The way we pay for things changed dramatically about a decade ago when we went all in on internet shopping. As it turns out, we may now be entering another period of great change in the marketplace, with how we pay for things.

An indication of that change is the American Express and Twitter announcement of a joint venture that takes advantage of social media and alternative payment options. Amex cardholders can now sync their card with their Twitter account to receive tweets about items and pay for them via Twitter.

According to the Prepaid Easy Blog, users will receive a tweet regarding an offer on an item. To purchase the item, users simply tweet a specific hashtag and their credit card account is charged.

“We’re leveraging our unique technology and closed-loop network to introduce a seamless solution that redefines what’s possible in the world of social commerce,” said American Express Senior Vice President Leslie Berland in a press release.

Actually, American Express cardholders have been able to sync Twitter offers for about a year now, although they weren’t actually able to purchase anything.

According to the press release, Amex “first launched on Twitter last March to deliver couponless savings to cardmembers who tweet special offer #hashtags from merchants.”

Now they can buy the items on offer, as well.

“Based on the initial success of Amex Sync for offers, we know there is significant power in combining our assets with Twitter’s platform to bring value to cardmembers and merchants,” said Berland.

Customer service is the prepaid industry’s biggest cost—it has to be done right. Done poorly, it means high costs for customer interactions, loss of customers and profit, and damage to customer loyalty and branding.

What raises customer-service costs?

• An agent or automated system providing incorrect information.
• Repeat calls because of misinformation.
• Inconsistent customer service experiences.
• Poorly designed voice-user interfaces.
• Low containment rates because of poorly designed automated systems.
• Low success rate on calls (misinformation, attrition, et cetera).

Every call has a cost, especially calls with live agents, so longer-than-necessary calls and repeat calls cost money needlessly.

Interactive voice response, or IVR, makes calls quicker and easier for the caller and company. For all but the most complicated questions, these systems make customer service via telephone more efficient as a whole.

Plum Voice, as an independent IVR service provider, has an incentive to lower your costs through customized applications capable of handling your customers’ needs. Vendors that offer both automated systems and live agents, by contrast, have no incentive to maximize automation rates because they make more money when calls go on to live agents.

How does Plum Voice lower those costs?

We’ve built 1,000s of voice applications. We leverage that experience to deploy user-friendly caller interfaces without any of the pitfalls listed above. We use analytics to understand which menus callers are accessing most frequently or even what happens on every call. We also use an iterative development process to constantly improve the performance of our voice applications.

Plum is much more than a platform provider. We have deep expertise in all aspects of call-center and enterprise-network integration, and our services extend beyond those of a typical IVR vendor.

“Ramp-up” services provided:

• Extend platform to accomodate integration throughout.
• Build application or work with developers to improve code.
• Voice-user interface design services.
• Portable, standards-based code: investment stays with company.
• Integration with any system.
• Consulting on PCI best practices as they relate to voice app.
• MPLS setup.
• Data networking services.

The prepaid card industry is big enough now that it’s gotten the attention of lawmakers who may put laws on the books to address what they view as a market needing regulation.

In a July 2012 article in the Banking & Financial Services Report—An Uncertain Regulatory Future for Prepaid Cards—financial services professional Monica C. Platt talked about this possible new regulation.

According to Platt, prepaid cards are essential for the “30 to 40 million un- or under-banked consumers who either cannot open a traditional bank account or choose not to.”

From the article:

The various types of prepaid cards represent a market that is expected to grow to $427 billion this year [2012], and reach $672 billion in 2013.

However, according to Platt there aren’t really regulations in place for some types of prepaid cards out there—not compared to the regulations in place for traditional debit and credit cards.

Platt says that may not be the case for very long, though.

Efforts are underway on many sides to change this, mostly through regulations promulgated by the Consumer Financial Protection Bureau (CFPB).

Platt speculates that interest in prepaid legislation will only grow as the market does, most likely with the CFPB leading the way.

Given the CFPB’s focus on transparency in other financial services markets, it is reasonable (especially in light of consumer advocates’ clamor for more protections) to expect the CFPB to focus more on prepaid cards in the future.

For all those people who haven’t heard of Bitcoin yet, they probably will soon. Introduced in 2009 as an alternate form of currency, Bitcoin is establishing itself as a viable alternative to traditional payment and banking.

As of February 14, in fact, social media site Reddit has begun accepting Bitcoins for purchasing Reddit Gold—Reddit’s own form of currency that users of the site can give to each other—according to Payments Journal.

From Reddit’s blog:

We’re using Coinbase as our Bitcoin payment processor and Stripe for credit cards. Right now we’re only accepting credit card payments from the U.S. and Canada, but Bitcoin payments can be made from anywhere in the world.

