Thursday 31 March 2011

Amex Exec on Digital Payments and Key Criteria for Success

A couple of days after Amex launched Serve, David Messenger, head of the online and mobile business unit at Amex today spoke at the Web2.0 Expo about the emergence of digital payments and what Amex views as the key criteria to excel.  Below is a summary of his talk along with a link to his talk.

Driver for digital payments:
  • Mobile penetration
  • Internet speed
  • Social networking and commerce
  • New POS technologies, such as NFC
Lessons from other industries: changes come faster than expected and many incumbent don't survive.

Promise to merchants: whole new approach to marketing and promotions.  Can we enable the insights from rich data captured to drive intelligent and personalised promotions.

Developing countries may be at the forefront:
  • Limited existing infrastructure to replace
  • Governments push for phasing out of money
Criteria for success in shaping digital payments going forward:
  • Scale: essential to keep costs low and get the data required to develop interesting analytics
  • Platforms must bridge distinction between online and offline
  • Need to be open (agnostic to payment method, technologies and form factors)
  • Partnerships to drive scale in complex ecosystem
  • Security: particularly as organisations will manage increasing amounts of sensitive data
  • Real-world servicing: managing money and sensitive data, providers must be able to provide service to customers
Range of players that will compete:
  • Data players (Google, Facebook,etc), that are primarily entering for access to data
  • Banks and incumbent payments companies
  • Startups that are offering a new approach
http://www.youtube.com/watch?v=CsMsKBfWcSg&feature=relmfu

Wednesday 30 March 2011

American Express launches Serve, its PayPal competitor

On Monday, American Express announced Serve, a digital payments platform and electronic wallet that will enable users to pay online and offline merchants with a broad range of payments options, including Visa and MasterCard credit and debit cards.

Serve will be accepted at all online and offline merchants that currently accept American Express, in addition to enabling users to perform Person-2-Person transfers.  For offline transactions, users will initially be issued a prepaid Serve card that is directly linked to its electronic wallet.  As these cards are considered prepaid, merchants will be charged the lower transaction fee associated with prepaid cards.

Although Serve will undoubtedly introduce an NFC solution shortly, Amex appear to go out of their way to remain technology agnostic and not associate itself too closely with any particular technology.

Partnerships will be core to Serve's long-term vision, focusing on verticals such as social networks, online commerce, gaming and entertainment.  At launch, partners include Ticketmaster, Concur and Flipswap.  Although Amex is likely to quickly grow this network, the initial list does not appear particularly inspiring. 

It is beyond doubt, that Serve is a very core part of Amex long term strategy.  And, Amex certainly have considerable assets to bring to the table; merchant network, world class servicing customer organization, robust payments infrastructure and a highly respected brand. 

However, at present it is difficult to assess its likelihood of success.  Although Amex intend to launch new functionality on an ongoing basis, Serve currently does not appear to bring anything new to the industry. 

Moreover, it will be interesting to see if Amex, a company that has traditionally had its strengths in marketing and customer service, is able to compete in an increasingly technical and innovative industry.  This might require a far greater cultural shift.

Monday 28 March 2011

Google teams up with MasterCard and Citi for Payments

News is now breaking that Google has partnered with MasterCard and Citi to demo their new NFC-enabled mobile payments solution. 

As has long been expected, the solution will initially launch on the Nexus S phone, with a number of other enabled phones being launched shortly, and the Verifone terminals that Google is rolling out in New York and San Francisco.

The most interesting aspect of this story comes from the recently published patent application that Google filed for the software behind their solution.  The application describes Google as a third-party broker who receives the customers' shopping cart and coordinates the payment and shipping details.

This contrasts Google with other payment solutions, such as PayPal, that simply receive the payment details between the customer and merchant, and do not have access to detailed, level 3 data.  Google have already positioned themselves as the masters of online data, and should they succeed with this venture, they will get access to the holy grail of offline data as well!

Thursday 24 March 2011

Great Article about Facebook Deals and Payments

The below article reports on the new Facebook Deals platform, which it reports will exclusively focus on social experiences, such as renting a karaoke room with friends or a tour of a haunted house, and may require customers to use Facebook Credits for payment.

The article goes on to suggest that Facebook's much talked about Payments subsidiary may be intended as the vehicle that manages the payments interface for Facebook's e-commerce ventures, of which Deals is the first.

Although Facebook Credits currently takes 30% of the total purchase amount, the article suggests that this may still be a reasonable deal for deal-sites that already spend a great deal on Google and Facebook ads to attract customers in the first place. 

Regardless, Facebook has already signed up Gilt City, HomeRun, OpenTable, PopSugar City, Tippr, KGB Deals, Plum District, ReachLocal and Zozi for Deals, so the proposition must be reasonable.

http://networkeffect.allthingsd.com/20110324/more-on-facebook-deals-will-only-include-social-experiences-may-use-credits/

Wednesday 23 March 2011

Foursquare Explore: the Real World Google Adwords?

