Malik Velani, Director, Product Strategy for S1 Corporation, talks about whether there are parallels between Americans’ confidence in banks and retailers, how the economy has changed shoppers, and retail’s biggest challenges in 2010.
Your company released a survey earlier this year about how the economic crisis has impacted customers’ relationships with financial institutions. What was the most interesting finding from that survey?
Convenience is not the main reason that people choose a banking relationship. Our survey found that U.S. consumers said that financial stability (65%) and trust (54%) were more important. Given the global economic downturn, it’s not surprising that nine percent of consumer respondents in the U.S. and in Europe are confident in financial institutions. For corporate customers, trust is the number one factor in building valuable banking relationships (70%).
While consumer confidence has improved since April, confidence in banks should similarly be on the rise. I think there are parallels to the retail industry. Consumers might prefer to do business with financially sound retailers that can extend more attractive deals, invest in better customer service and stand behind the products they sell. People want value, convenience and a company they can trust.
How do you think the drop in trust between consumers and banks are impacting the retail landscape?
We have seen what happens when consumers lose confidence in the overall economy. Spending dries up, and that has affected all areas of the economy, particularly retail.
Last year, retail spending was driven to a large extent by deep discounts. This year, retailers may offer fewer deep discounts. But those retailers that offer a great integrated shopping experience with a mix of targeted discounts and improved loyalty programs can help consumers rebuild confidence that they can resume spending again – albeit probably not at the levels we saw in 2006 and 2007.
How do you think the economy has changed the relationship between shoppers and retailers?
It’s a trickle down effect. Consumers stopped spending. Retailers are trying to improve consumer confidence by offering more value and conveniences. For example, with the recent snow storm in the Northeast, certain retailers extended offers for free shipping as a way to entice consumers to spend. Even though millions of shoppers were snowed in the weekend before Christmas, the retailers didn’t panic like they did in previous holiday seasons.
But it’s not just discounts that will bring people back to the stores. Some grocers are offering more coupons and strengthening loyalty programs to bolster consumer confidence and spending. In general merchandise and apparel, retailers might offer a combination of discounts, loyalty programs and a great integrated retail experience with a combination of channels.
The reality is that consumers will increasingly expect more and more value for the relationship they bring to retailers. The retailers that understand this will be on the top of the heap.
What motivated S1 to develop an iPhone application? How important do you think it is to have a mobile presence?
S1 is a strong player in the mobile banking market. We view it as another important channel that consumers and businesses can use to interact with their financial institutions. With the growing popularity of iPhones and other smart phones, we were able to offer a user interface that is accessible through any mobile device.
S1 helps financial institutions offer a downloadable iPhone application that puts their specific icon on a consumer’s iPhone, a device consumers literally use to run their lives. S1 also announced a partnership with PayPal to deliver mobile personal payments on smart devices. Customers of participating banks will be able to send money immediately from their mobile device to PayPal customers around the world.
Where do you see mobile retail heading in the next few years?
Generation Y doesn’t live in email anymore. They live on their smart phones and communicate via texting. If retailers develop a presence on the consumer’s phones as the financial institutions have begun to do and can open up secure integration with stores systems, loyalty programs, POS systems, online shopping, social networking, etc, watch out. This gives retailers the option to have their presence on a consumer’s mobile device. Retailers can use that presence for target marketing and provide greater levels of customer convenience and customization.
What is the biggest challenge for retail in 2010?
From a technology perspective, PCI compliance and overall data security will continue to be huge issues. These are not nice-to-have technology investments. And the networks will continue to hand out huge fines for retailers that are not compliant, so I think the focus on this area of IT investment will continue to intensify. Specifically, retailers will need to ensure that they are using PCI-approved devices, payment applications that are PA-DSS validated and that their environments pass periodic audits required by the payment networks.
Tell me what you are looking most forward to at NRF’s Annual Convention.
We always look forward to hearing about newer technologies that cater to the issues outlined above, and how we can work with these technologies in a way to deliver more effective and tailored solutions to our customers. Certainly it’s a great forum for being able to speak and interact with customers and prospects.