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Why (Most) Banks Need Not Worry About Apple Pay (Yet)

By Jim Bruene on September 15, 2014 5:04 PM | Comments

image I'll admit to being caught up in the hype. The 48 hours after Tim Cook revealed Apple's long-rumored foray into payments were some of the most exciting times in fintech since the 1995 to 1997 period when most of the online "firsts" happened (see note 1).

And we're seeing more thoughtful fintech posts in the past week than we used to see in an entire year. Thanks especially to Tom Noyes, Cherian Abraham, Brian Roemmele, Celent's Zilvinas Bareisis and finally today from Gonzo's Steve Williams for helping me see beyond the hype.

I can add little that hasn't already been said to the discussion about NFC, payment ecosystems, or the future of mobile payments. Clearly, it marks a turning point for mobile payments and improved U.S. security, and the play-out will be fun to watch.

The one area I haven't seen covered: What does all this mean for the 10,000 U.S. banks and credit unions not on the 11-name list at launch (note 2)?

So here's my take on the impact of Apple Pay on small- and medium-sized FIs over various time horizons: 

In the short term (2014): ZERO

In the medium term (2015-2016): ZERO

In the long run (2017+): Something, but impossible to quantify at this point
                                     (it could even be net positive)

Here's why bank/CU execs (outside the top-20 credit-card issuers) should not lose sleep over what Apple is doing:

1. Apple Pay (in the physical world) can only be used at contactless terminals
Supposedly, there are 220,000 contactless terminals in the United States. But if you've ever tried to use one, you know that 200,000 of them are either not working or are buried behind beef jerky on the counter. This will change rapidly as merchants upgrade during the next few years.

2. It's complicated to use (at first)
First, you need an iPhone 6, then you need to figure out how to use Apple's Passbook program, log in to iTunes or take a picture of your card, successfully authorize it, enable TouchID and so on. Millions of early adopters will figure all that out, but then they won't be able to find a working contactless terminal (see #1) and then they'll forget all about it.

3. The number of your customers that care enough to move deposit accounts for NFC payments is near zero (for now)
Let's do the math. Assume that a year from now there are 5 million Apple Pay active users (making at least one transaction per week) or 2.5% of U.S adults. If you have 20,000 customers, that means 500 will be active users of Apple Pay. Most will be happy to use their existing Capital One, Citi, and other rewards credit cards for the transactions. Very few will care that your debit card doesn't work on the system. Let's say it's around 25%. That means you have something like 125 customers who are disappointed with your mobile payment capabilities. If they like you otherwise, how many will move their checking account to get an Apple Pay-enabled version? While the number is probably zero, let's say it's 5% to 10%. That means you could lose 6 to 12 customers. Using the 80/20 rule, only one or two of them are profitable. Will it hurt to lose two profitable customers? Sure, but it's not going to be on your top-10 or top-25 list of worries.   

4. There are ways to mitigate any lost wallet share to Apple-Pay issuers
Even if my math in #3 is way off, or you are concerned that you will take a material hit to the bottom line, or you just want to be part of Apple Pay, easy routes will undoubtably be built to get your cards enabled into Apple Pay. Maybe not in 2014 (or even 2015), but certainly within the next couple years. And even if I'm wrong and you are locked out of the iPhone indefinitely, you can create an Apple Pay poaching program where your customers make their charges on a bigco bank card, then you automatically pay those charges off and essentially transfer them to your customer's checking account.

So my final advice. If you have an employer (or spouse) that's been reluctant to fund your iThings, now is the perfect time to do an upgrade (just don't show them this post).

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Chase homepage shown to existing customers (15 Sep 2014)
Note: All three links on bottom of page go to the iPhone6 "Apple Pay" features page at Apple.com which leads with Chase (link)

image 

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Notes:
1. Or perhaps 1999 when Paypal/X.com made P2P payments happen or even 2005/2006 when Zopa/Prosper/LendingClub launched consumer credit exchanges.
2. See Apple Pay launch event clip here, complete with transcript.

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UX Lessons for Card Issuers from the New Starbucks Mobile App

By Jim Bruene on April 8, 2014 7:39 AM | Comments

image When I moved to Seattle, Starbucks had just four locations. So I've had a ring-side seat in their climb to worldwide ubiquity. Though not a huge fan of their coffee, I greatly admire their business model, technology, and payments innovations.

I have been paying with the Starbucks mobile app for the past few months (note 1) as have 14% of its customers. It's great as long as there is a queue. That gives you plenty of time to go through the 9-step mobile payments process (10 steps with tipping):

1. Dig out your phone
2. Enter the smartphone passcode (if applicable) 
3. Locate the app
4. Open it
5. Press pay
6. View balance to ensure there is enough cash available
    (not applicable if auto reload is enabled)
7. Wait for cashier to press the correct key on terminal
8. Position your phone under the QR reader
9. Wait for cashier to give you the OK
10. (Optional) Dig in your wallet/purse/pocket for tip money

While this process seems ridiculously time-consuming compared to a card swipe (or cash), if you are waiting in a queue (typical), you can take care of all that before your turn to order (especially if you already have your phone out and are logged in).

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The new Starbucks app
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image The latest version of the Starbucks mobile app (iOS released 20 March 2014) cuts two steps from the 10-step process. More importantly, the crucial "hit pay" (step #5 above), has been replaced by a shake of the smartphone to signal it to display the Starbucks QR code needed at the point of sale. While not a huge timesaver, it pretty much eliminates navigation within the app before payment, quite an improvement in UX once you get the hang of it (note 2).

The new app also offers electronic tipping, a welcome improvement for the staff, since the move to no-signature card transactions many years ago took away credit-card tips.  

The app integrates four components into the homescreen (see screenshot #1 right):

A. Top navigation with choice of:
-- Pay: Opens up QR code (in lieu of shaking) (see screen #2 below)
-- Stores: Starbucks store locator with map and list
-- Gift: Opens to virtual gift-card function with integration to iPhone contacts (see screen #3)

B. Loyalty program: A screen-dominating donut shows exactly where you stand on the path to the next loyalty level.

C. Messages: Links to a "feed" of available offers (screen #4) including:
-- discounts
-- free iTunes song and app downloads (with integration to iTunes for easy redemption) (screen #5)

D. Account history (see screen #6)
-- purchases and reloads 
-- tipping function allowed for two hours after purchase (screen #7)

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Lessons
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There are some lessons here for card issuers:

  • Focus: Go to Starbucks.com on your desktop browser and you'll see about 150 navigation choices delivered via mega-menus across six main tabs. It's worse than most bank websites. However, the mobile app has just three primary navigation choices (Pay | Stores | Gift), plus rewards, messages and transactions on the main screen. Starbucks rightly chose to concentrate on exactly what customers need when they are on the go. 
  • Integrate rewards/loyalty: Despite the "shake to pay" process improvement, the Starbucks mobile payment experience is still cumbersome and by no means easier than paying by card. However, because the app is integrated with rewards, all of sudden it becomes compelling, both for early adopters (certainly) and the mass market (note 3). 
  • Annotate the transaction: Besides the new tipping function, the transaction history includes both a feed of the transactions (screen #6), plus the ability to click through to a full receipt (screen #7). While not super interesting at Starbucks, when so-called "level 3" data is available for more complex purchases, it becomes an important part of the value delivered. 
  • Mobile first: If you offer information or services consumed on the go, mobile services (app & website) are the key interaction point going forward. Starbucks CEO Howard Schultz understands this (note 4), does your CEO?

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Screenshots
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2. QR code (scanned at POS)             3. Virtual gift cards

image     image


4. Offer stream                                5. iTunes integration to redeem

image       image

 

6. Transaction history                      7. Transaction detail with tipping

image        image

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Notes:
1. Previously, I was paying with Square Wallet since no reloading is required. But now I'm on the quest for Gold Status at Starbucks, so Square will have to take a backseat.    
2. Since users are not accustomed to shaking their phone to make it do something, it may take a while for everyone to figure this shortcut out. Luckily, the Pay button has been moved to a position of great prominence, for those that prefer to use the old navigation process.   
3. I just put it on my wife's iPhone. Besides the map, weather, Yelp, and French translations, it will be only the fifth app she uses frequently.
4. Starbucks CEO Howard Schultz is a genius and seems to genuinely care about his employees and the world. If only he had stayed out of pro sports ownership (go Sonics!), his record would be virtually untarnished.

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New Y Combinator Fintech Grad, Coin Begins Pre-orders, Tech Press Goes Crazy

By Jim Bruene on November 14, 2013 5:38 PM | Comments

image It must be a slow news day. Two years ago, fintech barely got a mention in the mainstream tech press. Today, Coin, a stealthy "credit card 2.0" startup backed by Y Combinator and K9 Ventures, was covered almost immediately by 21 tech blogs (and counting). VentureBeat appears to have broke it first.

My favorite headline:

Master card? 'Coin' combines, debit, credit and others into one
--  by Devin Coldewey, NBC News

It's currently the fourth highest ranked article on Techmeme and it's the number 1 trending startup on Crunchbase today, beating Snapchat, which just turned down $3 billion from Facebook (bubble maybe?).

  image

Anyway, for anyone who's missed it, Coin is planning to release a programmable mag strip card along the same lines as Dynamics. Coin says its plastic card will hold up to eight distinct card details at a time, all accessible via a button and miniature LED screen on the card. The card syncs with your smartphone so you can swap out the eight cards anytime, for an unlimited number stored in the phone. It even beeps at you if you walk away from the Coin card.

image Coin announced a pre-order today. At 2:15 PM PST, the company said it had reached it's pre-order goal in 40 minutes, selling more than 1,000 at its website today (cost = $50 + $5 shipping). That in itself is a sign of the times. An unknown startup (albeit with YC alum cred) crowdfunding on its own site and raiding $50k in less than an hour (see note 1).

For those concerned about the card's potential use by credit card thieves, Coin requires the mag strip to be read via a Square-like dongle AND a photo of the front/back of the card which must match the mag stripe info AND your Coin profile.

The 2-minute video showing how Coin works has already been viewed more than 250,000 times. That has to be a single-day fintech record.

Video link

Bottom line: Some day, plastic cards will be relegated to the Smithsonian and the auction pages of eBay, but that day is many, many years in the future (see note 2). So the multi-card "plastic 2.0" concept from Dynamics, GoNowCard, Escardgot, Protean and others, could be a viable transitional technology. 

At $50 a pop (scheduled to double next summer to $100), Coin will clearly occupy a relatively small niche. However, if the price comes down to something closer to a burger and beer in NYC/SF ($15 to $20) or better, the startup uses a monthly freemium subscription model, it could take off.

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Notes:
1. I snagged one of them, so check back next summer for a report. 
2. For more info, see our recent Online Banking Report: Digital & Mobile Wallets(published Feb 2013, subscription).

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Monday Fintech Four

By Jim Bruene on October 28, 2013 3:32 PM | Comments

image Editor's note: This was supposed to be the Friday Fintech Four, which is much better alliteration. But alas, it didn't get published, so here's the belated Monday version.

<drum roll> Here are the four most surprising fintech developments of the past week (in no particular order):

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One: Stealthy mobile payment startup Clinkle hires long-time CFO of Netflix, Barry McCarthy, as its COO
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image McCarthy was CFO from 1999 to 2010, taking Netflix public in 2003, then overseeing its finances as a public company for seven years. It's pretty unusual for a big-name public company exec to take on an exec role at a startup, especially one in mobile payments. And one that hasn't even officially launched yet to boot. McCarthy is on the board of three startups: Chegg, Eventbrite and Wealthfront, a startup in the investment space.
    >> LinkedIn profile of McCarthy
    >> A nice overview of the news at TechCrunch 
    >> An interview with McCarthy at AllThings D

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Two: New mobile PFM, Level Money, beats Square Cash to #1 in iOS app store (finance)
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image As soon as Square launched its P2P payments app, Square Cash, it quickly rocketed to number two in the Finance section of the iPhone app store (see Chart 1 below) and number 55 across all free apps in all categories. But it never got higher, and a week later it's hanging in at number 11.

The reason it missed the top slot? Another newcomer, Level Money, a great-looking new PFM, was being featured by Apple in the App Store and maintained the top ranking during that period (see Chart 2). During its time as a promoted app, Level Money maintained a top-20 ranking among all 500,000+ free apps (see Chart 3).

    >> Netbanker post on Square Cash
    >> Distimo app rankings for Square Cash (see following chart)

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Chart 1: Square Cash app ranking in Free Finance in Apple App Store

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Chart 2: Level Money app ranking in Free Finance in Apple App Store

image

Chart 3: Level Money ranking among all free apps in the Apple App Store

image

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Three: Amex customers have put $1 billion into its Bluebird prepaid card
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At this year's SourceMedia Payments Forum, American Express revealed key metrics about its highly touted Bluebird prepaid program sold in Walmart stores:

  • 1 million new accounts
  • $1 billion in total loads
  • Average load of $1,000 per account
  • 87% of accounts new to Amex
  • 53% over age 35

Thanks to the attendees who tweeted the metrics @leimer (Bradly Leimer) and @JimMarous among others.

image

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Four: Four fintech startups snapped up last week
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Compared to other tech sectors, fintech has experienced less M&A activity in the past few years. Everything moves a little slower in a highly regulated, fraud-magnet segment. Buying fintech is not like bolting on a photosharing app. That said, it was a busy past 10 days on the M&A front:

  • Betterment buys ImpulseSave to boost its auto-savings features (Finovate post)
  • UK's FundingCircle buys Endurance Lending to enter U.S. market (Techcrunch)
  • Blackhawk acquires Intelispend (Digital Transactions)
  • Wonga buys Germany's BillPay to expand outside United Kingdom (Techcrunch)

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Photo credit: Fab Festival

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The Contactless Sticker as a Mobile Wallet Trojan Horse

By Jim Bruene on July 19, 2013 12:13 PM | Comments

imageI've had Discover's Zip contactless sticker pasted to the back of my iPhone for a few years. Although I don't run across very many places to use it in Seattle, I enjoy the user experience when it works. It's not a huge time saver, but it's easier to wave my phone than dig the right card out of my "analog wallet." And it usually is interesting to the clerk, since "paying by phone" is still a novelty. 

Whether Discover has benefited from issuing me a sticker is debatable. Stickers are issued only by request (at least on my account). Discover not only had to pay an extra $3 or $4 for the sticker (note 1), but also paid a customer service rep to answer the phone and take my request. Assuming they incurred an admin cost of $7 to $10 to process and mail the sticker would make the total cost to Discover $10 to $15. Therefore, my measly $300 in incremental spending hasn't yet given them a positive return. But if more terminals were around, I'd have put thousands on it, and they'd be ecstatic.

The reason I'm writing about stickers again, is that my Moven card and sticker package arrived last week (see pictures below; previous post; note 2). And I thought how much more impressive the startup's card mailer looked with the Moven sticker (and supporting mobile banking graphics) than the typical bank card mailer (Simple excluded, of course).

I know the extra $3 to $5 it would cost to toss a sticker into the card mailer is a huge expense. But I think the potential benefits makes it worth considering, at least for a portion of your customer base. (And if you add the sticker as part of a premium package, you might even convince customers to pay for it.)

Financial institution benefits:

  • Increased POS transactions: Move your card to the top of wallet instantly when users are at a working, contactless terminal.
  • Increased online transactions: If you print the card number, expiry date, and security code on the sticker, cardholders would turn to your card more often when arriving at check-out at ecommerce sites. It also would work for mobile commerce, although not as well since users would have to flip the phone around to read the numbers.
  • Increased loyalty/referrals: Once that sticker is placed on a phone, it's a constant reminder of your bank and card. It also makes it easy to show off to a friend.
  • 1st gen mobile wallet: The sticker, combined with your mobile banking app and/or SMS alerts, provides a fairly solid "mobile wallet experience" to compete with Google and others.
  • Seamless transition to NFC (or whatever): When the day arrives that the contactless capability is embedded in most handsets (yeah, Apple, we are looking at you), you simply tell customers to pull off the sticker and keep on waving that phone at the terminal. 
  • Competitive advantage: You differentiate yourself and earn referrals from a certain group of customers who are impressed with tech innovations.

Bottom line: Increasing costs with a contactless sticker is not for everyone. But if you are looking for a tangible point of differentiation that also builds your tech-cred, this is one possible solution. Moven, for one, is banking on it. 

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Moven outside envelope (13 July 2013)
Note: I know this is good for security reasons, but I was expecting something a little snazzier. Luckily, the inside card carrier was the best I've ever seen (see below).

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Moven card carrier
Note: Sticker is on left, plastic on right

image

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Notes
1. I've seen a wide range of prices quoted for contactless stickers, but I believe the relevant range for most issuers is $3 to $7 each, depending on quantity.
2. I can't report on actual Moven account transactions because I haven't verified the trial deposits. While this is a clever and relatively simple authentication technique, it does require users to log in to another bank account days later, so it is easy to neglect. Moven sent me a reminder two days after my application, but that was two weeks ago. Clearly, they will have to follow up with procrastinators like me again.
3. For more info on fee-based banking services, our Online Banking Report on fee-based online services (subscription, May 2011). For more info on the "near bank" or "meta bank" phenomena see our  report on Truly Virtual Banks (subscription, Oct 2011).

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First Look: Google Wallet "Pay by Gmail" (and the Pain of Authentication)

By Jim Bruene on May 22, 2013 9:38 PM | Comments

image As you probably already know, last week Google launched P2P payments via Gmail (and through the Google Wallet mobile/online interface). Once authenticated, users simply "attach" funds to an email message (see inset).

Bank transfers (e.g., ACH) are free while card-based payments will cost senders 2.9% of the amount, with a $0.30 minimum. However, all transactions are free for an unspecified time during the launch period.

With an estimated 400 to 500 million global Gmail users, the service has the potential to become an important method of sending money (it's only available to U.S. users at this point). However, like all U.S.-based P2P services, it's easy to send money, but not always so easy to receive it.

In my first test, I was able to claim the funds relatively easily with my four-year-old Google Wallet account. There was a short authentication process with a login, name, address, birth date and last four digits of my Social Security Number (SSN). After claiming the funds, I was then able to send money out of the system (note 2).

After sending my two cents over to Larry Page, congratulating him on the launch (see screenshots below), I then sent money to my work email account. While it was deceptively simple to send the money, I was unable to claim the money, despite already having an active Google Wallet associated with that email address.

After receiving the email notification, I went through the same authentication process as above. But after logging in and providing my personal info, I was hit with four additional out-of-wallet authentication questions, apparently pulled from public databases (I think NOT my credit bureau due to the errors..see below).

But apparently there was an error in the out-of-wallet Q&A served to me. The first two questions obviously pertained to me, and I answered them correctly, but the final two did not (note 6), so I answered "none of the above." But Google didn't believe me, and I was told my answers were "inconsistent" and that I could not be authenticated online.

I was invited to upload three pieces of documentation since I failed the Q&A (all required):

  • Picture ID (e.g., drivers license)
  • Proof of address (e.g., utility bill)
  • Social Security card

Unfortunately, I haven't laid eyes on my Social Security card for several decades and haven't a clue where it is. And in 18 years of testing online account opening, no one has ever asked for it. So I'm stuck. Had someone sent me a real payment, I would be extremely frustrated, and would have to either ask for a check to be sent, or use PayPal.

Bottom line: This is a brilliant play by Google, taking everyone by surprise. However, P2P payments (in the USA anyway) are still a pain to receive the first time which dampens their viral growth (note 7). I understand the reasons for good authentication, though it still seems like overkill given that I was only claiming a one-cent transfer via a pre-existing and active Google Wallet account (used for more than $400 worth of purchases this year). And especially after I provided the correct name, address, birth date, SSN and two additional out-of-wallet questions.

But I know the folks from Mountain View, Calif., will work the risk-procedure kinks out quickly (there is a reason it's called "beta"). And if they stick with it (RIP Google Reader), Google should be able to build a critical mass of financially authenticated users, making "gpay" as easy as using PayPal.

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How Gmail Pay works

Step 1: Craft email message and click on the "$" icon at the bottom of the compose screen


Step 2: Attach funds via Wallet balance, bank transfers, or card; then add memo if desired

image


Step 3: Press send

image


Step 4: Final chance to review

image 


Final: Confirmation copy is placed in your inbox (note 8)

image

 

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Notes:
1. During the beta test, you can become a P2P user only by first receiving funds from an existing user.
2. I have two Google Wallet accounts, one set up in 2009 and the other established in January 2013 when I got a Nexus NFC phone with built-in Wallet support. The credit card associated with both accounts was stolen earlier this year, and I had to add a new card to both wallets before I could use them. This could have triggered additional authentication requirements on the second Wallet account.
3. The payment appears as a "card" within a Gmail. There is no indication in the title of the message that it might contain money (user controls the rest of the email).
4. The transaction fee was waived for my Discover Card-based payment. I assume it would be on other card types, but I didn't test that.
5. Users have the option to add a memo to the payment (in addition to what's included in the email message).
6. Ironically, if the recipient was mobile-deposit-enabled, it would be easier the first time to send a high-resolution image of a check that the user could take a picture of and then deposit via mobile banking. Or, for Capital One 360 users, the emailed image could simply be uploaded directly into their account (see post). 
7. Though I suspect the last two questions could have been drawn from online info about my brother, who has a different first name and lives 2,000 miles from me.  
8. Yesterday, confirmation emails went to my inbox when I sent a payment. Tonight, I am not seeing that: It's only showing in my Sent messages.
9. For more info, see our recent Online Banking Report: Digital & Mobile Wallets (published Feb 2013, subscription).

Comments

Feature Friday: Capital One Offers $20 Incentive to Try ShopSavvy Mobile Wallet

By Jim Bruene on March 15, 2013 9:09 AM | Comments

image I have been fascinated with mobile wallets for a while (note 4). They've been "just a few years out" since the first Finovate (Oct 2007), where multiple mobile banking pioneers laid out their product roadmaps. And now we are starting to see real implementations. Not just Square and Starbucks. But financial institutions are moving forward. 

ShopSavvy app with single-slide purchasingThe latest rollout, the Capital One and ShopSavvy deal, was announced last month (press release). Capital One has already partnered with several major card-linked offers providers (and acquired one), but apparently it is still looking to boost its mobile efforts (note 1).

ShopSavvy is a San Francisco-based startup which has built a mobile wallet, shopping and deals apps. It has raised $11 million, two-thirds from Facebook co-founder Eduardo Saverin.

The company has integrations with a number of online merchants including Walmart, Barnes & Noble, Overstock.com, Target, Best Buy and others (note 2). Those links allow users find online prices, either by scanning a bar code in-store or in-app search, then purchase online with a single slide (see inset).

I got the invite from Capital One Wednesday morning with an eye-catching $20-off offer (see first screenshot below). But this wasn't like a straightforward card-linked offer where cardholders activate the deal and then buy. 

To bank this savings, users had to power through a three-stage process:

1. Sign up for an account at ShopSavvy using the link in the email. It's a relatively painless process, taking just a minute or two. None of my personal info was prepopulated (see screenshot #3-5 below).

2. Add the app to your mobile phone by locating the ShopSavvy app in the App store, downloading and opening.

3. Activate the ShopSavvy app by entering your username and password and repeating the info you'd entered online to set up your profile.

Altogether, it's a somewhat convoluted 5- to 6-minute process, but one that is probably acceptable for early adopters. I did have intermittent problems with the app, network errors, crashes and bizarre search results (note 3). But it seems to have stabilized now after the initial usage spike. 

Bottom line: Once it started working properly, the ShopSavvy features were impressive. The simple search combined with one-click purchasing would make a nice addition to a bank or card issuer's mobile app. I'm still a little surprised that Capital One is endorsing a third-party wallet. But by getting its card "top of e-wallet," the giant issuer boosts charge volume, mobilizes its card-linked offers, and gets a foothold in the wallet space.

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Capital One email to customers offering a $20 statement credit to use the ShopSavvy wallet (12 March 2013)

Capital One email offering $20 discount forthe first use of ShopSavvy wallet

Landing page at ShopSavvy (link)

ShopSavvy Capital One landing page

Step 1: Join ShopSavvy

ShopSavvy signup process

Step 2: Add Capital One credit card

ShopSavvy signup, enter Capital one card

Step 3: Locate, download and activate the ShopSavvy mobile wallet app

ShopSavvy download instructions

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Notes:
1. Or perhaps this is more of a straight revenue-play for Capital One, with ShopSavvy paying the card issuer for each new customer.
2. Unfortunately, ShopSavvy's one-click experience does not extend to Amazon.com, but the app does display Amazon prices and it's just a few more clicks to buy there.
3. Initially, I tried the app with a few barcodes I found at home and it worked, but only on the media stuff. Since I didn't want to buy anything I already owned, I went to the last remaining bookstore in northeast Seattle and gave it a try. Unfortunately, this store covers the regular barcode with its own, which are not indexed in the ShopSavvy database. But when I tried it again last night, the search function was working so I was able to easily find a DVD set and buy it from Target.com for a competitive price (even before the $20 statement credit). 
4. For more info on mobile wallets, see our most recent Online Banking Report: Mobile & Cloud Wallets (Feb 2013, subscription)

Comments

First Financial, US Bank Launch First Photo Billpay Services

By Jim Bruene on March 7, 2013 5:17 PM | Comments

imageI started this post Monday, before I knew US Bank would be making headlines today as the first "major" bank with photo billpay. I got that news last night, when I updated my US Bank iPhone app (see inset).

