Payment News - Runners & Riders

Mobile Movers, Shakers and Shockers

by Karen Webster

     

I don’t know about you, but 2012 so far has left me a little breathless given the fast pace at which the payments industry has been moving since we all emerged from the New Year’s break. Maybe it’s the mild winter. No matter, the catalyst, not surprisingly, is mobile and the IP-enablement of just about everything that touches or influences commerce. This last week was particularly interesting given a few announcements from very different corners of the payments ecosystem about their payments strategy, not surprisingly, keyed to what they will pursue (or won’t) along the mobile lines. Here’s my take on mobile movers, shakers, and shockers.

Movers

Visa announced that it will enable FIs to more easily enable the delivery of mobile financial services solutions to their customers. This mobile banking/payments platform capability is courtesy of its alliance with and equity investment in Monitise, a UK-based technology and services company that has a pretty powerful and proven mobile banking and payments engine. This new Visa capability will allow FIs to extend a variety of useful financial services to their accountholders including balance checks, funds transfers, and transaction alerts. As a purely B2B play, it didn’t get as much airtime as the stuff that is more consumer directed but is interesting nonetheless. It puts Visa right smack dab in the middle of same competitive playing field as Fundtech, Sybase, mFoundry and others who have built their businesses by allowing FIs to deliver banking services via the mobile phone. Visa can now use its powerful FI channel to distribute this capability and to do it worldwide. There was no reference made to the business model that Visa will use as part of its go to market strategy, but one can imagine that it could create a disruptive model given their long-standing FI relationships and the other revenue possibilities that this platform can generate for them.

This move could also be an interesting way to “back door” a variety of mobile payments capabilities that carry the Visa brand without the heavy lift associated with going direct-to-consumer. As the largest global payments network on the planet, Visa has the benefit of global brand awareness and acceptance but it lacks a direct relationship with the consumer. As a platform and absent those direct consumer relationships, it also faces a strategic conundrum in how to capture more transaction share and revenues since it is completely dependent on its distributors and merchant partners to do that for them. Enriching its platform with more capabilities that allow its “distributors” to add more value to its customers seems like a sensible move. It not only adds value to their customer – and their customers customer – but it rings the cash register at a much higher margin – the “distributors” are the ones that do the heavy lift with getting consumers to adopt. And, once these mobile banking and payments hooks are in place via the FI accounts, Visa all of a sudden has a worldwide mobile network of consumers that it can touch, via the platform, with other services like offers, coupons, and who-knows-what else. Visa has been criticized for being slow moving in the mobile world, and while this announcement certainly does not conjure images of “cool and nifty”, but if my assessment is correct, it seems a strategic and methodical approach to creating a mobile commerce capability that it can finally, ahem, monetize.

Shakers
Facebook has been making a ton of news lately, not the least of which is its S1 filing and all of the juicy tidbits that it revealed about its payments ambitions. [Check out David Evans article which provides insight and analysis.] But, it was its agreement with Bango last week that really got tongues a waggin’.

Bango does two things in the mobile payments space: it integrates with mobile operators’ billing systems so that consumers can buy mobile apps and have those charges show up on their mobile phone bills and it collects and provides data on mobile content usage. Facebook has 425M+ people around the world accessing Facebook via the mobile phone. It is increasingly worried that as more consumers access Facebook via mobile, that its ad revenue will plummet unless it figures out a way to monetize eyeballs that move from online to mobile. It’s a tricky proposition for them. Lots of brands – and mobile operators - have experienced the backlash from users who hate being bombarded by ads popping up on a small mobile (or tablet) canvas. Sponsored stories or similar strategies (a la what Twitter has done) are rumored to be in the offing for Facebook, but that alone won’t really help Facebook capture the revenue it needs – and frankly should be able to get – from the mobile channel.

Enter Bango, potentially. I don’t think that Facebook will use Bango to create its own payment network on Facebook, although I guess anything’s possible. It seems like it would be an awfully big an investment just to make money from moving transactions thru the system. Rather, Bango is likely to be used by Facebook to accelerate the adoption of a new monetary network using Facebook Credits as the currency to effect commerce transactions. Think about it. It’s been reported that one in every three Facebook mobile users uses the mobile phone to play games. Using Bango, Facebook Credits and the carrier billing channel, Facebook could flood, okay maybe just increase, the number of Facebook Credits in the system which Facebook monetizes by taking 30% of whatever Facebook Credits when businesses or people try to cash those Credits for government-issued tender.

It is a pretty sweet set up. Every $1 of Facebook Credits means 30% back to Facebook at some point down the road when those Credits are pulled out of the Facebook network. One might imagine mobile operators using Facebook Credits as a currency to pay developers who are, in turn, being paid via Facebook Credits when consumers buy their apps. At some point, those Credits will be “cashed in” and the 30% tax will be directed back to Facebook, but until then it is sort of like there is this little alter-monetary system happening all around us that is fueling commerce on a massive social and soon to be commerce platform, the Facebook way.

This mobile payments strategy cum-Bango also shifts the risk of chargebacks to the carrier, who probably bears little risk anyway since the transaction amounts are relatively small and the last thing people these days want to risk is having their phones shut off for non-payment. And those 30% “taxes” are pretty high margin to boot.

This whole scheme is made all the more powerful when you consider it on a global basis, where not now, but soon, most everyone in the world will have a mobile device and be able to connect to the internet via that device. Facebook, with its ~1 billion users today, is likely to capture many billions more as consumers in developing markets begin to use their phones to interact with this social platform. Once this happens, Facebook will see even more enormous growth - for instance, in spite of having an enormous user base in India, less than 4% of its population is on Facebook. Once that happens, Facebook will have a mechanism in place to monetize on the interactions of its consumers with the apps on its platform via a payments network that is already in place – the mobile carrier and a monetary system that they control - Credits.
Talk about shaking up the ecosystem. Now we know at least one other reason why Facebook’s IPO value is in the $100B range.

