Payments Innovation

Sizzle Or Fizzle: The Brexit, The Fire Phone Part II And Why It’s A Great Time To Be a Lawyer

Later today, millions of Americans will pack up their gear and head to a favorite spot to celebrate our Independence from the British. No, we are not going to make any Brexit jokes – as tempting as it may be – since we will devote a whole piece on Monday to describing the many rituals of Independence people all over the world will celebrate that day – or may be soon. What we will say is that fun times with family, the dazzling display of fireworks and the perfunctory cookouts and beach time, truly and totally make this upcoming weekend one very big sizzle wrapped around what appears to be in Boston, at least, abundant doses of sunshine. Seriously a Sizzle!

But given the state of things all over the world this week, we had to really think hard to find a lot more stuff that Sizzled. Fizzles, on the other hand, were in great abundance – although we did manage to find a few Sizzles, too.

Our Fizzle/Sizzle picks for the week.


London’s Fintech Scene

What a mess. In the week that was Brexit, U.K. bank stocks have been hammered – so severely, in fact, that storied names like Barclays lost about a third of their value, literally, overnight, not to mention, perhaps their perch as attractive FinTech incubator. Some of the members of the London FinTech scene are, themselves, prepping their own Tech-xits as other countries throughout the E.U. and the U.K. contemplate their own moves. The uncertainty over access to capital, resources and ease of movement across Europe grows, and the markets everywhere just hate uncertainty and have no problems showing it – just take a look at your stock portfolios, if you dare.

While there is an acknowledgement that whatever happens will take years to unwind, and many are keeping those stiff upper British lips, stiff, the longer that the lack of certainty takes to become certain one way or the other, the less likely that it might be that innovators set up shop, expand their footprint or make long-term plans to call London home. Even if Brexit turns out to be the real deal – some question now whether it will as the “be careful what you wish for” reality takes hold – London will certainly remain a strong financial center. Just how strong, however, only time will tell.

Peace Among Merchants and Card Networks

The lawsuits just keep flying fast and furiously between merchants and the card networks over EMV and PIN as Home Depot, Walmart and, this week, Kroger have all made their displeasure with Chip and Choice known via lawsuits and lawyers. Yesterday, Visa filed its counterclaim in the Walmart litigation, accusing the world’s largest retailer of “acting in bad faith” and deliberately configuring their POS terminals so as not to enable a signature when debit cards are prevented. They’re playing tough too – suggesting that both Kroger and Walmart are at risk of losing their ability to accept Visa debit cards if they do not follow their rules as stipulated in the commercial agreements they signed.

But the other shoe sort of dropped yesterday when the $7.25 billion antitrust settlement over credit card fees between Visa, MasterCard and millions of retailers was tossed out in the 2nd U.S. Circuit of Appeals in New York. New York Circuit Judge Dennis Jacobs wrote in his findings that the two classes of merchants should have never been represented by the same group of lawyers and that, in his opinion, posed a “fundamental conflict” to negotiate settlement terms that only benefited one of the classes. The case itself stems from a long-standing dispute between card networks and merchants over interchange and swipe fees toward merchants when shoppers paid with credit and debit cards. Merchants claimed that the card networks barred them from enabling customers to use a cheaper payment form at checkout.

What’s old, is certainly new again.

Lending Club
Speaking of shoes dropping, it just seems to go from bad to worse with Lending Club. We started the week with the news that acting CEO Scott Sanborn was appointed to replace Founder and former CEO Renaud Laplanche. At the same time, the marketplace lender said that they were going to cut 179 jobs in anticipation of lower volumes. Later in the week, we learned, from Lending Club, that some of Lending Club’s loan volumes reported in advance of the CEO were the result of Laplanche’s relatives taking out loans to boost the volume. This, of course, is on top of the other irregularities related to the falsification of loan documents, and the less than arm’s length loans between Laplanche and a Lending Club subsidiary that held loans for the lender. It’s going to make a great Netflix series one of these days.



