by Tim Attinger
eCOM 302: Emerging eCom Competition
Lesson 3 Discussion Board: In five years’ time, which eCom facility will have the biggest moment in the sun — one of the current eCom specialists, a platform delivered by one of the traditional networks, or a brand new player we have yet to see? Click here to respond.
In this week’s course, we have reviewed the establishment of emerging eCommerce payments competitors as strong network-effect commerce facilitators within established online ecosystems. We’ve further explored how these competitors have begun to move from basic transaction facilitation to commerce creation, promoting closed-loop consumer benefits and driving merchant sales. In our last class in this section, we will take a look at the implications of this important evolutionary trend for the major traditional card networks — those who settle large sums of money worldwide. As these multi-trillion dollar behemoths of the global bankcard network processing adapt to the rapid change in the eCommerce marketplace, how might their response to nimble, much smaller (merely) multi-billion-dollar payments networks online presage their potential future in the fast-changing climate of the eCommerce landscape?
Only the Strong Survive? So the evolution of eCommerce payments is trending in favor of the companies that do more than merely manage transactions. A new species of competitor has emerged that creates commerce for merchants, and in the process generates a higher level of value for the platform. So, what are the traditional card players doing to respond? How well are they adapting?
The major card networks have initiated solutions in this space, but along different dimensions. MasterCard acquired NextJump to create MasterCard Marketplace, an online marketplace of offer and promotions for general MA card users. Visa has gone the route of creating an end-to-end consumer plug-in shopping solution, called RightCliq by Visa, which provides consumers with pre-purchase discounts and wish list managemen — a multi-vehicle wallet to store and execute consumer payment — and back-end reporting on transactions and shipping details.
Not Dinosaurs Yet: Traditional card networks are still in a favorable position, if they can deliver valuable multi-merchant checkout solutions that enhance their core offerings to existing merchant and consumer participants in their networks. Visa and MasterCard represent the prime examples of network businesses with significant advantages in current consumer and merchant adoption. And in all network business models, the larger the network is, the greater its advantages over competitors and the brighter its prospects for continued growth. In this respect, a traditional payments networkm such as Visa, should be very well positioned. With nearly 2 billion cards in circulation (roughly one in three people on the planet) and over 30 million merchants accepting, Visa should be holding all the cards for growth in online payments. However, the company must invest in solutions that provide the same kinds of speed, convenience, and security (real or perceived) that alternative checkout solutions are currently delivering — and the company’s solution must be relatively easy for consumers and merchants to adopt if Visa is to play to its existing network strengths. As discussed below, the company is testing a couple of approaches to this, while MasterCard is taking a completely different approach by working to drive consumers and merchants into an online marketplace where MasterCard transactions are advantaged.
Multi-merchant account management facilities, particularly those already tied to a base network business platform, are well positioned to capitalize on the trend from commerce facilitation to commerce creation. And, as we have reviewed before at PYMNTS U, any commerce facilitator that has access to a major network with a large user base stands a great chance to ignite and grow differentially versus others. Those players that have established significant client bases on either the merchant or consumer front, and which have demonstrated experience in marketing and promotion are most likely to succeed. So, in addition to the likes of Amazon, Google, and PayPal, we should also keep our eyes on Intuit and Facebook. But don’t dismiss a commerce engine built by, and/or bolted onto, the MasterCard (Marketplace) or Visa (RightCliq) networks.
But What about Steve? Notably absent from the debate about how to monetize and expand an existing base of registered checkout consumers is Apple. Apple built a successful consumer electronics business out of a small, and arguably threatened, position in personal computing with the launch of the iPod and its progeny, the iPhone and iPad. Apple worked to tie these services together with an online marketplace for applications and services uniquely tied to those devices and to their “mother ship” platform, the Mac computing platform. With that model, a funny thing happened on the way to the App Store business: Apple built an enormous database of users and payment data, tied to alias and password. If Apple ever elected to drive that user base into a commerce engine, built by them or others, to facilitate mobile payments — for example, with merchants who might adopt the mobile PoS and e-mail receipt model found in Apple Stores for physical and online purchases — the payments landscape could change considerably overnight. Perhaps the little platform that could down in Cupertino is best positioned to become the most prevalent species in the coming climate change.
Click here to officially register for PYMNTS University
Driving Payments Innovation through Education- PYMNTS University
Durbin Debit 101 (required): Retail Deposits Have Changed Radically Overnight
Debit 201 (Required. Debit 101 prerequisite): Is Prepaid “Debit-Lite?”
Point of Transaction 201 (required): Competition for Consumer Choice
Mobile 205 (required): GPC Payments Value Proposition
Mobile 206 (elective. Mobile 205 prerequisite): Emerging Payments Value Proposition.
Cloud Payments 210 (required): Building Value in the Network
eCom 301 (elective): Evolution of Online Commerce
eCom 302 (elective): Emerging Competition
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