Showing posts with label PayPal. Show all posts
Showing posts with label PayPal. Show all posts

Thursday, October 17, 2013

Tuesday Morning at Money2020 Filled With New Product Announcements

After an evening of fun at the Haze Nightclub, Money2020 kicked it into high gear on Tuesday with a series of industry updates and major product announcements from PayPal, Citi, MasterCard, Square, American Express, Ericsson, Discover and Amazon.


While not being at Money2020 in person, I have compiled the highlights of the day from tweets posted during the day from my fintech friends as I did at the end of Day One.


Note: Each of these tweets are 'live' allowing you to access, re-tweet, favorite, etc. Thanks to everyone for the great digital conversation that makes the event a worldwide gathering.
















































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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

















Additional Resources




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Tuesday Afternoon Tweets at Money2020 Combine Insightful & Snarky

After a very exciting morning of Money2020 new product announcements and visions for the future, it would be difficult to maintain the same energy level on Tuesday afternoon. 


As can be seen from the hashtag tracker below, #Money2020 tweets reached a crescendo during the opening keynotes, with more than 300 tweets during the 9:00(PT) hour.


Unfortunately, the other spike in tweets represented primarily snarky comments, as attendees became restless in expectation of a major announcement from the MCX panel than never occurred. This not uncommon at events like this, where a tone is set for the day and patience grows thin when all presentations don't deliver equally.



Even without the two major tweet spikes for the hashtag #Money2020, the discussion on twitter was robust throughout the day on Tuesday as it was on Monday. The combination of comments around megatrends as well as product insights made for interesting reading at the event as well as from afar. 












While there were over a hundred tweets during the MCX presentation, there was minimal 'love' since the presentation was long on self promotion and short on facts or a new product announcement. The audience was obviously still stoked from the morning sequence of new product announcements from payments leaders like Amazon, PayPal, Citi, MasterCard, American Express and Discover.






























Thanks to all of the tweeters both at Money2020 in person as well as those who are living vicariously through others (@leimer). Your coverage and commentary on the event are invaluable.

Here are the top 10 tweeters who have used the #Money2020 hashtag to date.


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Money2020 Hump Day Tweet Highlights

Wednesday at Money2020 started very strong with an early morning tweet chat hosted by Bank of America and attended by over 200 fintech followers in a live chat room and digitally.


Participants provided feedback on the topics they enjoyed the most, the biggest takeaway, what the future shopper would look like and what it will take to make mobile payments mainstream. Despite the early hour, the twitter volume hit event highs based on tracking shown below.




Despite many people heading back home, the momentum for the day didn't stop, with keynotes from Facebook, Bank of America and First Data being a bridge to excellent 'Launchpad' sessions where new products were introduced each day in 6 minute intervals similar to Finovate.

Highlights of tweets made up until the lunch are provided below.









Money2020 Word Cloud Created By My Friends at TSYS























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The Rise of PayPal as a Major Payments Player

No place in financial services is transformation and innovation more apparent than in the world of payments, where the convergence of mobile and new data-driven business models have the potential to completely disrupt both the consumer and merchant experience.


The recently concluded Money2020 illustrated that there is no shortage of payments players vying for attention,  but no firm seems to be as aggressive as the new PayPal, which continues to roll out new innovations impacting the payments ecosystem.


While some of the 'innovation' at PayPal may not seem new or disruptive (such as the use of QR codes), the ability to quickly build scale by using the existing payments infrastructure may be the key to PayPal's success. The company hopes to transform its reputation as a means of exchanging cash over the Internet into the default payment system for many everyday transactions.

At stake for PayPal is control of a mobile-payment market that is expected to grow more than three-fold from this year’s $235 billion over the next four years, according to researcher Gartner. PayPal faces a host of competitors, including Google Wallet, Square, Lemon and Stripe (and potentially Amazon and Apple).

Brian Roemmele, researcher and business advisor says of a recent PayPal announcement, "The true innovation that PayPal has achieved is really quite invisible and perhaps even boring to technologists. No iOS devices or android devices deployed at the merchant locations. No new add-ons needed, just the a boring laser bar code scanner that every single major retail store already has."

It is clear that PayPal is moving fast to become a ubiquitous option at retail merchants, introducing products for both the consumer and the retailer. In fact, there have been so many changes recently, it may be difficult to keep up.

To that end, I am providing a brief overview of what has occurred over only the past couple months and what the future may hold.


