The Cashless Trend

Several organizations are making changes to go cashless or at least pilot the concept, including Massachusetts’ MBTA, American and United terminals in select airports (Miami being the latest) and Shake Shack’s recently opened cashless location in New York, to name a few.  Living in the Seattle area, I have access to two very publicized cashless pilot stores – Starbucks and the new Amazon Go store – so I thought I’d go check them out.

Starbucks Cashless Pilot Store

The Starbucks cashless pilot store is located in the Russell Investments Center in downtown, Seattle. This location is, ironically, reached from the street by passing through a Chase bank lobby and a row of ATMs. Credit, debit and gift cards are accepted as well as mobile pay through the company’s app.  To me, the checkout experience felt no different than checking out in any other Starbucks location – as a frequent patron, I rarely see customers paying in cash when I visit.

Out of curiosity, I also stopped into the Starbucks directly across the street from the pilot store (because it’s Seattle…), and I spoke with one of the baristas there.  He estimated he hears two to three complaints each day from customers who’ve tried to use cash at the pilot store and couldn’t.  This figure constitutes a pretty small percentage of customers who would visit a busy location like this, but as with any change, not everyone will embrace it.

Amazon Go

The new Amazon Go store (also located downtown Seattle) takes cashless to another level by removing the checkout process altogether.  After downloading the app, customers are prompted to connect their accounts and payment methods to their Amazon Prime accounts/payment information. Upon downloading the app, customers will receive a QR code. They are then prompted to scan their QR code in the app upon entering the store.  This code needs to be scanned for anyone walking into the store— if multiple people will be using one person’s account, each individual will need to scan the QR code from the device connected to the account they’ll be using.

The Cashless Trend: Amazon Go
A view outside the Amazon Go store


The Cashless Trend: Amazon Go
The view from inside the Amazon Go store

While shopping, customers simply take the products they want to purchase from the shelf, and then walk out of the store.  No product scanning or checkout needed.  It’s that simple.  A receipt appears in the app within 2-4 minutes and another one is emailed within 15-30 minutes.

The Amazon Go app tutorial indicates that as items are removed and put back on the shelf, they are added and deleted from your virtual cart.  While this is the process in the background, customers are not able to see their virtual cart to verify this, which means that you don’t see the total of items in your cart until your receipt is available after leaving the store.  While easy to keep a mental tally when shopping by myself, this could prove to be more difficult to when multiple people are shopping with one account.

Overall, shopping at the Amazon Go store was a great experience.  The biggest questions that I’m left with are:

  1. What happens if someone’s payment fails? Customer’s accounts are tied to their Prime accounts, so there’s likely a method of recourse through this.
  2. How great is the risk of fraud with customers placing returns? To obtain a refund, you simply swipe left on the item in the receipt you want to return and the refund is issued immediately. No returns are required.  This return process is essentially based on the honor system. It appears that Amazon has taken the approach that most people won’t take advantage of this, and the company feels the risk here is relatively low.
The Cashless Trend: Amazon Go Receipt
Screenshot of my Amazon Go receipt


The Cashless Trend: Amazon Go Receipt
Screenshot of my Amazon Go refund receipt

One could argue advantages and disadvantages of going cashless. Certainly not every customer will always be on board; but there is definitely a trend in moving in this direction.  Many experts feel that cashless is the future. They believe that cashless will continue to increase in popularity across multiple industries.  It is a trend to watch as organizations look to ensure a positive customer experience, keep payments secure and keep risk and fraud mitigation strategies on par with these advancements in payments.


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The Loyalty Sweet Spot

What’s the sweet spot of a loyalty program? If you asked a consumer, you may get a far different answer than if you asked a business. The consumer wants: free items (that they would typically buy anyway) rewarding their current behaviors and shopping frequency at the places where they shop most frequently. A business wants to increase spend, increase visit frequency and attract new users, all while keeping the reward threshold at a level that does not end up causing the business to pay out more than they reap from new or more frequent customers with higher spend.

The Loyalty Sweet Spot is a Spectrum to be Balanced

As loyalty programs enter and leave the marketplace, these decisions are shaped by how far the program is on either side of the spectrum of consumer or business “sweetness”.   When a loyalty program is giving away rewards that over-reward, today’s consumers act like sharks smelling blood in the ocean, and businesses will see the program rapidly shift away from their desired sweet spot.

Chipotle’s “Chiptopia” program, that began in July 2016[1] and lasted roughly three months (it remains unclear if this was planned or not), gave out over $20M in rewards in its short life.  For reference, according to Business Insider, Chipotle’s program offered a primary reward (free entrée in this instance) following only $35-$40 in spend compared to, “$90 of likely spend at Domino’s Pizza, $40 at Dunkin’ Donuts, and $62.50 at Starbucks.”

Consumers loved the program, but the business costs associated with the program likely made it impossible to give Chipotle any sort of ROI. Interestingly, Chipotle is once again launching a loyalty program. Chances are, unless the rewards are equally as compelling, consumers will not latch on as strongly and social media feedback will be harsh.

Loyalty Program Design and Measurement

Designing a loyalty program from the business perspective should be done with a view on both ROI and what will be deemed internally successful and sustainable, as well as with a view from the consumer perspective.  We are all consumers and know which loyalty programs offer rewards that meet our requirements to drive additional purchases.

To get that proper view on ROI, it is imperative to thoroughly think through and design your model.  While it may take some work to get pure marketing folks pinned down long enough to methodically discuss all the inputs, outputs, and define the metrics and financials that will define program success, there is no exercise more valuable.  Once the program is launched, frequent check-ins early on to see how the model is responding to actual consumer reaction is vital.  Programs can be tweaked as needed if results are unfavorable; Starbucks did a major loyalty program overhaul and while curmudgeons like myself initially declared that they were done with Starbucks, Starbucks’ loyalty program and offerings remain a gold standard in the market.

