The post-purchase space is a land opportunity, where partnerships push FIs and merchants further into profitability, feat. Gaurav Mittal, EVP of Ethoca

The friction between a customer and a purchase has gone down, but the same cannot be said for when customers want to disengage from services like a subscription. Similarly, while the industry has raced ahead in enabling customers to use new payment methods, financial tools that help customers keep track of their expenses, on the other hand, aren’t being provided as readily. 

But my conversation with today’s guest, Gaurav Mittal, Executive Vice President of Ethoca, a Mastercard company, has shown that the post-purchase space represents an opportunity for our industry. It’s where customers want convenience, autonomy, and trust but many of the players today have not been able to meet their demands.

Mittal brings a unique insight into how tools like digital receipts and subscription management delivered within the banking app can improve customer experience. What’s more, this mission to ease post-purchase tasks like cancellations brings with it cost reductions and operational efficiencies for merchants and banks as well — and our guest today tells us how to build for the hard to achieve but ideal solution: a partnership landscape where everybody wins. 

The big ideas

The bar for financial services is higher than ever before: You think about merchants and retailers, as an example: they spend a ton of money trying to acquire and grab the attention of customers. A single bad experience like an unresolved dispute with the merchant, where I felt like I didn’t receive the quality of service, or didn’t receive the correct information I needed – can turn customers off the merchant. 

More choice means more confusion: So because of this preponderance of choice, it’s a great experience at the onset, but it can create a lot of confusion subsequently. As an example, when consumers review their purchase information in their banking app, they are asking themselves, is this actually the amount I made the purchase for?

Giving customers control improves the bottom line: Contrary to what we see as a concern about adding subscription control features like cancel or pause capabilities, we have heard consumers say – what we are beginning to see them do is  – they are actually more likely to subscribe if they feel they have control of the on and off button. They are more willing to try new things that they haven’t tried before. 

Partnerships help FIs go further: There is this complex regulatory and data management challenge that financial institutions face. But this is where partnerships come into play.

To learn more about how subscription management tools and digital receipts can impact cost reductions and increase operational efficiencies, download this white paper. 

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Read the full transcript

As technology has advanced, consumers’ expectations have evolved in response to how they are interacting with all the digital tools and channels they use. The responsibility in financial services is a little bit greater.

The three things that customers expect from their financial services partners, particularly, are transparency – which is a proxy for building trust with the institution and control. People want to feel in control of their financial lives. They want to make sure that the money and their savings are being used consistently with their expectations. They want expediency, and this directly correlates to their experiences as consumers. They want to be able to press a button and access the information they need. They want to be able to resolve the problems that they have. They want to be able to undertake the activities that they wish to do. So the transition to online banking has been a great example. It’s a great illustration of how financial services have delivered – a little bit – on this expediency. 

There is less patience for doing activities physically that can be done online. We have seen in our surveys that up to 50% of consumers – including Millennials and Boomers – would consider switching institutions if they were able to better access information. If they were better able to self-serve in an online banking environment.

There are players who do it better than others. We won’t name names. If you take a look at some of the largest financial institutions in the country, they are investing heavily [in digital experiences]. A number of upstarts have come up through the ranks, primarily in an unrelated industry. Take Robinhood as an example: by providing a consumer experience and by changing the way consumers interact with their financial institutions. 

How to delight customers by doing simple things right

It’s doing a lot of simple things right, and then it is about taking that and adding to that. So there is a base level of expectations consumers have in financial services today, born out of the last few years of trends. You must have a website, you must have a digital banking channel. You must enable me to see all my information in the places that I want to see it. 

If we just take a moment and step back and reflect on a consumer’s journey which involves making choices around purchasing as an example and how they interact with their financial institutions. Someone may browse online for something that they are interested in. They may even visit the store or see an ad pop up on their social media feed. After that they may purchase it in store or online. In fact, they may even use their smart home devices, like Alexa to buy something. 

Oftentimes, these are shared devices, so some of the purchases on my smart home device may be made by me or by my kids – we have a six year old, Lakshmi. And in some instances, by  others that are in our household, like our nanny, for example. Then you may get an email confirmation of that purchase. You may see that charge in your banking app. What I think has evolved is that this experience has become multi channel and multi modal. So because of this preponderance of choice, it’s a great experience at the onset, but it can create a lot of confusion subsequently. As an example, when consumers might go review their purchase information in their banking app, they are asking themselves, is this actually the amount I made the purchase for?

Point of Sale devices have now added auto tipping, and so the consumer may see a transaction amount that is distinct from what they recall as the purchase amount for an item. It’s our responsibility, as the enablers in this financial services space, to improve that experience, to provide transparency and enable trust. The notion here is we need to provide more transparency, simple things like providing a clean name of a merchant or a logo. So that my cognition is not overly stressed while I’m looking through my banking statement and wondering if my money is safe, and then trying to understand what SBX in a banking statement means. I should just intuitively know it’s Starbucks, as an example. 

