Who’s Walking Mobile Payments’ Red Carpet?
Let’s face it; you don’t have to see a single movie nominated for an Oscar to love the Oscars. The real reason that anyone watches the show anymore is to see what the movie stars are wearing (or not wearing) when they walk the red carpet, who the emcee picks on during the opening monologue and who gives the worst acceptance speech. It’s the combination of the three that also keeps the really dedicated up until the bitter end, 3+ hours later, to see what movie picked up the Oscar of all Oscars – Best Picture.
So, OK, all you Payments A-Listers out there, the day after we all know who won Best Picture (Birdman), Best Actor/Actress (Eddie Redmayne and Julianne Moore), and importantly, who wore it best (Reese Witherspoon and Jennifer Aniston), here’s what might have happened if those walking Oscar’s Red Carpet last night were the mobile payments glitterati instead of Ethan Hawke, Bradley Cooper, and Rosamund Pike.
In no particular order …
Nominated for | Best Short Film
The Plot | Jilted lover tries (again) to find love and happiness in mobile payments.
Google Wallet made news last week and is reportedly in cahoots with the mobile operators to get its Wallet off the ground (again). From what was reported, this strategy is taking a page out of the Softcard/Isis playbook that tried to drive massive distribution of its wallet via the mobile operators. Or more likely, the Softcard business model, operator relationships and patent portfolio, if the reports of its sale to Google Wallet for $50 million are accurate. This news follows on the heels of more news that Google was shuttering Wallet activities in Africa, expanding its P2P use case in the U.K., hooking up with WePay to enable its Instant Buy button through its marketplaces and shuttering its API for digital goods in March. Of course, Google Wallet has struggled for years to get off the ground – first as Google Checkout, and then as Google Wallets versions 1 and 2 hit both NFC, handset and network brick walls.
What They’re Wearing | Jeans and T-shirts (and arriving in a driverless car)
What The Critics Say | Google has more than a bunch of challenges facing it in the mobile payments arena. As a company that has built its reputation and market cap on data, merchants don’t trust that it won’t use theirs against them. And, it doesn’t have enough control of the Android ecosystem to drive critical consumer mass and, therefore, enough merchant interest to be powerful or viable. Google Now and the “cards” that related to preferences, information about stores, services and locations is potentially a “back door” for commerce and its Wallet ambitions but it’s hard to see a viable path for Google in payments unless it buys a big player who basically becomes its payments’ front end.
Who They Would Thank In Their Acceptance Speech | Larry and Sergey for sticking by them with the big bucks.
Nominated for | Best Action Feature
The Plot | Once-dominant warrior buys startup to fight big powerful tech company rival.
Samsung bought LoopPay last week in an effort to become the Apple Pay of the Android ecosystem – and compete with Apple more generally. Samsung has had its fair share of bad news over the last couple of months as its market share against Apple has seen steep declines and the launch of its new operating system has seemingly hit a brick wall. The edge that was once theirs thanks to bigger screens and the dominant share of Android phones is slipping now that Apple has introduced its own version of the big screen, and Chinese handset manufacturers have entered the market with cheaper handsets. And, even though Android may have the larger share of OS market, the share of spend they command is small by comparison (Apple iOS users drive ~ 66 – 70 percent of consumer spend). Samsung’s move seems to be a nod to their belief that the availability of a digital wallet that can be used “ubiquitously”– and not features, functions, availability of apps and prices – will spike interest in their new handset that is said to debut at Mobile World Congress next week.
What They’re Wearing | Leisure suits, shoulder pads, and bell-bottoms.
