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2011: Tough Start for Mobile Payments

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10 January 2011

I learned my lessons on the Valley hype cycle early (from the source). In 1997, at the ripe old age of 32,  I joined GartnerGroup with the goal of participating in a great research and advisory team. Well… that lasted about 11 months. I learned that there was no research and their business model never broke away from its roots as a division of McGraw Hill. It was all about reporting, writing, buzz and sensationalism (with a very few exceptions .. Schulte/SOA).  It was great fun listening to buyers of IT talking about new products issues and then meeting with the software vendors (with more information on hand then their product heads had) to watch them watching them turn green.  But fun aside, I wanted to go run a business…. not become an industry analyst (this blog serves as an outlet for my minor competencies here).

The Gartner experience reinforced the importance of marketing in creating new products, of creating “buzz”. After all  IT periodicals and research firms must fill their pages with something every week. Of course ISVs and start ups are happy to oblige… Buyers and Investors must be able to cut through the fog and assess business viability, valuation and risk.  My data indicates that mobile payments is at the top of the hype cycle. I read the Nov 2010 Javelin report on mobile with great amusement: $7B in P2P mobile transactions in 2010!?  I would be very surprised if the number broke $100M.  Obviously the $7B number is driven by Javelin’s methodology, perhaps a mobile payment includes when I get an SMS message that my bank paid a bill….

Javelin’s methodology obviously does NOT include looking at financial statements. If it had (and the $7B number were real), we would not have seen the continued bloodshed in the space. 2011 has been a rough start for mobile payments. Early bets in the space are running out of cash, and established industry players are placing $1B+ bets to compete with new MNO ecosystems. An industry status of early movers here:

In every case above, there was complete failure in a value proposition. For Example, Obopay charging $0.50 to send money.  The key lesson learned (over and over) is: small companies cannot LEAD development of a payment network. The industry is replete with examples which substantiate this point(see list here). Payment networks are 2 sided, and compete against well entrenched competitors with deep pockets. Payment networks must start with delivering value to 2 parties (ex PayPal Consumer to EBAY). Going at consumers alone (p2p) or as a bank partner alone (Monitise) will not drive volume. As Clayton Christensen asks in Innovator’s Solution: “what problem are you solving”? Moving money through a phone does not create value.

To be clear, there is a very real potential for mobile payments (and NFC) to be the driver 100s of new companys. But their business models must deliver value today (example NFC to unlock doors), or serve  in a supporting role to new industry ecosystems. This supporting role requires a FUNDEMENTAL change in how valley firms typically operate: Start Ups must learn to work with and support multiple large companies and ecosystems. Supporting ecosystems is a B2C model.. NOT a direct to consumer model. This supporting role has new risks, as VivoTech (one of my favorite companies) has learned.  Small Companies which support emerging ecosystems are challenged to influence their overall shape and value proposition. Further, if transaction volume is low, there is minimal revenue or pricing power without a clear value proposition (see Google/Boku).

New ventures operating within NFC ecosystems have prospect of attracting  30-50% of the $6B in mobile venture capital. Investors should be wary of  hype and tag along investing as risk profiles are unique (ie NFC ecosystem play vs. consumer mobile app).  Look hard at the talent running the company (see investors guide). Social networks are much different than payment networks. Payment networks require alliances, regulatory/risk acumen, understanding of history, experience and relationships (see key skills). Banks can win in the move to electronic payments. The top 5 US banks are in a much better position to influence ecosystem development (see lessons learned) than the mid tier, however the mid tier is in a much better position to partner (ex. Barclays US in Discover).

