Category Archives: Big Data

Money2020: The Payment Leaders and Their Itch to Get into Marketplaces


The march towards a new generation of marketplaces was clearly in evidence this week in Las Vegas, as the 4th edition of Money2020 attracted a huge, 10,000+ person ecosystem of financial players that all want a piece of the new world of marketing, commerce and logistics.

In the new era, marked by mobile-based services, Uber and Apple Pay have shown the way for new payment processes: the former by tying together geolocation and an e wallet; the latter by signing up thousands of merchants to accept simplified payments on iPhones.

These companies plus Google, Facebook, Amazon, Microsoft, Groupon, eBay, Twitter, Living Social and Foursquare have been among the dotcom and tech giants exploring the utilization of payments as part of a new breed of “transaction marketing.” Loyalty based plays such as Cardlytics, Edo Interactive, FiveStars, Belly and MOGL are also vying for a piece of the action.

What can be said is that everyone is evolving towards becoming some type of marketing integrators or platform. And services that are geared towards millennials need to get there quicker: millennials won’t do anything that isn’t geared around their phones.

Behind the scenes, billing and payment tech has actually been underpinning advances in business and social processes and lifestyles for generations – perhaps, in modern time, since Amex transformed from a pony express delivery company to a traveler’s cheque company. As recently as the 1980s, we saw how MCI’s revolutionary Friends and Family plan transformed MCI into a long distance giant.

The new generation of mobile-based, wallet-oriented payment services — combined with Internet of Things connectivity and biorhythm user authentication — will be triggering on demand services, promotions, loyalty, credit, loans, delivery/pickup, social media/reviews and back office features such as payroll.

As a show, Money2020’s growth has been spectacular. But in its 4th year, some wondered whether the Money2020 ecosystem has grown too fast too soon, and that “winter is coming” after a year that culminated in the launch of Apple Pay; the expected rollout of two IPOs; and major buy-ins from the dot com giants.

In truth, the industry’s not an overnight success – and the technology still needs to catch up (i.e. phone batteries that can stay powered up). Apple Pay and other mobile payment services have had modest growth in actual usage; First Data’s IPO was smaller than expected; and the loyalty programs have had trouble scaling merchants. In fact, there is real pessimism about Square’s upcoming IPS; and there’s been some retreat by the dotcoms, many of whom have realized that their role is less in banking and payments than in big data and marketing analytics.

Bain Capital Ventures Managing Director Matt Harris noted that all this talk of the “winter” amount to “nothing.” The opportunities are as rich as they’ve ever been conceived, he said.

In fact, everyone should hurry to assume their parts in the ecosystem. All the trends point to 2016 as the mobile payment industry’s probable tipping point. eMarketer’s Bryan Yeager suggests that mobile payments will grow 3x over 2015 – from $8.7 billion to $27.1 billion.

Banks, of course, are widely assumed to be the most vulnerable to disruption in the new environment. But at Money2020, they showed that they plan to fight back, while leveraging an enormous volume of customers that give them a headstart. Chase, for instance, has 94 million debit/credit card accounts. CEO Gordon Smith, in a keynote, said he’ll be able to preload all these accounts by mid -2016 with Chase Pay: a comprehensive new platform that lets customers pay for goods in store, online, over the air, or with a camera in app.

Capital One, similarly, has come out with Spark Business, a new SMB platform that takes an agnostic approach towards single source banking as it builds in analytic services, management features such as accountings, payroll and benefits. “Banks (only) solve banking problems,” noted Cap One’s Keri Gohman, head of Capital One’s Small Business Bank. “They aren’t developing for SMBs, they are going up from consumers, or down from corporate.” The new platform is “more powerful for adding more connections and partners,” she said.

The POS leaders also intend to fight back against the new breed of cloud-based providers. They’ll leverage their existing customer base – VeriFone, for instance, has 90,000 taxi and gas station screens around the world. Taxi passengers in Las Vegas, for instance, can opt to pay $3 to make a credit card payment, and receive local promotions at the same time.

