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January 12 2012

Commerce Weekly: Report criticizes "feeble" mobile strategies of posh retailers

Here are a few of the items that caught my eye this week.

Report says 44% of prestigious retailers have "feeble" mobile strategies

Few high-end retailers are moving as quickly as they should on mobile commerce, according to a new report from research firm L2. In its first survey of premium brands' mobile strategies, L2 looked at the mobile and tablet platforms of 100 prestigious retailers — names like Dolce & Gabbana, Clinique and Cartier. In spite of their high margins, L2 found that most were taking a wait-and-see approach to mobile commerce, even though U.S. m-commerce sales are expected to grow from $6 billion in 2011 to $31 billion by 2016, according to Forrester.

In its report (and accompanying video, below) L2 scolds the laggards, reporting that:

  • 30% of brands haven't developed a mobile app
  • 33% don't have a mobile-optimized site
  • 16% have no mobile strategy at all

L2 placed 44 of the 100 brands it surveyed in the "feeble" category. At the other end of the spectrum, only four companies seemed to be doing enough right to earn a place in L2's "genius" category. Sephora topped the list, thanks to solid mobile and tablet apps, and successful cross-promotion of its mobile offerings across the rest of its digital platform. Nordstrom, Macy's and Net-a-Porter rounded out the top four.

It may look like a dismal showing, but as Lauren Indvik pointed out at Mashable, it may be enough to lead the rest of the retail competition. Indvik cited figures from Jesse Haines, group marketing manager for Google Mobile Ads, who told Mashable that a survey of major advertisers in early 2011 found only 21% had launched a mobile site at the time.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Sprint triples your chances to use Google Wallet

Samsung Galaxy Nexus with Google WalletIf you're like me, you've begun to see point-of-sale devices promoting the capability to pay with Google Wallet around town — for example at Whole Foods, Radio Shack, and CVS. Google has a nifty little map app that shows you where in your zip code you can wave your NFC-enabled Sprint Nexus S 4G phone to pay for — oh, you don't have a Nexus S 4G phone? Yeah, that's the problem: I've yet to see anyone actually making a purchase in the wild.

Sprint said this week it will do what it can to help by introducing two more phones that support Google Wallet: Samsung's Galaxy Nexus and LG's Viper. That brings the total number of phones that support Google Wallet to three. Both of the new phones store the payment applications on a secure embedded chip. Buyers will need to use either Google's Prepaid Card or a Citi Mastercard. The secure chips can also store coupons, points and offers.

Google will need all the help it can get from Sprint to spread the base of Wallet users, at least until the other carriers, all of whom are founding members of Isis, decide to let Wallet onto their phones. Verizon's decision in early December not to allow Google Wallet on its Android phones has cast a shadow of doubt on the whole business.

Meanwhile, all the players in the mobile payment system continue to run trials and tests to see where the soft points are. Visa said this week that it has certified six mobile devices to handle NFC payments using its PayWave system, a point-of-sale device that can process Visa payments wirelessly from a mobile device or a PayWave fob or card. On ZDNet, Zack Whittaker reported that in the U.K., Visa is hoping to roll the technology out as far as it can in time for this summer's Olympic games.

PayPal's mobile volume exceeds its own expectations

The volume of mobile payments is rising faster than expected, as shown by PayPal's announcement that it processed nearly $4 billion worth of mobile payments in 2011. That's up from $750 million in 2010 and $141 million in 2009. David Marcus, vice president of PayPal Mobile, made the announcement at the Consumer Electronics Show in Las Vegas. A year ago, Marcus told VentureBeat, the company predicted it would process $1.5 billion in 2011, a figure it later revised upward to $2 billion. Marcus credited, among other things, Starbucks customers using PayPal to top off their cards and the rise of iPad-based e-commerce.

Next stop: moving offline to point-of-sale devices. PayPal announced a trial using PayPal at the register in Home Depot stores, with no NFC required. For now, it's a limited test with a handful of PayPal employees who can use a PayPal card or just enter their mobile numbers in a point-of-sale terminal to pay for their DIY supplies. PayPal expects to roll it out to a wider audience later this year.

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January 06 2012

Commerce Weekly: Yahoo's new CEO has data focus

As the payments world roused itself from its holiday hiatus, here are some of the items that caught my eye.

Former PayPal chief brings data focus to Yahoo CEO position

YahooScott Thompson's move from leading eBay's PayPal division to becoming CEO of Yahoo received ample coverage in this light news week. The most interesting aspect to me was this former chief technology officer's focus on the importance of data to Yahoo's success. While past CEOs have focused on advertising, the company's role in the media landscape and alliances with U.S. and Chinese companies, Thompson showed his tech-centered origins in an interview with Ad Age:

At PayPal, we were able to create an unbelievably compelling business because we used data to understand risk and fraud better than anyone on earth. And that was the secret sauce. We had more data than anyone else, better tools and models, and super smart people who were challenged by the problem. It doesn't seem glamorous, but that was the reason.

Fast Company emphasized Thompson's background as PayPal's CTO and made clear to its lay-business audience that when he's talking about data, he's not just talking about a better dashboard to understand advertising opportunities. He's talking about the "big data" opportunity, tapping into large datasets produced by the transactions and interactions of Yahoo's 700 million members around the world.

From E.B. Boyd's Fast Company post:

Every day, those 700 million souls log in to the Yahoo universe and start making their way around its sites, moving from story to story to story to story — effectively giving Yahoo a media mogul's dream: the largest petri dish in the world to understand what sorts of content appeal to which sorts of people and what sorts of things will make them likely to consume more and more.

Of course, this is hardly news to Yahoo's data engineers or the big data community, but it will be interesting to see what effect a data-savvy CEO will have on Yahoo's prospects.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Flurry: More than one billion apps downloaded in 2011's final week

While most retailers focus on the crucial weeks leading up to the holidays, the week between Christmas and New Year's Day — when customers are off work playing with their newly received devices — is more important for app developers. In fact, Flurry reports that this particular week was the largest ever for iOS and Android device activations and app downloads.

Flurry estimates that more than 20 million iOS and Android devices were activated, and 1.2 billion applications were downloaded on the two platforms. Christmas day itself was the biggest day ever for downloads: Flurry estimates that 242 million apps were downloaded while happy recipients explored their new toys.

Flurry also predicted that Apple's App Store will have delivered more than 10 billion apps in 2011 — more than twice the number downloaded in 2008, 2009 and 2010 combined.

EBay's mobile VP goes shopping with Robert Scoble

Just before the holiday, we reported on the "Watch with eBay" feature in eBay's iPad app, which offers viewers a sort of real-time catalog, proffering goods related to the program they're viewing on TV. Robert Scoble has an interesting follow-up interview with Steve Yankovich, eBay's vice president of mobile. Yankovich dropped by Scoble's home office with the app to show him how it works, and he revealed a new feature that identifies fabric patterns in clothing and taps related clothing items in eBay's inventories.

Posters on Scoble's related Google+ thread were more fascinated (or irritated) by Yankovich's comments that even though Android devices are dominating the market, the iOS platform is still more important from a commerce perspective.

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December 01 2011

Commerce Weekly: Cyber Monday lives up to hype

Here's what caught my attention in the commerce space this week.

US online shoppers spent $1.25 billion on Cyber Monday

Screenshot from Amazon's iOS appWe knew we were going to spend a lot of money over the four days from Black Friday through Cyber Monday; all the TV commercials, digital ads, and forecasters told us so. But no one knew just how much until it was over — and no one saw how much of the spending was going to happen online. After it was over, when the purchase buttons had been clicked and the UPS trucks were rolling, Cyber Monday (Nov. 28) turned out to be the heaviest U.S. online spending day in history, according to ComScore. Shoppers spent $1.25 billion online, 22% more than on Cyber Monday 2010, the only other billion-dollar-plus day in online spending history. This year's Cyber Monday splurge capped a month of intensifying sales: more than $15 billion spent online since the beginning of the month.

If online sales growth was healthy, the growth in mobile sales was practically supernatural. PayPal Mobile reported a 552% increase in global mobile payment volume on Cyber Monday 2011 compared to the same day a year earlier. Of course, percentages are bound to look big when the baseline starts out low, and mobile payments have come a long way in the past 12 months. Claudia Lombana, PayPal shopping specialist, wrote on the company's blog that mobile sales volumes were 17% above those on Black Friday and volume was heaviest between 2pm and 3pm PST — suggesting that, on the East Coast at least, shoppers waited until the workday was (mostly) done.

So, does all this activity mean that consumer confidence has returned and we're about to buy our way out of the economic doldrums? Not exactly, writes Sheyna Steiner on Bankrate.com. Bankrate's November Financial Security Index reports that 42% of Americans say they plan to spend less this holiday season while only 10% expect to spend more. Black Friday and Cyber Monday mania may be less about kicking off an orgy of spending than they are about seeking the best bargains to stretch limited funds.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

A chat with a Groupon Now merchant

GrouponGroupon saw a big boost over the Black Friday-Cyber Monday weekend, too, reporting a 500% increase over last year for those four days. It's a little hard to keep track of whether Groupon is hot or not. Its Nov. 4 IPO blew past critics, raking in $700 million to become the biggest initial public offer since Google's in 2004. But within a few weeks, it saw its share price drop from its $26.10 opening-day closing price to $15.24 earlier this week. A boost in holiday sales could improve its standing, but many analysts are still saying the shares should be priced lower.

Whether Groupon's share price rises or falls, investors would do well to focus not on on its over-hyped daily deals, but on Groupon Now, the company's real-time discount service that lets merchants control when and how to offer deals. To find out more about it, I spoke with Dennis Cavanaugh the owner of 5 & Diner in Mesa, Ariz. Cavanaugh, who started out with a daily deal earlier this year, says he likes the flexibility of Groupon Now better. For example, he was able to increase one coupon offer of $10 for $20 worth of food up to $12 for the same offer and noted that there was no drop-off in uptake — so, he kept it there. "I can pause it, unpause it, change the hours of redemption, all the do-it-yourself things," he says, "and I don't have to call someone in Chicago. It's all in real time. There's no lead-time required on the decisions."

