Christmas at Taggo

Hohoho!

Santa just delivered a great Christmas present to Taggo. Our first patent has been granted!

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Sticky Fan Club

Sticky Candy in Singapore has launched a Fan Club for fans of their handmade rock candy. Their fan page already has over 100,000 fans. They were looking for a way to recognize fans at the point of sale to offer special discounts and benefits.

Sticky candy is very popular, so they hardly ever need to give discounts. Unlike thousands of other businesses in Singapore, they haven't needed to tie-up with a credit card company, and they haven't had to resort to profit destruction services like Groupon. Yet they now offer discounts exclusive to fans.

The place is packed. Here is a picture from this afternoon.



These people are registering through Taggo's fan club platform. Customers scan the QR code and register their mobile number. Then they give their mobile number to the cashier when they pay.



Now, the next step is for the fan club to be sponsored by a financial institution.

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Fans get bigger discounts

At the Charlie Brown Cafe in Singapore, on Orchard Road, customers that pay with a credit card from a local bank (UOB) get one free main dish for two purchased. But fans get one free dish for one purchased. Couples are fine! No need to be a threesome, unless you want to of course. Soon, the fan benefits sign will be sponsored by a financial institution, showing the full value of linking social media to payments.

Why do fans get bigger discounts? Because merchants get word of mouth advertising on Facebook.

Measuring engaged and active fans

"Do the majority of the brands using Taggo aim for engagement over fan growth?"

Yes, that's probably an accurate assessment. Right now, the companies that are showing the most interest in Taggo are those that want more interaction and engagement with fans, especially with fans that actually shop in their stores. As this activity matures, brands will become more interested in measuring active fans versus the total fan base.

I don't think the metrics will become exactly like those used by the credit card or telco industries, but some of the metrics should be very similar.

We track the number of new fans generated during a Taggo campaign, but I have to admit that I'm paying less and less attention to that number. I'm watching numbers like check-ins by fans and friend activity such as clicks on posts generated by Taggo, and comments and likes on those posts. All a learning process :)

4 decades of paper money - what next?

If you've been wondering why gold is soaring, check out this article in Forbes, "Nixon's Colossal Monetary Error: The Verdict 40 Years Later".

What I'm curious about is how a trend back towards hard (real) money will impact payments businesses.

The 10 Biggest Lies of B-School

Interesting observations in this article in Forbes.

"Ten years ago, everyone at my school wanted to be a dot com entrepreneur. That didn’t work out so well and most students later went back to being investment bankers or management consultants."

Today from what I can see, the focus is on location based couponing and Groupon clones.

Using social media to surprise and delight your customers

‎So what, who cares, why me? The right answers can determine your success

An e-booklet, soon to be published on Amazon.
Write to me for an advance copy, free.
Feedback appreciated :)

Coaching startups in the art of the pitch

Singapore's Echelon 2011 event is coming up in June. The organizers expect over 1,000 delegates and 50 startups. I was asked to help coach the finalists as they prepare their big pitch to potential investors.

Here is a short chat on the theme of "So what, who cares, why me?" and "Vitamins, painkiller, cocaine", with Koh Jitsiong (Manager at the NUS Enterprise incubator, Garag3 and operations chief at e27), Gabriel Yang (Event management guru at e27 - don't you love his title?) and yours truly.



And that's not all folks!!! Get an exclusive discount for Echelon 2011 if you attend Echelon Satellite events in Singapore, Malaysia, Indonesia or Hong Kong. All the information is at http://echelon.e27.sg

"Credit card of the future" co-innovation project

eYeka is a new form of R&D catalyzer that relies on a very large network of creative people competing to come up with great new concepts for brands. Briefs are prepared by eYeka and submitted to a global community of 130,000 creative individuals in 76 countries. The process is appealing to me. It cuts through the internal barriers that companies have when they try to think about innovation.

The payment industry has a very strong cultural bias towards incremental improvements. When you combine that with so many dramatic external changes happening at the same time (mobile phone capabilities, merchant discontent, social media growth, etc.), there is a potential for highly disruptive innovation that could be delivered in unconventional and unexpected ways.

eYeka launched a campaign last year to get fresh insights and ideas for the credit card of the future. They received 100 entries that you can browse through on the site. The actual details of each entry are locked out to mere mortals like us, as the ideas are now the confidential property of the company that sponsored the work. Still, you can get a pretty good understanding from glancing through the titles and pictures of the submitted creations.

