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A First Data White PaperCards and Payments:Innovation Designed Through EmpathyHow to Succeed with Truly Customer-centric Technology
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperIntroductionBanks, retailers and other organisations looking to drive new revenue are searching for the “next big thing.”They want to bring innovations to market that make customers change their habits, abandon existingbrand loyalties and flock to their new products or services. So, beyond the obvious attributes of mobileenablement and cloud-based delivery, what are the attributes of a product or service that will attract newcustomers? How do you truly get inside customers’ heads and understand what will drive them?Most importantly, how do you avoid making assumptions about customers that are off target—and developing new products that miss the mark?Fast Moving, Mobile WorldPeople worldwide have adopted smartphones,mobile devices and a variety of e-commerce andm-commerce solutions at record rates. The adoptioncurve for electricity, telephones, televisions and personalcomputers stretched out over years. Not so with mobiledevices.The speed at which people have engrained thesedevices in their lives has sent banks, retailers andother organisations scrambling to develop new digitalofferings. Whilst this general idea seems accurate—andis absolutely essential for growth—there is a risk that theassumptions organisations have made in their innovationprocesses are flawed. To be truly successful, gainingadoption in this new digital world requires “customerdelight and advocacy”—which can only be achievedby understanding precisely what customers need andnailing the execution of solutions to meet those needs.Today, more than half of the world’s population ownsa mobile device.* So it’s no surprise that mobile is fastbecoming the only channel for customer engagementand interaction. In the financial industry, global mobilebanking users are predicted to more than double fromnearly 0.8 billion in 2014 to nearly 1.8 billion in 2019.**As a survival mechanism, most banks now offer mobilesolutions to attract customers who want to checkbalances, make payments, transfer money and disputetransactions whilst on the go. Mobile also bringsNearlyBILLIONGLOBAL MOBILEBANK USERSby 2019Source: Mobile Banking Report 2015—Juniper Research/KPMG Analysissignificant operational benefits for banks — reducingtransaction costs, operational costs and resource needsas well as the number of ATMs and bank branchesto maintain. But how do banks do more and deliversolutions that really “Wow” their customers?In this extremely competitive environment, it isn’t easyfor established banks and card issuers to abruptly turnthe ship. Traditional banks are under threat like neverbefore from challenger banking sources like PayPal andnimble start-ups who can more easily introduce newdigital innovations quickly. To paraphrase Bill Gates:People need banking, but not necessarily banks.Many of the latest mobile solutions are focusedon meeting the needs of “digital natives”—thoseGeneration Y consumers that have never known a worlddevoid of digital. But that approach is short sighted.Nearly one-third of customers over the age of 65 todaydo some banking on their SMA Global Mobile Economy Report 2014-global.aspxfirstdata.com 2015 First Data Corporation. All rights reserved.2
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperStill, digital natives and those who’ve become digitalcentric over the last decade are crucial to movingmobile forward. According to the 2013 Mobile Banking &Commerce Summit, 49 percent of consumers age 26 to34 would switch banks for a better mobile experience.That doesn’t bode well for banks or other organisationsthat are just now joining the mobile party or making onlyincremental improvements customers already expect.Who is More Engagedwith Their Bank?It’s also not enough to just enable online banking froma mobile device anymore. Mobile app users are moreengaged with their bank than those who only interactthrough a website.* This is forcing banks to developan immediate and responsive mobile app channel andcontinually look for the next big thing in mobile bankingand payments.39%27%DAILY APP USERSDAILY WEBSITE USERSSource: Adaptive Lab/ResearchNow, Dec. 2014Which Mobile Banking App FeaturesAre Most Important62%The ability to see a list of direct debits60%The ability to set up a new payee/paymentThe ability to see my full transaction history57%The ability to see a list of standing orders56%41%The ability to temporarily suspend my card29%The ability to manage SMS & email alerts from bank20%The ability to see loyalty points information5%None of these9%Don’t know0%10%20%30%40%50%60%70%80%90%100%Source: YouGov/First Data Corp - Digital Agenda, Sep. data.com 2015 First Data Corporation. All rights reserved.3
Cards and Payments: Innovation Designed Through EmpathyThe Cost of Assumption-based SolutionsThere’s so much at stake when an organisationdecides to innovate. Will the new technology work?Will customers change their habits and adopt thetechnology? Will it be the tipping point to attractingnew customers and creating new revenue streams?Most banks say they listen to their customers—andthey do listen—but how effective is this engagementin developing truly needs-based solutions? Manyorganisations still develop solutions by makingassumptions early on about what their customers want.They advance products they think their customers willembrace and then hope for widespread adoption.Often, this is due to a push from the C-Suite for quicksolutions when there has been little engagement toget into the minds of customers and find out what theproblem is that needs to be solved.Making “early” assumptions can result in jumping to builda solution quickly without any effective mechanism inplace to validate if this really solves the customer need.Today there’s a significant focus on mobile payments,enhanced by the launch of Apple Pay in the U.S andthen just recently in the U.K. There are many views andreports about just how successful Apple Pay has been,with 47 percent of U.S. users reportedly disappointedwith the customer experience when they used it at thepoint of purchase.