Payments Journal says that the move is “a logical step towards their goal of reaching the mainstream. Reddit is one of the fastest growing social media platforms and is also staunchly dedicated to the rights of Internet users, including the right to privacy. Because Bitcoins inherently prevent the capture of identifiable transaction data, this partnership is a good match.”

Bitcoin started as the brainchild of superprogrammer Satoshi Nakamoto, who may be one person or several, we don’t know. In any case, Nakamoto had had enough of the financial system that failed in 2008 and introduced a virtual currency that lives in digital space.

Basically, Bitcoin is currency, but it’s not controlled by central authorities—it’s controlled by cryptography within the software program. According to a New Yorker article, Nakamoto wanted a new currency immune to “unpredictable monetary policies as well as to the predations of bankers and politicians.”

(You can read more about it in my Currency About Trust blog.)

But while Bitcoin can help the average user keep their financial information more private, it may also enable criminals to make purchases anonymously. That is, unless they’re using Coinbase.

According to Jon Matonis of the Monetary Future, Coinbase collects personal information from its users as a requisite for signing up—including “their name, address, phone number, email address, and bank or credit card numbers. Before using the service, customers may further have to give a social security number or birthdate, and they are subject to credit checks or identity verification by third parties.”

From Coinbase’s privacy policies:

We may share your personal information with law enforcement, government officials or other third parties when we are compelled to do so by a subpoena, court order or similar legal procedure.

That’s new. And while, obviously, criminals will just avoid Coinbase as a payment processor for Bitcoin purchases, reassuring policies like this (reassuring to law-abiding citizens, that is) may just help Bitcoin reach the mainstream.

Conventional wisdom says that firms that invest in the right technology outperform those that don’t. They’re able to achieve better economies of scale, automate redundant processes and more tightly control customer service. By doing those things, companies can maintain brand value.

One way to ensure that customer service interactions are handled in a cost-effective manner and in a consistent fashion is to invest in automated systems such as interactive voice response.

In the prepaid space, for example, one of the biggest costs is customer service. The more a customer calls to get their balance, et cetera, the more service costs are associated with a gift card or prepaid card.

Knowing which apps will help automate these processes can enable any company that’s managing a card program to control costs and handle customer service effectively.

The investment in IVR is made to not only automate repetitive customer service inquiries but to protect the brand by collecting real-time feedback from both employees and customers.

A big part of customer service is listening—to those customers and employees. To reach them, companies can deploy phone surveys over various communication mediums. Plum Surveys can collect data through mobile, Facebook, Twitter and more.

As business changes, software systems can also adapt. In the prepaid industry, for example, growth is high—businesses are changing constantly. The benefit of automated software is that it’s scalable, so as a company grows, the system grows as well.

In fact, using these systems becomes less expensive per user as volumes increase. This is especially true for hosted IVR because it’s offered as a service, so businesses can do a big deployment or small; regardless, they only pay for what they use.

With hosting, the service contract can grow or shrink as needed, without factoring in a piece of equipment. Companies don’t have to make large capital expenditures; they pay for a scalable service as an operating expense but not an expenditure.

As a result, hosted IVR provides return on investment immediately. And while it may cut into a company’s profit margin, it’s not some large piece of equipment depreciating, year by year. It’s always the right size, and always up-to-date.

High growth is undoubtedly a positive for most companies, but it does bring with it some potential downfalls. Rapid growth puts a strain on companies in a number of ways.

From the European Financial Review—

Growth means change. Growth inevitably stresses people, processes and controls. Without appropriate preparations, growth can outstrip management capabilities, financial controls and quality controls. Rapid growth also can dilute culture, brand and customer value propositions.

Essentially, rapid growth isn’t something to rush into without thinking about it seriously beforehand, and planning it all out. In some cases, rapid growth can have a negative effect on the entire brand.

Toyota, for example, has long been known for the quality of its vehicles, but in recent years a series of recalls has dented Toyota’s quality armor. According to the European Financial Review, Toyota instituted changes in an effort to become the world leader in vehicle sales—quantity, not quality. Those changes affected quality, and led to recalls.

The same for Starbucks, according to the European Financial Review. In an effort to expand, Starbucks put branches everywhere.

…[Starbucks,] who in order to meet unrealistic growth goals opened stores in subprime locations, cannibalized existing stores and made operational changes that diluted the customer experience. Starbucks admitted its wounds were self-inflicted and led to the commoditization of its strategic differentiators.

The Catlin and Cookman Group, corporate growth consultants, put together a list of pitfalls to avoid during high growth. Here are a few:

Not knowing what to expect. Many entrepreneurs admit they should have started earlier on preparing for growth and made “changes like hiring, financing and building infrastructure much sooner.”

