Four ways Coin can save its connected credit card
The startup ticked off preorder customers by announcing a shipping delay and communicating the news poorly. But Coin can still get back on its feet. Here's how.
Update at 6:15 p.m. PT: Coin has since penned an apology letter to its preorder customers. Coin's beta program will also now be free -- meaning those who decide to opt-in and are eligible to participate will receive the finished product next year without having to pay an additional $30.
Coin, a startup that makes an electronic device which stores multiple credit and debit cards, is entering a rocky weekend.
On Friday, the company disclosed that it would miss its original summer 2014 shipping deadline. Coin has now pushed back the device's release until spring 2015. Instead, Coin is launching a nationwide beta program for only 10,000 preorder customers, a move the company said would help better fine-tune its device and gear up for mass production. For now, the beta product works only in 85 percent of US card terminals.
The San Francisco-based company arrived on the scene in November and began taking preorders for its device through its own website as part of a crowdfunding campaign. Unlike more traditional methods like Kickstarter, however, Coin explicitly sold customers a device for $55 -- no pledging or donating was involved. Coin's product promised to slim down your wallet and communicate with your smartphone via Bluetooth, allowing you to swipe the card in place of up to eight pieces of plastic.
As recently as last week, Coin had reported progress and told customers that a long-awaited shipping announcement would arrive by the end of August. When that announcement turned out to be news of a delay, customers began seeking answers while others began seeking refunds.
While many were still under the impression that they'd soon receive the product for which they'd paid, Coin sought to address the confusion in a post on its website (viewable only by preorder customers using an emailed passcode). "Since there's no precedence of a Coin-like device, we need to validate compatibility nationwide to ensure a high-quality product," the company wrote of the delay.
Preorder customers didn't take the update very well. Within the first 30 minutes, more than 500 people left comments, many expressing dissatisfaction. After another half hour, the number of comments had nearly tripled. By the end of Friday, the post had garnered more than 4,000 comments.
"I didn't pay you for a beta. Happy to beta test, but the money I paid you last fall was for a final product," wrote one customer who placed a preorder. Another complained: "If we are helping you by beta testing and making this ready for public rollout, we should be given the gold standard for free as a thank you."
But it's not too late for Coin. Beyond the kinks yet to be smoothed out, the company's device works as advertised. About 1,000 people are already using the product in the San Francisco Bay Area. Yet management must now deal with a customer backlash and the aftermath of a broken promise. Here are four ways Coin can start to regain lost customer trust.
1. Give Coin beta customers the finished product for free
Coin plans to charge beta customers an additional $30 to upgrade to the final commercial version when the product is ready in spring 2015. That's not the way to win the hearts and minds of customers who bought the device outright for as much as 50 percent off its eventual list price as far back as nine months ago.
"When I prepurchased Coin in December 2013, the expectation was that I paid my $50 and should have the Coin summer 2014," preorder customer Mariah Clarke commented on the company's Friday blog post. "I did not realize there would be an additional beta testing phase and another year to wait. Plus an additional fee. Rookie mistake, but I am now debating if I want to request my money back. Do I still trust this company? Are they going to get it together at all?"
A gesture of good faith might dilute some of the bitterness. How about giving customers the eventual finished product without tacking on an additional fee? That could help transform the beta program from a pay-to-play trial period -- in which customers feel they're being unreasonably charged -- to something they accept as a fairer exchange.
2. Figure out the EMV microchip hurdle
Starting in October 2015, the credit card industry will push both card makers and merchants to upgrade their technology to the "EMV" microchip standard now commonplace across the globe. The chip adds an extra layer of security by replacing a vulnerable card swipe with a chip reader that lets credit cards and debit cards generate a unique code for each transaction, theoretically making it tougher for thieves and hackers to commit fraud.
Coin doesn't support EMV. The company has repeatedly explained that the US credit card industry will remain in a transition period for years to come, during which there will be support for both chip and magnetic stripe technology. This is true. But it's unclear how merchants will react to an unfamiliar looking device that uses old technology.
As the rollout begins to accelerate -- by the end of 2015, card makers project that half of all credit cards and merchant terminals will be chip-enabled -- Coin may be left shipping a device that doesn't function in all cases. The company says its second-generation device will have chip technology, but company CEO Kanishk Parashar acknowledges that Coin has not yet begun researching that possibility.
He also doesn't know whether Coin will be able to design a microchip that can store other microchip data. "We have good faith that [Coin] will be able to do so," Parashar said. At the very least, a roadmap for when EMV support may arrive is in order, and some dedicated research into the technology is a must.
3. Don't flub the spring 2015 ship date
Coin has already committed a crowdfunding cardinal sin by failing to deliver on a promise. To keep its reputation from crumbling, the company must ensure that it doesn't again disappoint its preorder customers come spring 2015, when it plans on rolling out the first edition of its product.
The company faces at least two potential outcomes. It can incorporate the beta customer feedback to hammer out a superior product that's ready to ship next year. Or it can begin shipping what may be a still incomplete product to meet the updated deadline. The first senario is preferable, but if Coin can't pull it off, it'll have to decide whether it can afford another delay -- even if the product isn't ready for prime time.
4. More transparency -- the sooner, the better
Coin could have avoided this mess. Had it said earlier that its deadline was fluid and that it couldn't commit to a defined timeline, preorder customers wouldn't be as furious as they are now. Instead, Coin failed to disclose any of its prototype or manufacturing issues and consistently led its preorder customers to believe everything was on track.
"We are still on schedule to launch and begin shipping this summer. No public release date yet, but let's just say Coin is fast approaching," the company wrote in July. Last week, the company instructed preorder customers to "keep an eye out for the Claim your Account email coming out next week," without mentioning an updated ship date -- though notably without mentioning the summer 2014 target either.
Whether it did so willfully or not, Coin collected tens of thousands of people's money on the promise that a product would be delivered by summer 2014. Coin customers are now learning that the promise won't be honored. Even more irritating, Coin had months to warn people about a potential delay. Not a peep was heard -- until Friday. Opening more channels of communication and being less opaque concerning progress may help rebuild trust among customers.