Google
Google’s a shaker for a totally different reason. The news last week was all about the reported ease with which Google’s Wallet could be hacked – and was. Reports suggested that if one’s phone is lost or stolen, all a bad guy has to do is to go into app settings, clear the data and reset the PIN. Now, that of course only applies to the universe of people with (a) a Sprint Galaxy Nexus 4S and (b) a Google wallet account which is still a pretty small universe. But it is unsettling particularly given the dust up in December over Verizon’s decision to block Google wallet from its Galaxy phones over security concerns. [See my commentary on that announcement here.] My take on that decision was that it was likely motivated over control of the wallet, but maybe their concerns were rooted in real security issues after all. This news also comes on the heels of recent reports of a pretty lackluster reception to Google Wallet in the marketplace as a result of many things – its NFC POS requirements, its demand for SKU level data from merchants and lack of a compelling value proposition for consumers (not many phones avaiable to acces Google Wallet and not many places to use it if you had it).

PayPal
PayPal made big news last week when it totally confirmed what eBay CEO John Donohue said about NFC some time ago .. .and that is that it stands for “not for commerce.” On Thursday, PayPal went on the public record to say that it was ditching, um discontinuing, its efforts involving mobile payments at the Point of Sale via NFC. The reason? Not enough merchant interest to continue. It seems that PayPal’s other POS innovations were far more interesting to them since they create less disruption at the point of sale (and don’t even require mobile phones to access PayPal accounts) and therefore a whole lot easier to implement and get traction. We’ve talked to a bunch of merchants who still want to see more of what PayPal has to offer but who admit to being intrigued by its frictionless POS experience and the prospect of enabling the PayPal account base on their behalf.

We’ve said before that PayPal has made a bunch of really smart moves, backburnering NFC as just the latest example of that, and is doing some interesting things to enable the convergence of on and offline commerce that will reinvent commerce at the physical point of sale. But, it ought to keep a close eagle eye out on its Silicon Valley neighbor Facebook, now that it will soon come under public pressure to deliver shareholder returns and sees payments as one of the ways to do that. Facebook, just by its sheer reach of consumer eyeballs, is in a great position to create an alternative online and mobile payments network but not in the same way PayPal has.

Instead of creating an alternative acceptance mark Facebook could force the adoption of an alternative currency on those channels that uses other funding sources to enable payment on its social platform. As more and more eyeballs and commerce move to the Facebook platform – which we believe it will in the next several years – it could more plausibly become a ginormous payments network without any of the investment required to build one and without getting into the risk and risk management business just by controlling the monetary supply, if you will, for enabling commerce on that platform. If it does, it could turn the online and mobile payments business model upside down by making its money, in effect, on currency conversion and not payments transacting.
Oh, and I am totally invoking my right to say I told you so on the whole mobile payments/NFC front. For those of you who haven’t read all of my NFC rantings, a few of the more recent ones are here. I don’t know about you, but I can’t wait for this week to see what else is in store!

O2 launches mobile wallet

26 Apr 12 - Author Editorial - editorial

The O2 wallet

Last night O2 launched the O2 wallet at the Wayra Academy in London, enabling people to send and receive money, compare prices and shop via their smartphone. The service is available to everyone, not just O2 users, and incorporates the following features:

• Money Message: transfer money to another UK mobile phone number via SMS. Sums of between GBP1 and GBP500 can be transferred daily.
• Shopping via mobile: a mobile barcode and search engine function allow users to scan items in-store and compare prices with around 100 online retailers. The feature also offers daily deals via a ‘My Offers’ icon which include discounts at retailers such as Debenhams, Comet, Sainsbury’s Direct and Tesco Direct.
• Mobile wallet: card data can be digitised and stored in the O2 Wallet to make mobile payments. Funds can be loaded onto the wallet via debit card, Money Message or with cash at around 30,000 locations including O2 stores, PayPoint and epay retail outlets. Users can access a 30 day payment history through the app and text alerts can be set up to notify the user of changes in account balance. The wallet doesn’t yet incorporate NFC technology but this is to be added in due course.
• O2 Money Account Card: a physical and virtual O2 Money Account Card is provided on a Visa prepaid account. The virtual card can be used for online shopping whilst the contactless physical card can be used on the high street and at ATMs.

The O2 Wallet is compatible with smartphones and the iPad, non-smartphones with web browsers can also take advantage of certain features such as Money Messages. According to O2, the amount of people using mobile banking rose from 9.7% in 2010 to 20.4% in 2011, and mobile shopping is expected to increase by 53%over the next twelve months to hit GBP4.5 billion, making the Brits the biggest mobile shoppers in Europe.

PayTag

 

 

Barclaycard has unveiled a stick-on credit card called PayTag, which will sit on the back of a mobile phone (or any other item you carry everywhere) and then be used to make small, contact-free payments.

The tiny sticker, which is about a third of the size of a traditional credit card, uses near-field-communication technology to transfer cash from your bank account to a contactless payment terminal. You just wave your device over the terminal, and you don't need to enter your PIN.

The idea is to open mobile payments to Barclaycard's 12 million customers, even if their mobile phone is not equipped with an NFC chip, or not set up for contactless transactions. Or even if they don't have a phone at all -- the sticker works on anything.

Right now, the sticker can be used to make payments of £15 and under, and it will rise to £20 in June 2012. That means it's suited for buying lunch, coffee, magazines and other bits and bobs. As such, retailers like Pret a Manger, McDonald's, Boots, WH Smith and Tesco are among the first to offer contactless payments.

Barclaycard's PayTag will launch in May, when a select group of its credit card customers will receive a sticker in the post. Later this year, all customers will be offered the free upgrade.

PayPal attacks Square & iZettle

More Than 200K Merchants Have Signed Up For PayPal Here

      

During eBay’s earnings call today, eBay CEO and President John Donahoe said that over 200,000 merchants have signed up for PayPal Here, the company’s Square-like mobile payments hardware and software platform for small businesses. We haven’t seen any sign-up numbers for the mobile payments service since PayPal revealed it was seeing 1,000 new registrants per hour for the new service.

As you may have heard, PayPal Here offers a triangular add-on that plugs into the headphone jack on your smartphone. Merchants can then accept payments by swiping cards with the thumb-sized card reader or can use the smartphone’s camera to scan credit cards (powered by Card.io), scan checks, etc. PayPal Here offers a flat rate of 2.7 percent for card swipes.

