Monday, November 28, 2011

What the JCP CEO learned buildin the Apple Retail stores

What I Learned Building the Apple Store
• By Ron Johnson
• November 22, 2011 |
• 10:41 am |

When I announced that I was leaving Apple to take the reins as CEO of J.C. Penney this month, the business press (and lots of others) began speculating about whether I could replicate the Apple Store’s success in such a dramatically different retail setting. One of the most common comments I heard was that the Apple Store succeeded because it carried Apple products and catered to the brand’s famously passionate customers. Well, yes, Apple products do pull people into stores. But you don’t need to stock iPads to create an irresistible retail environment. You have to create a store that’s more than a store to people.
People come to the Apple Store for the experience — and they’re willing to pay a premium for that
Think about this: Any store has to provide products people want to buy. That’s a given. But if Apple products were the key to the Stores’ success, how do you explain the fact that people flock to the stores to buy Apple products at full price when Wal-Mart, Best-Buy, and Target carry most of them, often discounted in various ways, and Amazon carries them all — and doesn’t charge sales tax!
People come to the Apple Store for the experience — and they’re willing to pay a premium for that. There are lots of components to that experience, but maybe the most important — and this is something that can translate to any retailer — is that the staff isn’t focused on selling stuff, it’s focused on building relationships and trying to make people’s lives better. That may sound hokey, but it’s true.
The staff is exceptionally well trained, and they’re not on commission, so it makes no difference to them if they sell you an expensive new computer or help you make your old one run better so you’re happy with it. Their job is to figure out what you need and help you get it, even if it’s a product Apple doesn’t carry. Compare that with other retailers where the emphasis is on cross-selling and upselling and, basically, encouraging customers to buy more, even if they don’t want or need it. That doesn’t enrich their lives, and it doesn’t deepen the retailer’s relationship with them. It just makes their wallets lighter.
So the challenge for retailers isn’t “how do we mimic the Apple Store” or any other store that seems like a good model. It’s a very different problem, one that’s conceptually similar to what Steve Jobs faced with the iPhone. He didn’t ask, “How do we build a phone that can achieve a two percent market share?” He asked, “How do we reinvent the telephone?” In the same way, retailers shouldn’t be asking, “How do we create a store that’s going to do $15 million a year?” They should be asking, “How do we reinvent the store to enrich our customers’ lives?”
It’s not easy, of course. People forget that the Apple Store encountered some bumps along the way. No one came to the Genius Bar during the first years. We even had Evian water in refrigerators for customers to try to get them to sit down and spend time at the bar. But we stuck with it because we knew that face-to-face support was the very best way to help customers. Three years after the Genius Bar launched, it was so popular we had to set up a reservation system.
There isn’t one solution. Each retailer will need to find its own unique formula. But I can say with confidence that the retailers that win the future are the ones that start from scratch and figure out how to create fundamentally new types of value for customers.
This blog post was first published on the HBR Online Forum, The Future of Retail.

Wednesday, November 23, 2011

Winning the battle for mobile at the retail POS

November 22, 2011

The last year has seen a proliferation of digital wallet announcements, pilots, and launches, some of them promising to reshape the way consumers shop at brick-and-mortar stores.

Banks should respond by throwing their weight behind near field communication technology, according to a recent Celent report. Despite many reservations, such as availability of handsets, required infrastructure investments, and ongoing business model debates with the [mobile network operators], NFC offers the best opportunity for banks, other incumbents, and their partners to remain the architects of a redefined retail point of sale landscape.

“This isn’t just about NFC,” says Zilvinas Bareisis, senior analyst with Celent’s Banking Group and author of the report. “If banks play their cards right, NFC-based solutions offer them an opportunity to remain in control of merchant and consumer relationships. The alternative vision of commerce promoted by cloud-based mobile wallet providers, such as PayPal, is a lot less appealing to banks and other incumbents.”

The report investigates what it takes to bring mobile solutions to the retail point of sale. Key findings include:

• Over the last 12 months or so, there has been a considerable increase in the buzz around mobile and electronic wallets in the developed markets. New wallets have been launched (e.g., Google Wallet, AmexServe) with many more companies announcing their intent to compete in this space (e.g., Visa, PayPal, Isis, and others.) A number of industry leaders proclaimed (again) the end of physical wallets.

• Not all digital wallets are the same. Some are better suited for money transfers and m-commerce, while others aim to bring mobile to the physical retail point of sale. The latter type is the focus of this report.

• Celent's research and analysis indicate that the battle for mobile at the retail point of sale is being fought along four major domains:

1. POS communication technologies: Which technologies should be used to communicate the payments credentials to the merchant's POS: NFC vs. QR codes vs. sound-based data transfers, etc.?

2. Secure element location: Where should the payments credentials be stored—inside the phone (with further options) vs. the cloud?

3. Payment account: Which account is going to be used to settle with the merchant—card vs. bank account vs. mobile network operator vs. a new scheme, etc.?

4. Wallet interface and service provision: Whose app will the customer use more—the one offered by the wallet provider or by the provider of the payment credentials?

• There will be multiple competing wallets at the retail point of sale with customers being the ultimate judges of their success. Celent believes that anyone launching a mobile wallet should think along the following categories:

1. Wallet as a consumer product—availability, distribution, branding, customer service, etc.

2. Availability and management of payment credentials.

3. Provision of relevant information.

4. Availability of other, nonpayment services.

• The sophistication of features under each of those categories is likely to grow over time. When describing the requirements for a successful wallet, Celent distinguishes between:

1. Must-have characteristics, such as the wallet openness and ability to load and manage multiple payment credentials.

2. Features that successful wallets are likely to have, such as provision of digital receipts and integration of merchant offers.

