allow use of member photos in ads, chances are all they had to do was offer an opt-in with a modest spiff or payment in return. Participation could well have become the “in” thing to do.

Lesson 5: Show by your actions that you have learned your lesson. As mentioned above, Facebook has a history of making unpopular changes, user protests notwithstanding. In the wake of the Instagram fiasco, it’s not surprising that Facebook’s good faith claims are being met with skepticism.

Crazy humans. Seems like we’re never satisfied.

If you don’t believe me, ask Abraham Maslow. According to his Hierarchy of Needs, which hardly needs introduction, as soon as we satisfy basic needs like air, water, and food, we up our expectations to things like security, revenue, health, and possessions. From there we seek friendship and belonging. Then respect and freedom. And then self-actualization. 

One human drive that Maslow seems to have overlooked, however, is instant gratification. When we want something, we want it now. No matter if only a couple of decades ago we were satisfied with a quaint “Please allow four to six weeks for delivery”; nowadays, every time industry figures out how to speed up delivery of that sweater, mug, pizza—or payment—we only want it faster.

Take, Amazon, which is getting really serious about same-day delivery. CFO Brian Olsavsky, as reported by PYMTS.com … 

… told investors that the costs of one-day shipping during Q4 had come in “slightly under” $1.5 billion, and noted that Amazon plans to spend $1 billion more on the initiative during Q1, and “again in [the second quarter].” He added that he fully expects that “we’ll start to lap this,” and costs will become more efficient as volume grows, new routes are put into place and additional delivery technology is added into the mix.

It seems that it was only impressive for a little while when Amazon could deliver that mug in a week, and later, in a few days. It will be interesting to see how online merchants who don’t have $2.5 billion to invest over six months toward speeding up delivery will compete.

There aren’t many industries that our desire for instant gratification hasn’t hit. 

We want our pizza now. And it better arrive hot. Not only that. We want to know how close the driver is to our home right now. It’s no wonder that, with its commitment to speeding things up and keeping customers informed, Domino’s has long claimed to be “a technology company that happens to make pizzas.” 

And we’re no longer content with just pizza delivery. DoorDash and Uber Eats have trained us to expect dinner of any sort, from any restaurant, ready to eat, and arriving in record time. This has brought about an unexpected problem for parents. A recent Wall Street Journal article highlights a new trend among teens—an annoying one, according to their parents—of ordering food online when the planned family dinner doesn’t appeal.

Our desire for instant gratification extends to music, audiobooks, and books. We want to download them now. And we want to stream movies now. We binge watch because we want the season finale now. Indeed, our society only recently coined binge watch with the advent of streaming. A related new term is Netflix cheating, which Urban Dictionary defines as “Netflixing a TV series with your spouse/friends/significant other, and watching episodes while the other party is out.” Apparently Netflixing as a verb has made its way into the lexicon as well.

We want McDonald’s to log our order before we arrive and start on it the minute we pull into the parking lot. We want grocery stores to fill a (literal) shopping cart, ring up the total, collect our payment, and have our groceries bagged and ready for pickup when we arrive.

Even home buying is going digital. Online real estate brokers like Prevu (which, if anyone cares, is French for “foreseen”) and Rex (while I’m at it, that’s Latin for “King”), whose home pages look remarkably alike, speed up the process by letting buyers browse properties online, involving an agent only when they’re good and ready. Agents are not commissioned but salaried employees. Both services return two-thirds of the buying agent’s standard commission to the buyer.

These days I am loath to declare any product or service impossible to buy and sell online. It wouldn’t surprise me if in time we figure out how to stream haircuts, pet grooming, and carwashes. 

Instant gratification in the payments world 

Not to be overlooked, we want our funds to show up in real time. No more of this two to three business days stuff. 

Hence services like Zelle, Venmo, Square, Quickbooks, and others are introducing instant or near-instant deposit services. This is, in fact, an opportunity for them to increase fee revenue, since these companies can tack on an additional fee for accelerating the process.

