Tag: paypal

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.

PayPal's US market lead

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.

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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.

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 can’t afford to forget.

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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.

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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.

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