paypal | Paul Wallbank - Communications Professional

Splitting two former internet giants

The results of eBay and PayPal show how combining the two internet companies was a folly

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.

Data driven lending

Square enters the small business lending space, will be they successful in a very competitive field?

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.

Apple looks dangerous in the payment wars

Apple Pay is making big gains in the online space, however the battle is far from over.

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.

Breaking down old technology empires

HP and eBay splitting their businesses is part of a structural change in the technology industries

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.

Time to strike deals

It’s time to strike deals as banks and other big businesses start to feel the effects of global competition

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.

Activating main street

PayPal lays out its vision of the future of retail

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.”

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.

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.

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.

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.

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.

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.

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.

Tipping and mobile payments

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

This post is the second in a series of four sponsored stories brought to you by Nuffnang.

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

Last week I had the opportunity to tour the PayPal Innovation Centre in San Jose where they showed off the work they are doing in the retail and hospitality industries to change payment systems.

One of the products they showed was their Pay At Table app that integrates into a café or restaurant’s point of sale system and allows customers to pay their bills immediately.

The immediate reaction to this has been resistance from restaurant managers who were worried customers to skip without paying. For waitstaff, the worry was they could be replaced by an app.

It turns out the technology has had a different effect, the productivity of floor staff in the establishments where the app has been trialled has improved substantially.

“In a typical café it takes around ten minutes to get the check,” says the lead demonstrator of the Innovation Center, Michael Chaplin. “We find that freeing waitstaff up to help customers and letting them pay their bills faster means everybody is happier.”

With that ten minute per table improvement, management have found customers’ satisfaction has improved and the waitstaff have seen tips improve – partly because diners are happy and also because the tipping is integrated into the payment, calculating an appropriate gratuity is always a hassle in the United States.

That ease of payment from mobile phone and table apps is rolling across industries, it’s not just limited to the hospitality sector. Increasingly these technologies are being used by tradespeople, retailers and across the service industries

Increased productivity is more than just saving money and reducing staff numbers, it’s about giving the customer a more seamless and easy experience.

All business need to think carefully about how they can use technology to improve their service and increase revenues.

Retail and the internet of machines

Paypal and eBay are using the Internet of machines to put service station cashiers out of work.

Online retail and payment giants Ebay and PayPal hosted a media lunch in Sydney yesterday to publicise their Australian Business Update.

While eBay dominates the online selling market, PayPal’s position in the payment market place is extremely powerful with Internet monitoring company Comscore reporting in their Digital Wallet Roadmap how PayPal dominates the US market and does likewise in other markets like Australia.

Their update confirms the trends which have been obvious for some time, particularly in how mobile devices are now driving retail. eBay’s research indicates properly implemented multichannel strategies drives six times more sales than just having an online presence.

What was particularly notable with eBay’s presentation was how the Internet of Machines is changing the retail and logistics industries as smartphones and connected point of sales systems are cutting out jobs and middle men.

Paypal are particularly proud of their US partnership with cash register manufacturer NCR that integrates smartphone payments with the point of sales systems in restaurants, convenience stores and gas stations.

eBay illustrated this with their examples of coupon offers being tied to smartphone payment systems so people paying for gas with their smartphone get a voucher offer for various up sells.

Studies in the US have found a $10 offer can result in sales of up to $100. A pretty compelling deal for most merchants.

With these technologies, we’re seeing how connected machines are changing even the most mundane business tasks.

It may well be that the days of the service station cashier are numbered; it’s quite possible that in one generation we’ll have gone from full staffed gas stations to totally automated facilities.

The example of gas station attendants and cashiers is just one example of how automation is changing many retail and sales tasks. It would be a brave person to say their job isn’t safe.

PayPal struggles with the Soviet customer service model

Just as Silicon Valley’s new businesses has challenged a whole range of incumbent operators, they too are at risk from upstarts who value their customers. This is something PayPal’s management has to face.

CNN reports that internet payment giant PayPal is looking at an “aggressive changes” to its fraud detection systems which see thousands of customers accounts frozen every year.

PayPal’s announcement follows last year’s promise by CEO David Marcus to institute a “culture change” at the company,

Our intention has always been to protect our customers. Not to mess around with our merchants.
I want to share two things with all of you:

#1 — there’s a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it.

#2 — you have my commitment to make this company GREAT again. We’re reinventing how we work, our products, our platforms, our APIs, and our policies. This WILL change, and we won’t rest until you all see it. The first installments are due very soon. So stay tuned…

Screwing around merchants and buyers has become synonymous with PayPal and their parent company eBay who together are the poster children for the Silicon Valley Soviet Customer Service Model.

Reader comments to the CNN article cited at the beginning of this post give a taste of just how bad the problem is at PayPal.

Once your business attracts the attention of PayPal’s algorithms, you’re locked into a Kafkaesque maze of dead ends and arbitrary, made up rules.

To be fair to PayPal and eBay this problem isn’t just theirs, it’s shared by Google, Amazon and almost every major online company. Their view of customer service is to shoot first and ask no questions, they certainly won’t answer anything from their victim beyond a trite passive-aggressive corporate statement.

Part of the current Silicon Valley mania around web and app based services is that, along with providing free content, users will provide support for each other and that customer service is an unnecessary overhead which should be kept to a minimum.