What The Critics Say |Cynics say that at just the point in time that the world is moving past mag stripe technology, Samsung is doubling down on it. Advocates say that it was a smart move to leverage the existing merchant tracks that are in place now that could give it an edge and compete against Apple. Independents say that it’s a bridge strategy, at best. Samsung’s biggest challenge is getting a grip on the Android ecosystem, something made that much more difficult since Samsung seems determined to launch its own alternative operating system (Tizen). Samsung is also likely to struggle to get consumers on board with a Samsung branded wallet since they are a long way from having the kind of brand devotion that its archrival, Apple, enjoys. Like most other things Android, to the extent that developers and merchants and issuers embrace its “Samsung Pay” application, it will be after they shore up their Apple Pay plans. The combination of shrinking handset sales, a big consumer adoption hurdle, and its operating system schizophrenia, makes digital wallet ignition for Samsung anything but a certainty. A big question is whether LoopPay will work so seamlessly that merchants really don’t need to do anything to get on board and if they do, then the share of consumer spend on Samsung phones with LoopPay might not be enough to get merchants to anything anytime soon.
Who They Would Thank In Their Acceptance Speech | VeriFone and Ingenico for having done such a great job of getting 9 million merchants in the U.S. over the last few decades set up to accept mag stripe cards.
Nominated for | Best Director
The Plot | Big man on campus plays the field.
Visa Checkout is Visa’s bid to enable digital payments in app and via the browser. Visa announced last week that it will expand to 16 more countries by the end of 2015 (Argentina, Brazil, Chile, China, Colombia, Hong Kong, Peru, Malaysia, Mexico, New Zealand, Singapore, South Africa, UAE) and that it has more than 3 million customers registered (1 million more than what Visa CEO Charlie Scharf reported in Visa’s Q3 earnings call in October). The press release from Visa that broke this news also said that 75 percent of those 3 million people are active users, repeat customers are up 16 times and merchants say that 40 percent of Checkout users are new to their site. Visa also announced on the eve of the President’s Cybersecurity Summit that it was extending its tokenization services outside of Apple Pay to Visa Checkout.
What They’re Wearing | Blue blazer, white button down and grey slacks
What The Critics Say | Both Visa and MasterCard have given alternative players like PayPal a 15 year head start on building an installed base of consumers with digital accounts and the ability to use them online. Today, merchant checkout pages are starting to look like NASCAR race cars – way too many checkout buttons and little reason for consumers to pick any of the ones that they haven’t already tried and used successfully. The real battleground, however, will shift to apps and who is able to deliver friction-free in app payments and in enough apps for consumers to build that habit. And there, in addition to the “incumbents” Visa has Apple Pay to compete with, a brand that they also enable and promote. Along with every other player whose model is to register a network branded card to their wallet. Oh, what a tangled digital web we weave…
Who They Would Thank In Their Acceptance Speech | The issuers who have helped them become the largest payments network in the world with the scale and momentum to compete with the same players they want to collaborate with.
Nominated for |Best Supporting Actor in a Comedy or Drama
The Plot | Rebuffed suitor pleads for just one more chance.
MCX emerged from hibernation last week and spoke at the Merchant Advisory Group meeting in Dallas. No official word on what was said but the agenda reported that they would address “the current state of mobile payments, with an emphasis on how this affects merchants across industries and throughout the country.” The last time we heard MCX speak it was related to the public relations disaster that followed the launch of Apple Pay and the decision on the part of merchants to shut off NFC and disable it. And apparently the conversation that was had there was more of the same vagaries – yes, we will have something sometime that will be great and will include the banks. The cat and mouse game is as tedious as Neil Patrick Harris’ attempt to keep the Oscars entertaining last night.
What They’re Wearing | Faded Glory (Wal-Mart’s primary clothing brand).
What The Critics Say | Most coalitions – business, political or social – are inherently destined to fail the day they are formulated. It’s nearly impossible to wrangle the many self-interests of the individual parties for the greater good, and there’s always one or two players whose power and self-interest ends up dominating the direction of the coalition. MCX, as a mobile payments merchant coalition, is no different, and as a result, has two chances of igniting its mobile payments scheme: slim and even slimmer. Rumors are circulating that at least one of MCX’s “anchor tenants” is ready to pull out and others are said to follow suit. Further, since Davidson remarked last year that it will relax the exclusivity provisions that are in its member contracts when they are up for renewal this spring, that will only open the door for competition from others (Apple Pay, PayPal, etc.) who have a more consumer-friendly proposition. And once PayPal or Apple Pay or both enable private label cards in their apps, the raison d’etre for MCX simply evaporates.
