| By Jim Bruene on March 24, 2011 5:58 PM | Comments (2) |
Groupon may be the biggest company in history that everyone thinks they could have built. Facebook, I guess, is up there too.
It seems everyone is wondering how they could do the "Groupon of ____" (fill in the blank). In my world, the blank is "banking." I already wrote about the potential for selling financial products through Groupon and other flash marketing sites last July, so I won't repeat that part. Anyway, that's Groupon 1.0.
It's Groupon 2.0 that I think is even more interesting for financial institutions. The new model, coming in a few weeks, is all about mobile deals. 
The company is said to be planning on adding two buttons to your smartphone:
I'm hungry...which will alert you to nearby Groupons you can use for food deals.
I'm bored...which will alert you to just about anything else Groupon sells.
It's brilliant. And so simple. Again, everyone will wish they'd built it.
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Banking Opportunities
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So how could you do the same thing in personal finance? What would those buttons be?
- I'm broke....leads to ATM finder, cash-back location, credit card site, loan app, friends & family loans, P2P lender, etc.
- I've just been paid...leads to ATM finder, branch locations, deposit accounts, billpay, investments, automated savings plans, etc.
- I'm out of town...leads to ATM finder, FX locations, travel services,
resource locator, card-issuer notifications, security preferences, etc.
But those are all pretty much standard functions of online/mobile banking today. The bigger opportunity may be to beat Groupon at the local level, with merchant-funded rewards tied to debit/credit cards (see note 1). Banks could potentially use the same "hungry/bored buttons" and direct customers to cash-back deals at restaurants and other merchants making offers to your cardholders.
Bottom line: Location-based rewards is another example of why mobile banking will be more important than online banking. To put it simply:
Banks enable commerce.
Mobile enables location-based commerce.
So financial institutions are right in the middle of a multi-billion dollar shift in retail spending. Enjoy all the opportunities!
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Notes:
1. For more on merchant-funded rewards, see the latest Online Banking Report.
2. Picture credit: All Things Digital
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Jim, as someone with mobile fintech experience, my feeling is that in theory FIs could outflank Groupon but it would not be easy.
The major advantage FIs have over someone like Groupon is in personalization. FIs have amazing customer knowledge and they have it as close to real time as anyone can get. This means personalization to a degree that Groupon could never do. Add in mobile location and you take something like merchant funded rewards to a whole new level. Personalization however is not just about data analysis, it is also about great customer experience, ease of engagement and product simplification. Personalization can better deliver timely and relevant information but it still has to be easy and convenient to digest. Even if FIs had more timely, relevant and valuable deals than Groupon, if it is not as simple as Groupon, I don’t think the FIs can “win”.
Local commerce / advertising are such enormous markets that coming in second is still pretty good! The US advertising industry topped $131B in 2010. Getting a piece of that as an industry could help recover some of the lost interchange fees, whether you beat Groupon or not.
Banks have another (huge) advantage - they can use rewards currency to make it easier for customers to purchase Groupon-like merchandise/services. This is what made the Frequent Flyer business what it is today. Use 1% of my $25K purchases to buy a $500 plane ticket. Of course this has eroded over time so that it's closer to $0.01 per frequent flyer mile, but frequent flyer miles were once worth about $0.02 each.