Donahoe says the reader will launch to the public in the second quarter, and will be available in the US, Canada, Hong Kong and Australia at launch. He adds that he’s not sure they can manufacture enough PayPal Here devices to keep up for demand.

For basis of comparison, over 1 million merchants currently use Square to accept credit cards (which is a data point that was released in December, so this number could be higher).
Donahoe also said during the call that eBay would be improving the marketplace checkout experience, search and discovery on the platform. With regard to NFC, Donahoe says that it will be at least a couple of years before you see adoption of NFC at large retailers.

Mobile payments could hold the key to Apple's next $100 billion

 

Apple has been a near permanent fixture in the headlines since the launch of the original iPhone in 2007, but this month the company received special attention when its market cap topped the $600 billion mark and it was made known it had more than $100 billion in cash reserves.

Predictably, a plethora of comparisons began to be drawn around Apple's worth and you can find an eye-watering listhere. Some choice examples include the estimates that put Apple's value above that of the global coffee industry and the international illegal drugs trade.

The position that Apple has now, not just financially but also within the hearts and minds of the modern consumer, gives it the perhaps unique ability to enter new sectors and make them "Apple" in a way that feels completely natural to us -- and by making them "Apple", I mean of course beautiful, desirable, easy-to-use and hugely profitable. Alternatively they also have the option to dip their toes into new markets without the need for much innovation on their part. When businesses are dependent on your ecosystem for continued growth, new ways can always be found of ensuring that their growth results are inexorably tied to yours and this generates fresh revenue streams in the process.

During the recent era of Apple's ubiquitous media presence, the concept of digital payment for goods and services has been threatening to bubble to the surface and is quickly gaining pace.

Since Square's launch in late 2010, the number of middleware services entering the transaction market has been picking up steam and I'm a big fan of anything that resembles innovation in this sector. It's dumbfounding that the security around US card transactions in 2012 is still so lax that merchants hand you back your card before you've even signed the receipt. When my brother first moved to New York, he found this so ridiculous he started to leave a different signature on every receipt, from describing his role in the transaction e.g. "customer" to simply a word for the thing being paid for e.g. "brunch". Have a look at his collection of non-legally binding signatures to get a sense of how "hard" it is to commit credit card fraud in the US.

In my role as a Digital Strategist at TH_NK, I've been watching with interest the progress of businesses like Square, iZettle, PayPal and MPowa in recent months and I can't help but notice the emphasis they put on Apple products both in terms of device support but also in terms of the imagery and language they use in their communications. Looking through their websites, you could be forgiven for assuming they were in the business of selling Apple hardware, and actually they are. As a small business owner, you're going to be conscious of the fact that you're asking people to swipe their credit cards through a tablet which in itself might be a turn off. But to what extent would that feeling be exacerbated by presenting your customers with an Android tablet which they don't immediately recognise?

So where does Apple fit in?
Skimming off the top: Apple has a reputation for collecting their dues from businesses that make money from their platforms. 30 percent from iTunes and App store purchases, 30 percent from in-app subscriptions, 30 percent, 30 percent, 30 percent. How long will it be before Apple start looking for their cut of the 2.5-2.75 percent transaction fees that the likes of Square charge for their services? I think they will wait at least until these middleware products start to turn a profit. Latest estimates suggest that Square is still making an operating loss of $100,000 per day despite processing $11 million in the same time frame. Apple has nothing to gain in the short term by killing off these businesses which are still finding their feet and could prove to be fruitful partners if nurtured in the short term.

Bringing a gun to a knife fight
The interest in products like the iCache Geode suggest that there is a real consumer appetite for converting a wallet full of debit cards, credit cards, loyalty cards, identity cards and so on into a single, easy to use, digital solution. No matter how much I love the Geode, I can't help thinking it's nothing more than a sticking plaster on a problem that someone will solve very soon. Now if only there was a business that held a high level of consumer trust, wasn't tied down to a single financial institution and had access to our pockets 24 hours a day. They could really shake things up if they had the stomach for it...

Transforming The Way We Pay

The iPad's Next Trick:

Revel Systems has realized the iPad, already changing various industries, has the power to take cash registers into the 21st century.

It's not just Square that is playing with iPad-based tech to change shopping.
Revel Systems just scored an interesting coup that'll help it transform how American consumers actually shop in stores: Its new iPad cash register system will from now on be installed by Best Buy's Geek Squad--meaning small to medium stores all the way up to big chain stores will get much faster access to a next-generation cash register, installed by technical whizzes for a more painless experience.

The company has only been out of beta test since August, but the firm's press release notes it's grown "exponentially" and is "processing millions of dollars with major brands such as Camille's Sidewalk Café, Popeye's Louisiana Kitchen, and Twistee Treat." Those aren't exactly massive megastores, but they are household names for millions of people, and Revel is in at the ground floor of these companies with its iPad-based system.
The idea is simple: Cash registers, even the newer touchscreen computer-based ones, are bulky, old-fashioned, expensive, and not particularly reconfigurable on the fly. They typically involve a large number of expensive pieces of hardware, with cash drawers, the registers, credit card machines, and a central management computer all connected up in a complex way.

 


But the iPad is small, powerful, cheap, comes with a built-in touchscreen and intuitive UI, and is naturally good at networking. And that's what Revel's system makes the most of: iPads can be used as the employee-facing part of a point-of-sale-system, with a touch interface that each store can configure to meet its needs with a simple drag-and-drop management software. The iPads interface with credit card readers and standard cash drawers, but are small, cheap, and reliable--and they deliver data to a central database so management can view transaction information, and peruse a suite of analytics about their business. Because the app is user-configurable, it's also possible to use it to help with payroll management, inventory tracking, employee time-system management, and even esoteric things like a daily menu change in a restaurant.

But there's another mode Revel's iPad system works in: Customer-facing "kiosk mode." That means the same intuitive, customizable UI can actually let consumers choose their own order (right down to picking ingredients in some food stores) and pay for it at the iPad interface. That offers all sorts of potential savings for small business, who may need fewer employees actually in the customer-facing part of their store, and it could mean faster ordering for customers too.

