The Big Questions in Payments

It's a while since my latest update.  For a while, I didn't think I was adding anything that you could not read on any other blog on payments, or technology in general.  I simply got too close to the speculation and gossip in the blogsphere about whether or not Apple were adding NFC to its iPhone 5 or what Google's payment solution would look like, etc.

It's not that these are not important issues.  Some of these product introductions could be important catalysts for mobile payments. 

Still, the vast majority of "innovation" in payments is not particularly innovative or transformational.  There is no question that there is a bubble in payment start-ups and that many average (or below-average) ideas are currently getting funding and being reported in the media and blogosphere.

Instead of continuing to write about all these over-reported issues, would therefore like to use this post to identify what i believe to be the key questions in payments for the next 5-10 years, and dedicate this blog to write about these issues.

So here goes:

• What technologies will be most influencial in the 21st Century commercial ecosystem (e.g. mobile, social media, geo-location, etc.)
• Where will payments fit in the 21st century commercial ecosystem?
• Who will own the customer relationship in this system?  
• What will be the role of tradition payments providers in this system?  What inherent advantages do these have that emerging payments providers will struggle to replicate?
• What infrastructure will the 21st century payment system run on?  Will new payments platforms continue to run on top of the existing rails or will they develop a new and simplified infrastructure?

That will do for now.  I will return in later posts with a more complete list of questions and then set out to form my views on these, more substantial issues.

Banksimple: a New Era of Banking?

This week, Banksimple, a US financial services platform, issued its first cards to its own employees as a first stage of their launch.  This is an exciting development as Banksimple has the potential to encourage a wave of innovation in banking.

Technically, Banksimple is not a bank, but rather a front-end money management platform, that works with FDIC chartered banks to store their customers' money in the back-end.  As a front-end platform, Banksimple is all about providing great customer service (think Zappos) through whatever channel is most convenient to their customers, from phone, mobile, chat, Skype, FaceTime or email, and eliminating all fees. 

In terms of product features, Banksimple is initially focused on making sure their customers get the best deal possible, without having to think about it.  In the background, customers will have checking accounts, savings accounts, loans, etc.  However, Banksimple is all about using predictive programming to optimise the management of these various accounts, so that the Banksimple customer always has sufficient funds for spending, while getting the best possible interest rates.

Beyond this, Banksimple eventually plans to open their platform to application developers.  This clearly necessitates a real focus on security and privacy, but could propel an exciting wave of innovation in money management and financial services.

At a time when banks are increasing their fees, and very possibly soon hike their interest charges, there might be an important place for Banksimple, as a commercial weapon for the consumer, in the financial services ecosystem.  However, having just begun the first stage of their launch, Banksimple has a lot of work a head of it yet.

Google to Pilot Discount/Loyalty Coupons for NFC

In an article from last Friday, Finextra reports that Google is teaming up with the French terminal manufacturer, Ingenico, to pilot a system whereby consumers can redeem discount/loyalty coupons that they have downloaded on their Android phone with NFC technology at POS.

Finextra, in fact, speculate that Google's much-talked-about NFC trials in NYC and San Francisco will be aimed at testing this system, and not the payments solution that has long been rumoured.  They back this up with recently published research from Oracle saying that using multiple NFC read/write apps on a mobile will slow down the process and negate the key benefit of the technology.

Personally, I would be very surprised if this is the case and that Google will not roll out a payments solution shortly.  Google has based its business model around organising the world's information and will definitely have recognised the power and value of transactions data.

The discounts and offers that they are working with Ingenico to execute might be what draws the customer to the merchant, but the transactions data is what will enable Google to target those offers.  I therefore believe that it is integral to Google's model to deliver both these elements. 

http://www.finextra.com/News/Fullstory.aspx?newsitemid=22523

E la Carte Digitizes Restaurant Service

A number of applications are now being developed to digitize service at restaurants.  E La Carte, a US based company, has developed its own tablet, that let's diners book tables, order their food, play games while waiting, make their payment and provide feedback.

If used correctly, these tablets should not be seen as a replacement of physical waiters, but as a tool to increase sales, improve service and receive immediate customer feedback.

