Jul 292015
 

Payment service Stripe joins the unicorn club as credit card company Visa becomes the latest investor reports the Re/Code website.

Two years ago this site interviewed John Collison, one of the Irish twins who founded Stripe about their mission to bring the payments industry in the 21st Century.

With the Visa investment it now means two of the world’s three major credit card companies are investors in Stripe, the other being American Express, and this shows the incumbent players are acutely aware of the changes happening in the payments world.

That credit card companies are investing in the businesses that threaten to disrupt their industry indicates the incumbents’ savvy management; while there are cultural and ethical barriers in trying to undercut the existing profitable products, having a stake in the new competitors gives companies like Visa and AmEx to remain relevant in a post credit card world.

For Stripe, investment from what could have been their major competitors not only takes some of the pressure off the the business but also opens opportunities for technology sharing and access to bigger markets.

Probably the most important thing for Strip with the Amex and Visa investments is they legitimise the business and the entire payments startup sector. It’s an important vote of confidence in the technologies and market.

For the Collison twins it also helps build better businesses, as John told Decoding the New Economy two years ago, “if we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

“By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

Now more people will be looking at what they can build on these payment platforms.

Dec 212014
 

Apple are making great gains in the online payment space but the battle with Google Android, PayPal and the banks to control the market is far from over.

One of the biggest business struggles this blog has been watching for the last five years is the battle over payment systems as banks, credit card companies, telcos and technologies vendors have jostled for control of what will probably the world’s most lucrative market by the end of the decade.

Apple were late to that fight with their Pay service only being released a few months ago however according to a report by ITG Investment Apple’s service is already ahead of PayPal in terms of usage among new adopters.

While PayPal have an impressive range of technologies, it’s clear they have found themselves wrong footed by Apple and have new companies like Stripe also challenging their market position.

Apple Pay may be getting the headlines, but at present Google Android still dominates the mobile commerce industry according to another research company Criteo.

In their State of Mobile Commerce report, Criteo claims that globally Android is well ahead in smartphone transactions. An interesting aspect of Criteo’s report is how far behind many nations such as Japan, South Korea and Germany the United States is in the take up of mobile commerce.

Criteo’s report shows the battle to control the e-commerce space is far from over, however if Apple Pay can grab a large chunk of the payments market then the company will have a strong hold on key part of global industry. It remains a high stakes and uncertain battle.

Nov 172014
 

Has Apple Pay legitimised mobile payments? It appears so, reports the New York Times. Since the launch of Apple’s payments service, Google and other mobile payment providers are claiming usage has doubled with customers exploring the systems.

If this is true, it’s similar to how Apple legitimised the USB port in 1998 with the release of the iMac.

Prior to the iMac the USB port was a bit of an oddity, on most PCs the sockets sat unused and the few devices available on Windows computers worked reliably, as Bill Gates himself found out during a live demonstration at the 1998 Comdex show.

Unlike Apple Pay, the move to USB on Macs wasn’t welcome and it was a high stakes decision by Steve Jobs given that Apple’s existence was still precarious and its user base was still made up of largely of true believers who had been through years in the wilderness with the company.

Those users also had many thousands of dollars invested in Apple Device Bus (ADB) devices, all of which became redundant with the move to USB. Many customers at the time swore this was the last straw and they would move to Windows PCs.

Apple’s users didn’t carry out their threats and stayed with the company whose move to USB turned out to be a winner for the entire computer industry.

For Apple USB’s success meant their customers were no longer locked into a proprietary technology, for manufacturers they were able to start moving off archaic serial and parallel ports while for Microsoft the shift meant a better range of more reliable devices — although their operating systems struggled with USB until the release of the far more stable Windows XP.

It appears in this respect Apple Pay is repeating history in giving a boost to a technology that has been struggling to find traction in the market place.

The difference this time is that the payments industry is a far bigger market with far more implications for the broader economy than the computer peripherals segment.

If Apple raise the boat on payment systems, there are some incumbent businesses who are going to find themselves in a very different marketplace in five years time.

Sep 222014
 

We’re past the time where business owners can dismiss new technologies as toys says Profitable Hospitality’s Ken Burgin.

Ken’s Profitable Hospitality website is a must read for anybody in the industry and I was lucky enough to be the the guest of his 99th podcast where we discussed payment systems, marketing and the challenges facing restaurant and cafe operators in a changing marketplace.

In the podcast we discuss PayPal’s plans for the retail sector along with how startups like Stripe look to disrupt the sector and what Apple’s announcements last week will mean to the payments industry.

The key message from the podcast is the entire sector is facing massive changes both from technology and changing consumer behaviour.

Like many other industries, the successful restaurant and cafe businesses over the next decade will be those who have the flexibility to adapt to a very different world.

Sep 152014
 

The future of retail is being fought out on three fronts believes eBay’s Michael Camplin  — global, local, mobile and data.

At eBay’s Commerce Innovation Showcase at its San Jose head office Champlin shows visiting partners, media and government officials part of the payments giant’s vision for that future.

“It’s about connecting buyers and sellers across the globe,” says Champlin. “Local is important for us because even with the growth of the online ecommerce revolution that we’re in the middle of right now we still see 75% of commerce happens within fifty miles of the customer and 90% of that happens in bricks-and-mortar stores.”

“So to be able to connect buyers and sellers in those local stores is a major push we have at eBay.”

