The payment players and their positioning

Hello all,

I have been quite impressed with how much coverage there has been about the recent Payment related announcements these past couple days and in fact, it is funny to say but I don’t see any surprises in any of them, or at least not much. Let me try to explain and unroll that as I see it (completely open for debate though):



Mr Thompson was kind enough to share with us the fact that PayPal didn’t see much of a future in NFC. Well being a company with most of their presence in the cloud, truly no presence a Point Of Sale, I don’t think how they would say otherwise.
The coffee use case is interesting though: One thing that this video unveils is that PayPal still plan to go to the Point Of Sale (POS) but though their own mean. Meaning that they will still need to find away to be of an appeal to offline merchants. This doesn’t say how they are thinking about reaching out to the thousands but their use case would show that they would tackle chains first and then expand slowly from there. This wouldn’t be playing their own advantage which always have been SMEs but who knows?! It would also be a very slow global roll out as chains even as powerful as Starbucks will never be giving them relevance in China, India or even Europe for that matter.
A big announcement with Facebook is apparently coming up. I hope the audience is captivated. I know I am…


MasterCard has announced that, at the contrary, they believe in NFC. Again no surprise here, a company that has such a strong POS presence can only capitalise on that. MasterCard has already expanded quite aggressively their acceptance for NFC and they ve been at it for couple years now so the only thing that will change is the use of mobiles instead of cards.
MasterCard war battle will be to convince that 1)NFC is secure. 2)merchants and consumers are willing to use NFC – which all their competitors would not agree with (see Square below)


Google announced that they will open their wallet to the wider audience beyond MasterCard / Citi Bank cards. Again no real surprises here, a player that wants to be mainstream has to play with everyone.

We probably have to pay attention to their Offers offering to merchants and consumers. Google data span is HUGE even compared to a PayPal or a MasterCard it could get scary/interesting (depending on who you are :)).


No real news besides the above.
Of course a Digital Wallet in in the cooking and has been announced to launch in US and Canada soon.
I want to also circulate this that not a lot of people are aware of. Visa in Australia had launched a Wallet already called PayClick. It’s an interesting positioning itself as it calls on the youth segment and Digital Goods. now I don’t think it is very successful but it does give them grounds into a new positioning that would hopefully have taught them a lot.

We ll definitely keep an eye for the “fall” announcement as well.


American Express:

Wallet announced and launched. It’s called Serve. It positions itself mainly on Personal Payments through Mobile but with an eCommerce and mCommerce posibility… Meaning…we don’t have merchant acceptance online yet but when it comes, the wallet will work with that.



I am sure you got it by now, Square doesn’t believe in NFC, as they use proximity payments already and that they don’t intent to get back to the traditional way of doing POS payments. Their positioning is also SMEs but from the POS stand point and so their strategic fit with PayPal is more and more prevalent.


[I know there is a lot of other important brands but I kind want to stay under 100 words…I ll get back to them at some point, I promise.]



OK now that we looked at them independently. How does it look like in the ecosystem.

First one prediction:

Every main player will play the advantage in the next couple months and covering its gaps:

PayPal will try to create Offers online and offlien and will try to bring them to customers, they will reinforce their entry into POS use cases.

MasterCard, Visa, AMEX will most probably enter e/mCommerce aggressively, one way or another, PayPal plays in their turf now so the logical reaction will be to play in PayPal’s. Moreover, I am surprised to not see more activity on SME front by these guys. Sure enough they know that SME are willing to pay more than Large Merchants by now…

Square can limit itself what they have already and re-inforce that but I see them getting either acquire by PayPal (but it would be expensive but a real good strategic fit) or concentrating on creating value for a segment that no one really touches upon now. POS for SME. It could be unique enough to be stand alone.


What do you think?



David Pardo


Virtual Currencies – currencies of the future? To what extent?

Hello all,

Bank innovation published a very nice article about virtual currencies and the progresses made by Facebook and Apple and such other virtual currency “emitter”. Let’s look at those currencies progresses and try to see the limits of the system they set for themselves.

First of all, let’s look at the facts.


The  virtual currencies are not completely new. How many offline retailers tried to do this? Loyalty points? Competition and rewards? Win points that you can exchange against presents, gifts and more or different loyalty points. Loads. Once upon a time retailers dreamt of managing their own currency so that they control fluctuation more adequately based on their own standards then a currency that wouldn’t listen to what they thought about the market.

To set things straight, Facebook and Apple are definitely democratising the concept but the real player that was worth watching when this came along was World of Warcraft (W0W). Blizzard didn’t in fact control the sales for those virtual goods that some users spent weeks seeking in the game and were mostly sold offline or on eBay. Many made a living out of that business very fast and it is said that there still are some 400 professional WoW sellers in South Korea alone and there are even price comparison sites to buy “WoW Gold” online (the WoW virtual currency). I am sure that Blizzard will see this as a big source of their future revenue for their next Massively Multiplayer game they ll produce. Who wouldn’t?

eBay themselves had to issue new rules of how to sell  those items which pretty much banned the virtual goods of the site at the time as the fraud was big and even sometimes went very far in litigation and even some murder cases (!).