But First Financial Bank (Abilene, TX; $3.7 billion deposits) actually imagebeat US Bank ($235 billion) to market by more than a month with its 22 Jan 2013 launch (press release; YouTube video). The bank said it had 12,000 bill uploads during the first 10-days of availability.

 US Bank mobile photo billpayBoth services use the Mitek engine to read the image and handle the OCR work. But First Financial also uses Allied Payment Network to process images that don't get properly digitized on the first pass and Malauzai Software for app development. 

Like remote check deposit, the system will improve over time as it learns the nuances of the thousands of billing statements fed into the front end. But today, there is still work to be done on the minority of statements that don't read correctly (see note 1).

First Financial features the new service front and center on its homepage (see first screenshot below) with a clever:

Tell your bills to say, "Cheese."

US Bank has no mention of it on the front page (nor in site search), but if you navigate to its mobile banking page, you can't miss it (third screenshot below).

image Bottom line: I'm not sure how many people will ultimately use photo billpay (though First Financial seems to be off to a good start). It's an interim technology until we can convert the country to ebills.

But since that may be a decade from now, using your smartphone to snap-and-pay is the best answer for now. So, we are bestowing our first OBR Best of the Web of 2013 to First Financial  for raising the bar in remote delivery (notes 2, 3). And an honorable mention to US Bank for getting it out to a broader market.  

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First Financial features its new photo billpay on its homepage (6 Mar 2013)

First Financial Bank homepage featuring photo billpay powerd by Mitek


First Financial landing page (link)

First Financial Bank landing page for photo billpay


US Bank's mobile page features photo billpay prominently (link)

US Bank mobile banking page featuring photo bill pay

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Notes:
1. Just today, the Chase ATM couldn't read the amount on a computer-generated check we fed into its deposit slot. So we had to manually add.    
2. This Best of the Web goes to First Financial since it was first. Mitek already won when it introduced the technology in 2010 (see our Online Banking Report on Paperless Banking (subscription).
3. Since 1997, our Online Banking Report has periodically given OBR Best of the Web awards to companies that pioneer new online- or mobile-banking features. It is not an endorsement of the company or product, just recognition for what we believe is an important industry development. In total, 89 companies have won the award. This is the first for First Financial. Recent winners are profiled in the Netbanker archives.

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PayPal's "Plastic Wallet" May be a Popular NFC Work-Around Model for Next Few Years

By Jim Bruene on February 25, 2013 10:01 PM | Comments

imagePayPal has been working on enabling in-store payments for much of its corporate life. It launched a debit card in January 2001, less than 18 months after the company launched. The card was used to tap funds held in PayPal accounts. 

Fast-forward 12 years. We are now entering the era of the digital wallet which features the ability to store multiple payment cards that can be changed manually or automatically at the point of sale. PayPal is well positioned here, since its core product has offered that capability for a dozen years. 

It's easy to see how PayPal becomes a major, if not dominant, mobile-payments player. But it's still a few years before NFC (or whichever) handsets and POS terminals become mainstream (see our latest report for more info, note 1).

So what can the company do now to make more inroads at the point-of-sale?
Plenty, it turns out:

  • PayPal Anywhere is a plastic debit card attached to an individual's PayPal account. But unlike the company's previous debit card, this one can facilitate PayPal Anywhere brochure at LA Jamba Juicepayment from any bank account, debit card or credit card linked to the user's PayPal account. Users can even change the routing of the charge later that same day.
  • Partnership with NCR: In an announcement made at January's national retail tradeshow, PayPal will be made available to more than a million locations using NCR's POS system.
  • Marketing at the point-of-sale: Last week, we noticed PayPal brochures at the counter of an LA-area Jamba Juice (see inset).

And, the big one, still in the planning stages:

Bottom line: PayPal, Google, Moven(bank), UMB (powered by Dynamics), Wallaby, and others aren't waiting for NFC. It's work-around time, at least in the United States. A promising tactic, at least for users, is the "plastic wallet," a traditional mag-stripe card (MasterCard, Visa or Discover) for point-of-sale use. Then, like PayPal Anywhere, the user routes the transaction to an outside deposit account, or another card, pre-registered in the system (note 2).

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Landing page for PayPal's plastic wallet "PayPal Anywhere" (23 Feb 2013)

PayPal Anywhere landing page


Pitch for in-store payments served after logging out 

Paypal anywhere pitch after logout


Landing page after clicking the "start" button above

Beginning of PayPal signup process for payment card

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Notes:
1. See our Online Banking Report on Digital Wallets (published Feb 2013, subscription).
2. The business model of the plastic wallet is a challenge. It could be workable if all transactions are routed directly to deposit accounts via ACH (aka "decoupled debit"). Also, advertising (Google Wallet) and/or interest charges (PayPal's Bill Me Later) can prop up the P&L.

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New Online Banking Report Published: Breaking Down the Digital/Mobile Wallet Hype

By Jim Bruene on February 22, 2013 9:19 AM | Comments

image We now have digital wallets, cloud wallets and mobile wallets. There's the Google Wallet, PayPal wallet, ISIS, Serve, MCX, V.me, PayPass, Lemon, Pageonce, Wallaby,  Passbook, LevelUp (see screenshot below) and 280 mobile payment startups listed on Angel List. NFC is coming, or is it? Why not just use the QR code? Or do we wait until EMV, Oct 2015?  Does this make money or just add another layer of costs? Are we having fun yet? 

Bottom line: With consumers carrying a powerful computer on their person, the days of the dumb mag-stripe are numbered. No one debates that. But what is a financial institution to do today?

That's what we set out to answer in our latest report on Digital & Mobile Wallets.

If you are not a major credit-card issuer, you may choose to ignore the issue until the dust settles. That’s a valid strategy, but it won’t help you pick up market share during the upcoming market confusion.

We believe every bank and credit union with a mobile app should dip its toes into the wallet space now with some relatively low- to no-cost positioning moves, while waiting for the tech questions to be answered this year and next.

And if you are a big issuer, you have a very interesting few years in front of you. Do you build or buy? Which of the major wallets, if any, do you throw your marketing support behind? And how do you explain any of this to your shell-shocked customers who just want to pay their tab and get away from the cash register as fast as possible? 

__________________________________________________________________

About the report
__________________________________________________________________

Digital & Mobile Wallets (link)
Payments in the smartphone era

Author: Jim Bruene, Editor & Founder

Published: 21 Feb 2013

Length: 36 pages, 10 tables, 12,000 words

Cost: No extra charge to OBR subscribers, US$495 for others (here)

-------------------------

Report excerpt:

First Trade Union Bank partners with LevelUp for mobile wallets

First Trade Union Bank is teasing its LevelUp mobile wallet partnership on its homepage (19 Feb 2013).

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Lemon's Premium Digital Wallet Carries Monthly Fee

By Jim Bruene on February 8, 2013 3:53 AM | Comments

image I've spent a fair amount of time playing with digital wallets during the past few weeks. The one with the most traction, at least measured by download activity, is the Lemon Wallet which has been a top-20 free finance app for some time.

While it's free, does cool tricks with the mobile camera, and is seemingly liked by users, it's not a transactive service just yet. Basically, using the mobile camera as a scanner, it digitizes all the bank cards, loyalty cards, IDs and various detritus we haul around on our person or stuff into the back of a desk drawer.

Right now, there aren't many places willing to accept a copy of your card stored on your smartphone. But if you need your healthcare plan number, driver's license number, or any of your card numbers, they are all stored in a handy location (you could do the same thing with the iPhone's notepad too).

Obviously, Lemon has bigger plans than simply being a card-number archive. You don't score $8 million in venture capital unless you have a path towards a $75+ mil valuation.

The startup's first step towards revenue generation is its $4.99 per month (or $39.99 annually) premium option. For that, users get a bundle of benefits including:

  • Card transaction scanning powered by BillGuard,
    which downloads transactions to monitor up to 10 cards
    (1 account can be tracked in the free version)
  • Lost wallet service (aka credit card registration) so that if you lose your physical wallet, Lemon will handle getting all your cards replaced
  • Extra password for more security
  • Transaction sharing
  • Export data to CSV (Excel), Evernote, Dropbox or Concur

My take: For power users, the BillGuard integration makes Lemon premium worth the $3.33.mo on an annual plan. One mistaken charge discovered every year covers the cost. But account aggregation is not something consumers are used to paying for, so by simply providing fee-based PFM services, it will take time to get meaningful revenues.

But with a solid base of cards aggregated onto the platform, Lemon can leverage the info in many ways. And as mobile proximity payments become technically feasible, the company is in a good position to be one of the major wallet players (or be acquired by one).

Email upsell for the Lemon premium option (5 Feb 2013)

image

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Mobile Monday: Square Wallet Enables On-the-Fly Tips & You Can Change Your Mind Later

By Jim Bruene on February 4, 2013 9:37 AM | Comments

imageSince much of my week revolves around reading and writing in various coffee shops around Seattle, I make sure to tip the barista so they don't get annoyed with me using their wifi for an hour or two.

Tipping is very easy when paying with cash. You can easily drop the change in the jar. But with cards it gets trickier. With old-school signature system (i.e. mag stripe), it's a little more time consuming, adding a tip amount and total, but still easy enough.

But with the move to contactless, no-signature below the floor (e.g. Starbucks) and many EMV transactions, the only way to leave a tip is to dig cash out of your pocket. But that kind of defeats the convenience of contactless. 

Maybe since it got it's start as a POS device for small merchants, Square's payment app, Wallet, had tipping built into it from the get go. As soon as the your wallet "pay by name" transaction is authorized, a message pops up on the iPhone lock screen, offering the opportunity to tip (see inset above).

Swiping the message brings up the transaction within Square Wallet, where you can choose your tip amount. The merchant can specify tip preferences by dollar amount or as a percentage of the transaction. The coffee shop I visited this morning offered $1, $2 and $3 choices for the tip. Those seem a little on the high side for a business with a $4 average ticket. Unfortunately, there is no way to override the choices and choose a different amount.

The app even allows you to go and edit the tip (see below). I'm not sure how long the "edit window" lasts, but you can certainly change it while you are waiting for your order.

Bottom line: The mobile wallet era will usher in a number of new payment behaviors. Tipping is just the tip of the iceberg.

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Square Wallet tipping function (1 Feb 2013)

image       image

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Categories: Mobile Payments, Square

Movenbank Provides a Peek at its User Interface

By Jim Bruene on January 29, 2013 10:11 PM | Comments

imageTech startups help define the future in many traditional industries. Amazon in books, Expedia in travel, Tesla in automobiles.

But there's been less disruption in retail banking than most industries, especially in the U.S. We saw ING Direct take some share in savings accounts, but not enough to really shake up the status quo. 

But we have some new players looking to change that and Movenbank is one of the most interesting. The Brett King-founded startup, armed with $2.4 mil in seed funding, is beginning to release more details as it prepares for its launch at our FinovateEurope event in two weeks.

In an email to customers today, the startup provided a few peeks at its Geezeo-powered PFM interface (screenshot below):

  • MoneyPulse: A snapshot of the your current financial situation with green/yellow/red dial so you know in a glance if there are problems.
  • Movenbank MasterCard PayPass sticker MoneyPath: More of a typical budgeting piece.  
  • Account aggregation: Beta users can already add accounts from several-hundred banks and credit unions; so unlike Simple, it appears Movenbank is supporting account aggregation out of the box
  • Spend | Save | Live: Primary navigation across the top of the dashboard

In addition, the "how it works" section shows a MasterCard PayPass sticker used for contactless payments (inset).

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Movenbank interface (from customer email, 28 Jan 2013)
Note: "Spend | Save | Live" navigation across top.
This appears to be a PC user interface, but it could be a tablet UI.

Movenbank user interface w PFM features

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Mobile Monday: Square Wallet Provides a Sneak Peek at the Future of Proximity Payments

By Jim Bruene on January 28, 2013 12:03 PM | Comments (1)

image We've used Square to accept payments at Finovate events for two years and have had an overall good experience. And recently, when our name-brand merchant acquirer of 17 years partially shut off our account for giving them too much risk-free business (a subject for another post, once I calm down), Square saved us by happily accepting our CNP volume with its fat 3.5% fee.

But this post is about the other side of Square's two-sided market, its mobile wallet for consumers. I've already written about Square's gift card option launched right before the holidays, but I hadn't used the wallet for day-to-day charges.

In surveys, consumers don't yet see the value of a mobile wallet. Mobile payments are looking to replace a plastic-card system that works very, very well. And who's costs, so far, are mostly hidden from consumers (note 1).
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Rewarding Usage
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square_bean.jpg

Here's why Square is better than plastic. And it's not because you can pay with your name, which is nice, but a little unsettling for both customer and clerk. It's the built-in rewards. And to a lesser extent, stored receipts/records (can you say PFM?)

We Americans are absolutely enamored with getting something for free. In total, we've joined more than a half-billion rewards programs (see inset, note 2). And it crosses all demographics. Have you seen how the billionaires' eyes light up on Shark Tank whenever someone offers them a free cupcake or cup of frozen yogurt? 

But we're also lazy busy and few people want to carry a wad of punch cards around in their wallet/purse to earn rewards at local retailers. Plus, the cards are mixed blessing for merchants. The loyalty is nice, but merchants are mostly giving free stuff to regulars who would pay for it anyway. Paper punch cards just don't do enough to convert people into "new" regulars.  

image This is where Square shines. When you use its wallet, a virtual punch card is automatically started for you (note 3). And when enabled, the next time you are near the merchant, Square will automatically remind you (via popup message) to come back and buy from that merchant. And even if it's six months later, you get a second punch on that virtual card. And if all goes well for the merchant, they have incremental sales and you are well on your way to a complimentary mocha.

And all your previous transactions, with full itemized receipts, are available within the Square app (see left). It's truly the future of payments available for a sneak peek today. I highly recommend giving the Square Wallet a try.



--------------------------------------------

Notes

1. It's also hard for consumers to answer questions about something they don't really understand. It's like asking someone in 1997 if they'd like to have their music purchases stored "in the cloud."  10% would say sure, 10% would say I don't know and the remaining 80% would choose the other options at random (but 100% would say WTF to themselves).
2. See our report on card-linked offers (Feb. 2011, subscription).
3. Starbucks does not currently support loyalty options via Square, but they are coming. Starbucks has $25 million invested, so they want Square to shine.

Comments (1)
Categories: Mobile Payments, Square

Mobile Wallet Providers Woo Retailers at Annual Convention

By Jim Bruene on January 22, 2013 12:44 PM | Comments (1)

image Last week I was just at ground zero of the mobile wallet battle, the National Retail Federation annual convention in NYC. It was a great opportunity to see what the folks from MCX, ISIS, PayPal and Google were telling the audience of 25,000+ retailers.

No one has won the war, but a few winners emerged at the skirmishes I witnessed:

  • Best Tradeshow Branding: ISIS absolutely owned the show in terms of branded impressions. They had their name on the bags (inset), on the registration desk, ISIS brand on NRF convention bagat two lounges and at their purple booth. Congrats to its Seattle-based marketing/PR team who made quite a splash with that six-figure buy. 
  • Best Product Launch: Google was the only one of the four which launched a new product, its digital coupon/POS initiative, Zavers. The new service isn't solely a mobile wallet, and the Google Wallet is a key piece of enabling technology. Although its booth was buried in the back, Google had a lot of traffic when I stopped by on day two.
  • Best Partnering: PayPal was the clear winner, announcing a huge partnership with NCR. (NCR, which owned the front of the show floor, seemed to have a huge buzz going at all times, and I don't think it was a coincidence that the color scheme of the whole show seemed to revolve around the NCR booth). See the post at our Finovate blog for a summary of the deal making.
  • Retailer BFF award: The MCX panel featured execs from Walmart, Gap Inc., Lowe's, Dunkin Donuts, and WaWa doing some serious bonding for an hour. It made me want to become a retailer, just so I could join MCX. It was impressive.
  • AWOL award: The bank networks, Visa and MasterCard, had virtually no presence, neither exhibiting nor speaking. Square was not represented either, unless you count the keynote by Howard Schultz of Starbucks, which owns a small chunk of the startup.  

Bottom line: Things are still wide open and it's impossible to see the winners yet to emerge. Silicon Valley remains enthralled with Square (which is partly owned by Visa), valuing it at around USD3 billion. NFC technology is hotly debated, and so far ignored by Apple, PayPal and MCX. There are 280 mobile payment startups hoping to become relevant. And all eyes are on PayPal and Google to further their partnerships with Discover.  

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Mobile Monday: Top 50 iPhone and iPad Apps in the Finance Category

By Jim Bruene on January 7, 2013 8:38 PM | Comments
app store logo.jpg

I knocked around Apple App Store last week researching our year-end Online Banking Report. Below are the current top free finance apps in the U.S. store (note 1). While there are not a whole lot of surprises, several are notable:

  • Credit Karma maintains its top-10 ranking (#9)
  • Intuit has three of the top-10 apps (#4, 6, 8) plus #30
  • Two of the top-5 financial institution iPhone app providers (PayPal and Capital One) do not yet have iPad apps
  • Three credit-monitoring apps are in the top 32 (Credit Karma #9, Intersections #23 and Experian #32)
  • Two banks each have two apps in the top 50: Capital One (#6 and #34) and PNC (#25 and #42)
  • Five fintech startups made the top 22 (Credit Karma #9, LearnVest #15, Lemon #19, Pageonce #20, Manilla #22); all but Lemon are Finovate alums (note 2)

Methodology: I first listed the top 50 iPhone apps from the "Free Finance" category (column 2). Then I went to the iPad store and found their corresponding iPad app rank (column 3). I then listed all the remaining iPad apps in the top 50 and their corresponding iPhone rank (last 20 rows below).

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Top iPhone/iPad Finance Apps in Apple App Store (USA)

Company iPhone Rank iPad Rank
PayPal 1 none
Chase 2 3
Bank of America 3 1
Mint (Intuit) 4 5
Wells Fargo 5 2
TurboTax (Intuit) 6 31
Capital One 7 none
TaxCaster (Intuit) 8 16
Credit Karma 9 none
American Express 10 7
Discover 11 13
Citibank 12 10
USAA 13 8
State Farm 14 47
LearnVest 15 none
Yahoo Finance 16 11
Easy Envelope Budget 17 42
US Bank 18 26
Lemon 19 none
Pageonce 20 23
Fidelity 21 12
Manilla 22 none
Identity Guard (Intersections) 23 none
Navy Federal FCU 24 none
PNC 25 19
iSpending 26 116
Barclaycard 27 35
Mortgage Calc (Zillow) 28 20
TD Bank 29 none
Quicken Money Management (Intuit) 30 17
TD Ameritrade 31 27
FreeCreditScore.com (Experian) 32 55
Pocket Expense 33 15
ING Direct (Capital One) 34 none
Quicken Loans 35 none
E*Trade 36 33
Spending Tracker 37 28
SunTrust 38 none
Western Union 39 none
iSpreadsheet 40 9
BB&T 41 46
Virtual Wallet (PNC) 42 40
Bloomberg 43 22
Budget 44 none
Expensify 45 53
Ally Bank 46 none
HSBC Personal 47 none
H&R Block 48 24
Bluebird (AmEx) 49 none
Seeking Alpha 50 none
Below top 50 iPhone    
Craigslist mobile not in finance 4
Money Magazine none 6
ShareBuilder (Capital One) 114 14
CNBC 55 18
Real-time stock tracker 64 21
Vanguard 58 25
Morningstar Stockinvestor 198 29
Personal Capital 92 30
Regions Bank 54 32
Visual Budget 62 34
Merrill Lynch 84 36
Bloomberg TV 125 37
Mortgage calculator (Trulia) 102 38
SmartMoney Retirement Planner (Dow Jones) none 39
Bills for iPad (iBear) not in top 300 41
Budgets for iPad (iBear) 162 43
Checkbook free 53 44
Smart Budget 120 45
TD Ameritrade Mobile Tracker 86 48
EZ Financial Calculators 63 49
Schwab 60 50

Source: Netbanker observation of Apple App Store directly from iPad and iPhone around 6 PM Pacific, 7 Jan 2013

None = No app listed with the App Store for that device

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Note:
1. The Apple ranking system is a bit of a black box. But it's generally believed to weigh heavily recent download activity.
2. Easy Envelope Budgeting (#18) is from a San Francisco-based Web developer Dayspring Technologies founded in 1998.

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Square Expands its Payments Footprint with Virtual Gift Cards

By Jim Bruene on December 10, 2012 9:42 PM | Comments

imageAs the first billion-plus payments startup since PayPal, I've been looking forward to watching Square deliver on those hefty expectations.

We got a glimpse today of where it's heading as the company rolled out virtual gift cards. That's a business with as much potential as anything it has done to date (note 1). 

And it's available now at any of the 200,000 merchants that accept the Square Wallet.

__________________________________

How it works
__________________________________

Square mobile app with Gift Card option Consumers can use their Square Wallet app to purchase a virtual gift card ($10 minimum; $1000 max) for any Square merchant. It can be sent immediately to any email address right from mobile app, which is integrated with iPhone contacts.      

As show in the inset, the gift card option is shown under each merchant's "page" within the Square Wallet app (above the fold).

Square holds the funds until redeemed. The virtual card can only be used by the recipient at the designated merchant using Square's processing services. In the event that the merchant stops taking Square, the funds will be cashed out and placed in the recipient's Square wallet for use at any other Square merchant.

Recipients can potentially redeem in three ways, but the last two options only work for merchants that support bar-code scanning at the POS:

1. Square Wallet app
2. iPhone Passbook (if merchant accepts Passbook)
3. Printing or displaying the QR code sent in the original email to recipient (if merchant supports QR code scanning)

If the recipient does not accept the gift card within 90 days, the money is returned to the sender.

So far, there are no fees or expiration dates for the gift cards. But the company must comply with a thicket of state rules on abandoned property and escheatment, so dormant cards are not pure profit unless Square institutes some type of inactivity fee down the road (note 2).
_____________________________________________________

Bottom line
_____________________________________________________

While messy, gift card issuing is a great business that offers numerous monetization avenues (note 2). It demonstrates how potentially lucrative it can be to be both the transaction acquirer and wallet/card issuer. That's what's sending Square's value to the stratosphere. 

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1. Email from Square to the gift card recipient

image


2. The Gift Card "wrapper"
Note: This is one of four designs the sender selects from

image


3. The Gift Card then needs to be "saved"

image

4. Non-Square customers are prompted to open a Square Wallet account
Note: For those that don't want to open a Square account, an "print" option is offered (at bottom of screen), but the merchant must support bar-code scanning for that option to work (see next screenshot).

image


5. If the merchant does not support bar-code scanning, the gift card can only be redeemed through Square Wallet

image

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Notes:
1. Here are the current Square business initiatives:

  • Merchant acquiring
  • POS systems
  • Merchant analytics
  • Mobile wallet
  • Merchant discovery/offers/ads
  • Starbucks relationship
  • Merchant loyalty business

2. Currently, Square tells users in the app that "Gift cards through Square have no fees and never expire." So, it doesn't sound like they'll be monetizing with inactivity fees anytime soon. 

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The iPad-Enabled Checkout Experience at the POS

By Jim Bruene on December 3, 2012 6:09 PM | Comments

The Hideout Coffee House in Austin

A few week ago I spent the weekend in Austin eating BBQ, watching my alma mater get crushed by the University of Texas, and sampling the Sixth Street ambiance.

But the highlight for me was the The Hideout Coffee House. Not only did it have great coffee and eclectic furnishings, but card customers could pay via Square through an iPad mounted in a novel wood stand (see inset; it's not possible to see well, but the ipad stand is on the counter at left).

The barista took my card and swiped it through the Square reader, which was supported by a wood guide (see similar unit left from Tinkering Monkey). Then he flipped the case over 180 degrees so it faced out towards me (see below).

Tinkering Monkey iPad holder at the POSI selected one of the large buttons for a preset tip amount and then once more to have the receipt emailed to me (I only had to enter my email the first time).

It was easier to use than most in-lane POS readers, even contactless ones, because the barista actually did the swipe. It eliminated the uncertainty about when I should tap/swipe or whether it worked or what I should do next. And I loved being able to put a tip on the card with the push of a button rather than writing it on a piece of paper or digging for change. 

Tinkering Monkey swivel ipad caseBottom line: Eventually payments will be made via proximity and settled in the cloud (my mobile will know I'm in the store and will automatically pair me to the store's POS). But there is still a long transition period ahead.

Tablet/smartphone card readers are a great interim step for smaller merchants (note 2), especially with the price wars waging at the point of sale (note 3).

