Payments Industry Pairings and Partings In 2015

Here we are – 19 days into a new year and midway in the month known apparently as “divorce month.”

According to companies that track this sort of stuff, January is the month when most husbands and wives decide to officially call it quits – opting apparently to stay together over the holidays and then splitting right after the holidays end. Ironically, December is the month in which most proposals happen, and when happy couples decide to make their commitment to each other more permanent.

So, what better time (or reason) to talk about who in payments might get hitched in 2015 or, alternatively, call it quits.

Google and Softcard

News broke late Friday (Jan. 16) that Google is negotiating to buy Softcard for a jaw-dropping $50 million. I’m sure to its carrier investors, it’s more like vein-popping, given an investment that approached and perhaps exceeded $1 billion. This news came on the heels of an announcement earlier that week of Softcard’s downsizing of 60 staff. That, says news reports, was in anticipation of an acquisition by a “business partner.” That business partner, as of the time this piece went to press is said to be Google.

Google/Softcard is a curious marriage, and one has to wonder if it might even be of the shotgun variety. I’ve said a few times that Softcard’s biggest issue was saving face. After all, it’s been in the market for five years (and seven years in development) and has nothing to speak of despite the hundreds of millions of dollars poured into it by the carriers and bullish PR pronouncement of its potential to disrupt mobile payments. So, having a player like Google buy it, and then promptly shut it down, would be a great way to save face. The official record of Softcard’s demise would then reflect Google’s decision to shut it down rather than having the carriers turn off the funding tap, thus publicly declaring their own venture a dud.

And at a $50 million price tag – which I’ll mention is half the valuation of Clinkle, that other wildly successful mobile payments venture first based on sound waves and now on Treats tied to debit transactions – that might not be as nutty as it sounds.

Then again, I suppose that Softcard does have some assets that are worth leveraging by Google.

Softcard’s carrier relationships would offer Google Wallet the chance to have its “Wallet app” loaded and installed each time a customer bought a phone, sort of like Softcard/ISIS claimed last year was driving 60k downloads a week. That, I’ll mention, didn’t do much to ignite Softcard so it will clearly take much more than just that to move the Google Wallet powered by Softcard needle.

But Softcard is the only carrier-based NFC spec out there and one might surmise that the carriers feel that this is their last shot at getting a piece of that mobile payments brass ring. With many players now having (and pursuing) visions of creating the Android version of Apple Pay ecosystem, a marriage with Google, which would enable them to get a piece of the action, is likely the motivation here. (Perhaps, combined with the wishful thinking that such a move might put the brakes on Google’s HCE ambitions with Google Wallet, which, of course, cuts out the carriers entirely.)

And, now that Apple Pay has given NFC a new lease on life, this acquisition could help Google Wallet get some much-needed momentum around in-store payments.

Not to mention access to Tapper, the Muppet that Softcard recently made the focal point of a consumer campaign to get consumers to “tap” their phones at merchants.

As I mentioned, even with the acquisition, Google still has the hurdle of getting consumers to activate the wallet and use it – something that even Apple Pay is working really hard to overcome, and convincing merchants that they aren’t after their payments transaction data. That, I have heard, is one of the many sources of anxiety that merchants have over NFC – it not only enables Apple Pay, it allows Google to get their mitts on their data.

But at a $50 million price tag, they don’t really have a lot at risk. If it goes through and then subsequently blows up, it’ll take Google about 10 minutes worth of search advertising to replenish their bank account.

Google and LevelUp

If Google really wanted to get into mobile payments with a platform that was actually enabling mobile payments, they’d start flirting with a Chief Ninja. Since Google Ventures is an investor in LevelUp, the thought must have at least crossed its mind more than once. LevelUp, as many of you know, is a mobile payments platform that has ignited by creating a network of consumers and QSR-type merchants in local markets and offering a unique mobile loyalty wrapped around payments value proposition. LevelUp started in the QSR space because people need to eat multiple times a day, and its Chief Ninja, Seth Priebatsch, recognized that the key to adoption is to habituation. Mobile payments at QSRs is LevelUp’s ignition strategy and 14,000 merchants and 1.5 million consumers are now part of its platform. Since its launch, LevelUp has white labeled its application and now powers a number of merchant apps, including national tea purveyor, Argo Tea. It recently incorporated a gift card exchange capability into the app, as well. The biggest risk for Google, frankly, is not getting up the courage to ask for LevelUp’s hand in marriage, it’s being told by its Chief Ninja that he’s just not that into you.

PayPal and Amex

So here’s an interesting potential marriage. American Express and PayPal merge to become a global three-party payments network. A merger with AmEx would enable it to have access to 157 million-plus global digital accounts, cross border payments capabilities (which is growing and contributing to PayPal’s volume and growth), a complementary SMB business and merchant focus which includes partnerships designed to expand its presence in SMB retail establishments and a transactional credit engine. PayPal would get acceptance at AmEx merchants (what the Discover partnership was intended to provide) and, therefore, a new shot at physical store acceptance, not to mention access to one of the most affluent cardholder bases in the world. I wrote last summer that Apple could become the American Express of payments – with a PayPal merger, AmEx and PayPal could out-Apple, Apple. The combination could provide a pretty impressive cross-ecosystem, omnichannel payments capability. Two good-looking, media magnets like PayPal and Amex seems as natural a match up as George and Amal.