3. Likely future capabilities, such as rule-based auto-selection of a payment mechanism at the time of purchase and ability to load and use other credentials found in most physical wallets today, such as a driver's license, various access cards, etc.

• Celent is skeptical that consumers will soon be able to get rid of their leather wallets. However, various new players, particularly cloud-based wallet providers, threaten to take over the banks' relationships with consumers and merchants at the point of sale.

Building a Mobile App Is Not a Mobile Strategy

3:35 PM Monday November 21, 2011
by Jason Gurwin

Everyone wants their own mobile application. In the last year, I have heard this consistently. In fact, mobile analytics firm Distimo claims 91 of the top 100 brands have their own mobile app (up from 51 just 18 months ago).
On the surface this sounds great, right? I can use my big brand name to get people to install my application, and then I can market to them via the palm of their hand whenever I want. If you're a big brand, I have no doubt you will get a ton of downloads. But downloads are a vanity metric; they don't measure success.
Most brands treat their mobile applications as an advertisement. No one wants to download an ad. I've seen it with grocery stores through my experience building a mobile grocery coupon company, Pushpins. They often underinvest in mobile and choose a form-fitted application — a cookie cutter white label that gets the job done but isn't a great solution for their consumers — to quickly get their brand in the hands of shoppers. Then they think it's enough.
Building a mobile strategy is more than just having your own application. It means working with third-party mobile apps, mobile ad networks, and using offline marketing to drive further use in mobile.
Here are four things to remember as you consider a mobile strategy — and some reasons why you should expand your mobile strategy past just your mobile app.
1. You don't launch a television station so you can market your brand on television. Imagine you're Dr. Pepper. You want to make sure that everyone knows about your new Dr. Pepper 10 soda. Do you launch Dr. Pepper TV? No! You find television networks and more specifically programs that can reach your relevant consumers. Why? Because even if you did launch your own TV network, it doesn't mean people are going to watch it. Don't build an app just to get downloads; build something people will actually use.
2. Building a mediocre app is just as bad as selling a mediocre product. The power of mobile is that you can interact with a consumer at any moment. However, would you want someone buying your new cereal if it tasted bad? No! They would never buy it again. So why would you want them to download a mediocre mobile app? If you are a billion dollar company, you shouldn't only be investing $50,000 in mobile. It's like airing a bad TV commercial; it will not end in the desired result.
3. It's ok to give up a little bit of control. Control is tempting. I get it. Creating your own app lets you control the message, and you don't have to worry about a third-party partner creating a bad experience for your customers. And yes, there are big brands that have made some amazing mobile applications. But just because you are big and have a brand name doesn't mean that you need to control the customer experience. For instance, P&G sponsored third-party bathroom finder app called "Sit or Squat" to reach Charmin users. Can a toilet paper brand find anything more targeted than this? There are successful third-party mobile apps that can reach your users better than you can. Embrace them.
4. Building your own app is not the only way to reach your consumers. Some people are going to use your app, and others are going to want to use third-party ones. It's like having a website. Just because you have your own destination doesn't mean you shouldn't use other channels to build relationships with your customers. United allows Expedia to sell tickets, even though you can book on
My advice is this: It's ok to have your own app, but your entire mobile marketing strategy should not stop at building one. But if you are going to invest in your own app, make it something that you would want to use. No one wants to download an ad.
Take a deep breath and look at the broader picture. It's ok to give up some control. Third-party apps are going to engage your consumers whether or not you are involved. Why not be a part of it?

Thursday, November 17, 2011

Visa helping developers create payment apps

Visa helping developers create payment apps

0 Comments 3In an effort to accelerate the development of its payment products, Visa Inc. today announced the launch of its Visa Developer Center. The center's primary purpose is provide approved application developers with easy access to tools needed for the creation and deployment of payment applications, said Jim McCarthy, global head of product, Visa, in a company press release.

The Visa Developer Center offers e-commerce and mobile application developers a pathway to create a seamless online purchase experience for consumers. Whether enabling the purchase of small in-game digital goods or the latest appliance from a big-box retailer, to enabling purchases with Visa's new digital wallet, developers now have access to application programming interfaces (APIs), simplified documentation, and software development kits needed to make online shopping with Visa fast, simple and secure, the company said.

"The convergence of Web, mobile and social networks is revolutionizing the way people buy and sell and is driving the creation of new and innovative ways to pay," McCarthy said in the release. "The Visa Developer Center ensures that application developers, especially those constructing eCommerce, mobile and social applications, have access to Visa capabilities, while still maintaining Visa's industry-leading security standards."

The center provides access to the payment expertise, open APIs and development tools offered by Visa and its subsidiaries, CyberSource, Authorize.Net and PlaySpan, McArthy said. It will enable e-commerce merchants, financial institutions, mobile network operators and gaming developers to integrate Visa payment functionality into their product offerings.

Inside Walmart Labs - How the World's Largest Retailer Hopes to Sell More By Getting Social

Interesting story about Wal-Mart Labs. This is the division that purchased Grabble. Also interesting in that they are thinking of looking at social media tweets and facebook posts to determine users interests both individually to do targeted marketing and collectively in a geography to do merchandise planning for a store.

