Google Officially Launches Tez Mobile Payments App in India (Sep 18, 2017)
I debated whether to make this its own item today given that I covered the leak of most of the details last week, but I feel like it’s worth it to cover a couple of details that I didn’t cover the first time around, when I largely focused on the broader issue of localization in markets like India. One of the most important aspects is integration with UPI, which is the Indian government’s mobile payments technology and is unique to the country. Almost any mobile payments service in India that didn’t feature integration with it would likely be dead in the water, while UPI itself has significantly boosted interest and uptake around mobile wallets in the country (and banking in general). Secondly, Google is using Tez to test some new ideas around payments including one based on sound called Audio QR, which borrows a little from the QR-based payments that are common in China but requires less specialized software and hardware. I wouldn’t be surprised if that technology in particular made its way into Google’s existing mature-market payment services too eventually.
Google is reportedly getting ready to release a new mobile payment service explicitly for the Indian market, with localizations intended to integrate with payment mechanisms unique to that country. The name is Tez, which means fast in Hindi, and it’s just the latest example of big tech companies making significant local adaptations to their products, services, and business models to fit into India, along with Amazon’s forthcoming first party smartphones (which I’m assured are launching soon), Apple’s local manufacturing, and Facebook’s work with local wireless operators and others. Other than its local manufacturing and fairly standard language support, though, Apple has largely resisted localization in India, unlike China, where it’s made far larger concessions to local customs and platforms. Others are arguably willing to bend their usual rules more to be successful there than Apple is, despite Tim Cook’s frequent remarks about how important the market is. That may need to change if Apple is really to break through, though there continue to be big additional barriers to Apple building a big business there (notably income levels).
Major US Banks to Launch Zelle, a P2P Payments App (Sep 8, 2017)
PayPal is Working on an NFC Payment App (Aug 21, 2017)
Square Reports Strong Growth and Shrinking Losses in Q2 (Aug 2, 2017)
Skype Adds PayPal for P2P Payments (Aug 2, 2017)
Stripe Partners with Alipay, WeChat Pay (Jul 10, 2017)
PayPal Partners with Google around Android Pay (Apr 18, 2017)
Apple Pay Promised to Make Plastic Obsolete. Then Came Wary Shoppers, Confused Clerks – WSJ (Apr 5, 2017)
It’s been clear from the very beginning that Apple Pay was only going to get so far as long as most retailers didn’t support the technology. Mobile payments are a tough habit to get going when it only works occasionally, and when there’s significant uncertainty about whether it will work at a given retailer, and both are certainly the case right now. As such, I would guess that many iPhone owners have either never tried it or tried it once or twice only to stop using it because it’s rarely available as a payment mechanism. Compounding the problem is the fact that, though the EMV liability shift drove adoption of new payment terminals, and many of those terminals have NFC capability, but Apple Pay support is switched off because retailers favor other methods of payment. As such, even the widely-recognized contactless payment symbol present on many terminals is no guarantee of availability. Ultimately, unless acceptance rates at retailers rise considerably, adoption by users it going to continue to be a long, slow slog.
In some ways, it’s very easy to predict what Amazon will do next in its e-commerce business, by simply identifying the biggest barriers to its continued growth. Which categories is it under-represented in? Clothing and groceries, and so you get private label clothing lines and various takes on combining online and other technologies with brick and mortar pickup. In the case of this item, we’re answering the question: what are the biggest remaining barriers to people buying stuff from Amazon online, to which at least part of the answer is that lots of people (around 7% of households in 2015) don’t have bank accounts or credit cards. Several times that number also regularly use check cashing, payday loan, and other related services, which expands the addressable market for something like Amazon Cash, which is intended to allow people to put money into an Amazon account by paying cash at a retailer. This is a logical next step in enabling more people to buy things from Amazon.com, and I expect we’ll see more efforts at this kind of thing going forward.
Square Announces Q4 2016 Financial Results (Feb 22, 2017)
Square’s results were much better than those for Jack Dorsey’s other company, Twitter, earlier this month. All the important numbers are heading in the right direction, with revenue growth strong year on year, margins steadily improving and heading towards breakeven, the Starbucks business in the rearview mirror, and new more profitable businesses ramping up nicely. I tweeted quite a few of my Square charts earlier in this thread following release of the results – overall, there’s a lot to like here, and the long-term challenge continues to be driving scale while leveraging the payment processing business to drive new, higher margin revenue.
