Archive for April, 2016

Banks Will Know Chipotle Is Going Bankrupt Before Chipotle

Friday, April 22nd, 2016

chipotle02Following Chipotle’s e-coli scare late last year, the burrito chain’s stock has been on a free fall. From a peak of ~$750 in October 2015, the stock price plummeted to ~$400 at the height of the crisis last month. At the time, it was rumored that the company might be forced to file for bankruptcy.

Whether the rumor is true or not, banks will know Chipotle is going bankrupt before Chipotle.


Because they’ve been tracking footfall at Chipotle’s outlets from the space. Yeah, that’s right. From. The. Space.

This data is made available by Orbital Insight, one of a new breed of companies that gather data from the space by floating low earth orbit satellites.

This is not all: According to a recent article titled “Traders’ New Edge: Satellite Data” in Fortune, Orbital Insight “also zeroes in on the parking lots of more than 50 U.S. retailers, providing intel about store traffic to hedge funds and other investors.” So the investment community will know whether a retailer’s sales will rise or fall before the retailer.

These examples show that, when it comes to making a quick buck, financial services follows a “no holds barred” approach towards gathering and analyzing data. Even from above the earth.

Now, when it comes down to earth, many finsurgents claim that traditional banks, financial services and insurance companies do little to analyze the petabytes of data they have about their customers’ spending habits. This doesn’t resonate with my personal experience and anecdotal evidence:

  • A bank made a snap offer for mortgage when I encashed my fixed deposits to fund a house purchase (click here for more).
  • Cardlytics claims over 500 banking industry customers in USA for its credit card spend analysis technology.

However, that’s not the point of this post.

I’m more interested here in understanding how brands – in BFSI and other industries – can translate data-based insights into customer engagement actions. I realized the challenges involved in this process when I chanced upon the following tweet:

This is a great example of a brand using analytics to make a highly relevant offer and, that too, in real time. As a marketer and CX advocate, I’d laud the private clinic and the drug company for reaching out to @rajagopalcv to help him save money (by offering a discount) and make his life convenient (by offering home delivery) before he went off to the nearest pharmacy to buy the medicines at full price.

However, as the consumer, does @rajagopalcv share my view? Doubtful. He’s evidently peeved about the loss of privacy. He doesn’t seem to have registered the offer.

Lest we justify his outburst on the grounds of data privacy, I’ve visited a few private healthcare providers. Each of them asked me to sign a form in which there was an opt-in clause to the effect, “I agree to receive communications from our authorized partners”. Based on my personal experience, I’m quite sure that @rajagopalcv would’ve similarly given his consent for allowing the private clinic for sharing his data with third party companies. (NOTE: In the absence of HIPAA-like health data protection laws, a patient’s consent is deemed adequate for disclosure of health information in India.)

So, technically, this guy shouldn’t be cribbing about getting this targeted offer. Despite that, he does. That too, in public.

chipotle-fi-2He’s not alone. A couple of friends and family members whom I quizzed sided with him and said they’d also be ticked off under similar circumstances.

So, even when they opt in, consumers don’t necessarily welcome relevant and timely offers.

Right or wrong, logical or illogical, this is consumer behavior. Brands ignore such vagaries and vicissitudes of the market at their own peril.

The problem is exacerbated when brands deal with sensitive information related to a consumer’s finances as those in BFSI do. And involve issues that go beyond the realm of technology.

Before going further, let me recast the above offer in the context of retail banking as an example of BFSI:

You close a mortgage with a bank and receive a discount on home furnishings from a leading retailer.

Assuming that you checked a box in the mortgage application to receive offers for third party products, here are some questions to which I’m seeking answers:

QUESTION 1: Would you feel better or worse that the bank has shared your financial information with a third party?

QUESTION 2: Should the bank ignore complaints – à la @rajagopalcv’s – and continue to make more targeted offers? (After all, it has been claimed that Winners Incite Action. Losers Wait For Actionable Insight and banks don’t want to be losers)

QUESTION 3: Should the bank take the safe way out and stop sending targeted offers altogether?

Please let me know your thoughts in the comments box below. Thanks in advance.

Scoping Can Make Or Break A Deal

Friday, April 15th, 2016

Whenever they’re asked to sweeten a deal, most vendors respond with a discount.

However, it doesn’t always have to be that way. In Dropping The Price Is Not The Only Way To Sweeten A Deal, we suggested several alternative tactics for sweetening a deal without dropping the price. We exemplified them with our interactions with the following vendors:

  • Acme Accounting: This accounting firm increased its scope of work without charging anything extra
  • Acme Campaigns: This appointment-setting firm reduced its scope of work without proportionately reducing its price

As you can see, these alternative tactics work by adjusting the scope of work. So, we’ll collectively call them “Right-Scoping”. If they involve a price drop, it’s for a reduced scope, so that’s not the same as discounting. In fact, as the below diagram shows, right-scoping has the opposite effect of discounting.


Discounting leads to a loss. Right-Scoping leads to a profit.