There are lots of entries related to the form factor, with mobile phones, touch screen plastic cards, and biometrics. The predominance of form related entries is a testament to how old the current plastic card is. Other entries see the credit card of the future as an ID device to access services as well as your house or your car. Intriguing titles like "credit/membership", "preferred store coupon alerts" and "all in one card" hint at a device that can collect together many different private label payment services, with built-in access to coupons and other promotions. And there is connectivity all over the place. Internet of course, but also built-in GPS and close proximity radio frequencies.

I met up with Alexandre Olmedo, co-founder of eYeka and CEO of the company's Asia-Pacific activities.

Aneace: I'm using the term crowd-sourced innovation, but it looks like you prefer co-innovation. What term should I use?

Alexandre: We prefer the word co-innovation because we find differences between crowd-sourcing and co-creation. The term crowd-sourcing implies launching a brief into a crowd and hoping something good will come back. Co-creation for us is more about getting the right ideas from the right people within a proper process.

Aneace: How did you come up with the idea?

Alexandre: We worked with the client closely to understand what they wanted to achieve. And when we realized that what they wanted was to revolutionize credit cards instead of just an incremental improvement, we knew that eYeka was a perfect fit for this project. The idea thus given birth was to engage eYeka's creators to imagine the credit card of the future.

Aneace: Can you briefly describe the process?

Alexandre: Once we knew what was needed, we crafted the brief for the creators, inspiring them to imagine what a credit card of the future would be like. Along the way, we would assist the creators with any questions that they might have. At the end of the exercise, all the entries were looked at in detail and analyzed carefully. If we have any doubts about the entry, we will get back to the creators. Analysis required us to look at the main themes and ideas suggested and group them together to understand what the creators wanted to see most, and how they want their credit cards to work for them.

A comprehensive report was then put together with recommendations for the client. This was then taken to a workshop where the stakeholders could discuss the recommendations and further testing with a representative sample of the target audience.

Aneace: How can banks benefit?

Alexandre: Banks benefit because traditional innovation/research tends to be more conservative, focusing on small incremental changes. This is because they talk to average consumers for their market research, who are good at telling banks whether they would buy something or not, but have more difficulties expressing what they want. Often we see changes to just the rewards scheme, or the interest rate, or partner discounts. But through a partner such as eYeka, we can deliver revolutionary ideas from a community of creative consumers whose ideas are more avant garde. These creative consumers are like creative directors in agencies. They have the ability to deliver breakthrough innovation, and we have 130,000 of them worldwide. These creators will express needs that the general population may have, but will have difficulty articulating. However when they see the creators' ideas, they can say "Yes, I always wanted that!". This allows banks to get fresh ideas for new product or services that are hard to invent through traditional market research methods.

Aneace: What surprised you most in the results of your work on the credit card of the future?

Alexandre: What surprises us and the clients always is the level of entries that we receive, not just from an executional perspective but from the ideas perspective. The most common reactions are: "Wow, who would have thought of that?" and we know that we are on the right track.

Digital Life magazine uses Taggo to give special deals to fans

It's the final countdown to the IT Show in Singapore, where Digital Life magazine is offering exclusive deals for fans. All you need to do is link your EZ-Link card with the Digital Life fan page on Facebook.

Check out the deals here.

If you're feeling guilty about buying that new Dell laptop ($50 discount for fans) then all you have to do is say that it's part of doing research on this cool new way to link Facebook to the real world!

Taggo wins 2011 Asia Pacific Frost & Sullivan Enabling Technology Award

Toot toot ... yes, blowing my horn again :)

Singapore, 22 February 2011. Taggo, the world’s only provider of online fan recognition solutions in the physical world, today announced it was conferred the 2011 Asia Pacific Frost & Sullivan Enabling Technology Award. The Award is presented annually to a company that has demonstrated excellence in developing a technology that can benefit or revolutionize the industry. Taggo won the award specifically in the area of Retail Visibility through Social Media.

“This Award magnifies the industry’s need to go the next step to recongise fans of its social networking platforms in the physical world,” said Aneace Haddad, CEO and Founder of Taggo. “Banks and retailers can now recognise online fans to provide for fan benefits at the point sale thus extending their online experience of their targeted audience into the real world.”