* Because it was an Apple solution,people assumed it would work seamlessly. In reality, thiswasn’t quite the case.Contactless paymentsexpected to rise 66% in the next 10 years66%Source: UK Card AssociationContactless payments, introduced in 2007, is a goodexample of where the payment industry has beenled by technology, instead of customer needs. Poorengagement, lack of user education and securityconcerns have made banking customers hesitant toadopt. Only when contactless payments were acceptedA First Data White Paperon London Transport did we see adoption rates beginto surge in the U.K. In 2014, 11 percent of all contactlesspayments were made on London Transport.To successfully innovate, you need to understand anddeliver what the customer really needs, rather thanassuming what they want. It’s important to ensure thatyou continue to engage with the customer, allow theprocess to evolve, and then deliver the best solution thatbest solves their need.Being customer-centricis about listening andunderstanding what yourcustomer’s real problem is andhow that can best be solved.What Being Customer-centric Really MeansSince customers are the ones you want to adopt yourinnovation, product development needs to start withthem. Being customer-centric isn’t about trying to find aproblem to fit a solution that’s already been developed.It’s about understanding what the customer’s realproblem is and what is the best solution to solvethat problem.Identifying and understanding these needs is key todelivering an outstanding customer experience, definingyour product strategy and determining where to investand focus your efforts. Discovering what “delights”customers can lead to highly relevant, immediatelyadoptable innovations that can positively impact thecustomer experience and bottom line.Today more than ever, banks need to differentiate withvalue-added solutions. But which solutions will trulydelight your customers?*The Guardian, 20 July 2015firstdata.com 2015 First Data Corporation. All rights reserved.4
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperDifferentiate with Needs-based SolutionsTo delight your customers, you have to understand theirneeds. Banks already know their customers want to domore than view their balance online or fill out forms todispute transactions. They also know their customerswant an engaging, seamless experience across allchannels—online, mobile or in branch. But whatspecifically do customers need? To answer this questionit often takes more than customer surveys, focus groups,polls and other typical ways of soliciting customer input.Both traditional quantitative and qualitative researchmethodologies provide limited value for developing trueneeds-based solutions. People are influenced by others’opinions when participating in focus groups. Surveysand polls don’t uncover customers’ real problems andneeds.True success is achieved when overall organisation goalsare aligned with identified and validated customerneeds. The critical element for developing needsbased solutions is Design Thinking—tapping into whatcustomers really need—whether that customer is a retailcustomer, a call centre agent or a cardholder. The result?Developing needs-based solutions that can improveadoption rates, enhance loyalty, establish trust, increaserevenue and reduce costs.Uncovering What Customers Really NeedRESEARCH TYPETraditional QuantitativeResearchTraditional QualitativeResearchInnovative DesignThinkingfirstdata.comTIMINGDuring, post-productdevelopmentDuring, post-productdevelopmentPre-product, duringand post-productdevelopmentMETHODOLOGYSurveys, pollsFocus groups, talks withcustomers in branch orstoreEmpathy-based,in-person interviews athome or place of business 2015 First Data Corporation. All rights reserved.OUTCOME Hard data withoutcontextual factors tosupport or negatelikelihood of adoption High time and costinvestment if product isnot adopted Soft data influenced byothers or environmentto support or negatelikelihood of adoption High time and costinvestment if product isnot adopted In-depth understandingof end-user needs Ability to learn fast andpivot if necessary Deliver what customersneed and will adopt5
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperEmpathy Drives Design ThinkingImproved OutcomesDesign Thinking lets organisations put themselves intheir customers’ shoes. By enlisting empathy—notassumptions—organisations can create new innovationsthat really resonate with their customers.This approach helps organisations invest in solutions thattruly delight their customers and minimises investmentcost by avoiding full commercialisation of a product thatultimately fails.Customer-centric design putsidentifying customer needs at thecore of proposition development,and testing assumptions about thebest way to meet them throughoutthe development lifecycle.Satisfying customers is at the core of productdevelopment, rather than banks developing solutionsbased on their own needs or assumptions. Customersare engaged even before ideas are advanced orsolutions are developed. Whilst this can feel like it isadding a little more time on the front end of a project,it will pay big dividends in the end as you increase yourchances of first-time success.Empathy drives this engagement with customers totruly understand what problems and challenges theyface—and why. In-depth, one-on-one interviews areconducted with customers in their natural