Archive for March, 2011

Why B2B Suppliers Should Accept Credit Cards

Saturday, March 26th, 2011
I learned from a recent experience as a supplier that, even in the B2B world, there are certain payments that are small enough to be authorized by VP-level of people in the customer organization. Such payments can be made in minutes by VPs using their credit cards and then claimed back from their company via their standard claims reimbursement process.
This experience exposed “frictionless payment initiation” as one more reason why suppliers should consider accepting credit card payments, especially for cross-border transactions. In fact, in such situations, acceptance of credit card boosts the chance of the sale happening in the first place.
On the other hand, when I wasn’t able to accept credit card payments due to issues being faced by PayPal in India, the following alternatives proved to be extremely painful and almost killed the sale:
EFT. According to their company policy, only the Group Chairman of the customer organization was authorized to initiate EFTs. When this person could finally find the time for this activity amid his busy schedule, they discovered that their bank – a local community bank in Illinois, USA – apparently lacked knowledge of terms like BIC involved in cross-border payments and hence had to regret inability to process such a transaction.
Western Union / MoneyGram. Could be used to make payments only to me as an individual, not to my company. So, this option was also ruled out.
Cheque. While this was the option that worked eventually, it took 35 days to sight good funds in my company’s bank account, not to mention that it attracted some fees.
While my experience possibly pertains only to a small percentage of B2B payment types, it does illustrate the merits of accepting credit card payments in such niches.

cc017-11 and other B2C merchants, who have long been accepting credit cards, have recently started protesting against the 1.5-2% merchant fees charged by banks for processing credit card payments. That being the case, you might find the title of this post a bit strange and wonder why we’re recommending B2B suppliers to start accepting credit card payments now.

Seasoned B2B sellers know that, even in the B2B world, there are many ticket sizes that are small enough to fall within the approval authority of VP-level of employees in many midsize to large customer companies. As a result, VPs can strike a deal quickly and make payments in a few minutes by using their credit cards and claim the expense back from their company via their regular claims reimbursement process.

As a result, credit cards deliver a highly frictionless buying experience.

As a matter of fact, for cross-border transactions that involve the flow of goods or services across national borders, the ability of the supplier to accept credit card payments might decide the fate of the sale itself: Accept credit card, the sale happens; refuse credit card, the sale goes for a toss.

On the other hand, if the supplier is unable to accept credit card payments for whatever reason (e.g. issues being faced by PayPal in India, more on that in a another post), the extent of friction found with most other payment methods might actually derail the sale, as we found out during a recent transaction with an American company:

  1. Electronic Fund Transfer (“Wire”). According to the customer’s company policy, only the Group Chairman was authorized to initiate wire transfers. It took a few days for him to find the time for this activity amid his busy schedule. When he finally got around to doing it, we were shocked to hear from him that their bank  – a local community bank in Virginia, USA – had no clue how to process a cross-border payment involving BIC and other terms it was hearing about for the first time. Unbelievable, but true!
  2. Western Union / MoneyGram. Since this option can be used to only make payments to an individual, and not a business, it was principally unsuitable in the present B2B context.
  3. Check. While this was the option that eventually worked, it took almost 30 days for the money to be credited to the company’s account. Besides, it attracted hefty charges to FedEx the check from the US to India and a payment processing fee of almost 1% of the transaction value.

While our experience might be one-off and hardly representative for many B2B payments, it does illustrate why B2B suppliers in certain circumstances should strongly consider accepting credit card payments.

They Who Invented The Car Can Do Everything

Friday, March 18th, 2011

mb01_250wIt’s widely known that Ford Motors developed the assembly line to mass produce automobiles so that they became affordable for everyone including their own shopfloor workers.

Thanks to the powerful legend of Henry Ford and Model T, it’s also popularly believed that Ford invented the automobile.

But, this is not true.

The car was actually invented by Mercedes Benz in 1886 as the company’s recent ads point out. Commemorating the 125th anniversary of the invention, the luxury car maker – which is a division Daimler AG, the company named after Herr Daimler, the person who actually invented the automobile – lists its other pioneering innovations such as airbags, ESP, ABS, and so on.

