Mobile payments market — Trends and understandings
#fintech #paypal #uber #groupme #whatsapp #weve #facebook #venmo #barclayspingit #paym #mycheck #zapp
Overview:
As I write this piece there is probably another start up finalizing their press release and interview with business insider about being the ‘next thing’ in the mobile payments market. This market is booming, and everyday (litterally) there is another announcement of a big company gearing up to introduce a financial services component, or a small startup who’s planning on changing the game. The mobile payment market is based around mobile applications (obviously — duh) and are split into three categories based on processing capabilities. The first is mobile to mobile payments, the second is mobile to merchant payments, and the third is both.
Meaning that these applications aim to process payments between two consumers, between a consumer and a merchant, or between multiple consumers and a single merchant. There are too many companies in the market to name here but here is a few new ones (some specific to the UK market) and a mini profile of them, to understand where the market is today. Bellow is a comparison table where you can see some main players sized up, or read below for detailed explanations.
Here I have analysed whether these players are Leaders, Challengers, Followers, or Niche companies.
Key:
Ø Leaders — Companies who have a huge market share, and are going to stay dominant through new technologies and wide acceptance among consumers.
Ø Challengers — Companies who have yet to gain a real market share, but have a USP and or new technology that should shake up the market.
Ø Followers — Companies that joined the market as a copycat of original technologies and systems, and do not have a majority of the market.
Ø Niche — Companies that market towards a specific payment function within the mobile payments market, or towards a specific demographic. May or may not be successful based on market share, depending on their targeted ‘Niche.’
1. PayPal — Leader
PayPal is a mobile and online payment platform. A user can buy and sell products and services with businesses who are on the PayPal network, but can also send and receive money via phone, text message, email or Skype. Both individuals and businesses alike can use their services, which connect effortlessly to bank accounts, credit or debit cards.
PayPal was acquired by eBay in 2002, and is one of eBay’s exclusive payment processing systems[i]. This acquisition gave them access to countless users who were already using eBay and will use eBay. PayPal has a very global presence and operates in 192 countries, and in 26 currencies. They have over 143 active users, processing on average 9 million transactions daily, and $27 billion mobile payments in 2013[ii].
PayPal is a market leader because of its size, user base, and its safe and secure reputation. PayPayl’s fees are standard for inside US transfers when fully funded from a PayPal account or bank account, but has some of the highest in the mobile payment market with 2.9% + $0.30 transfer fees funded from credit/debit cards, and anywhere from 2%-3.9% for international transfers. PayPal’s fees are currently being challenged by smaller and newer mobile payment applications. Venmo was a huge competitor, until PayPal acquired Braintree a company that provides backend application programming interface (API) for businesses to process payments, who also owns Venmo. Braintree also processes payments for companies like Airbnb, Uber, LivingSocial, and OpenTable.
2. Venmo Touch UK — Niche
While Venmo has a huge presence in the US, it has yet to launch in the UK. In October 2013, Braintree Venmo’s parent company announced their plans to launch Venmo Touch in UK, which would be a one-touch payment that works across many iOS applications. Customers enter their debit or credit card details once in the Venmo app, and then when in partnered apps with Venmo. For instance, when a customer is on HotelTonight’s app, a button will appear to automatically enter their information after typing in their security code. The info is securely stored and automatically populated into any other app using the Venmo Touch network, which allows for a one-touch payment. HotelTonight, Drivr, LivingSocial, Bizzby and YPlan will participate in the U.K. launch.
Braintree had also announced that to would be working with American Express UK. American Express (AMEX) will promote Venmo touch to all of its clients in the UK[iii]. This move is expected to target the wealthier niche of credit card holders in the UK, as American Express UK usually deals with credit card holders with high spending habits. Venmo is expected to advertise AMEX as an exclusive card for Venmo Touch UK, and is going to do so to increase their average spending per user[iv]. It is estimated the Venmo in the US currently has around a 30million active account user base[v], and processes $10 billion payments annually with over $4billion in mobile payments[vi].
Therefore, while Venmo has about 15% (and growing) of the US market and a unique platform to propel it forward with Venmo Touch and its partnerships with apps (Uber, HotelTonight, LivingSocial, Airbnb etc.) it has yet to launch in the UK market. I think it will be a niche player in the UK market as it will start by targeting AMEX customers, a typically older and wealthier base. There are also already established systems that exist in the UK that will preform the same processes like Zapp.
