Blog Archives

Apple in payments

Hello all,

I am not sure how many have seen this but I think it’s worth noting that Apple has made their first (baby) steps towards payments.

Apple Store

Image via Wikipedia

They will now offer a payment service on iPhone, only in Apple Store to scan a barcode and pay for the item on the spot. It overs some “specifically selected accessories” too.

Cautious first step that will make many tremble. Nice article here:


David Pardo



Another interesting article about Apple in payments is this one:

A Point of view that Apple will not play in NFC but will try to enforce a “pay with iTunes account” even for non Apple merchants. Clearly a long stretch in my mind but if Apple comes up with a stellar user experience it may happen.

Sincerely again

David Pardo


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Users are not ready for this. Which key player will win?

Hello all,

A quick post to introduce two important articles and one video that resumes well the slow or conservative point of view to this “revolution”.

Today the market is not ready for the revolution both from a consumer and a merchant side:

The second one is to discuss what is usually forgotten into that revolution – payments is not really painful as it is but this revolution will need to bring a whole set of value added services (Offers, Coupons, what else?) to the ecosystem to make a real dent into the current modus operandi:

Again, I like the approach here. You ll here it more and more, consumers and merchants are not ready for this. Even the professionals are saying it. What they are also saying is that they are all working to make this happen and make happen this faster in their own way using their own strengths.

List of questions and random thoughts from me:

– Will PayPal be right at assuming that NFC will be too slow to deploy and that merchants will try to embrace added value services experiences through players like themselves?

– Will the giants that are Visa, MasterCard and others be able to digitalise fast enough their offline offering?

– Will hardware deployment be the determinant limiting factor?

– Can we look at Google, Facebook, Apple and other non traditional payment players to be completely disruptive into their approach and leverage their data at payments to provide the best added value services both for merchants and consumers?

All I can say is it does look like a race and a pretty bloody one too.

Another thought is that I think that people still try to ameliorate a system that in the US and other mature markets works pretty well already. But what about emerging markets? What about the billions of people who are still un-banked/un-carded and don’t have access to that vast world of choice, depth and breath of products that mature markets do. Maybe the future winner will be the one(s) that will bring those two worlds together.

Happy to talk about it, let me know,


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