Cavanaugh says that Groupon Now customers are also more likely to spend over the coupon amount than customers who bring in coupons clipped from a newspaper — $6 to $8 more on average. He suspects it has something to do with the fact that they're affluent enough to afford a smartphone. And he notices that the Groupon Now offers bring in customers from further afield than the 3- to 5-mile radius that most of his customers come from.

Cavanaugh says he probably wouldn't make another daily deal offer: "I like Groupon Now better. Groupon gave us a huge surge in its booking period, but you can't control any aspect of it once it's out there. It was my first try, and I didn't know if the coupon was priced right. I know a lot more now. I think [Groupon Now] is a better tool for me to draw people in."

RIM pursues a mobile wallet

BlackBerry Curve 9380Research in Motion announced two more Blackberry devices that support near field communication (NFC) and RIM's small mobile-wallet trial with Telefónica, the Spanish telecom.

The Blackberry Bold 9790 and Curve 9380 join a few existing models that support NFC wireless communication, the leading contender for tap-and-pay wireless technology in mobiles. The RIM trial isn't at the scale of what Isis is planning in the coming year, let alone the real-world capabilities of Google Wallet on Sprint's Nexus S phones. At Telefónica's headquarters in Madrid, 350 employees will get Blackberries that let them make purchases and gain access to the company's buildings.

It's not exactly tap-and-pay on the Metro, but it's a start — one that RIM is hoping will slow its sliding market share to Android and Apple.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out DevZone on x.com, a collaboration between O'Reilly and X.commerce.


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November 10 2011

Commerce Weekly: Chasing down abandoned shopping carts

Here's what caught my attention in the commerce space this week.

Inviting customers back to their carts

Shopping cartOnly three out of every 10 online shopping carts actually make it to checkout, according to email marketing vendor Listrak. That's 70% of carts lying abandoned in the virtual corridors of ecommerce. Listrak wants to improve those numbers. It's one of several vendors offering "shopping cart abandonment solutions" — essentially, programs to follow up with shoppers who've left the store and ask them, "Haven't you forgotten something?"

Retailers would love to close more of those sales: Listrak estimates $18 billion lost in sales to U.S. retailers every year. A Forrester study last May found that 89% of consumers had abandoned a shopping cart at least once. Forrester's authors attributed that high rate to growing user sophistication: as shoppers become more experienced online, they are more likely to comparison shop even as they move toward checkout. Other industry observers offer a simpler explanation: shoppers are shocked at high shipping costs. A 2006 study by Goecart blamed comparison shopping, high shipping costs, and plain old running out of time as the leading causes of abandonment.

Listrak sampled Internet Retailer's Top 1000 online retailers, loading up carts and then abandoning them ("Hey you kids! Knock it off!") to see who would follow up. Only 14.6% sent a follow-up email, and fewer still sent a second or third email which, Listrak's CEO Ross Kramer told Internet Retailer, is where about half of the revenue comes from. Among Listrak's suggestions to retailers: get the shopper's email address first.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Intuit cuts payment rate for AT&T subscribers

Intuit announced a partnership with AT&T for its GoPayment mobile payment solution, which competes with Square. Like Square, Intuit offers a free card-swiping attachment that plugs into the audio jack of an iPhone, iPad, Android or Blackberry device, allowing anyone to collect credit card payments. Intuit's basic rate of 2.7% slightly undercuts Square's 2.75%, but AT&T customers will pay even less (1.7%).

Intuit originally charged customers $175 for the swiper dongle, but last January, in a bid to compete with Square, it began offering the dongle for free. Still, Intuit has struggled to gain the visibility that Square founder Jack Dorsey and COO Keith Rabois and high-profile investors like Richard Branson have brought to Square. This week's deal with AT&T is a reminder that Intuit is serious about GoPayment, which may actually offer more to merchants since it integrates with QuickBooks, its bookkeeping package that also targets small businesses.

PayPal embraces NFC (just a little)

PayPal has made something of a point of not jumping on the NFC bandwagon, emphasizing the technology-agnostic nature of its mobile payments platform. Demonstrations at PayPal's recent Innovate conference emphasized payment options like PayPal's Empty Hand system, which lets you buy things with only your mobile number and a PIN.

Still, NFC seems an inevitable part of the payments picture in the years ahead, and this week, PayPal delivered the peer-to-peer NFC payment technology that it promised last July. Shimone Samuel, Product Experience Manager for PayPal Mobile Applications, wrote on the PayPal blog that the technology for NFC P2P is included in version 3.0 of PayPal's Android app. No need for it in the iOS app yet, obviously, since the most recent iPhone upgrade disappointingly didn't include support for NFC.

As we noted back in July, in practice, the transfer of funds through PayPal's NFC system isn't substantially different from what was already possible using Bump, which sends the transfer through servers in the cloud rather than wirelessly between the mobiles. But the NFC system will let PayPal developers acquire experience with NFC wireless transfers, which should serve them well as NFC-enabled point-of-sale terminals begin to show up next year and beyond.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out PayPal DevZone on X.commerce, a collaboration between O'Reilly and PayPal.


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October 20 2011

Commerce Weekly: Google juices its Wallet

Here's what caught my eye in the commerce space this week.

Google pairs payment with coupons in one tap

Google WalletGoogle expanded its Wallet this week. At some retailers — American Eagle Outfitters, The Container Store, Foot Locker, Guess, Jamba Juice, Macy's, OfficeMax and Toys“R”Us — the lucky few Sprint customers who have Google Wallet can pay for purchases, redeem coupons and earn rewards points with just one tap.

Google showed off a video (below) of its employees at these stores, demonstrating Google Wallet to lots of very excited people. Of course, as is clear on the video, Google is paying for their purchases as part of the demo, so that may have something to do with the enthusiasm.

Google also announced a deal with the New Jersey Transit Agency to enable Google Wallet purchases through some busses, vending machines and ticket booths. Stephanie Tilenius, Google's vice president of commerce, said "Transit has been a common element of every major successful NFC effort globally and is a critical component of Google Wallet's success." Isis, which is likely to become one of Google Wallet's main competitors when it begins showing up on phones sometime next year, feels the same way. Last spring Isis announced that one of its first trials will be with Salt Lake City's Utah Transit Authority.

Announcements like this may come and go like streetcars, but the real shift will come when more NFC-capable phones are available on more carriers. Currently, only Sprint subscribers holding Nexus S 4G phones can tap and pay with Google Wallet. HTC, LG, Motorola Mobility, RIM, Samsung Mobile and Sony Ericsson announced en masse last month that they would introduce NFC-enabled mobile devices that implement Isis's NFC and technology standards, presumably sometime in 2012. But it will still take time before secure NFC phones are mainstream. Even so, Juniper Research is bullish on the uptake curve, predicting that NFC mobile contactless payments will reach nearly $50 billion globally by 2014.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

PayPal powers eBay's results

EBay reported strong growth this week through its commerce channels. Fueled by PayPal and mobile payments, Q3 revenue was 32% greater than last year ($2.97 billion compared to $2.25 billion in 2010). In a conference call with analysts, CEO John Donahoe said the company expects PayPal's payment volume to exceed $3.5 billion in 2011, five times greater than it was in 2010. At last week's Innovate conference in San Francisco, the company showed off plans to bring PayPal to the physical point of sale. Donahoe said the company will begin rolling those payment systems, which don't rely on NFC but rather pay through the cloud or with direct-billing technology, as soon as the fourth quarter.

Also this week, Donahoe discussed eBay, PayPal and the future of payment at Web 2.0 Summit. Video from his Q&A session is below:

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News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out PayPal DevZone on X.commerce, a collaboration between O'Reilly and PayPal.


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October 14 2011

Commerce Weekly: PayPal wants to "one click" across the web

Here's what caught my eye in the commerce space this week.

PayPal enters the single sign-on space

PayPal AccessAt its Innovate developer conference in San Francisco this week, eBay announced PayPal Access, a single sign-on technology that functions like OpenID, Facebook Connect, and other proxy identity mechanisms. But it comes with a twist: PayPal Access enables transactions.

As with other single sign-ons, PayPal holds the master record of the user's identity information, sharing only enough with the third-party sites to guarantee identity. If Facebook Connect makes it easier to share your web activity on your Facebook feed, the main benefits of PayPal Access appear to be simplicity (you don't have to re-enter credit card or even PayPal information at each site) and security (as with PayPal, you're not sharing any payment information with the merchant).

The ambition behind PayPal Access is sweeping: eBay wants to deliver a web-wide experience comparable to Amazon's one-click shopping. PayPal Access attempts to do this by integrating with browser functionality so that customers can see they're already signed on. A PayPal purchase can be made without leaving the site.

There are obviously huge challenges here for eBay. First among those is bringing a critical mass of merchants into the tent so that PayPal's 97 million active users can rely on Access as an acceptable payment choice. Second will be the inevitable spoofing that goes on under PayPal's name. How many emails from a "PayPal" source do you get in an average month? How many are really from PayPal? I would expect that never-ending struggle to continue at the browser level.

At the Innovate Conference, PayPal showed off some other neat stuff, too, including a Shopping Showcase that revealed how the company will use some of the technologies it's been acquiring this year. For example, using Where's technology, PayPal wants people to check into stores before they arrive, not after. This lets merchants show discounts or special offers. If it's a frequent destination — your regular coffee shop or grocery store, for example — the wallet will show the merchant your previous purchases or shopping list so they can offer discounts on those or related items.

Zong's direct-billing technology, which eBay bought this summer, will enable a service called Empty Hand. Don't have your wallet or your phone? Key in your mobile number and a pin on the retailer's point-of-sale console and you can access your PayPal account to complete the purchase.

PayPal is also planning to offer new financing options. Currently, you can link multiple payment sources to your PayPal account (for example, checking account, Visa card, and AmEx) or you can use PayPal's BillMeLater service. Soon, you'll be able to change your mind after the fact. Wish you'd put that dinner on your miles card? Log on the next morning and switch the source. You can even decide to change from a full purchase to a payment plan, freeing up more cash to ... buy more things with PayPal.

