Tag Archives: mobile payments

Banks think Apple Pay is so money..and Apple totally knows it

WellsFargoApplePayI was glued to my computer on September 9th to watch the live stream of Apple’s BIG announcements. As a fin tech guy, I was particularly interested in what Apple would announce around mobile payments and their creation of a true mobile wallet. I had my fingers crossed that the stream would not freeze during that part!  They did not disappoint with the launch of Apple Pay and the announcement of the several major banks and retailers that are participating in the network. Apple did it right…again. These bank and retailer partnerships are key to quickly driving adoption. Consumers do not need to change how they pay for things, download any apps or struggle to find retailers who accept a certain form of payment. The only “hurdle” to participate in this payments network is for consumers to buy the iPhone 6.

The major banks started aggressively promoting their participation with Apple Pay the day after the big announcement. As a matter of fact, I received an email from Wells Fargo the following morning informing me of the many features and benefits of Apple Pay. I also noticed similar messaging on Wells Fargo’s ATMs that day as well. Wow, major banks see Apple Pay as a benefit for the current customer audience. It will be interesting to see if Wells Fargo, and the other major banks, lead with Apple Pay messaging as part of a customer acquisition or switch marketing program.

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The aggressive promotion by banks and retailers also helps Apple too. Keep in mind that while the iPhone 6 was available on Friday, Sept 19 with HUGE lines outside Apple stores, 75% of all handset users worldwide run the Android operating system. Hmmm….will the creation of a secure mobile wallet be enough to cause Android toting bank customers worldwide to switch to an iPhone? Or will Android users be patient to see what payment platform Samsung and Loopts come up with in the months to come? The intensity and reach of the awareness messaging just might cause some Android users to shift…assuming the iPhone 6 and Apple Pay are AMAZING. Time will tell.  The race to create the leading mobile wallet is ON.  It is so on.

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On a side note, it is truly amazing that Apple has such strong brand power that powerful, multi-billion dollar market cap financial institutions have taken notice and forged partnerships. Yes, Apple is THE LEADING worldwide brand.  These partnerships also echo a common theme within the financial technology industry; technology innovation will happen outside the financial institution. So true. Apple, you are so money.*

* I’ve sprinkled many “Easter Eggs” through out my posts to make reading more fun. These eggs include cultural references from the ‘80s, ‘90s and present day. If you get the reference, send me a tweet (@ericdunstan) with the answer.


Apple Pay is great but I will still need to carry my wallet

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I have to admit that I was GLUED to my computer screen this morning during the Apple announcement. It still blows my mind that technology and bandwidth can’t deliver a smooth online feed to a live event. What was up with the live translation feeds being clearly audible to online viewers? ANNOYING! Fortunately the live stream technical team saw the multiple tweets and fixed the problem.   Unfortunately my viewing experience was very choppy and I got word of the announcement in real time more from Twitter.

As predicted, Apple entered BIG into payments with Apple Pay and into wearables too with Apple Watch too.  Apple’s recent announcements around partnerships with Visa, Amex, MasterCard etc were clear leading indicators of the entry into payments. I am very excited about Apple’s payment system and how it will help drive mass consumer adoption of a true mobile wallet. Yean! However, we are a ways away from Apple driving mass adoption of their wallet.

Screen Shot 2014-09-09 at 4.14.30 PMApple Pay will be available on the iPhone 6 and Apple Watch devices for it requires technology included only in this hardware. Yes, the iPhone 6 and Apple Watch will set sales records and proliferation will be fast across the globe. However, Apple Pay will not be available on legacy devices that will slow down the adoption rate. Additionally, Apple Pay will be limited to major retailers including Whole Foods, Macy’s and Toys R Us. Yes, over 200,000 stores will be accepting contactless payments through Apple Pay. I’m sure Apple is busy negotiating partnerships with several other major retailers as well and the footprint will grow even more.