Related: And banks, even though you don't have the POS issue, you can equip your frontline staff with iPad-powered sales tools (note 4). 

--------------------

Notes:
1. On one of the Austin freeways, I also saw a billboard for the ISIS pilot. But I didn't see any merchants promoting it. 
2. And some bigger ones. And of course, the 20,000-store Gorilla, Starbucks, is partnering with Square, though it is unlikely they'll use iPads at the point of sale.
3. Bank of America recently jumped into the game matching Square's 2.7% discount rate.  
4. Barclays just bought 8,500 iPads to equip its branch sales staff (Financial Brand post).

Comments

The Digital Wallet Value Proposition

By Jim Bruene on November 13, 2012 5:33 PM | Comments

image There has been more e-ink spilled this year on the subject of mobile/digital wallets than any other financial technology. For good reason. The upcoming shift impacts every major retailer, bank, and card issuer, along with their various supporting technology vendors. 

But there are still those who wonder what all the fuss is about. Doesn't plastic serve the consumer just fine? It's fast, ubiquitous, and oh-so much better than the checks and cash it replaced. 

The problem with that reasoning is it only focuses on the "last mile" of payments, the swipe. The swipe is easy. That's why contactless was slow to catch on. It only converted the physical action from swipe to tap; a tiny benefit hardly worth the trouble. 

imageBut the changes being ushered in now have little to do with hand motions. It's about simplifying the messy process consumers go through when deciding which card to swipe/tap/insert. Consumers, at least those with the luxury of having multiple payment options, are faced with a fairly complex decision process (albeit repetitive):

  • Do I have my wallet with me?
  • What cards are in it?
  • Debit or credit?
  • Signature debit vs. PIN?
  • What card types are accepted (e.g., Visa/Mastercard vs. Discover or Amex)?
  • What is my balance or available credit?
  • Personal card or company card?
  • Will the card be accepted?
  • Am I in revolving status? If so, what impact will this purchase have on my rate or monthly payment?
  • What are the penalty fees if I go overlimit or am late with my payment?
  • Are they any reward bonuses available on this merchant category with a certain card?
  • Are there any card-linked offers at this particular merchant?
  • Are there any other loyalty perks at the merchant for using their card?
  • What are my rewards balances on various payment options?
  • Do I have any coupons or offers to redeem here?
  • If it's a joint account, is my spouse making purchases on the card I didn't know about?
  • Do I trust this merchant, or might I end up with a fraud problem on this card?
  • Do I want the merchant to know anything about me?
  • What is this costing the merchant (if I don't want to drive up their costs)?
  • Will the merchant give me grief over using this option (e.g., surly cabbies)?
  • Does the merchant have any minimum purchase amounts or surcharges for various purchase methods?
  • For non-revolving credit, when will my grace period be over and I'll actually have to come up with the money?
  • How easy is it to track the payment for later reimbursement or tax deduction?
  • How hard is it to dispute a charge?
  • Which card did I use here before?
  • Is there more prestige in using one payment card over another?
  • Do I need to curry favor with one issuer vs. another (e.g., to get a better rate or higher line of credit)?
  • What is the foreign exchange rate and are there foreign exchange surcharges?
  • Do I have brand preferences for reasons unrelated to the actual transaction? 

Mobile wallets can use their computing power to instantly resolve these questions and present the user with optimal choice(s). Or the wallet could step in and make the choice automatically which is the key value proposition of the upcoming offering from Wallaby (see notes 1, 2).   

Then there's the whole issue of receipt management and expense tracking that can be integrated into wallets (see previous post; note 3).

Bottom line: I could go on, but the point is that the digital wallet era is upon us, and consumers are going to love it (eventually). How long it takes to catch on is uncertain, but it should be fun to watch.

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Notes:
1. I was briefed on the Wallaby card, currently in closed beta testing, by its founder Matthew Goldman at Money2020 three weeks ago. Like Google's rumored wallet 2.0 offering, Wallaby hopes to replace all the plastic in your wallet with a mobile app and decoupled debit card (plastic) for use at the POS. Then after the transaction is made on the Wallaby card, its proprietary algorithm will route transactions to the user's optimal card based on which offers the highest reward amount for each transaction.
2. For a more thorough analysis, see David Birch's vision of the "decoupled wallet" future here and Tom Noyes Battle of the Cloud, both published this week. And Glenbrook's Carol Coye Benson published this opus on Sep 24.
3. Aite's Ron Shevlin expanded on that in his blog post last week.

Comments
Categories: Google, Mobile Payments

Launching: Automatic Location-and-Merchant-Based Prepaid-Card Reloading with Spending Controls

By Jim Bruene on October 3, 2012 11:31 AM | Comments (1)

image That's a lot of buzzwords in one title, but they're all necessary to describe the payment innovation being tested by MoviePass.

MoviePass is a new service designed to do for physical movie theatres what Netflix did for rentals, turning movie-going into an all-you-can-eat subscription service. For $25 to $40/mo (depending on where you live), MoviePass allows you to attend as many movies as you like (but no more than once per day; note 1).

However, the company has had trouble getting theatres on board, who are rightly concerned about cannibalization. So the startup has been working on ways to get around the need to have theater partners. They tried in-home voucher printing, but it proved cumbersome and still required some level of theatre participation.

So MoviePass invented a clever workaround using a proprietary prepaid debit card. The new system allows subscribers to go to any movie at any theatre in the country, as long as they accept debit/credit cards. The service is in private beta with 1,500 users. You can add your name to the 75,000-person wait list here.

MoviePass iphone app Here's how it works:

1. User goes to the theatre location and checks in using the MoviePass app (inset). The check-in only works within 100 yards of the theatre.

2. MoviePass then adds the price of the movie to its prepaid card.

3. Consumer walks to the window and purchases a ticket with the MoviePass card using up the entire balance (note 2).

It's a clever mashup of GPS, point of sale, mobile and payment technologies.

Relevance: No word on who's powering the card, but hopefully we'll see it used in other applications. It could be a solution for youth spending (parents preapprove locations/amounts), employee purchases (employers preapprove locations/amounts), or rewards/offers (money appears on your card only when you check in at specific locations).

--------------------------------

Notes:
1. Clearly, the company won't be able to make a return at $40/mo unless they cut deals with theatres for discounts (especially to fill second-run and weeknight seats), which is the end-game here. At a cost of $5/ticket, it probably works. At $10 per ticket, movie buffs hitting theatres two to three times per week are going to kill the model.  
2. Presumably, MoviePass has controls that limit the purchase to the theatre where the checkin occurred. And it must be limiting checkins to the registered phone only, otherwise the card could be passed to friends and the biz model won't work. I also assume MoviePass will confiscate any unused balance if the ticket price is less than what was advanced or if the customer doesn't buy a ticket.    
3. It would be interesting if they also partnered with RedBox so you could get unlimited DVD rentals AND theatres in one monthly price.

Comments (1)

BillGuard is First Financial Service to Integrate with the New iPhone Passbook Wallet

By Jim Bruene on September 25, 2012 6:21 PM | Comments

imageApple's Passbook is a massive wildcard in the race for mobile payments, banking and rewards. Will the iPhone's massive user base take to it like they did iTunes, or will it be one of those ideas that sounded good on the drawing board, but just doesn't resonate with consumers?

imageNo one knows if it will stick (although I got pretty carried away with the possibilities when it was announced in June), but given the potential upside, it seems a solid bet.

Starbucks is about to push its massive mobile base onto Passbook, a pretty strong endorsement. American Express has thrown in its support. No word yet from other financial players. 

Except BillGuard, which gets to lay claim to being first. CEO Yaron Samid emailed yesterday announcing beta support for Passbook. The startup built a landing page for the new service at <passbook.billguard.com/> (see first screenshot) and is even testing some Google Adwords spending around the feature.

BillGuard users can now view each of their monitored credit cards within the Apple Passbook application. It's a two-step process to get the cards added to the Passbook utility.

  1. Users click on "Add to Passbook" at top of BillGuard's normal online dashboard (see second screenshot)
  2. BillGuard sends an email with a "pass" attached for each card. Users view the email on their iPhone, then click each attachment to add to the iPhone utility (see third screenshot)

Once added, user can view their current card balance and recent transactions from the Passbook card (see last screenshots).

Bottom line: It's a great move for BillGuard, especially since it does not yet have a native mobile app. Now I can click on the Passbook icon and without logging in, quickly see the activity on all my registered cards, and whether there are any suspicious charges.

Banks could do something similar. Basically, creating a no-login card mini-app that aligns their brand with the iPhone 5. However, one area to consider is security. Anyone who got a hold of the email BillGuard sent me could start monitoring my card(s) through Passbook without my knowledge. For a bit more security, passes can be distributed directly through native apps and websites.

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BillGuard Passbook landing page (link, 25 Sep 2012)
Note: Example is a Chase card "protected by BillGuard" image


Step 1: Click the "Add to Passbook" button on top of BillGuard's main online dashboard

image


Step 2: BillGuard emails a "pass" for each card on file. Users open the email from their iPhone and click the attachment(s) to add each card to Passbook

image


Results: Each pass has its own "virtual card" in Passbook, with a "front" and "back"
Front includes current balance                     Back includes recent transactions

image     image 

Note: The placeholder barcode displayed in the BillGuard pass is a customer referral form according to MyBankTracker. When Starbucks unveils its Passbook support next week, I'm sure the barcode will be usable to make a mobile payment at the Starbucks counter.

Comments

First Look: Google's Save-to-Wallet API at Discover Card

By Jim Bruene on August 16, 2012 8:39 PM | Comments

image This week, Discover became the first to use Google's new Save-to-Wallet API to seamlessly add its card to the wallet directly from its secure site. This API supports the recent expansion of Google's wallet to all US-based credit cards. 

To see how it works, I logged in to my Discover Card tonight and looked through account settings and the Help area for details. Coming up empty, I searched for "Google wallet" within the secure site and found a prominent link to the function (see first screenshot below).

The API worked even better than I expected, taking just 15-20 seconds (after I found the right page). Here's the 3-step process:

  • Press Add Your Card from within the Discover Card secure site (screenshot #2)
  • Enter your Google password into the Google popup page (screen #3; I was already logged into Gmail, so Google had prefilled my username)
  • Accept the API request from Discover (screen #4)

That's all it there was to it.

Optionally, users can go back to Google through the link on the Discover page (screen #5) to make it the preferred payment card (screen #6). Finally, Discover closes the loop with an immediate confirmation email thanking me for adding the card (screen #7). Well done.

Bottom line: Unless you are big enough to negotiate financial considerations from Google and/or build your own mobile wallet, you might as well drop this API into your secure site now. It gives your debit/credit card a fighting chance to be the default card in the wallet. While that might provide a slight spending lift, the major benefit is associating yourself with mobile wallets in general and Google in particular.

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1. Search results for "Google wallet" within Discover Card secure card management (16 Aug 2012)

Search results at Discover Card for "google wallet"


2. Landing page at Discover Card for adding it to Google Wallet

Discover Card landing page for adding to Google Wallet


3. Popup to login to Google account (at Google.com)

Login to Google Wallet through your Google account 

4. Authorization screen (at Google.com)

Google "Add Card to Wallet" API confirmation 

5. Confirmation screen with suggestion that cardholder go to Google to make Discover the default payment card
Note: Highlighting and arrow added for emphasis

Confirmation screen that Discover has been added to Google Wallet 

6. My Google Wallet contains the Discover Card on top

Note: The expired MasterCard below is a remnant of the old Google Checkout that has been replaced by the Wallet

Google wallet containing Discover Card 

7. Confirmation and thank-you email from Discover

Email from Discover Card confirming addition to Google Wallet

Comments

First Look: The Application & Onboarding Process for PayPal Here

By Jim Bruene on June 28, 2012 2:06 PM | Comments

image I put my name on the list for PayPal Here (its response to Square) when it was announced in the spring. Yesterday, I received my invitation to "apply" for the service.

I was a little surprised that I still had to apply given that I've had this PayPal account since 1999, and have run many thousands of dollars through it, both as a buyer and a merchant. But I understand the enormous risks in payment acceptance, so I will happily oblige some hassle. 

Interestingly, the process must be done via the mobile PayPal Here app. You cannot simply complete the application via PayPal's normal online system. Again, this is slightly inconvenient for me, but it's good to see PayPal enabling the mobile app for signup. This may be the first financial product from a major U.S. company that has a mobile-only app process.

The mobile signup process is a little confusing. First, you must download the separate PayPal Here app (it in not integrated with the regular PayPal app). Then when launched, if you press "register" on the opening screen (screenshot below), instead of being allowed to register, you are asked to put yourself on the PayPal Here waitlist

I thought I'd hit a dead end, so I went back to the invitation email (below). What you must do instead is login to the app with your PayPal credentials (note 1). Once in, users go through a quick account verification, then a merchants services mini-application, and ID check against credit bureau data.

At the end of the process, a reader is mailed to your business address and an optional debit card is mailed to your primary address on file. But you are immediately allowed to begin accepting payments through by scanning a card with the mobile camera or keying it in. That's impressive.

The next day, I received an email with a tracking number for the reader (screenshot below).

Bottom line: The process seemed a little convoluted for an existing customer. But, in all it took 4 to 5 minutes and required no supporting info and I was able to accept a credit card immediately. Had I not had trouble logging in, I could have completed it in closer under 3 minutes. Overall, I score it a B+.   

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Email to apply for PayPal Here (26 June 2012)

PayPal here email invitation

 

PayPal Here login screen
Note: Invited users must login, NOT try to register (which won't work)

PayPal here login screen mobile

Pre-populated account                 Card reader
verification
                                              confirmation screen

PayPal here application mobile    PayPal Here card reader confirmation


Confirmation email the next day (28 June 2012)

image

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Note:
1. The email said to login with my PayPal email address and password. I got an odd error message doing that, saying to "append my code to the password." I think this is because I have second factor authentication turned on for my PayPal account. But I could not see any way to get a code sent to me through the PayPal Here app, so I was stuck. I then tried logging in with my PayPal mobile credentials, and that worked fine. It seems like there might be a bug here. 

Comments

Apple Just Put a Mobile Wallet In 100+ Million iPhones: But Is This Passbook a Friend or Foe of Banks?

By Jim Bruene on June 12, 2012 1:46 PM | Comments

iPhone Passbook app If it wasn't obvious already, Apple is becoming the operating system of your life. And since money touches much of what we do, it's no surprise that the company is moving into the payments side.

Actually, Apple is already there. The most valuable company on the planet is already the biggest payments issuer, with 400 million payment-enable iTunes accounts.

Now, when iOS6 becomes available this fall, Apple will be the biggest mobile wallet provider as well, when 100+ million iPhones automatically getting one with the new OS upgrade.

The new baked-in wallet app is called Passbook, I presume because iWallet was taken, or Apple is saving it for something even bigger.

But regardless of the name, Passbook has broad implications in payments and commerce in general. One look at the UI (inset) shows what banks are up against. An app loaded with store cards! Just what a gazillion big-spending early adopters have been hoping for (congrats to Target and Starbucks for leading the way again).

The main reason iWallet Passbook is such a big deal, besides the Apple halo effect, is that it automatically opens your "virtual card" when you walk in the store. Yes, you read it correctly. Automatically. Opening. Mobile. Payment card. 

Starbucks "card" in Apple's PassbookFor example, when you walk into Starbucks its virtual store card, rendered in 2D bar code, will be triggered on your phone. You just swipe the lock-screen notification, enter a PIN (if necessary), scan your phone at the POS, drink your coffee and enjoy the perks (see below).

Is the POS experience dramatically better than using your Visa/MasterCard plastic? Not really during those 15 seconds of your life, but it's not worse either. Shaving 2 seconds off transaction time is not what this is about. It's the retailer value-adds that make it a huge winner.

Smart merchants will tack loyalty points/rewards/amenities (how about a free shot of vanilla in that latte?) on to Passbook-enabled purchases and you will soon be conditioned to pay with your phone. Really, just having your receipt stored safely away in the Passbook app could make the difference between using the store card vs. MC/Visa.

Because Apple wants to be platform, not a bank, they are making the tools available to developers to create apps that play nice with Passbook along with all the other iPhone utilities. So I see this as bank/issuer friendly, so far anyway, though not everyone will benefit.

While this is only speculation, I see a couple things likely to happen:

1. Proprietary single-brand (closed loop) payments make a comeback: With a direct connection to the front-screen of your iPhone as soon as you walk in the door, retailers can put together compelling in-store loyalty offers on the fly. For example, I can walk into Best Buy, and up pops my store loyalty card on the front of my iPhone. And they can dangle all kinds of bennies at me in real time, while encouraging me to pay with my Best Buy credentials rendered in a QR code on the screen (and later via NFC or a "cloud" connection).  

2. Banks and card issuers partner with retailers to become the preferred "Passbook card:" For stores that don't want to bother with the payments piece, instead of presenting a store card with the customer walks in the door, they could present the preferred partner card. For example, Costco, which only takes American Express, could launch an AmEx Passbook card when customers walk in the door.

3. The beginning of the end for paper receipts: Users will have the comfort knowing their receipts are all accessible via iPhone (and in the iCloud). So they will opt out of paper receipts at the register.

4. Mobile offers/coupons just found a new home: If you want iPhone-wielding consumers to see your offer, Apple just created an instant place to store (and discover) deals. I'm not sure if this is good or bad for ad-supported banking, but it's something to consider.

Bottom line: I could go on (for instance about Siri integration), but my head is about to explode with all the possibilities. Time will tell, but I think we just witnessed a watershed moment in mobile-enabled shopping and payments. 

----------------------------------

Recommended reading:

  • Read the full analysis by Glenbrook's Scott Loftesness here.
  • Fantastic stuff on on Quora too (HT to Brad Strothkamp for the link via Twitter).
  • The list of all the features via Techcrunch.
Comments

Mobile Monday: Intuit Launches 17th iPhone App, MoneyDue

By Jim Bruene on June 4, 2012 10:30 AM | Comments (1)

Note: Since I didn't get my Feature Friday post finished last week, it's now been transformed into Mobile Monday.

-------------------------------------

imageWhile most banks still have a single mobile app, the big players will eventually have a portfolio of apps for their various product lines, business units, and disparate customer segments (note 1).

While technically not a financial institution, Intuit shows why multiple apps are needed. With the launch of MoneyDue (see below), the company now has at least 17 apps available for the iPhone.

Tax-related (7)
Earned Income Tax Credit calculator
Intuit Tax Online Accountant
MyTaxRefund by TurboTax
TaxCaster by TurboTax
TurboTax 2011 Tax Preparation
TurboTax Card Mobile
TurboTax SnapTax

Payments (2)
Intuit GoPayment Credit Card Terminal
MoneyDue (ebilling for small service providers; see below)

Small biz (5)
Online Payroll
QuickBooks Mobile
Small Business Blog
Snap Payroll California Free Mobile Paycheck Calculator
Weave (project management)

Consumer (3)
Quicken Essentials for Mac
Intuit Health Debit Card
• Mint.com

___________________________________________________________________

MoneyDue: Ebilling app for hourly-based professional services
___________________________________________________________________

Intuit's MoneyDue iphone appFor almost 30 years, Intuit has been a key financial services innovator. So I'm always interested in the new services coming out of its R&D area.

Here's one that seems like a winner, a mobile small biz ebilling app specifically targeted to those that bill their time by the hour (or appointment).

The app integrates with the iPhone calendar and contacts to seamlessly turn appointments into ebills in a 3-step process (see screenshots below):

  1. Select an existing appointment from iPhone calendar
  2. Select the corresponding person to bill from the iPhone contact list
  3. Enter the billing amount and send

It would be especially useful for one-person shops such as lawn care, home improvement, cleaning services, tutors, etc. The main downside is that the appointment and contacts must already be loaded into those iPhone functions. You cannot create a new bill directly from the MoneyDue app if it hasn't already been scheduled on your calendar (note 2). 

The app hit the app store on May 30 and has been a top-150 finance app since for the past few days.

--------------------------------------------------

Intuit's MoneyDue iPhone app (2 June 2012)

  image   image   image    

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Notes:
1. See our mobile apps forecast here (April 2010, subscription)
2. The iPhone automatically syncs with your desktop calendar (eg. Google's Gmail calendar) so you needn't set up the appointment on your mobile phone.

Comments (1)

Feature Friday: Paying Online with Cash

By Jim Bruene on April 27, 2012 4:56 PM | Comments (1)

imageI love headline alliteration and it's good to have a shtick, so I will periodically post a "Feature Friday" here. It turns out I started last Friday with Capital One's new mobile rewards feature, the ability to trade rewards points to pay for PAST travel (and they did it without resorting to time travel).

PayNearMe mobile option This week, old-school cash was in the news:

  • Finovate fan favorite PayNearMe launched a mobile version of its cash-based payment service that allows users to buy online then take the receipt to 7-11 to pay in cash (or card). Until now, the system relied on a printed receipt to hand over to the cashier. And printing is so 2009. The new mobile version (inset), does away with the printing, allowing users to show the cashier a barcode rendered on a mobile phone. From then on, the process is the same.
  • WalMart just launched a "pay with cash option" that works with its Walmart.com site (screenshots below). The company could extend the service to purchases at other ecommerce sites if it wants to drive more traffic to stores.

Relevance for Netbankers: While we don't spend much time here discussing cash, it's still important across most demographics. And banks have a huge stake in the game with their ATM bases and other cash-handling infrastructure.

Banks could do the same thing as PayNearMe, using their branch and ATM networks to take cash over the counter as payment. And many parents may prefer sending junior to the bank instead of the convenience store.

But I also wonder if we'll see the reverse? Instead of handing cash over to the 7-11 clerk, parents can transmit a bar code to their kid's mobile to allow them to walk out of the store with a crisp $20 for lunch and a bus ride home. And it would make sense to extend that capability to mobile-enabled ATMs and even branches.

Anyway, that's all for this week, have a great one!

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Walmart homepage (27 April 2012)

Walmart homepage promotes pay with cash option


Homepage popup lays out how it works

Walmart.com popup lays out how it works


Walmart checkout

Choose "cash" icon under "enter a new payment method"

Walmart online cart with "cash" payment option

Comments (1)

Mobile Banking & Payments by the Numbers

By Jim Bruene on April 10, 2012 10:39 AM | Comments

Statement rewards provider and BillShrink parent, Truaxis, published a nice summary of mobile banking and payments on its blog (reprinted with permission below).

A few Industry Players metrics at the bottom of the infographic have recently been updated:

  • Starbucks said this week it has processed 42 million mobile payments, up from 26 million (Venture Beat, 9 April 2012)
  • Square has now shipped 1 million readers, up from 500,000; and is now processing $11 million per day, up from $4 mil (Splatf, 5 March 2012)

Mobile banking & payment infographic

Comments

Pageonce Adds Billpay; Showcases Multiple Mobile Apps on Single Page

By Jim Bruene on October 24, 2011 5:54 PM | Comments

image Last week, we looked at how Square makes a single webpage look great across various mobile platforms. Today, we look at the exact opposite problem. How to showcase your various mobile apps on a single webpage. 

Pageonce does it as well as we've seen, using a single showcase panel that includes all five of its mobile app platforms across the top: iPhone, iPad, Android, BlackBerry and Windows. Users can scroll horizontally to see two sets of screenshots for each platform.

The company also includes version number, date of the last update, and app size in the lower right corner. And of course, there's a link to download the appropriate marketplace to download the app. The Android page uses a QR code instead of a link.

In other news, Pageonce added bill payment to its iPhone and Android app today, moving ahead of Mint in the features arm race. The new Gold service, which we haven't tested yet, is priced at $4.99/mo, good news for fee-starved online financial providers. Mint says it has bill payment coming too. It will be interesting to see if they put a fee on it.

Relevance for Netbankers: The addition of transactional services such as bill payment makes third-party PFMs, or virtual banks such as BankSimple, bigger threats to mainstream banks and credit unions. As uber-consultant Richard Crone always says, "He who enrolls, controls."

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Pageonce iPhone app

Pageonce iphone app showcased on its website

iPad

Pageonce on ipad

Android

Pageonce on Android

BlackBerry

Pageonce on BlackBerry

Windows

Pageonce on windows phone

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Note: We cover mobile banking and payments periodically in our Online Banking Report (subscription).

Comments

PG&E's Convenient Mobile Bill Payment App

By Jim Bruene on September 26, 2011 5:37 PM | Comments

image Skimming my news feeds in the post-Finovate logjam, I flagged a news release about a new app that just landed in the Android Market (the iPhone version rolled out last December). The app allows Californians to easily pay their PG&E power bills from their mobile phone using a credit/debit card or checking/savings account. It's powered by Tio Networks

And while you'd think that three years into mobile app era, there'd be hundreds, if not thousands of similar apps, a quick search of the Apple App Store came up empty (see note 1). 

The app is drop-dead simple to use, as it should be (see screenshots below). The amount owed (across multiple PG&E accounts if necessary) is shown. Then, users select payment method, "sign" the screen with their finger, and submit. An email confirms the transaction.

