Matt Wilcox Pro

Last week on behalf of The Economist, this is how some hapless tweet writer boiled down an observation about flagging diamond sales:

Why aren’t millennials buying diamonds?

The tweet earned a spate of delightfully sarcastic replies from affronted Millennials. Many of the comments—dare I say some of the best?—were NSFW, so I won’t be including them here. (If you cannot resist, you can read them here, but don’t say I didn’t warn you.) Meanwhile, here are some of the more tame reactions:

maybe because they’re burdened with crippling student loan debt and can’t actually find a good paying job

I work at a grocery store

“Why aren’t millennials buying diamonds” she read as she ate crackers to quiet the hunger & wondered if she’d have a place to live come fall

You’ve gotta be kidding, @TheEconomist! The answer’s in the name of your publication! We’re all poor! [slits throat]

If millennials were buying diamonds then the articles would be why millennials are wasting money on diamonds when they can’t get jobs

If only the fateful tweet had more soberly attempted to win click-throughs to The Economist’s interesting, offense-free link. Diamond sales are a matter of interest at the very least, and quite possibly a matter of concern. In the chaotic system that a world economy is, you never know which industry will turn out to be a butterfly whose wings lead to a hurricane. Moreover, the trend may reveal insights about the shifting and morphing of societal values.

There is something to be said for sensitivity to the viewpoint of various generations. Millennials have fast-rising purchasing power, the above protestations of poverty notwithstanding, so it pays to know how to communicate with them, and how not to.

Last year, Inc. magazine ran an article entitled “15 Words and Phrases Millennials Use but No One Else Understands.” How many can you correctly define? A few were lost on me, and I’m a borderline Millennial myself. Maybe I’m not as young as I prefer to think.

Unless you were away climbing Kilimanjaro, you likely heard that last week the UK voted to secede from the European Union (EU).

In the final tally, 48 percent voted to remain while 52 percent voted to secede. In the aftermath, the media have spilled over with reports of UK citizens now ruing the vote for Brexit, short for “British Exit.” There are tales of people who didn’t bother voting but now wish they had, people who were misled by campaign misrepresentations or misunderstood the issue, people who—incomprehensibly—voted for Brexit to make a statement while counting on it to fail, and people who voted for Brexit but would now change their vote if they could. It’s important to keep in mind that such are anecdotal and not statistically valid. Whether to take the reports with more than one or two grains of salt remains to be seen.

The Brexit vote has raised myriad questions or, perhaps more accurately, myriad fears regarding economic and political outcomes. As for what Brexit portends for the payments industry, there has been an explosion of informed opinions, few of which paint the rosiest of pictures.

Prior to the vote, CNBC’s Arjun Kharpal quoted German venture capitalist Andreas Haug:

… other regions will grow stronger at the expense of the U.K. in the event of a Brexit … The fintech sector will take a huge hit. Teams in the U.K. are supported by the financial industry, and a constructive government and regulator, but if you can’t roll your product out European-wide, a lot of teams will move away.

Telis Demos wrote in The Wall Street Journal:

Europe is a key region for payments experimentation, with licenses allowing technology upstarts to make digital transfers across borders, a contrast to state-by-state regulation in the U.S. Several fintech firms such as TransferWise Ltd., Klarna, PayPal Holdings Ltd. and Circle Internet Financial Ltd. do business across the EU.

But the U.K.’s exit from the EU could add hurdles and disrupt discussions about how upstart firms and technologies can work with incumbent banks and networks.

BrickVest CEO Emmanuel Lumineau blogged in Financial IT:

Without doubt the UK is now a less attractive option for fintech investment platforms who want to operate across Europe. Platforms such as Brickvest are typically regulated by the FCA whose framework allows us, and companies like ours, to target investors across Europe. Brexit now means firms will eventually need to find a new regulator on the continent in order to continue doing business across Europe. Cities such as Paris, Berlin or Frankfurt can offer this. Consequently, BrickVest may have to shift some of our business and team abroad. Paris and Berlin are established fintech hubs, so it would be logical for us to open an office there, while maintaining a London office to support investment activity both locally and internationally.

