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

Seamless Receipts: $1.5M to Growth its e-Receipts & Marketing Platform

Seamless Receipts, a New York-based electronic receipts company, announced on Friday that it has received $1.5M funding from various venture capital investors.  The company delivers technology that enables merchants to replace paper with electronic receipts and deliver customized marketing messages.

The objective of SR’s solution is to drive offline customers online, improve engagement and increase sales.  To enable this, they offer basic components, such as email marketing, promotions and social sharing functionalities to more advanced solutions, such as group buying and reviews.

In additionally, SR has partnered with Fitzgerald Analytics to deliver simple but powerful analytics plug-ins.  With these components and with proper POS integration, SR can deliver:

·      Analysis of “shopping basket mix” (“What products do customers buy at the same time? How can they encourage larger purchases?)

·      Optimization of the timing, targeting, and content of messages to customers

·      Measurement of customer loyalty, return-visit incentives, and other data-driven tactics to improve marketing results

This is information that is generally not available to smaller merchants, unless they invest heavily in costly POS systems.

To support distribution of the system, Seamless Receipts announced a partnership with Canadian Retail Solutions (CRS) last year.  CRS provides POS solutions to small and mid-sized Canadian merchants and will integrate Seamless Receipts with its Retail Pro POS solution.  To support further growth, we would expect Seamless Receipts to announce more such partnerships in the time to come.

However, Seamless Receipts is of course not the first company to provide such services.  Apple has long used their email receipts as a marketing platform with customers and Square builds much of its business around the improved analyses it provides smaller merchants and opportunities to use receipts as a communication platform.

Still, not many stand-alone companies offer similar services, and Seamless Receipts’ independence and ability to freely partner with POS providers should provide a great platform for accelerated growth. 

Vivienne Tam Helps Square Re-Design Payments

So, Square appears to have taken a leaf out of H&M's book and brought in Vivienne Tam as a guest-designer for a special range of its terminals.  This is a great example of Jack Dorsey's approach to the payments industry. 

This is a complex industry, he says, where people have focused on functionality and reliability and no one have properly designed the user experience.  Merchants might have invested much time and money in designing their retail space - still the payment equipment is a clunky piece of machinery that sticks out like a sore thumb.

Changing this thinking and making payments a more user friendly, well designed process, it seems, is Square's core mission.  And the Vivienne Tam partnership is just one of many steps in that direction.

Square: Great Interview !

Square's great-looking POS device and simple sign-up process is attracting 50-60,000 new merchants every month and recently helped raise $27.5 million in fresh capital.

However, it is their vision of re-imagining the payment processes and providing merchants with analysis and marketing programs that makes Square one of the most exciting companies around.

Read the great All Things D interview with founder Jack Dorsey in the below link.

http://emoney.allthingsd.com/20110207/squares-jack-dorsey-wants-to-replace-everything-from-the-receipt-to-the-register/?mod=twitter&utm_source=twitterfeed&utm_medium=twitter

Boku & Zong: what does the future hold?

Having previously written about emerging payments companies, such as Square, Klarna and FaceCash, I wanted to look at two similar mobile phone players; Zong and Boku.

Zong and Boku are similar in that they target online purchases, using the mobile phone as payment method, rather than a credit card.  The user simply selects Zong or Boku as payment option at the online merchant and enters their phone number.  Both companies then perform a verification process with the customer’s mobile phone – the process differs somewhat between the two companies, but is quick and easy – and the transaction is charged directly to the phone bill – no credit cards involved.  To enable this, both Zong and Boku have entered extensive partnership agreements with phone carriers across the world.

Zong and Boku have both been very successful in capturing micropayments on Facebook and online games.  By making their APIs available to the merchants, their models are highly flexible and integrate seamlessly into the broader online experience.  They also aim to expand into other digital goods, but have yet to proven this model.

The issue is that the carriers take a big cut of the transactions, which makes the method of payment expensive compared to credit cards.  This clearly limits its attractiveness to merchants, who are likely to only accept Zong and Boku if a considerable proportion of their customers don’t have credit cards or are uncomfortable using them online. 

To get around this issue, Zong has added a credit card option, where instead of being charged directly to their phone bill, the customer is charged to their credit card.  This is a very similar model to PayPal and seems like the right approach to capture larger-ticket purchases outside Facebook and online games in the short term.

However, in the longer term, one has to question whether either of these players offer anything unique in terms of technology or business model to expand beyond the social networks and evolve as independent companies.  My bet would be that they are either bought by a larger payments player or pushed out of the market by better a technology.

Square and the Mobile Acceptance Devices

Square has become a bit of a media darling recently and received much press attention when they yesterday announced that they have closed their Series B funding round for $27.5 million led by Sequoia Capital, which values the company to $200 million.  Square is headed by Jack Dorsey, the co-founder of Twitter, and is benefitting from this association in the media.  However, it has also developed an exciting, new product that merits attention on its own.

Unlike most mobile payments companies, Square is not challenging the cards industry, but taking a more pragmatic approach that is likely to give greater payoff in the short term.  It works from the observation that everyone already have plastic cards and that this model works quite well for now. 

However, not all merchants are able to easily get card terminals and merchant agreements. Square has therefore developed a device that turns any mobile device into a card terminal and developed an approach that enables anyone to get set up to accept cards in minutes.  The technical innovation is a small, square card-reader that plugs into the phonejack of any mobile device and processes Visa, Mastercard, Amex and Discover cards. 

The device is cheap to produce and Square distribute them for free to merchants that sign up for their service.  This has proven very popular, with between 30,000 and 50,000 merchants signing up per month since launch in October 2010.  It is especially smaller merchants for whom it was previously not cost efficient or convenient to accept cards that sign up for Square.

It is primarily this market positioning that differentiate Square from other providers that have launched similar products over the last year, such as  Verifone, Intuit and HomeATM.  None of these have seen the same level of success, either due to more stringent merchant agreements, or possibly because they have been outshone by Jack Dorsey’s star power.

However, a number of market participants have warned against lacking security features on Square.  Essentially, Square relies on the mobile device to encrypt the magstripe data, whereas more secure devices perform this encryption at the magnetic head.  With Square’s approach there is a risk that the mobile device is hacked and that the credit card data is intercepted before it has been encrypted, and therefore exposing the cardholder to fraud.  

Moreover, Square and other mobile acceptance devices do not really tackle the bigger issues where cardholders and merchants hope to benefit from mobile payments.  They may bring some convenience for smaller, mobile merchants, and may justify its media hype and valuation on this basis alone.  However, it does not reduce merchant fees or improve security and is therefore unlikely to make a bigger dent in the card industry.