Monday, February 16, 2015

Digital Receipts at Your Bank: WIIFM?

(What’s In It For Me: Consumers, Banks, Merchants?)

Mark Johnson CEO Receipt Reliance Pty Ltd

In this digital day and age it is quite surprising that the practise of giving paper receipts for purchases is still the norm. The argument of paper vs. digital receipt has been the subject of many discussions in recent years and while some people would still like the opportunity to receive a paper receipt if requested, it seems the majority are in favour of receiving digital receipts. Determining the best way to deliver and store them is now the focus. 

In a previous article The Big Picture on Digital Receipts, I talked about some of the more common digital receipt solutions that have emerged to date and although these solutions are a welcome step forward, I feel they still fall short from a consumer perspective. I put forward an alternative idea whereby digital receipts are stored against their respective payment transactions at the consumer’s bank or financial institution.

Why is receipt storage at your bank more attractive? To answer that, let’s look at ‘What’s In It For Me’ for the three main parties involved; Consumers, Banks and Merchants.

From a Consumer perspective, this idea is invaluable.

The most immediate advantage would be that consumers can receive a digital receipt without any change to how they currently make a card purchase, other than not having to wait for a receipt to print.

They won’t be required to:
·         give out an email address,
·         have a smart phone and have downloaded any number of apps (depending on merchant choice),
·         ensure they have enough storage on their smart phone or PC,
·         register their  card number with a third party,
·         create a cloud storage account with a third party (depending on merchant choice),
·         join loyalty programs if they do not wish to do so.

This idea offers simplicity, security and privacy. It gives peace of mind knowing that receipts for tax and/or warranty purposes are always available; even those receipts that you may have discarded in the past but now find you need.  In the event of a tragedy such as a house fire, your bank would act as your fireproof box for all your receipts and could integrate with your insurance company to streamline and expedite the claim process.

It will allow for improved integration of receipt data with PFM (Personal Financial Management) tools and accounting packages, minimizing consumer effort therefore saving both time and money.
This idea provides consistency and reliability no matter where in the world you make a purchase. Consumers would be able to easily access all their card receipts by simply viewing their bank account from any device.

Current digital receipt companies offer a variety of receipt storage locations such as email, cloud, smart phone or combinations thereof. One thing many have in common is that they offer great tools for the merchant to design receipts that can include offers, coupons, dynamic links to promotions or feedback; a whole range of enticements for their customers. With a ubiquitous bank storage solution, these companies wouldn't have to hedge their bets on which storage solution will be the most popular in the long run; rather, they would be able to  focus on what differentiates them from the next company with regard to receipt design, marketing, loyalty and analytics functionality. Merchants would be free to choose from a range of solutions without being concerned about their customer’s approval regarding the receipt storage location. Consumers would have the best of both worlds; they could receive digital receipts stored in one secure and private location, without having to give out any personal information.

From a Bank’s point of view there are also many benefits. 

The flow on effect from enhanced KYC (Know Your Customer) data will be extremely valuable. Increasingly we are seeing banks becoming more customer-centric with a focus on providing ways to save their customers money. The more a bank knows about their customer, the better position they will be in to offer tailored products to meet their specific needs, while still offering their high level of privacy and security.

PFM tools offered by banks are designed to increase customer satisfaction and loyalty, thereby retaining and strengthening their customer base, however these tools have had a slower than expected take up over the last couple of years. People generally like the idea, but if they require too much work from the user they can be confusing and also become a chore - their shortcomings can outweigh their usefulness.

More and more we are seeing innovative companies like Moven partnering with banks to offer digital products that help customers track and manage their spending in real time; they provide automatic categorization of purchases along with a user friendly interface and relevant and timely advice. Whilst these tools are evolving and becoming more sophisticated, they could be even more effective if they were supplied with the merchant receipt detail of each purchase as well. Without it the financial insight provided can be flawed.

Take for example, a purchase at your local department store consisting of a couple of shirts, some DVDs and perhaps some glassware.  The purchase should be split into 3 categories; clothing, entertainment and household goods to give a true picture, however at the moment they would be put together into one category. Some banks and PFM vendors do offer users the option to split transactions across categories, but this is a manual process, and after the event; it does not allow for accurate real-time insight and advice which is key.  Digital receipt storage at your bank would certainly have the knock on effect of enhancing PFM tools.

Fraud detection could be greatly improved if this idea is implemented as it would increase a bank’s capability to quickly detect suspicious account activity; the additional savings to banks and ADI’s from reduced card fraud could be significant.

