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

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

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!

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

Buyster: Doomed from the Start ?

Three French telecoms, Orange, Bouygues and SFR, yesterday announced that they are launching Buyster, a mobile payment solution, to compete with PayPal, Google, Apple and others in the French market. 

While I believe there to be enormous scope for innovation in mobile payments and opportunities for new entrants to take a leadership role in the industry, I am quite dubious to this effort.  The basis of this venture is clearly that these telecom giants want to leverage their combined market position to take a cut of the payments market.  But, Buyster does not seem to offer anything in terms of innovative or improved features.

Although they have signed a few big-brand online retailers and may see some initial traction, I would be surprised if this partnership is around 3 years from now !

http://www.ft.com/cms/s/0/29fe9788-2fec-11e0-a7c6-00144feabdc0.html#axzz1D62AI4yo

Offers: How Groupon, Facebook and Google could Disintermediate the Payments Industry

In my post about Cardlytics earlier this week, I laid out the reasons for why the transaction-based marketing approach could displace, or at least severely weaken, the interchange model, which the major payments companies rely on today.

Previously, I have also covered other deal intermediaries, such as Groupon and Google, and highlighted the similar threat they pose to the interchange model.  As offers are increasingly delivered on mobile devices, it will be a small matter for deal intermediaries to add a payments solution to the backend of their service, and effectively disintermediate the traditional payments networks.

As the deal intermediary business develops at lightening speed and new players surface on a daily basis, we are starting to see different business models emerge. 

Below I will try to lay out five main categories that I have seen so far and try to make some sense of where the industry might be going.

Group-Based Buying

The group-based model pursued by Groupon and Living Social has seen the most traction so far.  Groupon is often referred to as the fastest growing company of all time, having received a $9B buy-out offer from Google within two years of launch.  It mainly offers deeply discounted deals from local service providers, such as hair dressers, restaurants and masseurs, and has proven a highly effective marketing channel for these business to attract new customers.

On the downside, their deals are not targeted or customized to potential customers beyond being in the same city.  This undoubtedly leads to low conversion rates and potential Groupon fatigue, in that people don’t even read their ads.  By exclusively focusing on deeply discounted deals, they also limit their offers to one-off services.

Social Group-Buying

Last week, Facebook announced a new feature called “Buy with Friends”.  The feature enables users to share their purchases and “unlock” deals for other friends.  Facebook has found that more than 50% of test users chose to share a purchase they made on the social network with their friends and a number of other studies show demonstrate the power of recommendations from friends to impact our purchasing behavior. 

Initially, the feature is focused on purchases within the network (e.g. games and apps) and only one purchase is enough to unlock deals.  However, over time, one could imagine how this feature could extend across the internet and require more than one purchase to unlock deals.  For example, I could imagine going to any online store and being told that the ordinary price for a product is X, but if I buy with 5 friends, we get a 15% discount, if I buy with 10 friends, we get a 25% discount, etc. 

This feature clearly has the potential to rival Groupon and could potentially transform pricing models across a range of industries.

Transaction-Based Marketing

Transaction-based marketing has been seen as Eldorado for card companies for years.  However, intermediating deals is far from the core business of a credit card company, and we have not seen a successful implementation until third-party players recently entered the market. 

The benefit with this model is that it provides retailers unique insight into their customers’ and prospects’ purchasing behavior and enables them to target their offers very effectively.  Seeing as the reward or discount is automatically redeemed when the customers use their registered cards, they also avoid the hassle of coupons, promotion codes, etc.

A key challenge associated with transaction-based marketing is the complexity of integrating the system with banks’ technologies and implement the program.  Cardlytics and similar providers also need to develop tools that effectively leverage the treasure chest of data to which they have access and enable merchants to easily and effectively target customers.  Finally, they must move away from delivering offers through online bank statements, and develop more timely and convenient delivery channels.

Location-Based Marketing

Location-based services, such as Foursquare, Gowalla, Facebook Places and Scvngr, are receiving a lot of attention and seeing explosive growth.  So far they have mainly encouraged ‘check-ins’ with social updates on online badges, and only sporadically offered deals. 

However, the potential to for these services to offer deals is undoubtedly huge.  Imagine leaving the cinema and being offered a dinner deal at a local restaurant or bar.  Seeing as location-based services, by definition, are mobile, it is also easy for them to integrate with a payment interface.  The benefit of doing this would be that they would have access transaction data and be able to overlay transaction-based marketing on their location-based services – powerful!

Preference Based Marketing

Earlier this week, a Seattle-based startup named Thoughtful, launched a new service that generates gift recommendations based on the recipient’s taste as indicated on their Facebook profile. 

The beauty of Thoughtful’s business is that it offers uniquely customized gifts for which its customers don’t expect deep discounts.  This makes it possible for a broader range of retailers to participate, in comparison with Groupon, which is primarily limited to smaller service providers that are willing to offer 50%+ discounts to get people in the door.  Still, by focusing on gifts, Thoughtful’s potential in terms of total volume is of course more limited that Groupon’s.

Although a gifts-business faces some limitations, there is clearly plenty of potential to leverage the preference-based model for other opportunities – e.g. Groupon or Google could perhaps benefit from adopting this approach to better target their offer.