Let’s face it, the legal profession is on fire. Between Brexit and all of the regulatory and legal mess that will create whether there’s a Brexit or a Regretxit that calls the whole thing off, as well as the lawsuits flying around between the merchants and card networks, it’s a very good time to be a lawyer. And from a billable hours perspective — since when stuff like this hits, who has time to negotiate a deal on fees — can you spell windfall? But since lawyers have among the lowest job satisfaction of any profession – and associates rate their jobs as worse than that of even a minimum wage sales clerk in retail — we wonder if this potential windfall will put both money in their bank accounts and perhaps even a spring in their step.


In a surprise move, Pinterest this week put a Pin in eCommerce by unveiling their version of a universal shopping cart. Consumers will be able to shop across Pinterest’s 10 million Buyable Pins from more than 20K retailers and put stuff in a single shopping cart that does one big checkout for the convenience of the consumer (and the merchant), across all devices and channels (web + mobile).

Pinterest has also unveiled a new feature that makes it possible for consumers to snap pictures of what they see in the wild and then find it online and buy it. Pinterest’s hope is that when people come to this digital inspiration and advertising platform, that they buy sooner (they already say they buy later) and checkout via the big, bad shopping bag that they now enable.

Amazon Prime Customers

Amazon makes a point of steadily adding more and more reasons for customers to spend the $99 a year to become a Prime customer – free shipping, streaming content, and more and more products to buy. But this week they added two more logs to their Prime pile.

The first is Prime Day, which is slated this year for July 12. This will be year two of Christmas in July sponsored by Amazon, which last year saw some 34.5 million products fly out their virtual doors. This year, Amazon says it will put some 100K deals out for Amazon Prime members, who, on average spend 1,100 a year with Amazon versus the ~$600 or so non-Prime Amazonians do. Of course, Amazon – who already claims 21 percent of the U.S. adult population as Prime members – hopes to increase that market share even more.

The second is the release of Android phones that offer Prime customers personalized ads in exchange for subsidiaries that make the phones cheaper to buy. These promotions are displayed on the phone’s lock screen, which can be either acted upon or ignored. We’ll see how much consumers really are willing to trade off for getting ads – even if they are personalized.

So, will Amazon Phone Take II be a sizzle or a fizzle?

Sizzle or Fizzle: The Fire Phone

Though we make it look easy, the determination of a sizzle vs. a fizzle is not as obvious as one might hope. Some things are genuinely on the fine line between genius and madness, and it can be hard to say which way public opinion is going to break on the subject. Other things start out looking like a surefire thing, only to explode spectacularly on the runway long before hitting orbit. And still others look like an idea bound for the ash heap of history, only to end up being that which customers the world over love and adore.

But some things are not so nuanced, and are more or less bound for the floor from the word go.  

Things like the Fire Phone.  

There are a lot of ways to quantify Amazon’s success of late. In surging quarterly profits, the explosion of Prime, the dominance of AWS, Alexa, its growing private label business, its status as a sleeper payments power, its work of art logistics management, the fact that it causes 9 out of 10 CEOs night terrors or the simple reality that when it come to eCommerce, the universal consensus is that there’s Amazon. Then there’s everyone else.  

And with such an incredible run of success of late, it can be hard to imagine that right around two years ago, Amazon was in the process of rolling out one of mobile’s greater belly flops: the Fire Phone. Within weeks of release it was pretty obvious that Amazon had not created the next iPhone, they hadn’t even managed to recreate success at Blackberry’s current levels.

By fall, its quarterly profits were hemorrhaging, stock price was falling and even The New York Times was actively making fun of Amazon’s run of bad luck. The question began to get uttered an awful lot in earnest: Had gravity finally come to call on Mr. Bezos and the gospel of growth over profits?

Well, Amazon got a literal Christmas miracle, as millions of consumers skipped the sugar plums dreams in 2014 and signed on to Prime instead, and found they were highly satisfied with visions of two-day shipping replacing trips to the mall dancing in their heads.