I learned about the German origin of the car from another ad, which, by the way, happens to be one of the best ads I’ve ever seen.

bw01_300wThis was a huge sign placed over the giant clock on the main concourse of the Frankfurt Hauptbahnhof (Central Railway Station) during the International Automobile Exhibition. IAA, as the exhibition is known in the German language, is the world’s largest automobile fair that is held once in two years in Frankfurt. The first three lines of the ad translate to:

The Italians invented the horn,

The Hessen the IAA.

And we, the car.

Apart from the truth, the first line echoes the popular German opinion that Italy is a noisy and chaotic place – at least by European standards. Since most people seeing the sign were visitors to the famous IAA fair then taking place in Frankfurt, a city located in the German state of Hessen, the second line is self-explanatory. It was the third line that enlightened me about the fact that the car was invented in Germany, more specifically in the state of Baden-Württemberg, whose government was the sponsor of this ad. Incidentally, Daimler AG’s headquarters is located in Stuttgart, which is the capital of this state.

Having informed everyone that it invented the car, Baden-Württemberg felt emboldened to proclaim that it could do anything – that’s what the first sentence after its name means.

After such a heavy display of braggadacio, the state government probably found it necessary to show a touch of humility. So, it signs off the ad by excluding ‘High German’ from its claim of omnipotence. This is a reflection of  the legendary difficulty faced by citizens of Baden-Württemberg in speaking ‘High German’, which is the standardized version of the German language used for formal communications amongst Germans hailing from different states of the nation having their own dialects.

Banks Undermine Branch Power

Saturday, March 12th, 2011
I recall occasions when I’ve visited branches of a couple of UK high-street banks (not Barclays) because I wanted the advantages of a high-touch branch environment to put through cross-border fund transfer and other tricky transactions. However, after standing in a long queue, when my turn would come, the bank staffer would tell me to use Internet Banking or Phone Banking without exhibiting the slightest sensitivity to why I was there in the first place.
Quite frankly, with such practices, banks alienated customers visiting branches and undermined the potential of their own branch network for doing cross-selling and upselling.
By sacking financial advisors from branches, while banks can undoubtedly save costs, I strongly doubt if they can retain or grow their revenues. Spurned by the branch, customers who are only comfortable in a physical location are likely to head to the nearest Western Union or MoneyGram outlet. Whereas, customers who don’t mind the online channel will find the websites of Xoom and other non-bank remittance providers to be superior destinations compared to Internet Banking portals of their own banks which are so full of friction and suffer from inferior usability.

bankbranch01_200wBarclays announced recently that it was shedding 1,000 branch jobs in a move to stop offering in-branch financial planning advice. In my personal experience, banks have alienated customers visiting branches, which is responsible for the current sorry state of affairs.

I recall occasions when I’ve visited the branches of a couple of UK high-street banks (Full Disclosure: Barclays wasn’t one of them) because I wanted to take advantage of their high-touch environment to put through cross-border fund transfer and a few other tricky transactions. I’ve done this despite being aware that in-branch service normally attracts higher fees. However, after standing in a long queue, when my turn would come, the bank staffer would tell me to use Internet Banking or Phone Banking without exhibiting the slightest sensitivity as to why I visited the branch in the first place.

Quite frankly, with such practices, banks have undermined the power of their branch network to generate incremental revenues via higher fees and boost customer advocacy via cross-selling and upselling.

By sacking financial advisors from branches, banks can undoubtedly save costs, but I strongly doubt if they can retain their customers or grow their revenues with this misguided approach. For, spurned by a bank branch, customers who prefer a physical location for transferring money abroad are likely to head to the nearest Western Union or MoneyGram outlet. On the other hand, remitters who don’t mind using the online channel will find the websites of Xoom and other non-bank remittance service providers to provide a far superior UX as compared to their banks’ Internet Banking portals that are beset with tremendous friction and suffer from poor usability.

How Remote Outposts Can Leapfrog Their Global HQs!