Deal of the Week

From a valuation perspective, the latest “head scratcher” in mobile payments is Square’s $27.5M raise at a $240M Valuation. From VentureBeat:

Rabois acknowledged, but he pointed out that Square is already achieving impressive growth without paying for traditional advertising or other promotions. He said Square is processing millions of dollars in transactions every week, and that it’s signing up 30,000 to 50,000 new merchants every month. Rabois said many of those merchants were previously cash-only, but they were attracted by Square’s ease-of-use (the card-reading device plugs into iPhones, iPads, and Android phones) and low financial risk

I estimate they are doing about $20-$30M TPV per week (5k users $5k/wk) this translates into revenue run rate of $6M/yr … which would equate valuation of $240M to 40x REVENUE. Square may have 30k downloads of their iPhone app /wk, but does that translate into transactions. This valuation is NOT based upon financials, but upon the people involved in this company. Existing investors took a bigger stake.. they have every right to set the price. This makes complete sense,  particularly if they are looking for a Revolution Money kind of exit.

ISIS: Moving payments from Rail to Air

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9 January 2011

Previous Posts 

It’s the New Year, and thought it was time to touch on this again (last post 9/10). Quite frankly its hard to believe I’ve been writing about this for almost 18 months.. it was AT&T Newco, then Mercury now finally I have a name: ISIS, with a URL www.paywithisis.com (err… same reaction). Over the last 18 months or so I guessed wrong on the consortium around AT&T, it was not Visa, but Discover (See winners/loosers blog above) it was also all of the major US MNOs (Sprint was initially involved, but has delayed further participation).  Discover makes complete sense, as stated previously a 3 party network is the only one capable of developing a new payment type (with corresponding set of rules and fees). Visa/MA are constrained by existing agreements with card holders, issuers, acquirers. A principle example is Visa’s failure to force a “mandatory” payment type in Visa Money Transfer (VMT).

Top questions I hear today:

1) What is merchant value now that Durbin has pushed back debit to $0.12

2) Will ISIS work with Mastercard Paypass/Visa Paywave ?

3) Will Phase 1 have a mobile advertising component?

4) What are the economics for a merchant POS “upgrade”

A common basis for many of these questions is the ISIS value proposition, the entities driving it and their incentives. The high level value proposition is shown below, updated from the previous September version (prior to announcement of Barclays and Discover).

Merchants love the idea of ISIS, as much because of prospective consumer value … as the pain it will bring: Visa, MA and Amex.  As one former collegue put it: “Merchants have always loved the idea of instant credit and see value in giving customers the ability to buy regardless of the balance in their account, however merchants don’t buy into paying 1.5% of sales for a debit transactions that was $0.05 with a check”.

Historically, the card schemes have built up much ill will with merchants due to: interchange, payment system integrity, fraud controls, consumer influence, …etc.  Two major issuers inferred that Discover is a failed payment “cash back” card network. I would proffer that their “success” is just delayed, and ISIS is the initiative which will drive transaction and network growth in a model that existing schemes can’t compete with. (See American Banker Article).  I see a $200B-$600B TPV network evolving with Discover at its core. Perhaps this is why JPM is assessing a Discover acquisition.

In addition to Discover, I see 5 other entities capable of driving similar value propositions (in the US): PayPal, Amex, Citi+??, Bank of America/First Data, and Chase/Paymenttech.

From an MNO perspective the value proposition is clear (see previous blog). Payments not only supports their existing value proposition to customers, they have the distribution and incentives (airtime, data rates, discounts, advertising) to change customer behavior.

Question 1: Will ISIS take off in light of Durbin and $0.12 debit?

I interpret this as a merchant question. Certainly merchants want the lowest cost payment type used in purchase. What if merchants were “paid” to take the payment instrument? Merchant borne interchange has historically been the major source of revenue for current card products, is there a model where advertising can replace interchange? Googlization of payments?

ISIS has this potential, but will likely not execute against this element for 2-3 years as it develops the payment infrastructure and customer footprint. This may be an issue for ISIS, as merchants may take a “wait and see” approach before investing in POS terminals. This would obviously impact payment volume as merchant NFC POS terminals are just as important to a payment network as millions of NFC enabled phones. If I were Michael Abbott, I would focus on a few very large merchants and commit to a very low interchange (50bps) to drive POS economics that would then support further network expansion. Perhaps this is why we hear so little of ISIS’ merchant value proposition..