Apple Pay will not be available to stores outside of this Apple negotiated big box retailer network. Consumers will not be able to truly leave their wallet at home. Apple’s partnership with IBM, though, will help Apple Pay expand its footprint to more business….but it will take time. As I mentioned in a previous post, the IBM partnership provides Apple access to many banks and financial institutions. These FIs have business banking customers and frequently provide merchants with POS payment systems. Now that the iPhone 6 includes the NFC chip, Apple will be hot to engage IBM on pushing the distribution of NFC enabled payment terminals to their banking customers. Only until NFC enabled payment terminals are more widely distributed will Apple gain ownership of the mobile wallet.

Clearly Apple has the hardware, technology and strategic partnerships to create the closed loop necessary to build a ubiquitous payment system. It’s a matter of time before this happens. However, NFC technology and devices are not Apple technology and can be easily licensed by competitors. Yes, Apple has leap fogged into the lead on building a mobile wallet, but the competition did see this coming. Apple must continue adding nationwide retailers to their network to enable consumers to use Apple Pay. The first mover advantage will be key and the network affects will take hold. If a competitor is to provide another offering for consumers and merchants, they better act FAST. Samsung and Loopt I’m sure are having lunch right now.

On a side note, I am amazed by the level of talent Apple employs for their advertising and marketing efforts; JT, Jimmie Fallon and U2. A list talent meets A + list company. I’m sure Apple pays a large portion of the marketing budget for these names. Or maybe it’s vice versa! Let this be a reminder of the high margins Apple receives on every product they sell. Impressive.

 

 

 

 


Apple poised to deliver mobile payment system that just works

Screen Shot 2014-09-04 at 9.06.31 PMI started off my week with a trail run and then a quick stop off at a downtown locally owned coffee joint. The coffee shop is filled with laptop toting Silicon Valley types, local Lululemon wearing trail bunnies and a myriad of salon and spa employees on their way to bill $150 for a 1-hour deep tissue massage. I stood in line and waited to pay for my overpriced cup of coffee. I’m an old school guy and paid in cash while most people paid using their debit/credit card. It seems strange to me to pay for something so cheap with plastic…but, hey, I AM old school right? However, of the 10+ payment transactions I saw, no one paid with his or her phone using the NFC feature of the payment reader. Now don’t panic…you are not the only one who has not seen the NFC technology in action. Very few merchants even have a card reader that includes NFC technology. Forbes magazine ran a piece in mid 2013 that asked the question if NFC payments were dead. After all, the only major retailer to include NFC technology at checkout is Walmart…and adoption is LOW. However, this will most likely all begin to change on September 9.Screen Shot 2014-09-04 at 9.01.31 PM

Apple yet again has the media and its loyal customer base all in a flutter with what will be announced at their big event on September 9. Of course everyone is super excited about what’s happening with the iPhone 6 and the expected announcement of their first wearable device. There is also buzz around a key feature of the iPhone and wearable – will these devices enable customers to make payments for goods and services at retail? Will Apple finally break into the payments space and push mobile payments into the mainstream? This buzz, of course, is mostly coming from technology people, but will have massive implications for consumers and merchants now and in the future. A big shift is coming.

Reports from the Financial Times and tech bloggers indicate that the iPhone 6 will include a near field communication (NFC) chip to enable mobile payments. Adding fuel to the mobile payments speculation, CNET recently reported that Apple has forged partnerships with all the major credit card providers and payments networks including American Express, Visa and MasterCard. Wow, these relationships are great leading indicators that Apple is poised to bring a true mobile payments tool, or wallet, to the mainstream audience. Color me stoked.*

Looking at this a little more closely, however, the media focus is on the consumer side of Apple’s payments technology.   But wait…I thought NFC payments was dead with very few retail shops and big box stores offering this form of payment? Is Apple setting itself up for a black eye if their payments tool is not accepted at most locations? Did Apple only think of the consumer side of this equation and totally miss the merchant? Not at all. Apple thought through this quite nicely and I’m surprised there is not more technology media focus on this strategic partnership that ties it all together. Once again, Apple has proven the importance of controlling the complete ecosystem to create products that revolutionize consumer behavior. Here’s how.