The company's cofounder and CEO Lisa Falzone spoke with Fast Company about the idea, which sprang originally from an iPad app designed for restaurants where the customer would view the menu, order, and pay on an iPad, which is an idea other firms have tried. Falzone said: "Through doing that and talking to the different restaurant owners and actually trying to integrate into the current point of sale systems we just realized that it was really hard to integrate, and they didn't have an open API. And for the restaurant owners they were hugely expensive, and they still had these back-office servers at $3,000 up-front cost and the touchscreen systems that were out there were slow because they had to talk to the server every time you touched their screens. We figured that the iPad was the perfect touchscreen for the next-generation touchscreen point-of-sale system."

In particular Revels' solution offers the "speed of a local system but the benefits of a web-based system." And to back it up Revel has an open API, so they've gone into partnership with existing payment firms, and it means the system is highly flexible. It's also got integrated networking, which means chain stores' systems all communicate so central management can see how sales are doing on a store-by-store basis. As Falzone notes, this means they're "not going after Square's market, which may be street vendors and so on," instead targeting bigger firms with more revenue.

That's all well and good, and Revel is likely to achieve much success and its customer list is growing as stores see the benefits of a cheap and flexible system that transforms their point-of-sale tech, but what this actually is is a sniff of the future of shopping. Twistee Treats, one of Revels' customers, has for example noted that people are using the iPad system preferentially "because they'd rather type their order in to a kiosk than speak to a cashier," as Falzone explains. And in terms of mobile payments, the idea is to adapt Revels' core code to allow mobile pay solutions and even mobile ordering before you arrive at the physical store, perhaps a little like Apple's EasyPay iOS solution.




The firm is already partnered with a firm called LevelUp, which lets you quickly pay at next-gen cash registers by simply having the register's camera scan a unique QR code on your smartphone's screen--for Revels' iPad solution, with its built-in webcam, that means the entire cash register could be just the iPad, with no extra peripherals to take a payment. That sounds subtle, but think about the complexity of a standard cash desk nowadays, with custom boxed hardware to print receipts, process your card and so on--if all you need is a wired-up iPad instead, you can completely streamline your cash desk. And even take it mobile, with emailed receipts and other solutions that depart from the way we pay for things right now.

This sort of system is also prefectly married up to the idea of mobile payments using NFC wireless tech, which Revels' app is already compatible with. And, interestingly, Falzone pointed out that so far her system is selling pretty much on its own merits, with customers actively seeking it out...which means that though other aspects of payment tech are maybe lagging, stores themselves are desperately keen to get this technology into your pocket sooner rather than later.

Bump Bump!

Bump Pay Will Let Users Exchange Money by Bumping Smartphones

The startup Bump Labs threw its hat into the crowded mobile payments ring on Thursday, launching an app that allows people to exchange money by tapping their phones together.

Similar Articles:

• 
  Bump, Throw, and Catch Files Between Mobile Devices
• 
  Bump
• 
  Android 2.3 Will Do Mobile Payments and Lots of 'Bump'
• 
  Angry Birds Are Real, Take Flight at 2012 Toy Fair
• 
  Android Doubles iPhone in New Smartphone Sales
• 
  Bump

The app, called Bump Pay, builds on the company's core technology, which enables two smartphones using Bump apps to transfer data by being tapped together. Unlike NFC (near-field communication), which Google and others are promoting for mobile payments, Bump requires physical contact between devices. The company's current app, called Bump, allows users to transfer contact information and photos.


To use Bump Pay, a user types in how much money he or she wants to send and then bumps phones with the intended recipient. Bump's software determines which two phones collided. The app then transfers funds from one user's PayPal account to the other's. Both users must have previously downloaded the app and linked it to their PayPal accounts.

"Bump Pay is interesting because of its novelty, which may spur trial, but being within arm's reach of the person you're paying back is not always convenient and will limit its usefulness," said Denee Carrington, an analyst with Forrester Research.

But Chris Silva, an Altimeter Group analyst, sees proximity as the right approach in the U.S., "where people are just so paranoid about using any type of technology where there's a transaction taking place and you're not actually exchanging funds or a card."

"I think it makes sense for what people are going to feel comfortable using," Silva said.
As for the security of the app, Silva noted that some Bump Pay users could claim that they had accidentally tapped another person's phone, and thus attempt to recoup their funds. "There's a risk, but it's almost completely borne by the credit card issuers and the banks who are going to be stuck arbitrating those disputes."

Bump Pay will compete with Venmo, Square and PayPal Here, among other companies.

Bump Pay is initially available only for the iPhone

EMV in Limbo

The journey to align U.S. payments processing security standards with those in most of the rest of the world has all the appearances of progress: "inevitable" is the word most often heard in connection to EMV, and MasterCard and Visa have set what seem to be migration deadlines. Yet for card-issuing banks, there's still a frustrating lack of clarity that's requiring a U.S. migration strategy reliant on contingencies and agility. The banks know the standards are coming, but still don't know exactly what they'll look like.

What is clear is that the magnetic stripe-dominated payment system is on its way to the museum and will be replaced by a standard to be named later that links mobile, Web, point of sale and contactless payments requiring vast IT adjustments that impact both processing and security.

"Mag stripe is 50-year-old technology," says David Porter, a general manager for JPMorgan Chase. "We look at the swirl of things going in payments, such as RFID, ISIS, Google Wallet, Visa Wallet, etc. ... However long it takes, it will settle on the next universally updated payment methodology in the U.S., which we still don't know at this time."

Successfully navigating the new processing maze depends on harnessing the growth of two payments components that feed off one another - near field communication-enabled contactless payments; and pressure from retailers and card networks to apply EMV payment card security in the U.S.

EMV refers to Europay, MasterCard and Visa - a global standard for security chips in payment cards that is widespread in other countries, but just beginning to make inroads into the U.S. after years of reluctance due to the cost of changing payment terminals to accept chip payments. EMV is not regarded as foolproof - studies have shown EMV cards to be susceptible to man-in-the-middle attacks - but is considered safer than mag stripe cards because the cards are harder to counterfeit.