Inside Walmart Labs - How the World's Largest Retailer Hopes to Sell More By Getting Social

A Q&A with founder of Kosmix - Walmart reportedly acquired it for $300 Million
By WADE ROUSH, XCONOMY on August 1, 2011 - 10:02 a.m. PDT\

One of the most head-scratching tech headlines of April 2011 was the news that Kosmix, a Mountain View, CA-based startup best known for building a Twitter filtering tool called TweetBeat, had been acquired by Walmart. Yes, that Walmart—the one with 9,000 big-box stores spread across the American heartland.
For one thing, Walmart already has a large technology presence right here in the Bay Area: you can see the big “” sign on the e-commerce division’s building from Highway 101 in Brisbane. So it wasn’t clear why the company needed a second Silicon Valley redoubt. Even more puzzling, Kosmix’s so-called “social genome” platform, which the company had been applying in areas like news aggregation and categorization, didn’t seem to have much to do with Walmart’s business problems—such as narrowing the gap with e-commerce market leader Amazon, for example.
There was speculation that Walmart’s real interest was in Kosmix’s founders, Venky Harinarayan and Anand Rajaraman, who have unbeatable pedigrees in the world of e-commerce technology. The pioneering comparison shopping site they co-founded in 1996, Junglee, was acquired by Amazon in 1998 for $250 million; inside Amazon, the pair helped to create the e-retailer’s huge marketplace of third-party retailers and came up with the technology behind Amazon Mechanical Turk. Perhaps Walmart—which paid $300 million for Kosmix, according to AllThingsD’s Kara Swisher—wanted Harinarayan and Rajaraman to work similar miracles for

Those were the questions on my mind when I drove down to the former Kosmix headquarters, now WalmartLabs, in Mountain View a couple of weeks ago. I talked for about hour with Rajaraman, who now shares the title of senior vice president of Walmart Global eCommerce with Harinarayan; he’s also an active Silicon Valley investor and writes about his big technology passion, data mining, at a blog called Datawocky. It turned out to be the most extensive interview that either Kosmix founder has given since the acquisition, and I learned a lot about why Walmart thought Kosmix was interesting, and what kinds of capabilities Rajaraman thinks his 70-person team can bring to their new employer.

A lot of it has to do with unsurprising things like improving the product recommendations that Internet users get when they go to, and tapping shoppers’ smartphones as a marketing channel. But Rajaraman also pointed to some more interesting applications for Kosmix’s social genome technology—like monitoring social media conversations in the vicinity of a physical Walmart store for signals about what goods that store should stock.

But we’ll have to wait a bit longer to see what concrete products, features, or campaigns emerge from the Kosmix acquisition. Rajaraman said his team is hard at work on some features that will likely make their debut before the 2011 holidays. He dropped heavy hints that smartphone apps and an enhanced presence for Walmart on Facebook will figure in the changes somehow, but stayed largely mum about the specifics. “In six to eight months the impact is going to be visible, for sure,” he said.

Here’s the interview transcript, edited for length.

Xconomy: What’s the big picture behind Walmart Labs—why would Walmart want a bigger presence in Silicon Valley?

Anand Rajaraman: Walmart is the biggest retailer in the world, but they are not the number-one player in e-commerce—Amazon is. About a year ago, Walmart decided that e-commerce is a strategic priority. It’s not like they had not been investing in e-commerce, but they said, ‘It’s time to go to the next level.’
When you do that, what’s important is to look at how the world has changed. Are there some assumptions that can be challenged, or some trends that can be used, to leapfrog the 800-pound gorilla in e-commerce?
If you think about the way the world has changed in the last two years, there are two big, disruptive changes that have happened, and one of them is social networking. People are spending more time on Twitter and Facebook and the like. And the other is smartphones. For the first time this year, more smartphones were sold in the US than feature phones.
If you put these two things together, they will be as disruptive to retailing as the advent of e-commerce was 15 years ago. The biggest disruptive change in the last century was the development of the highway system, which led to big-box retailing. Then came the invention of the Web. And the third disruption is social and mobile. In each case, the way people shop was changed. The goal of Walmart Labs is to make sure that Walmart is at the forefront of “e-commerce 2.0,” so that we help define it rather than playing catch-up.

X: Why do you think Walmart was attracted to acquiring Kosmix, specifically, as the nucleus for WalmartLabs?

AR: It’s a combination of things. The first is the platform we are building. The fundamental technology we were building at Kosmix is called semantic analysis. We understand the meaning of things. If somebody tweeted “I enjoyed Salt,” we would know that it was a movie with Angelina Jolie and not a food. We are applying semantic analysis to social media and trying to understand the connections between people, topics, places, and products.
We map that space, and we call it the “social genome.” We were using it to operate the Tweetbeat site, where you could find out the pulse of what was going on in social media. But if you look at the founders and management team of Kosmix, we have significant e-commerce experience, and it was pretty obvious to us that the social genome we were building had serious applications to e-commerce.
If you think about the evolution of e-commerce, Amazon did a lot of things right, but the key was using the data they gathered about customers to improve the customer experience. Telling you “People who bought this product also bought these other products”—things like that. Still, there are two significant limitations. One is that Amazon learns about users only by what they do on-site. The products I purchase are a very small window into me, and sometimes a misleading window. Whereas social media gives a much broader window. If you can, with the user’s permission, understand more about what people are passionate about, you can market to them much more accurately.
The second insight is that we can do this anytime if we put an app on their smartphone. When they walk into a Walmart store, we could tell them, ‘Hey, here is a product that we think you will be interested in.” It’s the combination of social and mobile with the Kosmix semantic analysis technology that was the attractive thing for Walmart.