So to answer this question, YES it will still take off. I’ve spoke with 2 Fortune 50 retailers this month and they are very firmly committed to making ISIS successful. They see value extending beyond the payment cost itself. That said, there will not be a “big bang” roll out, but rather geographically focused.

Question 2: Will ISIS work with other Visa/MA?

There are many, many sub-questions here. So let’s start with some facts:

1) Discover Zip is different then ISIS NFC (see Story Here).

Geoff Iddison (MA head of mobile) is quoted in NFC times as saying “The challenge that Isis will have is to re-terminalize all of those merchants to a terminal specification which is proprietary”. This is false, ISIS is not using ZIP. They are 2 different initiatives (see ZIP pilot results). The details are best described in this American Banker Article (Jan 2011).

2) NFC and RFID are both based upon ISO 14443

For further info, see the NFC FAQ. And NFC Ecosystem.

3) Merchant POS terminals support multiple standards today

POS terminal decisions have always been independent of card issuers, except where there has been direct subsidies for a “pilot”. Today, POS terminals support multiple staandards (example:  VivoPay 8100).  Note from a scheme perspective, these POS terminals must be “certified”.

Perhaps this interoperability question should be rephrased to ask if ISIS is constructing any competitive barriers? Does ISIS have unique “standards”? Will ISIS be subsidizing merchant POS terminal? What are the “control” points for ISIS? 

The “real” barrier ISIS is constructing is NOT at the POS, but the handset. Specifically, ISIS has created a multi carrier TSM (serviced by Gemalto). For those unfamiliar with NFC ecosystems, the TSM is the entity that owns the “keys” to the secure applications within your handset. Banks want to be in the position to serve in the TSM role, a “DESIRE” best exemplified in FirstData’s TSM brochure:

Card associations believe they are excellent candidates to fulfill the TSM role, and it makes sense from their perspective. The TSM role would make it much easier for the card associations to support their member financial institutions in the issuance of new payment applications and the expansion of the number of accounts they have. In addition, they already have an infrastructure in place for supporting their card accounts.

Banks will not get this TSM role… at least not for NFC which is embedded within the handsets. In the US market, MNOs subsidize phones and already engage in a device “locking” strategy (GSM phones cannot be used with another carrier). US MNOs plan to leverage ISIS and Gemalto (as TSM) to extend this control model to the secure NFC element. In other words controlling which cards and applications can use the device’s NFC capabilities. Note that this dynamic is very “US” focused, as consumers in most other countries buy their handsets unlocked and will have a “choice” of TSM.

This ISIS TSM construct greatly concerns Visa, MA and the large issuers. In the Visa/MA model, NFC transactions are “premium” and can carry very high interchange (see BestBuy Pilot). Merchants are very reluctant to add NFC POS capability if it will increase costs. Although Retailers don’t have to worry about consumers using PayPass or PayWave in mobile phones (due to TSM constraint above), they may have to contend with NFC stickers, MicroSD cards and unlocked phones with NFC capability.

I have no visibility into ISIS, or retailer, plans here. My guess is that the large retailers (which ISIS is working with) will exclude Visa/MA NFC payment types unless there is a an agreement to match interchange. Merchants and ISIS will be emphasizing a new payments brand.. Will merchants allow an Visa PayWave transaction on the same POS? I would imagine that some will, but I would bet that ISIS launch partners will not support PayPass or PayWave. They will tell their customers “sorry … just swipe your card”.

The issuers may contend that agreements in place prohibit discrimination of NFC vs. Card Swipe (retailers beware of this point). I doubt if they will be successful with this argument, given that the merchant is not discriminating but rather accepting a new payment type in a new infrastructure (which the merchant pays for).  Durbin, also allows merchants to “steer” customers toward preferred payment types.

Question 3 – Mobile Advertising

I have limited visibility here, but it would seem this is not in scope for Phase 1 of ISIS. Michael Abbott has only been in the job for a few months, and would expect him to be the driver of plans here given his CMO role at GE Money.  One interesting tangent will be what role ISIS allows Apple iPhone to take. It is assumed that the ISIS TSM will still manage the secure element, but Apple will manage marketing. See Apple NFC Patent.