While EMV migration creeps into the U.S., NFC-enabled payments are also starting to take shape as card networks, telecoms and handset manufacturers target the market with mobile wallet solutions. The conversions of payment terminals to accept contactless payments in the U.S. are expected to include EMV migrations.

The problem is that no ubiquitous NFC model and EMV model for all merchants and issuers to use for processing payments has emerged, impacting interoperability, slowing conversion and requiring IT execs like Porter to engage in multiple strategies - continuing old payment methods while preparing for contactless and EMV in some future form. "It's not clear how it will evolve," Porter says. "We have to be sure to be prepared in the back office and make sure our systems can process mag stripe, EMV or contactless payments."

UNDER PRESSURE
While the scant U.S. EMV adoption so far has been for travel cards, substantial migration will eventually come from card network and retail pressure.

Wal-Mart has been pushing for EMV adoption for years, and Visa and MasterCard are also pushing EMV in the U.S. By October 2012, Visa says any merchant that accepts 75% of its yearly Visa transactions via contactless and contact chip transactions will not have to validate compliance with Payment Card Industry Data Standards.

By April 2013, acquirer-processors and subprocessors must support chip transactions, and by October 2015, liability for fraudulent transactions on chip cards will mostly fall on merchant acquirers instead of issuers, if the merchants don't have chip-accepting terminals. For MasterCard, ATMs in the U.S. will have to accept EMV cards as of April 19, 2013.

Discover is also pushing EMV migration - though there are differences. MasterCard and Discover are pushing Chip and PIN, citing security, while Visa's Chip approach says online processing removes the need for the offline authentication of Chip and PIN.

"The changes in liability will push the risk back out to retailers and will force them to react by accelerating the swap-out in the terminals," says Ron Shevlin, a senior analyst at Aite Group.
While uncertainty surrounding consumer demand and prevailing tech models for NFC mobile payments and mobile wallets remains, the argument is that merchants that upgrade payment terminals to accept mobile payments will add EMV acceptance capabilities at the same time.

"The contactless part is very important," says Zilvinas Bareisis, a senior analyst at Celent. "The link between contactless terminals and EMV payments ensures that not only are these terminals accepting chip payments, but it's a way to ensure they are paving the way for mobile payments as well."
But both contactless and EMV standards are being hamstrung by the fact that in the U.S they really aren't standards in the way that word is usually used.

The lack of collaboration among stakeholders in the NFC payments market is well documented, as telecoms and handset manufacturers both have their own preferred method of delivering mobile payments. But Porter says there are lingering differences on the EMV front. Issuers, merchants, card firms and regulators in the U.S. still aren't on the same page - mostly over liability, the burden of terminal conversion and simple politics.

What made EMV work when it was rolled out in the U.K., for example, was the joint effort of a government mandate, bank users and the associations, which collaborated on an aligned system," Porter says, adding that these groups worked with merchant associations and hardware manufacturers to put EMV in place. "Those are four or five different disconnected bodies, but there was momentum to push it. The alignment of interests right now in the U.S. is not apparent, for whatever reason. For the final standard to emerge there will have to be alignment."

The expense of conversion is also a hindrance. Firms such as Javelin Research have estimated the cost of terminal and card migration as high as $12 billion, enough to cause haggling among stakeholders about who will shoulder the brunt of that cost, while attracting attention from overseas tech firms.

For now, travel-related EMV cards, which are not expected to spark broad U.S. migration, are still where most of the U.S. innovation is.

Chase is offering EMV in the U.S. in a manner similar to institutions such as Wells Fargo, the United Nations Federal Credit Union, and card technology firms like Gemalto: as a perk for international travelers. Frequent travelers are being offered cards that work in the U.S. as mag stripe cards and overseas as EMV cards.

In March Chase upped the ante to include a partnership with Hyatt Hotels. The Hyatt Credit Card will have EMV chip and signature technology, an industry first for a U.S. hotel credit card. The card will have a microchip and a mag stripe to accommodate merchants in the U.S

Global Payments Systems Breach

02 April, 2012 - 09:52

Global Payments breach affects up to 1.5m cardholders

US transaction processor Global Payments says that "less than 1,500,000 card numbers may have been exported" as a result of a systems breach.

Following media reports, the company was forced to confirm on Friday that it had identified and reported unauthorised access to its processing system in early March.

It is thought that only North America cardholders are affected, with 'Track 2' data - including account numbers - compromised but not names, addresses and social security numbers.

News of the breach saw trading in Global Payments shares halted after their price plunged by as much as 13.7% on Friday.

Visa has also removed the company from its list of approved service providers, telling it to revalidate as PCI DSS compliant.

PayPal goes toe-to-toe with Square as it launches mobile card reader

The mobile card payment race

PayPal is launching a mobile card reader, dubbed PayPal Here, as it attempts to attract small- and medium-sized businesses to its payment service in a move that could pose a significant threat to Square. PayPal’s triangular plug-in reader is accompanied by the firm’s software app, compatible with Apple’s iOS and Google’s Android OS, which enables merchants to process transactions, track them, and also accept cheques by taking a picture using a smartphone.



Merchants that join the initiative will receive a PayPal debit card, with funds from transactions available almost immediately, although cheques will take up to six days to process. Both the card reader and app are free to merchants, like Square’s, but PayPal’s 2.7% transaction fee undercuts the 2.75% that Square takes, as PayPal attempts to muscle in on its success.

"Consumers are changing how they shop and pay. Retailers are looking for a technology company they can trust and eBay is that company," says eBay CEO Kevin Donahoe.

PayPal has made significant strides in recent months to bridge the gap between online and offline payments, with moves to integrate its software at major retailers’ point-of-sale terminals. This is evidenced by its trial with Home Depot, as well as initiatives such as NFC-based cards and confirming purchases with a pin or phone number on their mobile device. PayPal labelled the trial as “the beginning of a fundamental change in the company”, and a card reader would allow consumers that don’t own a smartphone or haven’t downloaded PayPal’s app to purchase goods, with PayPal snaring a share of the revenue.