3. Zapp — Challenger
Zapp is a mobile payment service, designed for the United Kingdom’s mobile commerce Market. Zapp will empower consumers to use their mobile telephones to process real-time payments through their existing mobile banking applications[vii].
Zapp will allow customers to make safe and secure payments by partnering with approximately all of the UK’s existing payment partners including WorldPay, Optimal Payments, Elavon, Realex, and SagePay. This allows customers to be able to interact with nearly all UK merchants and retailers. Zapp has also signed on with HSBC, First Direct, Nationwide, Metro Bank and Santander financial institutions which will enable nearly 18million or 1/3 of UK current account holders to use their existing mobile banking applications with ZAPP[viii].
This means that customers of these banks will not have to download a new application; instead Zapp will be integrated into their existing mobile banking applications[ix]. Consequently, when customers use Zapp they will be able to access and view their bank account balances and select the account from which they wish to make a Zapp payment. Zapp will also work with an assortment of point-of-sale technologies that include Bluetooth, existing PIN-entry devices, and Near Field Communication (NFC)[x].
Zapp is a fierce competitor and can be categorized as a market challenger. Zapp’s attempt to recreate the mobile payment market by partnering with traditional banks and integrating into their existing mobile applications will definitely shake up the current mobile payments market. With the recent announcement (11/03/14) of PayM essentially providing a very similar service to Zapp, with an earlier launch date — it will be interesting so see how Zapp will take hold of the market. Zapp is planning to launch in Autumn 2014.
4. Barclays Pingit — Follower
Barclays Pingit allows anyone to send and receive money for free by just using a mobile phone. You can pay your friend, family, and colleagues back or pay a business. The app is available to any UK current account holder (regardless of where they bank) over the age of 16, and UK small businesses that bank with Barclays.
There is also a feature that allows a user to receive payments online. This is available to all app users, and UK small businesses that bank elsewhere. Money transfers are made to a users account that is associated with a cellular phone number rather than the app that is installed on the smartphone. This means that anyone with a mobile telephone, not only a smartphone can receive and send payments. Barclays keeps these payments instantaneous, quick and free between Barclays and non-Barclays’ customers by using the Faster Payment Scheme. Users can also split a bill with friends by typing in the amount, and requesting payment. Once all payment have been received — user can make a new transaction to pay a merchant — if they are on Barclays Pingit. Users need to know exact amount or pay friends back remainder [xi].
Pingit is considered a follower in the mobile payments market. While they have allowed for customers to transfer money between each other and to businesses for free, there technology is not revolutionary and they have yet to really gain traction among customers. They are considered a challenger because they offer a service to split a bill after the fact, (or if before the fact — the user has to then complete another transaction to pay the merchant).
5. Paym — Follower/Challenger
Paym is a new secure system for consumers to send payments to each other directly by using a mobile phone number. This service will be launched in the spring of 2014[xii]. Like Zapp and Venmo Touch UK, this service will appear in customers’ existing mobile banking applications. It will also allow users to transfer money with just a mobile phone number, no longer do they need to ask for account numbers and sorting codes.
Paym is set to launch in April/May of 2014, and has already signed on to 9 banks and building societies with many more announcing partnerships for later 2014, and early 2015. These banks and societies include Bank of Scotland, Barclays, Cumberland building society, Danske bank, Halifax, HSBC, Lloyds Bank, Santander and TSB bank. Other bank customers that the service will be available to in late 2014 are Clydesdale bank, First Direct, Isle of Man bank, NatWest, RBS International trading as NatWest, the Royal Bank of Scotland, and Yorkshire bank[xiii]. This means that Paym will be available on more than 9 out of 10 current account holders existing banking applications in the UK.
Users will register a mobile number with their bank account, and then trade money. This is the first industry wide collaboration on a financial technology mobile banking application, assembled by the Payments council. This service will be free. Paym would be considered a follower in the general mobile payments market, because the technology is not new. Yet they could also be considered a challenger to some established applications and others that are set to launch because of their wide set of partnerships.
6. Google Checkout
Google Checkout is an online payment processing service run by Google. It services proved convenience when paying for online purchases, by providing the one-click purchase. Google Checkout does this by allowing users to store credit card/debit card information in their Google accounts, and then when paying with participating merchants using Google Checkout. Users do not have to type in their payment information each time. Google Checkout’s other features include fraud protection, and a purchase tracker[xiv].