TIO levies a $1.45 transaction fee per payment (well disclosed, see second screenshot below), which is a buck more than a stamp, but it also gives customers the option of paying by card, something that can't be done in the mail, online or in person. And payments received by 5pm are posted the same day, an important benefit for the large segment of the population that prefers to pay bills at the last minute.

Summary: Company specific same-day billpay apps are a great convenience for the majority of customers who pay their bill upon receipt (rather than relying on automated options). We expect to see many more like this. FIs and payment processors that serve billers would be wise to help them mobilize their payments.

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PG&E mobile billpay screenshots (iPhone version)

image  image  image

image    image

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Notes:
1. There are likely at least a few others that I didn't find. The app search tools are not super sophisticated.
2. As of 7 July 2011, there are more than 425,000 available apps and more than 15 billion cumulative downloads.

Comments

MoveNbank: Can it Out-simplify BankSimple?

By Jim Bruene on July 11, 2011 6:02 PM | Comments

image I've been accused of falling for the Bank Simple hype. Just to prove that I don't discriminate, I bring you MoveNBank, a mobile-optimized banking startup founded by Bank 2.0 author and consultant Brett King.

From what little is disclosed on its Facebook page, Twitter feed and Startuply profile I've assembled the following facts:

Timeline:

  • Founded July 2010
  • Private beta to begin soon (per 1 July 2011 Tweet)
  • Soft launch scheduled for July 2012

Company:

  • Global startup with HQ in NYC (Madison Square Park, 25 W. 31st)
  • Founder and Chairman is Brett King
  • 8 employees

Product description:

  • Mobile only, with no paper or plastic
  • NFC-enabled app
  • Incorporates "gamification" in UX
  • According to Startuply, "reinventing credit scores and more with an open, social transparent, and viral model" (sounds P2P lending-esque)

Bottom line: MoveNbank is looking to leapfrog the competition by removing all vestiges of old-school banking. No branches (of course). No paper (no surprise). And no plastic (what?).

That's how ING Direct got its start (they did have paper statements), so it's not unprecedented. But if MoveNbank plans on offering payments, it will be harder to pull off. But with a soft-launch still a year away, it should be able to ride the NFC wave expected to roll across the globe in the next five years.

Are there any other remote banking startups I'm missing? Drop me an email (jim@netbanker.com).

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MoveNbank placeholder page (11 July 2011)

image

Comments

Op Ed: Thoughts on Google Wallet

By Jim Bruene on June 10, 2011 12:30 PM | Comments

This guest post was written by Daniel Thomas, a 25-year strategy and product development veteran of the financial services industry. He is a principal consultant with Mindful Insights LLC.

image Google's announcement two weeks ago certainly raised a few eyebrows in the mobile payments arena and took a giant leap toward putting to rest the debate about the use of NFC.

However, there's an interesting twist that hasn't been explored in the many articles written in the aftermath of the announcement. How will Google's effort impact revenues from the merchant-funded rewards programs (see note 1) banks hope will increase loyalty while softening the blow of the now-certain Durbin Amendment losses?

Citibank inside google wallet

But has Google just killed banks' dreams of grabbing a share of the online advertising pie ?

Merchants today are offering higher discounts and rebates to bankcard users because the banks, via various rewards vendors, are letting merchants in on their customers' spending history.  That data obviously has a lot of value and the merchants compensate the banks for it in the form of commissions on purchases made by the bank's customers after targeted offers have been presented.  On the surface, one might think that regardless of the mobile wallet used, Google's or otherwise, so long as the payment is made from a bank-issued product, the bank will still own the spending history data and be able to trade it for a commission.

However, Google, or whoever owns the mobile wallet (but especially Google), will be able to "see" the purchases as they take place and can begin recording its own spending history data.  That, coupled with other non-mobile spend-history gleaned from browsing on the web across multiple cards per individual or household, potentially gives Google a leg up on the richness of its data (assuming Google can tie the two together, is there any doubt?).  Combine that with general browsing history and Google has a pretty good profile of each person to offer up to merchants. 

Privacy issues aside, this seems to trump bank spending history data placing Google in a much better position to bargain with merchants and ad networks. But privacy issues may well loom large over all of this once consumers and Congress put 2 and 2 together and figure out what Big Broth... er, that is, Google is up to.

Meanwhile, not everyone will have an Android phone nor a Google Wallet. Plenty of other mobile wallets will soon hit the scene, but even so it will take a long time for mobile wallets to replace plastic (amusing thought-- which will go away first: plastic or the perpetual paper check?) so merchants will still want to keep banks in the equation by compensating them for allowing them to use their spending history to develop targeted offers.

So, merchants are going to need to decide: should they allow Google to make the reward offer or the banks?  Surely, they won't compensate both for bringing in the same purchase. That leaves the decision in the hands of the consumers. Do they want to receive points and cash back from Google or from their bank? 

Undoubtedly, consumers will decide based on which one offers the greatest value for the least amount of work. Online usability has been a trademark of Google, banks not so much.

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Citibank and MasterCard are key banking partners
On its website, Google asks prospective visitors if they have a Citibank MasterCard

Citibank and MasterCard are key banking partner

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Note: For more information, see Online Banking Report: Merchant-Funded Rewards (published  Feb. 2011)

Comments

Zong: A Payments Company Name to Remember

By Jim Bruene on May 17, 2011 7:36 PM | Comments (1)

Editor's note: This guest post was written by Daniel Thomas, a 25-year veteran of the financial services industry and a principal consultant with Mindful Insights LLC. He's been involved in strategy and product development for Online Resources Corporation, ARINC, and TeleCheck. He recently authored a report on merchant-funded in-statement rewards for Online Banking Report.

-------------------------------

imageAdmittedly, my online game prowess is more closely aligned with Pong and Donkey Kong than the latest complex and socially intricate diversions. Back in the day, computer games garnered only a single payment transaction: when it was actually purchased. But today, in order to reach the next level, buy virtual pets or beat your opponent a half a world away, a player/avatar/consumer will typically transact multiple times per month in order to buy Facebook credits or other virtual currency (cash, coins, gems, etc.).

These transactions can often occur in the heat of battle (literally), and the last thing any good soldier wants to do is stop progress in order to begin the seemingly weeklong process of taking out their credit card and typing a bunch of numbers just to spend a $2.99 to re-fill their weapons cache.

imageBefore you could say billabong, along came Zong to make it as quick and as easy as a song. How? They ask if you want the charge to tag along on your mobile phone bill. And before long, you are back in action and that much stronger.

So, what's the big deal? What has tickled my lifelong fascination with payments is not where Zong is now but where they are headed. Keep in mind that all these newfound payment transactions are seen only by the game company (merchant);, Zong (acquirer and network); and the mobile phone company (issuer). Financial institutions are involved only when the phone bill is paid at the end of the month.

Furthermore, the fees that Zong and a throng of other "carrier billing" processors command can be as high as 40% of the transaction amount. Ding-dong! Hello? After all, the cost of goods sold for a new virtual tank is pretty small and so is the actual transaction amount once the price has been converted from the game company's internal currency.

But even so, 40% ain't chicken singsong, especially when you consider that the online gaming (not gambling) market today is along the lines of $100 billion. Admittedly, 90% of that market belongs to the non-virtual console and PC games that Zong will be moving into as those products enter headlong into the virtual world.

Future plans
Zong, which now has 100 employees, is already available as a form of payment for Facebook Credits and virtual goods in 42 countries. The company has big plans to expand with its model. Online gaming is just phase one of its multi-prong strategy. Zong knows that moving into markets where physical and digital goods are purchased online (phase 2) will require a reduction in the processing fee percentage. But they already have millions of loyal consumers enrolled in their service which they can leverage to expand to merchants selling relatively low-priced products with reasonable margins (think: books, music, etc.)

Phase three takes things one step further as Zong's strategy intersects with mobile payments at the physical point-of-sale. The idea is that consumers will use the Internet to research their next purchase, as they do today, and will buy the item online using Zong to place the charge on their mobile phone bill. That payment information is then stored in the cloud so that their customers can go to the physical store, pick up the item and show proof of purchase to the merchant.

That should keep traditional payment providers awake all summer long.

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Purchasing Facebook credits with Zong

Step 1: Choose number of credits

Step 1: Using Zong to purchase Facebook credits

Step 2: Enter mobile number

Step 2: Using Zong to purchase Facebook credits

 

 

 

 

 

 

 

 

 

 

 



Step 3: Random 4-digit authorization PIN is sent via Text message

Text message from Zong authorize purchase Facebook credits

Step 4: The PIN is entered into Facebook

Step 4: Using Zong to purchase Facebook credits

Final confirmation screen

Final confirmation when using Zong to purchase Facebook credits

Comments (1)
Categories: Facebook, Mobile Payments

ING Direct Adds Phone-to-Phone Mobile Payments Powered by Bump Technologies

By Jim Bruene on May 2, 2011 7:59 PM | Comments

imageI've always admired ING Direct's focus on deposit accounts primarily sold and serviced through the Internet. While the bank has diversified into checking accounts, mortgages, and investments during the ten years since it launched, the core website look and feel is virtually unchanged (see 2001 version here). 

So I was more than a bit surprised to learn this weekend that ING Direct became the second U.S. financial institution to add Bump-powered phone-to-phone payments to its iPhone app. PayPal was first, adding the feature more than a year ago.

Bottom line: Evidently, with "high-yield savings" stuck at 1%, the giant direct bank needs to be a little more creative on the feature side to attract new business. While bump-to-pay will eventually be replaced with direct communications via NFC or other technologies, it's a nice addition that positions ING Direct as a mobile leader.

Bump is now one of two choice on the P2P menu on ING Direct's iPhone app (2 May 2011)

Bump is now one of two choice on the P2P menu on ING Direct's iPhone app (2 May 2011)      Bump is now one of two choice on the P2P menu on ING Direct's iPhone app (2 May 2011) 

Bump is now one of two choice on the P2P menu on ING Direct's iPhone app (2 May 2011) 

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Note: For more info on mobile banking, see our previous Online Banking Reports.

Comments

Watching the Mobile Payments Battle Unfold

By Jim Bruene on April 6, 2011 8:24 PM | Comments

Editor's note: This guest post was written by Daniel Thomas, a 25-year veteran of the financial services industry and a principal consultant with Mindful Insights LLC. He's been involved in strategy and product development for Online Resources Corporation, ARINC, and TeleCheck. He recently authored a report on merchant-funded in-statement rewards for Online Banking Report.


image The Alternative Payments Systems Innovations (APSI) conference held in San Francisco last week may want to change its name to Mobile Payments Systems Innovation. It seems that all things mobile has totally eclipsed any interest in non-mobile untraditional payments.

And for good reason, the speakers and a hundred or so fully engaged attendees at the second annual APSI summit, seemed unanimously to agree that the convergence of virtual and physical purchasing, social networking, rewards and promotions will be solved by the use of mobile phones. And that is saying a lot given the mix of technology companies, payment companies, merchants and financial services companies represented in the room.

However, there is uncertainty on what exact form the eventual solutions take. But each company with an innovation is positioning themselves to be on the winning side when the dust settles and at least one prediction by chip maker INSIDE Secure Corporation's COO Charles Watson says "it will unfold in the next 18 to 24 months to see who are the winners and losers."

imageFor us payments geeks, it's a little like being one of the people from the Virginia countryside who brought lawn chairs to watch the first battle of Manassas in the Civil War. We have an opportunity to witness payment history before our very eyes. For those companies that are on the battlefield, well, some will win and others will become what Steve Klebe, VP, business development and strategy at BilltoMobile calls "alternative payments roadkill."

The key issue is control of the consumer. This is not a new issue, of course. Richard Crone's (president of Crone Consulting, LLC) timeless mantra, "The one who enrolls (is the one who) controls" is as true with m-payments as it was with e-payments and bill payments before that. However, no longer is this control of the consumer limited to a tug-of-war between the banks and the merchants. Mobile Network Operators (MNO), handset manufacturers and even social networks are all investing in innovative new technologies and functionality to be in the best position to do the enrolling.

The technologies that are being developed to win this control tend to fall into three main categories:
___________________________________________________________

NFC-enabled phones (and stickers)
___________________________________________________________

Mohammad Khan, president of ViVOtech, the NFC payment and promotion solution provider says that 2011 is the year of NFC and that "by the end of the year, 60-70 million NFC-enabled phones are expected to be released--mostly in North America." The presumption here is that consumers equipped with this new functionality will be looking for a place to use it and will ultimately drive merchants to upgrade their POS equipment to accept tap-and-go payments.

Indeed, INSIDE Secure's Watson predicts that NFC enabled smart phones will generate the next generation of phone apps that have nothing to do with payments but will get consumers hooked on tapping (think: tapping posters to receive coupons, tapping labels on store shelves to learn about products, tapping when you walk into a store to check-in and receive offers, tapping phones with someone you meet instead of exchanging business cards, etc.) and that this acceptance by consumers will drive their demand for tapping to pay at the point of sale.

Yet other companies fail to see the value in NFC to consumers. Chris Hylen, VP and GM, Intuit Payment Solutions Division says Intuit is banking on its Go Payment card swipe system that attaches to the iPhone. They believe that in the future everyone that wants to receive money will be able to receive credit card transactions. To prove it, Hylen played this adorable video clip of girl scouts accepting payments with their device. What could be easier?

He went on to say that "NFC is a solution looking for a problem" since it is much easier for a consumer to pull out their card than it is to open their phone, go to the appropriate app, enter a password, select a payment type and then tap the phone to a POS reader. This sentiment was echoed by Vince Kadar, CEO of Telepin Software who asserted that NFC means "Not For the Consumer".
___________________________________________________________

Virtual Wallets
___________________________________________________________

Okay, so maybe virtual wallets are the answer? After all what could be easier for a consumer to understand? Their phone now contains all of the information that used to be in their leather wallet. But which wallet will we use? The one promised by the group called ISIS led by AT&T, Verizon, T-Mobile, Discover and Barclays Bank? Or the one developed in the future by the partnership of Google, Citi and Verifone? Or the neutral and agnostic wallet announced and demoed at the show by Zenius Solutions President John Weise, the Zenius Mobile Wallet?

Since control of the consumer is the goal, every large merchant, mobile network operator, handset manufacturer and card issuer is going to be developing a wallet that they will want you to use as your primary wallet. How is that going to work? I can smell a new business opportunity for data aggregators like Yodlee and CashEdge a mile away, but won't that defeat the purpose of gaining control? Somehow I can't get the vision of George Costanza's wallet out of my head.
___________________________________________________________

Carrier Billing
___________________________________________________________

The simplest solution, deemed the only "friction-less" mobile payment type by the service providers that offer it, is the concept of paying for items with a charge to the phone carriers' monthly bill. The concept is inherently secure since the payment providers have real-time access to the phone company database (and they know where you live!) and a second factor of authentication, a text message to your phone that you need to reply-to.

The companies leading the charge in this space include PaymentOne, MoPay, BilltoMobile, and BOKU. And while its true that they don't have the problems that NFC and wallet providers have, there are currently clear boundaries to the types of items that can be bought with carrier billing services.

Purchases today are limited to small dollar (micropayment) virtual goods such as ring tones, wallpaper, game purchases (if you are one of the millions of people that like to pay to throw virtual sheep) and the like. However, you cannot buy a refrigerator at Sears. At least not until these companies work out the issues between the merchants and the carriers about who pays for fraud losses, how often funds are settled with merchants (remember you only pay your phone bill once a month and Sears isn't going to want to wait a month to get paid for their refrigerator!) and how customer service will be handled for things such as charge-backs.
___________________________________________________________

Summary
___________________________________________________________

The conference concluded with a focus on major merchants and explored their needs and wants for new payment types. Representatives from Walmart, 7-Eleven, Inc., Macy's and SUBWAY Restaurants each explained how they were looking for reduced costs, reduced lines, reliability, security, easy implementation and low maintenance associated with any new payment mechanism they deploy. In addition, they want the system to include the ability to offer rewards and promotions near-store and in-store.

That's a pretty tall order for any new payment solution. Are the merchants being unreasonable? After all, each has tens of thousands of POS locations to worry about, employee training, employee turnover, software changes to make, capital decisions on hardware, and so on. Looking at it from that perspective, one can see why these retailers are among the many that brought extra comfortable lawn chairs to the battlefield sidelines. Maybe it won't be such a quick war after all.

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Notes: 
1. The conference was expertly organized by Strategic Solutions Network. Many thanks to CEO Aron Barkan along with Sara Sturman, Paula Haggerty and Debbie Bernbaum for an informative, interactive two days.
2. Picture credit: Prince William Conservation Alliance 
3. For more info on mobile banking, see our previous Online Banking Reports.

Comments

Can Banks and Credit Card Issuers Outflank Groupon with Merchant-Funded Rewards?

By Jim Bruene on March 24, 2011 5:58 PM | Comments (2)

imageGroupon may be the biggest company in history that everyone thinks they could have built. Facebook, I guess, is up there too.

It seems everyone is wondering how they could do the "Groupon of ____" (fill in the blank). In my world, the blank is "banking." I already wrote about the potential for selling financial products through Groupon and other flash marketing sites last July, so I won't repeat that part. Anyway, that's Groupon 1.0. 

It's Groupon 2.0 that I think is even more interesting for financial institutions. The new model, coming in a few weeks, is all about mobile deals. Groupon Now mobileThe company is said to be planning on adding two buttons to your smartphone:

I'm hungry...which will alert you to nearby Groupons you can use for food deals.

I'm bored...which will alert you to just about anything else Groupon sells.

It's brilliant. And so simple. Again, everyone will wish they'd built it. 

___________________________________________

Banking Opportunities
________________________________________________

So how could you do the same thing in personal finance? What would those buttons be?

  • I'm broke....leads to ATM finder, cash-back location, credit card site, loan app, friends & family loans, P2P lender, etc.
  • I've just been paid...leads to ATM finder, branch locations, deposit accounts, billpay, investments, automated savings plans, etc.
  • I'm out of town...leads to ATM finder, FX locations, travel services, 
    resource locator, card-issuer notifications, security preferences, etc.

But those are all pretty much standard functions of online/mobile banking today. The bigger opportunity may be to beat Groupon at the local level, with merchant-funded rewards tied to debit/credit cards (see note 1). Banks could potentially use the same "hungry/bored buttons" and direct customers to cash-back deals at restaurants and other merchants making offers to your cardholders.

Bottom line: Location-based rewards is another example of why mobile banking will be more important than online banking. To put it simply:

Banks enable commerce.

Mobile enables location-based commerce.

So financial institutions are right in the middle of a multi-billion dollar shift in retail spending. Enjoy all the opportunities!

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Notes:
1. For more on merchant-funded rewards, see the latest Online Banking Report.
2. Picture credit: All Things Digital

Comments (2)

The 12 Days of Mobile Banking

By Jim Bruene on December 21, 2010 5:14 PM | Comments (1)

image In the holiday spirit, I thought I'd lay out the perfect mobile banking/payments app for 2011 (note 1). These are the features I hope to be using on my smartphone at this time next year: 

Security

  • Option to log in with 4-digit PIN only
  • Authorize unusual and/or declined card transactions and unusual checks presented for payment

Bank account management

  • Banking data presented in order of importance with new transactions in bold (like Gmail Priority Inbox, previous post)
  • Quick view of current balance with predicted balance going forward based on known upcoming transactions

Paper management

  • Deposit paper checks via camera (remote deposit)
  • Pay bills by taking a picture of the billing statement (photo bill pay)
  • Scan-and-store paper receipts and statements

Payments

  • Use NFC or bar-codes at the point of sale to make payments directly via phone, without the plastic
  • Pay bills or individuals via their mobile phone number

Alerts & calculators

  • Receive important alerts via push messages to the phone's main screen
  • Take action or adjust alert sensitivity by responding to messages via text messaging or within the app
  • Key financial calculators, such as loan/mortgage payments

And a partridge in a pear tree.

Enjoy the real thing here:

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Notes:
1. I'm missing important features, but I had to stop at 12 to fit the holiday theme. Thanks for bearing with me.  
2. For more info on mobile banking, see our previous Online Banking Reports.
3. Photo credit: Apple holiday promotion in United Kingdom <itunes12daysofchristmas.co.uk>

Comments (1)

Cardlytics Partners with ClairMail to Take Merchant-Funded Rewards Mobile

By Jim Bruene on December 7, 2010 5:02 PM | Comments

image One of the best innovations to come out of this recession is in-statement, merchant-funded rewards. First-mover Cardlytics launched at last year's BAI Retail Delivery (see post).

A year later, it was already reaching 30 million consumers  imagethrough relationships with more than 100 card-issuing banks and 100 merchants (see notes 1, 2). That's unheard of growth in financial services. If just one-third of the 30 million customers look at their statements each month, Cardlytics would have more unique visitors than Groupon (note 3), which has been called the "fastest growing company ever." 

We're not saying Cardlytics has anywhere near the $60-70 million in monthly revenues attributed to Groupon, nor the $6 billion valuation. But enough similarities can be seen in their business models that I'd be very, very happy if I were an early Cardlytics investor (note 3). For example:

  • Both earn revenue directly from merchants who pay only when sales are made
  • Both leverage online channels to deliver significant discounts to targeted users
  • Both are first movers with aggressive growth tactics

And Cardlytics is different too:

  • Cardlytics focus (for now) is national merchants, whereas Groupon is closely associated with local merchants (but is adding national merchants)image
  • Cardlytics can target much more precisely and keep offers out of the hands of the merchant's existing customers, a huge and unique benefit
  • Cardlytics does not need to market its own site to consumers; it rides on the coattails, and leverages the trust, of its banking partners

Mobile opportunity
Cardlytics operates at the intersection of payments and advertising. And while the online card statement is the place to be in 2010 (see screenshot below), clearly the future for any shopping-related service is mobile.

Although no specific products or partners were revealed, the startup signaled its intention to go mobile with its ClairMail partnership announced today (press release).

Cardlytics example: in-statement McDonald's offer made to Burger King customers

cardlytics in-statement merchant-funded offer for McDonalds

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Notes:
1. Cardlytics will be demoing the latest innovations in its service at our Finovate Europe conference on Feb. 1, 2011.
2. BillShrink won a Best of Show award at Finovate Fall for its take on the concept (video).
3. On the strength of its early growth, Cardlytics landed a huge $18 million C-round in August.
4. According to Compete, Groupon had more than 8 million unique U.S. visitors in October.

Comments

Who Wins with NFC-Based Mobile Payments?

By Jim Bruene on November 18, 2010 7:37 PM | Comments (1)

image Now we can stop speculating and begin to plan strategies for the new NFC-in-the-phone world. Google CEO Eric Schmidt announced that an NFC phone running Android Gingerbread would be available "within a few weeks." He even demoed the NFC capability on stage on what is thought to be a new phone called Nexus S. He showed a location check-in, not a payment (see video below, first 6 minutes cover the NFC announcement).

You can be sure Apple will not let itself be out-innovated on NFC, so expect NFC on the iPhone 5 next summer. So what, if anything, does this mean for banks and credit unions?

There's much to be determined still, depending on how much control Apple and the carriers try to exert. The Isis venture from AT&T, T-Mobile, and Verizon is an indicator that the U.S. telecom giants are actively looking to gain an foothold in mobile payments. And it's not like the huge card issuers and MasterCard/Visa are going to sit on the sidelines. No one knows how it will play out. 

But it's interesting to try to figure out who stands to gain, and lose, from the inevitable move from plastic to mobile device. One aspect I hadn't though about was brought to my attention in a conversation with M-Com's Serge Van Dam yesterday. He pointed out one likely consequence of virtual cards running in phones: the resurgence of retail store-branded "charge cards" (non-Visa/MC).   

By making store cards virtual, almost any size merchant will be able to jump on the loyalty bandwagon issuing their own virtual loyalty/charge "card" hooked directly to customer bank accounts (or PayPal), avoiding Visa/MasterCard interchange. It's a decoupled debit play, but without the expense/infrastructure of issuing plastic cards.

Here's my list of possible winners in the NFC world. What do you think?

Potential winners:

  • As outlined above, the small merchant that uses virtual loyalty cards (i.e., in mobile apps) to compete with the bigger players
  • Larger merchants that may be able to cut their interchange costs by routing virtual store card transactions away from MasterCard/Visa/Amex
  • Mobile payment/commerce startups and clever financial institutions (including PayPal) that figure out ways to add value in the new NFC-enabled world (note 1)
  • Mobile telecom players (carriers, networks, and Apple) that derive income from the increase in mobile commerce and advertising
  • Card issuers, if NFC capabilities drive fraud losses down
  • Consumers, who gain convenience by no longer needing to carry a wallet full of debit, credit and loyalty cards around

Potential losers:

  • Incumbent payments brands, especially MasterCard/Visa/Amex, who could lose interchange revenue to upstarts

Google's Eric Schmidt shows first NFC phone running Android
Note: NFC demo is in first six minutes


Notes
:
1. My favorite quote from Google CEO Eric Schmidt's remarks in the video above," (NFC) will result in 500 new mobile payments startups."
2. Picture credit: AsiaBizz.com

Comments (1)

Why Mitek's New Photo Bill Pay Could be a Way Bigger Deal than Mobile Deposit

By Jim Bruene on October 25, 2010 6:10 PM | Comments (4)

imageFor the second time in three years, Mitek completely wowed me on the floor at BAI Retail Delivery. In 2008, I was amazed to see them deposit a check with their mobile phone; this year, the trick was similar, but with a bill.