The company’s move to target smaller retailers appears more aggressive, with the firm rolling out its plug-in readers and software this month, though this may have something to do with Square’s progress during the past year. Square is already establishing a strong base and recently announced that it is processing USD4bn in tractions annually. However, PayPal’s 106m global users make it an automatic threat to Square’s continuing success.

Jacob de Geer, CEO of payments firm iZettle, told StrategyEye earlier this month that PayPal's mobile reader, would be good for the mobile payments market. "Competition is healthy and helps to increase consumer understanding about mobile payments and pushes the industry to progress quicker,” he says. Though PayPal Here will be available in Canada, Hong Kong and Australia, de Geer says a move into Europe could prove more difficult. “The chip-card market is a different kettle of fish with different security standards and regulation to comply with."

How to Monetize Ideas

Posted on July 10, 2011 by Alan Weiss

 

Very few good ideas are ever monetized. They either drown amongst a lot of other, mostly bad, ideas, or they emerge not fully metamorphosed - crystalline, fragile constructions that blow apart in a light breeze.

Here’s how to can turn a good idea into very good money (or at least know that it’s not such a good idea):

• Assess the size of the audience. Do you have sufficient mass so that even 1 percent of the total constitute significant business? The “World” is never your audience. Who really might have pragmatic applicability for your product?

• Assess the quality of your reach. Do you have a highly popular web site, lists of people who know you and trust you (or, better, who have purchased before), a blog, a newsletter, speaking appearance, alliance partners and so on so that your product can be projected?

• Assess the medium. Are you considering a form and format that is ideal for learning and use? Does the medium add or detract from your value? (Example: “Talking heads” on video rarely constitute popular products.)

• Assess your brand. Are you sufficiently well known that many people will purchase merely on the strength of your name and renown? (Too many unknown people think the easy way to money is with a product. Even good products languish when people don’t trust you and/or have never heard of you.)

• Assess your price point. People believe they get what the pay for. Are you maximizing your price based on perceived value? It’s as much work to make a £10,000 sale as a £1,000 sale, so why not make the former? The key is profit, not numbers of sales.

• Assess whether this is long-term business potential. I believe that any new venture should reach six figures in a maximum of two years. Selling £25,000 the first year probably means much less than that in profit in terms of amortizing development and other costs, and the second year will probably bring even less.

• Assess your ego and motives. Are you doing this because others have done it, or because you want a “book” or a “CD” or just passive income, or are you really providing value to others in varying ways that extends their effectiveness?

• Assess the market. Is this fresh and new, or derivative? Do you really have new intellectual property, or is this the “Seventeen Habits of Teams Pursing Black Swans that Moved Cheese for the Soul”?

© Alan Weiss 2011. All rights reserved.

Square Beware

Squaring Off With Square: Ingenico Takes Control of Rival ROAM

Square, beware. Ingenico SA, a maker of in-store payment terminals, just took a controlling stake in ROAM Data, a rival provider of portable payment systems used by small merchants.

Just like Square, ROAM’s technology lets smartphones and tablets based on iOS and Android to accept credit-card payments. It’s distributed to small businesses by the likes of Intuit Inc., Sage Payment Solutions and Total Merchant Services.

“We are arming them to compete with Square,” said Robert Stringer, vice president of products and marketing at ROAM. The companies did not disclose the value of the deal.

With Ingenico behind it, ROAM hopes to invest more in its technology, and to expand beyond the U.S., where the majority of its users are based, Stringer said. ROAM is profitable, and had seen sales grow 600 percent since 2009, when Ingenico first invested in the company.

The additional investment could signal that large payment-equipment companies are increasingly taking Square seriously, and redoubling efforts to push the start-up aside. Last year, rival VeriFone Systems Inc. began offering a special sleeve, which lets mobile devices accept card payments.
Ingenico sells a portable, cell-phone-sized device that takes card payments as well. ROAM brings Ingenico a step closer to having a comparable offering to Square’s.

The investment “is part of chess moves by the industry stakeholders to protect their turf,” said Richard Crone, who heads Crone Consulting LLC. “I consider it an early warning for Square.”

Ingenico’s president of North America, Thierry Denis, downplayed the rivalry with Square, saying “it’s not a step against any one of our competitors, it’s a response to the market.”
Square, created by Twitter co-founder Jack Dorsey, did not immediately respond to a request for comment.

The Changing World of Mobile Payments

Karen Webster Sizes Up the Rapidly Changing World of Mobile Payments

Let’s play a little game after you’ve read all of these recent announcements.