Question 4 – POS Economics.

From my perspective, this remains the biggest barrier to adoption (see Federal Reserve Study). Durbin’s reduced debit rates have made a challenging business case even more so. There is a normal refresh rate on POS infrastructure of about 4-6 years. Card networks have typically subsidized POS infrastructure within pilot geographies. It remains to be seen how ISIS will incent merchant participation beyond the marketing value proposition (above).

Summary

Most of you know the story of FedEx Founder Fred Smith, and the college term paper he wrote discussing the market for a next day package delivery service. His professor scoffed at the idea and gave him a “C”. Why would anyone want to ship goods via Air.. and there was no need for a “next day” service. Similarly with ISIS, the banks see no need for a MNO driven payment solution… after all they have all of the technology that ISIS has … and have been doing this for years. The market opportunity for ISIS is in shifting of control away from banks and card networks toward merchants and consumers to deliver a new value proposition that goes beyond payments. The mobile handset has the opportunity to be THE primary device for advertising, content and communication. Payment is only one element, but perhaps the central one as it is enables delivery and tracking of incentives necessary for effective advertising.

Will banks / networks be able to adapt their existing payment rails to the ISIS model? It sure is hard for trains to fly…

Where can banks win?  Credit, Risk, Merchant Services, Consumer Preferences, Deposit, Customer Service, … etc.

Thought appreciated

MA buys Travelex Prepaid for $458M

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9Dec 10

Press Release

Great move by both MasterCard and Travelex. This gives MA a global platform for prepaid, by which their exisiting bank customers can launch branded, multi currency,  prepaid cards. Few banks today are able to compete with Citi’s pre-paid (http://www.citiprepaid.com/), a group that is seeing tremendous growth. Citi’s recent success here has certainly drawn attention.  On the product front, Citi prepaid had its genesis in the 3/2007 acquisition of eCount.  On the business side, Citi is hitting the ball out of the park with both governement and commercial disbursement, supporting new payment flows with existing customers and a high margin product.

The opportunities for MA growth are:

  • Commercial – White Lable Processor for corporate disbursement (ie Citi Prepaid )
  • Foreign currency card (Travelex Cash Passport). Important to note here that it is not just for travel, but also for cross border online transactions.
  • G2P Payments
  • Cross Border Remittance (Base of the pyramid).
  • …etc

With respect to a consumer “travel card”, the challenge that MA faces is that bank processors (TSYS ,FIS Prepaid) currently have much broader PRODUCT capability in this area already. Fortunately (for MA) these processors are dependent on multiple issuers for branding and marketing. Travelex has excelled in the branding and marketing of its products. Consumers (and businesses) all over the world associate the Travelex name with global travel, currency and FX. Can MA extend its brand here as well? They certainly have the A+ team to do it with.. but it will require some of the major banks to also jump on board. As an issuer, you have multiple choices for this today.. from the large processors (TYS/FIS), and Citi, to small global program managers like hyperWALLET.

From the press release

According to a 2010 Boston Consulting Group study commissioned by MasterCard, prepaid is expected to reach more than $840 billion in global volume by 2017, a compound annual growth rate (CAGR) of 22 percent. This same study estimates that the prepaid open-loop market in the travel sector is expected to grow at a CAGR of 31 percent over the same period.

MasterCard expects the transaction to be $0.04 dilutive to its 2011 earnings per share due to amortization and one time transaction and integration costs. For 2012, MasterCard expects the transaction to be neutral and accretive beginning in 2013.

Visa’s new iPhone App: Is this success?

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Visa’s iPhone app is available on Apple’s App Store (but not advertised)

www.visa.com/mobile

The application has been a 2 year effort driven by Monitise, and the UI looks very good. However, I’m afraid that Visa’s latest mobile effort is doomed to failure because of :  “last mile” issues at the POS, and issuer data ownership.