Taggo’s patent pending technology brings social media marketing to the point of sale. Customers click “like” on their bank’s or retailer’s Facebook page, and register their credit or debit cards to get exclusive fan benefits when they shop. Whenever a customer enjoys a discount or other fan benefit, Taggo automatically posts a message on the customer’s wall saying that they “like” the bank and the merchant.

Taggo helps banks and retailers attract new customers, engage and communicate with more people, and create opportunities for recommendations and referrals in popular social networks.

For additional information, please contact:

Aaron Koh
Social Media/PR
aaron@taggo.me
+65 9489 4557

http://www.taggo.me
http://www.facebook.com/taggo.me

Unexpected use of tap and go with mobile phones - think out of the box

Soon we will get tap and go technology built into iPhones and iPads. The common view is that this will replace credit cards. We might even be able to leave our wallets at home. I think people are missing lots of other features that may appear long before mobile payments, and that Apple could announce to everyone's surprise.

Two excellent articles tear apart the idea of tap and go mobile payments. Check out Will Apple Get Us To Wave At The Point Of Sale? by Karen Webster and A Bubble In Mobile Payments? by Scott Loftesness. I wholeheartedly agree with the views in both of these articles. I've been saying the same thing for years, as regular readers of my blog already know.

Yet, I do believe that Apple and others will very soon be building the technology (NFC - for Near Field Communications, to be exact) into their products. Why? Let's take a look from a different angle.

You might have wondered why Apple is putting tap and go technology into the iPad. Think about it ... waving your mobile phone at the point of sale is one thing, but waving your iPad?

I have a comical vision in my head of a guy getting a latte at Starbucks and looking very much as if he is swatting at flies with his iPad. Would make a great little piece on YouTube, but not very credible in real life.

So what's that all about? Why put tap and go technology into an iPad?

A few years ago, Sony demonstrated a precursor to NFC built into one of their mobile phones and a TV set. They demonstrated something very cool. Tap your phone against the TV set, and the pictures from your phone will instantly appear on the TV screen. NFC was used as a way to pair up a Bluetooth connection between the phone and the TV set without all of the normal hassles of Bluetooth pairing.

NFC functions at a very close distance, and is very secure, so it is a great way to establish a connection. After that, it's best to let Bluetooth take over for a faster connection at a larger distance.

Lots of things can be paired up in this way, just by tapping them together.

Tap your iPhone against your iPad to download your pictures to your iPad. Tap your iPad against your printer, and presto, they are connected and you can instantly print.

When I heard that the iPad would have NFC, I immediately realized that Apple was not going after the payments space (at least right now). And yet, that's where everybody is looking today.

BBC News interviews Taggo

Fans are more valuable than normal credit card customers

Banks across Asia compete with each other to convince retailers to give special deals to the bank's cardholders. Lack of differentiation leads to situations like this, where four different banks managed to get the same 10% discount for their cardholders.



Taggo has found a way to get bigger benefits and discounts for a bank's cardholders, with very little cost or effort.

The following picture was recently taken at Cafe Le Caire, one of the retailers trying out Taggo. OCBC credit card holders get 5% off at Cafe Le Caire Singapore. BUT... Fans of Cafe Le Caire that present their ez-link transit card get 20% off. Why? Because fans are more valuable, thanks to the automatic wall post designed to attract friends of Cafe Le Caire customers.



At another restaurant, Paulaner Brauhaus, Citibank cardholders get 15% off, but fans get 20%.



These early examples of Taggo deployments make it clear that fan recognition could generate lots of value for card brands. If OCBC were using Taggo for their promotion, then Cafe Le Caire would be offering a 20% discount to OCBC cardholders that are fans of Cafe Le Caire. If Citibank were using Taggo, their cardholders would get 20% off at Paulaner once they become fans of Paulaner's Facebook Page.

I've been linking marketing and loyalty techniques to the payment transaction for almost two decades now. I am obsessed with inventing fresh new concepts that are innovative enough to merit solid patent protection (for me that's the first basic test, otherwise, I'm not interested). This is the funnest and most exciting development I've been involved with in a long time. At my prior venture (Welcome Real-time, a company I founded in 1996) I searched for years for a simple, attractive way to enhance payment transactions without all the traditional overhead of CRM systems, complicated earning and redemption processes, heavily customized enterprise software integrated into a bank's credit card processing systems, etc.

Taggo passes these tests. We're in for a fun ride.

