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This McKinsey article on the growing role of digital marketing in today's world of the new consumer journey notes, somewhat ironically, "one consequence of the new world of marketing complexity is that more consumers hold off their final purchase decision until they’re in a store." Maybe it's consumer behavior of this nature - whether or not it sounds logical to the digerati - that prompts Citi to continue to invest in its branch network despite having a popular mobile banking app.

Agreed, "Razor, Razor Blades" is a better analogy. Although it's a bit more complicated, "Razor, Razor Blades & Reward Points" might make an even better analogy: A few years ago, I'd bought the then newly-launched Gillette Mach3 razor for a price that was not too high. When the blades that came along with the razor got over, it was time to buy replacement razor cartridges (looks like "cartridges" will enter all discussions about viable business models!) and I got a sticker-shock when I went shopping for them. But, since I had no choice, I had to go ahead and buy them. The next time I visited the reward redemption websites of my two credit cards, I noticed that both of let me redeem my reward points against the said Mach3 razor cartridges. The points-to-currency ratio was weighted heavily against me and in favor of Gillette or the bank or both but, since the transaction didn't involve any actual cash outflow, I opted for it on that occasion and every time thereafter. Although convoluted, this business model does manage to deliver win-win for all parties concerned.

I guess a certain degree of focus on merchants is inevitable since they're the ones willing to pay the mobile wallet provider for carrying their offers.

On a side note, since the article contains an analogy with HP, in 10 years, I've bought 4 HP All-in-One multifunction devices. The first one worked fine for the entire 6 years period that I'd had it. The second one had a small problem one year after I purchased it. I was able to solve it with a little bit of help from HP via Instant Messaging. The third one broke down after 10-odd months. It couldn't be repaired. While waiting for a replacement, I'd to go without a printer for almost one month. My latest HP AIO device has broken down within a month of purchase. I'm waiting for HP to fix or exchange it. This leads me to wonder if, apart from charging "a banana for cartridges", HP has also started dropping its product quality with time in order to create a viable business model. Hope mobile wallet vendors don't imitate this facet of HP.

There's a bit of a conundrum here: As @AlexanderP rightly points out, consumers are wary of irrelevant offers. However, as I pointed out in my previous comment, many categories of merchants are wary of relevant offers.

I got SMS alerts not because I subscribed to them but because the regulator mandated them. When the alerts sent by one of my banks ticked me off - cf. BANK1 in this post - I wanted to unsubscribe to them but the bank told me I couldn't do so since they were mandated by the regulator.

No, I'm not saying that the transaction should wait for the cardholder to respond to SMS alerts. In fact, such alerts can be generated only after the transaction gets authorized. I'm only saying that, at their current maturity level, predictive analytics create too many false-positives to be effective, so banks are replacing them by SMS alerts to give more control to cardholders. If, as you say, predictive analytics have gotten better, I look forward to seeing some case studies of live deployments before changing my mind.

@MarkG:

Very balanced post. I share your love for Oyster Card and skepticism for NFC mobile payments, for reasons I'd covered in this post. The context of that post was security, so I hadn't covered the following value-adds offered by Oyster Card: (1) No need to take it out of your wallet, just sidling past the reader with your wallet still inside your pocket will suffice to open the turnstile. This is a great thing if you're lugging around a couple of bags (2) No need to calculate the applicable fare between two points A and B, no anxiety about underpaying or overpaying, the system behind Oyster Card takes care to compute the the Least Cost Fare between A and B and deduct that amount automatically from the credit balance. This is extremely useful especially when you visit new places where you're not familiar with the topography or language or both. 

The way NFC mobile payments work, value add # 1 is absent. Maybe if I start getting offers if I pay by NFC mobile payments - and don't get them if I pay by plastic - I'll take that as equivalent of value add # 2.

Agreed that, say, Dunkin Donuts might be willing to pay you (i.e. mobile wallet provider) a lot of money to bring 10 Starbucks customers to DD. The only way you can prevent Starbucks from terminating its relationship with you would be to persuade Starbucks that you can make this work in the reverse direction, whereby you can use transactional data to hand over 10 customers from DD (or McDonalds or some other coffee store brand) to Starbucks. So far, so good. However, isn't this customer disloyalty at its extreme? How can an m-wallet provider causing this disloyalty then go back to the merchant and claim that it boosts customer loyalty and helps in upselling and cross-selling?

For reasons explained here, our work with banks has shown that merchants are not very enthusiastic about doing personalized deals on the basis of transactional data. I don't see why the hurdles facing banks using transactional data won't apply to m-wallet providers in the same position.

Low price, faster delivery, reputed vendor - these are criteria that definitely influence shoppers' choice of one online vendor over another. I've always wondered if 'frictionless payment' merits inclusion in this list. Braintree seems to go one step further by actually expecting that its payment service will drive the creation of new companies. Only time will tell whether this is a lofty or realistic goal.

Hope this doesn't lead to "enrolment fraud" of the type that hit NatWest's GetCash.

After working with many banks to introduce daily-deals based on transaction data, I've realized that this is like "preaching to the converted". Most banks recognize the potential of such a service to deliver an additional revenue stream as well as improve customer retention. If they still don't go ahead with it, I've learned that it's because of the challenges involved in building a big enough deal inventory. Although they're still loss-making, VC-fueled daily deal operators like GroupOn can afford to continue to grow their salesforce - which reportedly stood at 3,000 people at last count over a year ago - to work with merchants to sign up deals. Banks can't or won't do so. Secondly, merchants don't seem to like personalized deals. Counterintuitive as this might sound, there's a strong reason for this: Suppose a bank analyzes transactional data and learns that a certain John Doe spends a lot of money on pizzas every month. The bank will surely generate additional revenue and improve customer retention by targeting John Doe with a daily deal for, say, 40% off on, say, Marios Pizza assuming Marios Pizza is located near John Doe's home / office (since pizza delivery is a fairly local business). Problem is, Mr. Mario believes that John Doe anyway buys pizzas at full price from Marios Pizza, so finds it pointless - even loss-making - to offer 40% off to John Doe. Therefore, merchants are not too enthusiastic about signing up a daily deal for targeted audience. 

Now, it could be argued that Marios Pizza would be happy to sign up a daily deal if the targeted audience includes people like, say, Jane Doe, who spend a lot of money on eating out in general but nothing on pizzas at all. But, if the bank makes an offer for Marios Pizza to Jane Doe, it could be argued that the offer is irrelevant, which defeats the basic purpose of banks entering this business based on their access to transactional data.