Card Issuers Should Gift Back-of-Phone 'Wallets' to Targeted Cardholders
Something very low-tech is changing the card-spending patterns of mobile-first consumers, and card issuers see if they can use the trend to their advantage–rather than passively wait for their competitors to do so and relegate them to the bottom of select cardholders’ wallets. Tech-forward consumers (millennials and others) are attaching miniature stick-on wallets to the back of their phones, in order to consolidate two essential devices into one. These stick-on wallets work great (I’ve been using one for quite a while now, and will likely never carry a wallet again), and have the unintended consequence of changing card-spend patterns because they comfortably hold only a few cards–and perhaps just one or two large-denomination paper bills. Issuers: you don’t want to be the card that doesn’t make the final cut.
There’s an important experimental step that credit card issuers can take right now, and for a whopping buck a cardholder it might just be enough to provide an uptick in spending patterns. I’ll get to the specific recommended approach in a minute, after a brief a bit of foundation.
Paper or other physical payments die a death of a thousand cuts–for example check conversion or truncation, e-bill pay, and mobile or online remote check deposit. It’s no different for the long-term transition toward any radical new payment method, whether that be crypto-currency or mobile point-of-sale payments. To succeed in payments innovation, it’s all about experimenting and navigating the transitionary pathways–some of which may be low-tech. Back-of-phone wallets are one of many bridging methods on the interchange to fully-electronic mobile wallets.
Stick-on wallets convert top-of-wallet cards to ‘wallet dominators’, which is why card issuers need to experiment with one simple idea now. When I discarded my billfold for a stick-on phone wallet, I encountered the unintended consequence of a radical shift in my spending patterns. Treasured family photos and paper to-do reminders had been moved to phone apps many years before, so most of what remained in my wallet was payment methods. I was already using a phone app to pay for coffee, and for Apple Pay whenever possible. With a stick-on phone wallet, first to lose their place was loyalty cards (sorry, frozen yogurt or dry cleaning shop). My medical card was replaced by a simple photographic image. Lyft allows in-app tipping, so in my wallet they went form ‘preferred’ to dominator status (versus Uber) overnight. I used the bottoms-up approach to settle on just four cards that made the final cut, keeping a driver’s license, mass transit fare card, and one credit card each for work and personal spending. As a person who only needed cash only occasionally, I even stopped carrying my ATM and debit card long before my issuer (a top bank) converted their ATMs to cardless.
After ditching a full-size wallet for a back-of-phone version, my change in spending patterns was profound, and this is what payments executives must adjust to right now. Most importantly, two of my payment cards (one personal, one for business) went from preferred to dominator or monopoly status–establishing complete control over my spending. (Please think on that last sentence for just a moment: one giveaway device managed to completely shift several other cards and loyalty devices out of my life entirely.) Nowadays, I just so happy to have one less thing to remember that I won’t be bothered to carry anything that thickens the back of my neccesarily-thin combo phone-wallet. That, in turn, created an overnight shift in the profitability of the companies I work with. So how can leaders proactively use this to their advantage?
Issuers should take proactive steps to increase their chances of being wallet dominators, rather than risk not making the final cut with their mobile-first customers. In broad strokes, here’s how I’d partner with an issuer to implement such a program:
Analyze data to identify customers who meet at least two criteria:
Top-of-wallet, based on merchant-spend patterns
Those who regularly access their account via mobile
Identify a high-quality phone wallet (there are several kinds), and have them branded
Distribute the branded phone wallet to a representative sample of customers
Analyze how spending patterns change, adjust market test as necessary
If successful, expand the pilot aggressively to all relevant mobile-forward customers
Merchants with customers who skew to mobile-first also have a mandate, which is to move more aggressively away from relying on card-based loyalty systems.
A few other recommendations: there are several kinds of stick-on wallets, and don't settle too quickly on a flimsy fabric one. Don’t go too crazy with the branding either, because it may be too much to ask customers to carry an oversize logo in their wallet.
Will this work on a larger scale? I honestly only know what happened for me, and have yet to conduct any broader research on the topic. Why not see if this low-tech solution can serve up a modest spending-share lift, as a bridge to eventual universal mobile payments? Often times, the route to widespread adoption of advanced technology includes a few traditional bridges, and leaders must be willing to try every available route.