New PayPal Mobile App


In early September, Paypal introduced an updated version of the PayPal mobile app for both iOS and Android, turning it into much more of a mobile wallet. Maintaining all of the old features, the new app added tools to facilitate shopping and paying for goods online at the physical POS.



 The app features five clearly labeled sections on the home page, with the major sources of innovation residing within the new Shop tab and Bill Me Later integration. Within the Shop screen, you can find nearby merchants that accept PayPal. Once you check in at a merchant (using your PIN), you can download any special offers from the store and can complete the transaction simply by saying "I'm paying with PayPal". Since the merchant will have your PayPal photo on their POS device or phone, funds can be transferred without needing to pull out your phone a second time.

Leveraging the app's location-based capabilities, there is the ability to push coupons based on a consumers specific location and even allow for ordering and paying for a meal within the app.

As for payments, PayPal is providing the option to pay directly from a bank account, from a PayPal balance or to use a credit card on file within the app. It's also expanded the 'Bill Me Later' function, providing credit for large purchases within the app. 


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PayPal Beacon: No Tap, Swipe or Signature


One of the biggest challenges for PayPal over the years is expanding their online merchant capabilities to the physical point of sale, making it easier to use PayPal than swiping a credit card. As any payments player knows, simplifying the payments process is made even more difficult with today's merchant technology and the entrenched consumer payment behaviors.

PayPal hopes the introduction of Beacon may be the answer to this challenge. Beacon uses Bluetooth Low Energy, otherwise known as BLE to enable phones and merchant POS systems to communicate with each other seamlessly, without opening an app, without GPS turned on and even without a clear phone signal. In other words, hands-free payments.

All a merchant needs to do is plug a PayPal Beacon device into a power outlet in their store. Once the Beacon is plugged in, they will be ready to offer a highly personalized shopping experience (including personalized coupons or even offers based on the consumer's location within the store).

Consumers control the stores they will want to check in to, those they want to get prompted to confirm payment for, and stores they will want to enable a complete hands-free experience for. In the latter case, simply walking in a store will trigger a vibration or sound to confirm a successful check in. After checking in, a photo will appear on the screen of the Point-of-Sale system so the shopper can be greeted by name. Paying only requires a verbal confirmation.

In addition, PayPal is giving developers access to the PayPal mobile in-store API to create experiences such as being able to self-checkout on a mobile phone or automatically placing a customer’s usual order as soon as they walk through the door.
David Marcus, president of PayPal says that PayPal has been showing the device to retailers, large and small, and they “love it.” Part of the reason, he says, is that not only does it help them connect and potentially bring in customers, but it also integrates seamlessly with their existing point of sale systems. “I want to create an operating system for the retail environment,” he said.
It’s interesting to note that in iOS 7, Apple is debuting iBeacon, which could provide similar services for apps. But VP of PayPal global product, Hill Ferguson, maintains that the Apple version does not extend to Android, and that Beacon will work for any smartphone.
Piloting of Beacon is slated for Q4 2013, with rollout planned next year.


PayPal Working Capital


To help drive sales volume from the merchant perspective, PayPal introduced PayPal Working Capital in late September as a way to offer a simplified financing alternative to their customers. Initially offered to about 90,000 of it's business partners, potential loans from $1,000 to $20,000 will be underwritten based on PayPal sales history, with no credit check needed.

One unique aspect of the program is that PayPal said merchants could receive funds in a matter of minutes and that repayment would be based on a fixed percentage of sales generated with no minimum payments (if no sales are made on a particular day, no payment is required). In addition, rather than charging interest for the loan, PayPal will charge a fixed fee. The faster the payback period, the smaller the upfront fee. It is felt that this transparent fee structure will be welcome to retailers. 



"In talking to merchants, a lot of them are very capital constrained," says Brian Grech, who is in charge of risk management for small-business products at PayPal. "In a lot of cases, their next best option would be a personal credit card or a very high-priced merchant cash advance and we expect to displace those overwhelmingly with our new loan product."

Since PayPal cannot legally make loans directly to merchants, it is collaborating with the Salt Lake City, Utah-based lender WebBank.

PayPal Acquires Baintree


On the heels of announcing PayPal Working Capital, PayPal finalized the acquisition of Baintree, moving even more aggressively into mobile payments. In a very short time, Braintree leveraged a mobile-first mentality to build impressive mobile payment solutions that handle transactions in 130 currencies in more than 40 countries.

