Untapped Potential: What’s the Future of SMS Mobile Ecommerce Checkout? With Osa Gaius of Parrot

Guillaume: Hello everyone. Guillaume Le Tual here, host of the Ecommerce Wizards Podcast where I feature leaders in e-commerce and business. Today’s guest is Osa Gaius, he’s back for the second time and he’s the CEO and founder of Parrot which you can see at getparrot.com. Today we’ll be talking about checkout via SMS which is the future of mobile SMS commerce. So before we get started, here is our sponsorship message:

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All right, Osa, thanks for being here again.

Osa: Thank you. It’s great to be here again.

Guillaume: In case anyone has not listened to the first episode, can you briefly tell us a bit about yourself?

Osa: I’m Osa, the founder and CEO of Parrot. Parrot is a mobile payments platform that helps merchants collect money directly over text. Before starting Parrot I worked for a few years at MailChimp, leading one of the engineering teams there.

Guillaume: All right, perfect. So let’s dive right into the topic. Checkout via SMS is not something we see a lot right now, can you present us the concept?

Osa: The basic idea is, when a consumer goes to your e-commerce website today, a lot of merchants will ask for their email address, make them enter a password and create an account. And the real reason you’re doing that as a merchant is so that you can store that person’s credit card on file and charge them when they come back to your website later. We’ve seen a trend where a lot of e-commerce websites, especially those who are on Shopify, use the Shop Pay solution and will actually ask for your phone number during checkout and no password. So whenever you come back to the website and you need to buy again, they’ll just have you put your phone number in and get a code over text. That code is a replacement of your password, it is how you will remember who you are on the website and how you can confirm future payments. What we thought about is, when I was still at MailChimp, what if you could take that concept of being able to take someone’s phone number and use it as a way to authorize future payment but send them a text message to do that? Like, here’s a T-shirt, would you like it? Reply ‘Yes’ to buy it and use that same phone number to confirm that it is them. So reply with a code or reply ‘Yes’ from your phone so that we can make sure it’s you.

The broader trend we’re seeing is that, as merchants try to figure out how to get consumers to engage with them with their phone numbers as opposed to just email addresses, one of the ways they’re thinking about that is how to do secure payments in a way that allows that consumer to not need to remember an email or a password, especially when they’re just texting back and forth with that brand.

Guillaume: Yeah, and especially since the SMS has way higher opening rates, 90-95% typically. I mean, when there’s a new text message you’ll check your text message, and when it’s not read it’s not that you haven’t read, it’s because you’ve seen that it sort of looks spammy and you just swipe to delete it, but you’ve read it actually and that is amazing. But with email, 20-30% opening rate is sort of typical and good for most industries and in some industries it might run up to 50%, which is amazing. But they usually have an amazing relationship or they have unique offers or always have a special sale of the month or something. So to engage more for commercial purposes via SMS is very interesting because you’re going to have two or three times more people reading your offer, that’s for sure. So please walk us through a typical scenario like, what would the experience of checkout via SMS look like right now?

Osa: Well, my favorite example is to think of your favorite coffee brand and you buy coffee from them once a month. If you’re a person who’s doing roasted coffee and you get a bag every month and you get a few pods every month that you can just pop into your machine. So the experience would be, think of that coffee retailer, let’s say it’s been two or three weeks since you bought something. You don’t have a subscription but they want you to buy more, what they can do is push a message to you to say, here’s a reminder Guillaume, would you like to get more of this coffee? And what you can do whether it’s Parrot or whether it’s a solution that the merchant builds is save ‘Yes’. Then the merchant will ask you a question, do you want to use a credit card that you used before with us that’s attached to this phone number? And you reply, ‘Yes’ from your phone and send that to the merchant and that’s it. The merchant can now confirm that you, the consumer, wanted to pay for that bag of coffee with the credit card that was attached to your phone number. Now there’s a bunch of security stuff that goes into making sure that your credit card data is stored correctly, it’s attached to your phone number correctly. But the experience for you as a consumer should be as simple as saying, ‘Yes’, I want the thing and ‘Yes’, I want to use the same information and address that I have on file with you as a merchant, and that should be it.

Guillaume: ‘Yes’, and ‘Yes’, okay. And how do you think merchants should go about knowing what to suggest to people? Is that a fully manual system? Is it fully automated or semi-automated?