From Visa’s website (http://usa.visa.com/personal/using_visa/visa-mobile/faq.html)

 **Offers: Receive merchant discounts and special offers directly on your iPhone. The offers are stored on your iPhone and can be redeemed at physical merchant retail locations, online, or by telephone …

**In-store redemption:
Visit the merchant’s physical retail location and show the cashier the offer displayed on your iPhone. The merchant discounts the price in accordance with the offer and you pay for your purchase using your enrolled Visa card.

Great customer experience… click on an offer and “SHOW THE CASHIER” your coupon. My guess is that the cashier will gladly give you the discount with a cash purchase as well.  There is certainly the opportunity for a social network aspect to sharing discounts (think groupon) and location aware mobile advertising.. but the banks are not on board. Why?

  1. Visa makes it clear they can register up to 5 Visa cards. Hence they have 1 Participating Issuer – USBank.
  2. Visa is beginning to use customer data for advertising. Current Visa rules do not provide for them to advertise directly to the customer.. it is the issuer that owns the relationship. Perhaps this is the driver of the marketing annoucement

Fiserv ZashPay (Update)

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12 May 2010

(Update) I love a good laugh.. so be assured that you will have new insight into the importance of product marketing and product naming after you google “zash urban dictionary” to discover how Zash will resonate with urban consumers. Lesson learned: just because the URL is available.. doesn’t mean you should use it. Also interesting to note that they “new” definition of “moving quickly online” was placed in Urban Dictionary in April.. probably FISERV’s addition?

Skipping the humor, Checkfree is extending its existing “merchant integration” process to consumers. Creating a directory of e-mail/mobile/ACH accounts, and adding a “consumer registration” process where you receive a notice that someone has sent you money.. adding a mobile interface. Unfortunate that FISV/Checkfree will be loosing Bank of America as a bill pay customer, having 10% of deposit accounts in a directory would have been fantastic.

As a user you should be able to send someone cash via bill pay (or mobile) based upon an e-mail or mobile number. Checkfree has all of these pieces to make this work, and rock solid fraud and operational controls from their merchant integration activities. This product makes sense for ad-hoc P2P payments to an e-mail address or mobile, particularly for mid to small banks that are currently clients of Checkfree.. allowing them to send money to anyone with an e-mail address.

From a competitive perspective, Metavante/FIS has integration with Paypal which will accomplish most of this as well (from bill pay interface). What is lacking is a mobile client.. but not for long as FIS just hired Bank of America’s mobile guru Doug Brown as head of mobile product and strategy.

Cashedge’s Popmoney also competes here. The “transfer” paradigm seems to make more sense than a “bill pay” so I will give CashEdge a big edge in usability and in fraud controls as it has 6+ years experience (and data) managing individual account to account transfers.

As a banker, I much prefer the FIS/Metavante model, as PayPal shares merchant interchange. As a consumer I also prefer the FIS model for eCommerce goods purchase as it is quite important to establish “network rules” between buyer and seller and integrate the payment process with the marketplace. There would seem to be a solid revenue business case for FIS, while the ZashPay seems to be a bill pay extension to address an uncertain P2P need.

Both FIS and Fiserv may be getting into some interesting patent territory with other established players. For example, if either are using good funds they are probably stepping on this patent below..

http://www.patentgenius.com/patent/7177830.html

Visa Acquires CyberSource for $2B

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22 April 2010

CYBS/Visa Presentation

CYBS 2009 10K

126x earnings? $3M/employee  Why? Did  Carl Pascarella (former Visa CEO added to  CyberSource Board of Directors on March 5, 2009) intend to drive this when he joined the CYBS BOD?

Part of the job of any payment network is to ensure a balance between network efficacy, profitability, risk and “value” received by each participant. (http://en.wikipedia.org/wiki/Network_effect)

CyberSource bills itself as the “The World’s First eCommerce Payment Management Company” and initially focused on enabling “bricks and mortar” retailers expansion into the online channel. CYBS has evolved to provide global turn key services to any retailer selling goods online… from payment to distribution (ex. Digital software).