But VeriFone will also work to add new capabilities, and open app stores that give them a new revenue stream for every kind of service. Its rivals in the POS terminal business – namely First Data’s Clover and Poynt – are also building App stores.

“The industry is on the cusp of something historic,” noted PayPal CEO Dan Schulman, who notes that PayPal has 107 million account holders around the world. “We can take basic transactions and make them faster, easier, more secure and most importantly, less expensive. We can truly democratize money. (We can) rethink what financial services can be in world of mobile and software. It is not (just) about tapping a phone or swiping a card. It is much more profound than that.”

Square’s S1 Filing: Diversified Customer Base, Good Growth, High Deficits

When Square launched its credit card processing reader for smart phones in May 2010, it was one of the most enabling services for very small businesses we’d ever seen. It allowed businesses to affordably process payments at 2.75 percent of revenues instead of paying 5-6 percent; and take credit cards without investing $1200+ for POS; it also provided a complete set of analytics so that businesses knew how to target.

Since then, the challenge for Square has been scale up to include larger and more lucrative businesses; fend off increasingly stiff competition from players with arguably deeper ties to the SMB community, including PayPal, Intuit Amazon – as well as new cloud based POS type products from First Data’s Clover and Poynt as well as traditional POS players such as Verifone ; expand internationally – currently there are only some sellers in Canada and Japan; and build a complete eco system around its core processing services, including – Windows style — the development of a wide range of third party apps.

Success as an ecosystem would allow Square to become a true disruptor for all kinds of SMB services, back office logistics and marketing. In addition to Square Analytics, these services have now come to include Square Capital, a fast SMB loans service based on payments; and Caviar, a food delivery service with 1000 restaurants in key cities. But the company faces competition in each of these areas – a factor that has forced it to give up its initial hope for instance, to charge for its readers and stands.

It hasn’t been an easy climb. A 2012 deal with Starbucks to process all its payments gave Square credibility and brought Square up to scale very quickly. But it has also been a yoke around its neck, resulting in hundreds of millions of dollars in losses. That deal has proved unsatisfactory for both sides, and is likely to end soon. Talent wise, Square has suffered from high turnover and earned a reputation as a disorganized, difficult place to work.

Yet, the company continues to grow, provide exciting new services, and has taken its place as a major enabler and innovator of the new SMB economy. In 2014, sellers using Square processed payment transactions worth $23.8 billion generated by 446 million card payments from 144 million payment cards. Square’s own revenues from transactions and other sources amounted to $850 Million in 2014.

This week, Square has optimistically filed an S1 that reveals a great deal more about the 1,171 employee, tight lipped company than previously revealed. Among the highlights:

Revenues still come mostly from payments and POS services. 95 percent of revenue still comes from payments and Point of Sale services. This suggests that efforts to diversify are taking some time.
Customers are becoming more diversified. While Square has a reputation as mostly serving coffee shops and flea market vendors, its customer base is now comprised of 21 % retail; 17% services; 15% food; 14% contractors and repairs’ 11% health and beauty; 9T individuals; 6% health; 4% charity/education; and 3% transportation.
Larger businesses are beginning to adopt Square. 11 percent of transaction revenues come from companies earning $500k or more; 26 percent comes from companies making between $125-500K. The ratio of transaction revenues for companies making less than $125,000 has fallen from 92 percent in 2011 to 63 percent.
Larger companies use a wider range of services. On average, more than 70% of sellers who process more than $125,000 per year engage daily with analytics in their Square Dashboard.
Square’s digital receipts are a powerful feedback mechanism with customers. More than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts
Square’s cumulative deficit has been $473.2 Million. It needs for the IPO to be successful.

As Twitter Streamlines, Does Commerce Make the Cut?

Is Twitter Commerce going to make the cut? Up to 336 Twitter staffers are slated to be let go in a streamlining effort, and many divisions are likely to be impacted. Logically, it would seem that an experiemental area such as Commerce could be back burnered as Twitter focuses on ad contracts with big whales like national brands.

