- ApplePay users tripled
- Transaction volume up 500% YoY as Apple expanded to four new countries. It’s now available in 13 markets.
- 2 million small businesses are now accepting invoice payments via Apple Pay on the Web, and that the “Services” segment to which Apple Pay belongs saw revenue hit $7.17 billion,” up 18 percent year-over-year. category also includes major drivers like Apple Music and the iOS App Store.
My summary view
- Vodafone is linking all cards in Google like “Proxy model” w/ card issued by R. Raphael & Sons plc
- Vodafone is able to see all transaction data and deliver rewards/loyalty separate from card issuer.
- Paypal is virtual card (?Mastercard) at POS
- Vodafone has enabled a contactless SIM that can operate separately from the VodafonePay application with one default card (see Vodafone Smart Pass)
- TFL/Oyster accepts various external networks (see list). Paypal operates as a virtual V or MA in this circumstance.
- Revenue for PP is 30/40 bps less Vodafone and program manager costs.
The Vodafone Pay Terms give most of the meat
“For each funding source you wish to use with Vodafone Pay, we’ll issue you a prepaid virtual card (which we will store securely on your SIM card). By ‘funding source’, we mean a UK sterling denominated debit or credit card that was issued to you by a UK-authorised bank or an account
that you hold with a UK-authorised bank or your PayPal e-wallet. You can link up to 5 funding sources via the Add a Card feature. The virtual card expires when your funding source does. […]
Because the payment goes from your funding source to your virtual card before it is completed, you may not get the same benefits (like loyalty points, discounts and card protection) as you get when paying directly with your funding source. The funds loaded onto your virtual card will not earn any interest”[…]
We, the issuer or your virtual card, are R. Raphael & Sons plc (Company Registration No. 1288938) with our head office and registered office at 19-21 Shaftesbury Avenue, London, W1D 7ED.”
10 Jan 2016
V/MA are among my largest holdings, thus I’m constantly assessing. This also happens to be a consistent institutional investor and Bank question. So I thought I would share my views. Continue reading “2016. Threats to V/MA? (Nope)”
- Walmart announces Walmart Pay
- Walmart remains supportive of MCX and is still part (my first hand knowledge)
- Walmart Pay does not use Paydiant, but is using QR code capture (my first hand knowledge)
- Currently Walmart Pay is not tokenizing (my first hand knowledge)
- Walmart has highly successful mobile app
- Walmart is #2 online retailer (AMZN $89B, WMT.com $12B)
- Walmart.com has 30M+ Cards on File (my estimate)
- WMT almost every retailer in loyalty
- Walmart and Visa/issuers have reached some sort of swipe fee settlement (~$5B)
- Walmart does not have a loyalty program, but rather ELP
- QR Codes are not an approved “card present” delivery channel and thus are CNP
- MCX is operational, but Target and WMT are the clear leaders
- ApplePay is making inroads to CVS, BestBuy and other MCX Participants
- JPM gave WMT/MCX flat fee payments 2 months ago for ChasePay
As I’ve stated before, there are 3 industrys that enable mobile payments: grocery, gas, transit (frequency of use). Given WMT’s scale, consumer loyalty, mobile success, cards on file and acceptance cost efficiencies this is a no brainer. My summary is that they have used their unique assets in a new and innovative way, with superb timing. Continue reading “Walmart Pay”
15 September 2015
Well kids are back in school and Europe is tan. 6 weeks left till Money 2020.. and I just completed our Series A here at Commerce Signals.. wow what a summer!!
This blog is a little bit more of an inventory of things going on.. mixed with some views and general rumblings.
EMV. Its going to happen in October and the big merchants are ready. Two top processors told me that small merchants are in big trouble, particularly as the issuers will be pushing back all fraud to non-EMV merchants VERY aggressively. Think of it this way. EMV does NOTHING to help the small merchant.. currently no business bares cost of fraud in card acceptance. In October merchants must change to accept EMV or they will have the risk of fraud on their business. ISOs to the rescue? This will be a great opportunity for Poynt, Square and other merchant friendly POS/Payment providers.