Who They Would Thank In Their Acceptance Speech | Wal-Mart and Mike Cook for continuing to keep love alive (and money pouring in for MCX and its mission).
Nominated for | Best Comedy
The Plot | Group of businesses pour money into mobile payments money pit only to encounter a series of disasters, a horrible terrorist group that co-ops their brand name, and ultimately stages a “fire sale” just to unload it.
The last big news out of Softcard about 6 weeks ago was the layoff of 60 people and rumors for those who were left to “stop work” since an acquisition was imminent. It’s been crickets ever since, and pretty much since its launch in 2010. Well, there was that big Jamba Juice promotion and the rebranding to Softcard after the ISIS PR debacle.
What They’re Wearing | Mourning clothes
What The Critics Say | Isis, back in the day when the only other definition for Isis was the Egyptian Goddess of Fertility, might have amounted to something. Key phrase is “might have.” Except that it was a good idea badly executed. Softcard/Isis could have been Apple Pay + Samsung Pay all rolled into one except that it dug its heels in an NFC technology, a Secure Element strategy and a limited set of payments options that also forced an intermediary called the mobile operator into the middle of payments and created too many frictions for consumers and merchants. Hindsight is 2020 now for those guys, which also cost them nearly $1 billion.
Who They Would Thank In Their Acceptance Speech | Tapper, its puppet mascot, for its heroic efforts in trying to save the franchise in the 11th hour. Way to take one for the team, big guy.
Nominated for | Best Actor
The Plot | Showdown at the mobile payments dude ranch.
Ironically, at the ripe old age of 15, PayPal is the granddaddy of the digital payments world. Today, its ~180 million users drive about 20 percent of PayPal’s volume via mobile devices. New President Dan Schulman is doubling down on PayPal’s position as a trusted financial services provider and merchant partner – and expanding its scope beyond just POS acceptance on and off-line. Over the years, eBay’s acquisitions have helped it build out PayPal’s capabilities in the credit (Bill Me Later), software/developer/integrated payments (Braintree), data (Iron Pearl) capabilities, and dynamic pricing (Decide.com) to strengthen its merchant and consumer value propositions. More recently, PayPal released the results of its 22 market, 17,000 consumer survey about how consumers are using mobile devices to shop that underscores its strength in the cross border commerce arena, struck up a partnership with Microsoft to further expand its SMB POS offering using PayPal Here and announced new retail services that include credit, merchant cash advances and business consulting services.
What They’re Wearing | Chaps and cowboy boots
What The Critics Say | Critics say that PayPal is on the ropes given its inability to capitalize on the Discover relationship it struck up nearly three years ago to dominate in store payments – and has relinquished what many thought was a decided advantage in that area to Apple and Apple Pay. PayPal says that the best is yet to come and as a cross ecosystem, cross operating system, cross channel, cloud-based, technology agnostic (now), solution and 180 million consumer base gives it advantages that no one other player has in this space. The big wildcard is how PayPal uses those assets over the next two to three years and strikes up critical partnerships that get merchants and consumers hooked on it as Apple Pay rides the terminalization wave.
Who They Would Thank In Their Acceptance Speech | Carl Icahn for finally giving them the freedom to operate with autonomy and eBay for its $6 billion dowry when it separates later this year.
Nominated for | Best Actor in a Supporting Role
The Plot | Outwardly friendly and non-threatening neighbor is later found to be building a massive strategy to take over and control the neighborhood.
Starbucks is the most successful example of mobile in-store payments that exists today. Thirteen million consumers have the app downloaded since its launch in 2009 and national rollout in January of 2011. Those consumers drive 7 million transactions a week and now account for 16 percent of tender in its stores. Starbucks mobile payments scheme uses QR codes and a prepaid card to support its payments experience. Recent announcements include the severing of its relationship with Square (no one really used those wallets anyway in Starbucks), the ability for iPhone 6 users to fund their wallets using their Apple Pay accounts and a pilot program for online ordering.