Osa: I think the best advice we give to merchants is that early on if you’re thinking about collecting payments over text, you’re going to talk to your customers and get them to confirm that they are going to pay you with the saved card on file. You want to make sure it’s highly relevant because if you’re just sending a bunch of messages to people, like, ‘We know you like coffee but here’s a T-shirt that you should buy’. It’s not really relevant. Yes, you may sell coffee and T-shirts as a business but if I’ve only ever bought coffee from you, why are you trying to sell me T-shirts? The way to think about it as a business is, ‘I’m going to try to get in front of this person’. Think of it like an in-store sale, or ‘I’m going to get in front of you and I’m going to ask you what you want and I’m going to try to get you to buy it as quickly as possible’.

But I think over text sometimes brands kind of get trapped into a belief that I have to automate everything and I got to get all my flaws, set up and this and that. But we tell brands to start with just ask themselves the question, and you can do this by going to your Magento dashboard, or your Shopify dashboard, or whatever tool you use, and just look up your top customers, what are they buying from you regularly? If they’re not buying from you regularly then they’re not your top customers. They’re just people who bought one time. But when you look at those people and you look at their profiles you can very quickly figure out, what’s the next thing that in my list of products that I should tell this person to buy? Or what’s the one thing I know that they’ll need to buy again? Maybe it’s more dog food, maybe it’s more soap, then get that in front of them and get them to buy it. You can then figure out how to automate those reach outs. But it really has to start with you taking a piece of paper out, looking at a few of your customers and saying, what should I recommend this person to buy next? Otherwise, it’s going to feel very annoying, it’s going to feel like you’re just spamming your customer.

There’s more complex stuff you can do around like recommendation algorithms and artificial intelligence. But it really just starts with going into your customer database, finding those one or two customers who are your best customers and finding out what do I get in front of them that they will be able to reply ‘Yes’ to buy and will feel excited to buy from you again.

Guillaume: I guess the best angle is to come up helping, say, you’re buying an expensive DSLR camera, I’ll text you saying, ‘I see you haven’t bought the lens protection filter or a UV filter to protect your lens, would you like to add that just to be sure you do not scratch your lens and just scratch your cheap filter at 50 bucks?’ So you’re considerate to them and it’s also an upsell, no, in this case it’s a cross-sell. So I believe cross-sell of higher usefulness is probably the way to go to engage in this case.

Osa: I love that you mentioned that camera example. Because you can imagine that a worse example would be, you just bought a DSLR, here’s another DSLR. That would not be good. But you can easily see how someone who maybe was just trying to automate everything would create an automation somewhere, in Klaviyo or whatever tool you use, it says if someone buys this product, recommend another product of the same price. But to me, that is the wrong way to think about it. But as you just naturally mentioned, if I’m a company who sells DSLR cameras, I know what the five, six things you’ll need over the course of six months to make your camera the best experience you’ve ever had using a camera. It might be a filter, it might be a bag, it might be film, or it might be whatever you might need to make that camera experience great. So it’s your job as a merchant to map that customer journey out on a piece of paper and say, what will my customers need after they buy XYZ? What points in their journey when I want to upsell them or cross sell them those things? And then figure out how to automate that. But don’t start with automating a lot of stuff, start with semi-automated or manual and then you can very quickly automate those things.

Guillaume: Yeah, of course it helps if whoever is in charge of that has real life product experience. You could ask again using the DSLR example, do you often go out for a full day or for long trips of photography or travel trips, and so on? And if so then we suggest an additional set of batteries which is more convenient than running out of batteries at the wrong time. So you could have a few of those semi-automated systems that can check, did they buy a second set of batteries? ‘Yes’ or ‘No’? Did they buy a filter? ‘Yes’ or ‘No’? Did they buy a bag? If they buy something like an expensive lens, did you buy some kind of wrap for it? This is increasing the resale value so that when they want to resell it, it is not full of scratches and chipped paint and all that. So product experience for sure would help. They have very good rules. It’s so simple, like, it’s just a few rules. You just identify a few scenarios like I’ve just done here of real life usage and you could have something cool coming out of that. So are there any kinds of traps or things to be careful about when implementing mobile SMS commerce?