Simple things like providing a digital receipt can help distinguish between what was the tip amount versus the actual purchase amount. Enabling things like controlling subscriptions from within my banking app and helping customers remember their subscriptions. It happens to us so many times – I forgot to turn off this subscription account associated with Netflix or a home delivery service. I want to be able to in that moment, without distracting myself and leaving my banking application, have the right experience – to be able to press a button and resolve my problem, turn subscriptions on and off or renew them. That is the added layer of experience we can bring to consumers that will not only serve to meet their basic needs, but will also delight them. 

What makes a winner and the importance of the banking app 

Consumers are bringing to their financial institutions the experiences they’ve come to expect of any digital channel. There are leaders and laggards in financial services, and institutions that are investing most heavily in creating these consumer experiences are the ones we are seeing take the lion’s share and win. 

There is a balance between the older institutions – the institutions that have been the stalwarts of personal and consumer finance for the last 50 years – they are not sitting idly by. They’re taking note. They are reshaping how to drive this consumer experience. We have a number of really great clients that have embedded these new technologies into their banking apps and are delighting their consumers. 

So take, for example, the 90% of people who said they want clearer financial information within their banking apps. [At the same time] banks have told us that they’ve seen 30% to 40% reduction in call center volumes after adding additional information into their banking apps. So not only are the other consumers beginning to expect this, but the banks that are delivering this are seeing real results, both in operating cost reductions from the call center volumes, but also seeing changes in top of wallet behavior. 

You are seeing consumers actually gravitate more to the products and cards that provide these experiences. If we step back even further, I actually believe that the issuer banking apps are one of the most underappreciated places in online real estate. 

It is a point in the journey where a consumer’s attention is high. They are looking to ensure that the monies they’ve worked hard to earn are safe and there is a high cognitive focus. Our job is to reduce the stress of that moment, and then provide delightful experiences. 

Even things like providing focused offers and loyalty rewards can make a consumer feel more secure. It can certainly add to that sense of well being and experience we are talking about. So our job is to figure out how we can help our clients make their banking portals, this valuable online real estate, really meaningful. 

Even simple applications like PayPal or P2P money transfer applications, the adoption curve has trended up over a period of time, and today it’s a several $100 billion dollar public company. Now what we have seen is, because you can’t [move fast and] break things in financial institutions, they will take time to innovate, but they follow through. Zelle today is growing rapidly, as an example, on the back of just providing a good, simple, valuable consumer experience.

Partnerships help FIs go further

There is this complex regulatory and data management challenge that financial institutions face. But this is where partnerships come into play. Within financial institutions, oftentimes data is stored in different places and it’s all formatted in its own way. Bringing this data together requires translation, and even something as simple as displaying a clean merchant name to a card holder in the bank app requires a lot of cross referencing and a lot of matching. This is where partnerships are needed. 

Folks like us can help bring innovative technology that is needed to FIs. There is a greater level of collaboration across the ecosystem. This happened when credit cards first originated – you walked into a merchant and voila, you were able to hand off a card that the merchant could swipe. Then it would be between the merchant and your issuer and there would be a settlement of funds so that the consumer didn’t have to worry about carrying a heavy wad of cash or a wallet around. 

We are now taking this collaboration to the next level. So going back to digital receipts or subscriptions. For a financial institution or a merchant, to be able to implement this solution,  there is connectivity needed.

The second piece is there is probably greater collaboration needed. So when you reflect on the solution, just as simple as the digital receipts or subscription controls, you need to be able to pull the information from a digital receipt platform, whether it’s a point of sale device or a merchant CRM system, and then deliver it to a consumer where they need it for example the banking app. If each individual merchant were to try and connect to every single consumer financial institution, we would be on a long journey.   

So we need to find ways to amplify and accelerate this collaboration, build new data networks to take advantage of that, and this is really the mission we are on, in addition to driving consumer experience: Driving experience by enabling collaboration across this ecosystem to deliver better outcomes for consumers. 

I think we should probably answer this from the standpoint of each of the stakeholders that are involved in this. We’ve spoken about consumers a ton. For them it provides a greater sense of security and a greater peace of mind and trust in the institutions with which they are interacting. Nobody wakes up in the morning and says ‘Hey, I wish I could be on hold for 45 minutes.’ So our job is to try and improve the quality of lives of our consumers by creating a better experience. 

You think about merchants and retailers, as an example, they spend a ton of money trying to acquire and grab the attention of customers. A single bad experience like an unresolved dispute with the merchant, where I felt like I didn’t receive the quality of service, or didn’t receive the correct information I needed, can turn customers off the merchant. And then this drives the lifetime value of a customer down by providing these interaction points, by enabling a digital receipt within the banking app and providing recognition post purchase for that merchant, – that way you can create better association for that merchant. 

