Showing posts with label Google. Show all posts
Showing posts with label Google. Show all posts

Wednesday, October 16, 2013

P2P Payment Simplicity Square'd

Some of the best mobile banking apps are those that make everyday tasks simpler. Two of my favorites are GoBank's Balance Bar, that lets you see your account balance without login, and Moven's real-time mobile purchase receipts and analysis.


Tuesday, Square, Inc. joined my growing list of über-simple mobile banking applications with their introduction of Square Cash, a new app that makes sending money person to person as simple as sending an email. In today's mobile world, simplicity is the 'new black'.


P2P applications are definitely not new. There are literally hundreds of bank and non-bank applications that allow you to send money digitally, including Google, PayPal and Venmo. Consumers also have the choice of simply writing a check as they have done for years. But, I believe Square has introduced the most streamlined app that may have the broadest mass market appeal. 

Imagine emailing money to another person, without a fee, directly from a debit card without a login or password. All that is needed is a debit card number, Zip Code and expiration date from the sender and recipient (only need to be entered the first time you use the service). After that, sending money is only an email address away.

Compare that process to most banks, that require mobile banking sign-in (don't get me started), a test transaction and potentially more steps, even though there is normally no fee for the service. PayPal's P2P app transfers money from a PayPal account to another PayPal account, with transferring funds to a bank account being an additional step (in addition to a one-time signing up for PayPal). Google's P2P service uses email like Square, but requires signing up for Google Wallet and transferring funds to a bank account. Venmo is a growing favorite of younger people who prefer to send money via a Facebook-like newsfeed. This service also requires an application sign-up.


Unlike Square Cash, most of the other P2P applications have fees attached as shown below. Square Cash, however, only supports debit cards at this time, with low weekly limits ($250) unless you provide a mobile phone number and Facebook account or verify your full name, the last four digits of your social security number and date of birth -- then the limit is raised to $2,500. If the Facebook option is selected, no information or messages are ever passed to the social channel. Square is simply using Facebook as part of authentication.

Source: My Bank Tracker, September 2013
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How Square Cash Works


I got introduced to Square Cash first thing yesterday morning with an email from fellow fintech geek, David Gerbino, who sent me $1 via email. To inform me of the 'gift', I received both an email from Dave that told me he was sending me money and an email from Square informing me of the same (shown below).


To transfer the funds into my account, I simply hit the 'deposit funds' link on my computer or cell phone, and enter my debit card number, the expiration date of my card and my Zip code as shown below. That's it (and I only need to do that once). 

Notice how spartan each step of the process is. While there is an animated background with color and theme changes over time, there is zero unneeded information, highlighting that there are no strings attached.


Upon making my deposit, I immediately received an email confirming my deposit was made and letting me know that I can now send money as well. As with the initial communication, my email and all processes are clearly optimized more for mobile than for a desktop.



The Square Cash mobile app (offered in both iOS and Android versions) is very simple, with a built in step-by-step tutorial and an FAQ component. I found the desktop and mobile versions to be equally concise even though it is clear that Square Cash was built as a mobile-first application.
With Square Cash, money is transferred from bank to bank with no funds ever being held in a Square account (like with PayPal). Square says that deposits will be made within 1-2 days, and I found it a bit ironic that it took me longer to log into my mobile banking account to confirm my deposit than it did to perform the entire transaction with Square.

According to Square, there are no plans for ads or fees on the service as it is offered today, yet it does plan to offer premium options (I would assume that a fee could be implemented for faster transfers much like some organizations do for mobile check deposits).

Pros and Cons of Square Cash


I believe the simplicity of Square Cash is the application's strongest benefit. While Square may not be known by everyone, it has a track record in the merchant arena and obviously plans to promote this service heavily. And unlike many of the competitors, if a payment is initiated with Square, the recipient can get their funds with minimal steps and can start using the app themselves immediately.

From early comments on both the Apple and Android app sites, early buzz is overwhelmingly positive. I am sure that since it is free it helps.