X: Okay, now let me turn the question around. Why would Kosmix want to be part of Walmart? Why would a relatively small, nimble team of Silicon Valley innovators want to work for one of the largest companies in the world?

AR: What really motivates any technologist is the opportunity to build products that are used by hundreds of millions of people and make a big impact. The thing about Walmart is that we get that opportunity. We have this really big canvas to paint on. Any product we build will instantaneously be used by tens of millions of people.

X: But in a way, it still surprises me that a bunch of startup guys like yourselves would want to be part of Walmart, which, just by virtue of its size, has got to be a pretty bureaucratic place.

AR: You’d be surprised. Walmart has been one of the most innovative companies—they practically invented big box retailing, after all. They’ve made huge innovations around the supply chain and merchandising. I teach a class on data mining at Stanford, and interestingly, one of the examples we talk about is from Walmart, which was a pioneer in that space. Perhaps the one place where they didn’t innovate as fast as other companies was e-commerce where they clearly were not the leaders. But it would be wrong to say they do not innovate.

X: What was your company culture like at Kosmix, and how do you think you will fit within Walmart? What place will you have?

AR: My belief is that one of the best environments for innovation is graduate school. So that is the culture we have at Walmart Labs—it’s freewheeling and somewhat informal, with people yelling at each other, coming up with ideas all the time, having hallway discussions.
Within Walmart, it’s not like we will be the only people coming up with ideas. Walmart has 2.2 million associates, and there are many bright, talented, and committed people that I have had the pleasure of meeting, and they all have many ideas. But we can at least be a way to channel those ideas and bring some of them to reality. We are a place where if somebody has a great idea, they can come tell us.

X: Are there things you feel you can do to improve the way Walmart functions as a business?

AR: We talked about [using the social genome and semantic analysis for] building traffic at Another kind of project we are doing will explain to you some of the scope of WalmartLabs. If you take any specific Walmart store, it lives in a community, and each one is different, and therefore the assortment of products at that store should reflect the needs of that community. So far, it has been a lot of guesswork to make the assortment reflect the community. But one of the things we can do is use semantic analysis to analyze the area around the store and find out what people’s interests are, and use that to influence the store. Image the impact of that across 9,000 stories with a billion visitors every month.
One of the [other] possibilities is to figure out if there is a new venue for e-commerce outside of At the end of the day, retail is all about location. People put stores in downtown areas for a good reason. Where are people online these days? They are on Facebook So stay tuned.

X: I wrote about Shopkick recently—they have a technology for detecting whether customers are inside a bricks-and-mortar store and delivering digital reward points to their smartphones. Can you imagine bringing that kind of mobile interactivity into Walmart?

AR: Absolutely. When somebody walks into a store with their mobile, how can we inform them about things that are relevant to them? We have a Walmart mobile app already, and you could imagine simply connecting that with their Facebook account or their Twitter handle and effectively checking them into the store. It could be anything.
At a high level, we are asking what are the best and most innovative ways of connecting customers with products. Can we improve product search using social signals? Can we improve product recommendations? It’s been just two months [since the acquisition] and it takes longer than two months to launch something new. But we are making rapid progress, and I’m sure we’ll be talking very soon about some of the new things that we are working on. We’ll have something interesting for the holidays.

X: This may be my own chauvinism, but I don’t think of people who shop at Walmart as the most technology-savvy consumers. Are they really an interesting test audience for the social and mobile technologies you’re talking about?

AR: I had the same thought at first. But if you look at smartphone ownership, Walmart trends roughly with the U.S. population. The same fraction of Walmart shoppers have smartphones as the U.S. population in general. Also, roughly the same number of Walmart shoppers have Facebook accounts as in the U.S. population. So in some sense, it’s the ideal test audience. If owning a smartphone or having a Facebook account were limited to early adopters in Silicon Valley, then Walmart shoppers would not be the right demographic—but these things are mainstream now.

Saturday, November 12, 2011

Focusing on the wrong benchmark for mobile commerce?

Focusing on the wrong benchmark for mobile commerce?

By a MCD columnist

November 9, 2011

Anand Raman is vice president of digital programs and resident mobile expert at inStream
By Anand Raman

A decade after we began talking about mobile commerce, we are still wondering if mainstream adoption has arrived. Here is the short answer: it has.

So if widespread adoption has taken place, why is there still confusion in the marketplace?

One reason for the lack of clarity stems from our focus on the wrong benchmark for measuring adoption.

Hitting the marks
If we judge by the percentage of all U.S. retail sales that take place via mobile commerce or the closely related ecommerce channels, it appears as if both channels are still in their infancy.

Despite predictions of bricks-and-mortar stores’ demise in favor of transactions executed digitally from consumers’ living rooms, a widespread transformation of ultimate point-of-purchase locations has not taken place.

Real estate still matters for most retailers. That is not to say that ecommerce and mobile commerce are still in their infancy, however.