Yesterday, Foursquare announced that they will launch a new feature called Explore, which will recommend places, such as restaurants, bars and cafes, based on a user's check-in history and and the history of people like them.

This is exciting news as it demonstrates Foursquare's intent to influence the behaviour of their users.  If they are successful in doing so, the service will clearly be a fantastically valuable marketing features to merchants that want to attract traffic to their locations.

In this sense, it has the potential to become the real-world equivalent to Google, which influences online traffic.  And, in similar ways to how Google developed Adwords to buy advertising space connected to people's search terms, Explore could enable Foursquare to sell sponsored recommendations, alongside their natural recommendations.

Moreover, Explore could enable Foursquare to go one step further than Google has done.  By leveraging their partnership with Amex, or launching their own mobile payments solution, Foursquare will be able to track purchases that follow sponsored recommendations. 

Research has indicated that merchants on average are willing to pay 7-8% for marketing messages that specifically lead to purchases, 2-3 times more than the current merchant fee that credit card companies charge.  This type of solution may therefore be the next generation interchange fee and Foursquare Explore may be an important step on the way.

Tuesday 22 March 2011

Tesco Exec: Security Concerns with NFC

The head of R&D for the online operations of Tesco's, one of the world's largest retailers, has expressed security concerns with NFC.  Nick Lansley has come out saying that "NFC is not as safe as people make it out to be".  Essentially he is concerned that outside parties are able to pick up (or eavesdrop) the signal that is transmitted between the retailer's terminal and the customer's phone.

Although Mr Lansley emphasised that he was speaking on his own, not Tesco's, behalf, these are the type of concerns that could stall NFC adoption.  Of course, this is not a new concern.  It has long been acknowledged that NFC is vulnerable to eavesdropping, but that a third party will only pick up a customer's account number and possibly their name, but not sufficient information to perform card fraud. 

Still it will be interesting to see if other prominent retailers will have similar concerns and to what extent it will impact retailer and consumer adoption.

Apple: the latest on NFC

The 'will they' / 'won't they' speculation about Apple enabling the iPhone 5 for NFC goes on.  For a long time, it was considered a certainty that the iPhone 5 would include NFC.  Then, last week, the Independent reported that the will not, due to a lack of technical standards. 

Forbes then quoted an unnamed source at Apple, saying that they would include NFC.  The New York Times now reports that Apple will include NFC and that Qualcomm will supply chip - but not necessarily for the upcoming iPhone 5 release.  Add to all these conflicting reports the amplification effect of the blogosphere and you have total confusion!

However, what we do know for sure is that Google is enabling Android for NFC and that most headset manufacturers are including a chip in their phones - considering the opportunities inherent in NFC, I am sure Apple won't be too far behind.

Thursday 17 March 2011

Visa Introduces Person-to-Person Payments

Yesterday, Visa announced that it will introduce a person-to-person payment feature.  Cardholders from participating banks, will be able to make direct transfers simply by entering an amount and the recipient's 16-digit cardnumber, phone number or email address in their online or mobile bank. 

Of course, this feature has been around for many years, and Fast Company reports that over 70 specialist providers already offer the capability.  While many of these have the clear advantage of many years experience and a much cooler interface, such as Bump for the iPhone, Visa is the premier payments brand and does have far broader reach than any of these competitors.

As such, this move may not only open up a new opportunity for Visa, but may also facilitate the development of this space for incumbents, such PayPal and Bump.

Most interesting though, is that Visa have had to 'tweak' its payments network and partner with CashEdge and Fiserv to offer a product that has already been in the market for 5 years +.  This only illustrates how far behind traditional payments players are with regards to digital money.  As mobile payments become increasingly commonplace, it will be interesting to see if they are able to step up their game or if they are outflanked on every front.

Wednesday 16 March 2011

Interesting Article: Death of the Payments Terminal?

The article from Mobile Payments Today below, describes the limitations of the traditional terminal and how it will soon be replaced by more nimble devices, such as the smartphone. 

Essentially, the author argues that it is not hardware limitations that will kill off the terminal, but software limitations.  Entrepreneurs and merchants will want to write custom payment applications for niche uses.  This is not possible with the current terminal setup, but can easily be implemented with a simple smartphone.

So, what would be the broader implications for merchant acquirers and processors?  Clearly, as these devices become lower-cost and run on standard platforms, a number of the traditional barriers to entry will be lowered, and as innovation ramps up, competition within the industry will increase. 

http://www.mobilepaymentstoday.com/blog/5515/Prognosis-terminal-Will-mobile-payments-kill-the-credit-card-terminal?rc_id=400

Tuesday 15 March 2011

Google, Facebook and Apple: Speculation about Payment Moves

Over the last couple of days, the blogosphere has been rife with speculation about the big three tech players' moves in the payment space.