Not to be outdone, Mastercard has introduced its Bill Pay Exchange, which “which will enable real-time payment confirmation and automated reconciliation for the biller,” and Visa is promoting Visa Direct, which “enables fast payments to over a billion cards worldwide.”

Notwithstanding my leading the prior paragraph with “not to be outdone,” well, Fiserv may well be outdoing them. Its new CheckFree® Next™ incorporates intuitive suggestions and increased automation. Two top 10 U.S. financial institutions have already piloted it. According to a Fiserv press release,

The real-time capabilities of CheckFree Next [already] include instant notifications and, later in 2020, will include real-time money movement … 

and 

… allow bill payers to receive enhanced notifications that allow payments to be made in real-time and instantly reflected in their accounts.

Same Day ACH transactions are steadily on the rise. They reached $51 trillion in 2018. Expect to see the momentum increase when per-transaction limits next month increase to $100,000. And in March of next year, a new rule will allow “Same Day ACH transactions to be submitted to the ACH Network for an additional two hours every business day.”

We haven’t yet reached a point where payments arrive before they’re sent. But at this stage I wouldn’t rule out anything.

Disclosure: I work for Fiserv. Who could blame you if you envy me?

First posted May 28, 2015, adapted from my article for Credit Union Magazine.

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IT’S NO LONGER NEWS that payment relationships are a, if not the, wave of the financial services future.Experts have harped on the subject ad infinitum. People like me have harped on it, too.

Part of the message seems to have gotten through loud and clear. Financial institution decision makers are well aware that rising adoption trends attest to demand, and that being slow to supply risks losing business to speedier competitors. It is no idle threat. As mobile options supplant in-person transactions, it becomes easier for once-loyal clients to disengage and defect.

The reader needs no reminder of the value of sticky products, and payment options are proving themselves among the stickiest. Stickiness aside, they offer a wealth of behavioral data sure to make your marketing research people giddy with anticipation. Meanwhile, your CFO will delight in a new, substantial source of fee income, because clients don’t seem to mind ponying up for payment services. They’ll even gladly pay a little extra when they need a premium service like, say, a same-day transaction. I cannot recall another time in our industry when customers actually paid fees willingly.

So if the bottom line matters, you have plenty of reason to offer a full complement of payment services.

But the part of the message that doesn’t seem to have gotten through quite as loud and clear is the urgency not just to offer a full complement of payment solutions, but to out-and-out own the entire payment relationship.

The payments industry is splintering faster than a living room window in a fight with a baseball. And not just credit unions and banks have stepped up to the plate. A growing list of nonbanks like Google and PayPal and myriad merchants and utilities offer easy-to-use payment portals of their own. Every payment relationship a member sets up outside your portal weakens stickiness, and misses profit, longevity, and data mining opportunities.

It’s not too late. Clients still rate traditional financial institutions highest when it comes to payment providers. But that’s fast eroding. In its April 2014 North American Consumer Digital Banking Survey, consulting firm Accenture asked respondents how likely they would be to bank with nonbank companies if those companies offered banking services. Fifty percent said they would bank with Square, 41 percent with PayPal, and 31 percent with T-Mobil. Costco, Apple, Google, Amazon, AT&T, and Sprint all came in in the 26 to 29 percent range. Even at the low end, which isn’t all that low, this is sobering if not downright scary news for traditional financial institutions.

One problem with stickiness is that it works both ways. When a client engages with an outside portal, winning back that piece of the client’s business becomes all but impossible—assuming you even know about it. The best strategy is to enroll members and exceed their demands early, rendering needless all offerings from competing institutions and nonbanks.

I admit that owning the entire payment relationship is easier said than done. It calls for vision, commitment, resources, expertise you may not currently have in-house, and aggressive marketing. But the gargantuan nature of the task does not make it any less imperative.

There remains for financial institutions a small window of time in which set up or purchase and then market payment systems that are easy for clients to adopt and use. Though small, a window it is. I recommend leaping through it poste haste.