What They’re Wearing | Sequined barista aprons
What The Critics Say | Starbucks has certainly gotten consumers into the habit of using their digital wallets for the purchase of their coffee. Part of its success is the habituation associated with people buying coffee from Starbucks at least once a day, and the integration of loyalty around the payments experience. In one sense of the word, Starbucks has achieved ubiquity in the coffee market segment given the acceptance of its digital payments method in all of its ~20k locations and given its ~38 percent share of the market. Starbucks’ geographic density and proximity to other “main street businesses” would make it a strong candidate for a mobile payments scheme that allows the use of a Starbucks mobile payments account at other businesses nearby – main streets, airports.
Who They Would Thank In Their Acceptance Speech | The American consumer who made it OK for people to spend $2.25 for a cup of coffee.
Nominated for | Best Foreign Language Film
The Plot | Horatio Alger for mobile payments …former English teacher from China emerges from nowhere to show Americans and the world how to “do” mobile payments and commerce.
Alipay has the largest number of digital accounts in the world. It is reported that they have ~800 million digital accounts and more than 300 million mobile only accounts. Alipay, like PayPal, ignited as the payments method for the Alibaba ecosystem and has expanded to become the way that Chinese consumers pay their bills, pay for tickets, pay for taxi rides, invest and pay for things offline. Chinese consumers view Alipay as central to their financial lives given the many places and use cases it provides them. Ant Financial, the parent company that owns Alipay, is reportedly being readied for an IPO in 2016, with an expected valuation in the $30 billion range.
What They’re Wearing | Shirt and V-neck sweater
What The Critics Say | PayPal’s latest survey of mobile shopping and spending says that China is the most mobile centric of all of the countries it surveyed. Chinese consumers, armed with mobile devices and access to the Internet, use those devices to shop and buy online. As a result, Alipay has the potential to drive enormous incremental spend to merchants that accept Alipay and there is now a mad rush to add Alipay as a method of payment to many sites outside of China. Since most Chinese consumers don’t have branded Visa or MasterCard cards, Alipay provides them with a mechanism to buy anywhere in the world. For instance, ShopRunner, which received a $200 million investment from Alibaba, has added Alipay as a method of payment for its branded mall of American retailers in order to drive new customers to those merchants who are able to transact using Alipay.
Who They Would Thank In Their Acceptance Speech | Jack Ma for his decision to bag teaching and start Alibaba (and Jingming Liu for being his friend and creating it.)
Nominated for | Best Animated Feature
The Plot | Mad scientist plots takeover over of the world.
When Amazon launched in 1995, it launched with the online payments standard that everyone has since tried to replicate: one-click checkout. It’s helped grow Amazon into a $29+ billion company with ~240 million users and a starting point for consumers looking to buy stuff online. Ten years ago it also invented the concept of subscription-based delivery services – Amazon Prime – that has seen its paid membership grow 53 percent last year despite an increase in the annual subscription cost. It is estimated that Amazon Prime members number 40 million to 50 million, who outspend non-Prime members almost 3 to 1. Amazon has dabbled, largely unsuccessfully into payments outside of Amazon, acquired (but not used yet) a POS software platform (GoPago), launched an mPOS solution (presumably for its online merchants to use in their offline stores), and launched the Amazon Fire phone only to ice-cold reviews over a year ago. Amazon also made headlines last year when it announced that it was going omnichannel and later opened a bricks-and-mortar outpost in Manhattan where it just announced its same-day delivery service, days after the FAA put the kibosh on commercial drone delivery.