While online sales accounted for only 8 percent of total U.S. retail sales in 2010, online content contributed to 48 percent of total sales the same year, suggesting that these channels are indeed widely adopted but are presently being used to satisfy a different consumer need.

Rather than completing transactions via phone or computer, the majority of U.S. consumers are using digital channels to begin or proceed along their path-to-purchase, educating themselves about products and services before proceeding to make purchases in their preferred retail stores.

Post-purchase, many consumers use those same digital channels to advocate for brands, sharing their experience with friends and the public at large.

As a result, it is fair to conclude that digital channels’ influence is significant to many consumer purchases and its adoption widespread even, if at this moment, they are not the channels where the majority of transactions are taking place.

So what can we expect for the future?

With mobile Web browsing set to outpace desktop Web browsing by 2013, we can expect to see more consumers using mobile commerce-ready Web sites to accompany them along their path-to-purchase in the near future.

Will we ever see more than a single-digit percentage of retail sales taking place on mobile channels?


We cannot look to the evolution of ecommerce to project the next steps that mobile commerce will take as they are following different trajectories.

Right call?
Although initially there were parallels in their development, the smartphone changed the course of both channels.

The introduction of custom applications for the smartphone diverted resources away from ecommerce, stymieing its growth. It also slowed down mobile commerce adoption as retailers and brands had to choose one type of mobile presence over the other or stretch their resources to accomplish both.

HTML5 will unify these two paths, accelerating the overall growth in mobile commerce.

The emergence of a walled-garden approach to smartphone custom apps, which made their content inaccessible to mobile search, also inhibited the growth of mobile commerce.

Today, if consumers search for “Best HDTV deals during Black Friday,” their search results will only include deals available on the Web and will not include the specials available on Best Buy’s app.

A more integrated search capability that taps the broader universe of mobile content will spur ecommerce growth.

Finally, myriad differences in mobile phone design – bar, flip, sliders, swivel and mixed – have made it challenging to develop mobile-optimized content.

The good news is that we are beginning to see more consistency in design that will affect consumers’ ease of use.

Tips for path-to-purchase
In the end, continued growth in mobile commerce and ecommerce is directly correlated with ease of use.
Consumers expect technology to make their lives easier or, at least, not more complicated.

To guide consumers through their entire path-to-purchase, including concluding actual sales, retailers should:

1. Optimize their Web sites and any other program-landing pages for mobile consumption.

2. Develop smartphone apps that provide consumers with interactive and location-aware content.

3. Actively support SMS marketing, taking care to provide consumers with a hyperlink in all text messages to lead consumers to branded sites for further engagement. Sending plain text messages without the ability to “learn” from consumers viewing choices is a waste of resources.

4. Make it easy – one-click – to complete a transaction on every mobile channel.

The average time consumers spend browsing on mobile phones is considerably less than that conducted on their PC or laptop counterpart, given the nature of the device.

Making channels commerce-ready takes advantage of that time-limited window of opportunity to move consumers from consideration to purchase.

Anand Raman is vice president of digital programs and resident mobile expert at inStream, a cross-channel marketing company based in Boston. Reach him at

Tuesday, November 8, 2011

Investment Analysts: Mobile Wallets, NFC Payments May Be ‘Overhyped’

PaymentsSource | Tuesday, November 8, 2011
By Kate Fitzgerald

LAS VEGAS—Established payment card networks are well-positioned to continue generating profits over the long haul, as long as they continue adapting to changing payments technology, a panel of investment industry analysts told attendees Nov. 3 at the ATM, Debit & Prepaid Forum. But Near Field Communication-based mobile payments and mobile wallets might fall short of expectations, the analysts suggested.
“I think mobile wallet and NFC is getting way too much hype,” Tien-tsin Huang, managing director and senior analyst with New York-based J.P. Morgan Securities LLC, said.

For NFC-based two-way mobile payments to catch on widely, thousands of larger merchants would need to upgrade their payment terminals to process transactions from mobile devices, and so far there is no compelling reason for them to do so, Huang suggested.

“Merchants aren’t really incentivized to invest in new terminals, which I think typically have a five-year life cycle,” he said, adding that the payments industry may evolve in other directions even beyond NFC.

As for mobile wallet initiatives such as Isis and Google Wallet, “all the business models changed within six months,” Huang said, noting that such rapid change is making it difficult for standards to emerge. “I think (mobile wallet development) will be pretty slow.”

While some of mobile payment’s promises are compelling, potential players are struggling over data-capture issues, Huang contended. “Everybody is fighting to see who will own that, and who will own search, at the point of sale,” which may bog down development.

Payments industry innovators must also avoid overloading consumer payment channels with marketing messages, which is a risk with NFC-based mobile payments enabling marketers to tout customized deals to consumers, warned Glenn Fodor, vice president, senior analyst, New York-based Morgan Stanley.

“(Targeting marketing) is where we see emerging tech really changing things, whether it’s mobile technology or social media,” Fodor said. “(But) I don’t need six alerts from Starbucks saying that there’s 50% off on a latte. A lot of good stuff going on but (payments players) must manage it properly or people will get turned off,” Fodor said.

The best mobile payments ideas are those based on what consumers are asking for, said Julio Quinteros, vice president and senior analyst, New York-based Goldman Sachs & Co.

The effect of combining customer details, preferences, location and payment capabilities in mobile payments could be “much more efficient” than existing payment methods, Quinteros suggests, but he says that evolution may take longer than many anticipate.