When a business unit is designing a loyalty program, ensure that the program meets core loyalty program requirements of driving volume (new and incremental), increasing spend, and guaranteeing ROI.  This same business unit must also think about incorporating facets of the loyalty programs they enjoy and participate in the most as consumers.  By combining these two and building an effective model, a loyalty program will be primed for success.


For further discussion, contact Tim at


How will Blockchain Influence the U.S. Payment Systems?

If time is money, then why do our payments move so slow? In the 21st century, speed is the name of the game – instant communication via email, text and phone calls are critical to our day-to-day lives, social media has changed way we learn about the latest news and keep up with friends, and transportation continues to bring us to our destination quicker, cheaper, and safer. Yet, our payments system continues to create a drag on businesses, individuals, and the economy. The current system is a mesh of many different providers, limiting interoperability, using antiquated systems that are slow and expensive. Built on technology that predated the internet, with some minor updates, current payment systems are slow and prone to errors.

How do we go about creating the next generation of payment systems to address these issues?

The U.S. faces many roadblocks in improving the current state of payment systems. The US ecosystem includes a myriad of stakeholders, including government institutions, financial institutions, payment systems, merchants, consumers and service providers. The fragmented nature of US payments prevents the quick adoption of technological advances that could fix many issues we are facing today. Convincing existing players to invest in new systems is an uphill battle – industry incumbents don’t have much outside competition pressuring innovation. No matter how our payment systems change, we know one thing for sure – it will take time.

At the time of this writing, there are two main types of solutions being proposed as part of the US Faster Payment Task Force (FPTF) to improve US payments – Transactional and Distributed. For an in-depth look at the US FPTF check out our whitepaper Managing Risk in Faster Payments Systems.

Transactional proposals are those aiming to improve the existing payment infrastructure by offering increased speed, security and reduced costs.

Distributed solutions are those built utilizing distributed ledgers systems, also referred to as blockchains. Distributed solutions are touted by their advocates as the future for making payments for a variety of reasons. Blockchains are immutable, meaning a transaction can never be altered once it has occurred. This prevents bad actors from making changes. Transactions in distributed solutions are pseudo-anonymous because they use an address made of random chains of characters, rather than real-world identities, enhancing privacy while the ledger remains public. These transactions are fast and work globally – payments are completed in minutes or even seconds, and can be sent anywhere in the world with anyone allowed to participate. Lastly, transactions are secured through the use of public and private encryption keys

The case for XRP and blockchain

There are many cryptocurrencies, including Bitcoin Cash, Litecoin, DASH, and Stellar, that have gained traction due to attributes associated with Distributed solutions: speed, reliability, and scalability. However, few cryptocurrencies have actively started working with banks and financial institutions like Ripple, the company behind the cryptocurrency XRP. I believe these functional banking relationships will be key to creating long-term viability.

Proposing a blockchain solution to improve payments, Ripple offers a series of products on its RippleNet platform that aim to solve a variety of issues within the payment industry. Advantages of using XRP include transaction fees and speed. Transactions cost a fraction of a cent, regardless of transaction size, and are posted to the ledger within seconds. In comparison, a typical credit card transaction may take anywhere from 1-3 business days to post to your account.

For a solution to be widespread it must be scalable — XRP consistently handles 1,500 transactions per second, but Ripple claims it is scalable to the same throughput as Visa (over 50,000 transactions per second), meaning it could handle the strain of becoming a global currency[1]. With a perfect record – all ledgers have closed without issues since its inception in 2012 – XRP boasts many advantages as the potential future for digital transactions.

XRP’s Challenges

Despite being technologically superior to our current payment infrastructure, XRP still hasn’t taken off. This may be due to a variety of factors— a lack of decentralization, price volatility, or lack of regulatory approval by governments. Cryptocurrency fanatics typically are at odds with XRP due to its pseudo-centralized nature and Ripple’s desire to work with banks rather than replace them. Financial institutions are hesitant to use XRP because it faces extreme price volatility. Price volatility, along with a lack of regulatory approval, makes XRP an asset that banks just don’t want to take a risk on. At this point, the majority of banks working with Ripple are only using the RippleNet platform, and not XRP itself.

The road ahead for blockchain and cryptocurrencies

While Ripple is an example of a solution that solves some of the issues facing the US payment ecosystem, it does not solve all of them. It is unlikely one solution will solve all of the problems in payments, but it is a step in the right direction. It is critical that moving forward new payment innovations are designed to be easily interoperable with both old and new systems.

The second biggest hurdle for blockchain solutions is preventing illegal activity while maintaining anonymity for users. It is imperative that transparent ledgers keep individuals’ data private, but the use of cryptocurrency for money laundering and other illegal activities will continue to throttle adoption.

The most significant hurdle is that of theory – many blockchain systems are built upon the idea of decentralization, which at its core would require a complete shakeup of how the U.S., or any country for that matter, operates compared to the current centralized institutions. Regulation is imminent and may be beneficial or catastrophic to the success of cryptocurrencies. Without a central authority utilizing monetary policy to control supply,  volatility may always remain the biggest hurdle for cryptocurrencies. Unless the U.S. issues a USD backed cryptocurrency, adoption by merchants and financial institutions is likely to remain low for the coming years.

While no one may know what is in store for blockchain and decentralized currencies in the future, it sure is fun to speculate.

For further information, contact Danny at