That said, there are still some drawbacks to Square Cash:

      • Debit Card Only: While the limitation to only MasterCard and Visa debit cards may be viewed as a negative by some, I believe the limitation is consistent with the streamlined nature of the service. No decisions are needed as to what card or account to link. Simply link a debit card.
      • Use of Email: Many of my Fintech friends debated on the merits of using email as opposed to SMS as the transfer media. Again, I believe this was a conscious decision by Square to appeal to the 'mass' market. While email is not used by Gen Y as much as texting, everyone has an email address and knows how to use it. The email-only decision may be adjusted over time. Again . . . simplicity.

        In addition, new Telephone Consumer Protection Act (TCPA) rules limit the ability to market via SMS without opt-in. Square can use email for subsequent marketing messages (such as for their wallet) or to promote the download of the Cash app like below.
      • Limited Options: There is also no way to see a history of your transactions (except by keeping track of your emails) and you can only link one email to one debit card at this time. Again, I believe Square made a conscious decision to keep the application simple as opposed to filling it with a number of options that may be geared to 'power' P2P users.
      • Transfer Limits: The limit on amount that can be sent ($250 a week unless additional personal information is provided and then the limit increases to $2,500) could be a drawback for some, but the service is not meant for large purchases.
      • Fraud Liability: Square makes no guarantees in case of fraud beyond what is available on a person's debit card today. While they will reverse the transaction, that may not be enough.
      • Funds Availability: While many fintech followers pointed to the 1-2 day funds availability stipulation as a negative, this is still faster than checks clear. However, the marketplace is definitely moving to real-time P2P so I expect Square to follow this trend over time (potentially with a 'premium' fee).
      • Clarity: In the mission to remain a very clear app, some clarifications are tough to find. For instance, what if I want to change the debit card I have linked? (A Google developer answered this question online by referring me to www.square.com/cash/settings. As expected, the process was quite easy (even when I forgot my password).

Convenience vs. Security


Getting the balance right between convenience and security is difficult at best and potentially a death blow if miscalculated. Square definitely broadens the reach of its new product by leveraging email as the funds transfer tool. Very straightforward . . . very simple. 

But, with 73 percent of consumers being concerned about their card details being stolen on the internet (according to Datamonitor's 2012 Financial Services Consumer Insight Survey) there is likely to be a concern by potential users that there is a lack of visible payment authentication.

This highlights the paradox of mobile payments that must be overcome. On one hand, consumers find current authentication processes as being overly complicated and time consuming. On the other hand, increased awareness of cybercrime makes consumers concerned about how their security and privacy are being protected.

With Square Cash, they hope they struck the right balance. If they are wrong, and a highly publicized security breach occurs, it is likely to damage Square's goal of becoming a trusted consumer payments brand.

The Epitome of Digital Innovation Today


More than just a very easy way to transfer money, Square Cash represents what mobile innovation means today. Instead of trying to solve all of the world's problems in one app, companies are developing ways to use mobile to make our lives easier . . . from the customer's perspective. 

Square could have followed the lead of many of their payments counterparts and integrated Square Cash into their mobile wallet product. While it may have met corporate product growth objectives, it would have been a worse customer experience with a cluttered user interface. They could have carried forward their $.50 fee from the beta version of the service, at the cost of acceptance.

It is clear that Square Cash is a mobile-first application. Look at all of the 'unused' space on the desktop version of the application. Square Cash is a killer app because they didn't fall into the trap of moving beyond simple elegance. When you use the application for the first time (much like the first time I used my Moven or GoBank account), the first impression is, "Wow, that was really easy".

"There's a tendency to think of innovation as coming up with the latest gadget, or adding new features onto existing applications. But the concept of breakthrough simplicity recognizes that today, the most powerful forms of innovation don't manifiest themselves in new bells and whistles. They take the form of better customer experiences (or patient experiences, citizen experiences, etc.). And one of the best ways to improve any experience is to simplify it -- remove complications, unnecessary layers, hassles or distractions, while focusing in on the essence of what people want and need in a particular situation."
What will be interesting to see is whether other payments players follow Square's lead toward a more simplified application. More importantly, it will be interesting to see if the banking and credit union industries will be able to focus on taking steps out of mobile and online processes for a better user experience.