Viral marketing success story at a restaurant in Singapore

A couple weeks ago, the Indonesian Panggang restaurant at NUS began using Taggo to offer a 10% discount to fans when they use their contactless transit card. Their goal was to attract new customers and friends of customers. Within one week, the number of fans doubled, from 276 to 550. Within two weeks, the number grew to 639 fans, an increase of 139% in a very short time. Growth is still continuing at a rapid pace.

Better yet, an average of 50 fans now tap each day for the discount, causing their friends to discover the restaurant as well. Indonesian Panggang's viral marketing advertisement reaches approximately 7,500 students each day (50 taps X average of 150 friends per Facebook user). In comparison, the restaurant has had a total of 12 Foursquare check-ins. That's total ever. Versus 50 taps each day with Taggo. Geolocation might be cool and trendy, but the numbers are just not there. Good old fashioned payment is potentially much more viral.

This is what the fan's friends see on their Facebook wall:


Indonesian Panggang was getting an average of 8 new fans per day prior to launching Taggo. A launch burst occurred over the first 3 days, then settled at an average of 20 new fans per day.

Fake money becomes real - the future of money?

Two separate commentaries popped up on my screen this morning, which intuitively seem related in ways that are not yet clear to me.

The first is an article titled How Fake Money Saved Brazil, describing how four drinking buddy economists (insert your favorite derogatory comment about economists here) managed to stop Brazil's rampant inflation in the early 1990's. The article focuses on the psychological trick they used with the creation of a stable unit of account which eventually became today's Real. The article focuses on the importance of restoring people's faith in a currency, and simply gives one line to the absolutely necessary prerequisite: slowing down the creation of money. Currently, we appear to be in the early stages of the acceleration of money printing around the world, so the Brazilian solution won't be applicable until some time in the future.

A few minutes later I read Dave Birch's latest post, Why Now? Dave discovered two recent books with the same title, The Future of Money, and wonders why all of a sudden this apparent resurgence of interest in the future of money. He provides as usual a clear and succinct history of past payment initiatives like Mondex and Visa Cash, and then concludes that banks should probably not be in the payments business and should instead focus entirely on providing credit.

This is all connected somehow.

Money as we have known it over the past century is changing, thanks in large part to the stupid things that economists and bankers have been doing since we switched to worthless paper money. It's hard to see how the current money system will not crash, once everyone understands how central banks create it out of thin air. When that happens, it will be replaced with something new. My intuition is that whatever that is, it will be deeply impacted by new developments in payments that Dave brings up.

Could new payment technologies like PayPal, mobile payments, etc. smooth the way to stable money backed by gold?

Taggo is launched!

Check out the press release here.

Analyst sees massive pain coming for the states, recommends Visa and MasterCard

Analyst Meredith Whitney says state budgets could be the next systemic financial risk. The only companies she recommends investing in are Visa and MasterCard and Taggo (OK, just joking).

BBC interview on entrepreneurship and Taggo

BBC was in Singapore this week and did an interview with me on entrepreneurship and the launch of Taggo fan recognition. We did the interview at Paulaner Brauhaus, a German brewery and restaurant that will be launching Taggo October 1st.

To get a feel for Taggo, go to Paulaner's Facebook page, become a fan of Paulaner, and click on the taggo me tab to register your Singapore transit card. Taggo then links up all of your Liked pages to that card number so that we can easily identify you as a fan when you are out in the real world.

For overseas friends, if you have a Singapore transit card from a recent visit here, you can register now but you'll have to come back and visit again to enjoy fan privileges at Paulaner and other places.

Our next goal is to integrate lots of other tap and go cards in other countries.

(Credit to Aaron Koh for the picture.)

Taggo highlighted in article on entrepreneurship and innovation

Singapore's e27 is doing a "series of guest posts featuring first-hand insights, experiences and advice from personalities in Asia’s startup scene".

The first, by Jacob Joseph, looks at entrepreneurship in Singapore and highlights the work we are doing with Taggo.

Check it out here.

Only clueless management lets technologists drive innovation

If you've worked in a technology firm for any length of time, you may have sensed that innovation within your company somehow never seems to be truly innovative. At some point, the company's developers take control and something that starts out as a relatively innovative and useful idea gets whittled down to a small incremental add-on feature that is not very exciting. The technical people all explain how difficult and even impossible it is to get something done, and you end up thinking that maybe there is something wrong with you and maybe you should be happy with this stupid little feature that they have come up with.

If this sounds familiar, cheer up! Even the big boys with lots of cash suffer from the same problems!