As noted above, one of the challenges PayPal/eBay faces is bringing more retailers into its system. Toward that end, PayPal is taking its Shopping Showcase on the road to show what's possible. Next stop: a pop-up store in TriBeCa that aims to stimulate interest among trendsetters and the retailers they buy from.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Tracking down Bitcoin's developer

BitcoinThis week's New Yorker magazine features a report by Joshua Davis on Bitcoin, the virtual currency launched in January 2009 by the pseudonymous developer Satoshi Nakamoto.

Bitcoin's program has distributed more than 7 million bitcoins through a lottery process. Value rises and falls with perceived demand, reaching a high around $29 last June, though it's down below $5 now.

For the New Yorker piece, Davis visited a Bitcoin mining operation tucked into a warehouse in Kentucky and a Howard Johnson's motel near Disneyland that accepts Bitcoin for payment. The hotel manager was excited to meet Davis because he was "... the first customer who's ever paid with Bitcoin."

The article traces Davis' attempts to uncover Nakamoto's real identity. Internet security expert Dan Kaminsky outlined some of the skills Nakamoto must have: "He's a world-class programmer, with a deep understanding of the C++ programming language ... He understands economics, cryptography, and peer-to-peer networking." Davis also noted that Nakamoto has impeccable English skills and tends to write in UK style rather than American style when in a hurry.

Davis narrowed the field of likely suspects and eventually settled on Michael Clear, a post-graduate student at Trinity College Dublin, who — at least in the New Yorker report — offered a non-denial denial.

After the story broke, Clear issued a much more unequivocal denial: "Although I am flattered that [the New Yorker] had reason to think I could be Satoshi, I am certainly the wrong person," he said. Whether he is or isn't, he has good reason to dispel the notion. As Davis noted, the U.S. government has a record of prosecuting people who create alternative currencies.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out PayPal DevZone on X.commerce, a collaboration between O'Reilly and PayPal.


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October 06 2011

Commerce Weekly: How Steve Jobs changed the way we buy

We're changing the name of this blog from ePayments Week to Commerce Weekly to better reflect the wider scope of our coverage — not just payment, but communication and transaction technologies along the entire commercial value chain.

With that in mind, here's what caught my eye this week.

Steve Jobs' commercial legacy

First generation iPodIt's difficult to write about anything else today, with the entire tech and creative universe mourning the loss of an uncompromising genius. Much has already been published about the ways that Steve Jobs changed how we work and interact with computers. Less has been written about how he changed the way we shop and buy. Here are three thoughts on that.

The iPod and the iTunes store. As Jobs said before introducing the iPhone in 2007, the iPod "didn't just change the way we listen to music. It changed the entire music industry." Its pairing with the iTunes store actually went further, creating the first simple, sustainable platform for purchasing and downloading all kinds of digital media, including TV shows, movies, books, college lectures, and more. As of June 2011, iTunes had 225 million accounts, and through them more than 15 billion songs have been sold, making it the world's number one music store. Apple extended the model to software with the App Store, which has distributed more than 14 billion apps in three years.

The iPhone and in-app purchases. Although there were smart phones before the introduction of the iPhone in January 2007, finding and installing new applications for them wasn't easy. The iPhone changed that, making it simple to download and install new apps and opening the landscape for mobile app developers. By doing so, it broadened the opportunity for consumers to make purchases inside mobile apps. In-app purchases have helped make the freemium model (free to install, paid for with subsequent purchases inside the application) the dominant one for mobile apps, on iOS and other mobile platforms.

Apple Store in New York City
The Apple Store at 59th Street and Fifth Avenue, New York City. Via Fletcher6, Wikimedia Commons.

The Apple Store. Apple opened its first physical retail stores in 2001, just as other computer makers were closing theirs. But Apple's innovations — cutting-edge architectural design, the Genius Bar, iPhone and iPad checkout — made their stores a destination for Apple fans and the curious alike. Ten years on, Apple has 357 stores across the world.

Even all this was a small part of Jobs' legacy. I'd like to think the best part of what he gave us — even better than all the cool toys — was a shining, successful example of what's possible when you don't compromise your vision. He demonstrated to two generations of creative geeks what's possible when you commit yourself to making a thing work the way it really should. That's a rare feat in a world where too many things don't.

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eBay CEO: We won't compete with our customers

Ahead of eBay's Innovate conference, Robert Scoble talked with eBay's chief executive John Donahoe about the changes underway in retail, mobile, and social commerce. Donahoe predicted that rapidly evolving technology will drive "more changes in the way consumers pay and shop in the next three years than we've seen in the last 15 to 20."

Scoble has posted the interview on YouTube (it's also embedded below). Among the highlights:

  • Donahoe positioned eBay's commerce ecosystem as a merchant-friendly alternative to Amazon: "We provide all the tools to help third-party developers create businesses for merchants, and we will never compete with [merchants]."
  • There are 500,000 developers working with Magento (the open-source ecommerce platform that eBay purchased earlier this year) and, according to Forrester, that work has generated more than $1 billion in revenue for them.
  • Mobile is a big opportunity because "people don't want to enter a credit card number into a mobile device. It's cumbersome," and they don't believe it's secure.
  • Katie Mitic, who leads Facebook's platform and marketing efforts, is joining eBay's board. Donahoe positioned this as a significant gesture as eBay tries to work with Facebook to figure out the social shopping connection.
  • eBay is increasingly global: of the $60 billion in volume last year on eBay, 55% came from the U.S. and 45% happened outside the U.S. What's more, 20% of eBay's transactions cross borders. "So, $5 billion worth of goods was exported out of the U.S. on eBay."
  • eBay will remain platform- and operating-system agnostic. "We've lost the hubris of thinking we're going to decide for them. Our consumers will tell us where we need to go."

There were a few notable gaps where Donahoe was honest about not having the answers.

  • On China: Although some Chinese sellers use eBay and PayPal for transactions with customers outside of the country, foreign companies can't tap the enormous market in transactions within the country. He expects PayPal to partner with a Chinese bank or other financial service in the next few years.
  • On social commerce: While eBay is beginning to see elements of social entering the shopping experience, there's still no clarity on what the social shopping experience means. Is it Facebook coming to eBay, or eBay merchandise selling through Facebook (or both)?

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out PayPal X DevZone, a collaboration between O'Reilly and PayPal.


iPod Photo via Wikimedia Commons.

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September 22 2011

ePayments Week: Google Wallet debuts

Here's what caught my attention in the payments space this week.

The mobile wallet is here

Google WalletGoogle Wallet officially launched this week with payment partners Citi and MasterCard on board and three other credit card networks (Visa, Discover and American Express) waiting in the wings. Version 1.0 is pretty much what Google said it would be when it announced the service last May. Google is launching it first on Sprint's network, and for now you need to have Samsung's Nexus 4G — though there are several other NFC-compatible devices in use today and more coming soon. You also have to find a MasterCard PayPass terminal — typically found in taxis, fast-food restaurants and convenience stores — to tap and pay. (If you're looking for the technical specs on how that works, MasterCard's site has a handy interactive that shows how tapping the phone emits a beep from the terminal.)

Payment with the phone is only part of the value proposition; Google knows that won't be enough to convince consumers to use it. The integration of payment with rewards, loyalty programs, and coupons is just as important — as this spoof video of the "first Google Wallet customer," lifted from the "Seinfeld" archives, makes clear. It's a small start, with only a narrow slice of the smartphone user base able to tap into it. But who can doubt the promise of one of the Google engineers starring in the intro video when he says, "We're constantly working to improve the wallet."

It's worth noting that PayPal president Scott Thompson demoed their point-of-sale solution last week, emphasizing that PayPal isn't waiting for NFC and is instead considering multiple payment options, including bar codes (like Starbucks) and PIN confirmations (as with direct billing). Earlier this summer, Ogilvy & Mather's Mobile Shopper survey found that far more consumers trusted PayPal to handle their mobile payments than Google (34.3% versus 19.5%). If Google's challenge will be to earn consumer trust, PayPal's will be to remain visible as Google and its high-profile partners push their solution.

Mobile payments deemed "very unimportant" by some consumers

If Sprint fails to report a wave of new customers who suddenly must have the Nexus 4G, it will come as no surprise to the folks at Lightspeed Research who reported this week that mobile payments are "very unimportant" to more than half of all smartphone users. Only 15% said that mobile payments were somewhat or very important. An article in American Banker quotes Jim Smith, president of Blue Dun consultancy, saying that consumers are basically satisfied with their current mobile payment solution, the credit card: "The killer application in mobile payments hasn't happened yet," Smith said. (Presumably, he hasn't seen Google's "Seinfeld" parody.)

Lightspeed also reported that mobile app usage differs widely among customers of different credit cards and banks. Among the interesting differences:

  • Smartphone penetration is highest among American Express and HSBC customers — both at 37%.
  • Discover is the only issuer with more than 50% of its customers still using "basic mobile phones." In line with this, they have the lowest penetration of smartphone users at 28%.
  • 37% of Wells Fargo credit card customers said they have downloaded the Wells Fargo mobile app — the highest penetration among the card issuers analyzed.

Android Open, being held October 9-11 in San Francisco, is a big-tent meeting ground for app and game developers, carriers, chip manufacturers, content creators, OEMs, researchers, entrepreneurs, VCs, and business leaders.

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Who's that Android user?

Tech blog Mobile17 published a nice infographic on Android users, drawing on data from Nielsen, AdMob, Hunch.com, and others. One of their sources was a similar graphic from Mostly Blog published back in August, contrasting Android and iOS users. Among the more interesting findings in Mobile17's graphic:

  • Android owners talk on their phones about 15% of the time. They're on apps more than 56% of the time, not including email and messaging (19%) and web browsing (9%).
  • Android users are more likely than iOS users to be guys, more likely to be conservative, and more likely to be pessimists. They also are 80% more likely to have only a high school diploma (that is, no college degree) than iOS users.
  • That Samsung Nexus 4G you need to use Google's Wallet? It's not in the top ten most popular Android phones.

