Banks are at the forefront of payment innovation for consumers and many have developed innovation labs that focus on the development of captivating mobile app and digital wallet solutions.
The challenge, however, is moving from a prototype of an app in a lab, to a strategic and scalable mechanism for payments and commerce innovation for the unpredictable future. In order to do this, banks find themselves looking for much more than just a slick mobile app. They must consider the complicated web of components including security and identity management, POS, online and mobile channel integration, new products and incentives, and much more. In order to create a scalable, long-lasting solution, banks need to find a platform that integrates with today’s systems, yet remains agile enough to quickly deliver the payments innovations of tomorrow.
Banks also face some larger challenges. Recent research from Capgemini and Efma found that banks face a severe customer loyalty risk. Globally, an average of 40 per cent of retail banking customers are unsure if they will stay with their bank for the long term. Quality of service and easy- to-use banking solutions are cited as major reasons for this risk. Given that the cost of customer acquisition is far higher than retention, banks must find new ways to add significantly more customer value. Payments, or more specifically understanding payments behaviours, could be the key.
Despite payments being perhaps the most frequently used channel for interacting with consumers, it remains under-leveraged by many enterprises, particularly banks. To remain valuable to consumers, banks need to be present in this critical touchpoint to preserve their brand equity and fend off threats from non-bank competition. To address this, many banks are leaping into what was a traditionally retailer-dominated space, which is one of loyalty, offers and incentives. If a bank can generate offers to influence when and where people shop by offering incentives, they add value to the customer relationship. As a result, the approach of card-linked offers is gaining rapid popularity. But Chris Kronenthal, chief technology officer at Philadelphia- based technology company FreedomPay, sees this as just a first step. “The potential goes far beyond an offer’s capability,” he says. “Card-linked offers are typically cashback or statement credit scenarios. Being able to target real-time incentives to consumers and allow them to be redeemed instantly at the point of sale is a far more gratifying experience for consumers and leads to a higher level of offer redemption.”
More than a plethora of payments and offers, an integrated platform approach is the key to unlocking the true potential of the payments business.
Victor Dossey, chief technology strategist for worldwide banking at Microsoft, sees the enablement of real-time payment transactions combined with robust integration between data analytics, digital wallets and mobile devices as the road to the future. “More than a plethora of payments and offers, an integrated platform approach is the key to unlocking the true potential of the payments business and building for the future,” Dossey says. “A platform that embeds the strategic use of big data and is integrated to compelling mobile device and online experiences enables banks to understand and influence the payment habits of consumers when it matters most. This is not the checkout process, but the decision point of where to shop and what to buy. It’s not just a mobile payment; it’s mobile commerce.”
To address this fast-moving opportunity and to enable banks to transform their payments business to an information business, FreedomPay turned to Microsoft. “With Microsoft’s online properties, platform and devices – including the big data capabilities of SQL Server, Windows Azure, Windows 8 and Windows Phone – Microsoft technologies connect enterprises and consumers together at the point of payments experiences,” explains Dossey.
“Few other companies can enable such end-to-end value in the payments ecosystem,” says Kronenthal. “The Microsoft platform is the backbone of the FreedomPay Commerce Platform. Our partnership with Microsoft gives us the unique capability to deliver unrivalled payments platform innovation to enterprises and their customers alike. Furthermore, with Microsoft’s high penetration of back-office software and overall extensibility, we’re able to deliver all of this data when and where it matters most in an organisation.”
It’s no secret that banks are complex businesses, often supporting several mission- critical IT infrastructures. Making dramatic changes, like implementing new payment channels and a commerce platform seem daunting, if not impossible. FreedomPay recognises this challenge and has a process methodology to take enterprises to their ideal payments vision. FreedomPay’s platform, offered as a cloud-based service, is comprised of modular components that allow enterprises to extend the existing valueof investments through a straightforward integration process.
The FreedomPay Commerce Platform provides a comprehensive range of services and is a critical enabler of payments innovation for both financial services institutions and retailers alike. Conceived and developed over several years by FreedomPay, the platform includes mobile payments, digital wallet services and incentive technologies that integrate with live POS systems for real-time interactivity. It’s a state-of-the-art payments gateway that transports detailed transaction data and offers banking-grade security tools.
When combined and integrated to existing systems, this platform enables retail merchants to improve sales and drive customer loyalty. When hosted by a bank, this translates to a highly innovative extension of banking and payments products. FreedomPay builds on more than a decade of experience since the company’s founding in 2000 and was originally focused on the alternative payments industry. It now services a broad portfolio of customers, billions of dollars in transactions annually and nearly a million members on its pre-paid network.