“Ultimately that stuff will take some time to materialize. From a numbers perspective, mobile is still small,” Quinteros said.
For payment card networks, the key to growth and profits over the next several years will be continued technological innovation and flexibility, the analysts agreed.
Winners will have “business models that are flexible and can adapt to how the industry changes,” Fodor said, noting that while credit card spending has been on the rise recently, a lot of that payment volume shifted away from debit to credit. “People are respending on existing cards, which is why flexible business models are more attractive” and can help networks and card issuers react to economic and consumer-behavior shifts, he said.

Observers can expect to see more consolidation among payment industry players, Huang said.

“Consolidation is going to be on the rise...we’ve seen a lot of it in the last 18 months,” he said, pointing to Visa’s 2010 acquisition of ecommerce specialist Cybersource Corp. as a good example of the way card networks are working to “leverage technology” to capture more data and “get closer to merchants, acquirers and customers.”

MasterCard, because of its lower market share in credit and debit card transactions and purchase volume, has placed itself in a position to “play more offense than defense with Visa,” Huang said, which bodes well for its prospects. But Visa has very strong long-term profit prospects, he said, especially as its purchase volume continues to grow outside the U.S.

Amex is also in a relatively strong position to increase profits long-term, given its proprietary network and recent moves to invest in new payment technology, Quinteros said. “(Amex) can do things that are definitely advantageous because of how they control their network...with prepaid (cards) and mobile wallet, they are taking all the steps they need to take.”

Serve, the mobile wallet platform Amex launched in March (see story), “could be a pretty powerful platform for them; that could be the angle for them to participate in cross-border (transactions) where they are missing some,” Huang said. “It feels like (Amex) has some good potential there, it’s just a question of how heavily they want to invest.”

Saturday, October 29, 2011

Isis should be helping Google, for their benefit

10/25/11 - Einar Rosenberg

Recently we’ve been hearing grumblings about how Verizon is blocking the Google Wallet on the upcoming Galaxy Nexus. One of the arguments is that Isis has a legal lock on any wallet that goes on an Isis carrier.

But let’s think about this for a second. Isis has no wallet right now; Google does. Why not let Google do the heavy lifting now, so that Isis can benefit later? Just because you have a mobile wallet means nothing.

Let's say there was no Google wallet. Isis would be basically alone. It would have to incur, with its partners the expense of promoting and educating the public. It would also have to gather and sell the merchants. Google can do this now, and save Isis time and expense in doing so.

So what does Isis have to fear? It might think, "Oh no, if we let Google in, it will lock up the market on the mobile wallet!" Sorry, folks, but it's software. And the phones change every year and a half. So the likelihood that any software player will have a lock is basically impossible.

What about gathering merchants? Would Google have an early edge on locking in merchants? Nope, wrong again. In payments, it’s the same Mastercard Paypass that Isis would be using, so getting Google to push for merchants means more locations all ready to use Isis when they do finally have a wallet.

But what about the value-add like coupons and loyalty that Isis plans to potentially profit from? With VeriFone/Hypercom becoming the de facto "standardizer," we’re likely to see them define the standards that both Google and Isis can use. The merchants will pick the best of the bunch and not get locked in for 20 years. Technology is moving faster and faster, and with that speed no one will be locking in anything for the near, or long, term future.

If Verizon simply allows Google Wallet on its network, it gets an edge over any other carrier in the U.S. today. That means a reduction in churn. Verizon also gets Google as a promoting partner to lock in consumers, get them to want mobile payments, get retailers secure on mobile payments, and, therefore, create the perfect situation – at near zero expense. It could have three to five times as many merchants next year accepting mobile payments than it would be if it blocks the Google Wallet.

Blocking the Google Wallet on the upcoming Galaxy Nexus would be Isis and Verizon shooting themselves in the foot. Let Google have its day. There are multiple wallets to come, all to be carried on a single phone. Google’s ambitions are global, something Isis can never dream of. So there is an advantage to both parties at this point in the early launch days of the mobile wallet.

Right now, Isis and Verizon need to see the Google Wallet as the geeky rich best friend from the movies, the one the mean girls takes advantage of. When Google Wallet gets everything built, they cut the rich girl off and take advantage of it. It doesn’t sound very nice, but we’re talking about a mobile carrier and a mobile wallet. Who ever thought this would be nice?

If Isis wants to slow down or screw up mobile payments, it blocks Google. But if it wants to create opportunities for itself, my suggestion is let the Google Wallet in. Let Google push. Let Google promote. Let Google sell. Then Isis can come in to the party with a bigger, better environment.

Verizon loses nothing today, but gains everything tomorrow.

Thursday, October 20, 2011

EMV: What does it mean for Acquirers?

EMV: What does it mean for Acquirers?
19 Oct, 2011 21:10
With Visa’s recently announced U.S. EMV initiative, massive infrastructure changes loom on the horizon for card acquirers. To ready themselves for this change, acquirers can think about breaking down the implementation into three buckets: device enhancements, enhancements to acquiring systems and customer service.
While daunting, the complexity of the EMV implementation can be somewhat tempered by installing the new hardware in two phases, starting more simply with EMV-capable devices that can be upgraded later down the line. Sometimes it is just a software upgrade that can bring the devices fully up to EMV when needed. In addition, EMV acceptance device configurations need to include key certificates.
In terms of system enhancements, acquirers need to update transaction processing systems to handle additional data processing elements and EMV scripts as well as update switch interfaces. Storage of Transaction Certificates – or EMV e-receipts that prove the transaction took place – need to be automated and have the ability to send changes in case of charge disputes. Lastly, acquirers need to think through how these infrastructure changes affect the customer service end of things: merchant training and support, consumer training and dispute management all need to be considered.
The clock is ticking as Visa has set an April 1, 2013 deadline for U.S. acquirer processors to support merchant acceptance of chip transactions. Are you ready?

