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.

Interesting article: how is mobile payments changing traditonal banking?

ComputerWeekly.com today published an interesting article by Jenny Williams on mobile payments and its implications on the traditional banking industry. 

Barclaycard, which is launching the UK's first mobile payments network, Everything Everywhere, with Orange later this year, certainly expect that mobile payments will have profound implications for the banking industry and that retail banks will need to lead this innovation to stay competitive. 

The most obvious threat comes from mobile carriers, such as O2, which is applying for an emoney license that will enable it to operate a payment network without partnering with a bank. 

Vodafone, on the other hand, is focusing on M-Pesa, its mobile payment network in Africa.  Having launched in 6 markets and achieved very impressive take-up, M-Pesa has provided large portions of the population, who were previously unbanked, access to basic banking services.

However, I do not personally believe that mobile carriers will have a disruptive impact on the banking industry unless they partner with other players for three reasons; (1) they have no experience in operating a payment network - a complex business, (2) they will offer only basic payment services, and will be unable to enter the savings or investment areas and (3) they are unlikely to introduce disruptive payment technologies.

However, disruption in the payment industry is likely to come from another area - Apple and Google.  A number of  manufacturers launched NFC enabled handsets for Android at the recent Mobile World Congress in Barcelona and Apple is expected to include NFC on the iPhone 5. 

The article quotes Rachel Hunt at IDC Financial Insight; "As Apple and Google are considering NFC as part of their offering, they might get a score of applications that leverage that. This is an area where the bank cannot compete as it cannot act quick enough. Start-ups will be quicker to create apps".

She argues that the biggest challenge for banks is to predict how mobile payments will be used to create value for customers.  While Hunt expects mobile payments to ride on the existing infrastructure and networks, she expects that online payment players such as PayPal can cause serious disruption.

http://www.computerweekly.com/Articles/2011/02/22/245531/Near-field-comms-How-are-mobile-payments-changing-traditional.htm

Visa Acquires PlaySpan and Takes a Bite of the Digital Goods Market

Visa yesterday announced its acquisition of Silicon Valley based PlaySpan, a payment processor in the digital goods space.  Visa will pay $190 million cash, plus an additional performance based element.

So what are digital good; these are products or services that are purchased, delivered and consumed in its digital form.  Most common examples are software, music files, online movies and e-books.

Although these categories are experiencing rapid growth, the most exciting category are purchases made on social networks or within online games.  This has become an incredibly attractive space where PayPal has taken an early lead.

PayPal launched micropayment solution last year, with a number of high-profile partners onboard, such as Facebook, the FT, Autosport and Justin.tv.  What sets PayPal’s solution apart is its frictionless, two-click convenience and open APIs that enable merchants to customize the solution to their needs and easily integrate with their systems.

Importantly, micropayments also require a different pricing structure, as the traditional structure is not economical for smaller payments.  PayPal has therefore introduces a different structure that reduces the fees from a $1.00 transaction from $0.33 to $0.10.

And it is exactly this that PlaySpan provides to Visa.  Like PayPal, PlaySpan has developed a frictionless e-wallet that enables consumers to complete transactions across social networks and online games without interrupting their online experience.  It also operates with open APIs, so that merchants can easily integrate the PlaySpan with their application. 

Within four years to launch, PlaySpan is already the number two company in this space, with 28 million users, only after PayPal with its 80 million users.

As TV producers, online game developers and mobile operators increasingly seek to monetize their content through digital goods and micropayments, PlaySpan’s market potential is rapidly expanding.  This acquisition could consequently provide Visa access to entire new markets.  Let’s see how other networks such as MasterCard, American Express and Discover respond!

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

PayPal and Bling Nation

Ebay yesterday reported that PayPal tripled its mobile volume in 2010, a clear demonstration of the increased adoption of mobile payments.  To capitalize on this trend going forward, PayPal is increasingly targeting physical payments and has forged a number of partnerships to support this effort.  However, one partner has stood out from the rest; Bling Nation.

Bling Nation was founded by Meyer Malka and Wenceclao Casares in Palo Alto in 2008.  With Bling, they enable mobile phones for NFC payments with an RFID sticker, or Bling Tag, that is distributed for free.  Users simply register their phone number and PayPal account to their Bling Tag and are able to make purchases by tapping the tag on a contactless terminal.

To facilitate merchant acceptance, Bling initially partnered with local banks that would have cardholder and merchant relationships in the local area, to whom they would distribute NFC stickers and terminals.  The advantage of this approach was that transactions were ‘on-us’, which enabled Bling to offer merchants a cost effective solution.  On the flipside, each partnership was relatively small and growth was slow.

To achieve national scale, Bling has entered a partnership with Verifone, in which Verifone’s more than 370 resellers will begin to offer the Bling and PayPal service alongside traditional credit and debit card acceptance to merchants nationwide.  This is the first implementation that combines traditional cards-based payments with alternative payments at the point of sale.

The downside of this approach, is that PayPal transactions are charged at ‘card not present’ fees, and therefore adds unnecessary costs in a physical environment.

Interestingly, co-founder Casares views payments as the “commodity part”.  The value-added of Bling comes from connecting customers and merchants through data services and rewards. 

In the “marketing services” space, Bling has partnered with Facebook, as well as other online communities, where customers register to get access to discounts and rewards and merchants get access to customer data and profiles to drive increasingly targeted offerings.

It is this perspective that differentiates Bling Nation from other mobile payments providers and makes it such an attractive partner for PayPal, Facebook and a host of other companies that will want to leverage Bling’s growing network.

