Sizzle Or Fizzle: One Momentous Day in Payments

Just when you think that it’s going to be hard, once again, to find a Sizzle, yesterday happens.

SIZZLE

Payments and Consumer Choice
What a difference a day makes. Two days ago, the payments ecosystem was humming along as it always does. Maybe even more boring than usual. Summer doldrums. The next day, July 21, it goes into sizzle overdrive.

The day began with Mastercard announcing an acquisition of epic proportions: VocaLink. Most media passed this off as a way for Mastercard to cozy up to the U.K. payments scene, but it clearly has the potential to do a whole lot more than that. VocaLink is all about two things: enabling digital account to account money movement and using its rails to power faster payments initiatives. So far, that’s in Singapore, U.K. and Thailand and a deal inked with The Clearing House in December of 2015 suggests that The Clearing House and its banks are now in business with Mastercard to power their faster payments gig. With VocaLink added to its network assets, Mastercard has a way to spread its payments wings digitally, including enabling direct debit transactions, becoming the world’s interoperable faster payments and threading the regulatory needle in a market where interchange has been forced to pretty close to zero.

Later that day, Visa and PayPal announced a partnership of epic proportions that will, among other things, mitigate the fear that PayPal will ever again steer Visa cardholders to ACH debit payments. In fact, Visa cardholders won’t be pushed to sign on for ACH – at account signup, Visa cards and ACH will be presented as more or less equal options (in the spirit of giving consumers choice) and any Visa cardholder with an ACH account will be given an opportunity to work with their bank to flip it the other way to a Visa-branded debit product.

Speaking of debit products, PayPal and Venmo accountholders will be given instant credit to their accounts for money sent to and from Visa accounts.

The other big news is that as part of Visa’s Digital Enablement Program (VDEP), PayPal will work with issuers to provision digital PayPal accounts that can then be used in physical stores where Visa contactless is accepted. PayPal will go from having not much of an in-store presence to being the biggest dog in the digital physical point of sale hunt with its tens of millions of PayPal cardholders – already active users in the habit of using these accounts two or three times a month – all set and ready to tap and pay.

Oh, and with accounts that do more than just, tap and pay. Mobile at the point of sale JUST got a whole lot more interesting.

At the Innovation Project 2016, Visa CEO Charlie Scharf made a point of telling the assembled that there was no such thing as a frenemy, and that companies were either with Visa and supported their ecosystem or were against them. At the time, those in the audience interpreted that as a not-so-veiled jab at PayPal and its history of ACH tender steering, something that the Visa CEO called out as a concern on prior earnings calls. The announcement yesterday made it clear where PayPal and Visa now stand – and that’s now on the same side of the field.

The payments game overnight just got a lot more interesting.

FIZZLE

Worldpay
How can a massive global payments processor that serves the likes of British Airways be unable to process payments for two weeks? And as a result of a software update? It’s a question that Worldpay clients are asking – and have been, we’re pretty sure. Worldpay says that “only 1 percent” of customers are still impacted, but if you’re part of that 1 percent, it’s little consolation – you’re in a world of hurt.

One of those in that world of hurt is Etsy, which has seen its stock dip more than 3 percent since this happened. Psst, Esty, there are lots of other fish in that payments processing sea – could be time to go fishing.

Smartwatches
Consumers don’t really seem to be into smartwatches. IDC reported a decline of 32 percent in smartwatch sales, down to 3.5 million units in Q2 2016 from 5.1M in Q2 2015. Apple lost the most ground, but in a back-handed-don’t-feel-so-badly-about-the-bad-news, remains the provider with the most market sales – at 47 percent. It’s not all that great to be the largest player in a declining market with sales that are also declining.

The IDC analyst gave many reasons for the decline, including consumers waiting for more bells and whistles in the next upgrade cycle, and the lack of any big watch brands jumping in. But it might be even more simple than that. Maybe consumers who want to wear a watch, just want to wear a watch and leave the electronics and digital do-dadery to one of other devices they carry with them or wear. After all, we now have press-on nails that can enable contactless payments – who needs the watch?

Android Phones
Analysts say that iPhone 7 sales may disappoint, but Apple and its iPhone got a big high five from the U.S. Army that plans to replace their current stock of Android phones, reportedly Samsung Galaxy Note phones, with the iPhone 6. The culprit: the “inferior” ability to run a custom Army app that takes live video from drones. The problem reported: speed. Said Android phones were unable to refresh in a time frame suitable for that sort of precision assignment, and the need, therefore, to reboot them on a regular basis. It seems that when controlling the direction of a drone, one needs a stable phone and operating system.

Added bonus for Apple with its new iPhone 6 sales: a whole new crop of Apple Pay users!

SIZZLE OR FIZZLE: STARBUCKS’ MOBILE

The attention may have been on Starbucks’ slowing foot traffic, and delayed promotions, and comps that management called an anomaly because they missed the Street …

But mobile remained a bright spot in the coffee giant’s results, with on-the-go ordering coming in at 5 percent of all purchases in the United States, as measured in the third quarter that ended in June. The latest tally was up 25 percent from the second quarter, as measured as a percentage of orders, when it was 4 percent of transactions. The mobile payments platform clearly has been on the upswing after having been completed within the past several months.

Other statistics show that the membership base in the eponymous Rewards loyalty initiative, newly revised early in the quarter, showed 18 percent growth year over year. The firm said during Thursday’s results that the current enrollment in the program stood at 12.3 million members.

Looking at the latest results, the third quarter earnings per share came in at 51 cents, which beat the Street by two pennies. That was better than the 41 cents seen in the year ago period, and outpaced the revenue growth of 7 percent to $5.2 billion. Global same-store sales were up 4 percent, matched by similar growth in the United States.