Exploring the Future of Money, Banking and Philanthropy

Archive for March, 2011

A Really Big Idea

Here’s the first video in the New Moneeey Animation Series … “A Really Big Idea” … Enjoy … John Ince

AT&T, Verizon, and T-Mobile make plans to replace credit cards with smartphones | VentureBeat

Soon you’ll be able to make purchases in the U.S. by waving your smartphone, if AT&T, Verizon, and T-Mobile have their way. The carriers are partnering for a joint venture that will aim to displace credit and debit cards, sources familiar with the matter tell Bloomberg.

According to the sources, the carriers may work with Discover Financial Services and Barclays to develop a smartphone payment system in Atlanta and three other cities. They’ve also been seeking out a CEO to spearhead the venture.

The effort would compete directly with the likes of Visa and Mastercard, which together currently handle 82 percent ($2.45 trillion) of consumer spending on cards, according to the industry newsletter Nilson Report. The venture would be a boon to Discover’s payment network — which is currently ranked fourth in the U.S. Barclays would be the bank helping to manage the accounts.

The sources also say that AT&T and Verizon, the two biggest carriers in the country, are equal partners in the venture, while T-Mobile has a smaller stake.

While it would be something new in the U.S., similar phone-based purchasing systems already exist in Japan, the U.K., and Germany.

Not surprisingly, the companies involved aren’t saying much about the venture. AT&T’s Mark Siegel said that “mobile payments are the logical next step for consumers”, but then went on to say — along with Pete Dobrow of T-Mobile — that there was nothing to announce. Kevin Sullivan of Barclays said “facilitating mobile payments is a big part of Barclaycard’s strategy globally.”

Retailers may find the phone-based solution a savior from the interchange fees (also known as “swipe” fees) that card companies charge on debit and credit transactions. Said fees usually amount to 1 to 2 percent of every transaction, and end up exceeding $40 billion a year. There aren’t any details about the fees that the phone payment venture will charge, but it’s very likely that they will be much lower than typical interchange fees in an attempt to woo retailers.

via AT&T, Verizon, and T-Mobile make plans to replace credit cards with smartphones | VentureBeat.

In Silicon Valley, Forget Your Wallet — But Not Your Phone – Digits – WSJ

Two pilot programs by start-ups in Silicon Valley are testing ways to bring to market a long-promised innovation of the Internet era: the digital wallet.

In one, eBay’s PayPal online payments business is equipping some 2,000 of its own employees in San Jose with stickers from a company called Bling Nation that turn any phone into an instant payment device just by tapping it on a sensor. (The sticker tags have small chips in them that can be read by a machine that looks like a normal credit-card swiper.)

Bling Nation is outfitting all of the cafeterias on PayPal’s campus, as well as about 35 other merchants in the area, with readers for its system. PayPal doesn’t have a financial interest in Bling Nation, but the company is using PayPal accounts and technology to fund purchases made through its system.

In the other experiment, a startup called FaceCash has set up a deal with about a half-dozen businesses in the Palo Alto area — including Subway restaurants — to accept its own online payments system instead of cash. FaceCash users download an app for their smartphone, and pay their merchant from a pre-paid account by showing the cashier at the store a unique barcode on the screen of the phone.

The efforts face an uphill battle in convincing consumers and merchants that using their technology is cheaper and more convenient than swiping a credit card. Both companies say it is cheaper for merchants to use their systems than traditional credit cards.

With the proliferation of smartphones, the time might be right: Starbucks is also running a pilot — only at Target stores, and in Seattle and (you guessed it) Silicon Valley — that allows customers to use its iPhone app to make purchases in some coffee houses.

via In Silicon Valley, Forget Your Wallet — But Not Your Phone – Digits – WSJ.