Final thoughts

Having reviewed five emerging models, it is clear that none of the current players have total cracked the code, and despite their staggering success, there is plenty of potential to improve even further.  In addition to developing new approaches to the industry, the most obvious potential comes from developing hybrids from the already existing models.

Particularly the location-based model could be overlayed with any of the other models.  Being able to deliver deals based on a customers’ location adds immediacy and should increase conversion rates.  It is therefore no surprise that most of the big players, such as Facebook and Google are positioning themselves in this space.

Another interesting observation is that Facebook plays an important role in most of the models, perhaps with the exception of transaction-based marketing.  As social commerce matures and is likely to make up an increasingly important piece of Facebook’s revenue stream, they are sure to be a front-runner in this space.

Still, other players such as Google, Groupon and e-Bay will undoubtedly give them fierce competition and make this industry one of the most exciting to watch over the next few years.

Great Article about NFC Deployment by Non-Payment Players (Fast Co.)

In the below article, Fast Company lays out plans for NFC deployment by a range of non-payment players.

• BMW: introducing NFC technology in their keys, enabling the owner to open doors with NFC, store train and flight tickets on the car key and receive a multitude of data about the car, such as; is it locked?, how much fuel does it have?, where is it parked?, etc
• LG: developing both NFC enabled phones and point of sale terminals.  By getting involved with POS terminals, it is involved with the whole ecosystem and may better carve out a meaningful role
• Google, Apple and Nokia: as we I have previously covered, these guys are all developing NFC devices

Beyond payments, Fast Company also make some interesting suggestions for the potential use of NFC in retail and advertising.

http://www.fastcompany.com/1723276/companies-battling-to-make-your-nfc-wireless-credit-card-dreams-come-true

Apple: Taking NFC to the Mainstream?

The hottest area of speculation at the moment is around Apple’s entry in the payments market.  Already early last year, it was being reported that Apple was putting together a payments team, while patent applications revealed that they would likely introduce NFC the iPhone 5, which will probably launch in June 2011. 

Now, considering that NFC has been around for a long time and that a flurry of prominent companies, from Visa to the major phone carriers to Google, already have NFC enabled products or trials – why is Apple able to generate so much excitement? 

Simply put, Apple has a remarkable track record of popularizing new technologies with a user experience that seamlessly bridges the hardware and software.  Like they have previously applied their midas touch to the personal computer, the music player, the mobile phone and most recently the tablet, people are eagerly awaiting what they will do to payments.

Most interestingly, people are asking how they will enter the market?  What role will they play in the payments value chain?  Consensus says that they will probably use a version of iTunes as a mobile wallet.  However, it will be interesting to see if they simply have their customers pay with their credit cards through iTunes or if they attempt to link directly to customers’ bank accounts, and essentially do their own clearing and settlement.

Moreover, what features will they offer their customers?  Will they start their own offers and rewards program, similar to what Google is developing?  will they do anything cool with the data they collect?  How will they extend NFC outside payments – e.g. identification and ticketing?

Also, will they enter the merchant side of the industry?  Will they enable the iPhone or iPad as payment terminals by developing NFC readers that plug directly in to the devices?  Will they offer data services?

Another interesting perspective is if they will open up their payments platform (iTunes) for external developers to develop application, similar to what Apple has done for the iPhone and iPad and PayPal has done in payments.  We are starting to see some interesting developments coming out of PayPal X and cannot even begin to imagine where Apple could take this market.

Still, with all this excitement, we should still remind ourselves that not all Apple launches are a success.  Apple TV is a classic example.  The payments industry is probably also more complex than industries Apple has previously taken on.  It is the quintessential network business, which might not be a good match for Apple’s notoriously proprietary and closed approach. 

It would take time for the iPhone 5 to build a user base that is sufficiently attractive for merchants to justify new point of sale investments.  If acceptance is not wide from day one, all the excitement that surrounds the launch could whittle away and slow application innovation, etc.

Despite all the excitement and endless opportunities, we should therefore remember that Apple faces big challenges and stiff competition in this field.  Still, the buzz generated by an Apple launch, along with all the other launches upcoming launches, could mean that 2011 is finally the breakout year for NFC.

Location-based Services: Relegating Traditional Payments Providers to Commodity Players

As smartphones become smarter, location-based services and marketing is set to become the next big thing.  This is developing industry, with countless entrants.  Still, Foursquare, Gowalla, Facebook and Google appear to be the early leaders. 

Google is currently testing its Hotpot service in Portland (http://mashable.com/2010/12/09/google-hotpot-ads/).  Through this technology, customers will be able to receive marketing material and offers from the merchant as well as read reviews.

These marketing messages could be an opportunity for Google to leverage its Checkout service to disintermediate payments companies in the ‘bricks & mortar’ world.  One could also see Paypal entering this area by striking up a partnership any of the other players. 

Furthermore, we already see location-based services entering the rewards space.  Foursquare recently launched a partnership with Safeway and PepsiCo.  These partnerships will give brands access to check-in data on Foursquare and can push relevant offers based on your actions.  For example, a check-in at a gym could trigger PepsiCo to offer the customer an energy drink.

Location based services clearly demonstrate how mobile payments pose a threat to traditional payments companies and could potentially have them relegated to commodity status.