CYBS 1009 10K

Our customers range in size from small sole proprietorships to some of the world’s largest corporations and institutions. Our customer base includes leading companies such as Air France, Borders Group, British Airways, Christian Dior, Eastman Kodak, Home Depot, Louis Vuitton, Massachusetts Institute of Technology, Microsoft, Nike, Starbucks, and Yahoo!, among thousands of others. To properly serve this diverse set of needs, we divide our potential market into two customer profiles, enterprise and small business merchants, which require different solutions.

Enterprise merchants have high sales volumes and generally demand the greatest range of payment options and the most sophisticated risk and management tools. These customers often sell in multiple countries and require support for local currencies and local payment options. Enterprise merchants also frequently need to integrate payment processing with one or more internal business systems. We serve enterprise customers by providing solutions that address and simplify the breadth of these requirements.

Small business merchants generally seek simplicity and ease of use. We serve small business merchants by providing bundled services and integrations into popular online shopping cart software, while bringing to the small business market some of the advantages of our enterprise-level services, including important new payment options such as electronic checks, as well as high-reliability and quality customer support.

Retailers face huge hurdles in building teams capable of navigating the complex rules and regulations associated with processing payments from PCI, Sepa, CARD, Reg E, Reg Z, … etc.  The very existence of CYBS (and competitors below) show the market for value added services as a precondition to Visa’s goal of: EXPANDING THE NETWORK.

We face competition from merchant acquirers, independent sales organizations, and payment processors such as Chase Paymentech, First Data Corporation, and Royal Bank of Scotland. We also face competition from transaction service providers such as PayPal and Retail Decisions, as well as eCommerce providers such as Accertify, Inc., Digital River and GSI Commerce Inc. Furthermore, other companies, including financial services and credit companies may enter the market and provide competing services. Another source of competition comes from businesses that develop their own internal, custom-made systems. Such businesses typically make large initial investments to develop custom-made systems and therefore, may be less likely to adopt outside services or vendor-developed online commerce transaction processing software.

Cybersource will provide Visa with an enhanced portfolio of services which could address merchant needs, particularly in risk, compliance, payment/fraud operations. However the expansion of Visa into these services poses a substantial risk to its business model as it runs the risk of alienating acquiring banks and other processors. Currently, I would view that risk as small because of the tremendous issues associated with online (eCommerce/mCommerce) payment system integrity and fraud.

This is a bold move by Visa to drive network expansion, in mCommerce and eCommerce, and expanding value added services which cover ownership of payment risk and operations. The price does seem high if we view integration without synergies (CYBS will have to run at a 45% CAGR to be accretive in a 10 yr horizon). Therefore, Visa’s business case must be driven by new services which can be offered in the short term to all merchants and acquirers (ex Fraud data sharing, digital goods distribution, …).

Can Visa grow this business more effectively under the Visa brand? Absolutely, but expect other network participants (issuers, acquirers, processors) to pressure Visa into managing CYBS as a separate entity. It is important to note that there is no love loss between most merchants and Visa. To address this, Visa should lead with a road show on how it will deliver value. Example.. it will take on fraud loss responsibility, improve marketing and take on compliance risk.

Tangentially, I believe Visa will also likely add significant $$ to merchant marketing programs. Visa is investing heavily in a new mobile marketing/advertising engine... that will sit on the Visa switch. Their existing merchant agreements do not handle this kind of “marketing” services agreement so they needed a new contract vehicle. Given CYBS’s merchant footprint, they now have vehicle which can be leveraged to expand the advertising business in a turn key model which also tracks fraud and fulfillment.

Mobile Money: Emerging Markets/Emerging Models

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Regulators need to allow closed systems (for mobile money)

18 April 2010

As I stated in my previous post (reference)

Regulators in Africa and India working actively to ensure consumers (and the global banking system) are protected in the exciting confluence of mobile and finance. Their involvement is completely appropriate given the opportunity to improve the lives of millions of unbanked people around the world. Defining responsibility and the commensurate controls associated with connecting non-traditional (unregulated) networks to highly regulated banks is a herculean effort which may lead emerging markets to remake a “payment system” that is more efficient then that which exists in today’s developed countries. This opportunity for “leap frog” improvements will be driven by the unique path toward evolution given existing infrastructure and consumer penetration of both financial services and telecommunications.