NFC Chip Gets Put to Use with New Google Hotpot Iniative › AndroidGuys

As all of you Android junkies may know (at least you should know), the Nexus S was recently announced. With its 4″ Super AMOLED screen, Android 2.3 (Gingerbread), and close tie to Google, a big component in the device is the NFC chip that is built in. The chip allows for wireless communication between two devices, say a Nexus S, and a counter at a store. You could touch your phones on the counter to pay for a product. So far, Google has said it will use the technology in many ways, integrated Google services along with it.

Yesterday, the Google Hotpot Blog posted an article about how they plan to roll Places, Hotpot, and NFC chips into one pretty package. Starting Portland, Oregon, Google will be issuing Google Places Business Kits which aim to get more customers in the door, more ratings, and more exposure. As part of the kit, there will be a “Recommended by Google” sticker which plays nice with NFC chips in phones. Tapping the sticker will bring up more information about the establishment, educating potential buyers and patrons.

It sure will be interesting to see how this pans out. Imagine being able to “check-in” by tapping the image at a restaurant to earn free appetizers or upgrades on your coffee!

via NFC Chip Gets Put to Use with New Google Hotpot Iniative › AndroidGuys.

Apple planning NFC e-wallet functionality for a ‘coming’ iPhone, NYT says

Apple reportedly plans to add a near-field communications chip to a future iPhone for wireless e-wallet transactions, though the feature will not necessarily appear in this year’s anticipated iPhone 5.

Citing two anonymous sources with details on a coming iPhone, The New York Times reported on Monday that a future handset from Apple will include a NFC chip from Qualcomm. That wireless chip could allow a next-generation iPhone to be used to make mobile payments.

Author Nick Bilton said though Apple apparently plans to add the feature to a future iPhone, “it is unclear” which handset it will appear in. Apple typically releases its annual iPhone upgrade in June.

“one person familiar with the new Apple feature said the phone’s credit card information would be tied to information currently used on iTunes, which would make it simple for customers to set up the new mobile payment method on the iPhone,” the report said.

The report comes soon after a separate story from Forbes, which claimed that Apple plans to bring NFC functionality to the anticipated iPhone 5 this summer. But a separate report last week also claimed that Apple had abandoned its plans to include an NFC chip in the iPhone 5, citing “the lack of a clear standard.”

Google’s flagship, custom-built Android phone, the Nexus S, was released late last year with an NFC chip for short-range wireless data transmission. However, the feature has failed to attract any major applications thus far.

This January, AppleInsider exclusively reported that Apple was looking to hire a hardware engineer familiar with radio-frequency identification, or RFID, a type of NFC. The company also sought a number of payment platform experts for products in retail stores, inviting applications to be a part of “something big.”

via AppleInsider | Apple planning NFC e-wallet functionality for a ‘coming’ iPhone, NYT says.

Big Blue’s New Social Network and Mobile Tutors – Bank Technology News

Estimating the growth of social media and mobile channels equals a $70
billion global opportunity across banking and other consumer-facing
 industries, IBM has formed a new consulting practice to offer navigation
 expertise for companies looking to embrace the new technologies, many of 
which are offered in some form by IBM itself.

Called Smarter Commerce, the practice will advise institutions on how 
emerging channels can be monetized through sophisticated development 
techniques such as matching customization to price elasticity—IBM’s 
research has found that if banks can properly tailor products and services
 to customers can charge up to a ten percent premium for those services.

Some of the expertise involved in the consultations will include how to 
leverage new mobile and social technology as part of merchant loyalty and
 discount programs, as well as overall customer relationship expansion. IBM
 says that will require the ability to analyze massive amounts of disparate
 data in real time, perform predictive analytics, collaborate with retailers
and consumers and process a higher volume of transactions quickly.

“The digital and physical worlds are converging [in payments], and there
will be new competitors to banks that will be entering the market. Some
 payment schemes will be more open moving forward, enabling new types of
competition for banks,” says Gerard Hergenroeder, a global payments 
executive for IBM.