An article in the Telegraph reminded me of the frustrations I have had to deal with. The article looks at Google's new feature, announced with fanfare. Here's an excerpt from Google Instant: the technology anti-climax of the decade:

Google is faced on all sides with explosive growth from networks and platforms that aren't even indexable, let alone visible to Google for the purposes of ad sales, and it unveils a slightly faster way to get your search results? What am I missing here?

"Our key technical insight was that people type slowly, but read quickly," said the boffins from Mountain View in their blog post announcing Google Instant.

So, after years of research, in response to the question, "What next for Google?," that's what all those billions of dollars and brain cells have come up with. Wow.

This is what you end up with when management puts innovation in the hands of the technologists. You can't count on technologists to understand the company's high level strategy and competitive threats. They think they do. But what they really understand is the code and how difficult it is to change things when legacy systems are involved.

Management that leaves innovation in the hands of technologists is management that doesn't have any clue where they are going. It is a dereliction of duty that most board members are incapable of even seeing.

The only worse thing is leaving innovation in the hands of salespeople. But that's another story.

I once read a rant like this from Steve Jobs but have never been able to find it again. It must be a passage from a book that I lost years ago.

Local advertising is shaping up as the next great battle in the technology sector

A few headlines that are going into my next presentation:

Google And Facebook Battle For Local Ad Money
"Google, Inc. (NASDAQ:GOOG) and Facebook are in a race for local business-ad dollars, the Wall Street Journal reported."

Battle over online local ads heats up
"While online search has transformed the way large businesses reach consumers looking to buy books, arrange vacations or consume media, it's had far less impact on the way people interact with the mom-and-pop shops that represent a huge slice of commerce."

The Local Advertising War Will Be a Clash of the Internet Titans
"With local advertising revenues expected to reach $144.9 billion in 2014 according to BIA/Kelsey — and more and more dollars are shifting away from traditional media toward digital media buys — the new war for local ad spend will be a battle between the Internet titans and social networks."

Google, Facebook battle on mobile for local ads
"In the battle for local ad dollars on digital and mobile platforms, traditional local media don't even seem to be part of the conversation."

Rational efficiency (traditional loyalty programs) versus having fun (social media)

The traditional loyalty program mindset is a barrier to companies that want to adapt to the social web.

The industry is built on efficiency, complex incentives and clever triggering tricks designed to take advantage of the customer's mechanical rationality (or programmed irrationality, I can't tell the difference).

Comments in response to a post on LinkedIn show a very strong focus on things like points versus cash back and other rational or mechanical drivers. Social media is in a completely different space. Social media is not rational in the sense that loyalty marketers are used to.

Even Google is struggling with this issue.

"Google products are efficient, slick and -- as the coders say -- elegant," writes AdAge. "They get you from point A to point B fast. Really fast. But are they fun?"

Social media is about having fun. Foursquare players don't do their check-ins at Starbucks for the goal of getting a free coffee. They do it to become Mayor of a particular Starbucks location. A friend of mine recently commented that his sister was Mayor of their home, and proud of it.

"Can a company built for efficiency also help people waste time?" asks AdAge.

The same can be asked of the loyalty marketing industry today.

Blog post: Benefits of Rewarding Facebook Fans at the Point of Sale

Aaron Koh just did this blog post on Taggo:

Benefits of identifying and rewarding online Facebook Fans offline at the point of sale


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iN.SG Interview: The changing face of business

iN.SG, Singapore's infocom industry newsletter, just published an interview on Taggo. Check it out here.


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Points based loyalty programs: Legacy systems on their way out?

Traditional points based programs have been around a long time. They feel like heavy, complicated, old fashioned legacy systems, requiring huge investments in CRM, databases, POS integration and lots of other stuff. The work Taggo is doing with Facebook fan recognition makes this increasingly clear to me.

After so many years of heavy lifting, I now want to do things that are light, fast, easy, highly attractive, fresh and modern.

Traditional loyalty programs are the past. Legacy. Boring. Heavy. Very heavy.

Here is the last paragraph of Bill Hanifin's excellent article Winds of Change for Loyalty Marketing: "For the past 30 years, Loyalty programs have been designed by Boomers for Boomers. The influence of a digitally connected generation is more apparent than ever, and consumer engagement will only happen if you re-tool marketing strategies to embrace the Millennials and others who want more transparency and immediacy in their brand relationships. Are you equipped to make these changes?"