You can create purchasing behavior simple for returning customers. Even within digital receipts, you can provide the ability to say, ‘I want to buy this item again’ or you can interrupt a subscription cancellation journey to say, ‘is an alternative plan better for you?’ or  ‘would you like to pause your subscription?’ so that when Zack returns from his vacation, he still has access to the great entertainment that he wants.

For issuers, there are real benefits in the operating cost reduction. I’ve said consumer loyalty drives greater usage of their products. And if we drive top of wallet behavior and greater usage and lower cost for issuers, we drive higher consumer lifetime value for our merchants, and we drive a better experience and time savings for consumers – that creates a better economy. And it creates a better experience for everybody.

The subscription world is changing

Both due to regulators and as a result of our own values, we ought to meet a high threshold. Just take, for example, a recent ruling by the FTC asking to make it just as easy for a consumer to cancel a subscription as it is to initiate a subscription. They call it the “one click cancel”. 

You can’t hide it behind a button that is three links deep, that is hard for the consumer to find. These are the kinds of responsibilities we ought to hold ourselves to. Not only that, security is another top priority for us to make sure that consumers feel secure and are secure. That they aren’t the subject of scams and breaches that are so prevalent in our world today.  

We have to provide the tools – which are perhaps in the background – checking it so they are never really visible to the consumer and/or providing more explicit checks and balances in the system. Whether it is a secondary authentication step or a digital receipt that verifies the information, adding in those necessary controls to ensure that we continue to keep consumers safe. 

Let me add a little bit of color and data to that. Contrary to what we see as a concern about adding subscription control features like cancel or pause capabilities, we have heard consumers say – what we are beginning to see them do is  – they are actually more likely to subscribe if they feel they have control of the on and off button. They are more willing to try new things that they haven’t tried before.

Maybe you aren’t such a great chef and are willing to try a cooking app that will make you better, or maybe you are willing to recommit to learning that second language after failing the first three times, because you can turn this on and off based on what your convenience is, rather than based on trying to find hidden buttons and being on calls for 20 minutes in order to get something resolved.

What it takes to lead and how to get started

Three things come to mind. Firstly, I would say, just get started. And I say that because big ideas are often born out of small actions. If you have an idea, put it into action. Figure out a way to get it out into the real world. Let the real world provide you feedback and iterate based on some of that customer input. Wash, rinse, repeat – in order to get that feedback. 

The second is, focus on the customer. This is implied a little bit in that first suggestion, but have a really good view of the problem you are solving. Ensure that you go really deep into understanding it – which customer segment feels the problem most acutely that you’re trying to solve. Focusing on that customer to solve that problem. 

The third piece of advice is probably that in financial technology cooperation is more prevalent than in many other sectors. It’s all about cooperation. So what seems like a competitor at one point in time — take Stripe and Wells Fargo as an example —  may actually be one of your best collaborators, resulting in a highly productive relationship that creates incredible value for shareholders and consumers of both companies. 

As an example, small fintechs want to rethink financial services. They can do so in partnership with larger players. They can take away some of that regulatory complexity, they can create access to larger pools of customers. Ethoca’s business is grounded in the idea of collaboration. The Mastercard disputes capability is grounded in the idea of collaboration, and in the notion that if we connect merchants and issuers together, they can work to solve the most intractable, challenging problems of the consumer that they serve. Things like preventing fraud, preventing chargebacks, and improving the consumer experience. The innovation is based on simplifying a complex digital ecosystem. 

The future is a fruit of collaboration

There are plentiful examples of the wonderful ideas and great businesses that have emerged from those who are willing to lean into the cooperation. Hopefully it is a lesson that we can all carry forward. 

We’ve seen a ton of innovation over the last decade. We’ve seen the advent of digital wallets. We’ve seen Buy Now Pay Later, which provides more flexibility around purchasing. We’ve seen Early Wage Access that creates access to wages for hourly workers and which allows them to lead more comfortable lives. [We have also seen] the release of data via open banking that makes that data freely accessible to the consumers who want to use it, whether to secure a mortgage loan or for other purposes. So, companies like Ethoca are looking to improve consumer experience in the payment space that will allow the next generation to not only build on that, but also create absolutely new experiences by enabling better collaboration across merchants and issuers alike, being able to offer more unique, customized experiences for their shared customers. 

It won’t matter whether it’s in a consumer banking environment, or whether on a merchant platform. This includes things like being able to insure a transaction at the point of purchase for greater peace of mind. It may include things like upgrading subscriptions directly from within the banking app and signing up for new loyalty programs, receiving better and more targeted offers, and finally, making their financial lives easier. 

There is so much yet to come. I’m so excited for what lies ahead.