Chuckie's Blog

How 'Payments as a Product' Can Help Your Business

By Chuck Phipps   ●   March 23, 2017
First published on LinkedIn

Peter Drucker said, “The purpose of business is to create and keep a customer.” So, ask yourself: What single event draws the line between a customer and a non-customer?

The answer is: Buying your product or service. And a purchase is not complete until the payment happens.

Paying for your product is what makes your customer a customer.

Naturally, you want many paying customers so your company will thrive or your startup survive! And of course you want growth by keeping them. So the function of accepting payments becomes a defining feature of your product set and is often one of your users’ first experiences.

Payments as a Product (PaaP) is a concept that all companies must embrace during the fintech juggernaut that is happening now. The next 5-years are destined to be the most transformative in the history of electronic payments, so companies of every stripe should examine their user-experience of paying. That is, if they want traction, growth, and retention.

For example: I enjoy scrounging through discount stores and thrift shops to hunt for off-price treasures. Numerous times, having stumbled upon a true bargain (meaning: useless but desirable), I’ve grabbed an item on impulse only to face a 15-minute check-out line among the understaffed cashiers. No thanks! Back on the shelf it goes – the equivalent of an abandoned shopping cart and a lost sale. And reluctance to try that store again in the future.

Grocery chains have been aware of this fact for years: checking out should take much less time than it takes to fill the grocery basket. Non-profits have long known that failing to capture the payment while a potential donor is in a charitable mood can result in many lost donations.

Why shouldn’t the payment experience be easier for your would-be customer than the decision to buy?

For this all-important function, rather than simply bolting on a card-accepting service with PaaA (Payments as an Afterthought), you should build the payment process as a product feature. Not only can that feature be a compelling experience, it can drive sales and customer loyalty.

How then, can PaaP be designed? There are two steps:

1. Make it easier, faster, and better than the “decision to buy”. Who doesn’t love impulse-buying with iTunes? You hear a song on Pandora, click the “Buy Now” button, type in your simple Apple password and, with one more click, the song is downloading to your phone.

Amazon was the first to introduce a “1-Click” purchase in 1997, with payment and shipping information having been previously recorded, so this concept isn’t new. So why are countless mobile and e-commerce sites still requiring a clunky 16-digit card number, plus a 6-digit expiration date, plus 3-digit CVV code every time?

2. Make the payment disappear. As your payments become easier and faster, the experience will eventually be nothing to notice. This is sometimes called “sandwich UX”, or focusing on what surrounds the key activity. But that means your PaaP needz to become tightly intertwined with the rest of your product and the purchasing decision.

As Brett King said in a 2015 interview with the TCS Group, “If the payment becomes invisible, the priority shifts to what happens before and after the payment, rather than the payment itself. This requires broad collaboration.”

The best example of this is Starbuck’s mobile app that has replaced their (at one time innovative) plastic prepaid cards. It has drawn legions of customers into their stores because it’s fun, it’s easy, and you get free stuff. Turning on “product management for payments” is how they did it.

In the current era of You-Name-It Pay (Apple, Amazon, Android, Samsung) and biometrics and tokenization, the merchant with a superior digital and mobile-first payment experience will move to the front of your market.

When shopping for a product I want, but possibly don’t need all that much (the latest pop tunes will not prolong my existence), paying for it should be a breeze that delightfully guides me from “wanting” to “having.”



What's Happening Now and Why is it Like 1995?

By Chuck Phipps   ●   October 12, 2015
First published on LinkedIn

I remember a day in 1995 when the first popular awareness of the Internet started to spread. NPR did an amazing story on what later became known as e-commerce and how it could change the world. I was captivated then in the same way that blockchain technology is looming like a gigantic game-changer now. The stakes are enormous, just like they were back then.

Justin Newton, founder of Netki, who was also working in the 1990’s, says, “The resemblance is huge, both viscerally and practically. Bitcoin, like the Internet, is a transformational technology.”

We’re currently in the ‘squeaky modems’ and ‘busy signals’ phase. –Justin Newton

For the financial sector, William Mougayar has written what could be the most important blog post of the decade at StartupManagement.org. He rattles the cages of large banks about the biggest opportunity for reengineering financial services in twenty-years. He describes “a looming tsunami” that, he says, is being viewed askance exactly like the Internet was twenty-years ago.

Back then, many of today’s tech workers were playing Donkey Kong on Nintendo sets after grade school and may not even remember dial-up modems. But 1995 was the year that Internet usage took off and individuals discovered “the power to transform aging business models and create entirely new ones,” as Justin Newton reminds us. It was also the year that two obscure grad students at Stanford began working on a small research project that eventually turned into Google.

In the small New England town where I lived at the time, one of the first e-commerce startups sprang up. It was called Cyberian Outpost and was a frontrunner in selling packaged software directly to consumers. In those days, the magic of software came in shrink-wrapped boxes with colorful graphics, which never failed to elicit tingling excitement in your hands before they stood as trophies on your bookshelf.

That year I also got my first Netscape web browser, which didn’t work all that great on a Compac Presario with only 4Mb of RAM (the most I could afford). But I was convinced the Internet was the future and I needed to get on it, in spite of high hardware costs being the driver of speed rather than bandwidth. And yes, the sound of dial-up modems can still be heard in my head, along with the memory of excessive phone bills for calls to the ISP that were charged by the minute.

We can laugh at such ancient tools now, but what about the 2015 equivalent?

Mougayar has adopted, though probably not coined (since it’s also the name of a Polish security company), the term crypto-tech to describe the growing ecosystem of blockchain technology and its astounding potential for transforming the world of business.

What the Internet meant to the second-half of the 1990’s, crypto-tech means for the second-half of the 2010’s.

Beyond the dozens of use cases already identified -- such as smart contracts, digitized documents, identity verification and proof-of-ownership -- payments are the nearest and dearest to my fintech heart. Here’s the gist: Bitcoin and its crypto-currency offspring are simply the natural evolution of money, and there is nothing that can stop its inevitability.

As Collin Li said in a blog post on E27.com, we’re talking about the boundless potential for “innovations we would have never dreamed of even a decade ago.”

What does this mean for you?

Inspired by Mougayar’s advice for the banking industry, here are five suggestions:

  1. Take some courses on crypto-tech platforms and tools. A good place to start is CoinDesk.

  2. Follow some companies that are plowing ahead (or invest in them). One of my favorites is Factom.

  3. Buy one or two Bitcoins and spend them on something (legal, of course). This is fairly easy to do with CoinBase, Circle and Netki.

  4. Get somebody to pay you in Bitcoins and convert them to dollars.

  5. Don’t call it a passing fad (like many people dissed the Internet back when).

Above all, don’t be like me in 1995 when I KNEW that everything was about to change forever -- when I should have gone into hock for 16Mb of memory and a dazzling 100MHz processor, or begged for a job at a nascent Internet player.

Immerse yourself in crypto-tech now and you’ll be smiling in 2025.