Ultimately, the UK’s exit from the EU will limit the growth potential of UK-based fintech companies. These companies, as they will no longer be equipped to navigate the complex regulatory environment across borders, will be confined to doing business only in the UK. Eventually it will lead to London losing its fintech hub status.

Not all predict doom and gloom, however. 11:FS co-founder and director Simon Taylor blogged quite the positive take:

Banks in the UK have a rocky few weeks ahead, but the rank and file within banks and those in the fintech community can start the fight back now. We need a good Brexit, Brexit light and we need to solve the real challenges banks face. Call me an optimist, but I think we can.

All of the above-cited articles and blogs are well worth reading in their entirety.

So, what’s my take on the implications of Brexit for the payments industry? I’ll give you my short-term predictions after a little while, and my long-term predictions after a long while. I find that predictions are most easily made in retrospect.

Apparently you and I have a superpower. At least, that’s what uninformed writers, and informed ones with no regard for facts where profit is concerned, would have readers believe. Said superpower is the ability to make people buy whether they want to or not.

If you have worked in marketing for more than 20 seconds, you don’t need me to tell you that there is no such superpower. If there were, more new products would fly than flop, and I’d be rich. In fact, more products flop than fly and, more important, I’m not rich.

If you’re ever in Ithaca, New York, I suggest a visit to the New Products Showcase and Learning Center. (If Ithaca isn’t on your itinerary, there’s a book. More on that in a moment.) Dubbed by Business Week the “Smithsonian for Stinkers,” it’s a place where you can wander amid rows of failed products like Campbell’s Creamy Natural Soup, Listerine Cool Mint toothpaste, Jergen’s Body Shampoo, Crystal Pepsi, and others. Successful products are also on display, but the failed ones vastly outnumber and are frankly more fun. And each sad example packs a valuable marketing lesson.

One lesson is that sometimes there’s no telling how the public will greet your innovation until you take the plunge and put it out there where people can buy it—or not. Every failed product on display was backed by the best marketing minds in the business and thoroughly researched and tested before its dismal debut and eventual demise.

Another, related lesson is that there’s no need to go full-scale until you know you have a hit. Products that were rushed to national distribution and given whopping advertising budgets could have quietly and less expensively failed in test markets.

There’s also a lesson buried in the number of failures that bear a striking resemblance to earlier failures. Had the creators of the former troubled to familiarize themselves with the latter, they might have avoided costly and embarrassing flops. Something about, “Those who cannot remember the past are condemned to repeat it.” (George Santayana, philosopher, essayist, poet and novelist, 1863-1952).

The New Products Showcase and Learning Center is the brainchild and work of 30-year marketing industry veteran Robert M. McMath. I haven’t been able to find out if the Center is still open, but not to worry: McMath teamed with former Adweek editorial director Thom Forbes to produce the delightful book, What Were They Thinking: Marketing Lessons You Can learn from Products That Flopped. It’s not a new book—it was first published in 1998—but I highly recommend it, no less for the fun read than for the valuable information.

Two weeks ago I blogged about what happened when Apple tried to stand on principle (something I admire) against the Great Firewall of China. Brief recap: China shut down iTunes Movies and iBooks for a month. The loss of 700 million Internet users being nothing to sniff at, Apple capitulated (something I understand).

But Apple and China are by no means through. Visa, Inc. just announced plans to use Apple Pay to secure all online payments for online payments in Hong Kong.

Now, you could argue that Hong Kong isn’t really China, and you’d be right. Sort of. Trouble is, I could argue that it is China, and I’d be right, too. Sort of. It might (or might not) clarify things if I pointed out that Hong Kong’s official name is Hong Kong Special Administrative Region of the People’s Republic of China. There’s a clue to this mystery in the “Special Administrative Region” part.

During talks regarding the UK’s relinquishing Hong Kong’s sovereignty to the People’s Republic of China (PRC), Hong Kongers feared losing to the communist government the autonomy they had come to enjoy under British rule. The PRC and the UK hammered out a solution in the form of Special Administrative Regions, or SARs. (Not to be confused with the unfortunate, similar acronym SARS, for Severe Acute Respiratory Syndrome.)