Mitek CEO James DeBello demonstrated the new systam to me at their booth (press release). He grabbed a bill from a pile, took its picture via the Mitek iPhone app, and sent it off via 3G connection to servers which read the characters through OCR and queued it up for payment. The billing and payment-due info was presented in an easy-to-read table for the user to verify before hitting the "pay" button (see screenshots below). I coveted it for my checking account ... now. 

Analysis
While the deposit of a paper check has a little more of a "wow" factor (as in wow, I don't have to go to the branch anymore), the mobile scan-and-pay of a bill is actually far more useful. The potential market for mobile deposit-capture is limited by the shrinking number of personal checks in use, especially by iPhone-wielding early adopters. I'd guess the total U.S. market for mobile deposit is no more than 10 to 15 million households and shrinking.

And even though paper bills will eventually be eliminated by Doxo or someone, they are still a fact of life for just about everyone with a checking account. And even if consumers start accepting ebills from their major payees, most will still have a few paper bills every month for at least another decade or two.

So not only is the market for photo bill-pay about 10x that of mobile deposit, but the service also solves a peskier problem for most end-users: getting bills paid on time, something that has far more financial consequences than processing the occasional paper check gathering dust in the drawer. 

And for financial institutions, photo bill pay provides several important benefits:

  • Helps get customers started with online bill pay by eliminating the data-entry task of setting up new billers
  • Helps convert customers from other bill pay providers by eliminating much of the conversion hassle of re-establishing payees at a new bill pay service
  • Provides a tangible, value-added mobile service to differentiate from the competition
  • Provides a fee-revenue opportunity from either monthly subscriber fees and/or expedited payment fees

The downsides:

  • Cost
  • Tech support/customer service
  • Potentially harder to wean customers off the paper bill, if it's so convenient to just point-and-shoot to get it paid

Bottom line: Without knowing costs, what type of back-office integration hurdles the app faces, or even personally testing the user experience, I can't say for sure how popular it becomes. If the scanning is finicky, it could be a non-starter. But, if it works like it did in the demo, Mitek may have figured out how to finally eliminate the data entry from the electronic bill payment process, a HUGE win.

1. Main screen                               2. Scan with mobile camera

image     Mitek photo billpay camera view

3. Verify data (3 screens)

 Mitek photo bill pay verify data    Mitek photo bill pay verify data    Mitek photo bill pay verify data

Note: For more info on mobile banking, see our mobile banking series in Online Banking Report.

Comments (4)

Is Barcode Scanning the Next Must-Have Feature for Mobile Banking/Payments?

By Jim Bruene on October 13, 2010 4:18 PM | Comments

imageBarcode scanning via mobile phone has been around for a a while. But until Amazon.com added it to its mobile app this week, I hadn't experienced it firsthand. Target's iPhone app also supports barcode scanning, powered by RedLaser.

And it's impressive. Unlike mobile remote check deposit, where the trial-and-error method of getting a good picture can be tedious, barcode scanning provides real-time feedback so you know exactly when the camera is positioned for a successful scan (see screenshots of the process below).

Yes, it took a minute or so to get my first scan to work, but the built-in feedback mechanism makes it feel more like a game that I eventually won, not a frustrating task. But don't take my word, it's something you should try yourself via the Amazon Mobile or RedLaser app (see inset).

Relevance: Robust payment capabilities are the reason we believe mobile banking eventually eclipses online banking in importance. Whether it's location-based fraud monitoring, mobile wallets, or contactless payments, mobile phones have so many advantages that users will naturally gravitate to them to manage their spending/banking.

Barcode scanning, or the even cooler picture-recognition (also supported by Amazon, see screenshot #5), are important shopping value-adds that many mobile users will use. However, it seems to be more of a feature than a standalone app. And where's the most logical place to locate that feature? Integrated directly into bank debit and/or credit card apps. 

Amazon.com Mobile App barcode scanning screenshots (13 Oct. 2010)

1. Barcode-scan option within search                 2. Position UPC within orange bars

image           image

3. Orange bars turn green when                   4. Actual results from my scan of
the barcode is properly aligned                     a DVD lying around our house

image           image

5. Even faster, at least for media titles, is the photo-recognition feature offered by Amazon. Within seconds after snapping the photograph, Amazon had it identified and stored for future reference.

image

Note: For more info on mobile banking, see our mobile banking series in Online Banking Report.

Comments

With the Launch of Foursquare-powered Social Currency, American Express Now Has 7 iPhone Apps

By Jim Bruene on September 23, 2010 6:31 PM | Comments (1)

In the spring, we predicted that 10 to 15 years from now there would be tens of thousands of iPhone apps from financial institutions alone (note 1). Our reasoning: Many (most?) larger FIs would have more than one app, perhaps dozens. At that time, nine financial institutions (note 2) were tied for most-prolific app deployers, each with two iPhone apps.

imageToday, I found out that American Express has blown that record away. With the release this week of a youth-oriented Foursqure-powered app, Social Currency (app link), the card issuer now has seven apps available for the iPhone alone (but still none for the iPad).

AmEx iPhone lineup
Two are from American Express Publishing (making the comparison to other financial institutions a little unfair):

  • Best New Chefs
  • Eat and Drink

Two are published by other companies:

And finally, three more from core card-issuers:

  • American Express used to access most AmEx cards
  • OPEN Forum for small business clients
  • mobileXtend that can only be used by employees of corporate clients who have licensed this service option 

American Express has seven apps available for the iPhone
Note: Shown here in search via iPad (22 Sep 2010)

American Express has seven apps available for the iPhone

Notes:
1. See Online Banking Report: The Case for Mobile Banking (published March 2010)
2. See Online Banking Report: Mobile Banking and Finance Apps (published April 2010)

Comments (1)

Mobile Phones Just Keep Getting Smarter: Now Used as an Electronic Key Card at Holiday Inns

By Jim Bruene on September 22, 2010 8:33 PM | Comments (1)

imageI love September. When I was a kid it was the excitement of going back to school, a new football season, wonderful Midwest weather, plus my birthday to boot.

Nowadays the birthday isn't so much fun, but the weather is still fine and it's like Christmas for new tech products. I can't prove it, but I bet there are more major product announcements in Sep/Oct/Nov than the rest of the year combined. 

This month already, 70 new tech products launched at DEMO last week, and several dozen will debut at TechCrunch Disrupt next week. Then, of course, we have 56 new financial launches at Finovate, Oct 4/5 (which unfortunately is sold out).

Today alone, there were at least six new things I would have liked to blog about. Maybe I can get some of them into my Twitter feed at least. I have chosen the one that was the biggest "aha" moment of the day. The seemingly off topic, but oh-so-cool service, that can turn any mobile phone, yes even those low-end freebies, into an electronic hotel room key. And without any additional hardware/case/SIM/SD card or anything. It's like magic. Watch.

They use sound to engage the lock. Aha! Would I trust the thing? Probably not, but I'd use it anyway. The key benefit (pun intended) is that you get to bypass the endless lobby check-in queue when you arrive at the hotel and simply proceed directly to your room. For that, I'd take the risk that it didn't work. Besides, four times in my life I've been given a key card at the front desk that opened up on a room already occupied (see note 1), so this system can't be any worse.

The system, called MobileKey, is being piloted for the next three months at a Holiday Inn in Chicago and Houston. It's powered by OpenWays. When using the service, the hotel sends the guest a text message with a link that plays a unique sound that opens the door. Brilliant! 

Relevance: When your phone becomes your Starbucks card, then your airline boarding pass, and now your hotel room key, it's only a matter of time before it becomes a mobile wallet, not only controlling your bank accounts, but also used at the point of sale for purchases. 

Notes:
1. Does this happen to everyone or am I just cursed? At least three times the door was not deadbolted from inside, so I actually went partway in to the room. Once I was politely told to go away, once I was screamed at by a fellow whom I'd awakened after midnight, once the occupant was in the shower so I quickly backed out, and the fourth time there were dishes out front so I called the front desk first. Anyway, I always knock before going into my room the first time.  
2. HT ReadWriteWeb

Comments (1)

Complexity in Financial Services: Can We Really Bank Simple?

By Jim Bruene on May 28, 2010 2:34 PM | Comments (2)

Financial confusion Despite the best intentions of governments worldwide, does anyone really believe that consumer financial services will become simpler anytime soon?

Yet, I've been intrigued by Bank Simple and apparently, so have many others. Evidently, Twitter/Square founder Jack Dorsey and TechCrunch founder Michael Arrington talked about Bank Simple on stage at the TechCrunch Disrupt conference this week.

While most articles are hopeful, first-mover skeptics have already posted counterpoints to the startup's "motherhood and apple pie" messaging (make sure you read the comments on Ron Shevlin's post).  

I can't remember any financial entity, other than those with celebrity founders (Square, Revolution Money, Virgin Money) receiving this much attention before it even launched (note 1).

imageI still don't know exactly what Bank Simple will offer. Certainly, they have a great name and a positioning that's right for the times. But can they live up to it? Basic banking really is pretty simple. You deposit some cash, earn some interest, then take it out and give it someone else. Rinse. Repeat.

Innovation often creates complexity
Banking got complicated only when new features were introduced. People got tired of going to the bank, pulling cash out of the vault, and hauling it around to pay people. So checks were invented. Payment became much easier, and personal security greatly enhanced. And as a nice by-product, the returned check was the first PFM tool, serving as a handy authenticated record of who was paid for what, when.

That worked great for a couple generations, but then too many people wrote too many bad checks and it started to become a slow and cumbersome process to identify yourself at the point of sale. So debit cards came along to speed the purchasing process, fight fraud, and return some fee income to the issuing banks (note 2). And the electronic records of merchant name and SIC code made record keeping even easier, originally on paper statements and now online.

Those two innovations, checks and debit cards, really helped consumers save time and hassle. But did they make finances simpler? Not really. Those payment services led to NSF/overdraft fees, PIN vs. signature decisions, card authorizations, check-hold times, float, authorization holds, chargebacks, annual fees, check-printing fees, positive pay, reverse positive pay, remote deposit capture, mobile remote deposit capture, Quicken, My Spending Report, Mint, interchange regulation. The list goes on and on.

It may not be simple, but no one (except visitors to this UAE hotel) is going back to carrying gold nuggets to the general store to buy crackers out of a barrel.

Technology MIGHT be the answer
Technology advances often bring wonderful, sometimes life-altering, benefits (think electricity or water purification), but often at a cost of increased complexity. As much as I love, love, love the Internet, it's not known for its overall ease of use. 

But there's a glimmer of hope on the horizon, and you are carrying it in your purse, pocket, or briefcase.

The smartphone.

I'm still amazed at my iPhone after more than 2.5 years of continual use (note 3). It's the one and only device I've owned that makes life better AND simpler, albeit at a hefty monthly fee.

And I believe mobile apps will ultimately make banking better AND simpler. Why?

  • The phone knows who you are and where you are, vastly simplifying authentication at the point of sale and reducing fraud significantly.
  • The phone (via real-time links to the bank and retailer) knows exactly how much money you have and what you are buying, virtually eliminating overdrafts and unknowingly overspending.
  • The phone can provide an instant, secure way to pay any person or any business, with immediate settlement.
  • The phone has built-in scanning capabilities for depositing checks, capturing receipts, documenting insurance claims, etc.
  • The phone has access to every database on the planet to assist in shopping, evaluating, financing, insuring and closing any deal for any thing.
  • And if you have a question about any of the above, just speak into the device and you'll get an answer in moments via voice recognition self-service.

So yes, there is hope for banking/financial simplification, and I think it will almost exclusively come through mobile apps with the occasional visit to an online mission control (note 4). So if you want to compete with Bank Simple, or Bank of America for that matter, get cracking on your mobile strategy (note 5).  

Notes:
1. Now that Twitter's Alex Payne has been added as a co-founder, Bank Simple could probably be classified as a celebrity-founded company.
2. I'm still using my first-gen phone bought in Oct. 2007. The battery is still very strong, the touch-screen virtually unmarked, system performance seems unchanged, and it only crashes a couple times every year despite being carried, set down, and tucked away day in and day out.
3. This is a vast oversimplification of the move to debit cards, but the point is they disrupted checks at the point of sale.
4. If you are still unconvinced that mobile will overtake online for banking tasks, here's a thought:  Consider how often you go online now to check the local weather. A waste of time -- right? -- when all you have to do is press a button on your smartphone. The same near-instant response will happen for basic banking info.
5. In our Online Banking Report, we've published several reports on mobile banking strategies.

Comments (2)

New American Express iPhone App Does Away with Pesky Online Enrollment

By Jim Bruene on April 29, 2010 7:06 PM | Comments (5)

image As I've pointed out, the key to boosting mobile banking adoption is to make the user experience better than the desktop computer/browser version. But many banks shoot themselves in the foot immediately by requiring existing online banking users to first log in to online banking to enroll in mobile banking (see note 1).

I've never quite understood the logic. Why can't online banking customers use their existing credentials to log in via the mobile app? What's the new risk? If anything, you are more likely to get your credentials stolen via desktop login than mobile login (at least for now).

imageSo far, the mobile banking apps I've used have required initial activation via online banking (see note 2). I'm sure their security folk can sleep better knowing that I've proven ownership of the phone before logging in from it. But you don't have to prove you own the PC before using it, so what's the difference?

But finally, one of my financial providers, American Express, launched an iPhone app (note 3; iTunes link) that I can use right away by logging in with my online banking credentials (see screenshot below). I expect this will soon become the industry standard.

American Express iPhone app screenshots (version 1.1)

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American Express mobile landing page (link, 29 April 2010)

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Notes:
1. Even more important is enabling online enrollment of customers NOT using online banking; but that's a trickier, albeit potentially lucrative, project.
2. I am using mobile iPhone banking at Wells Fargo, Bank of America, and US Bank. While BofA, Wells and Chase (Update April 30, Chase has online enrollment for text messaging only; you can sign on to its iPhone app with your online banking credentials) all have a relatively painless 60-second signup process, US Bank's is truly cumbersome. It's a ten-screen experience that not only takes several minutes, but also requires the creation of not one, but two new PINs. A 4-digit one for transferring funds via mobile and a six-digit one for use in subsequent mobile app logins. While I'm all for simplified logins, six-digit PINs are not standard and many users will have a tough time remembering it. Many users may resort to using their mobile number, which kind of defeats the purpose. Use four digits and block access after four attempts.
3. The American Express app was released March 31 and a new update was released today.
4. For more on mobile banking see our recent Online Banking Reports.

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Mobile Firsts: PayPal Launches Bump to Pay

By Jim Bruene on March 18, 2010 6:12 PM | Comments

imageThis month we've explored several new features that promise to propel mobile banking into the mainstream market. Unlike developing nations, where mobile is the ONLY way to conveniently bank, in the U.S. and other online-centric countries, mobile has to compete with online for awareness and usage.

There doesn't seem to be a single killer app for mobile. But a growing list of things that mobile does better than online will eventually tip the scales in favor of the new channel. Here's what we've seen so far:

  • Location-based ATM/branch finders (here)
  • Remote check depositing (here)
  • Simple login with 4-digit pin (here)
  • Insurance discounts after graduating from iPhone-based program (here)

The latest addition to the list:

  • PayPal's Bump to Pay (see video below): Users of PayPal's latest iPhone app can transfer funds to each other merely by entering the amount and moving their phones within close proximity of each other (see screenshots below).

As David Eads points out at Mobile Manifesto, bumping to pay has some drawbacks in the real world:  

.....most of the time I want to send money to someone, I'm not standing beside them. And if I am, most of the time I would feel awkward actually touching the person. Imaging bumping someone for admission to a high school football game. Imagine bumping a street vendor for a newspaper or flowers. Imagine bumping a scalper for tickets outside the game.

My take: I agree with David that physically placing iPhones next to each other seems awkward today. But then again, so was writing paper checks back in the day when everything was paid for in cash/coins.

If so-called bump pay is super-convenient, fairly priced, and the perceived security issues are overcome, there's no reason why it couldn't become the predominant method of person-to-person payments. While it's way too early to make any kind of prediction, I'm just saying, don't dismiss it yet.

David's closing remark is spot on:

The key for P2P is getting people comfortable with the idea of transacting electronically between individuals. Bumping and Zooming makes it more fun.

Bumping is now an integral part of PayPal's iPhone app

image   image   image

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Off-topic addendum: As much as we like new bells and whistles, bump pay pales in comparison to the really big news at PayPal this week: the announcement that it's teaming with China UnionPay and Singapore's DBS Bank to offer payment services. The 2-year DBS deal will put PayPal in the hands of the bank's four million customers, 1.3 million of whom are currently banking online.

How big are these deals? A good indicator is PayPal's plan to double its staff in the region to 2,000 employees. Wow, has any financial company anywhere in the world added 1,000 to its staff in the past two years?

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Note: For more coverage of mobile banking and payments, see the most recent issue from Online Banking Report.

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Sneak Peek at Mercantile Bank's Powered-by-PayPal Mobile P2P Payments

By Jim Bruene on December 11, 2009 5:25 PM | Comments (1)

image

Mercantile Bank of Michigan is riding the wave of free publicity from being first to market (probably) with iPhone-based P2P payments powered by PayPal. That's a triple play in both imagealliteration and PR value. See the teaser ad on the bank's website below (first screenshot).

The new service, a joint effort from PayPal and S1, is expected to go live in early 2010. It will allow customers to send money directly from their iPhone to any other individual on the worldwide PayPal network. All the sender must know is the recipient's mobile phone number or email address. According to the five-question FAQ on the landing page (see second screenshot), the service will be available to all MercMobile customers and will be free of charge.

Mercantile Bank has become one of the most innovative banks we follow. Congratulations to CIO John Schulte and his team for leading the industry on several fronts and providing great material for Netbanker (previous posts here; note 1).

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For more on the P2P payments market, see our latest Online Banking Report, published earlier this week, Making the Case for Person-to-Person Payments

Mercantile Bank's powered-by-PayPal mobile P2P app (7 Dec. 2009):

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Mercantile Bank of Michigan homepage (8 Dec. 2009):
Note: MercMobile P2P Payment teaser in lower left and home-based remote-deposit capture on the top banner.

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P2P payments landing page (link)

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Note:
1. Mercantile even earns its very own category at Netbanker: <netbanker.com/mercantile_bank_of_mi>. 

Comments (1)

P2P Payments: CashEdge's POPmoney Spotted in the Wild at First Hawaiian Bank

By Jim Bruene on December 9, 2009 7:30 PM | Comments

clip_image002When CashEdge demo'd its new person-to-person (P2P) payment solution, POPmoney, at Finovate in September (video here), they said they expected four clients to be live by year-end. It looks like the first one is there, or almost there.

imageFirst Hawaiian Bank has a lengthy POPmoney FAQ posted on its website (see screenshot  below). Pertinent details on the new POPmoney service include (refer to full text below):

  • Cost is $1 per transaction
  • Users can send money via email address, mobile phone number, or directly into the recipient's bank account (if known)
  • Online banking customers will find it in the Transfers section under a tab entitled Send Money
  • P2P payments are limited to $5,000 per month subject to a daily maximum of $1,000 via email/mobile or $2,000 transferred directly to another bank account
  • Payments can be scheduled up to one year in advance

For more on the P2P payments market, see our latest Online Banking Report, published 15 minutes ago: Making the Case for Person-to-Person Payments

First Hawaiian Bank's POPmoney FAQ (link; 8 Dec. 2009)

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FAQ text:

What is "POPmoney"?
"POPmoney" is a feature of the FHB Online® banking service that lets you send money to someone electronically via their email address, mobile phone number, or directly to their bank account. Payments to someone's email address or mobile phone number are accompanied with a personalized message letting them know that the funds are available for electronic deposit to wherever they choose, while payments to someone's bank account are deposited automatically.

How much does POPmoney cost?
Sending money via POPmoney costs only $1.00 per transaction.

How do I sign up for POPmoney?
POPmoney is available to customers through the FHB Online service and can be accessed via the "Send Money" tab within the "Transfers" section. If you are not currently enrolled for FHB Online, visit www.fhb.com and click on the Online Banking "Enroll" button in the upper left-hand corner of the screen. If you are already enrolled for FHB Online, sign onto FHB Online, go to the Transfers section, and then click on the Send Money (Personal Only) link. Follow the three-step sign-up process:

  • Step 1 POPmoney Agreement - Accept the FHB Online POPmoney amendment.
  • Step 2 Contact Information - Your email address and mobile phone number are required as part of the sign-up process. You will need to verify the email address we have on file is correct. If it is incorrect, please close the window and click "Update Email Address" within the Customer Service tab to update your email address. After confirming your email address, return to the "Transfers - Send Money (Personal Only)" link and you will also be asked to provide a mobile phone number as part of the sign-up process.
  • Step 3 Email/Mobile Phone Validation - We will send verification codes to your email address and mobile phone. Please check your email and your mobile phone for these codes and enter them in the boxes shown on-screen to complete the sign-up process.

Once you've completed the steps above, you will receive a confirmation message indicating that you have successfully signed up for POPmoney. Click "Continue to POPmoney" to start using the service.

Who can I send money to?
You can send money to someone just by knowing their mobile phone number or email address. The person receiving the notification will be able to deposit the money to any personal checking, savings, money market checking, or money market savings account at FHB or nearly any other U.S. bank. You can also send money directly to someone else's bank account if you have their bank routing and account number information.

How does the recipient receive and deposit funds?
If you are sending money to a mobile phone or email address, the recipient will receive a notification with a personalized message indicating that you have sent them a payment. The recipient has two ways of depositing the funds:

  • If the recipient is a First Hawaiian Bank customer, they can deposit the funds into their account via the FHB Online service. Upon enrolling, or if the recipient is already enrolled for FHB Online, they can click on the "Send Money (Personal Only)" to access the POPmoney feature. Any payments that have been sent to them will be listed under the "Incoming Payments & Alerts" tab. They can then select an account to which to deposit the funds. They can also designate whether future payments should be automatically deposited to this account.
  • If the recipient is a not a First Hawaiian Bank customer, or would like to deposit the funds into a non-FHB account, they can visit www.popmoney.com/FHB. They will be prompted to provide their mobile phone or email address along with their bank account information for the payment to be deposited.

Can I send money internationally?
No, you can only send money to individuals via their accounts within the U.S.

What is the maximum transaction amount I can make via POPmoney?
The maximum daily amount allowed for POPmoney transactions is the current available balance in the source account (plus any available credit in an associated Yes-CheckSM account if applicable) up to the daily limit mentioned below, whichever is less. This includes any single transaction or the total amount outstanding or "in process." For additional information, see below:

Sending Money to Bank Account

Maximum Amount

Daily

$2,000.00

Monthly

$5,000.00

Sending Money to Mobile or Email

Maximum Amount

Daily

$1,000.00

Monthly

$5,000.00

Can I set up recurring or future-dated transactions?
Yes, POPmoney transactions may be scheduled up to 365 days in advance of the date the transaction is to be made. Automatic recurring transactions may also be scheduled for substantially regular intervals (e.g., monthly) in the same amount between the same two accounts. You can schedule recurring transactions to be made weekly, every other week, twice a month, monthly, every four weeks, every other month, quarterly, twice a year, and annually.

How far in advance can I schedule a transaction?
You can schedule a POPmoney transaction up to one year in advance.

When are POPmoney transactions processed?
Transactions will be processed on the date you specify up to a year in advance. Transactions will take approximately three business days to process. Transactions scheduled to process on a weekend or holiday will be processed the previous Business Day.

What is the cut-off time to submit a transaction?
The cut-off time for submitting transactions is 7:00 p.m. HT each Business Day. Transactions submitted after 7:00 p.m. HT or on weekends or holidays will be processed the next Business Day. A Business Day is every calendar day except for Saturdays, Sundays, and bank holidays.

What is the cut-off time to change or delete upcoming transactions?
The cut-off time to change or delete an upcoming transaction is 7:00 p.m. Hawaii Standard Time the previous Business Day prior to the send date.

When does the transaction get debited from my account?
The transaction debit request is initiated on the "send date" but will not post against your account for one to two days.

What happens if I set up a transaction but do not have sufficient funds in my account on the "send date?"
If, on the "send date," there is insufficient balance in your account to make a transaction you authorized, we will delay the transaction and try again on the next Business Day. If there is still insufficient balance to make the transaction, we may either refuse to pay the item, or we may make the transaction and overdraw your account. In either event, you will be responsible for any non-sufficient funds ("NSF") or overdraft charges that may result.

