Summer is usually filled with torpor, slow movement and dreams of beaches and other idylls.
Unless you’re in the payments space.
No kicking back here. For us at PYMNTS, there was plenty to chew over and mull, and none of it came with ice cream, beach umbrellas or swizzle sticks. Some of the biggest headlines of the year came during the summer and involved marquee names that dominate eCommerce, many of which are in the midst of pushing into each other’s wheelhouses.
Take for instance, Amazon, who, among the 800-pound gorillas in the eCommerce space, has been busy honing its reach into consumer living, well beyond the reach of order fulfillment and warehousing. As reported early in the summer, the company’s digital assistant, Alexa, unveiled a slew of new offerings and skills, bringing the list to as many as 1,900 skills and services. That comes on the heels of the one-year anniversary for Alexa, which has been growing at a pretty hefty clip, opening itself to developers who see a voice-enabled commerce future.
Elsewhere in Amazon land, the continued march to embrace and promote an omnichannel experience has been one marked by simplicity, such as the one-click payment system that now is the hallmark of the Pay with Amazon button. The streamlined checkout experience has, at its roots, the drive to make the mobile checkout experience an easier one. Then, of course, there’s the jump into physical retail space, dominated by the opening of the Amazon bookstore in Seattle, Washington.
Amazon’s scaling into new transactional and “lifestyle” territory makes sense when measured against the shots across the bow being fired by other retail giants, such as Walmart. The latter said earlier this month that it would buy Jet.com, focused on household goods and groceries, a move that spurred PYMNTS CEO Karen Webster to mull a retail rivalry gaining in intensity, especially in online sales (and it should be noted that Jet’s prices are competitive and, in many cases, lower than Amazon’s).
Where one rivalry deepens, another evolves. Visa and PayPal linked arms to foster a continuum where Visa and PayPal will work with issuers to give Visa accounts premium positioning in the PayPal wallet. And for PayPal, it’s an opportunity to glom onto contactless payments in physical stores. The other cross-currents of benefit will come through real-time P2P for Visa accountholders.
For Visa, the near-term opportunity is a year-long exclusivity period that allows the firm’s issuers to bring their own brands and digital credentials to PayPal, giving them and their customers an easy foothold into the digital wallet space worldwide. For PayPal, it’s an opportunity to partner with the world’s largest payments brand and boost the number of accountholders with active PayPal accounts, who can use them online. PayPal also gains parity in-store with an NFC-enabled solution.
All of these big players play in an arena that has headlines dominated by Apple (and after all, what subset of tech doesn’t have Apple as a continued hot topic?). This summer saw some efforts by the tech juggernaut to spread its payments wings geographically forward, so to speak, with management stating on quarterly conference calls that Apple Pay is growing at five times the transaction volumes that had been seen last year and that services as a percentage of sales (that would be the segment that includes Pay) has been steadily ratcheting up as a percentage of total top line. If only we knew the denominator, which Apple never talks about. Then, there’s the battle Down Under. Apple has been trying to make inroads into Australia, with a freezing effect, since some of the big banks don’t like having to pay the Apple piper for contactless capabilities when they have their own apps that they’d like to use on Apple iPhones instead.
Regulation was a key source of news in the United States, as there was continued debate over payday loans and interest rates focused on consumer fairness and just how information is conveyed as to what borrowers would actually owe. And it is a concern that layering such debt becomes a vicious cycle, wherein borrowers take on payday loans just to pay payday loans and, in effect, find themselves down a rabbit hole of payments, never quite catching up to what is owed. That, however, fails to consider the benefit of these loans to the middle-class, banked consumers who need them. Consumer protections are supposed to protect consumers and not harm the very people it was intended to help.
If fairness in payments remains a key focus of regulators, fraud should remain a key focus of, well, just about everyone. This summer saw the latest release of the Global Fraud Attack Index, and the numbers are a bit sobering. The statistics show that, in the first quarter of this year, there were 34 attacks for every 1,000 transactions logged across U.S. online merchants, which translates to a 126 percent increase over the past trailing four quarters. The targeted attacks on online merchants, perhaps understandably, translate into an attack rate on digital goods that tripled over the same period. The read across here? Don’t expect a Labor Day respite from fraud attacks, and certainly don’t look for an optimally safe online holiday shopping season.
The digitization of shopping has also spurred the emergence of unattended retail, which is gaining acceptance among several vendors (and the machines that vend). The Unattended Retail Tracker, in its latest iteration, showed that the emergence of the mobile payments-driven vending machine experience is in full bloom, with the entire unattended retail segment projected to grow to as much as $83 billion over the next six years, up from $54 billion now, which translates into a high single-digit CAGR. As amusement park crowds wane into the last few weeks of summer but fall festivals ramp up, could we see more transactions at the (smart) vending machines dotting the payments landscape in increasing numbers?
Shakespeare wrote that “the readiness is all,” and this applies to the state of omnichannel, where retailers have been bringing — albeit slowly in some cases, in terms of adoption — technology that enables brick-and-mortar locations to become more flexible digital store fronts. The latest data over the summer showed that, over the quarters from Q2 2015 to Q1 2016, the OmniReadi Index showed improvement from 75.2 to 87.2, which has been a bumpy ride (100 would be a perfect omnichannel experience and thus the trend overall has been a positive one). The shift from physical purchases to digital ones presents an opportunity for merchants, but the growing pains, in terms of investing in technology and also currying consumer favor in a crowded online marketplace, can be substantial.
The summer doldrums? Look no further than online lenders and Lending Club for those who are looking forward to putting this season of discontent behind them. Lending Club’s woes were, and are, in some sense, company-specific, as executives were ousted over furor tied to document falsification and worries over demand for its own loan book. But the malaise spread far beyond that company, including sliding stock prices, as online lending across the U.S. was off 34 percent in the second quarter from the first quarter, as Bloomberg noted last month. The fact remains that investors have curbed their appetite for risk and specifically risk tied to alt-financing, as charges have been on the rise.
And as you load up the car to drop the kids off at school, consider this: You may not want them to be too popular, as popularity may presage … obsolescence. OK, that may be a stretch, but if you’re a startup, as PYMNTS has noted, cool kids tend to flame out. We’ve tracked the coolest companies, class by class, and there’s a surprising trend that is also troublesome, where today’s innovation becomes tomorrow’s case study in failure. The latest iteration shows that the class of 2013 was a less-than-stellar vintage, with 15 of 24 companies tracked finding status as defunct enterprises. Funding means nothing when popularity is fleeting, competition is building and cash flow is lacking — bringing to mind the Paul Simon lyric, “Who’s gonna love you when your looks are gone?”