Have you ever discovered a phantom subscription fee on your credit card bill? A recurring charge that you don’t recall signing up for? It happened to me a few years ago, when I used my personal credit card to purchase some newly-released mobile phones that my company wanted to review. During the checkout process, I unwittingly “accepted,” a free trial of a device insurance policy, which started costing me money a few months later. When I found that I’d allowed a firm to syphon money from my account, I felt angry with the companies involved in this sharp practice and with myself for falling into their trap.
One company that I wasn’t upset with was my credit card provider. It didn’t even occur to me that the card company could have protected me. That’s why I was wowed by this announcement from Mastercard last week: “Free Trials Without The Hassle,” Mastercard changed its rules so that merchants must “gain cardholder approval at the conclusion of the trial before they start billing,” giving customers more control in this situation. (Critics have pointed out that the new rules only apply to physical products, but I’m still impressed).
Mastercard’s impressive innovation inspired me to start writing a blog post about the importance of a customer-centric innovation culture. Companies with this culture understand that innovation doesn’t only happen in the R&D department and it isn’t only about new technology (although Mastercard does a lot of technology innovation too). Mastercard’s announcement suggested to me that the company has taken steps to monitor emerging customer needs, and empower the whole organisation – from front line staff to teams who write policies and negotiate partnerships – to find better ways to meet those needs. That’s the essence of innovation.
But events have a way of derailing wide-eyed blog posts. On 22/Jan, it emerged that Mastercard was fined €570.6million for artificially raising the costs of card payments in the EU. Regulators found that Mastercard had “prevented retailers from shopping around for lower bank fees available outside of their home country [leading to] higher prices for both retailers and consumers.” This sounds neither customer-centric nor innovative. I can’t fault Mastercard for wanting to protect its profits, but I suspect that its desire to maintain business as usual might have blinded the company to the dangers of “bad profits”; sources of income that damage customer experience, hurt the brand, or make the firm vulnerable to disruption. If your customers or partners feel that you’re trapping them or cheating them, then you’re making bad profits.
Mastercard has a delicate balance to strike – seeking profitable growth, while positioning itself as a trusted partner to merchants, and a consumer ally, in an evolving regulatory environment. There is bound to be tension, since the constituencies that Mastercard wants to satisfy (merchants, partners, consumers, shareholders, and regulators) often have contradictory demands, such as lower fees for merchants vs. greater benefits for consumers. The best way for Mastercard to build loyalty and trust among merchants and consumers without letting profits dwindle is to double down on customer-centric and merchant-centric innovation. Mastercard’s success depends on systematically developing insight into the evolving lives of consumers and merchants, and using it to drive innovation throughout the entire organisation. Differentiation comes from being the first brand to wow the customer with a solution to an unvoiced need.
Jonathan Browne 