Square Wins Best of the Web Award



Jim Bruene, publisher of the heavily followed Online Banking Report and Net Banker newsletter has a discerning eye for what is evolution and what represents evolution in digital financial services. As founder of Finovate, he has the opportunity to see banking innovation up close on a regular basis. This week, however, he awarded Square with a 'Best of the Web' award. In doing so, Jim said,
"It's been six months since he handed out an OBR Best of the Web award. Since then, there have been many new enabling technologies and promising applications. But with every passing year, it gets harder to raise the bar with a new digital financial product. Square did it this week. The company took P2P payments -- something PayPal commercialized in 1999, CashEdge/Fiserv bankified in 2009/2010, and Google simplified in May -- and distilled it down to its essence."
He sums it up best when he says, "It's hard to imagine P2P payments being any simpler. And Square is doing it all for free".

Square Cash Twitter Discussions

















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Sunday, October 13, 2013

Loop: A Mobile Wallet Game Changer


Loop is an exciting new mobile wallet solution that has achieved near ubiquitous acceptance with more than 90% of POS terminals without any infrastructure change by the merchant, the acquirer, or the issuers. 


While other mobile wallet players are talking about NFC, EMV, barcodes, BLE and the cloud, Boston-based start-up Loop has invented an incredible mobile solution that intelligently communicates with the existing retail mag stripe reader interface today – without another plastic card and without the merchant needing to change anything!



Compared to the recently announced Coin solution that captured the hearts and more than 7M YouTube sets of eyes of consumers and the fintech world a few weeks ago (see Bank Marketing Strategy post on Coin), Loop has been amazingly under the payments 'next shiny object' radar during its funding process. There was a wave of fintech buzz in October, including several articles and a presentation at Money2020, but not much since.

In an exclusive interview with Will Graylin, CEO of LoopPay, Inc, he said, "Loop has been focused on product development and our soft launch which will take place in about 3 weeks. We did a small PR effort at the time of our Kickstarter campaign, but we did not want to blow a lot of hot air before we had our product ready for market and had happy users." He continued, "Many have overhyped their solution and have failed. We are more interested in the long run and are building solid a foundation for our future with solid partners."

Given that Loop is delivering a solution that automatically transforms virtually every existing POS terminal mag stripe reader into a contactless payment receiver, I don't expect Loop to be in the shadows much longer.

That's right, unlike other solutions that require merchant terminal conversion or a programmable card with limited security, memory, card or battery capacity, Loop integrates the highest level of Payment Card Industry (PCI) security and can store hundreds of payment, gift, loyalty, reward or ID cards into a smartphone.

To 'trick' the mag stripe reader into thinking a physical card is being swiped, the consumer will need one of several add on devices available from Loop to emulate the card swipe including a Fob (being sent to 2,000 pre-order customers and Kickstarter backers this month), smartphone charging cases (available for iPhone 5 and 5s in early 2014 and other devices shortly thereafter) and eventually wearable devices.

Once cards are 'swiped' into the LoopWallet app using the Square like device, the user can select the card they want to use at payments. While the process initially will use additional consumer hardware, ultimately, Loop would prefer that their Magnetic Secure Transmission (MST) technology be directly embedded into the mobile device itself, eliminating the need to carry any additional hardware.

Watch the video below and see if you agree with me that this is an ingenious new mobile payments innovation.


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What is Loop?


Loop co-founders Will Graylin and George Wallner think they have the killer mobile wallet solution. Their invention, which they've dubbed Loop, allows consumers to use their iPhone or Android phone to buy virtually anything anywhere they'd normally use a debit/credit card. 

The best part? It works with the existing mag stripe swipe terminals that nearly all merchants use today, so merchants don't need to make any changes to accept Loop payments . This is a major milestone in the mobile payments race! The loop app can also provide timely insight (gift card balance, reward points, available balance) and can serve offers from merchants and card issuers.

Oversubscribed in initial Kickstarter fund raising efforts, Loop has just collected $10 million in Series A funding, setting the stage for Series B funding in early 2014 to will fuel future growth.