Of course, we can't infer simple conclusions about demographics and preferences for Google's operating system versus Apple's without also taking into consideration that Android mobiles are offered (by multiple handset vendors) at lower price points than the iPhone — so, income may be driving that preference more than other factors.

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July 21 2011

ePayments Week: Is "0000" your passcode?

Here's what caught my attention in the payment space this week.

Most common iPhone passcodes

Really bad passcodeOne of the obstacles to mobile commerce is the sense that it's not secure, but there's a dead-simple action that can make things a little tougher for the bad guys: consumers can choose original passcodes. App developer Daniel Amitay took a look 204,508 iPhone passcodes and found that the 10 most common ("1234," "0000," etc.) accounted for 15% of all passcodes. Amitay also found a whole lot of codes based on year dates from 1980 to the present. Number 3 on Amitay's list — the code "2580" — stumped me until I looked at a keypad and saw it's a vertical line down the middle. Likewise, I needed to look again to see what "5683" spelled out: LOVE (or LOUD, but I'm guessing love).

MFoundry CEO Drew Sievers cited Amitay's results in his blog this week, and he also added a few things banks should do to educate their customers — like telling users to never respond to a request for a password via SMS text.

Android Open, being held October 9-11 in San Francisco, is a big-tent meeting ground for app and game developers, carriers, chip manufacturers, content creators, OEMs, researchers, entrepreneurs, VCs, and business leaders.

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Google In-App Payments

This week, Google made its In-App Payments system available for developers to deploy on any web app. In-app payments rolled out at the Google I/O developer conference in May, but it was initially limited to apps distributed through the Chrome store. Now it works anywhere on the web. It's similar to PayPay for Digital Goods in that it aspires to offer a seamless purchasing experience for users engaged in games or content. And it's similar to Apple's in-app payments for games and subscriptions, except that Google takes a 5% cut compared to Apple's 30%. (PayPal's cut is a close second at 5% plus a nickel.)

Mobile payments mainstream in 4 years? How about 2

It finally happened to me this week: the moment where mobile payments crossed the line from an intriguing novelty (at Starbucks, usually) to a serious questioning of why we're still waiting for this. I found myself out running errands with my phone, but no wallet. Without thinking too hard about it, I had left the house carrying the item that was more essential to me (the phone). Back home, a folded piece of leather stuffed with plastic and paper sat on my dresser. As I groped for a credit card that wasn't there, it seemed odd that with all of the things I can do with my smartphone — conduct business, keep up with friends, research topics, read news or books, watch any movie I could think of, play games, edit videos — I still can't pay for a gallon of gas.

That's changing, of course, and rapidly. Auditing firm KPMG released survey results this week reporting that 83% of 1,000 executives surveyed expect mobile payments to be mainstream within four years, and about half of them think it could be as soon as two years. I'll be surprised if it takes that long.

Isis takes credit cards

ISISIsis, the telecom-backed consortium to put NFC payment technology and standards into mobile phones, said Tuesday it has signed agreements with Visa, MasterCard, and American Express to let buyers and sellers use those credit cards in Isis' future system. (Isis launched last November with the No. 4 credit card company Discover as a partner.) Original consortium members AT&T Mobility, T-Mobile, and Verizon Wireless guaranteed near ubiquitous backing among U.S. carriers, but the credit card provider angle seemed a little thin with only Discover enlisted in the effort before this week. These new agreements with virtually the entire credit card industry would seem to be a major vote of confidence in the consortium's ability to drive a standard for NFC payment that handset makers can get behind.

That leaves the major mobile OS operators out own their own — where they presumably want to be. Back in May, Isis invited Apple and Google to join their consortium, but so far both appear to be content with their solo efforts.

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July 14 2011

ePayments Week: Contactless payment (and zombie survival tactics)

Here's what caught my attention in the payment space this week.

PayPal demos tap-to-pay

PayPal demonstrated peer-to-peer payments using near-field communications (NFC) at this week's MobileBeat conference. They showed how two mobile users could send payment to each other by tapping phones and confirming the transactions in the PayPal app. Laura Chambers, PayPal's senior director of PayPal Mobile, wrote in a blog post that they expect to make the service available publicly later this summer. Right now, however, there's only one NFC-capable mobile phone in the U.S. market — the Nexus S — so both the payer and the receiver would need to have that device.

A PayPal video (below) shows the recipient initiating the transaction, requesting $10 and then holding her Nexus S up to someone else's. Both phones buzz and vibrate, and the recipient gets a request, which they can confirm. Both get an email confirming the transaction.

In practice, PayPal's system doesn't seem too different from what's already possible with Bump, an app that lets mobile users share images or music, or send money from one phone to another — although Bump sends the transaction over the network rather than via NFC. Bump says its app has been downloaded more than 40 million times on Android and iOS platforms, but it still lacks the reach of PayPal with is 94 million users. What's more, by launching its NFC capabilities now, PayPal will already have experience under its belt as more NFC-capable phones (and point-of-sale terminals) begin to appear later this year and next.


NFC tap-and-pay wasn't the only gesture PayPal made this week to show it's getting ready for the future. CEO Scott Thompson put out the challenge for five Bay Area employees of PayPal to try to live their lives for a week with only PayPal purchases, and apparently they've found five willing to give it a try. It'll be interesting to see how they secure necessities like food and gasoline (not to mention rent or utilities, if those are due that week). But that experience may serve them well if PayPal's other publicity stunt of the week transpires: the company produced a funny video that suggests PayPal's one-tap payment system could prove useful during a zombie attack. (The short video is worth watching not just for laughs but also to see PayPal's vision of how one-touch user clicks will be enabled on everything from soda machines to rental car windows.)



eBay buys Zong

In other eBay/PayPal news, eBay continued its acquisition trend, announcing it would pay $240 million for Zong, one of the leaders in direct billing via mobile phone accounts. Zong, Boku, and Bill2Mobile all offer services that let subscribers buy digital goods — often something in an online game — by entering their mobile number online and replying to an SMS text; the charge shows up on their cell phone bill. At times, these services have touted their capabilities as a form of banking for the "unbanked," though in practice many of the unbanked are social game players who are too young to have bank accounts.

Zong brings along its direct billing relationships with 250 telecom carriers around the world, and it's easy to imagine that users will be able to put PayPal payments on their cell phone bills. A spokeswoman for eBay, Sarah Lasky, told me the converse is already true in some countries such as Malaysia where, through a deal with telco Maxis, customers can use PayPal to pay their mobile phone bills.

Back in April, Zong competitor Boku announced a trial with Germany's Telefonica 02 to pay for online purchases of real-world (that is, non-digital) goods. Lasky said there are no plans so far to use Zong this way over at PayPal.

Android Open, being held October 9-11 in San Francisco, is a big-tent meeting ground for app and game developers, carriers, chip manufacturers, content creators, OEMs, researchers, entrepreneurs, VCs, and business leaders.

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The three types of social commerce

Oodle CEO Craig Donato has posted an interesting short essay on social commerce on ReadWriteWeb. Donato breaks social commerce into three elements: social shopping, social marketing, social trading. Social shopping is nothing new, of course. Shoppers have always traveled in pairs or groups and shared opinions about purchases. But as commerce has shifted online over the past 15 years, the social aspect is now racing to catch up. Social marketing can be seen as merchants wanting to join this conversation. Donato points out that, here too, this is a restoration of a traditional two-way conversation that has only become a one-way marketing monologue in the era of mass communications. Social media offers a return to the days when buyers had a direct voice to the merchants, one that helps them decide what and how to sell.

Trading, Donato points out, is the weakest area right now — a hyperlocal activity that's often managed through donations or trading goods with neighbors (sometimes with an assist from online services like Neighbor Goods or Freecycle). While there may still be opportunity here, it's clearly the most difficult to monetize, given the very nature of these money-less transactions.

Oodle, the world's largest aggregator of online classifieds, also powers Facebook Marketplace, which figures prominently in a new report from JWT on "The Rise of Social Commerce." Perhaps not surprisingly, the report finds the Millennial generation driving social commerce, especially on Facebook where "they spend so much time ... they might as well shop there, too." The report says Millennials are more interested in conducting commerce through Facebook than Boomers or Gen Xers but, paradoxically, Millennials are also more concerned about privacy issues, particularly when Facebook shares information with third parties. Even so, 59% of Millennials in the survey say they appreciate personalized recommendations that help them cut through the volumes of marketing information. Now, if merchants could only find a way to offer personalized recommendations without knowing much about you, they'd really be on to something.

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May 26 2011

ePayments Week: Mobile payments target the point-of-sale

Here's what caught my attention in the payment world this week.

Google opens its Wallet

Google WalletGoogle's long-awaited digital wallet appears to borrow a page from Bling Nation, one of the big names in last year's mobile commerce story. Bling's system, you may remember, worked by attaching an NFC-enabled sticker on the back of phones. Users could then tap the phone onto specialized hardware (the Blinger) at the register and Bling could debit the user's PayPal account to pay the merchant. Bling tried the program out in Silicon Valley and San Francisco (and later Chicago), but others in the payments community poked some fun at the kludge factor of attaching a BlingTag onto the back of your phone.

Unless you have a Sprint Nexus S 4G on Sprint, you'll be attaching an RFID tag onto the back of your phone if you want to try out Google Wallet this summer. Google Wallet is an Android app, so presumably even though the RFID hardware is a sticker, the system won't work on any non-Android phones. Even so, Google should be applauded for getting its program rolling without having to wait on the handset makers.

Google Wallet partnerships are limited right now (you can pay only with a Citibank Mastercard or a Google Prepaid card) and you have to find a MasterCard PayPass terminal to tap and pay. Google says it's shaking the program out in San Francisco and New York initially and plans to broaden the scope later this summer. Ryan Kim on GigaOm has a good write-up detailing Google's partners in the effort and the likely gains to NFC as the dominant mobile payment platform.