Not listening. If company leadership doesn’t listen to its staff or customers, it could lead the company down a negative path.

Not focusing the company. Without focus and a plan for growth, a company will be reactionary instead of proactive. Lack of clarity about direction, priorities, targeted opportunities, expectations and values leads to confusion and lots of wheel spinning without solid results.

Not communicating enough. A company’s vision should be clear to all its employees and also all its customers. This pitfall arises from not making vision and alignment the number one priority of leadership.

One point that’s not on this list is neglecting or underestimating the effect of growth on customer service. During high growth, customer service can slip if a company isn’t on top of it.

For example, slipping customer service can mean not enough call reps in a call center to handle increased call volume. In short, customer relationships may suffer because customer service can’t keep up with the business.

When the European Financial Review looked at companies that did well with rapid growth, it found that many had an organized approach to growth, or an internal enabling growth system that “created an environment that produced high employee engagement resulting in constant improvements to their products, services, business processes and customer value propositions.”

Next up, Automation for Growth…

…continued from Growth of Gift Cards…

The prepaid industry is growing by leaps and bounds, and a segment of the consumer population known as the underbanked may end up being a big part of that growth.

Stacey Sicurella, who writes for the Gift Card Partners blog, has a couple of interesting statistics. According to Sicurella, U.S. companies spend about $23 billion on gift cards. And over half of those companies (52%) use “gift cards to recognize and reward employees, sales folk, partners and customers.”

Clearly, companies are recognizing what gift cards can do for them. And many of those are looking at the underbanked as a future customer base. The underbanked are those consumers who either struggle to establish banking and credit accounts or choose not to for reasons such as mistrust of banking institutions.

John Adams of Bank Technology News has researched what banks are starting to do with technology to reach more underbanked consumers. These consumers often turn to check-cashing services, but those services tend to charge high fees, a “chronic problem that can prevent consumers from establishing a track record that makes them more attractive to banks,” according to Adams.

Financial institutions know that the underbanked are a huge potential customer base—to keep the industry’s growth going—if they can find the right customers.

From Adams’ report:

The financial institutions can spot healthy customers among prepaid users to grow deposits and, eventually, credit and loan accounts…

…Financial services companies are using transaction tracking and analysis of payment tendencies to identify consumers who are a good bet for additional credit and deeper financial relationships.

Adams says financial institutions could use these types of technology to reach underbanked consumers with less risk, because analytics could tell them how people handle their recurring debt.

“You can look at the stored value card and see how people keep a balance on it, and when money comes in and out,” researcher Marc DeCastro of IDC Financial Insights told Adams. “You can see if they are spending it at the dog track or if they are buying gas.”

So, the prepaid industry is growing. But can high growth be a pitfall? Read more in High-Growth Growing Pains…

The prepaid card industry continues to grow, with gift cards leading the way, and it doesn’t look like it’ll slow down anytime soon. Because retailers have realized that gift cards are more than just digital versions of paper gift cards.

According to the Gift Card Partners blog, “much of this growth [comes] via gift card categories like digital-content (online games and social networking credit) and prepaid mobile; gift cards received more loads for these digital-content activities. Retailers are also doing a better job of integrating their gift cards with loyalty programs and other consumer promotions, which catches the attention of potential incentive and rewards buyers.”

Like all high-growth industries, prepaid may face challenges with providing the right level of customer service, making sure they have the right balance of labor and the correct technology systems to automate customer service and other processes.

According to Arlene Hauben of the Prepaid Press, there are 16 categories of closed-loop prepaid cards—cards that are merchant-specific, such as gift cards from Starbucks, Best Buy or Banana Republic.

Of these 16 categories, Hauben says that in-store gift cards are still the “darling” of the market (with e-gift cards emerging as well). These types of cards serve dual purposes—one for the consumer and one for the retailer.

“Designed for a specific store chain or location, the closed-loop gift card serves as currency and a mini-billboard for the brand,” writes Hauben “In effect, the gift card is a multi-functional promotions and sales tool.”

According to Hauben, legislative changes have made the gift-card market freer than it used to be, from the perspective of the retailers, which has helped the rise of the cards.

“Consumer protection reform, embodied in Dodd-Frank, has buoyed the gift card market further,” writes Hauben. “New regulations eliminated dormancy fees and extended expiration dates, among other changes. Essentially, the climate for gift cards has never been cleaner.”

Add to that a struggling economy, which tends to make consumers more practical. And if gift cards are anything, they’re practical.

So, no, the gift card industry isn’t going anywhere. It’s only growing. Next up, Reaching the Underbanked…