In my exclusive interview Graylin said, "We see Loop as the only contactless solution that has ubiquitous acceptance on day one." He continued, "Given that all other technologies require changes in the POS to have contactless mobile transactions, or require infrastructure or system changes by merchants, that puts Loop in a very good position to lead the way as the first wallet solution that works across merchants."

This is a major distinction to other mobile wallet solutions. Beyond mag stripe POS system readers, the only new POS interface to have achieved more than 10% acceptance across merchants is EMV, and that took 2 decades to reach 50% worldwide acceptance and is still not here in the U.S. And while EMV will come eventually, it will most likely continue to co-exist with magstripe readers for decades. 

Since the mag stripe will continue to be used by most debit card, gift card and loyalty card holders, Loop could be either a 'bridge' to a full mobile solution or 'an end solution'. According to Cherian Abraham, mobile commerce and payments lead at Experian Global Consulting, "As far as acceptance, Loop has fair winds. No longer is there a need to search for merchants who accept your choice of payment. And guessing by the state of EMV – even when it's been called a 'bridge solution' – Loop can expect a very long bridge."

Tomorrow's Transactions interview with Will Graylin, CEO of Loop by David Birch, Director at U.K. based Consult Hyperion available here.


How Does Loop Work?

Unlike most other mobile wallet solutions, Loop doesn't require a special dedicated transaction network. Instead, it mimics the magnetic transmission frequency usually held on a card's mag stripe, allowing it to be received by a traditional POS card reader. When the Fob device or MST enabled ChargeCase is held close to the reader (about 4 inches), the transaction occurs exactly the same when a card is swiped.

Loop Fob Delivery Package
Loop Fob in Colorful Carrier

Initially, Loop will only work with a $34 Fob device that comes in a variety of colors (shown above). With initial shipments occurring this month, the Fob can be replaced early next year with an MST enabled charging case for owners of an iPhone 5 or 5s. 

The Fob is a small audio jack device with a card reader to scan a consumer's cards. This Fob is compatible with both iOS (app available this month) and Android devices (app available in early 2014). Since the Fob also holds your payment information, it doesn't need to be connected to your phone to make payments. It pays using whatever card you selected as your default payment card. If you want to change the card, you can reconnect the Fob to the phone and select the alternative card you want to use.

When a consumer receives their introductory kit, they follow these simple steps:
        1. Download the LoopWallet App
        2. Simply swipe debit, credit, loyalty, IDs, membership and gift cards using the swiping Fob device provided (similar to a Square device)
        3. Use the LoopWallet app to select the card you want to use
        4. Place the Fob (or ChargeCase) near the POS card reader and hit 'transmit' on the screen or device to make purchases
Loop gives the consumer control over what to include in their LoopWallet. Load what cards you want and the LoopWallet app allows a consumer to organize and manage the cards as desired. A consumer can even store passwords within the application and take photos of the cards (unlockable with a pin).



The Loop ChargeCase (available in early 2014 for iPhone 5 and 5s) is a protective case that serves as both a transmission device as well as providing 60% more battery power similar to a Mophie battery case. A swiping device is included with the ChargeCase solution.



Loop Security


From initial LoopWallet set-up, to ordering the Fob or ChargingCase to initiation of a transaction, it is clear that security has been a top priority for LoopPay designers.

When ordering the device itself, security measures are in place to ensure that the person ordering the device can be authenticated. When I purchased the Loop FOB and ChargeCase (yeah, I did both), Loop provided security questions ranging from the last four digits of my social security number to previous address validation. This ensures that if someone stole my Fob, they would still need to have access to my name and password to access my LoopWallet.

In addition, when the transaction is taking place, the device must be less than 4 inches away from the mag stripe reader and the encrypted information only gets transmitted for a few seconds. No sensitive data is stored in Loop's servers and all card information is secured by a 4-digit pin (beyond what you need to access your phone).