Apple and Discover

Cameron Diaz’s unlikely pairing with rocker Benji Madden would have nothing on an Apple/Discover marriage. Apple could decide to throw the networks for a real loop and become one of their own by buying the Discover Network. Not only would this give Apple Pay a pretty slick path to acceptance at Discover’s 8 million merchants, it would give it a nice glide path into adapting Apple Pay and Apple payments on the B2B world which its recent deal with IBM suggests is a market they find attractive. (Discover powers AribaPay which is the network that is enabling payments between businesses that use Ariba for invoicing and procurement.) This marriage would also enable Apple Pay to operate on a worldwide basis more easily since it would leverage Discover’s unique net-to-net capabilities that enable Discover to process country-specific schemes like Union Pay, another strategic area of opportunity for Apple. The Discover Network is also open to the notion of enabling the payment type that is every merchant’s friend – private label cards, the one consumer engagement method that is every consumer’s friend – cash back, access to a PIN network in Pulse that could solve Apple Pay’s big debit issue today as well all of its merchants.

But hold on, Discover could also have other possible suitors.

Samsung and Discover

Softcard/Google Wallet aren’t the only players that have designs on being the counter to Apple Pay in the Android ecosystem. Samsung does too, and it’s said to have its eye on LoopPay as one of the ways in which it plans to enable acceptance at all merchants (LoopPay uses technology that leverages merchant’s mag stripe technologies and marries that with tokenization technology.) It, too, could decide to scarf up Discover and mash up all of the previously mentioned capabilities of Discover with the LoopPay app capabilities and be off and running as “Sam Pay” in the Android ecosystem.

MasterCard and Synchrony

In what might be labeled as a marriage of convenience, MasterCard could decide to snap up Synchrony in order to add private label capabilities to its portfolio. Private label cards are the cheapest form of payment that retailers can accept, which is why merchants love them. It’s also the way in which its most loyal customers pay, too. Cheap to accept plus used by loyal customers equals a payment method that makes merchants very happy. Acquiring Synchrony would give MasterCard an additional tool to satisfy the merchant side of its platform, and participate in the monetization of those schemes. Making these capabilities available to its developers to embed in their apps, including Apple Pay, could also be a way to attract developers and merchant partners. Such a marriage could also provide MasterCard with an opportunity to foil whatever’s left of MCX and its CurrentC’s ambitions.

PayPal and OnDeck

PayPal’s getting deeper and deeper into the SMB space and actively expanding its capabilities in serving that base of its business. PayPal’s toolkit now includes transactional credit offered on behalf of retail customers, PayPal Here card acceptance on behalf of retail and services-based businesses, and invoicing and other “business consulting” services. It has a merchant-cash advance lending capability that’s said to be growing rapidly, as well. Aquiring an alternative lending platform like OnDeck would give it additional lending heft as well as a new pipeline of SMBs to sell other PayPal services to. Of course PayPal would probably like to marry Lending Club, but that’s one big dowry it would have to pay given the current market cap. And, besides, Google has already elbowed its way into that relationship, it seems.

Amazon and Yelp

I’ve written about this before – but I think that Amazon’s best bet to moving Amazon Payments out of Amazon and into merchants is to buy Yelp and enable Amazon Payments within all of Yelp’s businesses. These merchants, by and large, are services businesses that don’t compete with Amazon or its marketplace sellers. Many of those businesses are also QSRs which Amazon can also extend its mPOS solution and possibly its GoPago payments platform around. In addition, Yelp really does need a commerce strategy that goes beyond advertising and sponsored pages. Notably, Yelp was one of the few partners Amazon selected to work with it on the launch of its Fire phone. Even though such an acquisition violates the Amazon rule of never making an acquisition over $1 billion, at a little more than $3 billion, Yelp is less pricey than it was even last summer. If you ask me, it sure seems like it has more to offer it in the short and long term than a lot of the other billion dollar investments it’s made, like Twitch.

First Data and Paydiant

First Data made a bunch of moves in 2014 to position itself as more than just a processing pipe. Its acquisitions of Clover and Perka and new data analytics capabilities have given it an integrated payments platform to take to SMBs and a platform for creating a new business model in the process. An acquisition of Paydiant, a mobile commerce platform, would enable it to extend mobile payments capabilities to those merchants, essentially seeding one side of the SMB platform with mobile payments capabilities. A sale to First Data also provides Paydiant with a hedge against the high-profile divorce that is likely within the MCX merchant ranks this year (more on that below).