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The first presentation in the tour demonstrates a day in the life of an eBay customer from the bedroom of a fictional customer, Reese McLaren, a funky young guy shopping for new equipment ahead of a camping trip. Champlin illustrates how Reese can order, pay and collect through a store’s integrated online service from his home.

On the other side of the transactions, store employees use the PayPal apps like Red Lazer and Braintree to complete the order. A key part of that is using beacon technologies to log a customer into the store to alert staff that a customer has arrived to collect an order.

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At the next stage of the tour, we visit some demonstration stores; first we start with the Burger Bistro where eBay’s Eric Armstrong shows how restaurant’s point of sale system is integrated with PayPal services, showing waitstaff who is logged in through the company’s app.

Integrating PayPal’s services into the establishment’s point of sale system means customers can order through the PayPal Wallet service and waitstaff know if a customer has paid through the app.

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The app also speeds up settling customers’ bills as diners can pay the check through their phone and not bother with using cash or swiping credit cards.

One key point with PayPal Wallet is that users can enter any payment form that suits them and choose whichever option suits them at the time including direct bank transfers and credit cards.

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Another area that PayPal are pushing out are coupon offers. At present the company is subsidising them as they test how the services work. The objective is to offer a digital equivalent of everything people currently have in their wallets.

For staff, eBay are offering the ability to bring your own device for point of sale systems with cloud base apps turning staffs’ tablets and smartphones into POS terminals.

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Tying into the Point of Sale capability is the PayPal Now service that allows establishments to swipe credit cards directly into the app through a dongle that reads the chip or stripe. Despite the rise of online payment services, swiping credit cards is still the main way US customers pay their bills.

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Despite the continued popularity of credit cards, eBay are hoping to move customers over to the online services through ease of service; the one stop authentication service means customers are logged into the payment platform as soon as they check into a location.

One area PayPal sees great opportunity in stadiums and major events where attendees automatically check in and can then access food and souvenir stands without having to re-authenticate or authorise each purchase they make.

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A key part of eBay’s retail strategy is the use of beacons to monitor customers entering establishments. The one illustrated is the PayPal beacon that was a limited release earlier this year. The device doesn’t have its own battery, instead relying on a USB socket for power.

Two weeks after this tour Apple launched its Pay service with its range of integrated APIs to offer many of things shown in this showcase. eBay and its Braintree subsidiary was conspicuously missing from the listed partners.

For PayPal and eBay the field has suddenly become more competitive, this is a sector that is now at the forefront of the battle between today’s internet empires.

Sep 092014
 

Interviewing Stripe co-founder John Collison in the company’s crowded, noisy lunch room in San Francisco’s Mission District is a good place to appreciate how quickly the online payment service has grown since it was founded three years ago.

Stripe was founded after twenty-four year old Collison and his brother Patrick encountered problems with online payments in their previous businesses, “we came to Stripe because we had built apps and webservices before and it was phenomenally difficult to take a product you had built and turn it into a business.”

“At the time you had two options; you could turn your business over to PayPal, which was problematic for a whole bunch of reasons, or you’d build something from scratch.”

“It was clear to us that neither of the options were very good so we went about building something better.”

Silicon Valley’s strengths

Since its establishment Stripe has grown from ten employees to 150, something the founder believes shows the strength of California’s Bay Area over areas like Collison’s native Ireland.

“One of the things that I like about Silicon Valley is that people here tend to be relatively risk tolerant. Joining an unknown internet payments company three years ago, most people would say ‘you’re out of your mind’. But the psyche around here is that’s a reasonable thing to do.”

Another aspect that attracts Collison to San Francisco is that most of his employees at Stripe have run their own businesses or startups themselves. Having a workforce of risk tolerant, independent self starters makes it easier to manage a fast growth company.

Pitching for funding

The Bay Area’s appetite for risk is reflected in how investors look at businesses; “in the startup world, people like to maximize the opportunity rather than reduce the risk,” observes Collison.

Collison’s advice for startups seeking funding is to get have users on board that validates the idea, “when we pitched Peter Thiel we had production user for four or five months. What made us think there was something here was that those users were really passionate.”

The other attraction for Thiel and other members of the ‘PayPal mafia’ – Thiel’s fellow PayPal founders Elon Musk and Max Levchin are also investors in Stripe – was their first hand dealings with the problem of online payments.

“With the PayPal guys specifically, they really get this. Early on this was what they were trying to do with PayPal – make it easy for people to move money around the world.”

Entering the era of mobile commerce

The problem today that Collison sees with PayPal is that it is a product based on a desktop view of online commerce in a time where the industry is moving to mobile.

“One of the things that has held online commerce back for so long is the purchasing experience has such a high barrier to it.”

”We’ve replicated the mail order form on the internet. It feels to me that in five to ten years time we will not be in the same world with people like Google and Facebook improving the identity story. That’s exciting because that helps merchants sell more.”

“That whole model comes from a desktop era so if your building a lyft or a mobile site it doesn’t make much sense.”

Beating the 1980s business model

For the credit card and banking industry, the payments sector is even further behind. Collison believes that until recently the payments industry was based upon a 1980s business model where the costs of inefficiency were pushed onto merchants and small business.

“All the banks and companies that offered services at the time were operating in the 1980s,” says Collison. “The business model was based on the old way of your customers being people within a fifteen block radius, on the internet your customer base is the whole world.”

Building new industries

With Stripe Collison sees an opportunity for new industries to develop out of easier ways of collecting payments, particularly given much of the world’s population in areas like Africa and China doesn’t have credit cards.

“If we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

“By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”