“Through our commerce platform, we provide a number of payments and commerce products for our enterprise customers so that they can, in turn, meet the commerce and payments needs of their consumers,” explains Kronenthal. “Payments are a key interaction between consumers, banks, and retailers and provide a unique opportunity to capture information which can be used to enhance business practices and consumer experiences.”
“The complexity of a bank’s business is almost always exacerbated by a tangled web of systems and processes,” Kronenthal adds. “They typically have thousands of different end points all using a number of disparate systems. You can imagine the difficulty this can cause – but solving this complexity is the arena in which we shine the brightest.”
Segments of the banking industry that have seen a growth in their customer base over the past few years are credit unions and community banks. Because they are smaller than the top tier institutions and have limited networks and technology investments, they must offer new and compelling experiences to compete with larger banks.
BCU, a US-based credit union, evaluated a series of solution providers before selecting the FreedomPay Commerce Platform. “We had a good idea of what we were after and took a close look at a number of different offerings,” says Corey Frank, senior relationship manager at BCU. “We wanted a technology provider that could deliver a white label solution that could not only offer incentives at a line-item level facilitating highly customised campaigns, but also centralised promotions management. This would provide each of our locations with state-of-the-art sales reporting and enablement of secure integration of credit card and pre-paid payments. FreedomPay was the most comprehensive solution for what we wanted to achieve and they are clearly a leader in servicing banks, financial services organisations and corporations. We had confidence they could help us deliver Cruise Card, our white label FreedomPay solution.”
FreedomPay’s next-generation transaction platform helps global enterprises from a wide range of industries capture data and turn it into actionable business intelligence that can boost sales growth and ultimately drive more profitability to the bottom line. “The platform seamlessly bridges disparate systems, acting as the ecosystem glue needed to create a cutting-edge transaction superhighway,” explains Kronenthal. “FreedomPay is all about giving an array of banks and financial services organisations like BCU fast, integrated technology solutions so that they can stay ahead of the competition.”
With respect to the underpinning technology – the platform uses Microsoft .NET at the core, is built on the Microsoft SQL Server product line and leverages best-in-breed capabilities to do real-time processing of payments and incentives. “For us at FreedomPay, it makes perfect sense to use Microsoft as the foundation of our platform,” says Kronenthal. “It’s extremely secure, scalable, and supports rapid development, all of which are hugely important when it comes to payments and financial services.”
“Leveraging the strength of the SQL Server products and the flexibility of Windows Azure, the FreedomPay Commerce Platform has an incredibly powerful ability to laser- target consumers with incentives based on an array of factors, including incentive preferences, GPS location, weather conditions or time of day,” Kronenthal continues.
Through an online portal, banks and retailers can ‘launch’ promotions instantly and track success in real time, fuelling offers that are successful and ending or tweaking those that are not. It also creates a way to issue short-lived promotions when business is slow. For example, restaurants with open tables at 7pm can offer incentives to those within a five mile radius, ending once the tables are full. A customer segment that this provides considerable value to is a bank’s small- and medium-sized business customers. “Banks continually seek to add value to their small business customers,” says Microsoft’s Dossey. “With the ability to offer white-labelled incentives and loyalty programmes, banks are driving new and repeat business through their customers’ doors.”
As part of the FreedomPay Commerce Platform, the company offers a mobile solution, which not only provides mobile payment capabilities, but also gives enterprises a white label option to offer their own mobile products on their choice of operating system, including Windows Phone. The mobile solution is also flexible when it comes to the enabler used to identify the consumer. The FreedomPay Commerce Platform is not reliant on any one particular technology such as near- field communication or QR codes, but instead is open to any of those methods or new ones that may come along in the future, such as finger print scanning. In fact, the platform does not even require it to be a mobile payment. A consumer could use their credit card, gift card, or phone number as the identifier. Using the Wallet Hub feature on a Windows Phone, the digital wallet in the FreedomPay Commerce Platform manages multiple forms of identification, multiple payment types, loyalty cards for frequented merchants and available incentive discounts. The mobile platform seamlessly leverages the full capabilities of the rest of the commerce platform – furthering the ‘single source’ of solution mentality that has allowed FreedomPay rapid adoption and uptake of its commerce platform.
“For most FreedomPay customers, the solution quickly becomes the backbone of their business,” adds Kronenthal. “It lets them see what transactions are being placed in real time, allowing them – as financial services providers and retailers – to start to tailor promotions and products to their customers. It helps them work internally to invest more wisely and make critical decisions about whether to reduce inventory or whether to combat specific competitors’ campaigns. For banks offering this service to merchant customers, the FreedomPay solution makes a huge difference in the way they work and truly transforms their payments business.”