The idea behind SARs is to allow for the best of both worlds. Hong Kong has its own government, laws, property ownership, legislature, currency, police force, national sports teams, passports and immigration policies, and more. But when it comes to foreign affairs and national defense, Beijing remains in charge. And SAR status comes with a 50-year expiration date. What changes, if any, will take place in Hong Kong in 2047 is anyone’s guess. Hopefully Visa Inc. and Apple will have had plenty of time to become established.

The authority to designate SARs was written into the PRC’s 1982 constitution. Hong Kong became an official SAR when the UK relinquished its sovereignty in 1997. Macau is also a SAR, and the PRC may create others.

For all I know, the People’s Republic of China and Apple have settled their disagreements. Either way, it appears that Hong Kong has the autonomy to proceed with Visa, Inc., even as it proceeds with Apple Pay.

(It is appropriate for me to pause here to remind readers—and myself—that I am no international law expert. I’m a writer doing the best he can.)

New bank building in the works?

THESE DAYS when a shiny new banking office sprouts, someone inevitably wonders aloud how close we may be to a tipping point where online banking renders physical locations obsolete. Will this building will be the one too many that shouldn’t have been built?

That might have seemed like a silly question in 1995 when, after largely unsuccessful forays in the prior decade, online banking had its real start. To ask if online banking might someday threaten in-person banking would have seemed as ridiculous as to ask if streaming might someday threaten the music industry as we knew it.

Though by the end of 1995 people could use a personal computer to check balances, transfer funds between their accounts, and make payments, not many did. Those who dared dabble accounted for not quite four percent of bank customers and comprised mostly the better educated, the better heeled, and the young. Despite the meteoric rise of PCs, people were still afraid of turning HAL loose with their money. After all, it was only a decade earlier that people over 35 were largely afraid of ATMs.

Things changed over the next decade. In the September 2006 issue of the Federal Reserve Bank of Kansas City’s newsletter, Perspectives, Division of Supervision and Risk Management of policy economist Eric Robbins reported that computer banking had risen to just over 35 percent. I hardly need point out that the upward trend continued, thanks in part to a hefty boost from the emergence of mobile banking. By the end of 2014, the number of people availing themselves of mobile banking was increasing by 33 percent a year.

Newer, related studies, like this one reported by Fiserv, confirm that electronic banking will only continue to grow in importance. Or take, for instance, this observation made in 2015 by Market Watch’s Bill Gunderson: “A whopping 85% of U.S. banking transactions now take place outside the branch, with branch traffic continuing to decline 4% per year for an aggregated decline of 51% over the last 16 years.”

Still, survey after survey shows that the proximity of a physical office remains the Number 1 factor in choosing a financial institution. Fine for now—but I have my reasons for doubting pundits who predict that that will be ever so. Here’s why: 

• Self-reported data are not reliable. Asking people what matters most to them reveals more about their self-concept than about their actual values or habits.

• The payments business isn’t limited to banks. When you count online payments to merchants and utilities, the growth of electronic transactions looks even more dramatic. 

• We must beware motivated reasoning. It is human to reward pundits who say you can stay the course and to dismiss those who say you must change. 

• As markets grow more accustomed to nonphysical banks the likes of PayPal and Simple, the importance of brick and mortar will diminish. 

• We humans are lousy at predicting the future. If you don’t believe me, watch the second installment in the Back to the Future series, which takes place in 2015. Or look at Captain Kirk’s communicator, which holds not a candle to today’s least capable smartphone. And, speaking of smartphones, iPhone took Google unawares, and the rise of texting took miniaturizing-obsessed phone manufacturers unawares. 

To be clear, I’m not telling you not to build that new office. I can’t foretell the future any better than the next person. What I can tell you is that it’s important to remain open and flexible. Change isn’t as slow as it used to be. Today, we must remain ready to change on a virtual dime.