But Commerce, naturally, continues to tempt Twitter and its social media peers. As commerce experiences become increasingly focused on a combination of social media and mobile, it is no coincidence that Google, Pinterest, Facebook, Foursquare have been testing out buy buttons.

In Twitter’s case, its buy now button tests have included key retailers (Home Depot, Burberry), non profits and musicians. The buy now platform has also been fleshed out with a full slate of payment partners (Stripe), ecommerce platforms, and content partners, including social shopping, digital content sellers and fan commerce.

The Commerce divison, which is helmed by former Ticketmaster CEO Nathan Hubbard, also includes a full slate of promotional offers, incentives, rewards, disocunts and other programs for registered credi and dibit card holders – on built on the foundations of Cardspring, which Twitter acquired in July 2014. There is also talk of Twitter developing a marketplace. It may also more tightly integrate with payment companies such as American Express, which are already using Twitter as an offers platform.

As the Twitter Commerce Web page notes, “The goal for all our commerce initiatives on Twitter is simple: make it as easy as possible for businesses to connect directly with, and sell to, customers on Twitter.”

Realistically, to survive amidst the downsizing, all these efforts must be tightly integrated with Twitter’s advertising and marketing efforts – many of which already overlap with analytics, etc. That’s what the company is hoping to acomplish in its Collections pages, which are meant to make it easier for users to find useful information and go shopping. They must also hone in on better sales channels that bring them more local and vertical depth.

Will they get a chance to do it? We’ll see. As returning CEO Jack Dorsey said in his note annoucing the deep layoffs, “The roadmap is focused on the experiences which will have the greatest impact.”

Microsoft Earn: CLO Effort Aligns ‘Time, Location, Context, Commerce’

Microsoft continues to push ahead with its card linked offer program, which has been in Beta in Washington, Arizona and Massachusetts since May. But since we last wrote about it in April, the program has been rebranded from Bing Offers to Microsoft Earn. The program is now more oriented towards promotional redemptions at The Microsoft Store. Registrants can earn points at participating merchants towards Microsoft products.

Participants in Microsoft Earn include hundreds of local restaurants, as well as national brands with local outlets. THey include 7-Eleven, Starbucks, Papa John, Whole Foods, Shell and Pet Smart. 1-800-Flowers is also participating.

Speaking at Cardlinx’s “Data Driven Commerce” meeting in Bellevue, WA, GM of Holistic Monetization Erik Jorgensen says “merchant acceptance is shifting from skeptical to believers.” CLO represents “a great signal for measuring the impact of the digital world to the real world.” It provides “friction free, almost magical consumer experiences.”

Early results have been promising with “member acquisitions easier and engagement great than anticipated,” said Jorgensen. “Meanwhile, customer confusion and support (issues) have been less than anticipated.”

Microsoft Director of Payments Will White said that CLO is an anchor product for a new generation of commerce built around wallets and authentication (“vitally important”), ease of use and personalization. CLOs “align time, location, context and commerce,” he said. The idea is to use signals to offer the right things at the right time.

The Economics of Sidecar’s Local Delivery System

Will logistics and delivery provide a key strategic advantage in local commerce? That’s the hope of players like Google, Amazon, Uber, Sidecar and Postmates. As we have previously noted, each hopes to get a leg up on the economics of local commerce and time-to-customer by cutting out the middleman: USPS, Fedex and UPS.

Sidecar, in particular, has suggested there are a revised set of delivery economics. A new blog post by CTO and co-founder Jahan Khanna says these economics have been changed by three factors: always on consumers and businesses; agile software that pinpoints ideal routes and matches and combines orders for delivery personnel; and “multi mode delivery networks,” consisting of walkers, bikers and autos – each utilized to complementa each other, traffic patterns, parking etc.

“When everyone is connected to the Internet all the time, people can work together in shockingly more efficient ways than was previously possible,” notes Khanna. “The ability to intelligently decide which mode works best at which time, and path-find between multiple modes, is a powerful cornerstone of the Sidecar network.”

Khanna notes that Sidecar has broken each of its local markets into quarter mile grids. The task is to predict how many orders are going will come into each grid – a process that is updated every 15 minutes. Additionally, Sidecar’s data group figures out where there are parking and traffic logjams. “The routing algorithm is the heartbeat of our on-demand infrastructure,” he says.