Acquirers. First Data is moving toward IPO. This is a very tough business.. but as I’ve said before my bets are around companies that can be merchant friendly.. Acquirers are the entity that own the merchant relationship in a 4 party network.. so it is theirs to lose. Nothing has really taken off (incrementally here), Clovr, Card Spring, First Data’s Palantir. Why?? Acquirers have largely been put into a pricing box at the top 500 merchants with a well defined service (not much room for incremental services), and have had their reputation impugned through the ISO channels at the low end (5-7% cost of acceptance). For any Acquiring CEO reading this blog.. my action for you today is to take a look at the invoice you send to a merchant. 2-4 pages of fees that are indecipherable.. When merchants don’t trust you they don’t buy more from you. This is why I would not invest in this space without a clear understanding of the disruption.
Private Label. Rumor is that both Amex and Paypal are looking at M&A here. Makes sense for Amex particularly given need for transaction volume, 3 party model and their state of the art infrastructure. Merchants love Amex customers.. and Amex does the best job in the industry of proving the value that they bring (justifying their hefty cost).
MCX. They are set with payment infrastructure from FIS and First Data. The payment capability is there, and it takes time to build a highly scalable payments company. I just don’t see the need for stand alone app. My guess is that there will be an MCX payment instrument that sits in Apple/Google wallet… just silly to compete on “presentment”. Is the alliance fracturing? I think all participants would love to have a payment instrument that they could own and control. The issue is that there is no agreement on anything beyond payment. Mobile is too important a channel to delegate to a consortium. Also, these are fierce competitors.. The real challenge? Creating a great consumer experience, quite frankly their product team was one of the worst I’ve ever met in any company. No wonder they were considering paydiant.. one of the only options out of the DIY.
Poynt and Square. This seems to fit right in to the flow.. I love both of these companies. Why? As described above the payment industry has been VERY unkind to retailers. Poynt and Square give retailers a greatly simplified hardware, software, and acquiring solution. As a small merchant moving from 5-7% acquiring to 2.75% is a rather simple value proposition. I believe Poynt has several significant advantages over Square: 1) Square has a 6month+ certification process on Apple devices. Whenever it changes anything in its app… it has to go through recertification by Apple. Poynt is the ANDROID of Point of Sale solutions 2) By staying off of Apple AND adding a separate stand alone processor for non-payment applications, Poynt can deploy more applications more quickly and act as a platform for other services. 3) Poynt has a powerful data solution that puts merchants back in control of their data, 4) Ergonomics/Design. Just beautiful. Chip/DIP, Chip Contactless, QR, BLE, customer facing touch screen (not a swivel stand) all work seamlessly without having to pick up the terminal and try to stick your card into a slot. Well done Osama and team.
Paypal? Not much of a stock pop.. I’m very high on the Dan and Bill. But their core asset (eCommerce risk management) is being rendered moot by great mobile auth. When Microsoft (OnePay), Google (Wallet), Visa (Checkout), Apple (ApplePay) all moving into eCommerce they also risk loosing consumers. One of my biggest beefs is their treatment of Venmo volume in TPV (it is 0bps). Rumors are also that they will lose Uber within next 6 months.. and worked a special deal to keep them with take rate below 90bps (perhaps a driver of their margin drop). Merchants are a natural ally here, but Don K really mucked things up with their POS try. It will take 2 years to get things in shape here.
Visa/MA.. They are my biggest holdings.. no change in my views here. VDEP and MDES have positioned both with new power to tokenize and own the rules on mobile. I expect to see a new CNP rate for tokens within next 9 months.
Google. Big news 9/10 (See Blog). Google wallet now on all phones KitKat 4.4 and above (50-60M in US). I love it.. This is the PLATFORM FOR PAYMENT INNOVATION. The user experience is not on par with Apple (or even Samsung Pay).. but Android users are more technical (only 6% of iPhone owners have ever used ApplePay). There are some BIG pluses over Apple, I love that it shows the ereciept and location of purchase for instance (most issuers). Very surprised that Google is still looking for bi-lateral deals from issuers (in order of $10M with no bps). This is why we don’t see many issuers at launch. What is funny is that there is a “free path” to issuers as well. If they don’t want their card art.. issuers can still just “turn it on” via the V/MA intranet tokenization route (register BINs). Funny that the big hold out is JPM.. given its data play.