How many people can I add to my list of contacts?
You may add up to a total of 50 contacts.

I used to send money to third parties via the External Transfers function. What will happen to this information?
As part of introducing POPmoney, we have migrated your third-party information and activity from External Transfers to POPmoney. This includes contacts or accounts, as well as upcoming and previous transactions. Categories for previous transactions will not be migrated and will need to be re-defined.

How do I disable POPmoney?
You may disable POPmoney by calling us at 643-4343 (1-888-643-4343 from the Continental U.S., Guam, and CNMI). Please note that disabling POPmoney will also disable your access to External Transfers.

Comments

Citibank Ends its Three-Year Test with Obopay

By Jim Bruene on December 6, 2009 7:21 PM | Comments (1)

imageIt appears that the Obopay/Citibank co-branded service is being shut down. From the sparse note on the webpage <citi.obopay.com> (see screenshot below), it doesn't sound like a temporary hiatus: 

As of Dec. 22, 2009, "Citi Obopay" will no longer be available.
If you would like to use the Obopay service go to www.obopay.com.
The service available at www.obopay.com has no affiliation with Citibank.

The companies have been working together on Obopay-powered mobile payment for more than three years.

Citi Mobile SVP Marylou Dowd said on Thursday in American Banker that the Obopay tests were concluded this summer. Not coincidently, Citi's mobile joint venture MMV announced last week that it was partnering with CPNI Inc. of Toronto to build a mobile P2P payments service.

Obopay's website still shows Citi Obopay on its Financial Institutions page (see inset above). But Citigroup, which invested at least twice in Obopay in the July 2007 C-round and April 2008 D-round, is not listed on Obopay's investors page.

The site was never publicized by Citibank. Traffic peaked at 7,000 unique visitors in Feb. before falling so low that Compete could not measure it after April 2009:

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Source: Compete, 3 Dec 2009, link

For future reference, we've archived the website screenshots below.

Citi Obopay homepage (3 Dec 2009, 4 PM Pacific)
Note: The <citi.obopay.com> URL now redirects to the Obopay homepage.

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How Citi Obopay Works page <citi.obopay.com>

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Get Citi Obopay page <citi.obopay.com>

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Citi Obopay Fees page <citi.obopay.com>

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Note: For more info on mobile banking, see our Online Banking Report: Mobile Banking via iPhone (March 2009) as well as our earlier reports on Mobile Banking (Feb. 2007) and Mobile Payments (April 2007).

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How Many iPhone Banking Apps Will There Be?

By Jim Bruene on November 12, 2009 6:02 PM | Comments

image Are you tired of hearing "there's an app for that" yet? Well, get used to it, we are still at the beginning of the great app rollout

Even as recently as our iPhone Banking Report published in March, I assumed most financial institutions would have a single iPhone app. One bank. One app. It's how the Web worked, for the most part.  

But when Starbucks unveiled a dedicated app just for its stored-value card (separate from the main Starbucks brand app), I realized that I wasn't thinking big enough.

For example, in August PNC Bank become the first U.S. financial institution to offer multiple apps when it released an app for its Gen-Y-focused Virtual Wallet. That was followed last week by Wells Fargo when it unveiled its cash-management app for larger businesses, CEO Mobile (screenshot below; press release).

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image Now, I believe that each major bank will roll out dozens of apps, perhaps hundreds, to support their business lines, major products and large segments. There will be an app for each major affinity credit/debit card, one for students, one for small businesses, one for large business, one for senior checking, one for home equity lines, and so on.

And, if that's not enough, there could be a dedicated app for each stock broker, loan officer and mortgage broker. There could be one app for every branch, neighborhood, or region. Right now the search-and-discovery tools at Apple would implode under the weight of all these apps. But they'll figure that out. It's worth billions to them. 

Today, more than 100,000 apps are available for the iPhone. But fewer than 20 are for U.S. financial institutions. It's conceivable that in the banking vertical itself, well over 10,000 apps could be developed, possibly many tens of thousands (see notes 1, 2). 

Wells Fargo is first U.S. bank with a cash management iPhone app (12 Nov 2009)

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Notes:
1. They won't all be iPhone apps. The mobile market is too big to have it all consolidated at one player. 
2. It's also conceivable that we'll move away from the dedicated app framework, and users will be able to configure their phones with hundreds of info feeds without needing to install an app for each one. More like the iGoogle portal model.  It will be fascinating to see how it plays out.

Comments

Quotes: Mercantile Bank on Using PayPal for P2P Payments

By Jim Bruene on November 11, 2009 11:08 AM | Comments

image The biggest surprise of the year in the world of alt-payments is PayPal's newfound reach into banking circles as evidenced by their agreements with S1, FIS, and FirstData announced at last week's Retail Delivery conference.

But a huge question remains: Will banks play ball with PayPal or will they provide the same functions via home-grown solutions or non-PayPal alternatives such as CashEdge, Fiserv, or Visa/MasterCard?

I don't think anyone has that answer yet. There are simply too many variables. But if you believe there's no way a bank would use a "powered by PayPal" solution, read this quote by Mercantile Bank of Michigan's CIO, who plans on launching the S1/PayPal person-to-person mobile service next year (note 1):

"(PayPal) is a network, it doesn't scare me at all. They're never going to steal significant deposits out of our bank and keep [them] in PayPal accounts. Visa and MasterCard probably look at PayPal as the enemy, and they probably should, but that's their problem, not mine."
   -- John Schulte, CIO Mercantile Bank of Michigan in a
      
Nov. 10 article from Digital Transactions

Note:
1. You might remember Mercantile Bank from our May post lauding its fee-based consumer positive-pay service.

Comments

Why Mobile Banking/Payments will be Highly Profitable

By Jim Bruene on June 18, 2009 11:29 AM | Comments (6)

imageMy credit card number was stolen again. It's the third or fourth time since the Internet came along. It's annoying, and a little disconcerting, but not a major problem, thanks to efficient card issuers who take the info, credit my account, and send me a new card. On a ten-point "hassle scale," where 10 is having your hard drive crash, it's only a 2 or 3.

And my previous stolen cards resulted in little financial loss to the issuer, other than the cost to process the chargeback and reissue the plastic. In those cases, either the issuer caught the fraud before anything was shipped, or the items purchased were digital (online subscriptions) and didn't result in any lost inventory.

But this time was different. Someone used my card number to buy a PS3 gaming console and three games at a Best Buy in the Bronx. Assuming Best Buy follows proper procedures, Wells Fargo will be out more than $600 just for the merchandise. All told, with the cost of the investigation and processing, it's probably an $800 to $900 loss to the bank and merchant.

Wells Fargo is generally very good about suspicious charges and usually calls us. I've had the card for almost two decades, and it's been othe primary card for both my wife and me for much of that time. WF knows our purchasing habits better than we do.

Yes, we get to NYC at least once a year, but our charges are usually travel- and tourist-related ones in Manhattan. And we probably visit Best Buy in Seattle a couple times a year (we have teenage boys), so the gaming system charge is understandable. But it's highly unlikely we'd buy a system while visiting NYC, and we've never visited the Bronx, so the authorization request likely triggered flags.

But unless there was inside theft, the bank's authorization system evidently decided the $10 in interchange was worth the risk. Bad call this time, but probably right 99%+ of the time; otherwise, they'd be out of the card business.

What's mobile have to do with it?
But if Wells Fargo had a real-time connection to me via mobile phone, they could have texted me for an OK (similar to the screenshot above, which is a text-based activity request to Wells Fargo). If it really had been I who stood at Best Buy's register, it would have taken a second to reply "yes," and the transaction would have gone through.

Of course, in this case, I would have said 'no, I'm in San Francisco right now.' Or even better, in the not-so-distant-future, if I'd allowed the bank to track me via GPS, they would have known, without even contacting me, that I was 3,000 miles away from that store. Either way, the bank saves nearly a grand from that single text message. Multiply that by the millions of fraud purchases every year and you have serious money, billions by most estimates.

So yes, mobile banking (really mobile payments) does have a robust and tangible business case from fraud reduction and customer service savings. The technology is in the hands of the users now, and most know how to use it. So, let's get moving.

Note: For more information see our Online Banking Report on iPhone Mobile Banking

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Notes from the Mobile Commerce Summit (day 2)

By Jim Bruene on June 5, 2009 1:45 PM | Comments (1)

image Day two of the Mobile Commerce Summit ran just for the morning (see Day 1 highlights), but anyone who overslept missed the highlight of the conference: the much-too-short panel discussion on revenue opportunities that started at 8:15 AM and ended at 9:00 (note 1). 

Panel: Mobile revenue opportunities 

  • Drew Sievers, founder & CEO, mFoundry
  • Joe Salesky, chairman & chief strategy officer, ClairMail
  • Cameron Franks, director, Mobile Commerce Americas, Sybase 365
  • Jayatsu Bhattacharya, SVP business development, Mobile Money Ventures (Citigroup & SK Telecom joint venture)
  • Mustafa Patni, former director of mobile banking, WaMu

Observations from the panel:

  • POS payment services: NFC at point of sale
  • Value-added services
  • Fees for mobile banking services: transaction, monthly, or annual
  • Premium accounts with a rich mobile feature set
  • Stock/investment trading (Citi Hong Kong is able to charge a premium for mobile trading)
  • Bill pay: expedited payments
  • Person-to-person (P2P) payments
  • Much of the revenues will be indirect, from deepening and improving customer relationship
  • Remote deposit capture for businesses
  • Merchant advertising: offers to customers as they shop
  • Loyalty programs: driving customers to certain merchants with alerts, offers, and discounts
  • Lots of cost-saving opportunities: self-service customer service, moving bill payments to on-us transactions, loyalty program management, security, fulfillment, marketing, call deflection

Panel: Smartphone impact on the customer experience 

Armin Ajami, VP retail Mobile channel, Wells Fargo

  • Almost half of smartphone users use the mobile Web daily (source: ABI research, Feb. 2009)
  • 18% of U.S. consumers have smartphones
  • 263,000 apps now available for smartphones, predicted to grow to about 700,000 by 2013
  • There are 27 different app stores today
  • Mobile-optimized website <wf.com> launched in July 2007, text banking launched Oct. 2007, native iPhone app launched May 2009
  • Funds transfer on mobile-optimized websites takes 2 minutes with 5 clicks, no zooming or scrolling vs. 10 minutes via iPhone mobile browser with 7 clicks, 5 zooms, 7 scrolls and 10 minutes

Alain DeSouza, sr. mgr., market development solutions marketing, Research in Motion

  • Globally, 12% to 14% of mobile phones sold now are smartphones; in North America, it's now above 20% (22% to 26%)
  • Blackberry app store officially launched April 1, 2009
  • Not excited about putting NFC chips into handsets (adds cost); will do it when it makes business sense (last year it was a top-5 opportunity, this year more of a top-20)
  • P2P transfer is not a killer app, but could be important for adoption
  • Be careful not to waste bandwidth in your app development

Note:
1. Note to conference organizers: Never start a session at 8:15 AM after a Thursday night in Las Vegas.

Comments (1)

Notes from the Mobile Commerce Summit (Day 1)

By Jim Bruene on June 4, 2009 7:02 PM | Comments (2)

image About 100+ folks gathered in the brand new M Resort near Las Vegas for the third annual Mobile Commerce Summit by SourceMedia. Jeff Dennes from USAA and Jim Simpson from City Bank of Texas, both provided an extraordinary amount of metrics on their mobile rollouts (details below).

The biggest innovation of the day was iPhone-enabled remote check-deposit capture soon to be available from USAA (official launch June 25; see picture below). 

imageSession highlights
Jeff Dennes, executive director, mobile money & movement, USAA:

  • 7.9 million logins so far this year vs. about 7 million in all of 2008
  • Highest week to date, 476,000
  • 4.8 million USAA members own mobile; 1.5 mil use it to access Internet
  • 20% say mobile is primary channel
  • 11.4% of members using USAA mobile
  • Why so much usage: no branches, members trust USAA, extremely mobile military-oriented customer base, more technically capable than average
  • Have SMS, Firethorn downloadable app, WAP <mobile.usaa.com>, native iPhone app
  • Native iPhone app released 2 weeks ago: Went to number 1 in first week with 55,000 downloads; 45,000 logins in first week, 93,000 in second week
  • iPhone app built in-house and has patents filed
  • Will be launching first iPhone remote deposit-capture app on June 25 (see photo above); tune in to the bank's webcast at 7 PM Central time at <budurl.com/usaaannouncement>
  • Current iPhone app has insurance functions: filing a claim, roadside assistance
  • Personal financial management functions coming soon
  • With mobile rollout, are seeing call volumes going down
  • 35% of access to mobile site comes from iPhone, 35% from Blackberry
  • Will be building app for Blackberry; others as demand warrants (e.g., Pre)

Jim Simpson, VP IT, City Bank of Texas

  • Mobile banking is powered by ClairMail (use Jack Henry for core processing and online banking)
  • Launched 17 Oct 2008 with balance, history, funds transfers, "call me," near-real-time alerts (not batch) including reward-checking status/summary (sent out 7 days before end of checking cycle telling users how they stand on meeting necessary activity levels
  • Have microsite: www.citybankmobile.com
  • Made a major cross-channel marketing effort at launch: TV, print, radio, in-branch, and so on; used it to differentiate themselves in competitive Lubbock market
  • 10.2% online banking penetration
  • 64% use weekly
  • Average age is 32
  • Average account balance on primary account is over $5,000
  • More than 3,000 active users
  • Limited use of mobile browser site, bnkngo.mobi; text-message banking is much more popular (also have gocitybank.mobi); get 5,000 balance requests via text messaging each week vs. 25 or 30 mobile Web logins
  • Real-time alerts (vs. batch) is one of the key benefits that users like; they often can text message a confirmation of the transaction while still standing at the checkout counter; not always that fast, sometimes can be a few minutes later
  • Coming: End-of-day, text-based account summary, "payit" loan payment via text (in response to text alert), iPhone/Blackberry apps
  • How to make money? Adding ad-supported links within text messages; e.g., link back to the restaurant where the transaction originated

Ginger Schmeltzer, SVP, SunTrust

  • Currently at 2.5% penetration of online banking users powered by Firethorn
  • 33% access via iPhone; 33% via Blackberry
  • Have an RFP out now to find vendor(s) to increase functionality
  • See real benefits from using mobile channel to decrease fraud

Patrick Reetz, VP & director, online banking, M&I Bank

  • Rolled out mobile in Oct 2008 powered by MShift
  • Within 11 days, achieved one-year goal of 2% penetration of online banking users (longer term, their initial goal was 10% by YE 2010)
  • Currently have 7% penetration

Ellen Johnson, SVP retail online services, Huntington Bank

  • Have just under 25,000 users of mobile Web banking, launched in June 2008
  • Number of users of text banking surpassed mobile Web in April, launched 6 months ago
  • Mobile banking customers are 38% more profitable; text banking, 13% more profitable
  • Call center contacts per active user dropped 3.4% in first 6 months
  • Have a mobile microsite for marketing

Juli Anne Callis, president & CEO, National Institutes of Health Federal Credit Union (previously at Keypoint Credit Union)

  • At Keypoint Credit Union, even usage between iPhone and Blackberry access
  • Keypoint powered by mShift and will be using mShift at her new CU
  • Launched on Facebook Nov 2007 (OBR Best of Web winner)

Amy Johnson, channel manager -- CEO Mobile, Wells Fargo

  • Launched 2 years ago (April 2007), and Wells Fargo remains the only major U.S. bank offering full corporate mobile banking
  • Mobile Web-based system
  • No charge except certain text messages (and those fees may go away)
  • No set-up process -- just log in at mobile site with existing online credentials
  • Will not disclose usage, but are targeting top-tier customers: top 10%-15%
  • Access: 30% iPhone, 50%+ BlackBerry -- no Android so far
  • $2.5 billion in wire approvals via CEO Mobile in 2008

Kevin Morrisson, AVP card products, H&R Block

  • Using text messages to defer calls to call center (currently receive 80 million annually), especially people checking to see if their refund has arrived.
  • Program was piloted this year and is expected to roll out nationwide later this year. Found dramatic decline in voice calls from test group.
  • Mobile program powered by Metavante/Monitise joint program. 

Rebecca Mann, director of strategic alliances, Western Union

  • Using mobile to replace either the sending or receiving part of a money transfer
  • Partnering with US Bank for international remittances

Lisa Stanton, CEO, Monitise America

  • Can do more secure services within an app compared to mobile Web or SMS

Matt Krogstad, VP business development, M-Com

  • Critical for banks to be point of registration and source of funds
  • Should be able to register outside online banking -- via call center, ATM along with mobile phone
  • In Australia, mobile money transfers was slower to take off, approx. 18 months after adoption of mobile banking

Clint Heyworth, attorney, consumer finance group, Chambliss, Bahner & Stophel

  • One-to-one relationship with phone (e.g., you have it with you) makes it better for security compared to PC where others have access
  • Not a lot of legal differences between delivering banking services via mobile vs. online
  • Don't expect to see specific regulation regarding the mobile channel; will likely be the same regulations as for online banking

Tom Wills, senior analyst, Javelin Strategy & Research

  • Security is single biggest factor inhibiting mass consumer uptake
  • Only 500 pieces of malware have been identified so far in mobile vs. thousands of new ones every day online
  • 47% of respondents are uncomfortable with mobile security (Mar 2008 data)
  • Main concern is hackers, mentioned by 73% of those above
  • Expects anti-virus software makers to build mobile versions

Rebecca Sausner, editor, Bank Technology News

  • Total revenues for mobile banking vendors this year will be $26 million (source: Aite)

Sean Moshir, CEO, CellTrust (also mobile banking sub-committee co-chair of Mobile Marketing Association)

  • 66% of consumers still not yet comfortable using mobile device for financial transactions (source: 2009 KPMG Global Consumer Survey)
  • 7% said they would pay a nominal fee to access online banking services via mobile phones (source: 2009 KPMG Global Consumer Survey)
Comments (2)

ING's Ultra-ATM Finder Android App Uses Augmented Reality (AR)

By Jim Bruene on March 19, 2009 9:50 PM | Comments (5)

image While working my way through the RSS backlog tonight,
I found a post from Rob Findley at The Bank Channel, I wish I'd seen a week ago. It would have made a nice example in our latest Online Banking Report on the iPhone and other mobile applications

image Last month, Dutch giant ING released a Google Android mobile application called ING Wegwijzer (see translated page below), that goes one step beyond the iPhone's GPS-enabled ATM finder apps.

In the ING (Netherlands) version, you have three choices of how to view the nearest ATMs (see below):

  • List
  • Map (regular or satellite)
  • Camera

The camera option is very cutting edge. Users point the camera in their G1 mobile phone camera (inset) and the app overlays a pointer to the nearest ATM (see below). The application works for all ATMs, ING-owned and others, but only in The Netherlands. 

The application was developed for ING by SprxMobile using technology from Australia's Austria's Mobilizy.

I saw a Japanese startup demonstrate a broader mobile shopping app at TechCrunch50 last September, the Sekai camera from Tonchidot, but this is the first production app I've seen using the technology.

Bottom line: This is probably overkill in terms of a mobile ATM finder. However, it shows the power and versatility that's rapidly being engineered into mobile phones.   

ATM location as pointed out by ING app running in camera viewfinder

image

ATM locations also displayed via typical mapping

image       image

ING landing page for the Wegwijzer (link) (Google translation, 18 March 2009)

image

Comments (5)

Blaze Mobile Wallet Transforms iPhone into Payments Device at the Point of Sale (sort of)

By Jim Bruene on March 3, 2009 5:22 PM | Comments (1)

image It will take years before the mobile phone fulfills its promise as a true mobile payments device. Or will it?

If you don't mind a bit of a work-around and you limit your purchases to MasterCard PayPass-enabled merchants, you can pay by cell phone today thanks to Blaze Mobile.

How it works:

  1. Download the Blaze Mobile Wallet at the Apple App Store (iTunes link), cost $1.99 (note 2).
  2. Sign up for a Blaze pre-paid MasterCard issued by MetaBank
  3. Affix the MasterCard PayPass RFID sticker to the back of your iPhone
  4. Wave and pay at MasterCard PayPass terminals

Granted, few people will go through this trouble just to buy an Arby's sandwich without pulling out their plastic (note 1). However, it shows that the technology is available today to enable at least some mobile payments. And for financial institutions, it provides a cool way to differentiate debit and credit cards.

Notes:
1. According to MasterCard, there are 463 PayPass locations within 25 miles of my Seattle location. 
2. The wallet also works on other mobile platforms, see the company's website.
3. Previous post on paying via credit card stickers (here).
4. For more info see our Online Banking Report on Mobile Payments.

Comments (1)

UK's MoBank Could be the First of a New Wave of Banking & Payments Companies Optimized for Mobile Delivery

By Jim Bruene on February 6, 2009 12:47 PM | Comments

imageMoBank, the U.K.-based mobile banking and payments said to be launching this month, is creating some buzz on the other side of the Atlantic (stories here, here, and here).  Given the pedigree of its two founders, Steve Townsend and Dominic Keen, who blazed many online banking trails at Egg and First Direct, it should provide a glimpse of the future of mobile finance.

The company is establishing a call center on the Isle of Man, run by Steph Gregg, a veteran of Egg, First Direct and Vodafone. Melanie Hunter is head of marketing, and David Rubin is head of mcommerce.

The company was named to Red Herring's top-100 global start-up list last month (here) along with FinovateStartup alum ClairMail (demo video here).

It appears at launch the service will support bill payment and certain mcommerce activities, such as purchasing movie tickets. An iPhone app is expected at launch. Users will register their credit/debit card(s) with the service. The company plans to expand into mobile banking and money-management activities in the future. 

The company has raised more than $1 million according to news reports. The company was founded in 2006 and presented at The Essential Web conference in June 2007
(p. 43, here) and had four employees at that time.

Here's how the company described itself 18 months ago:

MoBank is creating the world's first mobile-led online bank. The company believes that, for some sections of the population, small screen devices will become the channel of choice for most banking and payment services. moBank's business model is based on providing a free-to-use basic banking service with paid-for add-on features. Furthermore, moBank's users are enabled to participate in a range of unique, value-generating m-retail activities.

What's innovative: It sounds like a mobile-based account aggregation and bill-pay service, similar to Mint on the iPhone. But it could also contract directly with one or more banks like SmartyPig has (previous coverage). But as ING Direct proved, optimizing on a new delivery channel can pay off with great word of mouth and positive press.

MoBank pre-launch homepage (6 Feb. 2009)

image

Note: For more info on the growing market, see our Online Banking Report on Mobile Banking.

Comments

Privier Launches ATMsend, a Promising Idea that Needs Banking Partners

By Jim Bruene on November 7, 2008 4:27 PM | Comments (9)

image I've communicated with Privier founder Charles Polanco a number of times over the years. He's a Wachovia alum who's been working on a financial startup for several years. The company launched a suite of payment services on Oct. 16 that aims to get the plastic card out of the ATM business (press release).

Privier's value prop is straightforward and compelling: Enable money transfers from any device at any time with the cash delivered through the worldwide ATM network.

The system initiates transfers in three ways:

  • ATMsend: ATM to ATM
  • iTransfer: Web to ATM 
  • mPayment: Mobile phone to ATM

In Privier's model the ATM card is replaced by a one-time authorization code that recipients key into the ATM to withdraw transferred funds.

Analysis
From a usability perspective, it's a great idea. After all, what's not to like? Consumers need to send cash. ATMs have cash. Why not let folks authorize a remote ATM withdrawal from the comfort of their own home or office. A proposed fee in the $7 range beats most alternatives for long-distance money transfers.

However, from a practical standpoint there are two massive roadblocks to overcome:

  • Retrofitting ATMs to accept a keyed-in code instead of a mag stripe for authentication
  • Convincing banks to add ATM-transfer capabilities to Web, mobile and telephone services

It will likely take an organization the size of Visa, MasterCard, or Bank of America to pull this off. To ensure that those behemoths work with it, Privier has a portfolio of patents pending on the business process. 

What it means for Netbankers
It may take decades, but eventually, the Web married to mobile will eliminate the plastic debit/credit card; however, unless you are a major bank or payments company, this isn't likely anything you need worry about for a number of years.

A better short-term solution for smaller financial institutions is to enable P2P funds transfers using PayPal so you can send money to anyone with a PayPal account (see note 1).

Privier's Web-based interface for sending cash to an ATM (5 Nov 2008)SendCash_Step1

Note:
1. See our latest, the Online Banking Report 2009 Planning Guide, for more info on project priorities for this year and beyond. 

Comments (9)

Visa Announces Android and P2P Mobile Initiatives

By Jim Bruene on September 25, 2008 11:05 AM | Comments (1)

image Visa today put a stake in the ground to be viewed as the innovation leader, a position that American Express has claimed for some time with its chip cards, social media efforts, and even an online lab site. At today's "innovation briefing" in NYC, Visa announced several pilots and upcoming initiatives.