In addition to gaining an impressive list of clients such as Airbnb, OpenTable, Uber, and TaskRabbit, PayPal also acquires the very popular Venmo app, which lets users pay for free using their mobile device.

While Baintree will operate as an independent unit within PayPal, it is believed the superior application programming interfaces of Baintree will help PayPal work better with developers going forward. 

PayPal Payment Code


As part of the global Money2020 event in Las Vegas last week, PayPal continued their string of major announcements by introducing Payment Code, which will use QR codes and a PINs to verify in-store smartphone transactions over merchants' existing POS equipment. While initially seeming 'old school', this introduction leverages existing equipment and employee training while improving the experience for both the consumer and merchant.

Initially, PayPal is partnering with Discover and their 7 million retail locations to introduce this technology. To make an in-store payment, customers would first check in using the PayPal app. Once the app knows the customer’s location, it determines what kind of equipment the store has. 

If the merchant has a barcode scanner, a QR code will pop up on the phone screen. The customer then simply runs that code under the scanner finalizing the transaction. If the merchant only has a PIN pad, the app will supply a randomly generated four digit PIN, which the customer types into the terminal to verify the payment. (Note: This process is virtually the same as being used by Starbucks)

While the Payment Code does make the checkout process smoother, with easy access to all funding sources in one simple place (the customer's phone), the real benefit is that it will allow consumers to automatically redeem any special offers, gift cards, merchant rewards programs or other forms of payment that might be saved in their PayPal wallet in one quick transaction.

As with many of the innovations PayPal has introduced over the past several weeks, Payment Code is expected to roll out in Q1 of next year.

Amazon Challenges PayPal



Not to be left behind, Amazon responded to the recent wave of PayPal introductions and innovations by announcing a new service that will let customers of other online merchants pay for purchases using their Amazon credentials.

Login and Pay with Amazon takes advantage of Amazon's 215 million active customers and helps participating merchants make sales easier by allowing customers to access their account information safely and securely with a single login.

The new offering expands on the existing Amazon Payments program that lets customers pay with Amazon at check-out. The new log-in system ties merchants even further into Amazon's platform, including fraud protection from Amazon at no extra fee. Merchants get more information on customers, while the customers can buy without entering their address and card information on multiple sites over and over again.

Some merchants may be reluctant to work with Amazon because the company is a major retail industry rival, however.

Amazon will collect $2.9 percent plus $0.30 per transaction for transactions of $10 or more, and all fees are assessed on a per-transaction basis - always based on a percentage of the total amount. Login and Pay with Amazon will work on tablet, mobile, and desktop devices, the company said. Gogo, which provides in-flight wifi, already uses Amazon's basic payments service, but is planning to add the new service.

PayPal Penetration Challenges


Despite all of the innovation described above, PayPal is still an emerging mobile payment service provider, without the market size of penetration of the more popular credit card companies.

To alleviate this challenge, PayPal has worked hard to sign partnership agreements with consumer credit (Discover), money transfer (MoneyGram) and POS hardware and software providers (NCR, MICROS, etc.). By leveraging these partnerships, PayPal has expanded merchant coverage from just 18,000 in 2012 to close to 10 million locations expected by 2015.

"In 2013, Discover helped PayPal grow from the 250,000 retailers who accepted PayPal in store earlier this year to more than 2 million by the end of 2013," said Don Kingsborough, vice president of retail services at PayPal.

PayPal + Apple?


On October 11th, 2013, former Apple CEO John Scully mentions in passing during a BBC interview some ideas he suggests for Apple.  John referred to the logic of Apple acquiring larger companies with the huge amounts of cash they hold in reserves. In particular, John mentioned the idea that Apple acquire eBay for the single purpose if integrating PayPal into the iPhone.
"Apple's never been an acquirer of big companies before, and when you look at Passbook, the iPhone5S and fingerprint recognition - What would it mean if Apple went out and bought eBay? And they had PayPal, and integrated that?"
If you buy into the logic that Apple wants to be a facilitator for payments and not a merchant account supplier nor a payment card issuer, this idea may make sense. Combined, Apple and eBay would have over 760 million active payment cards on file, with some overlap.

So, maybe we will see a day when PayPal is part of Apple . . . or Discover.

I've definitely seen crazier ideas become reality over the years.

Additional Resources


 The Future of POS: Point of Sale Evolution and Its Impacts - PayPal White Paper (September 2013)

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