15 May 2013
I’m in overload on information this week. Just don’t know what to comment on..
- Visa’s earnings,
- MA’s miss,
- Bitcoin EVERYWHERE
- Google’s Plastic Future
- Paypal’s “free payments” or Plastic Failure .. Discover Relationship
- Square’s new “Stand”
- Visa’s new rewards Scheme and Vantiv’s efforts to support
- MCX new members
- WMT’s Success in Prepaid and Banks whining to the Fed to stop it.
- WU’s recognition that is must change agent model
- Groupon’s POS
- Network rule changes, particularly around “wrapping” cards.
- Emerging market developments
- Best Buy shutting down all of its NFC capability on payment terminals.
In an effort to conserve energy, let’s just say that there are MANY announcements.. but little real progress… If you were a retailer.. would you exclusively advertise through Groupon? Through Visa? Through anyone? Of course not you have a price promotion strategy and multiple marketing programs which to accomplish objectives in each. You would choose your channel based upon the ability to REACH the customer (ie Radio, TV, ?email…). As a retailer you also want loyalty to YOUR BRAND.. not some card, bank or start up… Most of these entities have NO REACH.. having customers is MUCH different than being an effective CHANNEL TO INFLUENCE them.
With respect to POS.. the world needs change. Both Square, and Paypal have the merchant value proposition about right. Their respective terminals solve a short term cost/complexity issue. Square’s product is much further ahead as it also solves inventory management and marketing problems. PayPal’s value proposition may be higher as they could manage payment costs more effectively (given consumer paypal account penetration), and many merchants already have a merchant account. Perhaps Paypal is taking my advice from 2 yrs ago.. focus on the merchant side first.. I hear that the paypal card is Don K’s pet project.. but John and Marcus may be finally tiring of the poor performance.
I’m actually starting to change my attitude on Visa. Its not just that Jim McCarthy is down the street from my in North Carolina… but rather Charlie is changing the culture there from one that alienated everyone.. back to a network that wants to add value to all. One example is emerging markets, where Hannes of Fundamo has done some REAL work in creating new VisaNet transaction sets to support emerging market solutions. Unfortunately their offers platform is stunted, as the mix of issuer “permission” and consumer experience makes this unworkable basket level program that I have already discussed many times (See CLO). Visa does not keep transaction history (with exception of debit hosted service of a few DPS banks), thus any offer targeting would be driven off a visit to a single store, or single event. This enables it to be a switching service.. Buy something at Macy’s and BOOM get a 10% back offer from Neiman Marcus. From the PR:
Most importantly, the Visa POS Offers Redemption Platform provides real time ticket reduction as part of the offer redemption during the authorization process, delivering an alternative option to the need for statement credits or paper coupons. This functionality streamlines the checkout process by enabling instant redemption of rewards and has the potential to drive incremental transaction volume. Once the reduced transaction amount has been approved by the card issuer, consumers are immediately notified of their savings via receipt printout and SMS text, or email message. (The Next Web)
Customer Experience? The Visa “POS Offers Redemption Platform” is really a “credit” that COULD be given on the receipt if the retailer’s POS interprets the message, and IF the issuer allows it. Thus the entire platform suffers from targeting, basket level redemption, consumer experience, POS integration, Issuer permission, … (need I go on)? American Express’s focus is completely different. They work with the retailer to help them gain insight into their most valuable customers and work with them to create programs to reach them. Visa can’t do this.. as they don’t own the customers.. nor does Vantive.. NO WONDER JPM wanted to opt out of VisaNet.
Google.. lets wait 2 weeks here (after I/O). I already discussed what was reported on Android Police in November. My guess is that the cost of this program was going to be pretty big… even for Google.. If it was successful. Eating 100-150bps in physical commerce ($2.4T) can be quite a big hit, even if you take only 1% of the market ($240M-$360M in US alone).
WMT’s Pre-paid success.. and impending MCX efforts are making the banks itchy. Somewhat ironic, as banks really don’t want WMT’s mass consumer customers in their branches.. while WMT loves them in their stores. Think the banks really don’t like having their “banking lite” services productized and sitting on a retail shelf to buy. They don’t want consumers to think of them as a product which can be bought.. and switched. Of course some banks have seen the light (Amex, Discover, GreenDot, BankCorp, Meta, …). Competition, transparency, and product selection are core elements of efficient markets. Of course it makes sense to ask your regulator from protection against consumer choice. But this is certainly not to benefit the consumer.
Bitcoin? where to begin.. ? Unlike most currencies, bitcoin does not rely on a central issuer, like a central bank or government. Instead, bitcoin uses atransaction log across a peer-to-peer computer network to record transactions, verify them and prevent double spending. It is a VERY INNOVATIVE mathematical crypto innovation (that is used extensively in illegal activities). Bitcoin stands in dramatic contrast to all of the data sharing, bank controlled, transparent stuff above. Its success demonstrates that there is a tremendous need for anonymity in payments. There is no centralized authority here.. which is what alarms governments.. Thus there will be very strict controls on how coins can be converted into currency. Thus Amazon’s coins can only be used to purchase games/apps. For those investing in this space, you should thoroughly research eGold.
Payment is still a red hot market.. expect significant M&A activity over next 12 months.