My 1996 patent, "Real-time RFM", launched the real-time rewards industry and was the basis for launching my last company, Welcome Real-time. The technology in some form or another drives credit card loyalty programs in over 30 countries. The whole focus of past loyalty programs has been on segmentation and triggering methods and complex rewards calculation and delivery at the point of sale. All very Boomerish (Bill, I love your analogy).

Time for change.


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Facebook fan recognition is potentially a huge business

First the statistics (from Website Monitoring Blog):

500 million active Facebook users
3 million active pages on Facebook
1.5 million local businesses have active pages on Facebook
20 million people become fans of pages every day
Average user becomes fan of 4 pages each month
431 million Google entries for “get more Facebook fans”

So what does this all mean?

When a business wants to harness the power of social media, the first step is to set up a page on Facebook. After setting up a Facebook page, the next question is how to grow the page’s fan base.

A very common technique is to offer exclusive promotions for fans. There are 386 million Google entries for "only for Facebook fans".

This is easy to do on the web, where the user is online and probably logged into Facebook. It is much more difficult in the real world, at a physical point of sale.

That's where Taggo's fan recognition service comes in.


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New website for Taggo

We have just relaunched Taggo on www.taggo.me after refocusing the service entirely on Facebook fan recognition at the point of sale.

You can also find Taggo on Facebook at http://www.facebook.com/Taggo.me


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Geolocation social tools like Foursquare are beginning to show their weaknesses

Marketing platforms built on geolocation social media services are one of the hottest trends with investors and advertisers. Starbucks launched several offers using these techniques, with great fanfare. Now that the service has begun to get beyond the early excitement, several weaknesses are beginning to appear.

One major issue is that anybody can checkin to a business, without necessarily being a paying customer. According to Forrester,
"complaints are surfacing that customers checking in at Starbucks are finding their barista is the mayor, effectively blocking them from earning the discount." Forrester recently provided an analysis of the Starbucks offer on Foursquare.

The number of users is also an issue for marketers. Foursquare has 2 million users, a highly respectable number for a geolocation game, but a minuscule fraction of potential shoppers.

Give people a reason to become a fan of your Facebook Restaurant Page

Australian restaurateur Benjamin Christie gives the following advice:

"Give Facebook users a reason to become a fan of your Facebook Restaurant Page.

Why not do a monthly dinner for two giveaway, exclusively for Facebook Fans. Or all Facebook Fans get a glass of sparkling wine on arrival.

Why all this to get people to become Fans? These people will be come ambassadors for your restaurant, every person will now have a link to your Facebook Restaurant Page on their page, kind of endorsing your restaurant in many ways. This in itself have a viral effect and will, over time help bring diners to the door."

Coming soon: Facebook fan recognition at the point of sale

Become a fan of taggo.me on Facebook for details.

Lemonade stand runs into health inspectors, needs $120 license to operate

In my entrepreneurship workshop I open with a big picture of a couple kids running a lemonade stand. A perfect example of our common, innocent, universal longing to create. And then this article comes along and turns all that into Twilight Zone and 1984 material. What's the world coming to?

Go to the article: Portland lemonade stand runs into health inspectors, needs $120 license to operate

Beer and diapers - the myth of purchase data analysis

Doing some research on how Foursquare and other social media companies are trying to get into the loyalty business, I stumbled on this piece that basically says that the key is data analysis:

"Loyalty programs enable businesses to conduct what we market researchers call market basket analyses of purchase data – by determining what items frequently get purchased together or at least by the same types of consumer, companies can optimize promotions."

I could almost see it coming ... the beer and diapers story. And bang, right on cue, there it was:

"There is a reason why Godiva chocolates are sold near the jewelry counters, and why (to use my example above) beer and diapers are often near each other in convenience stores."

Twenty years of purchase data analysis and the only story that sticks is beer and diapers. The secret is that there has always been much more talk about this type of analysis, and very little real work.

If not, we would be talking about something other than beer and diapers.

Currency competition: the next driver for innovation in money and payments?

The economic crisis is a great motivator for innovation. Since fiat money is at the heart of this crisis, we could see a resurgence in private currencies. Dave Birch's Digital Money Blog has brought up private currencies many times. Now, with government fiat currencies devaluing around the world, the topic is being looked at through the angle of currency competition.

"In the two years since the recession began, in order to fight off a depletion of local wealth, local communities have created their own currencies," writes Jeffrey Lewis in this article. "The benefit here is that the money spent at these shops can openly circulate throughout the community, ensuring that at least a small amount of liquidity stays local and keeps the economy moving."

