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Lisa Hronek Posts Tagged ‘Capital One’
The Mobile Wallet: Coming to a phone near you
In case you haven’t heard, Apple announced its upcoming mobile wallet service. It will be introduced through an app called Passbook with the release of its next iPhone. The app will allow users to store loyalty cards, event tickets, and coupons in the app. The company’s intentions are somewhat unclear, but experts seem to think this positions Apple to move into mobile payments mainly because it’s not a huge leap from storing loyalty cards to storing credit cards. And consumers already trust Apple – the company has 400 million credit cards on file through iTunes, so the transition could be relatively seamless.
Apple will enter an already crowded space. Google, of course, has been offering Google Wallet for a year now. The offering is limited by the fact that it works only with Sprint on a handful of phones, with one payment card – the Citi Mastercard – and can only be used where Mastercard’s PayPass system is used. Sprint has announced its intention to introduce its own mobile wallet, and it’s unclear how that will affect the mobile relationship. Isis has been in development for almost a year, and is a partnership between T-Mobile, Verizon, and AT&T. American Express cardholders will be able to use the Isis mobile wallet, along with Chase, Capital One and Barclay cardholders. The service is scheduled to begin testing this summer in Salt Lake City and Austin, TX.
And then there’s Facebook. It’s hard to imagine that the company would actually move into the mobile wallet space. However, the company does seem to want a piece of the action, although probably most likely in the form of processing payments, rather than creating mobile wallet products for consumers. It recently moved away from its virtual currency to real money – something that the experts think is an indication of the company’s intentions to move into the payment space. And in a survey – this one by Cisco – 30% of consumers surveyed said they might one day use Facebook for banking services if they were offered. In terms of specific types of banking products, 14% said they would use a Facebook prepaid account they could reload, 8% would consider using a Facebook checking account or debit card, and 5% would consider a savings account or online bill-payment service. Despite the Cisco survey, there’s no indication that the company plans to provide traditional banking services. The company has also obtained money transmitter licenses in 15 states which are required for companies that keep, retrieve or transfer money. Additionally, any eWallet service would require a money transmitter license. The general consensus is that the licenses are an indication that Facebook plans to create a wider payment system, but guesses on the specifics vary widely.
Despite a large number of surveys done on the subject, it’s somewhat unclear how consumers feel about mobile payments. Starbucks is certainly a success story that no other retailer has been able to match. The app launched in January, 2011 and by the beginning of December 2012 the company stated that there had been 26 million transactions using the app. According to a study by the Carlisle & Gallagher Consulting group, which surveyed 600 consumers, 48% were “interested” in mobile wallets. Of those, 53% said they would prefer an alternate provider over their primary bank. But according to a survey by IDC, of consumers who have a phone enabled with Near Field Communications, only 2% are expected to use them for purchases in 2012.
The technology landscape is certainly littered with product failures. Some because of bad marketing approaches, some had fatal design flaws, and some because consumers just weren’t ready. But sometimes these product failures pave the way for the future. Remember Apple’s Newton? It was a complete flop, but in retrospect provided valuable information to make the iPad the huge success that it is. When Apple announced the release of the iPad, many naysayers talked about the failed Newton. Many of today’s mobile wallet players most likely won’t be around in the future. But most of them will probably provide valuable information on how to construct and offer a mobile wallet to consumers. Despite less than enthusiastic consumer sentiment, the mobile wallet is destined to happen sooner rather than later.
All bets are off: The future of credit card direct mail in Canada
The TD acquisition of MBNA is a real game changer in the Canadian credit card industry. The deal, finalized in December, pairs a traditional Canadian bank that relies on an extensive branch network, with a U.S. monoline that acquires its customers primarily via direct mail. It adds MBNA’s MasterCard portfolio of 1.8 million accounts to TD’s Visa portfolio of 4 million accounts making the newly combined operation one of the largest credit card issuers in Canada. The big question is whether TD will continue to promote the MBNA brand and/or adopt MBNA’s direct mail expertise in its on-going marketing efforts. The answer will have huge implications for credit card direct mail in Canada.
Mass market direct mail, as an acquisition strategy, was pioneered in Canada by MBNA and Capital One back in the late 1990’s when both issuers decided to enter the Canadian market after building solid foundations in the U.S. Capital One launched its Canadian operations in 1996 and MBNA followed in 1998. Without a branch presence both relied on direct mail to seek out new customers. They challenged the established Canadian banking order by targeting revolvers with low interest cards and those looking to establish credit in Canada – two segments previously overlooked by Canadian banks who tended to focus their efforts on premium customers. In the early years the U.S. monolines dominated direct mail, but the Canadian issuers, particularly CIBC and RBC, soon realized they had to respond to the threat in the mailbox and launched their own campaigns. The arrival of unaddressed Admail also played its part, culminating in a 2008 peak in acquisition mail volumes, but the unique dynamic of the Canadian mailbox has always been the U.S. monolines as the drivers of direct mail activity. Without this on-going threat the established Canadian banks would not have the same appetite for the channel.
