Finetics™ Studio at Money20/20: Talbott Roche

Finetics Studio | Payments | 2/3/2016 3:52 PM

Blackhawk Network President Talbott Roche analyzes the growth of prepaid and gift card options in our Finetics™ Studio with PaymentEye's Sarah Gill, live from the exhibition floor at Money 20/20.


Sarah Gill, Reporter: Next up in the Finetics Studio, I'm joined by Talbott Roche, who is the President of Blackhawk Networks. What are the trends you are most excited about?

Talbott Roche: I'm really excited about digital. So I have to--it's something we've been passionate about for the last four or five years, but I feel like it's coming into its own in 2015 and '16. I think we all suspected the mobile wallets would be a little further along than where they are today.

Sarah Gill, Reporter: Right, yes.

Talbott Roche: But we've had a lot of success, not just in that environment, but maybe even more so in the B2B marketplace. And so what it did, digital opened our eyes to the fact that gift cards--very popular in a retail environment, where you can sell them direct to consumer‑‑but also very popular, $40 billion addressable market, in the B2B, where they're used as rewards and incentives. That's the market where digital is being embraced faster. Because the consumer doesn't mind receiving a reward or an incentive as an e-gift. They might not quite be ready for it as their Christmas gift or their anniversary gift. So the adoption rate is a lot higher for digital solutions.

And I think, looking at our business, and instead of looking at it as individual products, but looking at it as a platform where we can democratize those specific account balances and branded currencies into all these digital markets--whole new, incremental way for us to think about the business.

Sarah Gill, Reporter: Yes. I mean clearly, the transition to digital is really exciting. But it comes with a lot of challenges. What are the kind of biggest ones facing your particular industry at the moment?

Talbott Roche: I think a lot of people in payments are trying to understand the consumer behavior around digital, how quickly they'll embrace it. One of the major factors is fraud, understanding how to manage security in a digital environment. I think we're all in the value chain trying to figure that out. So we spend a lot of time developing solutions around e-gift and fraud management.

I think the other thing is helping the consumer understand how to use this and exploring, with the consumer, all the new use cases. So like I said, it isn't just about gifting anymore. Gift cards aren't--in a digital environment, it can be rewards, incentive, it can be budgeting. It's self-use, everyday spend.

So one of the reasons we get so excited about it is because we go beyond the $320 billion gift market into the $4 trillion everyday spend market.

Sarah Gill, Reporter: I mean, you know, looking around at the expo today, there are a lot of companies here who are actually building new brands or taking new brands in finance, and they don't have the advantage of that kind of name behind them. Do you have any kind of advice for them starting out?

Talbott Roche: I think it's really important that you know what you do well. So one of the things we focused on early days was we figured out what is the consumer proposition that we had, and it was making these gift cards more convenient for consumers. And we really made that our true north.

We leveraged the frequency of shop and the distribution that Safeway brought us, but we had to create the technology that was differentiated, that allowed it to be easy enough to purchase these products in store. And then later, we looked at that technology, which was our core advantage, and we looked at it as a platform. So we could then take it into digital environments and other new channels. But once you have that core strength, that point of differentiation, that's how you develop your brand. That's what you get known for.

Sarah Gill, Reporter: Do you think people need to be able to admit that maybe something didn't work, be a bit more candid about that, and just be like, "It didn't work as we expected but, you know, this is what we're going to do next"?

Talbott Roche: Absolutely. I mean, failure is a gift, too, right? Because you're learning what isn't working, and that helps you point yourself in the direction of what is more likely to be successful in the future.

We have worked on a couple of new products that are coming to market right now. One is a gift card that's good for fractional shares and allows consumers now to purchase a gift card that can be given for stock, that's traded in--yes. And what we were learning, and as we got deeper into this business, we started to figure out consumers aren't just buying gift cards to purchase as gifts; they're using them for themselves for budgeting reasons and self-use.

So we look at all the use cases out there and we see investing; 72% of Millennials today aren't investing in the stock market because they either don't know how or they don't know how to get started. This is a way to give them more accessibility to that market.

So it's that kind of learning through the years. First we had to understand that gift cards aren't just for gifting. And then we had to develop products that resonated and were meaningful with the consumer base that we serve.

Sarah Gill, Reporter: Yes. What do you think this industry will look like in 10 years' time? Will it still exist? Will we still be using cards?

Talbott Roche: Oh, yes, it will definitely exist, and I think it will be a mixture of physical, digital, mobile solutions, global solutions. One of the things we've really focused on is global expansion, because so many of our partners want a global platform to work with. They want to be able to reward their employee that is in the Asia-Pac market the same way they do in the US market. They want to be able to provide a gift card in that market the same way they do here in the US. So I think you're going to be seeing a lot more global solutions. I think you're going to see a lot more happening with mobile technology and kind of omnichannel solutions.

Sarah Gill, Reporter: Okay, for sure. And is there anything, you know, on the flip side, that you're kind of disappointed with in the industry, some things you feel like it could be moving faster on, maybe from your peers? You know, your colleagues and counterparts across the space?

Talbott Roche: I think the only thing that sometimes--I wouldn't say it's disappointing, but I'd say it's a misunderstanding that I often see--is I think we all want this change to happen, and we sometimes think it's going to happen overnight. And I think in payments, because it's a complex ecosystem, there are a lot of players, change does take more of an evolutionary path than revolutionary. I think there are some things that are happening that are very revolutionary. But overall, the move to digital and mobile is taking a little bit longer than I think a lot of us thought it would.

I think 2016 is shaping up to be a promising year. We're especially excited about the B2B markets that we're now serving in a big way. We've spent about $0.5 billion in acquisitions in that market space now. And we like it because we are seeing an acceleration into some of the digital solutions. They're taking a bit longer in the consumer market.

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