Screen Shot 2014-09-04 at 8.55.09 PMApple announced a few months back a strategic alliance with Big Blue. I provided my point of view in an earlier post on how the Apple/IBM partnership will affect the banking industry. This partnership will also affect the technology these banks provide their business banking clients (merchants) at point of sale. For example, the infusing of Apple technology into the bank provided payment terminals will enable merchants to collect payments using NFC in addition to accepting card swipes. Apple strategically addressed the biggest roadblock in enabling adoption of mobile payments – how can merchants accept payment from a mobile device without undoing the POS payment system that is already in place.

The Apple/IBM relationship enables Apple to create the complete system required to connect consumers with merchants through a single payments technology. No other technology provider can do this. However, Samsung sees this happening and is quickly putting together their “me too” plan for the Android market. There are rumors flying around that Samsung is partnering with Loopt to connect consumers to merchants through one payments system as well.

There will be a lag between what Apple announces around payments and the launch of the complete ecosystem.   However, given the amount of iPhone users who already have their credit card on file in iTunes, the major credit card providers will be HOT to get the NFC card readers in place to enable card use in the online and offline world. We can expect a lot of pressure on the banks to get the NFC enabled payment terminals out to market quickly.

How we pay for things will be very different a year from now. Now if Apple can solve how to securely store my driver license, loyalty cards and annual memberships cards as well, I can finally stop carrying around my wallet!

* I’ve sprinkled many “Easter Eggs” through out my posts to make reading more fun. These eggs include cultural references from the ‘80s, ‘90s and present day. If you get the reference, send me a tweet (@ericdunstan) with the answer.


Now hear me out,the Apple/IBM partnership is BIG for mobile payments

Apple IBM PartnershipI have worn many hats working in the financial technology vertical including business development, product, marketing and partnership development. In fact, I managed the IBM partnership for a PFM technology provider I joined in 2010. IBM played an important role for the PFM technology provider for it opened access to many of the financial institutions that run on the IBM technology to support core, online and mobile banking systems. Specifically, the PFM solution ran on IBM’s Websphere mobile software and on the IBM DB2 data base software. The software compatibility proved to be a strong selling point during business development discussions with banks that ran core legacy banking systems on Big Blue.

I learned fairly quickly that one of the biggest objections from mid-tier and larger banking executives was, “love your technology….but it MUST run on our legacy core and online banking systems.” Fortunately for us, we overcame this objection by playing the “we run on IBM” card to continue conversations. Unfortunately for IBM, these legacy limitations prevent many financial institutions from launching new tools and features that help consumers access their money through a mobile device. As we fintechers all know, these mid-tier and large banks are losing customers to the more sophisticated, innovative and mobile centric financial institutions…like Moven, Simple or GoBank.  An April 2013 Forrester study found that nearly 50% of respondents said they would be willing to switch to a bank with a better mobile experience.

The recently announced partnership between Apple and IBM could fix this and will position both companies very well for continued growth in the mobile banking and payments verticals..even with Millennials. I know, this is shocking …but in the words of Kevin Nealon, “now hear me out.”

As part of this partnership, IBM will be launching roughly 100 native mobile apps developed specifically for iOS. These apps are part of the MobileFirst platform IBM launched earlier this year and will adhere to the security, backup and data movement capabilities IBM is known for across the high technology industry. These capabilities are what keep banking IT executives coming back to Big Blue and a few of these iOS apps will strategically address the specific needs of the banking vertical.

The collaboration between IBM and Apple to build these apps will allow legacy systems written in Assembler or COBOL to run on the iPhones and iPads. Penny Crosmen at American Banker states, “Making existing mainframe applications usable on iPads could help banks bring mobility to old technology.”  This is HUGE for it helps banks easily engage with customers within the branch, through merchants or at home through a mobile device without having to make heavy investments in new technology or go through the lengthy process of selecting a clunky third party provider. For example, a bank will no longer need to license mobile platform technology from a Kony or mFoundry for their IBM partnership will open up mobile functionality through iOS sitting on top of legacy software. This is cool for the banks…but SCARY for mobile platform providers.