Google Checkout and PayPal compete for customers, and Google Checkout is considered the ‘loser.’ It has very few users and is on eBay (who owns PayPal) banned payment methods[xv]. Therefore Google is considered a follower.
7.
Weve, MasterCard — Challenger
Weve combines three of the UK’s largest mobile telecommunication providers Vodafone, EE, and O2 to provide a widespread mobile payment service. This service will provide access to a majority of the UKs mobile phone users by providing NFC-enabled SIM cards in all of their phones. This will allow consumers to pay for products and services in person through their mobile telephones at any of the already existing 300,000 points of sale for contactless card payments[xvi].
Weve’s recent announcement to partner with MasterCard will allow them access to these points of sale infrastructure without providing their own unique forms. Another benefit of Weve is that consumers will be able to pay for their products even if their mobile phone is out of battery, a previous concern with contactless mobile payments. Because of the NFC-enabled SIM cards, consumers no longer will need to worry if they wish to purchase something, but their phone is dead. Weve claims that this technology is actually safer then the current chip & pin infrastructure[xvii].
Weve is a challenger in the mobile payments market because of their NFC-enabled SIM card, and their partnership with MasterCard.
8. WhatsApp — Facebook — ?
WhatsApp is a mobile messaging app, that allows a customer to send messages without having to pay for SMS. It is a cross platform system, so that it works on all smartphones. They have 200M monthly active users, and 400M total users as of December 2013. In mid-February 2014, Facebook acquired WhatsApp for $19 billion[xviii]. WhatsApp works on the free trial model, where its free to download and for the first full year, and then you pay a small fee to keep it.
The reason WhatsApp is viewed as a competitor is because it has been predicted (partly in Deloitte’s TMT 2014 predictions) that Facebook will move into the financial services industry and away from the advertising industry through WhatsApp. They needed an app that had a wide user base, and that they could transform into a mobile payments service. There have been no official announcements of this, and much is unknown about Facebook’s plans (look for a more detailed explanation here). Although, it is worth keeping an eye out for them, especially considering Facebook paid $19 billion to acquire them — they must have serious plans so that the investment was worthwhile[xix].
They may be a challenger to the existing mobile payments, but too little is known so they cannot be classified.
9. Clinkle — ?
Very little is known about Clinkle except that they plan to be a financial services application where users can transfer money and pay merchants. After filing for a patent it was revealed that they would like to use acoustic mechanical wave signals to transmit data, so that users could exchange money with each other and merchants through the sound waves. This technology garnered over $25 million in venture capitalist investments, and so while little is known — many are awaiting to see what they produce.
They may be a challenger to the existing mobile payments, but too little is known so they cannot be classified.
10. Direct to Merchant Applications — Niche
These applications include Uber, and MyCheck. Uber is an on demand limo, taxi service that allows a user to order a transportation service from their phone. The reason Uber is a competitor is because along with being extremely popular they have introduced a feature that allows users to ‘split the ride.’ This means that users can split a ride within the application with someone else who is Uber as well[xx].
MyCheck allows customers to pay and or split their bill on their phone in partnering restaurants without interacting with the waiter. This is competition for GroupMe’s new feature to split any bill (not profiled here but read about it if you’d like here), because users can split the bill when dining in restaurants that have partnered with MyCheck, and with friends who already have the app[xxi].
These two are definitely Niche players.
11. Payment Organization Applications — Insignificant
Both Tab and Plate organize and tabulate a bill for a group of people and help split an expense but do not allow consumers to pay each other back (like many apps currently do) or pay a vendor.
Market Trends
After analysing all of these players, there is a clear trend (for other cool trends to look at, and where I got alot of my ideas — look here) — mobile payments is the industry to be in. Big and little companies, alike are adapting their business models to become a part of this industry. GroupMe just released an option to split a bill within the app, it wouldn’t suprise me if we saw something like this from WhatsApp as well. Banks are becoming insignificant, and all the intermediaries are being cut out (cough couch bitcoin). These traditionally strong, untouchable industries feel this market trend and we can see that through financial technology start up accelerators hosted by banks, and Facebook buying WhatsApp — the evidence is there… this is a hot market and is constantly receiving media, technology, and business attention.