There’s also monetizing going on for IBM, which has spent more than $2.5
 billion in the past few years acquiring new social and mobile technology via
 acquisitions such as Sterling Commerce and CoreMetrics.

“With this bigger
 portfolio we wanted to have a dedicated practice to help clients implement
 these technologies,” says Paul Papas, a global leader for master commerce
for IBM.

via Big Blue’s New Social Network and Mobile Tutors – Bank Technology News.

Expanding Our Commitment to Facebook Credits – Facebook Developers

Expanding Our Commitment to Facebook Credits

By Deborah Liu – Thursday, February 25, 2010 at 2:30pm

Since our alpha test of Facebook Credits started in May 2009, we have worked hard to build a program that drives value for our developers. The long-term goal of Facebook Credits is to provide a currency that makes purchasing virtual items across applications fast and simple. To make it easy to buy Facebook Credits we support several different credit cards, fifteen currencies, mobile payments, and now, PayPal. For developers, this translates into more people ready to spend, each with a higher likelihood of completing purchases.

As we move into the beta phase of program, we want to provide an update about Facebook Credits. Over the past several months we have added several of the largest developers, including Crowdstar, Playdom, Playfish, RockYou, 6waves, and Zynga, into the Facebook Credits program. Many Facebook Credits integrations are in very early stages but start to illustrate how the product can be used. As part of the beta phase of this test, we plan to bring on more developers over the next several months.

Last week we announced that Facebook users can purchase Facebook Credits with PayPal, and can use those credits to purchase virtual goods with all applications that accept them as part of our beta test. This new option is live in a few applications to a small percentage of users, and will roll out more broadly over the coming weeks.

Today more than 500,000 applications exist on Facebook, and the virtual goods within those applications (particularly games) have become an increasingly valuable part of the user experience. By providing a single, cross-application currency, our goal is to making transactions simpler for users, leading to a higher conversion rate for developers. Specifically, our early testing has shown that users paying with Facebook Credits are significantly more likely to complete a purchase than the average Facebook user.

via Expanding Our Commitment to Facebook Credits – Facebook Developers.

Facebook enforces credits system | Marketplace From American Public Media

Facebook enforces credits system

By Steve Henn

Facebook is now requiring that app developers and users buy credits for virtual goods from its own system. It may be another sign of a booming virtual economy.

JEREMY HOBSON: From the real economy to the growing virtual one. Facebook will soon require all app developers to use Facebook’s own “credits” system, when selling virtual goods. So if you want to buy a new pig on Farmville, for instance, you pay with credits that you buy from Facebook. And Facebook takes a 30 percent cut.

STEVE HENN: OK, I’ll admit it. I can’t for the life of me understand why someone would spend real money to buy an imaginary pig on FarmVille.�I’d rather move anywhere. But social games are exploding without me. Two hundred million Facebook citizens play these games and lots are spending real money for digital pigs, houses, even imaginary fishing poles — a.k.a. virtual goods. And when millions start spending 50 cents every few days on imaginary products, it quickly adds up to some serious coin.

Justin Smith just published a report on this industry called “Inside Virtual Goods.”

JUSTIN SMITH: Our estimate for the size of the U.S. virtual goods market is that it will hit $2.1 billion in 2011.

Smith thinks more than half of all these purchases will take place on Facebook. So by forcing all game developers to use its own virtual currency, Facebook will collect $300 million in fees next year from U.S. consumers alone.

And Deb Lui, who runs this business for Facebook, says social games are just the beginning.

DEB LUI: We see a lot of different options for Facebook credits in the future. Right now social games is where a lot of this virtual economy is happening but we see new verticals emerging, and we hope new verticals will emerge to use credits in the future.

Think of how much that you already buy that’s digital. Your music, your media — all this could be delivered through Facebook and bought with its own corporate currency.

So will the Facebook credit rival the U.S. dollar one day for economic dominance? Randy Kroszner, a former fed governor, doesn’t think so.

via Facebook enforces credits system | Marketplace From American Public Media.

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