CapOne Buys Discover

Quick Take

Discover has been looking for a buyer for some time. Back in 2012 they were the launch partner for the Google Plastic card and positioned the opportunity with Google. While Google was interested in the network, there was no interest in taking on banking licenses and credit risk. Finding a buyer for the BUNDLE of Discover was their ongoing problem, with many BigTechs interested in the network only. 

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PayPal Innovation Opportunity – “All In” on the Consumer

I’m usually just a cynic. Today, I’m constructive with specific suggestions for PayPal’s new executive team. Note that about 80% of your large institutional investors will read this.. 

Exec Summary

  • Wallets are a core battlefield for Issuers, BigTech, marketplaces, and governments.
  • PayPal’s previous “super app” strategy failed because there was no clear consumer value proposition.
  • The most significant consumer value proposition to be unlocked is the unbundling of financial services, with the wallet providing the common UI to manage the complexity. In this future state, a “super wallet” would enable bank competition for every account and every transaction.
  • PayPal is well positioned to execute on a super wallet, but it must go ALL IN on a consumer-focused value proposition without regard for issuer relationships. 
  • For example, Curve is the best-in-class Wallet providing aggregation, transaction, loyalty and analytics across all account types, networks, POS, eCom, P2P and banking services. 

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Part 1 – Identity Models, Government and Governance Structures

This is a big topic, and I’ll get a few things wrong. My mechanism for correcting my viewpoint is this blog, where this community gives feedback. It’s the reason I write. I won’t get into the tech weeds in this blog series. When there is a need to drill down on a standard or tech, I’ll provide a link to documents providing an overview. The insight I’m attempting to provide surrounds the evolution, economics and value chain implications of various models. 

Why read this? 

Identity is the key shaping force across many domains (including payments) because: 

  1. ID touches “everything”,  
  2. ID is the “primary key”  in trust, risk, contracts and value exchange 
  3. ID is core to a well-functioning government (voting, taxing, regulating, …etc).

This breadth makes it challenging to sift through ID-related announcements and assess the implications. Thus, I’ve created three identity communities for my taxonomy:

  1. Government – Working to define identity as part of Digital Public Infrastructure (DPI). DPI has three legs: identity, payments and data exchange.
  2. Commercial – Platforms, Banks, Healthcare 
  3. Web3/Blockchain/Social – Jack Dorsey is the unofficial spokesperson.

These communities find alignment in technology but are working toward different end goals with significant philosophical differences across communities, particularly regarding the role of government and near-term objectives. These differences surround the definition of trust, authority and governance structure, which is the focus of today’s blog.

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PayPal’s Shock to the world

Short Blog. I’m sorry for the delay on part 2 of the Govenance models for identity. I’m on my 14th update.. Will get out soon.

In the news today. PayPal’s Alex Chriss said ““There hasn’t been a lot to celebrate over the last few years. Innovation has been slow,” Chriss responded. “I love being an underdog. I will take all of that feedback and we’ll shock the world.”.

PR Today

https://investor.pypl.com/news-and-events/news-details/2024/PayPal-and-Venmo-Unveil-Six-New-Innovations-to-Revolutionize-Commerce/default.aspx

Shock is the right word.. Just not what Alex was hoping for as the stock dove 5% immediately after the announcement. IMHO the market reaction is spot on. I’ve spent 15 yrs in retailer data, offers, wallets and etc, founding Commerce Signals (now part of Transunion).

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New Blog Series – The Economic Models of Identity (and Trust)

Free Content

Happy New Year. I’m starting a new blog series in 2024 – The Economic Models of Identity. 

Identity is the #1 shaping force in new payment schemes, Web3, blockchain/crypto and more broadly “trust” interactions in government, commercial and social (see Trust Networks). Most investors haven’t spent much time thinking about identity because it was the realm of tech geeks or bundled into the services we use (see Separating Identity and Payments). The reason to pay attention today? Identity is shaping a redesign of the internet’s infrastructure AND governments are defining new LAW on what constitutes a digital identity (ex India’s UIDAI and Europe’s eIDAS/eID).

Let’s unpack the word Idenitity to ensure a consistent taxonomy. While most people relate a drivers license or passport to identity, it is much more than that. Who are you? And who can answer that question? Are you a US citizen? Licensed Driver? Doctor? Skier?  Great credit risk? While your SSN or DL# are legally issued identitiers that only the government can issue and authenticate, you are also biometrically defined and have credentials, behaviors, preferences and other attributes. Identity and the contexts in which it is used are the foundation of trust, contracts and relationships. 

Continue reading

Adios 3DS “Step up”.. Hello FIDO2

Short Blog

There are significant changes brewing in eCommerce authentication and authorization. Today’s blog is more of a headline summary of key points that I hope to break down over Thanksgiving. 

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Why are US Banks Building a Wallet?

This week, I outlined several of the friction points in the US card payment network in US Payments Where to Invest. Today let me try to articulate a few reasons why US banks are attempting to build a new eCommerce Wallet (Paze) as well as some additional merchant commentary on their efforts. 

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