Apple. I wouldn’t be surprised to see an ApplePay product announcement in October at Money 2020. Note that my track record is near perfect here so I don’t want to mess up 2 years of predictions. I know that Apple has ApplePay working in Safari, don’t know if they will roll this out our not. I also know that Apple went back to issuers asking for an “Amex like experience with eReciepts”. The issuers said “sure we can do that.. lets first tear up that 15 bps contract and talk about what you will pay me”. My sources say that beacons are a part of the next launch.. they could be just feeding me *&^*(&. My guess on new release? 1) New Developer Support Program and rollout of Private Label/ Synchrony, ADS and Citi. 2) Improved “eReciept” process (like Amex) in order to compete with Google. 3) ApplePay in Safari (60% chance.. it is working but don’t know if they want to push yet before new token CNP rate tier). 4) Beacons at POS. Improve retail experience with beacons (40%.. again working in lab but don’t know of readiness).
The big Apple news that everyone is talking about is their plans to finance phones directly (end running carrier subsidy dependencies). As I’ve stated before, Apple’s phone is already capable of enabling a virtualized SIM. This is the one step needed before Apple enables consumers to “switch” to the lowest cost network every month.. or every day. This obviously has big implications for Gemalto as well. Google is 2-3 years behind, but is making more progress in enabling wi-fi as network option.
Innovation. Chain getting investment from NASDAQ, Visa, Citi.. is big news. I remain very positive on use of bitcoin as a disruption to Payments (see blog structural changes to payments). I also live industry specific solutions where payments are combined with something else to solve a problem. hyperWALLET for global payroll, justpushpay for construction, WEX for fleet/gas. I also love payments and data (hence commerceSignals), in this Klarna and Sofi are just tremendous ideas.
Samsung Pay. No change in my views here. What is sad is that they didn’t know that their entire application is incompatible with Android M (until they read my blog). Working with a competing app on their own phones with no registration.. just sad.
Card Linked offers. Guys don’t believe the press.. all of these things are dying. Even the most successful (cardlytics). Citibank is rumored to have called EDO to come pick up the pallet of their equipment (after 300M+ spent). The good news is that their transactional data is in better shape for use.
Gemalto. Stock is at a 5 year low.. I told you guys to be short here. NO MCX, No GSMA NFC SWP… now Apple is pushing the SIM out of the phone altogether (or soon will).
Monitise. I want to end on a humorous note. This company did a great job at enabling online banking 8 years ago.. enabling “check your balance” functionality via a quick integration to the ATM switch. They pivoted in 2006/8 to support development on an array of handsets (Nokia, RIM, Apple, Samsung, …) with their only competition being mFoundry (acquired by FIS). But the phone complexity went away with 2 mobile OS (Android and iOS) and the rapid shift of mobile from the periphery to the center of the customer relationship. No bank will outsource the CENTER.. mobile development was a specialized skill.. now it is mainstream. As if this were not sad enough, they hired a US network exec with no EU experience, no mobile experience and no network of issuers (that liked her). Then she pushed out the founder.. only to quit last week. Wow .. I hope the BBC can make a Silicon Valley (HBO) equiv.. only make it more of a Shakespearian tragedy.
10 Sep 2015
Big news for 50+M Android phones with NFC in the US. Expect to see a very fast international expansion to this as well.
Why is this big news?
- Payments are now in the OS (see blog). This is a PLATFORM not a just a “wallet”. If you compare Android Pay to Apple Pay the user experience is not quite a good, and most would ask (logically) what is different than the Google wallet launched 4 years ago. Under the covers the new AP “changes everything”. Google’s approach to security (Trust Zone, tokens, authentication, Host Card Emulation,…) and management of secure credentials has moved into the Android OS. Google Wallet (not mentioned in this PR) is an app that uses the standard Android Pay APIs at parity to any other wallet. This means that Google could care less about “wallet”. Can banks create their own app that does payment? Yep… Can a retailer? Yep.. can a health care provider store secure credentials? Yep..
- Google is the “open” platform for Banks and Retailers to innovate on. As I’ve stated before, the objective of any platform (and network) is to have millions of people investing to build value. Payments work very very well… Google is approach is to let consumers and merchants decide what they want to do… and we will provide the “reference implementation” (See Open Innovation, Structural Changes in Payments). This first release works on Android KitKat 4.4 and above. The next release (within Android M) will bring about some massive security changes (TEE/Trust Zone) that will render other apps like SamsungPay obsolete. Google Android and Apple iOS are working to establish an identity brokering role that is FAR MORE VALUABLE than any role in payments.