Just to make the distinction between discounting and right-scoping clear, let’s take a simple example of a product that has a list price of US$ 10 per kilogram:

Discounting would mean selling it for US$ 8 per kg, thereby yielding a net realization of 8 dollars per kilogram (being US$ 8 / 1 kg).

Right-Scoping would mean selling half a kg of the product at US$ 6, thereby yielding a net realization of 12 dollars per kilogram (being US$ 6 / 0.5 kg).

In this post, we shall look at the following benefits of Right-Scoping closely:

  1. Make or break the deal
  2. Increase margin

We’ll continue to the use the same two examples from the previous post to explain these benefits.


Acme Accounting: Activities like collection of accounting material from our office, making a photocopy of the entire set and delivering the copy in a file back to us were vital to us. But it was painful for us to carry them out. If Acme Accounting had insisted on excluding them from its scope of work, we’d have looked for another vendor. Acme Accounting won the deal by taking these activities into its scope of work without charging anything extra.

Acme Campaigns: We had the field sales capacity to handle only 8 appointments per month. Therefore, the additional 8 appointments in Acme Campaigns’s original proposal of 16 appointments per month had no value for us. Had Acme Campaigns insisted on sticking to its original scope, we’d have shopped around. By halving its scope, Acme Campaigns made an offer we couldn’t refuse.


Acme Accounting: By not giving a discount, Acme Accounting preserved its margins. (We’d have selected Acme Accounting even if it had asked for a slight price increase to compensate the increase in its scope, in which case the firm would’ve enjoyed higher margins).

Acme Campaigns: The company could halve its cost of delivering 8 appointments a month instead of 16 appointments a month. We were willing to pay a 30% lower price for the reduced scope. By agreeing to a price that wasn’t 50% lower, Acme Campaigns could increase its margin.


As the above examples show, Right-Scoping can help you to boost your win-rates and improve your margins.

You can use Right-Scoping whenever your deals have either or both of the following characteristics:

  • You can carry out a certain set of activities for a lower cost than your customer. It makes sense for you to take them into your scope of work. This is the basic principle behind outsourcing.
  • Your customer attaches lower value to a certain set of deliverables than it costs you to deliver them. Therefore, it makes sense for you to not offer them. This is the basic principle behind unbundling.

If you need help with structuring the best scope for a given deal, we’re there!

Publix Deserves A Standing Ovation

Friday, April 8th, 2016

publix-fiYou generally give standing ovations to speeches, concerts and other live events. On one occasion, I literally stood up and clapped after reading a book (it was “Gods of Guilt” by Michael Connelly in case you’re interested to know).

But it’s unheard of to compliment magazine articles with a standing ovation.

But that’s what I did when I read the article titled My Five Days of ‘Bleeding Green’ in a recent issue of FORTUNE magazine. While the article was very well-written, it was its subject that stirred me.

Welcome to Publix.

The Florida-based retailer has been ranked 67th in the magazine’s list of “Top 100 Best Companies to Work For”. In case you’re wondering why I haven’t mentioned the year of the list, it will become clear in a moment. Written by Christopher Tkaczyk, the article chronicled the author’s experience of being “embedded” for five days in a Publix store in Lake Nona, a suburb of Orlando, Florida.

Here’s what I admired most about Publix:


  1. SIZE: Publix is big – FORTUNE 100 sorta big (it’s ranked 101 to be precise). It’s the largest employee-owned company in the world.
  2. FOCUS: Publix has reached its size with a presence in merely six US states.
  3. CONSISTENCY: The retailer has been one among the Top 100 Best Companies every year since Fortune first published the list in 1998.
  4. HUMANENESS: Publix has never laid off a single employee in its 86-year history.
  5. CULT-LIKE CULTURE: Publix enjoys a level of employee loyalty that others – in or out of the retail industry – can only dream about. Compared to the retail industry’s average of 65%, Publix’s attrition rate is only 5%. This is astounding in an industry where, according to a friend who works as a CxO of a pioneering retailer, employees change jobs for a mere salary hike of US$ 10 per month.
  6. MERITOCRACY: Anyone can reach any level in Publix: Its soon-to-be CEO Todd Jones started out bagging groceries at the company 36 years ago.
  7. CONTRARIAN: Publix shatters the myth – proliferated by self-serving financial advisors, I suspect – that the longer you hold a stock, the greater your return will be.

I once stumbled into a Miami-based Publix store a few years ago. I never knew the company’s street cred at the time. I’ll be sure to look out for a Publix whenever I’m next in its neighborhood.


The shorter you held a Publix stock, the greater was your return!

I’m not alone in my adulation of Publix. “It’s the kind of company I’d like to buy,” Warren Buffett recently told Fortune. “It has a terrific record in a very, very, very tough industry. There’s a certain amount of magic down there in terms of running the place.”

There are times when you hear about a company and wish that you worked there (or created a company like that). But, on almost all those occasions, you’re left with a nagging doubt on whether its actual employees shared similar feelings.

I had no such undercurrents when it came to Publix.