So what is new? 

Certainly the scale. If the article quoted at the beginning is correct, Facebook would have sold for $250M of virtual money this year. This number is big. Although in the grand scheme of things $250M compared to the overall scale of payments (about $20-$25 Trillion) is nothing ~ 0.13bps or 0.0013%.

The growth would also make people wonder. Facebook’s revenue alone are said to grow 70-80% a year still and 1/4 of that would come from their virtual currency. Something to watch out for then?

The number of players in that new economy is also interesting, of course most talk about Apple and Facebook early successes but  the number of players in the market is astronomical. Small and medium merchants are also issuing their own currencies, usually game producers and other gaming platforms are forced to emit their own virtual currencies. Reason: economies of scale perspective. In effect, all payment companies charge a by-transaction fee that would make the low cost items too expensive to sell and eat the merchant’s margin so they all came up with that virtual currency so that they can afford to get higher ticket items and lower proportional transaction fees; $0.18 of $1 would be 18% of your margin that would just evaporate, $0.18 of $18 is much more affordable and only 1%.

Let’s consider the limits to these new currencies

At this moment, no or few rules exist on how to use that currency but of course as any financial services company and banks all those companies issuing these new mode of payments will need to comply with normal rules. Facebook is considering usage of their virtual currency offline, for physical goods and beyond borders. Surely at some point our lovely lawyers and regulators will start to regulate all of this very strictly. Again all is about scale.

Inter-operability will also grow into an issue. The big players will probably be strong enough to enforce more and more acceptance points but what about the myriad of small ones? Where would I be able to use my obscure virtual credits that I bought online if the company goes bust or if I don’t want to spend some more. Very few companies authorise these currencies to be cashed out. And even if they did, Anti Money laundering laws won’t be long to block any kind of transfer back to cash.

In conclusion,

Virtual currencies are an interesting problem to have, for some economy of scale stand point, players have created new problems that they wouldn’t have if the payment industry was more adaptable. PayPal is at this moment the only payment player that issued their Digital Goods’ pricing but I see this as a legitimate fight back by those industry giants. How long for the historical players like MasterCard, Visa and American Express to emit a reasonable response? Will it be too late to turn back to “normal money” by then for all the small players? Will Facebook and Apple succeed where other retailers that created their own currency failed?


David Pardo

South East Asia corruption and a cash less based society

Hello all,

South East Asia has a strong history of corruption. Out of the main countries in the region, only very few have been historically fighting their own corruption.

Today’s situation is not much better for most.

on a scale of 1 (very bad) to 10 (no corruption). Here is a ranking that should frighten all of us:

Myanmar (Burma) 1.4

Indonesia 2.1

Laos 2.1

Cambodia 2.1

Philippines 2.4

Vietnam 2.7

Sri Lanka 3.2

India 3.3

Thailand  3.5

Malaysia  4.4

and…wait for it..

Singapore 9.3 (or #1 ranking in the world…)


So why is it that such a small country have been effective at cleaning up its own space . Some countries around the region are told to be similar and yet don’t have such results. Malaysia has been contemplated as the bigger cousin of Singapore for many reasons  and yet doesn’t achieve close to the same results.

One reason I d like to put out there for the ones that care to fix it: cash less based society. 

Now I am going to state the obvious: imagine a world where all transactions are electronic. Imagine a world where there is no way for people to pay than using legitimate companies that have to report suspect transactions and fraud. Well corruption in that world would be limited don’t you think?



David Pardo

A different perspective?

Most of that said revolution is driven out of the USA. We have a lot of changes and excitement coming from the undoubtedly the most innovative place in the world.

But if you consider the acceleration in that reference, we see a lot of focus on addressing markets that are already served. A revolution using mobile phones to pay in the US will take time to take place? Why? Because the USA consumers are not asking for it. They are well and happy with the current methods they are using, plastic cards for offline and wallet like PayPal online. Have you ever heard anyone in developed market saying “I would like to get rid of my wallet and not carry all that stuff with me”? I haven’t and there is a good reason why.

A revolution has to be led by customer behaviours. Today this evolution in payments is led by payments experts and companies as they lead to more convenience but the acceptance will be as fast as those companies push their own solution to the market.

The different perspective

On the other side of the spectrum, you have countries where cash is still the main king and the society and consumers are pushing their own solutions to replace cumbersome and inadequate systems.

Take a look at Kenya and mPesa: some merchants already have moved 100% away from cash and don’t accept cash payments anymore as the convenience of the new system created such an awareness of the previously used inadequate systems.

Take a look at India, where the banked population is still small, the penetration of people that can afford a Credit Card is minuscule but 60% of the population have a mobile phone and of course the entirety of the population has payment needs.

This will be my angle; looking at the revolution in payments from the really under-served markets and population and try to see how this will make a tremendous difference into daily lives of the ones that need it the most.


A new Payment blog

It is said a revolution is at hand in Payments and around how eCommerce and mCommerce will happen in the near future. I ll be talking about that. Mostly.

Disclaimer: all opinions here are my own and my own only and not the ones of which companies I worked or am working for.