In this respect, many of these new businesses are little different from the legacy airlines, telcos and declining department stores who have spent the last thirty years stripping away customer service with the result of locking them into shrinking commodity markets.

That failure to value customer service is the biggest weakness for companies like eBay, Amazon and Google. The very forces that favour them, the reduction of the entry barriers, also makes it easier for more customer orientated businesses to grab market share.

Transferring risk to the customer

The business model of many web startups transfers unacceptable risks to their users.

AirBnB is one of the poster children for the “collaborative consumption” model of internet businesses where people can put their spare resources, in this case rooms, out into the marketplace.

Like most web based businesses though the customer service is poor and the proprietors try to push responsibility for the platform’s use back onto the site’s users.

A good example of this is an article this week in the New York Times where AirBnB hosts risk fines and eviction for breaching their leases or local accommodation laws.

When Nigel Warren rented out his New York apartment while he was out of town, he returned to find he was facing eviction and up to $40,000 in fines. Fortunately he avoided both but AirBnB did little to help him except to point him in the direction of the terms and conditions which required him to obey all local laws.

The New York Times asked AirBnB for comment and received corporate platitudes about how their service helps struggling home owners but no real response to the risks of falling foul to local government, landlords, building owners or insurance problems by sub-letting their residences.

Failing the customer service test is not just AirBnB’s problem, Vlad Gurovich was scammed by a buyer on eBay and now he finds PayPal is chasing him for outstanding money.

This is a pretty typical problem for PayPal and eBay customers – as Vlad has found, the various seller protections often prove to be useless when dispute resolution favours scammersand PayPal’s philosophy of shutting down accounts unilaterally and without appeal exposes sellers to substantial risks.

Interestingly, PayPal’s president David Marcus claimed earlier this year that he was trying to change this culture within the company. It seems that’s not going well.

PayPal, eBay and AirBnB are alone in this of Soviet customer support model – Amazon, Google and most web2.0 businesses have this culture.

In many ways it’s understandable as dealing with customers is hard. In the view of the modern business world, cutting deals is glamorous while looking after customers is a grubby, low level task that should be outsourced whenever possible.

Pushing the risks onto users also makes sense from a business perspective, that makes the billion dollar valuations of these services look even better.

For the founders of these services, none of this is a problem. By the time the true costs and risks are understood, the founders have made their exit and the greater fools who bought the businesses have to deal with the mess.

While the greater fools can afford to carry the costs, the real concern is for users who may found themselves out of money and out of a place to live.

That’s why the founders of these businesses need to be called to account for their ethical lapses.

The mobile payments revolution

Paying bills through a smartphone is going to radically change how we do business

Ten years ago when I was running a computer support business we spent a lot of time trying to find an mobile payment service for our on-site technicians to process payments.

At the time there were plenty of options but they were all expensive, asking 6% in merchant fees at a time when our bank merchant facility charged us 2.75% to accept Mastercard, Visa and Bankcard. Interestingly, the cut the mobile providers wanted to take which was the same commission as American Express and Diners Club.

We’d long before decided Diners and Amex were too expensive and it was easy to make the same decision about mobile payments. The technicians were given a manual card swipe to carry around and they phoned through authorisations. It was messy and time consuming but a lot cheaper than the then high tech alternatives.

Given that history, I was keen to get along to the Australian Information Industry Association’s “Mobile Payments – Cooperate, Collaborate, or Abdicate” breakfast panel held in Sydney last week to see what has changed in the mobile payments space.

The rise of smartphones – and the developing SoLoMo trend among consumers which brings together social, local and mobile technologies – should have meant the era of online payments should have arrived and it’s puzzling why it hasn’t happened.

It isn’t for a shortage of operators; one of the panel members, Oliver Weidlich of Sydney’s Mobile Experience mentioned a number of the services such as Square, developed by one of Twitter’s founders that are changing mobile payment overseas.

Interestingly it was the audience questions that gave the answers to why online payments haven’t taken off in Australia. The key question from the floor was “which authority handles disputes should a phone be lost or stolen”.

As a customer, one hopes it’s the bank that takes responsibility as the idea of a telco – particularly their mobile phone divisions with their attitude towards billing customers – having control over your credit card or bank account would make most consumers’ blood run cold.

The point was well made though as it saw the panel’s bank, telco and credit card representatives all ruminating over the question of ‘who owns the customer’.

Oddly, while they argue about whose property the customer is, all of them may lose out. While services like Square and built in payment features on social media and mobile apps such as Foursquare or Red Laser may take a slice of the market, there is a bigger competitor already making huge inroads.

The day before the AIIA event, Internet payment giant PayPal announced a series of deals with various group buying sites and online applications. Their press release pointed out PayPal’s mobile payments, or mCommerce as they call it, is growing at over 400% a year

While it might not be correct to say PayPal were the elephant in the room at the online payments breakfast, it isn’t unfair to say Big Ears was just outside scoffing the morning tea while the incumbents argued about who would have first dibs on clipping the tickets of both merchants and customers.

It’s too early to say the banks, or the telcos, have lost the market but players like PayPal, Google with their wallet service and possibly even Apple – should a Near Field Communication (NFC) equipped iPhone appear in the near future – are going to make the mobile payment sector far more interesting and competitive.

For businesses, we need to keep a close eye on the mobile payments market as it is promising to offer a lot more options in banking and transactions that what we’ve been used to in recent years. The days of 6% merchant fees are well and truly over.