Just as Bling did, Google is pinning the hopes of its payment system to users' interest in loyalty programs and rewards. Google plans to bring its own Groupon-like daily offer to a wide audience after its current trial in Portland, Ore., and it will integrate those discounts and others into the tap-and-pay scheme where that works.

Android Open, being held October 9-11 in San Francisco, is a big-tent meeting ground for app and game developers, carriers, chip manufacturers, content creators, OEMs, researchers, entrepreneurs, VCs, and business leaders.

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Square and PayPal at the register

Payment companies are converging at the cash register — the point of sale, or POS in payments lingo — to try to bridge the gap between what they know about us online and how they can make the most of that offline. The various check-in services that some of us have been playing around with for several years now (Foursquare, Gowalla, Facebook Places) can be considered a sort of dry run — an attempt to answer the question, "Will mobile users consent to third parties knowing where they go in exchange for small rewards?" The answer for many seems to be "yes," and rewards are hardly necessary.

Square Card CaseAmong payment companies, Square has always been firmly rooted in the physical realm, with its plug-in dongle for swiping credit cards and its focus on small merchants that need to accept credit card payments in person. This week Square reached beyond its merchant base to offer something to the buyers: Card Case. Card Case sets up a directory — visually, it's a "wallet" with cards in slots — of frequently visited merchants within the Square app on your Android or iPhone. The idea is that, after an initial setup you'll run something like a tab at your favorite spots and can pay just by telling them your name and then confirming the process with your phone. (Fast Company reports on their experience trying out the service.) There's a nice data payoff for both sides: the buyer gets a handy little record of how much they've spent at their favorite, Square-enabled spots; the merchant gets analytics from Square about their customers.

Card Case looks kind of cool, especially to those of us who increasingly rely on our digital trail to remember what we've done and to verify that fun was had. But there's no getting around the uncomfortable truth that, for the level of transaction Square is pitching, it may be more hassle than handing over $3 for your coffee. Still, it's an encouraging sign that Square is after something more than a simple cut of the small merchants' credit card transactions. As Square COO Keith Rabois told Fast Company, they're hoping to "create magical experiences" and they're tuned into the connection between good design and consumers wanting to come back for more.

But just as we use different payment methods for different purposes — cash for our cappuccino and a mileage card for our monthly membership fees — it seems like there will always be room for multiple payment systems online, too. And maybe that's why PayPal spokesperson Anuj Nayar didn't seem too worried in an interview with Fast Company (Square is on track to process $1 billion in payments this year; PayPal processed $92 billion last year).

As Square moves closer to PayPal's online customers, PayPal is moving into the physical retail space to meet the challenge. As we've reported previously, PayPal's acquisitions of GSI, Where, and Fig Card this year help put it in a position to do that. A blog post earlier this month by Sam Shrauger, PayPal's vice president of global product and experience, says they plan to be at the retail point of sale by the end of this year. If Square can boost the speed of adoption beyond coffee shops and farmers markets, it might just meet PayPal at the POS.

US banks try out PayPal-style money transfers

clearXchangeThree major banks announced an initiative that copies PayPal's system for sending person-to-person payments with just an email address or phone number. Bank of America and Wells Fargo have been testing the system, called clearXchange, among customers in Arizona, according to the Los Angeles Times, and now they plan a larger national roll-out with Chase joining the effort. In doing so, the banks are trying to catch up not only with PayPal, which has offered a similar system among its customers for several years, but also with mobile banking systems like M-Pesa, Safaricom's similar service in Kenya.

Reuters' financial correspondent Felix Salmon has a great write-up that gives a broad perspective of clearXchange's place among other money transfer services, from the banks and from challengers like PayPal and Square. His hope is that they all remain competitive to keep services like clearXchange more or less free (like sending checks) rather than loaded with lots of little fees (as some debit cards have done). The competition from web-native services is clearly on the minds of bank executives, as evidenced by a comment attributed to John Feldman, a Bank of America executive in charge of the program. The LA Times says Feldman believes consumers will feel confident in the security of the program because it relies on email addresses and cell phone numbers rather than old-school account and routing numbers.

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May 05 2011

ePayments Week: Report says developers chill on Android

Here are some of the payment stories that caught my eye this week.

Report: Android developer momentum stalls

Android illustrationEven as more consumers are craving an Android phone, developer interest in the platform has stalled — for now. First, the consumer angle: When Nielsen surveyed smart phone subscribers last summer, it found one third of them craving an iPhone, 26% with their eye on an Android device, and 13% sticking with Blackberry. Nielsen asked again during the first quarter of 2011 and found interest in Android had grown to 31%, just edging past iPhone's 30%. Blackberry dipped to 11%.

We can speculate on the causes for consumers' fickleness. Last summer, the iPhone 4 had just been released (in June) so Apple's marketing machine was in full swing. In the dog days of summer, nothing demonstrated early adopter-tude more than swapping the beveled edges of the iPhone 3 for the boxier look of an iPhone 4. By the fourth quarter, enthusiasm around Apple's smartphone had settled down while several handset makers (HCL, Samsung) and carriers were promoting new Android phones. At year's end, Android had the steepest curve on smartphone growth and was second only to Symbian in global market share.

So why has enthusiasm for Android dampened for developers in the months since? Surely they're not all swooning over the charms of the white iPhone.

Here's a more rational explanation: A report released by developer platform Appcelerator and market research firm IDC says "developer momentum is shifting back toward Apple as fragmentation and tepid interest in current Android tablets chip away at Google's recent momentum gains." The Appcelerator-IDC Q2 2011 Mobile Developer Report also noted a minor shift down at the lower end of the pack, with Windows 7 inching ahead of RIM Blackberry — no doubt because of Nokia's new alliance with Microsoft. But even so, it said that "nearly two-thirds of respondents believe that it is not possible for Microsoft, RIM, HP, and Nokia to reverse momentum relative to Apple and Google."

Perhaps surprisingly, the waning interest isn't driven by money — at least not directly. As Jason Ankeny notes on Fierce Mobile, the report found that only 19% of developers thought they could make more money with iOS. I'm not sure why only 1 in 5 think that, since iOS users seem to be a more lucrative market. Research from IHS iSuppli predicts that Apple's App Store will continue to account for about three-fourths of the market in mobile apps, even as the size of the pie grows from $2.1 billion in 2010 to $8.3 billion in 2014. ISuppli's release includes predictions on the other numbers (and they're nicely summarized by John Paczkowski on All Things D.)



Facebook Credits get noticed


Interest in Facebook Credits is rising, sparked partly by the launch of Facebook Deals and the news that members can use Facebook Credits to purchase the deals — in effect, using Credits as virtual currency to buy real-world goods. A Wall Street Journal report speculating about the IPO value of Facebook talks mostly about its growing dominance in online ads (in the first quarter of this year 31% of all online display ads were served on Facebook) but also cited Credits as a yet-to-be-exploited opportunity. And an article in the Chicago Tribune cites an upcoming report from Social Times Pro that estimates that $600 million will pass through Facebook Credits in the 12-month period that starts in July 2011.

In the midst of all this speculation, Jesse Stanchak, an editor with Smart Brief, has an interesting read on the future of Facebook Credits seen from the perspective that it is a form of scrip. Scrip, Stanchak writes, tends to work under any of three conditions: when money is scarce, when users think they're getting a better deal by using the scrip, and when the retailer controls the distribution mechanism. Facebook, Stanchak writes, aims to do all three.

Another eBay/PayPal acquisition at the register

PayPal made yet another acquisition that signaled the online payment service's desire to extend its service into the physical space. Back in March, PayPal parent company eBay said it would buy GSI Commerce, which supplies e-commerce services to retail stores. Then in April eBay purchased Where, a mobile app for finding local deals. Now, in a deal that appears to bridge the gap between these two services, PayPal is paying an undisclosed sum for Fig Card. The Boston-based startup (which launched just last year) offers a $5 USB dongle that lets merchants accept SMS text or NFC wireless payments. A Fig video (below) is light on details, but it demonstrates the service, which runs a little like Starbucks' mobile app except that it doesn't rely on a bar code scan and it transmits an image of the customer to the merchant for an added bit of security.

Here's the Fig demo video:

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March 31 2011

ePayments Week: PayPal in brick-and-mortar territory

Here are a couple of items in the payment space that caught my eye this week.

EBay's retail play

GSI CommerceEBay said on Monday that it will pay $2.4 billion for GSI Commerce, which supplies e-commerce services to more than 180 retail brands. The acquisition moves eBay closer to the retail space, and some news reports saw it as a move to compete with Amazon.

The GSI deal wouldn't turn EBay into that kind of a super mall, but it would strengthen PayPal as the payment method for a whole new crop of online and offline retailers. The latter seemed to be the real point of the purchase, according to Frank Hayes at Storefront Backtalk, who described how the deal could help eBay move PayPal into brick-and-mortar stores. It's not clear yet exactly how that would work: perhaps through mobile phones and a point-of-sale terminal near the register, or eBay could have something else in mind. But, as Hayes points out, even if lower payment fees can convince merchants to adopt PayPal as a payment method in physical stores, eBay will still have to explain to customers (who are perfectly happy swiping plastic) how and why they should use PayPal.

Where 2.0: 2011, being held April 19-21 in Santa Clara, Calif., will explore the intersection of location technologies and trends in software development, business strategies, and marketing.

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Google's VP for platform on where all this is headed

Osama BedierWhat will the future of mobile commerce look like? If we do it right, it will look a lot like a nostalgic past, said Osama Bedier, Google's new vice president for platform, mobile and new ventures. Bedier, who described his vision at the Web 2.0 Expo in San Francisco this week, said the goal of all this technology should be to get us back to a shopping experience that's more local, more personal, and a blend of digital and physical.

Ideally, that would deliver an experience as personal as the one Bedier gets when he returns to his favorite mom-and-pop store in his hometown in Egypt. "I walk in, Ali greets me by name ... That makes me feel good." Ali can recommend items that he knows Bedier or his father likes, and if he doesn't have something in stock he can recommend nearby merchants who may have it. Best of all, if Bedier forgets his wallet, Ali puts it on a tab. "Why would I buy anywhere else? This is the kind of experience we used to get."