- Google is creating a PLATFORM for a new mobile ECONOMY (see blog). If you were a bank or a merchant what mobile platform would you invest in? There actually isn’t another choice… Apple is not a platform.. Apple wants to define, own, and brand the consumer payment experience. Apple has chosen NOT to create a platform. As I mentioned in blog above, this platform effort involves 5 primary vectors:
-Enable Android as the secure platform (SE Linux, Trustzone)
– Incentives for all to invest in commerce “network / platform”
– Improve physical world insight/data collection to enhance targeting and attribution
– Capture and manage consumer identity
– Create/enhance consumer engagement platform for commerce
- ApplePay volume is leveling off… yes it is still growing, but usage is not taking off. I still believe that the ApplePay experience is the best consumer mobile payment experience ever designed. But it does nothing differently than my card. Actually my card swipe is faster. Perhaps it is muscle memory.. Apple has gone back to big issuers asking them to for transaction notification (ie “Amex like experience”) as today banks have not provided. Bank response? This is funny…. Banks said “sure we can do that.. but lets first tear up that 3 yr 15bps agreement and talk about what you will pay me to make that work”. Apple’s consumer base is just amazing, but they are a TERRIBLE PARTNER (see my blog). ApplePay has managed to alienate both Banks (15bps) and Merchants. They listen to no one. Alternatively AndroidPay is like a set of Legos… build what you want..
- 50M-60M phones turned on at once. While Android demographic is 3x the phones.. they are at the bottom of the spending quartiles. But there is power in numbers, particularly given the fact that merchants are very reluctant to do anything the doesn’t help all of their customers. Remember the first Google wallet was limited to Sprint and Citi (GW 1.0) the next enabled all issuers (proxy card) but mobile operators still did not support (GW 2.0). In this latest iteration Google acquired the US MNO wallet consortium Softcard and has their buy in. Additionally when Android M rolls out.. all payments will go through them (Sorry Samsung I told you so).
- Tokenization/VDEP/MDES. This is the first major rollout post VDEP/MDES with 0 bps for “wallet” providers. In an odd twist, google is going to market with only a handful of banks as it requires a marketing bilateral for marketing spend. One issuer told me the fee was $10M.. ! wow.. So if you want your card art on.. and Google press you must pony up the money. If not.. your card will work otherwise.. same issuer registration process as with ApplePay.
- Beats SamsungPay and the new ApplePay update to market (more on this next week). AndroidPay completely kills SamsungPay (see my blog with Loop CEO depating with me). Samsung is not built on Android M.. so all the user interaction for card registration will have to be done all over again when redeployed on Android M.. unless Visa and MA do the work of reissuing tokens during the OS upgrade. SamsungPay may have an edge on AP on user experience.. but this product is 4 years too late to market (the MST Loop Stuff). The idea of it launching just before the EMV Oct date is just plain silly. One retailer brought up the idea of putting a lead/iron sticky strip on the terminal (over mag head) to keep it from working.
Samsung Pay has 2 parts
1) NFC (Contactless EMV ISO 14443 stuff)
2) MST (Mag Stripe Emulation)
Both “could” work in the new Google world. But Samsung does not seem to be aware of the new Android efforts to build an organic security solution within Arm’s TrustZone that completely steps on the proprietary work they did (mostly with Knox). For background, see the following articles
– Android L vs Samsung (see this article)
– Samsung nixes Knox – Bob Eagan
– The BRAND NEW Google for Work Security Whitepaper
Historically, NFC wallets driven by GSMA’s SIM based approach require MNO support (keys for either SIM based or for embedded). SamsungPay was based upon a new software SE that ran within its own proprietary security architecture.
Problem is that Google’s new Android M steps on Samsung’s security architecture. Both are claiming the same space.. Sorry I can’t be more specific.. I’m almost 50 now and have lost most of my real skills.
Now Samsung could redesign its wallet, give up its security architecture and run within Google’s HCE environment. Samsung pay would operate as Google wallet does.. at Parity. But Samsung is not currently running in this model.. Samsung could also launch a loopPay only wallet that works in this model..
Why are Google and Samsung so focused here on payments and security!!? See my blog on Brokering Identity, and Authentication in Value Nets. The key to future profitability within mobile is about managing interaction between the physical and virtual world… security, identity and authentication is EVERYTHING.
