Another great take on Apple’s entry into mobile payments from Ben Thompson, who believes the wearable device will be the centerpiece in making this happen:
That’s where Apple’s ability to move units simply because they are Apple becomes something that is an incredible weapon: suppose 10% of iPhone customers are willing to buy a wearable with some cool fitness functionality mainly because it’s built by Apple. Boom – suddenly there are 80 million wearables with payment functionality out in the wild. Moreover, the customers sporting said wearable are likely to be both vocal about their desire to use said payments, and high spenders to boot. That’s a very good way to spur merchants to install what will likely be a free payment device, available at your local Apple Store.
He also argues that having this functionality baked into a watch or other wearable makes payments a very different proposition than having it done through the phone:
Moreover, I’d bet the difference between using a wearable for payment and using your phone will be greater than most people expect. I have no particular evidence for this outside of my own experience with keyless ignition systems in cars; the first time we got it, I thought it was a tremendous waste of money (it was part of a package); since then, I can not imagine buying a car without it. Saving a bit of hassle and a few seconds on a daily basis really adds up; it’s the type of subtle experience improvement that is Apple’s biggest differentiation.
A mobile scan via a watch that’s always at-the-ready and alleviates the friction associated with pulling out of a phone, opening the proper app etc.? Sign me up.
Horace Dediu with the smartest take on why exactly Apple is (potentially) taking the mobile payments route after so many have failed in similar endeavors:
But one word of caution: if Apple does enable payments it’s important to realize that being a (payment) bit pipe is not a particularly profitable business. It will undoubtedly bind value to the iOS devices which make it possible, but I don’t think there will be a direct capture of profit from the transactions themselves.
So for a company that facilitates the payment clearing system, the margins are likely to be very thin and with costs being non-zero it may be nearly a wash. The real impact of the decision to support payments will be in the aura surrounding the iOS ecosystem. An aura which will glow intensely.
And an aura that will do even more to perpetuate lock-in to current hardware, which is where the real value is; not in facilitating your 99 cent cup of coffee. Makes a lot of sense.
On Friday, the startup said it’s delaying its full product release until spring of 2015 while it refines the device and works out kinks in manufacturing. Instead, the company says it will ship what it’s calling Coin beta, the latest iteration of the all-in-one card, to the first 10,000 pre-order customers who opt-in to the program.
This part isn’t surprising if you’ve been paying attention to similarly crowdfunded hardware campaigns. But what card manufacturers are working on may present a serious problem for the functionality of Coin itself:
The US credit card industry is preparing for one of its biggest technological leaps in decades. New cards arriving in customer’s mailboxes are being affixed with security chips, called “EMV.” These chips promise to reduce fraud by making it hard to quickly copy a card’s information, and by requiring that customers sometimes punch in a passcode. By October 2015, the industry has said it will change its business practices, shifting liability for any fraud to merchants and card makers who don’t upgrade to the new technology. Coin may be one of them.
Basically, the magnetic strips that have become the basis for what amounted to over $11 billion in fraud in 2012, are being phased out.
The goal of the EMV standard is to phase out reliance on magnetic stripes, which have been around for decades and are subject to all manners of fraud. The microchip generates a unique code for every transaction, and inside the chip is what MasterCard spokesperson Oliver Manihan calls a black box: a private section in which a cardholder’s PIN and the cryptographic keys used to generate code are located.
As for Coin, even if it does find a way to include security chips on its device, Manihan said it may not be able to store information from the ones his company sends to customers. “You could only get a portion of the data,” he said, adding that some of the information stored on the chips is designed to never be copied.
And because Coin’s entire raison d’etre is to store that data from multiple cards, well…yeah. That would require a complete overhaul of not just the device but maybe the underlying business model itself.
Luckily for them, these magnetic strips are not going to go away overnight. Even without doing the hard math, you can think of the hundreds of millions of credit cards that are floating around out there and reasonably assume that this will take some time.
We’ll see how this impacts Coin moving forward.
Full disclosure: I supported Coin’s initial crowdfunding campaign and am eagerly awaiting one of the beta units.