What They’re Wearing | Flight suits and crash helmets (just in case drones are approved)
What The Critics Say | Amazon has a merchant problem in much the same way that Google has a merchant problem – merchants fear them. Despite the fact that 50 percent of the number of units sold by Amazon were sold by third-party sellers (1 billion of the 2 billion units sold), the number of new sellers has remained flat. Amazon provides a massive opportunity for distribution but exposes that seller to Amazon’s incredibly sophisticated data mining capabilities that some have said make it too easy for Amazon to cut out sellers by going to their suppliers when they see demand for certain types of products expand. That creates a conundrum for Amazon as it contemplates expansion of its payments mark outside of its own ecosystem, and suggests that Amazon’s best strategy is to leverage its mark (and the habit created by its 240 million consumers that use it regularly) to expand into services (restaurants, the trades, travel where it is rumored to be expanding). And its omnichannel ambitions to bricks-and-mortar locations that make it more efficient to showcase, warehouse, and deliver goods and services the same day from those sellers it features in its online marketplace – sort of a Wal-Mart + Macys on steroids.
Who They Would Thank In Their Acceptance Speech | Apple and PayPal for keeping Carl Icahn busy and off his radar screen and investors for two decades of patience while it has failed to deliver a profit.
Nominated for | Best Picture
The Plot | Beautiful, rich and exotic young ingénue shocks the world by marrying powerful, well-off but much but older suitor.
Established payments networks see big tech giant fall in love and get married after a whirlwind (for payments anyway) courtship. Throughout the courtship, big tech giant was plied with offers of devotion from issuers – including interchange spiffs and consumer incentives – to keep it from playing the field. Their love interest, Apple Pay, has been showered with affection from merchants like Whole Foods and Walgreens that claim that in-store contactless payments has doubled since little baby Apple Pay was born, and Staples that claims that in-app conversions have skyrocketed. NFC enthusiasts have been reported to have celebrated hard at the reception, feeling vindicated that someone as powerful as tech giant finally took them seriously enough to adopt their technology protocol and give it life and legitimacy. Roll credits.
What They’re Wearing | Oscar de la Renta – what all exotic ingénues wear on the red carpet
What The Critics Say | Apple Pay has pulled off the coup of all payments coups – the most powerful and profitable company on the planet managed to get issuers to subsidize its payments scheme by paying 15 bps on each transaction, issuers and networks to underwrite most of the cost to ignite it via promotions and advertising while having their brand subordinate to Apple Pay and being okay having Apple standing between the issuer or merchant and the consumer. The catch was tying Apple Pay to NFC and the terminalization efforts underway in the U.S. related to EMV migration and thus the availability of merchant terminals and consumers with iPhone 6’s/6 Pluses. The hardware constraints on both the consumer and merchant side put Apple Pay ignition at risk to a cloud-based, cross-ecosystem/operating system player and a merchant strategy that forsakes terminals and checkout lanes to cloud based/on to offline payments transactions. And, at the moment, since Apple Pay is only about payment, and is not widely available at merchants, the big question for Apple is whether just being about payment is enough for consumers to get hooked enough to make Apple their mobile payments habit. And, like all young, beautiful, rich and exotic ingénues, whether Apple may decide, after seeing how the whole payments gig works, that they are bored and look for something more exciting – like buying a payments network and becoming their own big competitor to the networks and issuers that gave it life.
Who They Would Thank In Their Acceptance Speech | The card networks and issuers for making it so easy and costless for them to learn about payments.
OK, so while the payments world might never see the glitz and the drama of the red carpet in Hollywood, the big winners are all of us, who get to be part of the most exciting time in payments and commerce. We are all living in and watching history unfold before our very eyes. Books will be written about this time in payments and we are pretty lucky to be shaping, disrupting and innovating a sector that powers our global economy.
I’d also be remiss not to mention that we actually have the mobile payments version of the Oscars – that’s at least what people have said – the evening of March 19. That’s when we announce the 2015 PYMNTS Innovators Awards, live, on the closing day of The Innovation Project. We have nearly 80 companies as finalists, from a field of more than 600 submissions – and voting ends on Tuesday. When I last checked in on Friday, we had nearly 10k votes and some of the categories were pretty tight. Don’t forget to vote for your favorites!