Apple: yesterday a number of newspapers and blogs reported that Apple will not include NFC in the iPhone 5 and postpone its launch til 2012.  With Apple's history of popularising new technologies, this is clearly a blow for the NFC-afficionados.


Facebook: over the last few days there have been reports about Facebook Payments, a subsidiary that Facebook appears to have incorporated in Florida in December of last year.  According to Facebook itself, this subsidiary is simply intended to handle payments to developers related to its Credits program.  However, industry analysts and commentators have interpreted this subsidiary, along with related moves, as a clear indication that Facebook is moving deeper into payments, including offline payments.

Google: today there have been several reports that Google is preparing two NFC pilots; one is NYC and a second in San Francisco.  Most commentators agree that Google is likely to use its Nexus S phone, which is currently configured to read NFC tags, but would be 'unlocked' to write tags to facilitate payments. 

According to the sources, Google will pay for the installation of “thousands” of NFC-enabled terminals across retail locations in both cities. The report speculates that each user will have not only their purchasing information but coupons, gift-card balances, loyalty cards and other subscriptions loaded onto the phone.

With so much speculation and 'expert testimony', its critical to take all this with a pinch of salt.  What is for sure is that there are high expectations for non-tradition, technology players to enter, and revolutionise, the payments space. 

We also know that this is a highly complex area, that deals not only with technological and infrastructure complexity, but also with the human psyche, which is notoriously averse to risk and slow at adapting to change.  I would therefore not be surprised if mobile payments becomes more of an evolution than a revolution.

Monday 14 March 2011

Apple Drops NFC for iPhone 5

According to a number of newspapers, Apple has revealed to several of the major UK mobile phone operators that it will not include NFC in its iPhone 5.

This is a big blow to mobile payments, as NFC is widely viewed as the most likely platform and Apple was seen as a company that would bring it to the mainstream.

Apple's apparent reason for not including NFC in iPhone 5 is the lack of clear standards.  They have therefore decided to postpone their NFC-launch until 2012, which will enable them to develop a set of proprietary standards in the meantime.

Google, along with a whole host of handset manufacturers and carriers, are are still committed to rolling out NFC in 2011, so it will be interesting to see how much headway they will make without Apple's unique ability to launch new technologies to the mainstream.

Thursday 10 March 2011

The Foursquare + Amex Link-Up Explained

Foursquare has linked up with Amex for a pilot at SXSW, the technology conference in Austin, Texas.  By providing their Amex card details, Foursquare users are able to collect specials and trigger donations with purchases at select Austin merchants.

The specials: participating merchants give a $5 credit to Foursquare users who check in at their store and make a purchase of more than $5.

The donations: the first time signed up users swipe their card at any Austin merchant during SXSW, Amex will donate $1 to Grounded in Music, a music-based non-profit.

I truly believe that this is a peak into the future of location-based deals and the path to profitability for Foursquare and its competitors.  However, once mobile payments becomes more mainstream, I'm uncertain if they will need Amex.  I would essentially expect Foursquare to build its own mobile wallet or PayPal integration that users can register to with the card of their choice.

This approach would open the Foursquare solution up to any user, regardless of whether they have an Amex card or not.  Moreover, it would enable Foursquare to leverage its customer relationship to get a foothold in the payments value chain and a piece of the associated revenues.

http://www.businessinsider.com/foursquare-amex-deal-2011-3#the-first-step-is-to-go-to-amexs-sxsw-site-and-sign-up-your-credit-card-1

Wednesday 9 March 2011

Mobile Wallet: the Battle is Shaping Up

The attached article provides a very interesting perspective on the various players that are aiming to build your mobile wallet.

It assesses 3 different groups:
  1. Mobile platform providers (Apple, Google, Microsoft, etc.)
  2. Mobile carriers
  3. Banks
In my view, mobile platform providers will be the clear winners of this battle.  The mobile wallet will essentially be a software solution and Apple, Google and Microsoft are clearly better at building software than carriers or banks.

They will also be better able to leverage platform/network effects than the other players, particularly by triggering innovation through app markets, etc.

This is not to say that carriers and banks will not play a part.  Particularly banks will still be a key provider of payments solutions, but probably through the platform providers' payment interface (i.e. Google Checkout or iTunes/iCash).  This way, Apple and Google will gain a foothold in the payments market, without having to take ownership of the complexity of the full payments value chain.

Read what the author of the article says.
http://snasm.com/article/nfc-2011-whos-building-your-mobile-wallet?utm_source=twitterfeed&utm_medium=twitter