“Starting This Summer, the Isis Mobile Wallet Will Be Available to More Than 100 Million U.S. Card Holders” (ISIS announcement with BarclayCard, JPMC, Capital One)
“[The Visa and Vodaphone mobile wallet] has the potential to transform the way that people pay and are paid the world over.” (Visa/Vodafone mobile wallet announcement at MWC 2012)
“Google Wallet has announced that 22 of the largest U.S. retail chains support its initiative, which enables consumers to make purchases by tapping their Android smartphone at 300,000-plus MasterCard PayPass-enabled merchant terminals.” (Google Wallet)
“We are exploring potential solutions that would help us to deliver the fastest, most secure mobile-payment experience possible for our customers." (New retailer-centric mobile payments scheme)
“Home Depot has decided to bring the revolutionary POS technology to nearly all of its 2,000 stores in the US. It’s the first time in recent memory that a major retail chain has allowed a way to pay at the register that doesn’t actually require customers to have a physical product (whether it’s a credit card, a mobile phone, or a dollar bill).” (PayPal mobile wallet debut at Home Depot).
“Apple is clearly running a semi-sandboxed experiment inside selected retail stores. The experiment? Allowing customers to buy physical goods using Apple's own virtual currency system (iTunes).” (Apple Easy Pay Trial)
“Serve, the digital payment and commerce platform from American Express, debuted a Facebook application that allows users to send, receive, and request money without leaving the social network” (Serve and mobile wallet via Facebook)
“Card Case is an example of the grace that Dorsey believes defines Square, a company he hopes will radically transform the generally unmagical burden of exchanging money for goods and services. The app, designed as a visual homage to the fashion house Hermès, can also show you your payment history, what’s for sale in-store, and nearby places that take Square.” (Fast Company writing about Square)
Here are the rules of the game:
• For one point, to what are all of these announcements (made since the start of the year) referring?
• For ten points, what major players are missing from these announcements?
• For one hundred points, what’s the same about most of these announcements?
• And, for 64 thousand points, who’s likely to gain the most traction and win?
Let’s see how you did.
If you answered the first question with “mobile wallets” then score a point! (And if you didn’t, don’t admit that to anyone…)
If you answered the second question with Amazon and Facebook, add 10 points to your score.
If you answered the third question with, “All but three don’t rely on NFC to enable payments (Apple, AmEx, and PayPal),” then add 100 more to your score.
Now, before we see whether you can add 64 thousand points to your score, we need to first discuss just how many winners there will be and why.
Everyone quoted above, plus probably at least a hundred more, all want to win and are working very hard to capture market share. Just about every day there is a new announcement about a mobile wallet something or other. The Mobile World Congress last week in Barcelona was mobile wallet announcement central where we had the long-awaited ISIS debut, along with announcements from just about every mobile operator, network and mobile wallet start up.
Then, on Friday — well timed, I’m sure to hit at the tail end of all of this mobile wallet euphoria — was the retailer coalition. Their announcement basically dissed everyone in favor of “something different.” The strategy, I suppose, was to appear stealth, but its complete absence of substance made it too cute by half. No, we don’t have a technology and we’ll work with anyone, but “it” has to be better and safer than what exists now. To that point, there’s not a whole lot of experience to draw from; mobile wallets are mere babies in the payments lifecycle. Sure sounds like a strategy to me – but maybe one that is less about mobile wallets and more about shaking down the fees from the card networks and future mobile wallet providers.
But I digress. Let’s get back to the discussion of the mobile wallet winners. It will come down to, I think, how many mobile wallets people will want to have which is a function of: how easy they are to use; how convenient they are to access; and how many merchants will accept them.
My hypothesis is that, in spite of the fact that people, today, technically, have multiple accounts registered for payment (e.g. iTunes, Amazon, PayPal), most people by and large think of themselves as having one wallet. Most of those wallets are leather and they hold a bunch of stuff, including cards, cash and ID. If you were to ask anyone today if they would like to carry around two or three or ten leather wallets, my guess is that most people would look at you as if you had lost your mind. They’d say they’d rather consolidate everything into a single wallet that could comfortably hold the cards they wanted, and those they liked to use at the places they liked to shop. I would say this would be true even for women who carry purses that could hold multiple wallets, and like buying a lot of fancy leather accessories.
So, will the mobile environment make the answer to the “how many wallets are you willing to carry” question be any different? That depends on how you define the wallet — or, more correctly, how consumers will define their mobile wallets.
One answer is that the mobile wallet is the mobile phone so the phone literally becomes the digital substitute for the leather wallet. The many individual payments apps that can be downloaded on that phone are the digital analogs to the plastic cards that are carried around today in the leather wallet, even if they have more functionality and give the consumer the choice of switching between payment types. This new mobile form factor makes it tons easier for people to have and use many different payment types at many different merchants. As I have written previously, Starbucks has shown us the power (and profitability) of having an easy-to-use, single-purpose payment app – a stored value app that can be used only at Starbucks. The mobile phone makes it easy to now carry around multiple store card apps just like that since the fat wallet syndrome is a non-issue in cyberspace.
But I don’t think that most people will think of those apps as wallets. They’ll think of them as payments apps to be used at a particular merchant, just like the store cards they carry around now.
My definition of a wallet is a container that holds a bunch of different payment options that can be used at many merchants – cash, checks, cards – and I think that most people would agree. If you also agree, it means that single use apps like Starbucks aren’t wallets, they are apps which people today refer to as wallets (thus contributing to the confusion over mobile wallets). One of my colleagues has the Starbucks and LevelUp apps (a new mobile payment method available in Boston) on his iPhone and the iPhone is for all intents and purposes his mobile wallet. Those individual apps aren’t wallets, they are apps inside of his new digtal wallet, the iPhone. My guess is that he’ll probably add more of those sorts of apps, but not a lot more.
The mobile wallet as I have just described it (the phone) will make it possible to have multiple — even, in theory, hundreds — of such apps. It would make merchants really happy since they like it a lot more when people use their store cards (hence their motivation behind their own mobile payment network). But that doesn’t necessarily mean that people will want and/or use all of them. Just as in the leather world, people have a lot of cards (on average 7) but use only a few (like 2). Mobile may make it easier for more payments apps to “fit” into the wallet, but it doesn’t mean people will use them or want to have them. And having another icon on your phone isn’t costless—it takes more time finding the apps you want. Over time, people will reduce icon clutter on their phones and just have the payment types that generally use.
Moving on. Another answer to the wallet question is that the mobile wallet is actually a container that lives in the cloud or on a phone, that is accessed via the mobile phone, and that aggregates and makes easily accessible several frequently used payment tender types. That’s the PayPal and Square models (cloud-based) and what Google, ISIS, AmEx/Serve, Visa, MasterCard and many more are all pursuing too. Of the group, PayPal is the farthest along – 100M+ consumers with accounts ready to transact at the point of sale and merchant traction is starting to happen. Its cloud-based approach has given it a running head start – like 12 years of a running head start – with fewer moving parts to manage. Cloud-based wallets, like PayPal’s and Square’s, will integrate lots of other things too, such as loyalty programs, financial management tools, shopping assistants and so forth. Square’s Card Case is designed to recreate the experience of putting your purchases on “account” never producing cards or even showing the phone. The identification of the Card Case customer and authentication is done in the cloud, and via a “geo-fencing” feature that recognizes customers with Card Case accounts as they enter the merchant’s store. In all of these cases mobile wallets function more or less as an acceptance mark which, to be useful to consumers and merchant, means that these wallets must be accepted beyond just a single merchant.
If mobile wallets, a.k.a. new acceptance devices, are defined as these cloud-or phone-based containers, lots of other questions naturally arise.
The first is, how many are merchants going to be willing to accept them? The answer to that question depends on how costly it is to add another mobile wallet to the POS system but my guess is that it is going to be costly enough that only a few wallets will get traction with merchants.
The second is, how many are consumers going to be willing to use? My guess is this isn’t going to be any different than the physical wallet in the end and that consumers will have a handful.
The third is, how many mobile wallets are going to get enough traction with consumers and merchants, and solve the chicken and egg problem quickly enough so that they can survive long term? If you agree with my answer to the first two questions the answer is NOT MANY.
The fourth question is whether the existing payment networks will be wallets, simply, as they are with PayPal, just a choice within a wallets, or simply payment apps on a mobile that only allow the consumer to use their network card. I’m less sure on my answer to this one but my guess is that the networks will either survive as payment apps on the mobile phone (like the Starbucks store card) or that consumers will decide what they really want is a multi-tender type wallet with lots of functionality in which case the payment networks will become a much less interesting business. Unless that is decided soon, and the business model questions related to this for the networks are thorny, PayPal will have had a long lead time in plowing the multiple tender type ground and consumers might not see enough value to move away from that wallet to something new. (Square is aiming for the same target but in a slightly different way.They’re hoping to build and ignite a merchant and consumer network around using IP-enabled devices to create a personal experience in store, an invisible payments experience and a prompt to try other merchants who can match that experience.)
Then, there’s Facebook. Facebook could redefine the mobile wallet even more differently since its core asset is Facebook Credits, which is more of a currency than a mobile payments application. To put this in perspective, the Facebook Credits experience is more like what you do when you travel to a different country and need to buy that country’s currency to transact there - you simply use your native currency to buy it and then use that currency to transact in that country. Facebook Credits is no different - you basically use existing currency (accessed via existing payment methods) to buy a new currency (Facebook Credits) that are accepted at a country you want to visit (the merchant). Today those merchants are digital goods/games, by and large, but tomorrow who knows. It is also easier for merchants to accept Facebook Credits than add a new acceptance mark to their POS. Sure, there is the “currency conversion” that happens on the back end to “convert” Credits to the dollars attached to a payment type, but it is likely a much easier lift than adding a new acceptance mark. The Facebook wallet would become the currency used at the point of sale, with the details of how those currencies are “exchanged” being handled in the background. Facebook in this scenario, could have the equivalent of a software-enabled smart euro. (Sound interesting? Read the full take on Facebook’s possible “smart currency” at PYMNTS.com).
So, back to the 64 thousand point question. Who will win and get traction? The game is very early. And as they say, never make predictions you don’t think you’ll outlive. But you need to look at consumer and merchant behavior together to predict the outcome. I’m not going to put money yet on the winners (some of whom may not even have been born yet). But I am going to lay down a wager that consumers will have only a handful of icons on their phones that connect to a single-tender type (payment app) or a wallet (multi tender types) and that merchants accept payment with mobile only for a few of these icons. The notion of a thousand wallets is unrealistic for the same reason that there aren’t thousands of payments networks: merchants and consumers don’t want them.
So, now it’s your turn. What’s your answer to win 64 thousand points?

