Visa/BAC in Mobile Pilot

20 Aug 2010 (update Aug 23)

(update – Was just told that the BAC pilot is NOT using the Monitise application. Wow.. what on earth is going on with the Visa team? They have at least 5 different pilot models.. in a positive light this is market experimentation. I’ll take the blame for being premature, but given that I saw the new application and was told it was July I connected the dots… albeit incorrectly.  Bloomberg’s story above is on target and trial is a field test of the newly certified DeviceFidelity MicroSD.  Purpose is to ensure all works as planned from enrollment, activation, OTA provisioning, application usage and NFC payment ).

Visa has a number of initiatives surrounding mobile and NFC. Certainly a challenge to get multiple parties aligned to make this happen:

  • Monitise, provider of a new iPhone application
  • Device Fidelity, NFC tech provider which
  • Bank of America (pilot agreement, marketing plans, focus demographic)
  • Advertisers.. currently part of existing visa discount program
  • Apple.. certification of the Moni iPhone application (submitted in June)
  • First Data. Trusted Service Manager (TSM) in the NFC role…
  • … I could go on

This activity represents a major investment by the entire industry team.. ( given equity stakes perhaps Keiretsu is more appropriate).

More to come … this is just a quick update

Previous Posts

Paypal at the POS?

18 August 2010

Great WSJ Article TodayPaypal looks to real world commerce

First Draft…. final tomorrow.

As stated in my previous blogs about Apple, Bling, and the Mercury NewCo we are in the midst of a revolution in consumer payments, driven by large non banks, with new value propositions. For example, we see established organizations like AT&T, Verizon, and Discover collaborating (Mercury NewCo) with a payment value proposition driven by mobile advertising, Card networks attempting to develop PayPal killers (see Visa PayClick) and mobile handset manufactures attempting to create models for payments separate from banks (see Nokia and Apple NFC).

The worst kept secret in mobile payments today is: there aren’t any (except for MNO unbanked solutions). Efforts like Mastercard/Obopay have failed globally because they have focused on P2P (no existing volume). Alternatively, PayPal’s efforts are focused on the POS. Enabling any “merchant” to accept any card either at POS or virtually (see previous blog on PayPal’s virtual terminal). This approach is a win for banks (card acceptance), a win for consumers (convenience/loyalty), and a win for merchants (reduced merchant fees and interchange).

PayPal is best positioned of any major player to link the virtual and physical payment worlds (see here for detail): they have a consumer base, merchant base and a phenomenal fraud/risk team of 300+ with commensurate tech and ops. However their ability to execute is not without challenges. For example, what % of their current merchant base does POS transactions? Will there be a need for merchant terminals? If so who will pay? As discussed in the article above, Bling has been mentioned as a potential approach. Issuing Bling tags to PayPal’s employees is certainly a useful way of testing the consumer issues associated with issuing (and using) a payment tag.

My guess on PayPal’s “focus”?

Given PayPal’s strengths I would see a “phone as POS” approach as the most logical.  As consumers we focus on our individual accounts, but PayPal is one of the few “2 Party” payment networks (others are Discover, Amex) that also include merchant acquisition. 2 Party systems are uniquely positioned to control the costs and value proposition between the merchant and the consumer. One of the major NFC challenges is POS infrastructure: who will pay for it? The phone as POS would certainly address this Gordian Knot for small merchants. Small merchants are a group that also feels the most pain in interchange and card acceptance fees due to their lack of negotiating leverage. Oddly enough large banks seem to be supportive of PayPal’s efforts here with the view that their actions will help drive cash replacement. In other words, if PayPal’s innovation is indeed focused on NFC acquisition then they will be able to process all cards..

On the merchant side, PayPal has already completed much of the heavy lifting with its existing virtual terminal service. This service equips PayPal merchants with ability to accept any card at the POS (see Virtual Terminal blog). NFC or RFID form factors are just another abstraction for this card.  On the consumer side, I would expect to see PayPal working to link PayPal accounts to multiple form factors. Expect PayPal to make an acquisition in this space.

As of today, here is my view of the teams competing in mobile payments at POS

  • Mastercard/Citi/Obopay/Nokia
  • Visa/Monitise
  • Apple
  • AT&T/Verizon/Discover/?Google/First Data
  • PayPal/?

More to come tomorrow.

Citi/Mastercard beats Visa/BAC to market

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).

Bumping payments? Paypal Bump

26 March 2010 (updated April 13)

Excellent Video overview below (30 sec commercial)

[youtube=http://www.youtube.com/watch?v=suCe4-SWsHo]

I’m reading the CTIA press and see this come out, wondering how my iPhone communicates with another iPhone. The bump application listens to the iPhone accelerometer and when it reads a bump (when running) it sends time and event to the bump cloud. The bump cloud looks for 2 events and then requests that your bump user information be shared (from bump)

When you bump, if we find a match with a phone that felt the same bump, our servers ask each phone to send up the contact information each user chose to share, but nothing more. If and only if both users then confirm that the match is indeed correct will the contact information be sent down to the other person. None of your personal data is ever stored on our servers.

Very ingenious…. What I’m most impressed with is Paypal’s ability to extend itself in niches like this. Their open APIs, ability to manage risk and extend “payment rails” beyond internet merchants is 5-10 years ahead of what any other payment network can do. Beyond the technology side, it certainly helps that  Paypal’s user penetration within the iPhone’s customer base is “rather high”.

This application also highlights the opportunity for NFC in Apple’s platform. For those that aren’t familiar with my previous posts, industry G2 indicates that Visa and AT&T are going without Apple. Obviously a good strategy for AT&T as Apple already has significant leverage in the “relationship”. Of course, NFC P2P will require an intermediary to own “risk” of card acceptance and work through (payment network related) merchant and third party payment aggregator (TPPA)  issues.

