TD Bank's payments overhaul a lifeline for brick-and-mortar stores
Traditional U.S. retail is in crisis at the hands of e-commerce. Bankers have a role to play to stop the bleeding through a combination of service, incentives, and payments technology.
“The headlines around retailers never stop,” said Matthew Boss, who became TD Bank’s head of U.S. credit cards and unsecured lending in February as part of a TD Bank reorganization that united its retail card, U.S. Bankcard, U.S. partnerships and personal lending operations.
“Bricks and mortar are closing thousands of stores. As much as we talk about banks transforming, it pales in comparison to what’s happening in retail," Boss said.
In the first few months of 2019, store closing announcements were up nearly a quarter from 2018’s pace—a year in which more than 5,500 traditional retail stores closed in the U.S., according to Coresight Research, adding retail bankruptcy filings as of early February were already at 33% of 2018’s total bankruptcies.
The reasons, according to Coresight, include e-commerce, rising interest rates and flat sales-per-location performance. They're problems that don’t have obvious solutions — but banks can still play a role in countering these trends.
“We have to partner with them to figure out how to navigate that change,” Boss said. That means figuring out a way to match new payment, shopping and marketing techniques to stores, rather than fixing a category.
It’s an attempt to go beyond the idea that stores have to have a mobile app, or new rewards programs, or be omnichannel. Each retailer can have a different mix.
“What digital capability do we bring, what kind of loyalty can we bring? We’re thinking about online as an experience. How do you engage consumers in or out of a store?” said Boss, who has a mix of transaction technology, modern marketing techniques and new channels on his resume. He joined TD Bank from Australia’s ANZ, where he served as managing director of products and marketing and also had responsibility for digital channels and assets, end-to-end marketing, data and analytics. He also worked for Bank of America for 12 years, leading teams in North Carolina and Chester, England, with roles covering product marketing, credit cards and strategy.
The bank is approaching different retailers with different digital and tailored elements that fintechs are using to try to pry retailers away from banks. For Ethan Allen, a high-end furniture retailer, there is the option to build a Klarna-style installment payment feature for higher-ticket purchases. “There’s a huge opportunity to do more financing,” Boss said.
For the bank’s fitness clients, it’s working on digital sales and a hybrid of subscription and installment payments.
For ICON, which sells Nordictrack, the opportunity is to roll subscription payments into financing. A rowing machine could be financed over several payments, or paid for as part of a subscription program.
“It’s marrying two types of businesses,” Boss said, adding that increases the change of the card to be used for different purposes.
With big box retailers, there have been changes in loyalty programs, such as RedCard incentives for Target’s new third-party sales service (TD Bank issues RedCards). Another card partner, Nordstrom, has upgraded its loyalty program to add more personalization, channels and layers.
“With our partners we’re trying to be flexible,” Boss said. "It’s not one size fits all.”
There are competitors on several fronts. TD Bank is going up against other merchant acquiring banks, such as JPMorgan Chase, which has added fintech Cardlytics as a partner to support incentive marketing in the mobile channel. Capital One has acquired Wikibuy to add online shopping deals for merchants.
“We’re looking at creating different experiences,” Boss said, adding this is where the combination of cards and financial services comes in. “The data and infrastructure can help make those journeys relevant and timely.”
Banks are under pressure to support incentive marketing programs in different channels that are more relevant to consumers. Merchants are also under pressure to respond to rivals such as Amazon, which is building a merchant base for its Prime loyalty program through Whole Foods, Amazon Go and other venues.
“It isn’t all about responding to Amazon,” Boss said. “Amazon inspires folks in terms of new ideas for retail.”