Coin Gets a PR Lesson as Some Early Backers Reconsider Purchases
Coin's ongoing public relations fiasco illustrates that startupsespecially those that have crowdfunded money from prospective customersneed to be transparent about any hiccups in the development of their technology.
Coin is a programmable magnetic-stripe device that can store multiple payment accounts. The company launched a crowdfunding campaign, a method of raising funds from the product's expected audience, in November and reached its $50,000 goal in less than an hour. But last week, Coin delayed shipments to its earliest backers, who were upset that the company hadn't notified them directly of any changes.
"I found out via CNET about the 10,000 beta testers, the fact that I might not be getting my card until 2015 and the even stranger fact that if I was 'lucky' enough to be one of the 10,000 [beta testers] I would have to pay $30 to upgrade from a beta card to a public release card," said Christopher Fago, an early Coin backer who lives in Atlanta.
The shipment delays were mentioned in a Coin update provided over social media to announce that its beta version would have some differences from the final product.
One of the features that separates Coin from its competitors is the "Bluetooth leash," which alerts consumers via their mobile device if they leave their Coin card at a retailer. The functionality is absent in Coin Beta.
Coin did not respond to direct inquiries from PaymentsSource, but it has contacted backers to apologize for setting an "overly optimistic" summer 2014 shipment date, according to a letter obtained by The Verge. It now plans to ship its product by spring of 2015.
"I am still fascinated by the concept Coin promises; I am not angry with the delay itself, just with the lack of transparency from the company," said Fago. He said he's trying to decide whether to become a beta tester or cancel his order (the company is offering refunds).
Several other crowdfunded ventures have found themselves in Coin's situation. Crowdfunding platforms such as Kickstarter and Indiegogo have risen in popularity in recent years, allowing companies to test the marketability of a product by seeking funding from end users. Often, companies promise early access to the product as a reward for certain levels of funding.
Prior to the crowdfunding trend, product delays and cancellations were much less visible to consumers. Recent failures such as a video game by Yogventures, which raised over half a million dollars in funding in 2012 but was ultimately cancelled last month, have prompted consumers to demand more transparency from the projects they fund.
While Fago still thinks Coin would be beneficial for the three to four business trips he takes per year, switching between his personal card and a company card, he worries time may be running out for Coin to be successful in the payments market.
Coin said the current version of its product will not support EMV chip-and-PIN payments, but it will support magstripe payments from EMV cards by scanning the card's stripe. The U.S. is currently migrating to EMV with an October 2015 deadline for most companies. After that deadline, merchants will still be able to accept magstripe cards, but they open themselves to additional fraud liability if they accept a magstripe transaction when EMV was an option.
"Only time will tell if Coin will be dead on arrival, have a product life of three months or if they use this delay as a way to buy some time and figure out the chip-and-PIN implementation," Fago said.
Plus mobile wallets have been increasing in popularity, with many new systems tied to smartphones, smartwatches and other payment-capable devices.
Coin's lack of a clearly communicated EMV roadmap was one reason Aaron Crocco, a Long Island-based sci-fi writer, canceled his purchase. However, he still thinks there's room in the market for such a product, especially for gift and loyalty cards.
But even that use case could be quickly disrupted by mobile. The use of mobile gift cards and loyalty cards has been on the rise, as consumers benefit from its convenience and merchants from the lower instances of fraud.
Coin's apology letter also says its hardware team is working on getting Coin to work at every payment terminal. Coin currently works at 85% of U.S. terminals and may not work on "older or worn out machines," according to the company's website.