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16 March 2012
Gareth Lodge
....Gareth Lodge will NOT be launching a mobile payment, mobile wallet or alternative payment scheme! It sometimes feels though that everyone else is. PayPal Here is the latest development in the market. Some early comments are suggesting that its too little, too late. I think it would be rash to write it off quite yet. Square has certainly made impressive progress so far, with statements that they are processing over $4bn a year. Now, that’s a long way off the mainstream payments processors – the ACH I worked for processed considerably more than that in just one day, and that wasn’t counting the ATM transactions. But for a start-up that is impressive, and equally that volume is coming from somewhere. Even if its cash, its impacting someones business somewhere. The focus of discussions to date has been on the creation of new payment types and schemes. A discussion for another time includes whether that’s true (some are actually channels or wrappers), what a scheme actually is (something that is very important, as it leads to the governance and safeguards) and frankly, who other than payment geeks like me and whoever is sad enough to read this blog! In reality, as Zil rightly and frequently says, "new payment methods have to satisfy three parties - merchant, consumer and the provider”.
  • A consumer doesn’t think about payments other than when they don’t work or something goes wrong. The obvious analogy is plumbing – unless there is a leak or water doesn’t come out of your tap when its supposed to, it just is.
  • Providers are fighting a turf war. They recognise that they missed opportunities in the nascent days of the internet – we all know those banks who passed on buying PayPal… Mobile is perceived as a new opportunity. Again, a topic for a whole discussion on its own. I fondly remember seeing a presentation entitled “Waiting for Godot”, saying that we were too unrealistic in our forecasts for mobile payments, but it would be another 5 years yet. The date? 2001….
What is interesting with Square, is that it is a proposition for all concerned, and PayPal builds on that. The things that I think make it interesting include:
  • The brand is global and established – Visa & MasterCard didn’t get to where they are today without spending a huge amount. Of all the competitors to date, few if any have that recognition factor.
  • Multi-payment type – the inclusion of PayPal (natch!) and RDC adds to the attraction to merchants and consumers
  • Established customer base – lets not forget where PayPal came from, so cost of sale in theory could be lower.
  • Building out the proposition – the inclusion of a business debit card is very canny. You still need to get money out of the “system”, so what better than controlling that channel too?
  • Multi-country launch. EMV concerns aside (i.e. the plans that credit cards in Europe won’t even have a mag stripe to read!), it demonstrates that the proposition being built is much, much bigger than its competitors. I have no insider knowledge but it feels “watch this space” to me.
Down sides? Many, and many are common across all the competitors. The one I would single out as being unique is the reserve issue, which has recently been amended. On one hand the business debit card allows “instant” access, yet it doesn’t truly act as a business bank account or even a merchant card account. For many, it won’t be an issue, but for some it may pose significant risk. Whatever your take on how successful it will be, coupled with other announcements over the last year, PayPal is signaling a clear intention to be a mainstream payments network, rather than “just” an online payments provider. It’ll be interesting to see where the journey goes next. A debit card to access your money where money has been received... isn’t that a bank account….?

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