Downside?

"One of the biggest disadvantages to these local currencies is that they are unfortunately pegged to the US dollar, so it is just as encumbered with the threat of inflation as the dollar. However, their popularity does suggest that consumers are at least willing to drop the greenback as a medium of exchange, and we can only expect that as these currencies spread further and further, Americans will begin looking at their dollars a little bit differently."

The Next Step?

"The next step in moving forward with competing currencies and the eventual resurgence in metals as money is right around the corner. Following the success of currencies backed by the US dollar that can be readily exchanged in local businesses, we should only expect that the next step will be a currency system that is devoid of any ties to the greenback. Instead, the new currencies will be backed by metals, labor, or another fungible product that is easily monetized. Their use in local businesses will help propel an economy that is strained by debt and fear of the future, and we can only hope that they will go mainstream."

Crisis, Innovation and Relationship Cards

Here's a great presentation by Patrick Gauthier. It's missing the audio, which I imagine must have been very interesting to hear.

Crisis Innovation and Relationship Cards 2.0

View more presentations from hyperion941.

Hyperinflation – An Upcoming Black Swan in the Payments Industry?

With no inflation in sight, why am I writing about hyperinflation? Remember, in October 2008, the deer in the headlights look on the faces of economics experts? Nobody in charge knew what was going on. None of the experts in textbook economics, none of the Nobel Prize winning old men. They were all dumbfounded. Every one of them. And they are still playing with dangerous things like derivatives and money printing, turning the Western economic world into a gambling den, and forcing all of us to bet on possible outcomes when some of us would rather be focusing on building great companies.

When strategizing my business activities and planning the safety of my family, I now take a serious look at the impact of these people being wrong again, and of their gambling losses causing more damage. I’m certainly not placing all my bets on the continued blind faith in the dollar and other fiat currencies.

Hyperinflation doesn’t need to be the cartoonish version that happened in Zimbabwe. It is actually much more common than that. We’ve seen it in the last decade in places like Turkey, Thailand, Brazil, and other places. It still leaves vivid memories in Italy, Greece and even France if we go back just a few decades.

Around ten years ago, in Turkey, two banks grew their credit card businesses much faster than their competitors. Garanti Bank and Akbank both credited their success to the real-time loyalty programs that they offered. My prior company, Welcome Real-time, provided the software for Akbank’s program. Several years later, I came to understand that it was in fact high levels of inflation that actually drove the success of those loyalty programs.

Inflation causes people to spend money quickly, to convert cash into goods before prices go up further. High inflation will boost credit and debit card payments, since that is an easier and quicker way to spend cash than paper money. All credit card issuers can benefit, especially those that can quickly increase their points program ratios to take into account higher interest rates, like Garanti and Akbank did in Turkey.

But there is another area where inflation will have an even bigger impact and create much larger opportunities for a few nimble payment providers. I see a once in a lifetime opportunity for new prepaid services.

Putting $50 on your Starbucks prepaid account is not very useful in a high inflation environment. But tweaking the system to let customers prepay 10 coffees is a completely different thing. Dollars are converted to goods and services immediately, locking the value of those goods in for the future. Want to lock more in? Prepay 20 coffees. Want to spend your money on more than just coffee? Purchase Starbucks Sterling or Carrefour Bucks. The exchange rate for each retailer’s currency can be displayed on a daily basis.

Customers are already familiar with loyalty currencies and exchange rates for points. Why not retailer currencies for payment?

Closed loop prepaid providers will be the big winners. Open loop prepaid cards are useless in a high inflation environment. Closed loop gift cards that are based only on dollars are also useless.

The real disruption this time, compared to ten years ago in Turkey, is the ability to use mobile phones for transacting. Now, with my new startup venture, Taggo, and with prepaid technology offered by CRM, membership and POS providers that have integrated Taggo into their solutions, any retailer can quickly create their own currency, without needing to issue new pieces of plastic that customers don’t want to carry around.

I have been talking and writing for many years about ways to make payment acceptance more attractive to merchants. This has been a big focus for me in creating Taggo. Developing strategic ways to benefit from potential currency devaluations is an added plus that doesn’t cost much today, but could prove to be very profitable.

Still, I wish all of those gambling addicts in London and New York and Washington would just go cold turkey and let the rest of us get on with our lives.