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The biggest use cases for the IBM/Apple mobile technology marriage can be seen at the branch and merchant levels. I can easily envision a wealth management representative having an in-branch investment conversation with a client using an iPad. The representative easily accesses a client’s core banking information from the mobile device and displays current balances, checking account activity and recommended investment opportunities right on the tablet. Taking this one step closer to the consumer, I envision the consumer later that evening going back to the banking application and sharing the investment recommendations with his/her spouse. Together the couple reviews the recommended investments, discusses financial goals and asks for further detail from their adviser directly from the iOS application.  Tadaaaaaah! The mobile/table user experience is helping the bank build deeper customer relationships through helping consumers manage their money…leveraging a channel the consumer prefers.

The second benefit of this marriage comes at the business banking level. This relationship should make payment providers pause…and maybe even shit.  Imagine a small retail merchant opens a business banking account that includes the “rental” of a payments tool like a card reader. The Apple/IBM relationship enables the bank to provide payments tools, card processors, etc. through already widely adopted iOS products. The bank may even function as a third party retailer for the iOS hardware and will save money by phasing out those clunky counter top card processors.  Banks will take away a key competitive advantages from payment providers who boast about the ease of use and mobility of collecting payments. Additional benefits for the bank are the ability for business bankers to track small business activity and recommend lower cost banking products, loan savings opportunities based on the specific business activity and transactions. Banks can also FINALLY find the right channel to provide those ever so sought after (and never well executed) locally targeted special offers and discounts to consumers.

For those of you keeping score at home, the consumer will also benefit from the IBM/Apple partnership. The iOS loving consumer will now be part of the same payment ecosystem merchants have with their banks. The iOS system now includes Passbook and it is no far leap to envision this evolving into a wallet that holds bank provided payment cards. This is “duh” obvious. Given that merchants, banks and consumers are all part of the same iOs payment system, consumers can easily continue using their long held VISA and Mastercards on their mobile device.  Continued adoption of the same payment ecosystem may provide opportunities for lower processing fees for all involved. Unfortunately, at this point the mobile payment providers are now banking on lower fees as their main value proposition. However, if banks are able to provide an easily adopted mobile wallet with many iOS supported merchants accepting these payments, even lower fees may be a moot point. Consumers will be able to FINALLY use their mobile wallets at the merchants and service providers they have always used.

Wow, way to go Apple.  You created a true mobile wallet.


eBay cyber attack highlights value of card on/off tools

eBayEbay is yet another giant consumer brand that has fallen victim to a cyber attack. Like many of us, I raced to change my password when I heard the news break early Wednesday morning. Of course the news media and many eBay users assumed the worst had happened and that personal and financial information had been breached. Fortunately, the attack was limited to a corporate network and only a small amount of employee login credentials were breached. EBay’s PayPal business unit did not show evidence of user personal or financial information being exposed. Few.

Given the frequency of these high profile breaches, it seems like only a matter of time before hackers are able to break into the networks of the most trusted consumer brands and financial institutions. Target experienced a massive breach late last year that many consumers are still dealing with today.   High-end retailer Neiman Marcus experienced a breach as well. Larry Ponemon, chairman and founder of the Ponemon Institute, which specializes in data-security issues, said “It shows that even the best of Internet sites are vulnerable to cyber attacks … you can’t stop this tidal wave.”

Yikes! What are consumers to do?! Even the perceived most secure websites, businesses and financial institutions are vulnerable to cyber attack. I think the best form of protection is to empower consumers to control when, how and where their credit or debit card data is used. If consumers can limit the use of, “turn off” or block the use of a card, they are empowered to protect themselves from any resulting damages from these cyber attacks.

Ondot Systems provides one of the most compelling solutions to help consumers take control of their payment cards.  The Ondot solution lets consumers…

  • Turn a credit card on or off
  • Limit the use of a card to a specific retailer or spend category
  • Limit card use to an area near them or to a specific geographic region

Ondot SolutionsThe eBay cyber attack highlights the consumer value of Ondot solution    Imagine that you were a victim of a data breach and that your credit card information may have been sold on the black market. Sadly, this is the case for millions of US consumers. The Ondot solution empowers you to prevent any fraudulent transactions should a fraudster purchase your data and attempt to buy things on or offline. For example, upon hearing about the breach you could easily turn off the card immediately giving you extra time to determine if it’s necessary to cancel the card. Or, if you limit card use by geo proximity to you, use of the card will be denied to any cyber criminal across the world attempting to purchase items. You are empowered to protect yourself from fraudulent payments BEFORE they even happen. That’s cool.