Visa and Stripe

This matchup would pair the largest payments network on the planet with this young cloud-based payments processing platform. Stripe could not only give Visa’s development center a huge turbo-charged boost by bolting on its API commerce to the platform capabilities that it’s in the process of building out, but could accelerate the distribution of Visa Checkout in app and online. Stripe powers Apple Pay, Twitter’s commerce feature and has a deal with Alipay. Patrick Collision told Bloomberg in December of 2014 that it’s only “10 percent of the way” to its end game as an enabling commerce platform, and views its work as a “multi-decade” project. That project could be accelerated with Visa’s global heft behind it. With a valuation of $3.4 billion, Visa is probably one of the only players in the space (other than Google or Apple) that could afford to buy it, which is exactly why they just feel that they might need to do it. And, the Collison brothers would probably even feel at home in Visa’s hip and happening new San Francisco Market Street digs.

EBay and Pinterest

It was recently reported that Pinfluencers – the bloggers who promote products on Pinterest – drive more volume to merchants than ads do. And when ads cost $1 million and bloggers cost a few thousand, it’s not hard to understand why brands would rather opt for the blogger and not the advertiser. So, it seems that Pinterest needs to figure out how to make money. At its core, Pinterest is a destination for women to check out trends and get inspired about what to buy. An acquisition by eBay could enable it to leverage eBay Inc.’s assets and efficiently corral a more direct way for brands of all sizes to more fully incorporate commerce around individual products beyond what is now possible via Promoted Pins.

Alibaba and eBay

Lots of pundits predict that Alibaba will buy eBay once it separates from PayPal. Doing so would give it the quickest path to becoming a true global marketplace. Ever since its IPO, Alibaba has been making investments in other global marketplaces, notably in Brazil and India. Buying eBay – or making a big investment in it, would allow it to capture a commerce asset that has traction in the markets it doesn’t, namely the U.S. and Europe, and even ditch, its U.S.-based eBay hedge. That relationship seem to be going nowhere fast.

So, those are a few of the happy matchups that could be contemplated or even consummated in 2015. Who, then, is – or could be – on the outs?



Merchants and MCX

The reality TV show, “Sister Wives,” gives the world a peek inside a household in which lots of wives clamor for the attention of one husband. While the public face of this unusual household is said to be “liberating,” the show demonstrates that it’s clearly not all wine and roses on the home front. In a post that I wrote last week, I just don’t see how MCX – with all of its sister merchant competitors and lack of product in the market after three years – hangs together.

On paper, it seemed like a noble thing for merchants to pursue – a coalition created in the merchant’s interest that lowered the cost of merchant acceptance and gave merchants control over their customers and their data. Except, that was then and this is now. And, now is a world in which consumers associate breaches with merchants, a world that now includes Apple Pay and a number of big players who are likely to make big moves, merchants who are focused on EMV migration and a bunch of other things and merchants who simply want more traffic in their stores. Noble has to take a backseat to doing what is necessary to give consumers access to the methods of payment they want to use and help them sell more stuff. The notion that banks are doing to save the day by issuing MCX-branded cards that cannibalize their revenue stream seems like the last gasp in igniting a strategy that was a stretch to begin with. I think we will see merchants bail as contracts expire and more merchants exercise their right to walk away. Maybe, unlike “Sister Wives,” they won’t all leave at the same time, but it wouldn’t surprise me to see one or two walk away, and when that happens, this merchant marriage dissolve.

JPMC and Chase Cards

Till death us do part doesn’t mean as much as it used to. In 1990, only 1 in every 10 people married for 25 years or more split up. By 2011, the Census Bureau reported that number to be more than 1 in 4. So, when Jamie Dimon seemed pretty resolute last week when he said that JPMC was better together and breaking up the bank was never gonna happen, unless the Feds made him do it. But hiving off the Chase Cards business has to have crossed someone’s mind at Chase and maybe even more than once. That business itself constitutes a pretty big contributor to overall financial performance, roughly 23 percent according to their latest earnings reports, but could enable it to free itself from a number of regulatory and compliance issues that now get in the way of running the business. And Chase has a number of assets on the issuing and acquiring side that uniquely position it as the newest member of the three-party network club.

Alibaba and Alipay

Jack Ma said that Alipay will IPO at some point and 2015 is as good a year as any for it to do that. Like eBay and PayPal, Alibaba has benefited tremendously from its ability to ignite inside of the Alibaba ecosystem. And like eBay and PayPal, separating them can unlock additional value for both Alibaba and Alipay and eliminate any real or perceived merchant and payment conflicts. Alipay is moving strategically to gain acceptance at merchants outside of Alibaba and is the preferred method of payment by Chinese consumers at retailers as well as across a broad number of use cases, like bill payments. As a stand-alone network, with its 300 million registered mobile accounts, Alipay would become the largest digital payments network, and an attractive sell to merchants on the acceptance side. Since Ma still owns about a third of Alipay, making Alipay its own business would not only make Ma even richer than he is today, it would give Alibaba even more of a war chest to make other acquisitions and investments. And, when such a breakup happens, it’s good to know that they can still be good friends.

So, who do you think is likely to hook up or break up? I’d love to hear your thoughts.