Jul 26, 2013

Meet the future of branded currency

I've been speaking about branded currencies for a few years, coming from the angle of inflation causing loss of confidence in currency, and triggering a move to prepaid value stored in a merchant's own products and services rather than dollars. TED just came out with a great talk on how declining faith in government will drive a move back to alternative currencies like these.

I first became aware of this in Turkey in 2000, when the country's second largest credit card issuer, Akbank, launched a new real-time rewards program using software from my company, Welcome Real-time. Usage was much higher than anything we had experienced anywhere else in the world. It eventually became clear that customers were collecting points and miles as a partial hedge against inflation. Points and miles don't usually inflate as fast as currencies.

Today, as more people experience high inflation and loss of confidence in government issued currency, how could this insight be applied to today's world of smart phones and social media? Branded currencies are a simple and obvious answer.

Starbucks is currently the only mobile payment success (outside of Africa's mobile cash deployments). This shows that customers see more value in mobile payments linked to a retailer's rewards program than in mobile payments that simply eliminate the need to pull out a credit card. Instead of storing dollars, it would be very easy to store Starbucks Beans. The dollar price for a reload of 50 beans may go up over time, but the cost of a latte will always be the same number of beans.

What's really intriguing to me is that this whole theme is about marketing. It's not so much about "traditional" payment technology. Which is why most of the mainstream players in the payment industry will likely watch as something like this unfolds, unable to respond to it and unable to see the large scale impact that branded money could have on the payment industry.

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