If this interested you look at Bradley Leimer’s blog here, and is his insights into the financial technology region.
[i] PayPal (2014). Crunch Base Company Profile [accessed online], http://www.crunchbase.com/company/paypal#ixzz2vecAEJ4z
[ii] PayPal Media (2014). About PayPal [accessed online], https://www.paypal-media.com/about
[iii] Giagom Research (2013). Braintree’s cross-app payment service Venmo Touch comes to the U.K. [accessed online]. http://gigaom.com/2013/10/03/braintrees-cross-app-payment-service-venmo-touch-comes-to-the-u-k/
[iv] Carney, Michael (03/10/2013), Pandodaily. One small step for Braintree, one large step for mobile payments: Braintree takes Venmo Touch international [accessed online]. http://pando.com/2013/10/03/one-small-step-for-braintree-one-large-step-for-mobile-payments-braintree-takes-venmo-touch-international/
[v] Lacy, Sarah (16/08/2012), Braintree Buys Venmo for $26M — If PayPal Wasn’t Scared Before, It Should Be Now, Pandodaily. [accessed online]. http://pando.com/2012/08/16/braintree-buys-venmo-for-26m-if-paypal-wasnt-scared-before-it-should-be-now/
[vi] Carney, Michael (03/10/2013), Pandodaily.
[vii] Zapp (2013), About Us. http://www.zapp.co.uk/about-us.html
[viii] Mobile Payments Today (2014), Elavon joins Zapp for UK mobile payments.
http://www.mobilepaymentstoday.com/article/228565/Elavon-joins-Zapp-for-UK-mobile-payments
[ix] Zolfagharifard, Ellie (2014), Forget your wallet! Now you can pay with your SMARTPHONE: UK banks roll out mobile payment app — and claim it is safer than chip and pin [Online]. The Daily Mail Jan. 15, 2014. http://www.dailymail.co.uk/sciencetech/article-2539376/Forget-wallet-Now-pay-SMARTPHONE-UK-banks-roll-mobile-payment-app-claim-safer-chip-pin.html#ixzz2v0ioT8p6
[x] Mobile Payments Today (2014)
[xi] Barclays Pingit (2014), Mobile, Barclays Pingit [accessed online]. http://www.barclays.co.uk/Mobile/BarclaysPingit/P1242603570446
[xii] Papworth, Jill (10/03/2014), The Gaurdian. Paym promises mobile-to-mobile current account payments [accessed online]. http://www.theguardian.com/money/2014/mar/10/payem-mobile-current-account-payments
[xiii] Payments Council (2014). Mobile Payments [accessed online]. http://www.paymentscouncil.org.uk/mobile_payments/
[xiv] Crunch Base (2014), Google Checkout Company Profile [accessed online]. http://www.crunchbase.com/product/google-checkout#ixzz2vlD6kDIV
[xv] Thomas, Stuart (2011), Memeburn. The Google graveyard: 20 products that failed [accessed online]. http://memeburn.com/2011/08/the-google-graveyard-20-products-that-failed/
[xvi] Meyer, David (05/02/2014), Gigaom Research. UK carrier joint venture Weve partners with MasterCard to simplify mobile payments rollout [Accessed online]. http://gigaom.com/2014/02/05/uk-carrier-joint-venture-weve-partners-with-mastercard-to-simplify-mobile-payments-rollout/
[xvii] Shah, Sooraj (06/02/2014), Computing. Weve partners with MasterCard to provide smartphone payments [Accessed online]. http://www.computing.co.uk/ctg/news/2327393/weve-partners-with-mastercard-to-provide-smartphone-payments#
[xviii] Crunch Base (2014). WhatsApp Crunch Base Company Profile [accessed online], http://www.crunchbase.com/company/whatsapp
[xix] Howard, Bradley (2014), Bradbox. Deloitte 2014 Predictions for Technology, Media and Telecommunications [Accessed online]. http://www.bradbox.com/blog/deloitte-2014-predictions-for-technology-media-and-telecommunications/
[xx] Crunch Base (2014). Uber Crunch Base Company Profile [accessed online], http://www.crunchbase.com/company/uber
[xxi] Crunch Base (2014). MyCheck Crunch Base Company Profile [accessed online], http://www.crunchbase.com/company/mycheck