The rise of big box stores took a lot of that personal touch away, but technology may be able to bring it back — or at least create an automatic system that mimics that personalization. Bedier, who earlier this year left a similar position at PayPal, sees these changes coming soon:

The Internet has come a long way, we've made a lot of progress. But in commerce, it feels like nothing has really happened. We're about where we were 15 years ago ... Over the next couple of years, though, we're about to see some major change.

Bedier's full Web 2.0 Expo keynote is available in the following video:

NFC round-up

Bloomberg Businessweek reported on rumors that Windows 7 mobile phones will support NFC beginning later this year. Their write-up quotes a Gartner prediction that mobile payments could ring up $245 billion in 2014, up from $32 billion in 2010.

Google Android phones are clearly in the lead on the technology, having pushed out support for NFC late last year, a move supported by the launch of the Nexus S handset. While banks and credit card companies continue to run tests on NFC, VentureBeat quoted a senior Sybase executive, Marty Beard, who criticized the “obsession with NFC,” saying it hadn’t been adequately tested yet. That view may have caused Apple to slow down its plans to implement NFC, a feature that had been predicted for inclusion in the iPhone 5 this summer but which (according to rumors) Apple may hold off on while standards are sorted out.



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March 24 2011

ePayments Week: Visa moves into PayPal territory

Here's what caught my attention in the payment space this week.

Visa announces P2P payments

PayPal customers have grown used to the ability to send money to someone just by typing in their email address — that's much easier and quicker than writing out a check and getting it in the mail. Now payments giant Visa is moving into the P2P payments market with two partnerships that will let its 1 billion cardholders send funds to someone via their 16-digit Visa number (hard), phone number (easy) or email address (even easier). Penny Crosman at Bank Systems & Technology detailed the deals, explaining that they'll make use of a couple of existing services by partners: Fiserv's ZashPay, which lets a Visa card holder send money to someone else's bank account, and Cashedge's Popmoney, which lets you send money to someone via their mobile number or email address. Visa expects to bring the services online this summer.

Meanwhile, Visa continues to experiment with contactless payments, most recently in a trial with Australia and New Zealand Banking Group. Fifty employees used an iPhone sleeve that includes near-field communications (NFC) hardware. MasterCard Worldwide's Vice President of Strategy and Corporate Affairs David Masters applauded the trial with the backhanded compliment that it looked a lot like the proof-of-concept trials that MasterCard launched … in 2007.

Groupon gets even more local (and more daily)

GrouponGroupon announced some details on a secondary service it intends to launch next month. Groupon Now promises to be more timely and more local than its original offer. In Groupon 1.0, users buy a coupon to be used at some future date. Groupon Now intends to offer more dynamic deals, managed by the merchants themselves and delivered to mobile devices. This could be used to take advantage of a big conference in the area or to boost business when things are slow. As Groupon founder and CEO Andrew Mason explained to Bloomberg Businessweek: "The daily deal is like teeth whitening and Groupon Now is like brushing your teeth. It can be an everyday thing to keep your business going."

Groupon also announced that its president and chief operating officer Rob Solomon was stepping down (and returning to Woodside, California — or "God's Country" as Mason called it in an internal memo). Groupon has grown from about 200 employees to more than 6,000, and Solomon and Mason both said the company needed a different kind of operations exec to manage a team that size.

Where 2.0: 2011, being held April 19-21 in Santa Clara, Calif., will explore the intersection of location technologies and trends in software development, business strategies, and marketing.

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Apple to Amazon: App off


If nothing else, Apple's lawsuit against Amazon for calling its upcoming app store for Android apps, well, "Appstore" has raised the visibility of Amazon's effort.

As we reported back in January, Amazon's scrutiny and classification of Android apps will likely be a little more rigorous than Google's app marketplace (with its 200,000 apps), though less stringent than Apple's care for iOS apps. But the announcement of Amazon's upcoming marketplace didn't travel much wider than developer circles. Now everyone with an Android phone (or without) knows that Amazon has an app store — or whatever they wind up calling it.

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March 03 2011

ePayments Week: Is iTunes the fifth most populous country?

Here's what caught my attention in the payment space this week.

Jobs: 200 Million Apple IDs

iTunesJust slightly overshadowed by Steve Jobs' introduction of the thinner, dual-camera, black-or-white (but still somewhat evolutionary) iPad 2 was his announcement that 200 million people now have Apple ID accounts. Jobs noted that Amazon doesn't release comparable numbers for the accounts it holds, but suggested that this may be the largest collection of credit-card-backed accounts anywhere on the Internet. If it were a country, iTunes would be the fifth largest in the world, smaller than Indonesia but bigger than Brazil.


Jobs gave some other interesting numbers: developers have earned more than $2 billion through the App store and 100 million books have been sold through the iBooks store — an impressive number for the lesser-known third of Apple's trilogy of stores. It remains to be seen whether Apple has ambitions for its 200 million accounts beyond selling digital goods. Certainly there's a treasure trove of information in there about buying behavior and the opportunity to sell more through the stores. For now however, Apple seems content to keep its iTune members — and its plans for them — close to its chest.

Hearst Media's least sexy product: online bill portal

Hearst Media wants to cash in on its know-how in managing subscription renewals by creating a bill-paying portal that would compete with the post office to deliver bills and other barely wanted communications to the paying public.

ManillaOn Monday it launched the beta version of Manila (named for manila folders), which Hearst is pitching as a place to manage all your accounts, bills, frequent flyer miles, and reward programs. Manila is free for consumers; billers pay monthly for every customer they convert to paperless billing — a small amount, but something that Hearst hopes will add up. And there will be advertising in the bills.

The new venture is led by George Kliavkoff, whose background includes leading NBC Universal's digital efforts and helping to develop Hulu. Kliavkoff told David Kaplan at paidContent.org that the idea came from looking around to see which areas were "the most inefficient and the ones most ripe for disruption." According to Kliavkoff: "That's where we started the idea of tackling junk mail ... Essentially, we're challenging the US Postal Service's business."

They're entering a crowded field that includes not only other third-party financial management sites like Mint.com, but also just about every bank and credit union that offers online banking. Still, with traditional media models crumbling, and media, marketing, and financial companies all pretending to be each other, who can fault an old-school media company for challenging an even older institution?

Reports of the death of credit cards are greatly exaggerated

While Hearst takes aim at one icon of the 20th century (the US Post Office and its junk mail delivery), online payments services are taking aim at another: the credit card. Back in the "Mad Men" era it may have been the height of smooth to drop a Diners Club card on the silver tray after dinner. But the card was never designed for online or mobile payments, writes PayPal's Bill Zielke on Mashable. Zielke notes that the recession contributed to a decline in use of credit cards for online purchases — down from 44% of online purchases in 2009 to 40% in 2010. He suggests this trend will get worse even as times get better. For exhibit A in his argument that credit cards and the Internet are a poor match, he cites the ridiculous act of typing a 16-digit code over and over again to make purchases. He argues that the ubiquitous cards will fade over time in favor of "services that were designed for the online experience from the start."

PayPal would prefer users link their online payments directly to bank accounts so that it wouldn't have to pay those credit card interchange fees. Some services like Boku and BilltoMobile are taking a different tack, looking to add those mobile and online purchases directly onto your phone bill.

But the credit card companies won't slink away quietly. They heard the news that it's no fun to key in that number, and they're working on ways to leave that pain behind. This is particularly notable on mobile devices, with programs like Isis (which we wrote about recently) that would make it easy to buy products by swiping or tapping a phone that stores credit card data in the SIM card.

And, of course, swiping a credit card hasn't gone completely out of fashion. Even as online and mobile options try to move away from plastic, Square is making a business by updating the credit swipe in the iPad era — and making a go of it. The closely watched startup announced this week that it was now processing more than $1 million a day.

Hiatus

ePayments week will be taking a two-week break. We'll return on March 24.


If you're interested in learning more about the payment development space, check out PayPal X DevZone, a collaboration between O'Reilly and PayPal.



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February 08 2011

Big data thwarts fraud

A new O'Reilly/PayPal report on web-native payment platforms, "ePayments: Emerging Platforms, Embracing Mobile and Confronting Identity," is now available for download.

Among the topics covered in the report are the rise of payment platforms, the mobilization of money, and the advent of contactless payment in mobile commerce. This excerpt looks at the role big data is beginning to play in fraud detection for these services, and the new opportunities that development brings. Additional excerpts will be featured here on Radar throughout the week.


Web-native payment platforms have a tremendous challenge combating fraud — greater in complexity than that faced by traditional payment processors. But the solutions they have devised to deal with it have created some enormous new opportunities.

First, the problem: payment platforms have to process orders from many more sources than do credit card companies. "Traditional processors have to deal with tens of thousands of sources of fraud at each individual point-of-sale or merchant site," said Matthew Mengerink, VP of Platform at PayPal. "PayPal has to be able to identify potential sources of fraud from the almost 90 million browsers and mobile phones that are constantly connecting to our payment processing services. We're dealing with a much larger challenge, and we've designed systems to identify and manage fraudulent activity often before it has started."

PayPal, Amazon, and Google have all developed sophisticated analytical tools and infrastructure to identify patterns of fraudulent activity. Paypal, for example, has a series of Fraud Management Filters that screen payments and sort out transactions that warrant review because of their amount, their origin, or other factors that can be set by a merchant. But the opportunity to identify fraud reaches far beyond this virtual point of sale. PayPal and Amazon have developed fraud detection tools that depend on massive datasets containing not only financial details for transactions, but IP addresses, browser information, and other technical data that will help these companies refine models to predict, identify, and prevent fraudulent activity. PayPal and Amazon have had years to amass databases of the transaction details for hundreds of millions of customers across thousands of merchants.