Forget about technology.. here is the real problem
Let’s assume that Samsung solves ALL of the technical issues above and now SamsungPay works on all Android devices. Everyone knows that MNOs decide what gets pre-installed on the phones they subsidize (even Apple). Six weeks before MWC, Google made a strategic deal with the US MNOs to buy ISIS in exchange for Android Pay (the new Google wallet) becoming part of Google Mandatory Services (GMS.. just like search and gmail). Part of this is also a new android registration flow that addresses THE KEY weakness of Android profitability.. it gets consumers to add a card and play account (Apple brilliantly required an iTunes… with accompanying credit card.. in launch of iPhone).
Samsung’s wallet could still work.. however IT IS NOT PRE LOADED.. so this is what the consumer would have to do (AFTER REGISTERING FOR ANDROID PAY):
1) Find out about Samsung pay
2) Install Samsung Pay
3) Register for Samsung Pay
4) Understand where they can use Samsung Pay
5) Wave it near the Mag Head reader
6) Then use Android pay for in-app and play purchases..
Forget about the technical issues. In a world where only 6% of iPhone 6 users have ever used mobile payments.. What Mobile wallet has ever succeeded without:
#1 MNO Support
#2 OS Support
#3 Merchant Support … PLUC
#4 An ACTIVE COMPETING WALLET in same phone
Samsung .. just drop it… !? there is no longer any revenue or data rights associated with it.
18 March 2015
A major retailer just called me this AM. Theme of conversation is that the industry is creating a “perfect storm” for issuers in acceptance. While LoopPay is very secure (because of Visa/MA tokens, phone ID, and transaction counters), the existence of a commercial grade mag stripe emulator in the hands of “bad guys” will create a little chaos… particularly when the cashiers think nothing of consumers (or fraudsters) waving their phones at the POS.
While both Visa and Mastercard have set rules that prohibit merchants for asking for IDs in a contactless EMV transaction (EMV), LoopPay (Samsung calls it MST) muddies the waters as it uses the phone to talk to the magnetic reader of the payment terminal. MST transactions are magstripe transactions which merchants are (and have always been) allowed to ask for IDs. Merchants can make the case that they have no idea which is which, and they have no way of “prohibiting” either, thus they must assume that it requires them to treat as something that requires them to validate (signature).
Let me see if I can list the different acceptance methods (looking for input into what I miss)
Add to this list Token authority (Tier 1, Tier 2, Visa, Mastercard, TCH, Bank, …) and TSM for GSM style NFC and we have quite a complex mess. The good news is that issuers have control over where their cards are presented.. Problem is that there are many new “exploits” which can be attacked by very well funded fraudsters.
Normally, all of this seems to put pressure to update and lock down your payment terminals. But merchants don’t bear any costs for POS fraud where they have validated signature/ID… it moves to the banks. How can Banks force merchants to lock down terminals? The incentives are very complex.. so complex that it may mean “can I see your ID” happens in every case. So much for mobile making things easier.
In EMV transactions, issuers are normally in control of when PIN is required.. In mobile there is no physical payment instrument (card) for the cashier to validate signature … so when they ask for ID what do they validate against? (ie no embossed card with your name on it). This means issuers will naturally like PIN for mobile. In the US consumers don’t know their PIN (for credit cards)..
This is just too confusing.. lets just say small issuers will have a very challenging time adapting here, while the big issuers will maintain a substantial advantage. This is the normal course of [big] bank fraud strategy: if a bear comes to your campsite you don’t have to be faster than the bear.. just faster than the slowest fellow camper (small banks)
1 Mar 2015
It seems that in the US, Samsung plans to create and certify a new software secure element within the ARM Trustzone architecture that precludes the need for SE Keys, avoids US MNO SE Key Ownership issues (that can’t make MNOs happy).
In other countries (China, EU, …) Samsung’s architecture would leverage the traditional NFC approach within the NXP SE (and traditional TSM).
This is a great technical approach, but is doesn’t appear that Samsung has bothered to sell US MNOs on the concept (of going around them). Anything US MNOs subsidize they must approve.. Which means no pre-installation, particularly given the new Google relationship outlined below.
Brilliant tech and security.. killed in the US by recent Softcard deal
Samsung has just launched its LoopPay plus NFC (plus tokens) with support of top 5 US banks, MA, Visa, Amex, FD. What is it? a mobile payment wallet that works at the POS within Samsung’s new S6. The “new” part is hardware based upon their recent LoopPay acquisition (Samsung calls MST ?Magnetic Secure Transmission?). What does this Loop stuff do? It enables your phone to talk to any payment terminal that accepts a swipe by “emulating” the magnetic field generated as your plastic card’s magnetic stripe goes across the payment terminals’ reader (ie head). This is SUPER cool stuff.. and addresses the key problem impacting ApplePay today: merchant acceptance. In other words a LoopPay enabled phone payment can be accepted anywhere a card swipe is accepted (mag stripe).