Ondot Systems does not provide a direct to consumer solution. They are actively pursuing relationships with the major payment processors and financial institutions to white label the technology. I’m wondering though if this technology is relevant enough that consumers could actually ask their bank card providers for it….or be willing to switch to a card provider who has this technology deployed already. The Ondot solution could prove to be a strong differentiator that may attract many new customers to a bank’s credit card offering.   With the increase in data breaches, I’m hoping my bank will provide this functionality soon. If not, I am open to learning more about who does offer this technology.

Ondot has the wind at its back now. However, this technology is not new and competitors have built similar solutions. From what I understand from my patent attorney friends, this technology is not particularly defensible for there are many ways to skin that technology cat.  Meow.  Ondot must build strategic partnerships with the largest payment processors first to grow market share…and do it quickly.  These processors will pave the way to deploying to small and mid tier banks.  Ondot’s big hurdle will be in how easily the solution is deployed at the bank.  As we know, these smaller banks get heartburn if a solution integration requires a big internal commitment.  However, it appears they have addressed this hurdle with seamless integration into the universally accepted payment standard and with deployment support. Once deployed, Ondot’s next challenge will be in how well they engage these banks in co-marketing the solution to the consumer.  Many mid and lower tier banks run lean on marketing so the key here will be how to take advantage of current marketing channels to drive adoption.  However, I have a feeling consumer word of mouth may be the most effective channel.

Ondot is a formidable competitor and is well positioned to be the market leader.  Now it’s about how well they execute.


How can a remote control for credit cards create value for consumers and banks?

Last week I attended FinovateSpring in San Jose. I was excited to see the latest innovations around mobile payment technology from companies including Loop, Quisk, WePay and Red Giant. However, I was most intrigued by what Ondot presented and the value the technology provides to consumers and to financial institutions. Their technology was so well received last week that Ondot won a Best of Show award.

Screen Shot 2014-05-09 at 10.48.15 AMYes, there has been a lot of activity within the digital wallet space to improve card security or reduce the number of cards one needs to carry. Coin, for example, enables users to consolidate all their credit and debit cards on to one “smart” credit card. Think Swiss Army Knife…but just for your cards. The user selects which card to use by activating it on the Coin device…with the other cards remaining turned off. FinovateSpring presenter, Red Giant hopes to replace all the cards in consumer’s wallet with a “smart” card that can be turned on to make purchases…to then be turned off when not in use or if it’s not in the close proximity of the userI think what Ondot presented takes the card management and security technology features and benefits one step further in meeting the needs of the consumer AND the financial institutions. Ondot launched its Mobile Card Services…or putting it simply, it launched a technology that enables a user to remotely turn on or off a payment card from a mobile device.   There is no need to carry around another device or card. Ondot is controlled by the one item weall carry with us….our phones. The implications of this technology are HUGE for consumers and for banks.

Consumers now have the opportunity to control when, where and how a debit or credit card is used. Thinking this through a bit, this technology in effect helps prevent fraud or spending abuse before it even has a chance to happen. It puts the cardholder in total control of all cards in the purse or wallet! That is GREAT!!!!!

For example, let’s say your wallet or purse (or Coin device!) falls out of your hands and all your credit cards are now in control of a nefarious individual. The Ondot solution can be used to sense that your card is no where near you and turns off the cards before the potential criminal is able to run to Best Buy and buy a TV. Or, let’s say you give a credit card to a son or daughter attending college and you want to limit the type of spending to just books and school supplies…and not to spending at bars and restaurants. If your child tries to charge a $100 round of drinks on Friday night the card will be denied for payment. Sigh…hopefully your child is good at washing glasses to pay the bar tab!

