Paul Wallbank – Brilliant Communications

Tag: paypal

  • Splitting two former internet giants

    Splitting two former internet giants

    Just how mismatched PayPal and eBay were is now becoming apparent since the two companies separated last year.

    Yesterday, PayPal beat the street with 23 percent growth in its payment figures along with an additional six million new users. The company’s stocks rose 17% following the news.

    For eBay’s investors the news wasn’t so good with the company reporting no increase in US sales over the key Christmas buying quarter despite the National Retail Federation reporting a nine percent gain for the entire industry.

    One of the main criticisms of eBay being part of PayPal was that there were no reasons for the two companies to be joined and so it is proving now they have gone back to separate entities.

    For eBay, it’s hard not think that the opportunity has passed with the market moving on from the days of households selling their unwanted items to e-commerce now being a major industry dominated by traditional chains and, most menacingly, Amazon.

    While PayPal is travelling better its business is still under great threat from other payment platforms, particularly while much of its revenue is still locked into desktop software. Shifting to more API and mobile based streams is going to be essential for the company wanting to compete in a very changed marketplace.

    The failed PayPal-eBay venture will go down as one of the great missed opportunities of the first Dot Com wave as both companies were distracted from growing while the industry evolved over the last decade. No doubt some of today’s unicorns will suffer the same fate as they respond to a changing marketplace.

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  • Data driven lending

    Data driven lending

    Banking has always been a data driven business, understanding borrowers and the risks they present is one of the essential skills in making money from lending.

    The new wave of payment startups present a new way for lenders to analyse risks; with real time data aggregated across businesses and regions, lenders can quickly decide wether a borrower is likely to able to pay the money back with the conditions asked for.

    Payments company Square in its latest pivot has partnered with Victory Park Capital and claims to have extended more than $100 million in capital to more than 20,000 merchants writes the New York Times.

    Like other payment companies that have entered this market, Square uses their own deep understanding of their customers’ incomes to be able to make a data based decision on the creditworthiness of applicants.

    Square also offers ancillary data-driven products created for small businesses. The new instant deposit product, which is still in testing and will be fully available in the spring, will give businesses faster access to money they put into a debit account. And the company’s new charge-back protection service will cover some disputes between consumers and merchants.

    Those products also rely on data that Square has collected. They will be available only to small businesses that have a solid financial track record, based on a history of accepting payments with Square.

    Square is by no means the first business to do this, last year we wrote of PayPal’s move into small business lending and Point of Sale hardware manufacturer Verifone retreated from the market two years ago calling it ‘fundamentally unprofitable.’

    The competition in the space and the fact assessing financial risks isn’t exactly a core competence of Silicon Valley start ups indicate Square’s and other companies may find small business lending a tough business as well.

    Despite that, small business lending is a field that is overdue for disruption. With companies like Apple, Google and Amazon all offering payment services, the logical expansion is into evaluating risk and profit.

    It may not be Square, Verifone or PayPal who ultimately redefines the sector, but it will be one of today’s tech businesses that does.

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  • Apple looks dangerous in the payment wars

    Apple looks dangerous in the payment wars

    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.

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  • Breaking down old technology empires

    Breaking down old technology empires

    HP’s CEO Meg Whitman announced today that the company will be splitting in two with its Printer and PC division being carved away from its consulting services.

    The two new companies will be Hewlett Packard Enterprises and HP, the latter being the old printer and PC division.

    For HPs shareholders this split is a decade too late as the printer and PC division is in an industry where declining margins are the norm.

    It’s not hard to think though that both businesses are ultimately doomed, it wouldn’t be surprising to see the smouldering ruins of both companies being picked up by companies like India’s Wipro or China’s Lenovo in the not too distant future.

    That HP is divesting isn’t surprising as the trend is moving away from the big conglomerates model of the past decade; two weeks ago eBay announced it will be splitting its PayPal division and the float of Alibaba will almost certainly see Yahoo! begin to hive off businesses that have underperformed under their corporate umbrella.

    An era where the key to growth in the technology industries doesn’t involve buying competitors and startups to build online empire will leave the Silicon Valley greater fool business model somewhat lost. It might be time for a few venture capital and seed funds to think about their pivot.

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  • Time to strike deals

    Time to strike deals

    It didn’t take long for the competition in the payments market to heat  up after the announcement of Apple Pay last week as PayPal launched a campaign asking if you’d trust your financials to a business who can’t protect your selfies.

    While PayPal  pokes fun at Apple, there are more serious competitive pressures developing as the companies start negotiating with credit card providers and banks to reduce their rates. This is something that will be an immediate benefit for businesses of all sizes who are prepared to renegotiate their contracts.

    Most businesses, big and small, are poor at monitoring what they pay for a service; while they’ll shop around and negotiate when they’re looking for provider, they’ll let often these contracts go for years without reviewing them – something that utilities like banks, telcos and power companies take advantage of.

    I was reminded of this earlier this week at a lunch with some senior Qantas accountants who were quite open about how every supplier’s contract was constantly reviewed and discounts were aggressively pursued. It’s a tough life for the airline’s subcontractors.

    Times are tough for Qantas though, having sustained a 2.8 billion Aussie dollar loss last year along with constant declines in market share and stock prices. So it’s not surprising they have an aggressive cost cutting strategy in place.

    Many other industries are now looking at the same problem as the global economy is now in a phase of at best anemic growth for the foreseeable future, which makes it essential for all businesses to start reviewing their costs.

    With the banking sector now being disrupted by companies like PayPal and Apple, it might be time for all businesses to ask some hard questions of their banks and payment providers. The time is right to strike a deal.

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