The Monsters Of Payments And Commerce

The haunted commerce season officially comes to a close tonight after the last trick-or-treater departs. Most Americans will, at this point, determine they were either over-prepared for Halloween and now face weeks of eating candy for breakfast, or discover that they were underprepared and thus forced to empty their pantry and give the neighborhood children whatever was lying around.

Whatever way that breaks, the reality for most Americans is that the time for make-believe scary has come to a close, and the time to contemplate holiday shopping — the real horror — has begun.

And that is not an obligatory “the holidays now start the day after Halloween” joke. It’s a statement that reflects the fact that any number of major retailers are under strict orders to have flipped merchandizing from Halloween gear to holiday goods by Nov. 1. That means that on Saturday, when consumers go to stores to run errands, it will still be Halloween, but when they go out early Sunday to buy the milk they inexplicably forgot at three different stores the previous day, it will be Christmas (or at least Thanksgiving).

However, we at PYMNTS are not quite ready to throw our lot in with Target, CVS, Walmart, Lowe’s, Kohls or Kroger and start jingling all the way just yet. We think those make-believe monsters deserve at least a few more minutes of our consideration.

MPD CEO Karen Webster, incidentally, wrote more seriously about The Scariest Things In Payments for last Halloween. That list still holds up pretty well, but we recommend reading it in a well-lit room.

This year, however, we thought we’d look at the lighter side of scary. And when we started to think about it, it occurred to us that many of the classic monsters being celebrated today bear something of a startling resemblance to some of our favorite payments and commerce players.

For example, have you ever noticed that:

On-Demand Grocery Delivery Is Like The Mummy …

...because it rises from the dead every so often to wreak havoc.

Grocery delivery is undeniably big business and a force to be reckoned with in the market. Venture capitalists have dropped over $1 billion into grocery and food delivery operations. Instacart, the best known startup associated with grocery delivery, is currently valued at an impressive $2 billion.

And if something in that story feels a bit familiar to you, it’s not a deja vu, you’re probably just remembering Webvan — a firm that went down in history as an example of dotcom-era startup enthusiasm gone awry. After bringing in a whopping $800 million in VC funding (a little over a billion dollars in 2014) and clocking in with a top valuation of $1.2 billion ($1.6 billion today), Webvan went public and then went spectacularly bust. Brought down by logistics that were deemed unmanageable, a GBF (get big fast) mentality that saw expansion into cities faster than the firm could actively manage and a pricing model that even its founder later said was “unsustainable,” the firm didn’t survive long on the public markets.

Enthusiasts of on-demand will note that the parallels between Webvan and Instavart or its fellow grocery delivery mates are actually limited, as mobile has changed (and resolved) many previous infrastructural challenges. Grocery delivery is not so much a resurrected idea that has found a way to shamble out of its tomb, but a reborn idea that offers much of the promise of the past, without many of the problems.

But, detractors wonder if the essential idea: that people will en masse opt to have groceries delivered as opposed to shopping themselves, is different enough this time to overcome one of the two biggest hurdles grocery delivery ran into last time (after an initial pop of enthusiasm, consumers weren’t that into it and it didn’t get to scale). The other big issue, of course, was logistics, another big obstacle that mobile and apps has overcome. Instead of having to operate a grocery store and deliver groceries, mobile and apps makes it possible for an army of green-shirted delivery people to be mobilized, literally, to shop at existing stores and deliver groceries that those stores have in stock and on shelves anyway.

So it is possible that on-demand is actually less like the mummy and more like the phoenix, renewed by its rebirth and better than ever. But anyone with a longish memory should be at least a little spooked about on-demand grocery finding its way back to the sarcophagus of consumer indifference.

Bitcoin Is Like An ’80s Movie Slasher …

… because no matter how spectacularly dead it looks, buoyed by an enormous fan base, it will survive for another sequel and another and another.

About this time two years ago, bitcoin was on a meteoric rise in value that saw early adopters becoming “bitcoin” millionaires (on paper) over the course of days, or, in some cases, hours. That was followed by a long, dark period that featured the collapse of Mt. Gox, the fall of Silk Road/Dread Pirate Roberts, a single mining pool gaining so much power they nearly brought on “the apocalypse,” various votes of no confidence from legislators around the world — and prices that would be mildly described as turbulent.