From a regulatory perspective, it is fortunate that PayPal has already gone through the “heavy lifting” in obtaining money service licenses in the 50 states (see related post).

What other vendors/payment networks could compete here? A: CashEdge and Money Bookers. In the UK I could almost envision the video clip for a money bookers “Bump Bet”. In the US CashEdge is a 3rd party service provider with 60-70% of US retail deposit accounts in their footprint (BAC, Wachovia, Citi, …). CE has  a much more efficient (low cost) ACH network and is one of the few US companies with proven operational risk management in “remote” payments. CE should look into riding PayPal’s marketing wave and leverage bump technology to allow me to do everything PayPal does,  only directly from my bank account (at no cost). On the regulatory side, Cashedge runs as a bank service provider… in essence you are dealing with your bank to “push” funds (ACH debit) when you use POPMONEY.

Great job Paypal.

NFC Tea Leaves

9 February 2010 

Previous Post http://tomnoyes.wordpress.com/2009/12/23/visa-att-mobile/

In the last week of December I made an “informed” prediction on a major NFC announcement…. the predicted time has now past.. and… no announcement. This seems to be common place in this space.. NFC presents the best chance for development of a new ecosystem and a new “boom” for small companies… Unfortunately the keys to the “ignition switch” are held by multiple established (read entrenched) overlapping and competing networks (bank, mobile, card, …). Apologize for getting hopes up.. it does look like more of a slow burn than “break out”..

Visa’s mobile apps at CES 2010

[youtube=http://www.youtube.com/watch?v=c3Ff6uYXBD0]

VivoTech

[youtube=http://www.youtube.com/watch?v=Kzyy6ZLbDZk]

All of the activity listed in the previous post has been validated:

– FirstData is acting as a TSM (in vein of Germany’s Giesecke & Devrient)

– Visa does have €200MM planned for NFC (See here)

– Top 3 US bank is planning a major mobile initiative w/ Visa to roll out in early 2Q

– AT&T has TBD initiatives into pre-paid card and pre-paid plans, I do have conflicting information on whether this will be led by AT&T or Apple and time period has extended significantly.

 

 

http://www.youtube.com/watch?v=330RZpwrmAg

http://www.youtube.com/watch?v=z0BwYz1P0BE

 

 

Visa – New Mobile Payment “Rails”?

25 November 2009

Word on the street is that Visa is set for a major mobile payments announcement in next 6-8 weeks. Separately, US MNOs are also rumored to be collaborating on Near Field Communications (NFC) payments with acquirers. Could it be that the log jam on NFC is about to be broken? Is Visa developing new rails to support mobile payments? Let me say up front that this blog represents “connecting the dots” more than a definitive market projection.

The US market is ripe for a break from the 6 party political “fur ball” that is hampering delivery of mobile payment (Card Issuers, Acquirers, Network, Merchant, MNOs, Handset Mfg). For those outside the US, MNOs have substantial control over handset features and applications, and have been leveraging this “node control” to “influence” direction of payments. The central US MNO argument being: “it is our customer, our handset, our network we should get a cut of the transaction rev”. Unfortunately existing inter-bank mobile transfers/ payments are settled through existing payment networks that provide limited flexibility in accommodating a “new” MNO role and the network rules leave much room for improvment in: authorization, authentication and consumer “control”. 

Outside the US, the situation is much different, as consumers have great flexibility in switching MNOs, have ownership of their handsets, and are largely on pre-paid plans. The MNO challenge for payments in this environment is largely regulatory. Many countries (EU, HK, Korea, Japan, SG) have open well defined rules for MNOs role in payments (example: ECB ELMI framework within the EU), while other countries are highly restrictive and are in the midst of developing their legal and regulatory framework. Even in the countries where MNOs participation is defined, they have largely benefited from the complimentary role that the service plays with pre-paid plans (not in interchange at POS).

Globally, MNOs are looking for a payment platform where they can benefit from interaction between consumer and merchant, with flexibility to deal with a heterogeneous regulatory environment. The competitive pressures on Visa/MC are much different then they were 5 years ago (when both were bank owned). The network fee structures and rules were written with banks and mature markets in mind. Emerging markets present a much different set of opportunities, as MNOs lead banks in brand and consumer penetration within every geography.

All of this leads to the case for a new “Mobile Payments Settlement” network, a network which will alienate many banks. I expect to see Visa roll out the initial stages of this network in the next 2 months with an emphasis on NFC. Quite possibly the best kept secret I have ever seen from a public company. I’m sure many Silicon Valley CEOs are crossing their fingers (with me) on this, as a “new wave” of innovation is certainly close at hand that will drive growth (and valuations).

For those not keeping up with the 50 or so product announcements a day on NFC, handset manufacturers committed to have NFC enabled phones to consumers in mid 2009 in the GSMA 2008 congress. NFC capabilities are numerous (Vodafone YouTube Overview), and may represent a true disruptive innovation surrounding payments. There have been many very recent product announcements that will enable existing phones to use NFC, and P2P Capability. All of which will blossom in a more “fertile” mobile settlement environment. See one example “future” Visa mobile service here: http://tomnoyes.wordpress.com/2009/09/24/googleoff/

Side note: This is not all bad news for Banks, as the structure will certainly provide for existing cards (debit/credit) and may deliver substantial revenue through cash replacement (small < $50) transactions. More details on structure of MNO in settlement 2 weeks….

Select Product/Alliances Below:

[youtube=http://www.youtube.com/watch?v=2AmeM33r7wM]