As Alan Veith, the manager of the store in which the author was embedded for the week, says at the conclusion of the article,

“I can’t imagine a life better than the one I’m living, thanks to Publix.”

You can’t get a better endorsement than that!

How To Really Kill Cash

Friday, April 1st, 2016

They said cash is costly. It didn’t work with merchants.

They launched one mobile wallet after the other to drive cashless behavior. It didn’t work with consumers.

They scared people away from currency notes, claiming they contain all kinds of germs, bacteria and viruses. It didn’t work with anyone.

  1. 85% of world’s transactions happen in cash. Source: Business Insider
  2. rkc-fiUS currency in circulation is growing, according to the chart on the right from The Wall Street Journal
  3. There are mile-long queues of people waiting to withdraw cash from ATMs (Source: Finextra). Ironically, mobile apps were supposed to eliminate cash but many of them are now facilitating cash withdrawals from ATMs! The slew of such apps launched in the last 2-3 months makes me wonder if “cardless ATM cash withdrawal” will trigger the next fintech killer app
  4. For Millennials, cash is still king. Source: Financial Brand
  5. And, according to PayPal CEO Dan Schulman, cash will never die.

Where did it all go wrong?

I tend to believe that the “War on Cash” brigade has caused the current state of affairs by:

  1. Being self-serving while promoting cashless payments. As FORTUNE rightly observes in its article about MasterCard, “(CEO) Banga espousing the benefits of going cashless is a little bit like Howard Schultz saying everyone should drink coffee – after all, this is a company that makes money on transaction fees every time someone uses credit instead of cash”
  2. Refusing to acknowledge that cash is still the only truly realtime retail payment method in the world (Source: DB Research). Cash is also the only form of payment that accomplishes transfer of value between payor and payee without any dependency on bank, hardware, software, network, battery, and other third parties
  3. Naively linking all cash use with drugs and tax evasion, thereby casting aspersions on the legitimacy of several industries. This puts off etailers, QSRs and many other industries that carry out a lot of genuine cash transactions and pay their taxes like any POS and mobile wallet wielding member of the aforementioned brigade
  4. Barking up the wrong tree that cash is costly. I haven’t come across a single merchant who refuses cash but accepts cards. A bunch of retailers in USA have sued banks over interchange fees, saying it’s their second highest cost after healthcare. So it’s silly to keep claiming that cash is costlier than cards.

Governments and regulators have tried to reduce cash by mandating lower interchange fees and EFT gateway charges. However:

  1. There’s no evidence from countries where interchange has already been capped that merchants have passed on the benefit of lower card processing charges to consumers by way of lower prices
  2. When regulators repealed the “no-surcharge” rule, merchants have been known to slap extra charges of as much as 7.5% for accepting cards although their card processing costs never exceeded 2.5%
  3. Lowering interchange fees will disincent banks from increasing the spread of POS terminals, which will in turn restrict card acceptance.

So, I doubt if regulatory intervention will work, either.

However, all is not lost.

Finserv can kill cash in many areas by reorienting its approach. It should stop being inward-looking and start focusing on the needs and concerns of payors and payees, who’re the two most important stakeholders of a payment transaction. I can think of the following tactics for doing this:

  • Relax two factor authentication for online payments below a certain threshold. This will reduce the friction of online payments and eliminate the risk of failed payments, both of which will encourage many people – including me – to go back to using credit cards online
  • Popularize the “card on delivery” option to coax ecommerce customers to pay by cards even if they’ve opted for cash on delivery at the time of making the purchase. As of now, very few etailers support this option. Even the ones that do support it use flaky smartphone-based POS terminals on which every other transaction fails. If you’re wondering why this involves finserv, merchants have complained that banks are charging exorbitant rates for supplying GPRS POS terminals.

  • Reduce hidden cost of electronic payments. By eliminating CICO costs described in my blog post Cash in Hand Is Worth More Than Card In Bush, merchants like cab drivers will stop throwing temper tantrums when their customers proffer their credit cards for payment
  • Provide enhanced remittance information along with electronic fund transfers so that payors are sure that their payments will reach the right beneficiary and that payees will receive enough information to be able to match their receipts with the true purpose of payments. Payments UK’s “Enhanced Data with Payments” is a great initiative in this direction


  • Stimulate credit card use. I know many people who don’t use their credit cards. While some of the reasons for their behavior are genuine, most of them are rooted in misconception e.g. credit card means debt. Banks can get fencesitters among their cardholder base to shed their inhibitions and start using their credit cards more frequently. There are many ways of doing this. I’ll describe them in a separate blog post but suffice to mention for now that these include frictionless reward redemption, inherently superior fraud protection, better accounting, and so on.

While I doubt if cash will ever disappear totally – even after 190 years – I strongly believe that the above tactics can be the low hanging fruits for replacing cash by electronic payments. Executing them will call for changes in products, processes and mindsets of banks and fintechs alike, as well as cost money. But I’m sure banks will be able to realize a decent return on their investments by way of greater interchange revenues and reduced cash handling costs at their end when people move to cashless methods of payment.