The team behind E la Carte claims that restaurants could see increases in sales of up to 10% simply by including pictures of their food in on the digital menus.  They should also see improvements in customer satisfaction, as customers no longer need to wait for waiters to make their orders and to receive the check and make payment.


From a payments perspective, it is interesting, but not surprising, to see that the payments process has been integrated in the tool.  This is a fantastic opportunity for the E la Carte, and similar companies, to intermediate the networks and extract a healthy profit. 

If they are successful at building a network of restaurants, they should also be able to gather valuable information about their customers; which restaurants they visit, what they eat, how much they pay, etc.  This could be fantastically useful for restaurants to fine tune their offerings and in tailoring marketing programs for the customer.

Will Google Commit to their Moves in Mobile Payments?

In a fun feature, Business Insider logs Google's 10 weirdest investments.  These include wind farms for $40M, Shweeb, a $1M human-powered monorail and a prototype for a new solar panel technology.

With Larry Page back at the helm of the company, Google is likely to continue making these type of weird and wonderful investments.

"What does all this have to do with payments?", you may ask.  Nothing, really.  But, as we watch Google enabling NFC on Android and investing in payment pilots in New York and San Francisco, it is worth keeping in mind that the company has a history of making ambitious and visionary investments without executing.

http://www.businessinsider.com/google-weird-uses-of-money-2011-5#

Visa/MasterCard/Amex: Mobile Payment Bets

In a recent article, Gigaom draws out some of the most interesting moves that each of the big 3 payment networks are making in mobile payments. 

The most interesting overall observation is that many of these moves are unproven, high risk and somewhat scattered.  Visa is teaming up with Square, MasterCard is joining forces with Google and Amex has partnered with Payfone.  This goes to show that none of the big players have yet figured out where the industry is going and seem unwilling to place more than a few chips on any one technology.

It is also noticeable that Visa and MasterCard are considerably more active when it comes to partnering with technology players than Amex.  From a cultural perspective this may not be surprising, seeing as V/MC have based their entire business models on being open networks, whereas Amex has built a closed-loop, proprietary network.  Still, in a highly uncertain market, V/MC's model may prove more nimble and adaptable than Amex' and may provide a crucial head start.

Among all the partnerships that have been announced, the most interesting in my mind, would be MC's venture with Google.  I absolutely believe that Google will be a central player in the mobile space and in mobile commerce, in particular, and that this partnership has the potential to make MC the dominant mobile payments provider.

Read the whole article below.

http://gigaom.com/2011/04/27/credit-card-cos-whos-doing-what-in-mobile-payments/?utm_source=social&utm_medium=twitter&utm_campaign=gigaom

Tyfone: Plug-and-Play Mobile Banking

I have previously covered Monitise, a mobile banking and payments platform for banks that has been incredibly successful in tying up partnerships with UK and US banks, as well as partnering with Visa to deliver mobile payment solutions.

In a recent article, Pymnts covers Tyfone, a competing mobile banking a payments platform.  Tyfone was founded in 2004 in Portland, Oregon and is funded by Ojas Venture Partners, a Bangalore based early-stage tech fund.  They target banks and credit unions and initial traction appears to primarily be with credit unions.

In terms of product differentiation, Tyfone emphasize the folowing features:  

• Mobile banking for non-online bankers: enabling all bank customers, including those that are not currently signed up for internet banking to quickly sign up for mobile banking 
• Account aggregation: enabling the user to manage all their accounts from the same interface 
• Secure ID management: Multi Factor Authentication (MFA)  to ensure secure log-in 
• NFC Contactless Payments: a flexible mobile wallet

This is clearly a fast-growing market that will develop very quickly.  In my opinion the success of Tyfone will be less about the technical sophistication of their product and more about their ability to build a network of bank partners.  I.e. a player with 'good enough' technology and a broad customer network will have a great chance of success than a player with the most advanced technology, but a less developed partner network.

The market is definitely big enough for another couple of players, so it will be interesting to see if Tyfone will choose to focus their efforts on credit unions or if they will go with a broader approach to business development.