These tools vastly improve on the periodic, offline analysis that has been the norm. Institutions traditionally sampled existed data and ran nightly or weekly analyses using fraud-detection models. The newer approaches perform continuous, real-time analysis on large datasets, applying some of the lessons that Google and others have learned for indexing the web to the problem of calculating the risk of fraud for individual consumers or merchants. There's a swarm of activity around a new crop of "big data" tools like Hadoop, MapReduce, and BigTable that can deal with huge amounts of data. The fraud question is a large driver of all this activity.

"Sampling is dead," said Abhishek Mehta, a big data lead at a large U.S. bank institution. "When banks stored petabytes of information on magnetic tape, it was impossible for them to develop appropriate models to measure risk without resorting to sampling techniques. Today we can run analysis on upwards of 50 petabytes of data to more accurately calculate risk. Technologies such as Hadoop allow us to do things that were previously impossible."

Mitigating risk is just one use for all this data. With everything that payment platforms know about their customers — transactions, searches, messages, likes and dislikes — they can increasingly use this information to devise sophisticated advertising models or predictive analytics for selling products and services. Privacy advocates might be alarmed, but the payment providers are just continuing a model pioneered by financial institutions decades ago for identifying consumer preferences and identifying fraud risks. The emergence of tools for processing big data creates new opportunities for payment platforms and vendors to get better at what they already do.

A payment system built on top of systems that facilitate real-time analytics creates some interesting possibilities. Consider the architecture of a modern advertising network like Google's DoubleClick. DoubleClick and other ad networks have refined real-time auctions that deliver targeted ads to users in milliseconds. When a request for an ad comes in from a browser, it's quickly passed to one or more advertisers, each of whom has between 10-20 milliseconds to match that user to a profile and assign a potential value to its bid. The high bidder gets to place its ad — and it all happens in under a second. These interactions are happening with every click, generating a massive amount of real-time modeling and calculations that drive an efficient market for advertising.

Imagine a similar system for electronic payments in which a payment platform offers potential transactions to competing credit issuers. As you browse an e-commerce site, your browsing history and the item you're considering come together to create a risk profile. The site or payment platform may offer that profile and the details of the transaction to a handful of competing lenders so that at checkout you receive several offers for financing from different banks. If you have previously chosen to pay automatically with the most advantageous offer, the site could automatically select the credit source offering the best terms. From your perspective, your funding sources and credit card don't have a fixed APR; the rate is variable and can change depending on your evolving real-time risk and the risk of the merchant.

Real-time analysis like this was, until recently, an impossible idea. But the innovations of ad networks like DoubleClick and Google AdSense have shown their potential and created an efficient market for advertising. A real-time approach to analytics in payment will undoubtedly lead to a wave of innovation among merchants and banks at the point of sale.

Excerpts from "ePayments: Emerging Platforms, Embracing Mobile and Confronting Identity" will be published throughout the week. You can download the full report here.




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January 13 2011

ePayments Week: Square rounds up

Here are a few stories in payment news that caught my eye this week.

Should Square lose the square?

SquareSquare, the mobile payment system that lets anyone take credit-card payments with their iPhone, said it has raised another $27.5 million in a round that funded the company at about $240 million. The startup has been watched closely since day one, partly because Twitter co-founder Jack Dorsey is a founder here, and partly because of the simple square block that snaps into the iPhone's audio jack and turns it into a credit card terminal.

But Business Insider has some unexpected advice for the start-up: lose the dongle. Although Square's square is an iconic attention grabber — part of its system that is, in the words of COO Keith Rabois, "an intuitive product that anyone can use as easily as a microwave" — it also makes the Square system dependent on credit cards. Since Silicon Valley startups are "about disrupting dumb, slow incumbents," Business Insider wants Square to dump the credit cards and turn to a more 21st-century way of transferring money, like Bump's PayPal API.

Meanwhile Intuit, which also has a card reader that attaches to the iPhone 4, has caved to peer pressure and decided to offer a plan that gives its GoPayment hardware away for free, just like Square does. Last summer Intuit teamed up with iPhone peripheral maker Mophie to offer its Complete Credit Card Solution for $179. The new plan makes up the difference by taking a bigger cut from credit card transactions (2.7 percent instead of 1.7 percent, which is still lower than Square's 2.75 percent).

Are you using Square or GoPayment? I'd like to hear your experience. Drop me a note.



PayPal's mobile strategy gets a nod


JJ Hornblass, who blogs at BankInnovation.net, gave his Best Mobile Strategy award to PayPal for acting on the conviction (sooner or more assertively than most payment providers) that "the payments battlefield shifted irrevocably to the mobile front in 2010." Given that PayPal has been experimenting with mobile payments since 2005, one suspects the company actually made the mobile shift a few years back.

Now PayPal appears to be waiting for its customers to catch up. Hornblass links to a BNET video from a mobile conference in October 2010 with PayPal's Osama Bedier saying that PayPal expects to process $500 million in mobile payments for 2010, up from only $24 million in 2008. Bedier says the time is right with smart phones, apps, and customers all finally reaching critical mass.

While they may be a leader in mobile payment strategy, PayPal still has plenty of runway. Fellow Bank Innovation blogger Nitin Gupta says that most PayPal customers make only one transaction per year, leaving PayPal's transaction volume far behind payment champs Visa and MasterCard (according to this chart from Silicon Alley Insider).

Verizon expands iOS market

Verizon's long-awaited announcement that it would offer the iPhone can hardly be categorized as news, given how long it's been anticipated. But it did create opportunities for reflection on how this would further spur the growth of mobile commerce. Mobile-Financial.com pointed out that between Verizon and AT&T 180 million subscribers in the US will soon have access to the iPhone, and many pundits (particularly those in the Northeast US, where Verizon's network is strong and AT&T's weak) relished the chance to switch carriers so they could actually use the device to successfully make calls. New York Times tech columnist David Pogue even offered a tip to pay off early-cancellation fees: sell your AT&T iPhone to Gazelle.com, which pays for gadgets in order to keep them out of landfills.

Got news?

Suggestions are always welcome, so please send tips or news here.


March 31 2010

Thoughts from the front lines of payment's big shift

There's a lot brewing in the payment space and much of that activity traces back to developers. You can get a sense of the seismic shift by looking over the winners of the recently concluded PayPal X Developer Challenge.

Rentalic, Paypal X Developer ChallengeThe big winner in that competition was Rentalic, a service that uses PayPal to let regular folks rent out their gear. And by "gear" I mean virtually anything -- sporting goods, electronics, tools, toys, etc. This video and the company's FAQ spell out its process.

Rentalic CEO Punsri Abeywickrema has a unique vantage point in the payment world. He's in that interesting spot where code is turning theory into application. I asked Abeywickrema for his take on the current and future state of payment and the role startups will play in shaping that landscape.

Mac Slocum: What have been the most important recent innovations in payment?

Punsri Abeywickrema: An important change is that companies like PayPal and Amazon are opening up APIs to provide more flexibility for the developers to build their payment solutions. This will result in a big wave of innovation and a whole new line of payment apps in the months and years to come.

Also, as a result of more flexible APIs, companies will figure out new ways to monetize their features and technology. That will result in more innovation and revenue growth while providing convenience and better security to the users.

MS: Do developers bring a unique perspective to payment?

PA: The way I see it, companies that provide goods or services online are the best ones to know the challenges their customers face. And it's not just the developers. It's the product people, architects, business development, marketing, sales and all other parts of the organization that come together to build the next generation of payment solutions. Empowering organizations to come up with their own solutions to address their own problems in their own business segments will continue to drive activity in the payment space.

MS: What's the upside to a competition like the Paypal X Developer Challenge? Is it the prospect of funding? Is it the focus competition can bring?

PA: I'd say both. Initially we were planning to release our new transaction solution at the end of March. Then we got to know about the competition and really had to speed up the development effort. Definitely, the competition helped us to focus. Prospects of funding is another huge advantage.

If it weren't for competitions like the PayPal X Developer challenge or events like Maker Faire, a small company like Rentalic, which has a great idea and a business model with huge potential, would have gone unnoticed.

MS: Could you run Rentalic through traditional credit cards, checks or cash?

PA: Probably not. I don't know of a way for credit cards or checks to process chained or split payments and handle deposit refunds. I would have been able to handle the pre-approval part through traditional cards and Automatic Clearing House, but the rest of the requirements would not have been possible. Or even if it was, it would have been too expensive to implement.

Note: This interview was condensed and edited.

December 14 2009

Innovation from the Edges: PayPal Taps the Developer Community to Build Next-Gen Payment Apps

Two enduring tenets of Web 2.0 are "A platform beats an application every time" and "All the smart people don't work for you." Companies that take those bits of wisdom to heart find ways to engage developer communities to extend their products--and the result can be creative, surprising new applications that would never have been developed from within. Online payment giant PayPal recently announced the PayPal X APIs, a new group of developer APIs designed to enable new applications that can more tightly integrate with PayPal services. To encourage developers to create some awesome applications with the APIs, PayPal is offering prizes $100,000 and $50,000 (in cash plus waived transaction fees) for the best new applications. We caught up with PayPal's director for their Developer Network, Naveed Anwar, as he prepared to deliver a talk in Beijing, and he filled us in on what the new PayPal APIs bring to the table for application designers, and laid out the details of the challenge.

James Turner: In the last week or so, you've released new API. Can you talk a little bit about what's different with them, in comparison to how people have interacted with PayPal in the past as developers?

Naveed Anwar: We haven't actually released new APIs; what we have done is that we announced a set of APIs on November 3rd, which was our adaptive suite. Adaptive suite APIs include adaptive payments and adaptive accounts. Then we also announced our authentications and permissions API. What we had done at Innovate was to make those APIs exclusive -- adaptive account, authentications and permissions, exclusive to the attendees of the conference. We did a full-on release for those APIs on November 3rd when we announced the platform. But we've had an overwhelming response from the community where people where saying, "You're limiting us from actually using these APIs. Is there any ability for us to get these early on rather than to wait until 2010?" Based on the feedback, based on what people were looking for, we decided to open it up to everyone now, instead of sometime in 2010.