Operationally the new payment wallet will combine Loop’s mag stripe emulation plus traditional NFC to work with terminals in either a “swipe” or “tap” mode. If a terminal accepts NFC SamsungPay will detect it and use the more secure NFC, if not it will emulate the magstripe. Technically Samsung has done a super job creating a “secure enclave” equivalent within the ARM TrustZone (and NXP’s PN66T.. having dumped Samsung’s Snapdragon). Samsung may have achieved a coup over Apple in this new architecture (approval for storing card encryption keys within a new software secure element which will be certified as EMV compliant). This means Samsung doesn’t require the SE keys (in the US) and can also ride on the existing token rails that were created by ApplePay, thereby leveraging the same provisioning process for enabling cards that the networks created in ApplePay. Interestingly neither Samsung nor Google have been able to get the 15bps that Apple got.. showing that banks have learned lessons and that the ApplePay late followers (Samsung) are now in a weaker position.
The “bad news” is that SamsungPay software is VERY VERY far behind (think Aug/Sept best case), and even if it were ready today it will never be be pre-loaded on ANY phone in the US (given the recent Google/Softcard deal with all 3 major US MNOs). The Google/Softcard deal hit Samsung HARD.. a complete surprise. What does this mean? Complete chaos. SamsungPay Loop requires specialized hardware (MST in S6 Only), This means that SamsungPay will not work with any existing US handsets (all the SE keys went to Google and old phones don’t have the new ARM TEE with Software SE),
Why would Samsung make this kind of “marketing announcement” without an operational wallet, carrier support and big US holes? Guess is they are feeling the pressure from Apple. The new iPhone is even grabbing over 33% marketshare even in Samsung’s home market (see Reuters article). There are MANY pieces necessary to make a wallet launch work: hardware, new loop acquisition, tokens, certification, bank support, it looks like they have those taken care of.. what is missing? MNO support, SW SE certification and a production ready software wallet.
While I’m rather negative on the prospects for Samsung in the US, I’m very enthused about Samsung’s prospects outside the US by leveraging a traditional NFC architecture plus tokens. As I discussed in Secure Element, NFC, HCE, EMV, Tokens and Cards, tokens plus mobile enabled identity (token assurance information) have enabled software to displace specialize hardware. In this case, a tokenized LoopPay is pure genius.. taking a basic device the tricks the card head into accepting information.. into a card transaction much more secure. I’m not going into the fraud prevention measures, but rest assured “replay attacks” will not be possible.
The purported “mobile acceptance gap” that Samsung’s wallet WOULD address is primarily in the US and due to a lack of merchant terminals that accept NFC. LoopPay addresses this gap through emulating the mag stripe swipe.. The US is where mag stripe swipe remains predominant, and only in a very short term “interim” period before EMV becomes mandatory in October of this year. Thus the market where mag stripe emulation would deliver the most value is the US, yet it is only so for the near term (EMV rollout), with a much delayed software release (September) in an inaccessible MNO environment (per Google/MNO reasons above).
- SamsungPay is LoopPay plus NFC plus tokens. There won’t be anything to even trial until late summer, it is a marketing launch only (S6 contains the necessary HW)
- Google/Softcard/US MNO deal has completely killed hopes for SamsungPay in the US, as MNOs CAN NOT pre-install on any Android phone (including S6).
- Samsung’s hardware is very innovative, leveraging Arm’s TrustZone to store the EMV keys in a new software secure element within ARM’s TEE. I’d be surprised that the networks have already certified this.
- Visa/MA and Amex will leverage their existing token infrastructure (from ApplePay).
- LoopPay is super cool and tokens make is super secure.
- Banks will be able to provision cards to SamsungPay just the same as the do with ApplePay today. Some banks may want to consider the incremental risks associated with the LoopPay card emulation. It looks like the controls are there, but it is not a card presentment mechanism that many have experience with.
- Perhaps my biggest news here is something that wasn’t announced. My understanding was that Paypal was part of the launch. Perhaps they want to get a little momentum before pissing off all the banks.