Bank Regulators in emerging markets face many challenges in expanding basic payment and (mobile money) services to the rural poor and unbanked. The MNOs have proven their ability to delivery services to these consumers, and are therefore the entities most capable of delivering services. Governments and regulators must continue to encourage investment and innovation by MNOs, and resist the temptation to apply “open network” standards to this quickly evolving area. Although there is substantial academic research on two sided networks which shows social benefit of network “compatibility”, mobile money is clearly an exception (to compatibility constraints) given the absence of profitability for any current provider. Until a sustainable business can be built to serve this function it must be either driven by an existing company prepared to make investment, or by the government in the form of a monopoly. (see Open and closed systems of two-sided networks . Schiff, A. 2003, Information Economics and Policy, 15)

Network business models are complex, whether they are: banks, railways, shipping, telecommunication, cards, electricity …etc. Historically new networked business started as a closed proprietary system which was coordinated by a single “channel master” (or state sanctioned monopoly) which defined standards, and made sustainable capital investments. Early business models seem amusing compared to current evolved uses (Telephone Wikipedia)

At first, the benefits of a telephone exchange were not exploited. Instead telephones were leased in pairs to a subscriber, who had to arrange for a telegraph contractor to construct a line between them, for example between a home and a shop. Users who wanted the ability to speak to several different locations would need to obtain and set up three or four pairs of telephones…. Signaling began in an appropriately primitive manner. The user alerted the other end, or the exchange operator, by whistling into the transmitter.

 Similarly in banking, early in the US there were over 7,000 varieties of paper money until 1861. During this chaos, early US banks each issued notes which were not universally accepted by other institutions (http://www.secretservice.gov/money_history.shtml)

During this same period (1793 – 1861), approximately 1,600 private banks were permitted to print and circulate their own paper currency under state charters. Eventually, 7,000 varieties of these “state bank notes” were put in circulation, each carrying a different design!.

To reach the worlds poor, the advantages to an “open” system with compatibility and interoperability are clear… in the long term. In the short term, the urgency is to get something started by an entity that is motivated to invest. Regulators should consider the history of successful networks in order to balance constraints, competition and incentives to invest. Regulatory and legislative actions focused on: consumer protections, competition and financial accountability may be the most effective short term focus areas…

Citi/Mastercard beats Visa/BAC to market

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8 April 2009

Great Article

http://www.nfctimes.com/news/citi-makes-its-first-move-mobile-payment

As a friend told me this week “if you put an NFC sticker on a bicycle.. is that mobile payment?” Sure a sticker on the back of a phone is not necessarily “Mobile payment” but NFC has taken so long.. who cares? Lets just get started!

Will Citi/MasterCard beat BAC/Visa to market with a US NFC sticker rollout?… Regardless of who is first out of the gate,  I think it will be a win/win for both institutions as significant marketing money is necessary to get this moving. Citi has the upper hand w/ numerous NFC pilots, established card marketing and 55M card accounts.

[youtube=http://www.youtube.com/watch?v=8aWpzGE431k]

Although Citi is first out of the gate, Visa has put together a much more impressive array of services which will work for any card and any bank, with more thoughtful “integration” (See FirstData/Device Fidelity/Monitise).

“Let the NFC games begin”.

Note to NFC times:

This US initiative did not originate in Citi’s growth ventures, but rather with US Cards (likely led by mobile guru Kurt Weiss).

First Data

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http://www.firstdata.com/en_us/about-first-data/media/press-releases/03_11_10_02

http://www.firstdata.com/en_us/about-first-data/media/press-releases/03_11_10

Michael Capellas is gone on the day that earnings are announced. 4Q09 (EBITDA) was down to $530 million compared to $645 million prior year.  As a friend told me yesterday, it is quite telling that they put Joe Forehand (former chairman and CEO of Accenture) as the interim CEO. Accenture has a huge project going on right now to consolidate the 100s of disparate back end systems within First Data.