How Google Wallet’s Ex-Product Lead Plans To Tell Retailers What You Buy

In the spring of 2012, the team developing Google’s mobile payment product, Google Wallet, lost two critical executives: Jonathan Wall, the project’s then-technical lead, and Marc Freed-Finnegan, its product head. The pair were leaving the search giant to start a new stealth project, and were doing so with the financial backing of Google chairman Eric Schmidt.

The fruit of their departure, Index, offers retailers a chance to link the mountain of data, available about consumers online, to the growing, but relatively opaque, credit card data collected by retailers in stores. The company uses software, integrated with a retailer’s point-of-sale system and mobile application, to connect credit card data and product information with online data to create a shopper profile than can help inform messaging in a mobile app or email campaign.

Marc Freed-Finnegan, the company’s chief executive, recently spoke with Street Fight about the data challenges facing brick-and-mortar retailers, the inefficiency of existing marketing methods, and the shift toward a more intelligent brick-and-mortar retail experience in some the country’s largest retail organizations. 

There’s a lot of discussion around bringing online tools offline. From a data perspective, what’s the largest barrier impeding retailers from replicating digital models in stores?
Part of what makes Amazon so effective in retail is that they have perfect data about their customers because all of the activity — from search to click to browse and buy — takes place in a web browser. They can use that information to create a great experience and sell a lot of stuff.  We know, for instance, that Amazon generates around 35% of their revenue from product recommendations.

When you compare that logged-in experience to what happens in physical stores, physical retailers are at a stark disadvantage. In stores, it’s extremely difficult to identify the shoppers that spent a hundred dollars last week or tweeted that he loved the spring collection.

Are retailers simply not connecting the dots, or are these activities not being measured in the first place?
There are two major things that are missing from most retail datasets. The first is that most retailers are missing any customer identifier. They never find out who your are. At the end of the month, Chipotle, for instance, may know how many burritos they sold but they have no idea who they sold them to. There’s no customer identifier in each line of the transaction data, so they cannot answer basic questions about the health of their customer base.

Some retailers try to solve that using loyalty cards. A grocery like Safeway, for instance, says to consumers, “identify yourself every time you shop and we’ll give you the sale price.”  We believe that credit and debit cards are very strong forms of identification. If you’re handing over a payment card, even if we don’t read your name, it’s a pretty strong ID. The challenge is that amid the string of recent retail hacks,  most retailers have decided to throw those data away.

Let’s talk Apple Pay. On stage, Tim Cook argued that the process by which the company anonymizes a user’s credit card number before making a purchase would improve security. Would that not also make it impossible to infer identity from credit card purchases made via Apple Pay?
The model used by Apple is similar to the one Google uses to manage passwords. Instead of giving the real password to a gmail account on your phone, the system creates a password that is only to be used for Gmail on your iPhone. That means if you’re iPhone is ever stolen, Google can revoke just that single password — and not the password for all of your accounts.

The model Visa and Mastercard are using with Apple Pay is similar. Instead of provisioning your true underlying credit card account number, they create a token that is specific to the device. In effect, it’s a stable number. If you lose your iPhone and get a new one, it will change. But for most people, it will be stable for the lifetime of that device.

The amount of transactional data to which retailers have access has undoubtedly increased as more consumers use debit and credit cards to pay for purchases. But help us understand how the opportunity around payment data is more than an incremental uptick from a decade ago?
There’s an ocean of difference between understanding the amount of dollars someone spent and what they purchased. The payment networks in existence today — Visa’s and Mastercard’s — can give a retailers sales data; but they tell you very little about the health of a customer. You might discover that sales are going up, but maybe two thirds of the customer walking into your stores only come once a year. Or, that the top 20% of your customers are generating 80% of revenue.

Visa and Mastercard do not have that SKU level data to identify the products you purchased.  It’s not enough to know that you’ve spent 50 bucks at Macy’s; I kneed know what you bought to do meaningful personalization.

Give us a sense of how this plays out in a vertical such as grocery?
Grocery is a particularly interesting example because it’s super scientific. If we understand everything a customer bought in a store, there are two opportunities. The first is that grocery is kind of a zero-sum game. For example, everyone buys toothpaste. If you haven’t purchased toothpaste in my store, then you’re probably buying toothpaste somewhere. From a personalization standpoint, the opportunity is to identify the gap and then deliver the targeted messaging to fill in those gaps.

What types of marketing will change most dramatically as a result of access to these more modern datasets?
Last year, Gap shared that they sold about $22 billion worth of clothing; But their revenue was $15 billion. That means they discounted $7 billion off of their apparel, mostly in the form of 40% off the whole store. Why can’t those pricing dollars become strategic, not only to capture share of wallet and drive revenue but improve margins going forward.

Instead of handing that sales flier to everyone, we could look at a customer history, see that he already bought Chobani yogurt. Why not give a dollar off a new category to try to move the customer in, and not compromise margin in what you already buy.

Steven Jacobs is Street Fight’s deputy editor.

Marc Freed-Finnegan will be appearing as a speaker at Street Fight’s Local Data Summit in Denver on March 5th. Join him and dozens of other top executives from Bing, Esri, YP, Yext, and more to gain key insights into this rapidly evolving industry. Click here to find out more and buy tickets.