In response to the recession, Canadian banks scaled back their direct marketing efforts leaving a severely depleted mailbox to US issuers once again. Eventually, with an economic recovery in place, Canadian banks, as in the past, would have had to react with their own campaigns leading to the long awaited increase in mail volumes. With the MBNA acquisition, all bets are off.
MBNA was the top mailer in Q4 2011, according to Mintel Comperemedia , and volumes remained strong, despite the acquisition announcement – it is not unusual for the target of an acquisition to ramp up its efforts with the aim of increasing its market share and therefore its value to an acquirer. MBNA, unlike TD, is particularly strong in Quebec and has dominated the mailbox in the province for years. If TD decides not to continue with MBNA’s direct marketing strategy it will expose a gap in the mailbox nationwide which other issuers could exploit. It will expose a gaping hole in Quebec, although Capital One has recently launched in the province and is poised to fill the void. Capital One may have known for a while that Bank of America was looking to off-load MBNA and that could have been the catalyst for its launch in Quebec. Regardless of whether or not this was the reality, the timing was perfect.
MBNA customers were informed via letter, in January, that their credit cards were now issued by TD. The letter stated that “We will continue to operate under the MBNA name: that means your statements, payment options, phone numbers and websites remain the same.” It appears that, at least for now, it is business as usual. How the TD strategy will unfold in the next 12 to 18 months, which is the timeline for the transition, will shape the outlook for credit card direct mail in Canada in the years to come.
It’s Raining Venture Offers
I recently wrote about how my household received three, extra-large (8×6), offers for Capital One’s Venture card in one day. To me this was a sign of renewed confidence from Capital One and an example of the optimism that is spreading throughout the card industry as competition increases. Since then my household has received three more offers for the Venture card and two for Venture One (the no annual fee version of the card) making it a total of eight Venture offers in just under two months.
All of these offers are extremely creative (some may be test campaigns) with each employing a different approach to capture my attention in an increasingly cluttered mailbox.
Big and Bold: First it was the 8×6 envelopes. For more on these please see my March 17th blog
entitled, “Capital One’s 8×6 Envelopes Demand Attention (Alec Baldwin Does Too)” – notable was the fact that while timed perfectly to coincide with the launch a nationwide TV campaign, using Alec Baldwin, there was no integration of the TV campaign in the offer.
Integrated: Next came the first step towards integration. A navy blue envelope with the request to, “Take an exclusive look at our most powerful rewards card.” The offer letter didn’t mention the Alec Baldwin TV campaign but a separate, postcard-style, color insert showed the actor posing the question: “Why settle for less?”
Bold and Integrated: Then came two large, identical, blue and white envelopes exclaiming: “IT’S A NO BRAINER” in bold, capitalized, font. This was a more seamlessly integrated approach – the photograph of Alec Baldwin was on the letter itself and the style was more jocular, in line with the style of the TV advertising. The letter began with, “If you could keep the same job and double your paycheck, wouldn’t you at least consider it? Of course you would! That’s why the Capital One Venture card is right for you. It gives you double miles for every dollar you spend.”
The Personal Touch: The Venture One card offers 1.25 miles per $1 spent (instead of 2 on Venture) and has no annual fee. In an unusually personal touch, for a credit card offer, the Capital One executive’s name and address was shown on the front of the outer envelope as if it came directly from his office. It included the following as a p.s: “Thank you for your consideration. Even if you don’t take us up on our offer today, I hope you’ll keep Capital One in mind for your future financial needs.”
Just open me! In a final plea, the most recent offer we received exclaimed “OPEN ME: You’ll be glad you did. (But your current card won’t be).” The offer included a faux version of the Venture One card and echoed the tone of the “personal touch” offer, outlined above, by acknowledging that we are likely to own multiple cards and requesting that we keep Capital One in mind for the future.
Bold, creative and integrated with a strong product offering and a multi-media campaign. I wouldn’t be surprised if the response rate for some of these offers was well above average; however, the cost of acquisition must be high given the volumes as well as the quality of each piece. The rewards segment is extremely competitive and Capital One is intent on breaking through and making an impact.