In an exclusive interview with Damien Balsan, COO of LoppPay, Inc., he provide a list of security measures their team has put into place for enhanced security:
      1. We are preventing cards from being used by anyone other than the owner himself/herself. The user has to register to LOOP Wallet thru a KYC Process and our server is authorizing any card loaded in the wallet. You could only enter cards with the users name.
      2. Our server is a Level 1PCI certified server. It does not store Track Data. The card information is stored in a Global Platform Secure Element.
      3. The LOOP experience is quite intuitive for a consumer: he/she loads all his cards one time whether payment cards or ID/Loyalty cards and he can chose the level of security he desires.
A great series of Loop usage and security FAQ's available here.

Potential Drawbacks


The two most likely drawbacks of Loop would probably be the cost ($34 for a Loop Fob and $99 for the ChargeCase) and the desire for more simplicity. There is also the issue of 'the other 10 percent' of places where Loop won't work.

Cost

Requiring consumers to invest in specialized hardware could be a significant obstacle to acceptance. While Coin may have been able to get people to invest in their card technology at $50 (early bird offer), there is no history on the potential mass appeal of a mobile payment device at any cost and certainly not at a cost of $99.

In response to this issue, Loop's Graylin told me, "Today, consumers pay $99 for a Mophie charge case. For the same price, we give them a mobile wallet that can be used at almost every store." He added, "Obviously, being able to claim 90%+ acceptance at current retail locations is a big plus, but it remains to be seen if consumers believe the cost offsets the current convenience afforded by carrying plastic."

He also added, "Just consider the benefit of being able to pay at a store the few times that you have forgotten your wallet. Many of our pilot users and testers remind us this all the time."

Simplicity

"In the payments space, Coin has almost an Apple-like simplicity to it, stated Deva Annamalai, SVP of marketing technology and data insights at Salt Lake City based Zions Bancorporation. "On the other hand, the Fob is a form factor that is almost a step back in time."

For any payments solution to stand the test of time with today's digital consumer, it will need to be easy to understand and simple to use on a daily basis. The iPhone 5 ChargeCase with integrated Loop technology is definitely a step in the right direction, but will need to be offered for other Android and Apple devices quickly for the solution to be embraced.

The 'Other 10%'

The fact that Loop works on approximately 92% of the POS systems in the country, there are the 'other 10%' of locations that users need to be aware of. For instance, Loop will not work on most gas station devices or at ATMs or on machines that that use 'two-sided' readers (older technology). For this reason, Loop recommends that users bring along a 'go to' card for those places that Loop may not work. That said, initial tests have shown that Loop will work in most locations.

The Future of Loop


In addition to the shipping of an MST enabled ChargeCase ($99, 1200 mAh battery) for the iPhone 5 and 5s in early 2014, a potential thinner and more powerful ChargeCase may follow. In addition, Graylin has hinted on several occasions that other form factors (possibly wearable technology) are in development. 

There have also been discussions of a Bluetooth LE-enabled plastic card (sounds like Coin) and a mobile wallet product aimed at students who prefer not to carry college IDs, payment cards, loyalty cards, etc.

Potentially more important to the industry, Loop has been having discussions with handset makers to see if Loop could be integrated into future phones. As mentioned by Cherian Abraham from Experian, "Loop's ultimate goal will be to be aggressive with its future form factors so that it no longer draws attention to itself and disappears – into phones or its accessories. Aesthetically it’s dongle has to be like Square, and that’s tough when you are not Square."

When I asked the team at Loop about the future, they said the main question that they get over and over is how will their solution work after EMV becomes more prevalent in the US. Their response was that the Loop solution will still be able to work. They referred to the fact that they will continue to co-exist with magstripe readers for decades to come and are confident that their dynamic data solutions will be appealing for many issuers. 

While Loop is definitely an ingenious solution for an industry looking for a go to mobile wallet solution, the road ahead is not all smooth sailing. Not only does Loop need to convince Customer 3.0 that a mobile wallet solution with a physical Fob or ChargeCase is a value added solution worth the cost, but they also need to persuade skeptical consumers who continue to worry about security and privacy issues around mobile payments.

LoopPay LinkedIn page

LoopPay Facebook page

LoopPay on Twitter

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