Square has acquired curated food delivery service Caviar today, confirming earlier reports that the companies had been in serious talks. We reported last month that the companies were in talks on a deal worth about $100 million. Both Re/Code and The New York Times reported the deal would take place this week, but the reported price now is for $90 million in stock.
Really interesting piece that you should read all the way through. A lot of stories about M-Pesa: some use cases you may have heard of before, some not. This point really stuck in my head though as it relates to the way phones are used as a proxy for banking infrastructure that was never built in Africa:
I think the most interesting point of note in this solution is how it essentially skips over banking. If we think about our own lives, and especially those of the generation entering the workforce now, banking is most decidedly archaic. The whole idea of opening an account and dealing with a level of indirection which offers very little by way of useful services — it just feels like there’s a need for disruption. Our installed base of infrastructure makes this very difficult, but in the developing world that challenge doesn’t exist. It isn’t likely that most people will graduate to full-fledged banking just as we don’t expect people to graduate from a mobile phone to a full-fledged PC.
Think about how wild that is. An entire banking industry, which in the United States alone, is responsible for holding almost $15 trillion worth of assets, is being left behind for mobile phones on a whole continent.
I also wonder if Bitcoin can grow as a legitimate source of this kind of transactional activity. As Steven infers in the piece, the lack of legacy infrastructure inherently makes it easier for these kinds of solutions to grow. You’re not disrupting the existing financial system because there is no existing financial system, at least what we in the developed world see as a financial system.
Now we have confirmation on why Facebook hired PayPal’s David Marcus: Payments and Messenger will eventually “overlap,” Zuckerberg said during today’s earnings call. When the company first announced it had hired Marcus, the former president of PayPal, the industry took it as a strong hint that Facebook was looking to monetize its messaging app. After all, Marcus joined PayPal after parent-company eBay acquired his mobile-payments startup Zong in 2011, first leading PayPal’s mobile efforts before taking the lead as president.
Everybody kind of knew this was going to happen. The question is whether payments will stay confined to messenger or whether it will eventually branch out to include other Facebook-owned properties (Instagram, WhatsApp etc.)
Snapchat has filed three trademarks. The first, which was filed in 2012 and granted in July 2013, sounds like the Snapchat we’ve all come to know. It defined Snapchat as a “computer application software for mobile phones, portable media players, and handheld computers, namely, software for sending digital photos, videos, images, and text to others via the global computer network.”
These two filed in July paint a different picture:
“Computer application software for processing electronic payments to and from others that may be downloaded from a global computer network”
“Electronic transfer of money for others; providing electronic processing of electronic funds transfer, ACH, credit card, debit card, electronic check and electronic, mobile and online payments”
As Alyson notes in the piece, these didn’t come with any accompanying patents so it’s unclear whether or not they have concrete plans to do anything in mobile payments or if this is a hedge against Facebook and other companies who may be making their way into this space.
It’s also interesting in light of a decrease over the last two quarters in the amount of independent mobile payments startups funded.
The New Republic’s Noam Schieber:
It’s this habituation that’s the key. Humans are prisoners of inertia. The places where mobile payments seem to be taking off are places where the credit-card swiping habit never truly formed—like parts of Africa and South America—or places like Russia, where it was sufficiently unsatisfactory (think long lines) as to make consumers open to forming new habits. Even people like Rosenblum, who recognize the theoretical improvement mobile payments represent, apparently won’t form a new habit unless they deem the old one to be a serious drag.
Despite the click-baity headline, this is a really good piece. I’m interested to see how the market reacts to Coin, which is something of a hybrid, since it doesn’t fundamentally alter the behavior to something involving a smart phone or wearable. Maybe that helps ease people into the process.
Using those payment accounts as a foundation, the company is evaluating ways to make it easier for shoppers to buy physical products in apps and on the Web using their iPhones. The company is also considering how it might best help its customers make purchases in physical retail stores using only their phones and payment information stored in their iTunes accounts.
Conflicting reports Sunday night centered on whether Google did or did not talk toSquare about acquiring the mobile payments company. First, the Wall Street Journal (reg required) reported that the San Francisco-based company, founded by Twitter co-founder Jack Dorsey, did, in fact, hold acquisition talks with Google earlier this year. The story also claimed that Square had talked informally with Apple and PayPal about a sale.