Osa: I think the biggest trap brands fall into is not taking PCI compliance seriously. PCI compliance just generally means, are you being very careful when you collect credit card information from the customer? One thing that we would not recommend you do is if you are going to try to collect payments from your customers through the text, don’t ask them to text you their credit card number. That’s a big no, no, both in Europe and Canada, and in the US. That is insecure because when you’re sending a text message to someone it’s not encrypted by default. If you’re using WhatsApp or Telegram, you have encryption there but just texting your mom or your friend, that’s not encrypted by default. And what’s really important about that for you as a merchant, is, if someone says yes, I already have a DSLR actually, but I really need some new lenses. What you want to do is, send them somewhere where they can give you their credit card and attach that credit card to their phone number. You don’t want to actually tell them to text you back their number, and then you write it down on a piece of paper or keep it around on your desk and use that to charge them. Or even type it on a piece of paper and then put that into some database somewhere, you actually want to get them to put in their information without ever giving a raw credit card number.

So that’s one thing we see brands kind of screwing up when they first try to figure this out. It’s manual, I’m going to collect their card over text and I’m going to write it down and I’m going to put it in some database, or I’m just going to put it in my Stripe dashboard and charge it. But the right way to do it is to actually collect their information by a secure link. So send them a secure link that they can put the credit card in, and once they put it in, you should have some way to check as a merchant. You can then go ahead and press a button and charge them for the product, or ideally, you’d have some natural language like a bot or something that can collect the card and then charge them. Now if you’re going to build this yourself, you can, as a merchant, go to some providers like Twilio or Stripe and build something like this yourself securely. Although what we recommend is to go and find a vendor who can actually help you do this kind of thing in a secure way, and can help you with the PCI compliance risks to make sure that you’re protected as a business, and make sure your consumers are also protected.

Guillaume: Yeah. I won’t deep dive into PCI but at the very least, you always store the credit card inside a vault, such as the one provided by Authorize.net or by Stripe or in Canada by Moneris. So you don’t want to have any liability whatsoever with storing credit cards, you store it in the vault of those companies. They’ll charge you like 10 cents a month for a credit card, more or less, something like that, but that’s the way to do it. So you can just have a clickable link send you to a web page where you fill in your credit card info, it will be secured and the web form securely saves it to the vault, returns the phone conversation, and then you could proceed with the checkout.

Osa: Exactly. Vaulting is definitely a rabbit hole we can go down. But the thing we always tell brands is, it doesn’t matter how you collect credit cards today, they should be vaulted somewhere. So it’s your job to make sure you understand how payments work at a very cursory level. So that when you need to reuse that card, whether it’s over SMS or Instagram, or wherever your customer is talking to you, even email, you can very quickly access that vault for that customer and say, I’ve got your card vaulted, I can see it here, is it okay if I go ahead and charge it? The right way to be thinking about payments for you as a brand is, there’s always going to be a vault. You’re never going to be copying credit cards or saving credit cards anywhere on your personal computer as a merchant. But there is some vault somewhere whether it’s with Authorize or Stripe, and it’s your job to make sure that whenever your customer wants to pay they can very quickly authorize you to charge that card that’s in the vault. Then you as a merchant can continue with actually fulfilling the orders and doing the regular thing we do in your business.

Guillaume: Correct. All right, anything else that people should keep top of mind when implementing this?

Osa: I would say, again, the exercise of taking a piece of paper out is not trivial. Take a piece of paper out and write a few rules down. But think about all the moments in your customer journey where you would, if you had the customer directly in front of you, present something to them. The way you want to be thinking about SMS generally is, how do I present something to them in the right moment at the right time. And that’s not really a function of automation, it’s just a function of you understanding your product and your customer. You already have that stuff in your head as a merchant, the hard part is taking a piece of paper out, or even a Google doc and just starting to map out like, Jack buys a DSLR on January 1st, he’ll probably need lenses on January 15th, or he might need a bag. Write all those things down, map out your customer lifetime journey. It’s going to be very easy for you to write the text messages and request payment for all those things because you’ve already done the hard work of figuring out what the customer wants and at what time, based on your deep understanding of your product.

Guillaume: Okay, maybe they want to implement the SMS transactions right now. All right, so I think we’ll wrap this up here. If anyone wants to get in touch with you Osa, what’s the best way?

Osa: If you want to learn more about SMS payments, please go to getparrot.com. We’ve got a great blog which can help educate you not only on payments but also SMS. If you want to get in touch with me directly, it’s [email protected], I’d be happy to answer any questions around payments or SMS.

Guillaume: All right, thank you for being here today, Osa.

Osa: Thank you so much. It’s great to be here again.