Wednesday, March 9th, 2011

I read today that  HSBC UK is planning to issue credit card sized keycode devices that will generate onetime passwords for accessing its Internet Banking portal. My immediate reaction was:

Finally HSBC UK does it!
HSBC India issued RSA tokens for One Time Password (OTP) generation for Internet Banking access more than six years ago. I didn’t have to visit the branch to collect the token which came to my home address by post. It got activated upon first use. Losing the token, battery running dry and all other standard concerns around this technology have somehow spared me so far, and I’ve been a satisfied user of this security method.
Around four years ago, I visited the HSBC branch in Canary Wharf to open a bank a/c. After finishing the entry of the basic particulars into her PC, the manager who was doing this on my behalf asked me to come over to her side of the table and enter a static password for Internet Banking access on her computer.
Given my elegant, self-service experience with HSBC India, I was surprised to come across a somewhat old-fashioned process in HSBC UK – and that too at the branch right below its global HQ!
When I pointed this out, the manager admitted that, unfortunately, all system enhancements in UK were put on hold pending a multi-year core replacement. Looks like this has finally happened!
This experience taught me a lot about how legacy systems stymie progress in one part of a bank whereas their absence infuses agility into its other parts, however remote they may be from the headquarters.

Finally HSBC UK does it!

vasco_tokenHSBC India issued tokens for One Time Password (OTP) generation for Internet Banking access more than six years ago. I didn’t have to visit the branch to collect the token which came to my home address by post. It got activated upon first use. Losing the token, battery running dry and all other standard concerns around this technology have somehow spared me so far, and I’ve been a satisfied user of this security method.

Around four years ago, I visited the HSBC branch in Canary Wharf to open a bank account. After finishing the entry of my basic particulars into her PC, the manager who was doing this on my behalf asked me to come over to her side of the table and enter a static password for Internet Banking access on her computer.

Given my elegant, self-service experience with HSBC India, I was surprised to come across a somewhat crude and old-fashioned process in HSBC UK – and that too at the branch right below its global HQ!

When I pointed this out, the manager admitted that, unfortunately, all system enhancements in UK were put on hold pending a multi-year core replacement.

Looks like this hold has finally been removed.

This experience taught me a lot about how legacy systems stymie progress in one part of a bank whereas their absence infuses agility into its other parts, however remote they may be from the headquarters.

The Mark Of A Great Product

Saturday, March 5th, 2011

I think it was Pink Floyd who said, “we never thought of it that way”, when someone asked them to comment on a particular interpretation of one of their songs.

It’s the mark of a great “product” when its consumers think of more / different uses for it than are contemplated by its creators.

Microsoft Word, Excel and many world-class ERPs show such signs.

GTM360_GIFT_SAMPLE_KB_B_50pctIn our own sphere, we came across such a product last year. My company GTM360 Marketing Solutions developed go to market solutions for a mobile phone based secondary sales application. The company that owned this product positioned it primarily as an automated solution to replace what it termed as “the tyranny” of paper-based process followed by FMCG and CPG companies. However, when we did a deep dive study of the product, we discovered that one of its customers was using a rarely-touted product feature that permits realtime discovery of new stores that opened in existing beats of its salespersons. Equipped with this source of competitive advantage, they were able to expand their market. We recognized that this was a powerful “use case” that gave the product an entirely new value proposition. By packaging it via a marketable item, we were able to propel the product into a different orbit of sales pipeline, ticket size and sales cycle.

More recently, we came across a sign of greatness in another product. Having nothing to do with IT, this was a portable LED lamp that we chose as our corporate gift to give away to our customers and prospects for the new year.

The vendor from whom we bought this product described it as an LED lamp that ran on a pair of AA batteries (batteries included). Soon after we began distributing the gift, we received a lot of appreciation for it from many recipients who had found a plethora of uses for it, such as:

  1. Light up a laptop keyboard while traveling in a car in the night.
  2. Flashlight in the dark.
  3. Bedside reading lamp. If people fall asleep while reading – as many do – they risk the book or their hands falling on the power cord of regular table lamps, which could crash the lamp and break its shade and bulbs, if not cause electrical short circuits. Being cordless, our LED lamp neatly sidesteps this problem.

One recipient waxed eloquent that this “lovely lamp … will surely light up my new year!” Another has ordered it as a giveaway for guests attending a family function, thus launching this product into far beyond the realm of corporate gifting market for which it was originally conceived.

When we selected this lamp, we thought of it as nothing more than a physical product that still remains relevant in today’s digital world that has torpedoed traditional gifting favorites like pens and diaries. We’re pleasantly surprised that its recipients have found so many uses for it.