Card fraud falls to its lowest level for 11 years

When the penny drops

Card fraud losses have fallen by nearly half since their peak in 2008

The amount of money lost due to fraud on credit and debit cards fell last year by 7% to £341m - its lowest level for 11 years.

The drop from 2010 was mainly due to a 41% fall in fraudsters impersonating people to obtain or use credit cards.

There was also a 24% fall in the amount of fraud from cards being faked.

The UK Cards Association said it was the third year in a row that card fraud had fallen, with a drop of 44% since losses peaked in 2008.

It brings card fraud to its lowest level since 2000 when £317m was lost through fraud.

The association credited the improvement to the increased use of anti-fraud measures.

Among them were online card verification software, such as Verified by Visa and MasterCard SecureCode, and the increased use of chip-and-pin technology abroad.

Melanie Johnson, chair of the UK Cards Association, said: "This is... clear proof that our endeavours to fight fraud are packing a punch."

"Customers have also played their part in driving down losses by taking heed of advice about looking after their personal and financial details," she added.
Losses falling
Card fraud rose during the past decade to reach its peak, in 2008, of £610m.

Continue reading the main story

Card security tips

• Shield entry of a Pin number at a cash machine with a free hand
• Regularly update a computer's anti-virus software
• Be wary of unsolicited e-mails and telephone calls

• Trying to foil cash-machine cons
• Fraudsters turn to card snatching

Although the adoption of chip-and-pin technology, largely replacing signatures, had helped to rein in fraud in the UK, there was a revival in the fraudulent use of cards abroad.

However, this has now dropped as well, with fraud abroad falling by a further 15% last year to £80m.

That was its lowest level in 12 years, and nearly two-thirds down from the peak of foreign card fraud in 2008, when it stood at £230m.

Overall, the most common losses last year were due to cards being improperly used to order items over the phone, by post or over the internet - so-called "card not present" fraud.

This accounted for £221m - nearly two-thirds of all card fraud losses.

Meanwhile counterfeit card fraud, once the second-largest category of loss, has slumped in the past five years, down by three-quarters since 2007.

The biggest areas of card fraud loss in 2011 were:

• Cards not present: £221m
• Lost or stolen cards: £50m
• Counterfeit cards: £36m
• Card ID theft: £23m
• Cards stolen the post: £11m

DCI Paul Barnard, who leads the police cheque and plastic crime unit, said with more sophisticated anti-fraud technology now in use, criminals had returned to simpler forms of fraud.

"Many scams involve customers being conned into handing over their cards and Pins, or their telephone banking security details by someone calling, pretending to be their bank or police," he pointed out.

"Be wary of any unsolicited phone calls or emails - never hand over your card and Pin or bank security details in full as neither your bank or the police will ever ask you for these."

Meanwhile, fraud losses against online banking accounts fell by 24% last year to £35m, while fraud losses involving telephone banking rose by 32% to £17m.