PayPal_mark_180x113.gifVery briefly, adaptive payments has a lot of core features. Some of them are the ability to send money, receive money, do parallel payments, do chain payments, do PIN authorizations. Adaptive account is the ability to create single or batch accounts in an in-flow, versus the idea of actually going and creating an account off an experience of the PayPal account. And authentication APIs is the way of actually interacting and accepting PayPal as an authentication mechanism on your site. Those are just like very high-level things that we have announced with our launch. But PayPal X per se is not just the new stuff that we announce, but also a slew of everything that is our merchant services, our web check-out flow, all of those products which have been out there in the community and people have been utilizing for the last seven years. Those all come under the same umbrella.

James Turner: So most people are familiar probably with PayPal as a third-party payment mechanism; that you go to a site, you buy something and then you get redirected to the PayPal site. What new functionality does this bring into that picture?

Naveed Anwar: Well, what you describe over there is a very typical merchant flow where someone wants to create PayPal as a payment mechanism. And once they are about to complete their transaction of the shopping cart experience, they click on a button which they come to a PayPal site and basically helps them complete a transaction. With the new set of APIs, what we've decided to open up is the ability for people to enhance that experience. Rather than to jump from their site over to the PayPal site and lose context, now people can actually incorporate that experience straight into their application. You don't have to jump onto the PayPal site to complete a transaction or to create an account. That is one major functionality that we're adding. And really, it's removing those barriers that developers have had in the past of actually trying to think of coming up with a payment solution, and giving them the set of tools which lets them concentrate on the core experience of the application versus trying to figure out how are they actually going to get payments integrated; how can they come up with a payment mechanism; what are the rules and regulations needed to set up a payment system. All of those headaches are taken away from the developer and the entrepreneur or the merchant. And that is where the solution from PayPal comes.

James Turner: So most developers have probably at some time in their life had to integrate in with a credit card processing system. What do you see the real ease-of-use or value-add on a developer perspective for using PayPal instead?

Naveed Anwar: The biggest advantage that I see is that as you look where the industry is moving towards, it's really focusing around digital goods as well as mobile. There isn't any platform out there which supports cross-border transaction and cross-border ability to pay anyone and receive goods. I see a lot of movement of goods which are actually created outside the US and then shipped over to the US as well as digital goods such as video games where a lot of the development community is out in Southeast Asia. In particular, you have developers setting out in India, China, as well as Singapore where someone wants to buy a quick experience on a digital good, be that a game on Facebook, be that a game in some other social networking environment. And that ability of PayPal, where we support 190 countries and 24 currencies, is something that no one else has been able to offer. We've done a lot of partnerships with a lot of banks and extended the reach. And that is the real value proposition of someone who integrates with PayPal X. From the very first day, you become global in nature. And with the scale of things which move these days across the globe, PayPal fits very beautifully into this as a solution for the community.

James Turner: One of the big hopes in the community has been to see micropayment become more feasible. Traditionally, the sub-dollar transaction level just hasn't been economically feasible because you get killed by the per transaction cost. Is this going to help people out?

Naveed Anwar: Absolutely. I think as the platform opens up more APIs -- I mean we did do a very brief announcement around new pricing, which will be available next year. And we'll make an announcement on what date it's available, but going down to a flat transaction model for goods moved across in certain areas. But the real thing which I look over here is that as they're looking and working with our community, we're trying to mold our roadmap based on feedback from the community. So a lot of times, you'll have companies out there talk about like, "We can offer you a certain amount of feature sets and we'll work with you." But really, no one actually reserves the road map to work with the community.

In the case of micropayments, in the case of other APIs, we've been hearing a lot of feedback from the community. What we announced on November 3rd was that we're reserving 30 percent of the roadmap based on direct feedback from the community where they get to vote on certain features that the community has been asking. And based on the ranking of the community, we will put them into our roadmap and release them. And that is one of the things that we heard loud and clear, that they wanted a micropayment solution. They wanted to see new pricing. And we touched a little bit on that on November 3rd. And early Q1, we will be announcing when that pricing will be available to the rest of the community.

James Turner: One of the things we're seeing as PayPal matures and expands is a lot more of PayPal as almost a financial institution. As you become more of a generic payment methodology for sites and other institutions, what kind of assurances are you going to be able to bring to the end users that things like fraud protection and challenges to charges are going to be easy for a consumer to do?

Naveed Anwar: So I'll take a step back for this one. Security comes to the core of what we do. That is one of the main reasons why we took a while. I mean the idea of opening up a platform is not something that came overnight. We've been thinking about this long and hard. And anytime we do deal with financial institutions and the complexity of moving money, the fact of risk management, the fact of fraud management comes in majorly. We've spent the last three years looking at all of the possible avenues in making sure that we are building out the safest and secure platform which we will open up to the developer community by making sure that we're building the appropriate risk models in place, building out the appropriate fraud deterrences in place. And that's something that we take very seriously.

That said, PayPal has been doing this for quite some time. For the last seven years, if you look at the PayPal history of being able to be the number one P2P, person-to-person payment solution, and then three years ago when we launched our merchant services program, the fastest growing merchant services program accepting PayPal, the fact that we moved almost $2,200 a second through our pipeline into 190 countries; over 24 currencies gives me quite a bit of assurance that what we are trying to build out over here is not just safe and secure, but it's also keeping in all of the models of risk that we know of to date as well as building a mechanism to anticipate things which might be hitting this industry and building a good set of resources behind it. So I feel that what we're opening up from the platform side is not just something we came up overnight but spent quite a bit of time looking into all of the details and something that we will keep monitoring very closely.

James Turner: You have, right at the moment, a challenge going on for your developers which I believe is going to end this week. Can you describe a little bit about what that’s about and if there's still time for people to get involved?

Naveed Anwar: Absolutely. The last day for people to actually register, which is basically giving your idea of what you want to submit for participating in the competition, is December 16th. Now that said, there's always that possibility of extending that deadline because a lot of people have been asking for some time. But December 16th is the current deadline for which people can submit an idea. There are two prizes. The first prize is $100,000 in which $50,000 is a cash price and $50,000 in waived PayPal fees. The second prize is $50,000: $25,000 in cash and $25,000 in waived PayPal fees. The ideas are simply to utilize and come up with an innovative application using our set of APIs, and let the community basically vote on it. So the first set of ideas, once they are submitted, are going to be opened up to the community to vote on. And from that, a set of finalists will be selected which will be judged by a panel of judges from PayPal and across the industry which are listed on our rules and regulations site. And from there, the winners will be announced. We're shooting for them to be announced at the Demo conference coming up in March.

James Turner: Obviously you don't want to give people, "Here's what to do to win." But in your mind, if you had to come up with one interesting application that people could use as an example, what would you think something you've thought of would be?

Naveed Anwar: Again, like you said, I don't want to push people in a particular area, but really looking in ways on how we can solve the problem of transactions on mobile devices is something that excites and interests me a lot, if people can think around those areas. A couple of examples that I can share that people have already built applications on is a company called Fundraiser. Fundraiser, which is a company which launched at TechCon, utilized adaptive payments as a solution in which, very quickly, they came up with an idea of setting up fundraisers for any particular cause in which people could contribute online. And that would come through parallel payments and chain payments on features out of our adaptive set of suites. So those are the kind of ideas that we're looking for. Something very creative. Something out there which people want to solve for and can be innovative around it. So that would be something that I would suggest people to look in, particularly the mobile area.

James Turner: If I'm a developer and I'm considering doing this, I haven't actually had a chance to look at the APIs and the platforms, what would my choices be as far as languages, as far as platforms?

Naveed Anwar: We have sample code available in PHP, C, C++, Ruby. I mean it doesn't limit anything. Again, it's a true platform, whatever you feel comfortable in writing code in. I think you'll find a lot of examples available in those out over here. But, again, not to limit anyone. We've got sample code available on X.com. That is our developer portal where you find sample applications, our documentation APIs, SDKs, and all of the things that you need to get started on one single destination. So I encourage developers to spend a little bit of time thinking about their idea and then looking across some of the high-level documentation before they actually sit down coding.

James Turner: So just to finish off, obviously you're talking about a fair amount of money even for a company as big as PayPal. What is it that makes you want to kind of spark this kind of interest? PayPal, in a way, is a big enough brand that you don't really need to introduce people to the brand. Why do you need to run this big promotion?

Naveed Anwar: It goes back to the basics which I started off with, in that we can probably come up with solutions and think of use cases for one or two or three or four ideas. If you look at the whole global scale of ecommerce available, it is a business. It is an opportunity of almost $30 trillion. PayPal is doing, from this opportunity that is available out there, a very small percentage. And if we could actually facilitate the community out there who are building applications -- and an example I would use is like look, when Facebook opened up their platform, it allowed people to work in that particular environment, in the Facebook environment. When the iPhone opened up their platform, they allowed people to work in their environment which was build the applications on the iPhone. When PayPal was looking at opening up its platform, we are not limited by one particular area. We go into the enterprises. We go into social networking. We go into all the places where payment as a solution is needed. And if we can actually reduce that barrier of entry -- because at the end of the day, when anyone is building out a business and anyone is building out an application, they're looking at ways of monetizing it. Traditionally, the ways to monetize is to take click-through or inserting ads, but really not a mechanism in which people can actually get real money coming to their account. That's where PayPal comes in.

From a brand perspective, I think if you look at what PayPal started off with, it was kind of like four failed business models and the fifth business model was the ability to send money to each other, and through a demo which was going from one Palm Pilot to another Palm Pilot. So doing and working from a demo point-of-view where the developer community goes back to its roots and we really wanted to go back to our roots and work directly with the community. Hence, the reason -- the push around X.com, bringing back that domain, using that for the community, as well as looking at ways in which how the community can give us feedback on the 20th or the 30th use case for which I cannot think internally, but someone out there already has a problem and they want a solution. We want to work with them to have a solution for them. What do I get out of all of this? It's that when someone thinks about writing an application, be that in an offline mode or an online mode, and they want to think about integrating payment transactions as a solution, I want their day to start at X.com and finish at X.com. That's my ultimate goal.

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