Tuesday, October 18, 2011

PayPal Thinks Big Offline: Exploring PayPal’s Seamless Shopping Vision

PayPal Thinks Big Offline: Exploring PayPal’s Seamless Shopping Vision
by RUSS JONES on OCTOBER 17, 2011
Every year I try to attend what I think of as the PayPal Developers Conference. This year what used to be the PayPal X Innovate Conference was expanded to include eBay app development, Magento app development, and –– most importantly –– X.commerce app development. X.commerce is eBay’s new end-to-end, multi-channel commerce technology platform. While most of the conference was focused on the X.commerce platform, this is the first of two posts reflecting on what’s new with PayPal.
Over the last several quarters eBay has beating the drum about extending PayPal’s momentum in online payments to point of sale in the offline world. More recently, PayPal starting talking about wanting to help brick-and-mortar retailers engage with consumers through the entire purchase process — from customer acquisition, to in-store engagement, payments, and post-purchase retention. This vision is nicely pulled together in a video entitled “PayPal: Future of Shopping” that PayPal released about a month ago.

So, with the marketing campaign in full force, much of the industry was waiting to see what PayPal would say at last week’s X.Commerce Innovate Conference in San Francisco. First, the bad news. None of the shopping capabilities shown in the video were announced. Now, the good news. To show how these shopping concepts might work in everyday life, PayPal did assemble a Shopping Showcase demonstration and provided access to experts to answer questions from curious developers.
The Showcase was divided into a number of “vignettes” that illustrated different end-to-end use cases. Most involved some sort of front-end customer engagement utilizing a combination of shopping list, local product inventory, purchase incentives, loyalty points, gift card balances, etc. The vignettes showed how these components could be combined when the consumer is out running errands and shopping on a typical Saturday afternoon.
It’s hard to say which scenario would be best received in the market, but there is no question that PayPal is swinging for the fence, so to speak, and rethinking how shopping could be made easier for both buyers and sellers. We especially liked the way a shopping list could be built online and then shared with the merchant upon in-store check-in to match what the consumer wants with product availability and purchase incentives from the merchant.
Presumedly, most of the merchandising capabilities would be drawn from the various acquisitions eBay and PayPal have made over the last 18 months –– companies like Milo, Where, etc. They might be accessed as their own app in a SmartPhone or integrated with the PayPal Mobile app. Besides the standard capabilities we’re familiar with today in the PayPal Mobile app, PayPal also imagines users would have a wallet capability that would hold the consumer’s payment methods, current offers, loyalty cards, gift cards, available points, purchase history, and digital receipts.
We’re always curious about who controls the wallet and where the payment data resides. In PayPal’s case, the wallet would be one of many functions inside the PayPal Mobile app. And the wallet in the app would act as the user interface to the consumer’s payment data in the cloud. This is in sharp contrast to the models being advocated by both Google and Isis, where the wallet is the app and the payment data is in the phone.
While all this merchandising stuff is interesting, let’s get to payments. PayPal envisions three different ways that a consumer might use PayPal for purchases in a brick-and-mortar setting.
Option #1 – PayPal Card
The PayPal Card is an unembossed, PIN-enabled payment card with the PayPal logo on the front and a magnetic stripe on the back. There is no visible customer name, card number, expiration date, or CVN on the outside of the card. The basic motion for the buyer would be to swipe the card, enter their PIN, and approve of the purchase amount. Essentially, the same motion of using a PIN debit card today. Funding would be drawn from the buyer’s default PayPal payment method.
Here’s how it would hypothetically work. When swiped at the point of sale, the merchant’s iPOS software would communicate over an Internet SSL connection with unannounced PayPal APIs to authenticate the buyer, access and apply relevant credits, capture the transaction, and generate a digital receipt. The digital receipt would be stored in the buyer’s PayPal account and a purchase alert sent to the buyer’s mobile device.
It’s not clear how consumers would get their PayPal card, but its easy to imagine existing PayPal users would simply ask for one on their PayPal dashboard so they could use their PayPal account at the POS. PayPal stressed a number of times that there is no hardware upgrade required by the merchant –– its simply a software integration. In addition, if the terminal has enough interactive capabilities, the merchant might want to ask the buyer if they want to apply relevant coupons or use loyalty points.
A point of clarification here — because this is a payment card used at the POS it’s natural to think there would be some underlying use made of the existing card industry infrastructure. But that’s not the case. The transaction does not use existing card industry “rails” nor is there necessarily a merchant acquirer involved.
Option #2 – Empty Hands
The second option, called “Empty Hands”, replaces the swipe of the PayPal Card with the terminal entry of a phone number and PIN. PayPal believes this is what a buyer would use when they don’t have a PayPal Card with them at the time of purchase. Essentially, they have empty hands. The basic motion would be to select PayPal as the payment option (Credit, Debit, PayPal), enter their registered phone number, enter their PIN, and approve the purchase amount. Like the PayPal Card option, funding would be drawn from the consumer’s default PayPal payment method.
Behind the scenes, the Empty Hands options would work very similar to the PayPal Card option. Instead of the PayPal Card being the “token” to locate the buyer’s PayPal account, it is the buyer’s phone number.
Option #3 – In-Aisle Purchase