And that’s a very short list.

And yet, bitcoin is alive, well and the recipient of GOBS of VC money – like hundreds of millions of dollars of it — like a Hollywood franchise slasher that’s never actually going to die because studio executives keep pouring money into sequels. It is apparently immortal.

Or at least it has a number of lives.

Bitcoin’s reputation has preceded it into the hallowed halls of banking where it is an intellectual curiosity but product non-starter. So, bitcoin has become reborn into the blockchain – where it is gaining momentum. The distributed ledger, as a concept, to expedite the secure delivery of data and money, is intriguing. That means that many of the players that once wouldn’t give bitcoin the time of day, are giving the blockchain lots of time, money and attention: Visa, Amex, and Santander Bank.

Unfortunately, it is impossible to separate the blockchain from the bitcoin, as we’ve pointed out a couple of times. But, alas, bitcoin fans (no matter what happens) will always point to the innovation of the blockchain and its potential for making payments to anywhere from anywhere instant and free – the Internet of money!

If that were only true.

Because, as it turns out, whether it’s bitcoin or Freddy Krueger, a loyal fanbase is more important than a logical narrative.

Mag Stripe Cards Are Like Zombies

…because they appear dead even though they are far from it.

Ding-dong, the mag stripe is dead!

We’re a month into the EMV transition, chip cards rule the land and flowers can be sent to the grave of mag stripe in honor of its 50-plus years of service.

Except, surprise, surprise, mag stripe is not in that grave.

Nope, like zombies, millions upon millions of mag stripe cards will be shambling across the country for some time to come. As of the liability shift earlier this month, the majority of consumers didn’t have chip-enabled cards yet. And, the majority of small businesses were not – and are not — equipped for EMV tech (and had no immediate plans to become compliant). Visa’s published data states that there are 341,000 EMV-compliant terminals in the market as of Oct. 1.

And then there’s self-service gas pumps, which are exempt from the liability shift for two years. Paying at the pump will be via mag stipe for a while (unless there is a major case of mobile leapfrogging which many players are trying to enable).

However, even when that happens, prepaid and gift cards will still by and large be on the mag-stripe standard for the foreseeable future, and gift cards are among fraudsters’ favorite targets. On average, Americans buy $100 billion in gift cards – so that will remain a large, desirable and mag striped target.

So EMV, is sort of like shooting at zombies with a shotgun — it can slow them down, but there’s a lot of them out there so wiping them out entirely could be something of a long-term project.

Smart Credit Cards (Coin, Swyp, etc) Are Like The Frankenstein Monster…

… because they were created for no clear purpose and make for an unnatural hybrid that is less than the sum of its parts.

After a long run-up, the smart cards are finally out there on the market. Well Coin is. Swyp, Plastc and Stratos are all still in the “coming soon” phase, with early 2016 release dates across the board and preorders still open.

Though each smart-card has its differentiating features, they all sort of run on a hybrid mobile-wallet-credit card design where users load all of their existing plastic cards onto a single, plastic card-sized-piece of tech they can then use as their “carry-all” card.

And like villagers dealing with Frankenstein’s monster, it seems that consumers could at least fairly ask in the case of smart cards: “But why exactly does this hybrid need to exist?”

While smart cards do solve a problem with today’s plastic-based payments (picking which plastic card to use), it is sort of not the most serious problem consumers face at the POS. Sort of like reanimating limbs in part of solving the mystery of life and death, but not the most interesting or useful part.

It seems likely that consumers who really want to use something card-shaped to pay will use a card. Consumers who really want mobile payments will use their phone (or Apple Watch). It is hard to imagine that there is a large group of consumers who really want mobile payments but don’t want to use a mobile device.

On the upside, even if consumers do not end up liking the chip and dip card, understanding their purpose – they’re unlikely to stomp their feet and en masse embrace smart cards.

And, before we close out this spooky recount, we’d also like to offer an honorable mention to Amazon.com for becoming Walmart’s personal boogeyman this year and the reason that so many executives in Bentonville, Arkansas, will be sleeping with their lights on all the way till Christmas.

But we’re not ready to think about Christmas yet — so, for now, Happy Halloween!