Social Commerce: Leading the Future of Online Shopping & Payments

Until recently, e-commerce was the domain of online shopping sites and payments was a fenced-off part of a now-familiar ‘check-out’ process.   With the emergence of social and geo-location-based services, e-commerce will change fundamentally.  This will disrupt the current online payments process and require more flexible and customisable solutions.  This blog entry looks at the emergence of social commerce, early market leaders and possible implications for online payments.

Although online social networks have been around since the late 90s (sixdegrees.com launched in 1997), the tipping point can be traced to 2003 when PC penetration, the emergence of broadband technologies and the rise of software platforms fuelled the growth of these networks.

Today, these networks have fundamentally changed the online experience from a passive, read-only mode, to an active, read-write experience.  The corporate world has thrown itself on the bandwagon and nearly all companies now have a presence on social networks.  Still, very few have cracked how to transform this presence to dollars on the bottom line. 

In a recent edition of the Lydian Journal, Karen Webster identified 4 forces that will trigger a tipping point for social commerce:

The explosive growth of social networks

·  75% of worldwide online users now visit social networks or blogs, a 24% increase from 2009 

·  Although younger users are more likely to visit social networks, half of Internet users aged 50 – 64 and one in four of users aged 65 or older now use social networks

·   Among the different networks, Facebook is the largest with close to 600 million users, followed by Twitter (190M), MySpace (122M) and LinkedIn (70M)

Social networks become the dominant destinations online

·  Time spent on social networks Facebook and Twitter accounts for nearly one-quarter of the time spent online for Americans, up nearly 50 percent from a year ago

·  One explanation is that social platforms allow their users to do everything from online gaming to messaging with friends to exploring their interests and favourite brands, and thus economise on their time spent online

·  Mobile phones are also increasing the time we spend on social networks; 150 million people connect to Facebook via their mobile and 37% of Twitter users connect via their mobile

Social networks are high-trust sources of information

·  People join social networks to be part of a connected community

·  Communities of peers are high-trust networks where users are more willing to disclose personal information and even make purchases

·  Peer-to-peer word-of-mouth has always been a source of valued, dependable information – social networks have the potential to systematise this and become a hub for purchasing decisions

Merchant begin to see the value and growing importance of social networks

·  Based on the above factors, merchants are beginning to view social networks as a sales channel with which to turn fans into customers

·  Nearly all major retailers have a fan page on Facebook as traffic to their own websites is being cannibalized by traffic on Facebook, where fans are more willing to buy and advocate on behalf of the brand

·  Analysts estimate the value of an average Facebook fan to be $136.38, suggesting that fans are likely to spend an extra $71.84 they would not otherwise have spent

·  More than half of Twitter-users recommend companies or products in their Tweets, with just about that same percentage actually following through to buy that product

Although social networks clearly represent a fantastic prospective sales channel, very few companies have yet managed to generate revenues on these platforms.  Attempts to tap into this opportunity can be grouped in three categories:

·  Shopping cart technology that facilitates check-outs on Facebook (e.g. Payvment)

·  Deal-sites off social networks that drive sales at discounts (e.g. Groupon or Living Spaces)

·  Promotional activities aimed at driving traffic to online or offline stores off social networks (e.g. JetBlue’s Twitter promotions)

However, the next years will no doubt see tremendous innovation and social networks will transform our current experience of online shopping.  New forms of online shopping are likely to tap into social dynamics in new ways and will require more flexible and customisable shopping and payment interfaces. 

It is therefore essential that payment providers develop technologies that can support this development. PayPal and IP Commerce have approached this challenge by opening up their platforms to external developers.  However, the other major players, such as Visa, MasterCard and American Express will undoubtedly have their own responses.

Open Platforms: A New Era of Innovation

The payments industry is entering an exciting, new era of innovation.  The reason lies in how several established industry players are opening up their platforms to third party developers. 

Some have likened this to the situation in the computer industry in 1979 when the development of the PC and emergence of a shared operating system allowed software providers to develop programmes for a shared platform.  The PC revolution led to a massive number of developers around the world producing innovative software packages that spawned entire new industries.

Three payments providers that are enabling this development are Visa, IP Commerce and PayPal.

Visa is selectively entering partnerships and opening its platform for development.  It is partnering with Monitise to develop a suite of mobile services, collaborating with DeviceFidelity for contactless payments and integrating it’s mobile solutions with ClairMail’s mobile banking platform.  These partnerships enable Visa to tap into external technical expertise and significantly increase speed to market of its services in these areas.

IP Commerce has developed a platform that sits on top of the traditional payments infrastructure.  The system are reminiscent of Windows in that it enables developers to write applications for the platform without having to worry about the complicated plumbing that supports it.  They claim that this reduces time to market and development costs by a factor 3.5.  

Moreover, through Commerce Marketplace they offer an online solution catalogue on which developers can publish applications.  Potential customers can search and acquire applications from this catalogue that all leverage the IP Commerce architecture.

Similarly PayPal has opened its platform with PayPal X and Adaptive Payments.  Developers can access X.com's development toolkits, technical documents and programming interfaces to produce integrated checkout solutions.  Examples of pre-existing products using the Adaptive Payments API include:

·      The Javastore's new drag-and-drop installation and frictionless payment system

·      Instant storefronts for Facebook via Payvment's social network shopping cart system

·      Cut-and-paste shopping solutions embedded in mobile applications, including instant purchases via ShopSavvy's barcode-enabled comparative shopping application for Android

There is little doubt that these developments will completely change the face of the payments industry.  And, if experiences from elsewhere are anything to go, innovation will be rapid and the industry will soon converge on one platform.