“Every car, bike courier and walker on the Sidecar network is not on one ride, or one delivery per se,” says Khanna. “Rather, they are assigned to an ordered set of multiple waypoints each with individual deadlines. They might be picking up two orders at the first location, dropping one off at the next, picking two more up at the third, and so on and so forth. The goal of the system is to maximize driver efficiency and minimize confusion due to reassignments, all while targeting a 95% on-time percentage.”

Khanna also says that all this works for $6.90 deliveries — even with San Francisco’s especially high labor costs. In San Francisco, walkers need to make $16 an hour, drivers need to make $22 an hour, and bikers need to make $19 an hour. At peak times, cars can handle six deliveries an hour; while a bike can handle four.

“Our technology enables us to work together more efficiently than was previously even imaginable,” Khanna sums up. It certainly beats FedEx’s $17 charge for same day delivery — which is still not capable of getting a hot pizza to a customer’s door. What it means for Uber’s attempt to make $3 deliveries is less certain.

Centro: Boost Demand Side Ads With Full Program, Not Just Programmatic

Chicago-based Centro, which helps provide targeted ad solutions to 13,000 publishers – 4,000 at any given time — says it is refocusing on providing publishers with complete Demand Side solutions that integrate first party data targeting, hyperlocal mobile tools, digital extensions and cross-channel capabilities.

Publishers increasingly want to provide greater reach for their advertisers than they can provide from their own-and-operated (O&O) properties, said Centro SVP Katie Risch and VP John Hyland in a discussion with BIA/Kelsey. “O & O solutions are becoming a smaller share of the mix.”

Centro DSP for Publishers, the new product offering, provides a wide range of mobile, display, video and social campaigns directly through Centro’s platform. An increasing amount of these efforts are automated. “Revenue is going towards self -serve,” said Risch and Hyland. “People don’t go back after they start with self-serve.”

To be sure, programmatic – an automated process of planning and placing ads on the platform – represents a big part of Centro’s evolution. Centro has committed 18 buyers specifically to support programmatic. But programmatic needs to be supported with other pieces.

“We are in an early iteration of programmatic,” said Risch and Hyland. It helps to “close the loop.” But “it doesn’t do enough to support the demand side of the business, which is critical for local targeting. The biggest challenge is how to drive demand. There has to be a human layer; a set of KPIs.”

Centro’s Brand Exchange, for instance, has enlisted 1,400 publishers. It allows auto dealers and other SMBs to call on the company to meet their needs for local inventory. With such services, “we are providing a cohesive media strategy, along with first party data.”

Signpost Raises $20.5 Million to Provide CRM-Based SMB Services

Signpost announced today it has raised a new $20.5 Million round, which will let it build out an evolved, CRM-based “close the loop” strategy of tracking SMB digital sources via transactions, social media, websites and email.

The current round has been led by led by Georgian Partners along with Spark Capital, OpenView Venture Partners, Scout Ventures and Jason Calacanis’ Launch Fund. The company has raised $36.5 Million since its founding in mid-2010. Earlier funders included Google Ventures.

Signpost’s evolution has been a dramatic one, fully reflecting the changes in local online marketing. The company launched as a provider of sales agents for local SMB deals, then evolved into an SMB-oriented SAAS company with offices in New York, Austin and Denver. In its case, deals gave way to a broad range of marketing services, including analytics, marketing automation, loyalty marketing, referrals and review acquistion.

The company now serves over 10,000 customers, and says it is eyeing a large customer set of six million very small businesses with 2-10 employees. Most of these have not previously had access to CRM and are unlikely to subscribe to pricey CRM tools such as Salesforce.

The inclusion of financial transaction information provided by a third party is something that is increasingly being added to marketing services. Google, ForwardLine and others similarly incorporate financial transaction information.

BIA/Kelsey Managing Director Rick Ducey, Signpost’s Ryan Sommer and Peter Krasilovsky play “Chinese style.”