Mobile person-to-person transfers
The most far-reaching announcement was the ability for Visa cardholders to transfer funds from one card to another via mobile device. So far, just one bank is participating in the pilot. US Bank says it will make the service available to a few thousand cardholders as a test later this year. PaymentsNews has more details here.

It sounds good, but as always the devil is in the details. For instance:

  • Through what hoops will cardholders have to jump to enable their card and phone for the service?
  • Will the transfers be treated as cash advances triggering fees and finance charges?
  • Will it be available to all cardholders using any mobile phones? 

Visa jumps on the android bandwagon
A more immediate innovation is a location-and-alert-based service built for Google's android platform, a new mobile system launching in late October. Visa's new service, to be rolled out initially by Chase Bank (no time frame given), promises some important new developments:

  • "Near real-time" purchase alerts (see note 1) so you can see immediately whether your server added an extra digit in front of your tip on that bar tab. The real-time alert pilot was announced a month ago (here) involving several thousand accounts at PNC Bank, SunTrust Bank, US Bank, Wachovia, Wells Fargo, Royal Bank of Canada, TD Bank, and Vancity.
  • Visa merchant finder based on your location-based/GPS technology  (nice!) with targeted marketing offers (hmmm??). The merchant locations will be integrated with Google Maps.

Again, PaymentsNews has the entire press release here.

Notes:
1. Visa says that the alerts will arrive "typically before (the consumer) leaves the store."

2. For more information, see our Online Banking Report on Mobile Money & Payments.

Comments (1)

Will eWallets Make a Comeback on the iPhone?

By Jim Bruene on September 2, 2008 12:29 PM | Comments (4)

image Since the July opening of Apple's App Store, we've been tracking the apps in the Finance category (see previous coverage here). But there are also several apps in the Productivity category of interest to financial institutions: the eWallets.

Ilium's eWallet for iPhoneThere are two wallets available in the U.S. iTunes store:

  • eWallet from Ilium Software: #46 in popularity in Productivity with a cost of $9.95 and rated 3.5 stars (out of 5) across 143 reviews (see inset)
  • Memengo Wallet: #48 in Productivity with a $0.99 cost and rated 4 stars across 43 reviews (website)

Web-based eWallets never took off because of security concerns and because they provided only marginal improvements in desktop productivity. However, a mobile version has more utility owing to sticky notes with password reminders and credit card info, helpful to users away from their desks.

How it works
Storage of usernames and passwords for websites is the primary use of eWallet, but it also has a Finance category (see inset above) where users can store credit card numbers and contact info (see screenshots below).

That info is helpful when using a card to make a purchase online or through the mobile phone. It's also a great place to store the info in case the card itself is lost or stolen.

Financial institution opportunities
While these apps haven't gained an overwhelming following, a financial institution could offer a free version that highlights its own card offerings while providing storage space for other card numbers. That way, you get your logo on the iPhone instead of Mint, Wesabe, or some other financial institution. 

The bank-branded eWallet could also include a financial calculator and direct connection to online banking.

Ilium iPhone eWallet showing credit card info    eWallet showing credit card detail

 Note:
1. For more info see our Online Banking Repot on Mobile Money & Payments.

Comments (4)

Could Mobile Payments Get a Boost from Lowly Stickers?

By Jim Bruene on August 20, 2008 4:42 PM | Comments (6)

image Even though I have credit cards from Citibank, Wells Fargo, U.S. Bank, American Express and Chase, I have never been offered the opportunity to add contactless payment capability to my card, so I still have no firsthand experience of that particular wave of the future. 

And it hasn't been too high on my list of things to try, since it still requires carrying a piece of plastic or an additional device such as keychain fob (inset). I don't see much benefit to tapping a piece of plastic compared to swiping it.

However, I do look forward to NFC-enabled mobile phones. But given the hurdles for adoption among carriers, payment processors, and issuing banks, I wasn't expecting that much before the next summer Olympics.

But now an interim workaround is being tested around the world: the contactless payment sticker. It's a quarter-sized sticker you plop on the back of your mobile phone making it instantly payment-enabled.

That allows consumers to leave their wallets at home, a nice benefit for outdoor enthusiasts, club goers, or anyone who doesn't want to worry about losing their wallet while on the go. Of course, we'll need a few million more contactless-enabled merchants before the wallet-free world is realistic for most, but widespread use of stickers could move that along (see note 1).

Who has it?
There are several rollouts under way around the world. For example:

USA Technologies Pay Dot contactless payment sticker

Note:
1. There are about 110,000 PayPass merchants worldwide, less than 1% of the 25 million locations that accept regular MasterCard cards. 

Comments (6)

Stealth Finsphere Corp Lands $10 mil for Mobile Transaction Verification Services

By Jim Bruene on June 20, 2008 11:06 AM | Comments (1)

imageLast week, the Puget Sound Business Journal reported on a Pacific Northwest stealth startup that's receiving a lot of attention from Silicon Valley, at least measured in dollars. The $10 million round for Finsphere is an impressive endorsement, especially given the apparent involvement of prominent VC Mohr Davidow.

There's not a lot we know about the company other than the founders are out of the wireless industry, and the company's services are described as "location-based transaction verification services." That sounds like using the GPS-based or triangulated location of mobile phone users to authenticate card transactions and/or online banking logins. Armed with the GPS reading, card companies would know that you (or at least your mobile phone) are where your credit card activity says you are, e.g., buying a tank of gas in Washington D.C.

With GPS capabilities coming to the iPhone next month, this could be a very large market indeed. If we are right about the product, we'll try to convince the company to demo at one of our Finovate conferences. 

Comments (1)

Mobile Payments Stalemate

By Brandon McGee on November 12, 2007 5:58 PM | Comments

Diamond.png

Are you interested in learning more about the mobile payments stalemate? Earlier today, as I was browsing for information about mobile banking, I found a number of articles that may help.

First, to provide an overview of the existing card payment landscape, I would recommend an article by Jeremy Simon titled Merchants encourage use of PINs for debit card payments. In the article, Mr. Simon provides a sampling of the fees that retailers pay to banks every time a card transaction occurs. This example assumes a customer bill of approximately $40:

* Debit card purchase (customer enters PIN number) = $0.24 paid to bank
* Debit card purchase (customer signs the receipt) = $0.35 paid to bank
* Credit card purchase = $0.50 paid to bank

Next, I would recommend an article by Richard Winston titled Mobile Wallet Will Take Time to Mature in U.S. This article does a very good job of providing an overview of the mobile payments landscape, the challenges ahead, and the parties involved.

Finally, to understand the granular perspective, I would recommend downloading the white paper from Diamond Management and Technology titled: Mobile Payments: Mobile Operator Market Opportunities and Business Models.

As you dig into the data you will notice that the critical element is trying to determine how the carriers will be compensated for their role in mobile payments initiative. While merchants, customers and banks would appreciate the carriers performing this service for free, the fact remains it’s unlikely to happen.

Yet, the money to pay the carriers must come from somewhere, and it is equally unlikely to come from:

* Retailers volunteering to pay higher fees
* Banks volunteering to forego a portion of their fee
* Processors volunteering to forego a portion of their fee
* Customers paying a premium to utilize a virtual wallet

So that's the quandary. Will the standoff be resolved? I'm not sure. In the article Wave-Pay-Go by Bank Systems and Technology, I read, "Alarmingly for banks, carriers may take a more aggressive position by assuming direct control over processing, billing and collection of payment transactions, thereby removing banks from the process and threatening payment transaction revenues."

Brandon McGee is vice president and senior product manager at The Huntington National Bank. He is not only the real deal, a genuine industry insider, but also knows exactly what's on the minds of financial service pros as they contemplate the various mobile options. For more great content, check out his blog, Mobile Banking.

Comments
Categories: Mobile Payments

Mobile Money & Payments 2.0 Released: The Latest from Online Banking Report

By Jim Bruene on April 12, 2007 11:59 AM | Comments

Mobile Money & Payments 2.0 from Online Banking ReportOur parent publication, Online Banking Report, has just released its latest in-depth report: Mobile Money & Payments 2.0: Why credit & debit card issuers should embrace mobile delivery now

  • Link to the full report here
  • Link to the abstract here

The report builds on last month's Mobile Banking Report (report here), this time looking at the rollout of mobile payments in North America. The report recommends tactical and strategic options for financial institutions both in the short-term and into the next decade. In addition, several innovators are highlighted including Obopay, PayPal Mobile, and NTT DoCoMo.

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Mobile Payment Metrics: NTT DoCoMo

By Jim Bruene on March 26, 2007 3:55 PM | Comments

DoCoMo mobile payments in use In today's special Technology Report in Wall Street Journal, the lead article was "What's New in Wireless," by Amol Sharma. The article's main focus is mobile video and advertising, but there are several paragraphs about mobile payments, mentioning the Cingular/AT&T/Citibank cellphone payment trial through MasterCard's PayPass. The only statistical backup provided was the 1.3 million Japanese mobile users signed up for NTT DoCoMo's year-old mobile credit-card service (note 1).

That number seemed low based on what I've been hearing about the popularity of all things mobile in Asia. It turns out the 1+ million number is just DoCoMo's credit-card slice of the mobile payments pie. 

NTT DoCoMo iD credit card platform In Japan, per capita credit card usage is just one-seventh that of United States (note 2) and stored value is much more popular. DoCoMo has 20 million stored-value mobile wallets in place, 15x the number of credit users. The mobile wallet penetration is approximately 40% of DoCoMo's 52 million wireless subscribers (note 3). 

That's a healthy uptake rate for a product that was introduced less than three years ago. Even the year-old mobile credit card adoption is dramatic given the country has just 130 million credit cards outstanding. DoCoMo's market share is already higher than 1% of total cards outstanding, the equivalent of 8 million accounts in the United Sates (note 4).

Interestingly, part of the reason for the popularity of cash replacements in Japan is that the lowest paper-money denomination is 1,000 Yen, or about $8.80, making coins more common and somewhat less convenient for low-value payments compared to the U.S. and its ubiquitous $1 bill. However, the stored-value mobile wallet is expected to eventually become popular in the U.S. once merchant acceptance grows, especially in the youth and underbanked segments with less access to traditional bank cards; but it won't likely reach current levels of Japanese penetration for another five to seven years (note 5).   

Notes:

1. According to a Feb. 1 article in the Motley Fool, DoCoMo has 1.5 million users who've applied for and activated the credit card function in their phone. The number of outlets accepting DoCoMo mobile payments was expected to top 150,000 this month. DoCoMo allows other credit card issuers to use its ID platform to delivery card services to its customers. DoCoMo also began issuing its own mobile credit card under the DCMX brand last year. For more information, watch the DoCoMo's video about its mobile wallet (here). The wallet discussion begins at about the 4.5-minute mark of the 16 minute video. DoCoMo's ID credit-card platform and its own DCMX credit card discussion begins at the 6-minute mark and ends a little before the 10-minute mark. The rest of the video discusses i-Mode's international growth and is not directly related to payments.  

2. According the Federal Reserve Bank of Philadelphia, in 2004 American's made 84 credit card purchases annually per capita, vs. 11 in Japan (see report here). According to the online CIA Sourcebook, in mid-July 2006 the population of Japan was 127 million compared to 298 million in the United States.

3. According to the company, DoCoMo has a 55% share of the Japanese cellphone market.

4. The U.S. has about 800 million credit cards outstanding (according to FRB Philadelphia, see #2.  

5. See our forecast in Online Banking Report 138/139 published three weeks ago.

Comments

Conference Notebook: Mobile Payment Forum

By Jim Bruene on March 14, 2007 10:25 AM | Comments

Mobile Payment Forum link I attended the public portion of the 2-day Mobile Payment Forum Spring Member Meeting in San Diego yesterday <mobilepaymentforum.org>. The group was formed by MasterCard, Visa, American Express and JCB more than five years ago to help develop standards and promote best practices in mobile payments.

The current board of directors:

  • Simon Pugh, VP Standards & Infrastructure, MasterCard 
  • Stephanie Ericksen, VP Product Technology & Integration, Visa
  • Martin Harrison, Head of Sales and Strategy, First Data
  • Christopher J. Bierbaum, Product Development, Emerging Products Group, Sprint
  • Bob Adamany, VeriSign
  • Oliver Kelly, Vodafone

It was a pay-to-present day, with each sponsor allotted time based on the size of their financial contribution. Six gold sponsors spoke for 30 minutes, a silver sponsor was allotted 15 minutes, and the only platinum one was handed the podium for a full hour. Consultant Richard Crone of Crone Consulting gave the keynote and handled the introductions and wrap-up.  

Platinum Sponsor:
ClairMail: Joseph Salesky, CEO

Gold Sponsors:
Firethorn Mobile: Tripp Rackley, CEO
PayCash Mobile (Cyphermint): CEO, Joseph Barboza
eBizMobility: CEO, Jeremy Kagan
Erico: VP Marketing, Larry Loper
mFoundry: VP Product, John Pizzi

Silver Sponsor:
Sapphire Mobile Systems: Rick Rasansky, CEO

For the most part, the speakers did a commendable job keeping things informative and not heading straight to sales-pitch mode (see note 1). The highlight was Firethorn CEO Tripp Rackley and ClairMail CEO making impassioned pitches on opposite sides of the SMS banking (ClairMail) vs. downloaded app (Firethorn) continuum (note 2). And as usual, Richard Crone of Crone Consulting set the stage with an entertaining and fact-filled keynote (note 3). 

Despite being a payments forum, most of the talk centered around online banking (Firethorn, ClairMail, mFoundry, Sapphire), mobile advertising (Erico), and ecommerce (eBizMobility). Only PayCash Mobile and keynoter Richard Crone spent more than a few minutes on payments. 

The main reason: Mobile banking is on the verge of breaking out, and banks are reaching for their checkbooks. With far more infrastructure hurdles, cellphone-based payments will lag mobile banking adoption by five years (see forecast in our most-recent Online Banking Report, 138/139).

I'll post a few more items from the conference during the next few days.

Note:

1. Hint for conference attendees: Always look for private-company CEO presentations. Private-company CEOs usually do a great job speaking about the broader issues, understanding that their industry knowledge is a far better sales pitch for their organization than a dozen "About us" slides. Marketing VPs on the other hand, seem enamored with how many times they can work their company and client names into the presentation deck. Unfortunately, the same cannot be said of many public-company CEOs who are so ham-strung by disclosure regulations, they can hardly say anything that's not already widely known.  

2. For more on the mobile banking debate, see our latest Online Banking Report, "Mobile Banking & Payments" (OBR 138/139 here).

3. Disclosure: Mr. Crone has been an occasional contributor to our sister publication Online Banking Report. His first article appeared in our 1996 issue.

Comments

Citibank Mobile Banking Delayed Until April

By Jim Bruene on March 2, 2007 11:03 AM | Comments (1)

Citibank mobile credit card access in Japan In a multi-page look at mobile banking (here), BankRate.com reporter Laura Bruce quotes Citibank's Rob Julavits as saying the bank will be:

...testing (mobile banking) in March and allowing customers to enroll in April, with a broad launch expected before midyear

That's a few months later than originally expected. The bank sent Citi Mobile disclosures to checking account customers in January indicating the service would be live in February (see article here). Citibank already provides mobile access to its credit cards in Japan (link here).

Comments (1)

PayPal Mobile Promotion in Print this Fall

By Jim Bruene on July 24, 2006 10:35 AM | Comments

Paypal_mobil_luckymagConde Nast's Lucky magazine will use PayPal Mobile technology to allow users to buy products from 18 advertisers in its September issue (see inset). Using PayPal's Text2Buy technology, readers will be able to purchase products from magazine advertisers by simply sending a text message to the number in the ad, then confirming the purchase when PayPal automatically calls back a few seconds later (see NB June 5 for more on how it works).

This is believed to be the first major offline promotion of PayPal's new service. According to The New York Times, the following advertisers have signed on: Avon, Bulova, Dooney & Bourke, Estee Lauder, Ford, Le Tigre, Liz Claiborne, L'Oréal, Perry Ellis, Sephora, Target, and Unilever.

Readers will also be able to order online via a special website <livebuyit.com> that was not operational at press time.

Banking applications
Paypal_mobile_texttobuy_unicefWhile spur-of-the-moment buying is not a major part of financial services, Text to Buy in financial advertising could be a simple way to order information, such as a loan application, mutual fund prospectus, or a new account kit. Advertisers would list a code in their print ad, billboard, or other offline promotional device (see UNICEF example in the inset; buyers simply text "water" to the 5-digit number to make a $10 donation). This would allow users to request info by simply entering 10 characters into their cellphones or mobile device. The information packet would ship to the "buyer's" PayPal address.

An even bigger application, especially around the holidays, would be ordering prepaid MasterCard/Visa/American Express gift cards. Different codes could be set up for different amounts. For example, text "card25" for a $25 gift card, "card50" for a $50 card and so on. A handling charge could cover the 3% processing fees due to PayPal.

Finally, financial institutions could use Text to Buy for non-financial items such as:

  • Donations to community causes
  • Entry fees for a community event such as 5k run
  • Signups for seminars
  • Schwag, e.g., t-shirts, hats and so on
Comments

Creating the Perfect Mobile Wallet for Payments and Banking

By Jim Bruene on June 7, 2006 12:01 AM | Comments

Obopay_phone_graphicObopay and PayPal both offer phone-and-text based payments along with a linked debit card for spending the money sitting in your payments account. But it's not as powerful as a true mobile wallet with a cellphone preprogrammed to connect to online banking and various payment options.

Here are the specs of the perfect mobile wallet:

  • One-key access to common banking functions: check account balances, confirm transactions, and so on
  • Money movement between the user's own accounts
  • Send money to others using the bank's bill pay system or inter-institution funds transfer (A2A)
  • Pay for purchases at the point of sale (debit card or credit card) using an embedded RFID chip
  • Authenticate users at ATMs, branches, and remote terminals
  • Person-to-person payments (potentially by linking to the PayPal network)
  • Text message data entry: Update bank account records by sending a text message to the bank (for example, if you paid $22 cash for a business lunch, text to the bank, "22.00 biz lunch" which would be posted to your transaction records)
  • Priority customer service: Voice, text, or IM customer service with minimum wait times with transcripts emailed for future reference
  • Text-message-based alerts
  • Real-time virtual "panic button" to disable phone: If the phone is misplaced, users should be able to temporarily disable payment and banking functions with a simple email or phone call to an automated system

Where will users purchase their mobile wallets?
While first-generation mobile wallets will come from tech startups, wireless phone companies, and Internet giants such as Google, a bank-based model has a number of potential benefits:

1. Trust
2. Integrated online banking features (balance lookup, transaction history)
3. Integrated bill payment (use pre-existing bill-pay merchants)
4. Mobile payment transaction history integrated with online banking history

As cool it sounds, mobile wallets will not replace cash or plastic until RFID-equipped POS terminals are widespread. Until then, you'll still need to carry plastic. That brings to mind a practical interim solution, a plastic clip that attaches an RFID-enabled mini-credit card to the back of a cell phone. Users would have the convenience of waving their cell phone to pay, but could also easily swipe the mag stripe through a conventional terminal.

-- JB

Comments
Categories: Mobile Payments

Mobile Payments vs. Mobile Wallets

By Jim Bruene on June 6, 2006 11:18 AM | Comments

Obopay_phone2One of the better overviews of mobile payments appeared in the Wall Street Journal several months ago (April 26). It looked briefly at TextPayMe, Obopay (see screenshot below) and PayPal Mobile (NB June 5). The article does a good job of contrasting these systems to the more common "mobile wallet" where a cellphone is used in place of a credit/debit card.

Analysis
While we see much promise for the mobile wallets, the mobile payment feature appears far less useful, at least in the United States.

Mobile Wallets: It's inevitable that today's plastic-based payments systems morph into cellphone-based services using radio frequency (RFID) technology as the enabler. For many people, especially younger cellphone-toting, debit-card users, it will be easier to point their phone at the POS terminal and press # than to swipe a card and enter a PIN or sign a receipt. Arthur D. Little projects $37 billion in mobile wallet transactions in 2008, a twelve-fold increase from the $3 billion in 2003.

And for those who don't carry a cellphone, or who prefer a different access device, companies are working on RFID-enabled watches, jewelry, key chains, and something Citibank is said to be preparing for market later this year, an RFID money-clip, which I'd love to use, although I've yet to see a contactless point-of-sale location in Seattle (see, "Creating the Perfect Mobile Wallet," NB June 7). 

Obopay_homepageMobile Payments: On the other hand, text-message-based services, designed to send money to individuals, are a solution seeking a problem. As cool as they look on a well-crafted homepage (see Obopay's homepage right), there just isn't enough payoff for changing deep-seated consumer payment habits.

Even the WSJ couldn't dig out a rational anecdotal example, though the writer tried. The usual "splitting the dinner bill" straw man was trotted out, but upon closer look, too many variables could make it unworkable. Imagine you had a group splitting a $100-tab four ways. The vendors want us to believe that one person will pay the entire bill, then his or her three friends will each text-message their $25 share. Outside of Silicon Valley and a few Manhattan neighborhoods, it just won't fly.

It is not only a hassle (what if the phone call is disconnected, or the wrong button is pushed in a dark eatery), but also each of the three parties will likely incur one or more transaction fees (from the payments gateway, the cell phone provider, and possibly one or more financial institutions along the way). Finally, the person receiving those payments then has to initiate some type of transaction to tap the $75 sitting in their account. 

This makes about as much sense as ordering dog food online. Current methods of sharing costs, either with cash, having the restaurant apply it to two or more debit/credit cards, or by agreeing to "get the next one" works just fine.

--JB

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Categories: Mobile Payments

PayPal Mobile Sets High Standard for Ease of Use

By Jim Bruene on June 5, 2006 4:08 PM | Comments

Paypal_textobuy_logoMost people interested in electronic payments have probably read reviews of PayPal's mobile payment system launched in March. However, if you haven't had a chance to use it, by all means head over to PayPal Mobile and activate your phone.

The service covers two mobile payment services:

  1. Person-to-person payments: PayPal's email-payments service is extended to phones, mobile or land-line, allowing users to send money to anyone with a phone number using text messaging or by following the prompts on PayPal's toll-free number (800-4PayPal).
  2. Text to buy: To buy things at participating merchants, users send the text message a code to the merchant's text-message number; for example, listed on the PayPal site today is a special offer to purchase a DVD Of X-Men 2 from by texting "X2FF" (full-frame) or "X2WS" (widescreen) to 63336 to FoxStore.com.

Sign-up Process
The sign-up process is absolutely painless (click on screenshots below for a closer look). Assuming you already have a PayPal account, just enter your phone number and then a few seconds later answer the verification call on that number. After that, you can send money to any other phone by sending a text message from your phone or calling PayPal's toll-free access number and following the simple prompts to make a payment.

Paypal_mobile_step1_1      Paypal_mobile_step2      Paypal_mobile_confirm

Paypal_mobile_activatesweepsThe company ran a sweepstakes during the first month to encourage activation with instant prizes valued up to $1,000 (see screenshot left). The sweepstakes has ended, but not before we bagged a fresh $5 credit to our account. All entrants are also in the running for a new BMW.

Security
Although it will take some convincing before PayPal Mobile hits the mainstream, it's really far more secure than using a credit card. When you text money to someone or to pay for goods and Paypal_mobile_howitworks services, PayPal first confirms the purchase by calling your designated phone number for confirmation with a self-selected PIN number. At that time, you are also able to make changes, such as altering the default funding source, which is always bank transfer (see inset for PayPal's how-to-use instructions).

Analysis
In the United States, payment by phone is likely to be a small subset of the "online payments" market. It provides a good solution for situations where a computer is not available (purchasing a new DVD from a magazine ad or paying your friend for the concert ticket she just gave you).

However, in other parts of the world where mobile phone usage is far higher than computer usage, it could become an important payments vehicle.

--JB

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Categories: Mobile Payments

Do M-Payments Have a Future in the U.S.?

By Jim Bruene on May 14, 2006 3:28 PM | Comments

David_evans An unpublished study being completed by Market Platform Dynamics says there’s little data to support assertions that mobile payments will become the payment vehicle of choice for the people under the age of 40 called Gen X and Gen Y. According to the company’s multi-year research, 62 percent of respondents said they think using cell phones as payment vehicles is unnecessary, and 38 percent said they don’t use their cell phones enough to make it worthwhile. The good news: People born since 1977—Gen Y’ers—like the idea better than their Gen X elders. Last week, founder Market Platform founder David S. Evans spoke with NetBanker about his findings, and their implications.

NB: Tell us about the difference in attitude between the 16-to-19-year olds and older people.

Evans: The very young people indicated they’re more interested in using their mobile phones as a payment device, and the very old people—real geezers in their late-30s to early-40s—are less enthusiastic. Everyone else is about the same [as the geezers]. But still, even 50 percent of the real kids say ‘not really interested.’

NB: Most of the enthusiasm for mobile payments is based on the idea that these children are going to be flocking to use their cell phones like they do in Asia, and that therefore, mobile payments is not only the wave of the future, but also the demise of the credit card and the credit card brand as we know it.