environment(home or place of business). This is where customersare most relaxed and willing to share how they reallylive or work, what their true needs are and howtechnology could make their lives, jobs or running theirbusiness better.The empathy approach is enlisted very early in theproduct development cycle, allowing banks and otherorganisations to learn fast what their customers needand pivot in a different direction if the original ideadoesn’t resonate with customers—saving significant timeand cost. What we have learnt early in Design Thinking isthen translated into innovative concepts that customershave already validated.This approach is the opposite of building a solution andthen seeking a problem for the solution. It leads to realunderstanding of what is important to customers, whatthey value and what solutions they will adopt.firstdata.comShifting to a Design Thinking approach requires culturalchange for an organisation—allowing more time andaccepting uncertainty in the early stages of productdevelopment. However, a little more time upfront hasproven to be extremely valuable for organisations thathave made the shift. It ultimately helps them determinewith certainty what innovations should move forward.For example, First Data worked on a design challengeproject to improve the way customers report asuspicious transaction on their account (TransactionNot Recognised), aiming to reduce the time andcosts associated with handling telephony inquiries.Rather than digitising the process and expecting theircustomers to adopt it, Design Thinking was employedearly in the product development cycle to understandbank customers’ needs.An empathy-based approach resulted in deepunderstanding of customer needs and demonstratedthe need to respond to the emotional needs of thecustomer, rather than just digitally capture data to feedinto the same old process.What’s Most Important for“Transaction Not Recognised”Via Mobile App50%19%18%IDENTIFYINGTHE TRANSACTIONSUSPENDINGMY CARDGETTING AREFUND11%1%2%CANCELLINGMY CARDNONE OF THESEDON’T KNOWSource: YouGov/First Data Corp – Digital Agenda, Sep. 2015 2015 First Data Corporation. All rights reserved.6
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperIt’s far better to allow this minimal investment of time, resourcesand cost in the early stages than invest fully in solutions customersultimately don’t adopt.Minimal InvestmentMaximum InvestmentNeeds-based Solutions fromDesign Thinking ApproachAssumption-based Solutions fromTraditional ApproachesNominal investment in early stagesSignificant time spent developingproducts customers do not needLess investment in products customersmay not needHigh cost investment with minimal returnsEliminates low adoption and usage ratesLow adoption and usage ratesUncovers opportunities to developproducts that delight customersPotential to repeat past failuresGreater customer engagement and loyaltyRisk of losing customers toinnovative competitorsIncreased opportunity for revenuefirstdata.comLost trust and revenue 2015 First Data Corporation. All rights reserved.7
Cards and Payments: Innovation Designed Through EmpathyA First Data White PaperConclusionThe Bottom Line: Delivering InnovationCustomers Will AdoptWith so much at stake, organisations are reactingto deliver technology quickly, often making costlyassumptions about their customer’s needs and how bestto meet them. Significant amounts of time, resourcesand money are spent launching products with loweradoption and usage rates than organisations expect. Inthe end, the next big thing can often turn into the nextbig disappointment.With Design Thinking and the empathy-based approach,you know up front why customers do things, what isimportant to them and what their real needs are. Itdrives a more focused product innovation strategy thatultimately removes time and cost from the process. Itleads to innovation that customers will actually need,value and adopt.How can your organisation move from assumptionbased to needs-based innovation?First, find a partner to undertake a Design Thinkingproject. Employ the empathy-based approach andwork together to understand the true challenges yourcustomers face. Whilst your competition continues tomake assumptions about what customers need, yourorganisation can rise more quickly to the top and attractnew customers that become the ultimate champions ofyour brand, products and services.Design Thinking Paysoff for Bank of AmericaAttracting new customers is an on-going focusfor banks large and small. Bank of America is noexception.To understand their target market—BabyBoomer-aged women with children—and getthem to open new accounts, Bank of Americapartnered with IDEO, a design and innovationconsulting firm. Together, Bank of America andIDEO travelled throughout the U.S., talking withpeople in the target audience as well as thegeneral public and learnt most people roundup their financial transactions for speed andconvenience.This insight fuelled Bank of America’s 2005 launchof its “Keep the Change” program, a servicethat rounds up purchases made with a Bank ofAmerica Visa debit card to the nearest dollar andtransfers the difference from individuals’ currentaccounts into their savings accounts.In less than one year, this program attracted2.5 million customers, translating to more than700,000 new current accounts and one millionnew savings accounts for Bank of America. Sincethe launch, the Keep the Change program has ledto more than 12 million new customers and morethan 3.1 billion in savings for ccount-service-for-bofafirstdata.com 2015 First Data Corporation. All rights reserved.8
Commerce Summit, 49 percent of consumers age 26 to 34 would switch banks for a better mobile experience. That doesn’t bode well for banks or other organisations that are just now joining the mobile party or making only . Cards and