- My biggest unknowns: software live date, bank rev share, TEE certification for holding card keys (Tier 1 TSP), Paypal, HCE in the US (to by pass the Google’s SE key ownership), how will consumer install on top of (next to) GW and why would they want to?
24 Feb 2014
Well done Google. As predicted last month, Google announced last night that it had acquired “some exciting technology and IP from Softcard”. The price? My guess is around $50-60M, plus multi year revenue share (below). This is a FAR cry from the $3-$4 BILLION that these same Mobile Operators wanted for “NFC RIGHTS” in 2011. Google proposed a rev share back then too.. but MNOs were convinced they could go it alone. After dropping almost a billion in ISIS/Softcard with no future revenue of any kind in sight the drivers of the deal were obvious. Not only did carriers need an exit for their investment, they needed a partnership that gives them a role in the future of mCommerce.
What technology will stay? The SE Keys and the vending machine acceptance terminals.. seriously.. 98% of what ISIS/Softcard was is completely dead. My biggest unknown? I would love to see if Amex Serve could pick up the pre-paid card from Mastercard.. as the banks wanted to beat up my good friend Ed McLaughlin for doing what I still think was one of the best most innovative deals ever (Google pre-paid).
What did Google get? MANDATORY GOOGLE WALLET. That’s right, now EVERY ANDROID phone sold by the carriers will have wallet installed. This addresses a key advantage that Apple has in mandating an iTunes account (with credit card) for activating the iPhone. Apple’s brilliant registration process allowed it to know its customers (ID, card on file) where Android/Google did not. Many analysts believe that this ID/Payment deficiency is THE KEY reason why Apple’s environment is 8x-10x more profitable with less than 20% of the handsets. Now Google can compete in all things which require identity+payment. Not JUST in buying apps/music in Google Play, but in orchestrating commerce and brokering identity. I cannot understate the win here for Google. A brilliant move, and I firmly believe that this was the primary driver of the deal. Don’t look at this as a ApplePay competitive thing, it is about enabling Google to identify every Android holder as a default “opt in” during phone activation (iTunes Account Mandatory = Wallet Account Mandatory).
The Carriers? A partner that will share revenue. Where Apple takes 15bps for itself, my guess is that Google will give that to the MNOs, plus some revenue share for play services. My TOP 2015 prediction was that this would be the year of partnerships.. This is certainly my top new one for the year. MNOs are losing sleep about Apple’s unmatched “walled garden”, no one plays but Apple here. Google is developing an open model and this deal may be the first template for MNO/Platform revenue sharing.
Banks? Google will likely slowly “roll out” of its Google Wallet Card (also see TXVIA blog) which wrapped all other cards in a Mastercard Debit. Banks will be able to sign up for Google Wallet through network agreements just as they do for ApplePay today (at same rates/rules). This will mean that the networks will provision bank cards as tokens, and that Google will also benefit from forthcoming CNP token rules this summer. The primary difference in GW operation is HCE+Tokens (see blog). The Google Wallet model is not dependent on the SE Keys, or SD storage.. but it CAN operate in a non HCE model (from its GW 1.0 lineage).
Payment Networks. BIG WIN. Cards are the defacto standard for everything in mobile. I’m interested to see if the networks recognize (certify) the HCE card emulation application, as of 3 months ago it was still not certified. My belief is that they certify as part of tokenization scheme acceptance. This is a funny side story in itself. Most would ask how Google Wallet could run a non-certified card emulation app. Remember that the ONLY card being emulated was a Google owned mastercard debit.. just a brilliant work around. Note that in ApplePlay, Apple operates as a tier 1 token requestor in the current ApplePay model, and V/MA/Amex are tier 2 token requestors (see this excellent blog by SimplyTapp). In the Google model Visa and Mastercard will act as both Tier 1 and Tier 2 token requestors.
Big Losers? Samsung. OUCH!! No wonder they had to buy loop. Their new wallet strategy was to have a DUAL NFC/LOOP wallet. Google just got all the SE keys for the Samsung Phones. This means that Samsung’s wallet will only work on new phones.. a rather rough place to start. Paypal.. with the birth of a new CNP scheme this summer driving ApplePay and Google Wallet beyond Apps to mCom checkout.. Paypal has no future in Mobile… Except in emerging markets.
More to come.. but wanted to get this out today.