Apple Pay most popular mobile payment service among US retailers, survey finds – NFC World (Feb 7, 2017)
This survey suggests that Apple Pay is the most popular mobile payment service among 500 top retailers surveyed by Boston Retail Partners (BRP). It beat out PayPal (which I’ve never seen at retail other than at Home Depot, but appears to be largely used by smaller entities rather than big chains), and a variety of other card network-, bank, or store-specific alternatives like Chase Pay, MasterCard PayPass, and Visa Checkout, as well as Android Pay, which was accepted by 24% versus Apple Pay’s 36%. That’s good progress for Apple Pay, but still makes it a minority option even among these larger retailers, which tallies with my own experience of trying to find places to use it – where I live, two of the nearby grocery stores take it, but our closest and default store doesn’t, Subway and one or two other fast food places take it, but most don’t, and several other places (including CVS) have NFC-enabled terminals but block Apple Pay. The progress is good, but until Apple Pay is available more often than not, I suspect many people will just never bother trying – there’s too much embarrassment around a failed payment for most people to endure the trial and error process it often entails.
Amazon put out some new numbers around its third party Payments platform today – volume nearly doubled in 2016, 33 million customers have now used it, over half those using it are Prime members, and around a third of transactions were on a mobile device. There’s good growth here for Payments, which doesn’t get much press but has made quiet but steady progress since its launch. But it’s also worth putting in context – the leader in the space, PayPal, reported 197 million active customer accounts as of the end of 2016, up from 179 million a year earlier, so Amazon may be growing but it’s way behind. Amazon, of course, has over 300 million active customer accounts itself, but most of those only use their accounts to shop on Amazon.com. All the more interesting, then, that the two companies are apparently in talks about working together in some way.
This is an interesting but not unexpected development – PayPal already powers lots of payments for e-commerce purchases online, and the biggest past barrier to doing the same with Amazon was the close ties between PayPal and eBay. With that relationship now severed, PayPal is free to pursue this opportunity further, and with Amazon the largest e-commerce retailer in the US and a number of other markets, that could be a big boost. It’s less obvious that it will make a huge difference for Amazon, since it has credit cards on file for many of its regular customers, but it could well help reduce friction for occasional or first-time users, potentially providing a wider funnel for eventual Prime members. The other interesting wrinkle here, of course, is that even without the eBay angle, these two companies still compete with each other for web payments – Amazon has a much smaller third party payments platform which is used as an alternative to PayPal by some online retailers.
I’ve commented a couple of times in the last week or so on payments-related stories, and have talked abbot the relative immaturity and fragmentation that characterize mobile payments. But those comments were referring to Western markets, and the situation in China is very different, with massive adoption of mobile payments across several major platforms, and Alibaba has been one of the largest players. It has separated its payment activities into a separate entity, Ant Financial, which has been becoming more and more like a bank in its own right, and is now about to buy MoneyGram, a large global person-to-person payments provider. This is a rare example of a Chinese company buying a global player to extend its reach into other markets – it’s been much more common for Chinese companies to expand organically, and generally that hasn’t gone well.
Target plans to introduce its own smartphone payment service in stores later this year – Recode (Jan 24, 2017)
The fragmentation of mobile payments continues – following in the footsteps of other big retailers, Target is going to roll out yet another proprietary mobile payment system in its stores, rather than merely supporting the two or three store-agnostic mobile payments systems that already have decent traction. The motivations are obvious – control the user experience, capture the data, and drive loyalty – but the user benefits are always minimal, and uptake has generally been minimal too. We’re still at an early stage in mobile payments with no obvious winners yet, but it’s already fairly clear that this kind of store-specific approach isn’t going to be part of the eventual solution.
Apple Pay on the Rise – TXN (Jan 23, 2017)
The headline here is a positive one about Apple Pay, whose adoption does seem to be on the rise, as this data from consumer spending analytics app TXN suggests. However, it’s also worth noting that the actual penetration of Apple Pay within the set of retailers in the data is still very low – no retailer has higher than 4% of their total credit card transactions going through Apple Pay, and that includes those that have iOS apps where it is by far the easiest way to pay (assuming you have Apple Pay set up in the first place). Apple Pay continues to be a fantastic technology where it works, but it still works in relatively few places, and as such most users haven’t been able to develop the habit of trying to use it everywhere. Even where it seems it might work (e.g. my local CVS) it often fails, which causes embarrassment and a barrier to trying again next time. We’re still waiting for the big tipping point for mobile payments like Apple Pay to go truly mainstream – for now it’s mostly still a niche technology.