Evans: Let’s be careful about a couple of things there. First of all, and despite the survey results, I’m still bullish on mobile phones eventually becoming payment devices. The thing you need to keep in mind is that people can’t really imagine what it is like to use one of these things until you actually present them with the goods. So, despite these numbers, I’m still bullish on mobile phones.

Number two, you say ‘Displace the credit card industry.’ There are two issues: One, whether the mobile phone is going to become the new form factor—just a physical thing that people use instead of a magnetic stripe card. The other question is whether the possibility of the mobile phone carriers being in the loop has an implication for the card system.

Those are two different questions. For the second question: What is currently happening in the U.S. is that the mobile carriers are not expressing, at the moment, great enthusiasm to be card systems. But having said that, it’s ultimately the mobile operator that has the relationship with the customer, so the mobile operators are being injected into the payment eco-system, and it’s possible that that could have some implications for the card associations. But it’s pretty complex.

NB: It seems to me that the real impetus here is going to be the first question—will the form factor impel the cell phone operators into the loop.

Evans: That’s correct: If consumers are interested in using their mobile phones as payment devices, then you can be sure that ultimately, the mobile phone operators are going to want to figure out some way to get a piece of that action.

NB: Based on your research so far, what are those indications?

Evans: Based on what’s happening in Asia, and looking at the U.S., our sense is that in the long run, and despite the lack of enthusiasm that we get in the survey, the mobile phone has many advantages as a form factor, because of the possibility of its being a contactless device with a graphical user interface—able to do lots of different stuff and being ubiquitous as well. So it’s a natural thing for them to become an important—if not the—form factor for paying for things.

NB: So I take it that your ultimate conclusion here is that this will happen, but it will take longer than some enthusiasts may be suggesting.

Evans: That’s correct, and I think the survey results indicate that people aren’t going to flock to this thing just because it’s new, and whoever is trying to push this form factor on consumers, or on merchants, is going to have to present a solid value proposition to the consumers. Consumers will have to be able to do something with this device that they can’t do with their current, easy-to-use magnetic stripe card. It underscores the fact that the introduction of a new technology in the payment card space is always an uphill battle.

NB: So first of all, the way to accelerate adoption will be to offer something the cards don’t do, aside from being able to use your cell phone as a gizmo; and number two, the people who want to push adoption will have to be willing to buy market share by accepting lower margins today.

Evans: I don’t necessarily agree with that. If you can come up with a clever, valuable thing on the mobile phone that is of interest to consumers, consumers will be interested in it. And that can happen without necessarily taking a hit on margins.

NB: Would that include rewards programs?

Evans: It may turn out that mobile phones make it easier for card issuers and merchant participants to have rewards programs, because you have a graphical interface on the phones. That implies that you can basically beam rewards to people. There are more clever things you can do with a computer than you can do on a mag stripe card, or even a contactless chip card. So that’s one of the value propositions that one can start thinking about with mobile phones: Are there ways to turn the mobile phone into something that’s valuable to both consumers and merchants?

NB: And what do you think?

Evans: Once you start moving towards a smart computing device with a screen, there is an enormous amount of things, including rewards, that people in this business can start thinking about—things we can’t even imagine. The mobile phone is most interesting because it truly is a computer. And in other parts of the information technology world, we’ve seen that once you start talking about software platforms for computers, developers come up with all sorts of ideas about how to use that computing power. That’s the true excitement of the mobile phone.

NB: So the payments mechanism will just be included in the phone, and over time, people will use it more.

Evans: We have to be careful about one thing, though: When you think about people using mobile phones, we’re talking about contactless, and therefore the adoption of mobile phones as a payment device is tied to the adoption of contactless at the point of sale by merchants.

NB: Which is the chicken-and-egg issue.

Evans: It’s a chicken-and-egg issue. There are all these contactless cards out there now, but there aren’t a lot of merchants that accept them. But if consumers wind up really liking the idea of contactless mobile phones as a payment device, and people start getting those sorts of phones, it could propel adoption of contactless. Having said that, if I gave you a mobile phone with a contactless chip today that was an incredibly powerful payment device, you could use it at your local McDonald’s to buy a Big Mac, but not much else.

NB: Everything you’ve said is contingent on a screen. What does your research tell you about what people say will be the generation after cell phones—a chip embedded in a wristwatch or token?

Evans: I don’t think that’s after mobile phones—I think it’s pre-mobile phones. One of the things that came out of our research is that our respondents exhibited utter lack of enthusiasm for fob-like devices.

NB: Yet most people have predicted that that is the next generation after this, and that’s what’s going to atomize the brand value.

Evans: The Gen Y people indicated slightly more interest in fobs than Gen X, but no one expresses a lot of interest in fobs.

NB: I infer from that that some of the anxieties that I’ve heard about the next generation of payment devices atomizing brand value is, at a minimum, overdone.

Evans: Yes. I don’t think there’s any reason to think that mobile phones are going to atomize the brand. I think that the major implication is that in the long run—five to ten years—mobile phone carriers are potentially important players in the eco-system, and whether they  become allies of the card systems, or whether they think about becoming alternatives, or allying with someone else, remains to be seen. But it’s certainly not going to atomize the industry—it’s just going to inject another set of interested parties into the business.

NB: What’s happened in Japan [where DoCoMo already operates a thriving mobile payments system] could be done in this country just as easily. Do you think that could be the disruptive element that could marginalize cards?

Evans: It’s possible, but there are very important differences between Japan and the U.S. Japan has a poorly developed card industry and not a lot of interest in the use of credit cards. It has enormous interest in the use of mobile phones. DoCoMo got established in Japan mainly because people don’t have personal computers, and there is an extensive broadband penetration, so Japanese consumers standardize all their Internet activities on mobile phones. And you have companies that are able to push the mobile phone manufacturers around and tell them what to do. When you come to the U.S., you have totally different sorts of operators and a very, very well-developed card industry, with plenty of muscle behind it. So I think the [U.S.] mobile operators are an interesting set of entities that, as the mobile phone becomes a more important payment device and gets injected into the [U.S.] payments eco-system, could alter that eco-system. It could possibly take on a more significant role. But I think that’s a long time coming, and certainly not imminent. It remains to be seen whether that is even a plausible outcome in the U.S.

(Contact: Market Platform Dynamics, David Evans, 617-266-6839)

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Contactless Payments Systems are the Future

By Jim Bruene on April 29, 2006 1:12 PM | Comments

Contactless payments systems in their various stripes are the future of retail point-of-sale systems, and banks still own the networks. But unless they stop trying to control the process, they could lose the system to merchants with their own private-label card programs, thinks Bruce Cundiff, a research analyst with Javelin Strategy and Research.

There’s really nothing to stop such merchants from outmaneuvering the banks, if they want to, he says. “The possibility exists among those merchants considering contactless, and really have a robust card issuance card network to begin with. They’re well-versed in credit, debit, and closed-loop card operations—and they see their private label brand as a lower cost channel.”

The merchants have plenty of good reasons for moving away from bank-owned cards. Doing so would not just give merchants more money from each transaction, it would also reinforce customer loyalty—making for more repeat business—and enrich marketing programs by giving merchants better access to the customer data in the payments stream.

Merchants increasingly view private-label, contactless payments as their best bet for driving revenue. According to Cundiff’s research, 20 percent of merchants considering enhancements to point-of-sale payments consider the technique among the most productive choices they can make. Only signature debit (31 percent) and ACH payments (33 percent) scored higher among merchants as possible new payments options.

Even worse news for banks: Cundiff’s survey of 900 retailers included all sorts of merchants, from large chains to the iconic Mom-and-Pop store. “We reached out to all types of merchants, even to those with only one location,” he says.

The irony here is that banks started this phenomenon in the first place.

“Contactless payments are the wave of the future because issuers like (JPMorgan) Chase got into the game,” he says. It was Morgan Chase’s decision to jump into contactless payments with both feet that solved the chicken-and-egg question surrounding contactless payments, because it was a signal to cell phone manufacturers that there would be a market for RFID (radio frequency identification) chip-enabled cell phones that can facilitate payments. “Prior to that, merchants were saying ‘It’s not broke, and I’m not going to fix it. They didn’t think people were going to come in and ask ‘Where’s your contactless terminal?’”

But that historical fact is irrelevant to the future, because with the genie out of the bottle, the challenge for issuers is to do everything they can to enable the technology now, before merchants do it for them. And since, as Cundiff’s research indicates, those merchants are a substantial fraction of the overall universe, the prospect that banks could be disintermediated by these merchants is a very strong possibility.

The fact that banks will have laid the foundation for this turn of events by educating merchants about the benefits of the technology is merely one of life’s injustices; the most disturbing element in this scenario is that bank disintermediation is entirely avoidable, if institutions will just make it in the merchants’ interest to work with the banks—even if that won’t be so easy. “If I’m Macy’s, and I’ve invested millions of dollars in contactless, I’m going to make sure that as many transactions that flow over that system are going to be Macy’s cards,” says Cundiff.

That prospect will be made easier by the widespread availability of cell phones that can make payments, he adds. The logic is perfectly clear, if brutal: With so many people carrying payments-enabled cell phones, he says, it makes perfect sense for stores to offer to download their own card onto a customer’s cell phone at the point of sale. Then, unless the banks have already beaten the merchant to it, more and more payments volume will go to merchant cards—edging out the bank and cutting into the fastest-growing segment of payments-fee revenues.

How to avoid this? “They (banks) need to consider the fact that they need to work with the merchants in a more integrated fashion—especially a large merchant that has a high profile and has plenty of locations and payments volume,” he says. A promising tactic to make sure the banks are still involved is to approach the merchant and offer to issue a co-branded, contactless card.

But to do this, banks have to recognize that contactless payments are the key to the future at the point of sale, and that they either turn the lock, or don’t. And if they do, they either continue to insist that everything be done their way, or they can start working with their customers to integrate themselves into that next generation of payments.

Luckily, the best banks already get this, says Cundiff. When Morgan Chase went to market last year with their Blink contactless cards, for instance, “they were talking about how they had to approach merchants and not only build acceptance, but build affinity for the product with both cardholders and merchants—that meant co-marketing agreements and signage,” he says.

But what this also means is an apparent shift in the balance of power between issuers and merchants. While some will argue that issuers have always valued their customers and tried to accommodate them, that posture is undermined some by the ongoing interchange war: After all, if the issuers had always been so accommodating, the years of complaints from merchants that interchange was too high would have resulted in adjustments—not lawsuits.

At this point—as many observers have argued—the better part of valor for issuers may be collaboration with merchants instead of battle, lest contactless, private-label cards prove to be yet another army rising on the issuers’ flanks. (Contact: Javelin Strategy and Research, Bruce Cundiff, 925-225-9100)

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Payments via Text Message

By Jim Bruene on April 26, 2006 9:02 AM | Comments

Textpayme_image_1In today's WSJ, there's a good roundup of the text-message payment systems attempting to find traction in the United States. The article looks briefly at TextPayMe, Obopay, and PayPal Mobile. The article does a good job of contrasting these systems to the more common "mobile wallet" where a cellphone is used in place of a credit/debit card.

Analysis
We see much promise for the latter. In fact, it's almost inevitable that today's plastic-based payments systems morph into cellphone-based services using radio frequency (RFID) technology as the enabler. For many people, especially younger cellphone-toting debit card users, it will be easier to point their phone at the POS terminal and press # than to swipe a card and enter a PIN or sign a receipt. Arthur D. Little projects $37 billion in mobile wallet transactions in 2008, a twelve-fold increase from the $3 billion in 2003.

However, text-message-based services, designed to send money to individuals, are a solution seeking a problem. Even the WSJ couldn't dig out a rational anecdotal example, though the writer tried. The "splitting the dinner bill" straw man was trotted out, but it just doesn't fly. Imagine you had a group splitting a $100-tab four ways. The vendors want us to believe that one person will pay the entire bill, then his or her three friends will each text-message their $25 share.

Not only is this a hassle (what if the phone call is disconnected, or the wrong button is pushed in a dark eatery), but each of the three parties will likely incur one or more transaction fees (from the payments gateway, the cellphone provider, and possibly one or more financial institutions along the way). Finally, the person receiving those payments then has to initiate some type of transaction to tap the $75 sitting in their cell phone.

This makes about as much sense as ordering dog food online. Current methods of sharing costs, either with cash, having the restaurant apply it to two or more debit/credit cards, or by agreeing to "get the next one" works just fine.

Mobile Wallets
Obopay_phone_2Obopay and PayPal both offer a linked debit card for spending the money sitting in your payments account. But it's not as powerful as a true mobile wallet where the bank offers its debit card base a cell phone preprogrammed to link customers to their card and online banking account. The device could be used to check bank account balances (a walking ATM), transfer money between the user's own accounts, or send money to others using the bank's bill pay system or inter-institution funds transfer (A2A); and, if equipped with RFID, the device can be used to pay for purchases at the point of sale.

The bank-based mobile wallets have significant advantages over the start-up, non-financial systems:

1. Trust
2. Integrated online banking features (balance lookup, transaction history)
3. Integrated bill payment (use pre-existing bill pay merchants)
4. Mobile payment transaction history integrated with online banking history

As cool as the mobile wallet sounds, it will not replace cash or plastic until RFID-equipped POS terminals are widespread. Until then, you'll still need to carry plastic. That brings to mind a practical interim solution, a plastic clip that attaches an RFID-enabled mini-credit card to the back of a cell phone. Users would have the convenience of waving their cell phone to pay, but could also easily swipe the mag stripe through a conventional terminal.

--JB

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Categories: Mobile Payments

Prepaid Topup May Mainstream M-Payments

By Jim Bruene on April 1, 2006 5:21 PM | Comments

Cellphone_pay_2Aite Group’s Gwenn Bezard thinks he’s figured out the avenue cell phone carriers may find themselves taking on their way to becoming financial services providers: By selling air time to nontraditional markets like the under- and unbanked through prepaid cards. Over time, he thinks, serving that market could lead them to become merchant acquirers.

Cell phones are the great disruptive technology for the financial services industry: To the extent that mobile payments take market share from other vehicles, they have the potential to atomize the value of bank brands and even minimize payments cards’ market share.

Continue reading "Prepaid Topup May Mainstream M-Payments" »

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Technology is Transforming Banking and Payments

By Jim Bruene on March 27, 2006 3:17 PM | Comments

With the recent Motorola/C-Sam mobile payments announcement followed by similar payments platform launches from PayPal, Black Lab Mobile Inc., Commerciant LP, Sify Ltd. in India, Q-Pass, and SVC Financial Services Inc., it’s obvious that mobile payments aren’t the mere pipedream they seemed to be last year.

What’s less obvious is the change about to befall the payments industry and, especially,  banks, that mobile payments embodies. To hear Ray Kurzweil tell it in his newest book, The Singularity is Near (Viking, 2005), the rate of such change in the next ten years will be exponential, and a line graph of it will be vertical. The change grows slowly and imperceptibly at first, he says, but when the pieces are all in place, its acceleration explodes.

This is important not just because the world we’ve lived in is about to more or less end, but because of the backdrop against which innovations like mobile payments will take place. The current crop of cell phone-based payments will preserve bank and card brands, but the second generation of mobile payments will be made with very small devices that will eliminate the possibility of displaying any sort of logo and, thus, branding. The third generation—taking place in hyperspace, for all we know—will follow in less than ten years, and make the second generation’s futuristic world seem quaint.

Technology has ceased being only a more efficient tool to accomplish traditional jobs; now, it’s changing the jobs themselves. The capabilities created by technology create the premise for ever-greater changes in what’s achievable, in turn raising expectations of what can be accomplished; meanwhile, the abilities of that transforming technology lay a foundation for even more change. Banking and payments is unlikely to escape this phenomenon, and in the approaching world, the past is a poor predictor for future performance.

Sound familiar? Sure. Consultants and other wise men have been intoning about this for 20 years, and financial professionals can be excused for being skeptical about this latest round of warnings that the sky is falling—especially since the sky’s still blue.

But technology has always been the instigator of change and not just its messenger. The telephone and private automobile turned concentrated cities with economic specialties into sprawling, economically-diversified megalopoli, eventually allowing people like this reporter to live in rural America and still make a living in the mass market (I was doing this before the Internet). The idea of just-in-time delivery didn’t just turn Indianapolis and Nashville into thriving metro areas because each is at a nexus of the Interstate Highway system. It made the idea of a national industrial base obsolete, which in turn paved the way for the minimization of the nation state.

That still-evolving transformation took two generations following World War II to become visible, even though the pieces were in place before World War I. But this next chapter will take much less time, and be more transformational: Scientists, for instance, have already created two different types of machine-based muscle tissue, paving the way for real androids right out of Bladerunner, while experiments leading to computer-enhanced humans—cyborgs—are underway today.

Finance cannot escape the revolution it helped create. Ten years ago, foreign-exchange trades were cleared over long time periods, all over the globe. Today, most are cleared outside Coventry, England, at the Continuous-Linked Settlements Bank. Credit derivatives, now a multi-trillion dollar market made possible by computers, barely existed ten years ago; today, the global hedging market is probably bigger than the equities market being hedged. And certainly Basle II compliance, which frees so much capital for business purposes from regulatory reserves, is built entirely on the idea that creating a computer-generated, intraday picture of institutional risks is achievable.

But in most cases, banks have been following change and trying to adapt it to their internal considerations. They have rarely embraced it. This may be rational and seems prudent—both virtues in a period of great change.

But as Harvard’s Clayton Christensen points out in his work, this is also what destroys institutions—even industries. Acting rationally and prudently, institutions focus on building on their core competencies, and serving their best customers: Little-regarded businesses pick up the unwanted crumbs, and sooner or later, the market for the big company’s products is hollowed out, and the disregarded company, now a dominating giant, is buying the former colossus.

That phenomenon is what created First Data Corp., and what today undermines the business case for credit cards. It’s also what underlays the idea of the so-called “cannibal” bank of the 1990s: An entirely new institution sponsored by a traditional bank that, using the latest technology, would create the next generation of banking and eventually “eat” the parent.

Jamie Dimon pretty much scuttled that latter idea when he shut down Wingspan Bank and took the reins of Bank One. The dot-com bust did the rest. But the dot-com bust didn’t bury technology or technological change—it just weeded out businesses whose primary asset was a preposterous story, and left the adults in charge. The Internet is still growing, and computers are faster, smaller, more common and more capable than ever.

It’s not impossible that the Wingspan idea was just a little early. Certainly banks, which rely more and more on payments—entirely a computer operation—can’t afford to minimize how computers are changing the nature of their business, just because their internal politics finds “Wingspan” to be a convenient buzzword for dismissing a threatening new idea.

Those discussions typically revolve around banks being either this, or that—fully automated, or merely assisted by useful tools. This premise is nonsense. The world banks and payments operations we live in today wasn’t created by Kierkegaard; it was created by people like Ray Kurzweil and Andy Grove. The Medici Bank closed a long time ago.

Mobile payments is the path to the next generation of retail payments, and even if they do threaten to minimize—or atomize—the idea of what a bank’s brand is worth, that’s no reason to avoid the reality that there’s plenty of money to be made in the future of payments, and that clinging to old forms is unlikely to prove a useful response to new facts.

In the American Civil War, infantry doctrine was still attached to ideas of how to overwhelm the enemy’s position, based on the idea that slow-loading muskets made it possible to march up to their line in formation, and give ‘em the bayonet. But new guns made mincemeat of that idea—and of the men who charged entrenched positions defended with those guns. There’s no reason for banks and their payments operations to suffer similar fates if they embrace change.

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Motorola Introduces Real Mobile Payments to US Market

By Jim Bruene on February 21, 2006 1:27 PM | Comments

Two weeks ago, Motorola Inc. introduced the same mobile payments platform already being used in Japan and India, opening the door for U.S. banks on a retail payments future that could spell prosperity or doom, depending on the choices they make.

Those loaded alternatives have little to do with the immediate future for mobile payments in this country. Buying cheeseburgers by waving a cell phone will begin as a gee-whiz novelty in this country, packaged in ways that will preserve the bank brand, and allay the current boardroom anxiety that banks are fated to become mere payments utilities.

The real danger to banks is the next generation of m-payments, when the payments chip is miniaturized to fit into a ring or necklace; at that point, opportunities to remind customers of which bank’s card they’re using will disappear, along with the visible screen, taking with them much of the bank’s relationship with its customers. But this generation is here now, says Dan Schatt, a Celent Communications analyst, and likely to shake things up.

Continue reading "Motorola Introduces Real Mobile Payments to US Market" »

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Cash and Cards Are Both Endangered Species

By Jim Bruene on February 7, 2006 7:48 AM | Comments

Right around the corner is a world with neither cash nor payment cards. Contactless payments mechanisms—built into cell phones or even jewelry—are helping create this world, and the result will help change banking, thinks Theodore Iacobuzio, managing director of Tower Group’s executive research office.

The reality is that companies that once fed the banks’  payment networks—merchants, for instance—will be future competitors. But banks shouldn’t panic about this, any more than when, not so long ago, the Internet was supposed to be extinguishing banks. And banks won’t be disappearing now, either, thinks Iacobuzio: the anxiety over banking’s future, so prevalent in boardrooms around the country, is overdone.

Continue reading "Cash and Cards Are Both Endangered Species" »

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Mobile Payments: Japan Leads the Pack

By Jim Bruene on January 27, 2006 5:39 AM | Comments

The potential of cellphone-based mobile payments to eventually squeeze banks out of their central role in payments can already be seen in East Asia, says Andrei Hagiu, a principal at Market Platform Dynamics, and by ignoring it, American banks have nothing to lose but their business.

Octopus_cardHong Kong’s Octopus prepaid debit card (see inset) is one example: Issued by Hong Kong’s subway system and several other transportation companies—with no bank involved—Octopus cards drive about $2.2 billion in annual payments volume.

Continue reading "Mobile Payments: Japan Leads the Pack" »

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Mobil’s Speedpass: Wireless Payment at the Pump

By Jim Bruene on June 13, 1997 11:23 AM | Comments

The proliferation of microprocessors, wireless communications, and the Internet will change the way we use various payment devices. Case in point: Mobil Oil has begun a nationwide roll-out of a wireless payment device called Speedpass. The free device has been in testing at 50 St. Louis-area stations since last August. Mobil expects to issue one million Speedpass’s in 1997. More than 14,000 have been issued so far. The technology was developed for Mobil by Texas Instruments and Dresser Industries.

For Mobil, this is the second major payment innovation in the past six months. Mobil launched the first full-scale bill presentment program on its Web in December. Mobil was also first to provide card payment capabilities at the pump in 1986.


Users order a Speedpass online at www.mobil.com/speedpass/h_home.html.

How it Works

SpeedPass uses technology primarily deployed today on toll roads and toll bridges referred to as Electronic Toll Collection (ETS). The Mobil version allows users to automatically pay for their gasoline purchase simply by waiving the transponder “key tag” in front of the pump (recommended 1-2 inches away). An antenna on the pump sends a low-frequency radio signal to the key tag to determine the user’s ID number. The transaction is authorized against a Mobil credit file and the pump automatically turns on. After filling the tank, the purchase is automatically charged to a the MasterCard, Visa, or Mobil credit card account designated on the users enrollment form.

Mobil is also looking at locating transponders in tags affixed to the car’s rear window so the pump would automatically turn on as soon as the driver pulled up. The devices could also be used to personalize service station visits with user-specific messages such as a reminder that their car is due for an oil change.

Broader Applications

Simply being able to purchase gas at Mobil stations with a key tag won’t change your life. But consider the implications if an industry standard and secure RF transponder was issued to credit card customers. It could be used anywhere that transaction speed is of paramount importance or where there is no clerk available to swipe a plastic card, such as parking garages, taxis, telephones, ATMs, vending machines, mass transit, fast food restaurants, etc. Users could swipe the device as they entered a queue and already be authorized for purchase when they got to the front of the line. The technology also offers the benefit of allowing users to charge a purchase without revealing their card number at the point-of-purchase. Transponders could also be used to control physical access to banking locations by automatically unlocking the door to a branch or bank of ATMs.

Wireless payment is just one of many innovations coming to the payments industry. Widespread use of electronic bill presentment, automatic payment services, digital cash, smart cards, and whatever else comes along, will provide new opportunities for financial institutions to add value to their online offerings. Financial institutions, building on 100 years of consumer trust, are in a great position to be the retailer of choice for new payment services. And the Web will be the logical point of contact for disseminating information, signing on new users, and tracking usage.

Contacts: David McGettigan is Mobil Speedpass Project Manager, www.mobil.com. Bill Wallis is President of Arch Energy/Wallis, owner of the St. Louis stations that piloted the service www.wallisco.com/new.htm. For more information on Electronic Toll Collection (ETC) refer to pelican.its.berkeley.edu/ PATH/DSS/etc.html, sponsored by the California Partners for Advanced Transit and Highways (PATH), a joint venture among the University of California, California Dept. of Transportation, and private industry.

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Categories: Mobile Payments

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