With the third option, called an in-aisle purchase, the PayPal Mobile app is the exclusive interface for the purchase done in-store — and because PayPal fully controls the point of interaction on the mobile devices, it can provide a richer set of features. Instead of just accepting the default payment methods, the consumer might pre-select their preferred funding source for the purchase — and would be able to see and control how various offers and gift card balances might be applied to reduce the total “out the door” cost.
One innovation that PayPal imagines is being able to offer installment payments to qualified buyers. The buyer might, for example, want to break a $300 purchase into a series of three $100 installments transactions against the payment method of their choice. Installment payments are an especially interesting twist in the PayPal funding model because they potentially blur the traditional banking industry distinction between credit and debit.
Once the purchase is complete, the buyer receives their receipt electronically and can leave the store. In industry terminology, this is unassisted checkout so it will be up to the merchant how they want to verify payment prior to their customer leaving with the goods. For low-value goods or familiar customers it might just be the buyer flashing their phone receipt on the way out the store. Large ticket merchants might want to restrict in-aisle purchases to just goods that are picked up from the dock or delivered to their home.
Post Purchase Flexibility
Regardless of payment method, PayPal envisions offering certain qualified buyers the ability to adjust their funding methods after they leave the store, and potentially the option to set up installment payments for select purchases instead of one-time payments. This would have nothing to do with the merchant. They would get paid immediately in real-time for things they sell, irrespective of what funding method is used or when the funds are actually received by PayPal.
The capability, which PayPal believes will be unique in the industry, gives buyers the ability to sit down at the end of the day’s errands and adjust how they want to fund various purchases –– perhaps using their bank account for budgeted purchases, their credit card for discretionary purchases, and installment purchases for large ticket items. Not every buyer would qualify for installment payments, and the available installment options might not be the same. PayPal indicated, for example, that small ticket purchases might be available to be adjusted for 7 to 14 days, while larger ticket items might be adjustable up to 30 days.
How does this work? As indicated earlier, merchants get paid immediately by PayPal, meaning that purchases are credited in real-time to the merchant’s PayPal account. On the buyer side, PayPal would hold the default funding transactions for some amount of time, giving the buyer the chance to change which source they want to use. Simplistically, you might think of this as a user changing a pending ACH transaction to a pending credit card transaction before it is submitted into the appropriate network at the end of the day. But instead of submitting all transactions every night, as they do today, they would wait days or potentially weeks before they submit the transaction. In the case of installment payments, they are breaking down the single funding transaction into 3 or 6 equal installment transactions.
Sounds risky, but PayPal must obviously feel good about their ability to risk manage their customers and their transactions. And if you think about it, this model is not a lot different than their current model. Today, every merchant is funded immediately even though PayPal doesn’t collect the funds for several days, and is not guaranteed that funds will be available for bank-funded purchases.
Glenbrook’s Reaction
eBay has been very vocal about mobile starting to blur the distinction between online and offline, and that’s something we see very clearly as an important trend in the market. We think buyers and sellers don’t see the distinction today and, quite frankly, don’t care. Consumers just want to buy things and merchants just want to sell things.
It is interesting that PayPal is focused on optimizing the shopping experience, and not just the payment experience. As many have pointed out, it’s not just how long it takes to swipe your payment card at BestBuy –– it’s how long you have to wait in line for that privilege. Either way, you have to prove to the door police that you’ve paid for your purchase. So, the emphasis on the overall shopping experience instead of just the payments piece seems right.
Of course, the hard part about ramping up any sort of new payment paradigm is breaking open the chicken and egg problem. Here PayPal is working both sides of the hen house –– providing a rationale for merchants to adopt without the capital expense of redeploying terminals, and providing consumers with an incentive to use PayPal as a payment option at POS.
For merchants, the value proposition is clearly all about selling more –– auto alerting consumers when a store location a couple of blocks a way has an item in stock; auto matching shopping lists with inventory availability to apply coupons; in-aisle checkout to reduce line abandonment; 100 million active buyers with multiple payment methods on file, etc.
For consumers, the value proposition is all about convenience –– interactive access to coupons and credits; loyalty point management; digital receipt tracking and management; no-interest installment payments on large purchases; post-purchase reshuffling of payment methods to better manage daily or weekly budgeting; in-aisle purchasing to eliminate wait times to get out of the store; and on and on.
Will it work? Who knows? There are open questions on the actual products, real-world adoption challenges, strength of the value proposition, credibility of the initial partners, and overall economics and pricing. Still, PayPal’s vision is quite ambitious. If this whole thing doesn’t work out, it won’t because PayPal was thinking too small

Friday, October 14, 2011

PayPal to issue a plastic card for brick & mortar stores.

Hotel groups unite to reduce PCI scope#.TphXOEYc0cc.twitter

Hotel groups unite to reduce PCI scope#.TphXOEYc0cc.twitter

Wednesday, October 12, 2011

Lawmakers Propose Legislation To Repeal Durbin Amendment - PaymentsSource Article

Lawmakers Propose Legislation To Repeal Durbin Amendment - PaymentsSource Article