We’ve all looked at our transactions and now and again wondered what a particular payment was all about.  In many cases, the merchant information contained at the payment transaction level is not informative to either the consumer or the bank and as a result, consumers are inclined to call their bank to clarify payments associated with unfamiliar business names. Being able to quickly and easily identify the merchant via the receipt details will result in lower call centre volumes for banks and less interbank service fees.

By providing receipt storage and management for their customers, there is also the opportunity for banks to charge a small fee for this service and thus introduce a new revenue stream. Most people don’t mind paying for something that is value for money.

For banks, improving and personalizing the relationship they have with their customers is paramount.  The last few years have seen a massive amount of innovation taking place in the financial technology space and if banks are going to survive and flourish in the long term, they must find ways to attract new customers and give their existing customers incentives to stay; offering a new and innovative product like digital receipt storage would help them do that.

Finally, let’s look at some advantages for the Merchant.

Imagine two merchants side by side offering more or less the same products.
They both offer digital receipts however at store A, in order to receive a digital receipt, the consumer must supply the merchant with some personal information (as listed previously), create a login for an online cloud account or download one of many mobile apps to their smart phone. 

At store B, they simply pay using their card as usual (whether that is with a physical plastic card or a digital one stored on their phone or wearable), and that’s it. Their receipt automatically goes with the payment transaction to the bank.

I know which merchant I would choose. 

This digital receipt storage idea would provide merchants with a new and innovative way to attract customers and improve POS efficiency. Merchants will also benefit from reduced liability by storing less personal consumer information that could be compromised in the event of a data breach.

There are several other advantages but firstly let’s look at some perceived obstacles. Merchants have traditionally been reluctant to disclose sales and marketing information to third parties without some contractual arrangements to back up the trust required in such a partnership.  A major concern would be the possibility of their competition getting access to their data and using it against them in a commercial sense. When a merchant engages with their POS vendor or third party supplier to deploy a customer loyalty programme, commercially sensitive information is revealed in return for data analytics that they can use to further enhance their business. Many of these programs rely on collecting personal information from customers by having them join a frequent shopper club or similar, in return for offers, gifts, discounts and privileges when shopping with that merchant. Of course many customers are deterred by the prospect of disclosing personal information and choose not to participate.

Currently there are a variety of receipt delivery and storage locations offered, depending on what each individual merchant has chosen, so it can be quite difficult from a consumer’s perspective, to keep track of it all. Once the receipt has been generated and is ready to be issued to the customer, does its final storage location really impact the merchant per se? It certainly matters to the customer from a convenience point of view. In any event, the point here is that the ‘customer copy’ of the receipt data is already leaving the merchant’s environment and can be used by the customer as they see fit.

 The key question then for merchants would be “What percentage of their card paying customers are willing to give out some personal information to receive a digital receipt?” I’d hazard a guess that the average would be a lot less than 100%; probably less than 50%. Surveys have shown that when it comes to consumer trust, financial institutions score well. Most people would acknowledge that their bank already knows where they shop and to an extent, the type of things they’re buying. This leads me to surmise that the majority of consumers would trust their banks to store their receipts.  Depending on the opt-in arrangements each bank may have, merchants would be able to get their offers and coupons to close on 100% of their card paying customers.

An interesting idea was presented in a recent article Using Digital Receipts to Facilitate Loyalty Program Enrollment, where the writer suggests joining a merchant’s customer loyalty program post purchase via a single button click. (It would utilise your bank’s potential ability to authenticate you). If you combined that idea with storing digital receipts at your bank, how much easier would it be for the consumer and how many more customers would join the merchant’s loyalty program as a result?

With the advent of new apps like Square Register and offerings such as Pi, Albert and Leo from the Commonwealth Bank of Australia for example, smaller merchants who cannot afford to invest in a more comprehensive POS system or customer loyalty program will also be able to benefit. These products turn the mobile device into a combined sales register and payment terminal and would provide the digital receipt generating engine that will open the door for SMEs to offer this innovative solution to their customers.

I think merchants have little to lose and a lot to gain if they were to embrace this idea.

The concept of storing digital receipts with their respective payment transactions could be implemented globally to the great benefit of consumers, banks and merchants. Although ubiquitous, it still allows for merchants and banks to differentiate themselves by the choices they make regarding POS systems, receipt design and marketing companies, loyalty programs and PFM products. 

It’s a win for all parties involved.