alternative payments: turning virtual into reality
DESCRIPTION
Last week’s alternative payments webinar with MetraTech’s chief marketing officer, Esmeralda Swartz, and Andy Schmidt, research director at CEB TowerGroup, examined alternative payment models for virtual currency and new business scenarios within which these currencies can be used. In the initial survey of webinar participants, 68 percent responded that their customers expressed interest in virtual currency and alternative payment options. This percentage is an indication that customers are driving the market to offer more flexible payment options. Just as plastic credit cards replaced paper currency, virtual currencies are now replacing plastic with bits and bytes. The market demand is clearly established, and in order to remain relevant, companies need to innovate and adapt to these trends in direct monetization.TRANSCRIPT
+ SocialLocal
BigData
AlternativePayments:Turning Virtual Into Reality
Mobile
2+Your Presenters
Tracy Duprey - Host
Andy Schmidt – CEB TowerGroup
Esmeralda Swartz – MetraTech, Corp.
3+Overview
Next Generation Payments: What, Why
User Experience
Building it
Optimize, Analyze, Act
Make Money
Create an Economy
+US Noncash Payment Volumes Continue to Grow Despite Market Turmoil
Noncash Transaction Volume by TypePercentage of Total Transaction Volume by Type of Transaction, 2011.
Trends in Noncash Transaction Volume by TypeNoncash Transaction Volumes (in millions) by Type 2005 – 2016(E).
Source: TowerGroup Payments Database
4
5+Virtual Currencies Replace Paper and Coins with Bits and Bytes
Transactions are often peer to peer without the use of a central authority
Relies upon “the network” to self-police
Concept drives regulators crazy
Can’t rely on the network to stop/filter transactions
Proponents claim attention is just a ploy by banks to impede adoption
Source: Bitcoin, Facebook, MintChip, CEB TowerGroup
6+
Freemium:
Product or service is provided free of charge
Premium is charged for advanced features, functionality, or virtual goods.
“Freemium” Model has Taken Hold in Many Games and Other Applications
7+
DEAD AGAIN? Maybe you need a bet t er swor d – cl ick her e t o
come t o t he auct ion house Now
Source: Blizzard Entertainment, CEB TowerGroup
Diablo III Brings Real-Money Auctions (RMA) to Gaming
Moves items from eBay to monitored channel
Buyers can pay in “gold” or 9 different currencies
Fee structure is $1 per item and 15% percent of the purchase price
8+Swarms of New Payment Partnerships in the Real and Virtual Worlds
9+What Questions Should the Market be Asking?
Questions for Banks
How do I get there from here?
What is the risk?
How do I get involved?
How do I automate this?
Questions for Regulators
What about AML?
What can we do – if anything – about vendors who switch currencies to avoid taxes?
10+Three Simple Drivers
Traditional players must innovate to remain relevant
Clear market needMake currency
ubiquitous
11+
Online4%
Offline96%
Online6%
Web-in-fluenced Offline
37%Offline
Online+
Offline
TomorrowYesterday Today
2008 = $325B
2013 = $ 10T
Source: Forrester, Euromonitor and Economist Intelligence Unit Source: Forrester Source: Economist Intelligence Unit
Commerce Today
12+Establishing Alternative Payments Brand
Trust and simplicity to drive customer behavior
Strong organization/brand behind product
Clear value proposition for: Consumer, Merchant, Biller, and Financial Institutions
Convenience and ease of use
13+Adapt or Don’t Bother
Indirect Monetization
Direct MonetizationFreemium/Causium
Pay to use
m/ecommerce
Premium content
Subscriptions
Virtual currency
Reselling
Digital goods
Offers
Ads
Referrals
14+Back to BasicsUnderstand the Buyer/User
Where, when, why they buy
How they behave
What they prefer
When are they at risk
How to retain them
15+No Perfect Answer, Only Better One(s)
Cannot spend months before launch worrying about pricing FACT: Pricing, bundling, and offers will be revised over time
Lots of data, how do you maximize expected lifetime value of the customer
Data has to be interpreted, source of data is critical
If you double prices, double short-term revenue, but triple churn not a good idea
16+Acquire & Analyze: Data to Better Serve Customers
Heuristics
+ Aggregated Metadata
= Meaningful Benchmark Stats/KPIs
17+Billing Data Makes an Impact
18+A3 The New Model
• Enroll• Meter• Pay
Acquire
19+Creating Value to Accelerate Adoption
Access to customer data is key
Delivering relevant, personalized
promotions
Rewards integration (earn & burn)
Convenience parity with other payment solutions
Examples:
ConsumerAccount (s)
Consumers
Merchants
Non-TraditionalMerchants
Merchant Intermediarie
s
Alternative Payments
P2P, Mobile, POS, Alt.
Currencies, Prepaid
+Case Study: Reconciliation
Reconciliation: calculate aggregate net amount per merchant and generate ACH & merchant statements
Problems: manual process, poor integration, inaccurate calculations, delays in issuing statements, poor visibility to profitability
Solution: simplified and automated reconciliation process
Cash Management
ACH Files
Merchant Interchange Billback
Bank Admin File (BAI)
Gateway Files ACH reports, Bank/
Merchant Statements
Accounting System
Billing and Payment System
“Compare, Identify, Adjust,
Prepare”Daily Reconciliation:• Cash
Management• Gateway• Bank Account• Merchant
Funding Is this automated process between systems? Ease of adjustment for line item & aggregate?
Higher conversion & sales
Happier customers
Ease of online selling
More targeted marketingShorter time-to-market
Profitability analysis
Accurate statements
More resources to focus on core capabilities
20
21+Pricing
Difference in pricing is no longer whether online or offline or virtual or real
Timeliness of offers
Functional goods drive more users to pay
Price points need to be experimented with
Understand user demographics and customize when appropriate
22+Summary
The experience economy is powering virtual and physical worlds Growing Virtual Economy
More users More channels Convert users to spenders Get spenders to spend more money Serve and retain high spenders
Offline and Online Commerce Blurring Social Commerce Acquire, Analyze, and Act
Release product Change it, change it yet again
Simplicity Locality