And so the Fire Phone was allowed to quietly be extinguished — a quiet testament to the fact that even Amazon gets it wrong sometimes — and maybe being a major mobile device player is not in their future.  

Or was it?

As it turns out, Amazon may be done with making branded smartphones of their own, but that doesn’t mean they are exactly ready to be done with phones entirely.

Nope, the smartphone rides again at Amazon, proving that if at first you don’t succeed, outsource the hardware to someone else and focus in on the parts of a device your bottom line actually cares about.  

Like stuff.

Instead of selling its own smartphone, Amazon is capitalizing on  Android’s open source, easily modified operating system to offer a modified version on two steeply discounted Android models.

Amazon’s new BLU R1 HD, which comes with a 5″ HD display screen, quad-core processor and 4G LTE speed, can be purchased by Prime members for just $49.99. The sticker price on the phone is currently $150. The Moto G, which comes with a 5.5″ full HD display, an octa-core processor with 2 GB of RAM and 4G LTE speed, is available to Prime members for $149.99, or $50 off its current sticker price.

The unlocked phones allow buyers to find the wireless carrier and service plans that fit them best, as opposed to the Fire Phone which was only available on the AT&T network. But only the more expensive of the two works on all four major carrier networks (Verizon, Sprint, AT&T, TMobile), but the $50 BLU only works on AT&T and TMobile.

So why be so generous with their customers? Well, we like to think they read MPD CEO Karen Webster’s column about what the Fire Phone didn’t have much a chance to igniting.

“To me, the Amazon Fire feels like a strategy that is a bit out of synch with what is needed to truly ignite its ecosystem,” Webster wrote. “If it wanted mass distribution and ignition, and felt it needed a phone to do it, then it could have launched an Android phone and given consumers access to an apps store that at least is at parity to what they are used to. It could have released the Fire at a much lower price point, like it did with its tablet product, to get share or even given it away. Perhaps those consumers don’t drive a lot of spend which is why Amazon decided to go upmarket with the phone and the price point. Yet that’s territory that has a well-established customer base and competitor which is going to be very hard to dislodge. I’m a Prime customer and use Amazon on my desktop, mobile device and tablet but I’m not giving up my iPhone for a Fire phone.”

It seems Amazon Phones 2.0 have checked off a lot of those problems – Android store instead of their own too-small app store alone and a lower price point. But a lower price point that comes with a feature that makes it easier for Amazon to do what Karen Webster speculated all of Amazon’s latter day device enthusiasm is really about.

“The great hope of the Amazon Fire – create the walled garden of Amazon accessed only via a mobile device that they produce.”

The producing their own device part didn’t work out so well, but it turns out that is no reason to abandon the hopes of getting consumers into that Amazon-fueled walled garden.

Which is likely why consumers who buy one of these new discounted smartphones have signed on for ads. Behind the lock screen, Amazon users will see ads, much they way they do on subsidized Fire tablets and Kindle e-readers.

More than ads though, the smartphones will also come preloaded with apps — lots and lots of Amazon apps. And while many Amazon users have the eCommerce app or the Kindle app, the new Amazon subsidized phone will put users much more in touch with Amazon’s apps ecosystem. The apps for Amazon Underground app store, Audible, IMDB, and Amazon Video – and the far less commonly downloaded Goodreads, Prime Now, Alexa, Amazon Music, Amazon Drive, and Amazon Photos — will all come preloaded in the newly available low cost models.

So, will it work?

Well, this time around, it is much harder to make the sizzle or fizzle call. Amazon has corrected many of the major defects of the first time through with its latest run at the space. That is encouraging and indicative of a sizzle. 

But …

The people in payments so far don’t seem to be buying that Amazon can pull a Phoenix and make a device play work. In a PYMNTS Twitter poll yesterday, only 11 percent rated the idea as a sizzle. The remaining 89 percent went fizzle.

So what to say on Amazon this week? It’s not impossible, but it seems they have a high mountain to climb.


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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