Ondot benefits for banks are equally as exciting. For example, offering this remote control feature will be a big point of differentiation for card issuing banks. I can’t think of any bank within the SF Bay Area that provides this feature….without having to actually cancel the card. Secondly, the technology helps consumers reduce exposure to fraud…which in turn helps banks and card issuers reduce charge backs. Lastly, if integrated correctly on the bank’s website or mobile app, the solution creates another touch point with consumers who regularly manage and check their cards. There will be A LOT of opportunities for the card issuing bank to learn about spending patterns and to cross sell these users to other banking products. This feature could get customers to return daily to the branded mobile app to manage their credit cards.

The big challenge for Ondot will be how easily will these features be integrated within a financial institution’s current online and mobile banking platforms. Ondot will no doubt be exploring strategic partnerships with the platform providers to help springboard distribution and adoption. The Ondot product team will also be looking into how the solution can be integrated through APIs…which will be a key requirement for the mid and lower tier financial institutions.

Ondot will be one to watch!


Avoiding the boom-chickaboom clubs at Finovate in San Jose

I have attended several Finovate events over the past few years in their exotic 🙂 locals of San Francisco, New York, London and Singapore. As a denizen of the south end of the San Francisco Bay Area, I was surprised and excited to see that the next FinovateSpring event will be hosted in San Jose at the City National Civic.

Screen Shot 2014-04-18 at 11.59.10 AMSan Jose is roughly 50 miles south of San Francisco and has long time positioned itself as the capital of the famous (if not infamous) Silicon Valley. San Jose is home to many tech giants including eBay/PayPal and Cisco. Apple, Google, Yahoo and Facebook are located in cities just 20 minutes up the 101 or 85 freeways. San Jose is also home to the San Jose Sharks who are snapping at the heals of the LA Kings in divisional play offs.

Even though the San Jose area is home to many world famous brands, technologies and teams, it is NOT a booming cultural mecca of historical sites, tourist attractions and a bustling night life. In fact, the downtown San Jose area rolls up the sidewalks after work hours and most restaurants close down around 9pm. Unfortunately, any nightlife is limited to the standard “boom-chickaboom” type clubs that blare “Rhythm of the Night” on a speaker turned up to 11.  Yes, I’m aware that I’m mashing together several pop culture references here.

So where to go and what to do when we all descend on San Jose for FinovateSpring on April 29 and 30? For starters, I’ve listed below a series of local restaurants that are great to host business dinners at and are within walking distance of the Civic.

Original Joe’s  – Does not accept reservations and good for smaller parties.

Il Fornaio – Accepts reservations and hosts larger parties.

The Grill – Accepts reservations and hosts larger parties.

Firehouse – Accepts reservations and hosts larger parties.

There are a few options for after dinner entertainment…but they are limited. The San Jose Sharks will be in Los Angeles unfortunately. However, there may be something happening at the SAP Center worth attending. The nearby Hotel De Anza and the Fairmont Hotel hosts jazz musicians in their lobbies most nights for something more low key.  However, avoid the bars and club scene in downtown San Jose.  There was a fatal stabbing at a bar just last week…and it even happened on a night early in the week.

Screen Shot 2014-04-18 at 12.00.19 PMAs a resident of the south bay area, I recommend visiting the nearby town of Los Gatos. Los Gatos is a small town tucked to the side (map) of the Sillicon Valley and is a 15 min drive or cab ride South/West of San Jose. There are several great restaurants in the downtown area and many interesting bars for after dinner drinks and strategy sessions. “Rhythm of the Night” is seldom heard.

I’ve listed my favorites based on personal experience. I recommend making reservations at all restaurants for each is well known in the area.

Restaurants

Nick’s

Cin Cin

The Lexington House

Bars

Carry Nations

C.B. Hannegan’s

The Black Watch

Cabs can be hard to find in the area so ask the restaurant/bar host to call one for your party.  Keep in mind that Los Gatos is also a great town to just walk around in too.  If you are into exotic cars, the Los Gatos Luxury Cars  dealership has a store on Main St where one can drool over Aston Martins, Bentleys and Lamborghinis.  There are also several gift shops and clothes boutiques to purchase a peace offering for the home front. There is an Apple store too in case you forgot your iPhone charger at home.

I hope you enjoy FinovateSpring and have a chance to explore the Silicon Valley.


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