Calling BS on Visa’s mobile payment numbers

Visa published a report claiming the use of mobile payments has surged in the last year. Tripled to be exact. This looks almost too good to be true, and when you read further down the article, it certainly is.

According to the Visa study, the number of Europeans regularly using a mobile device for payments has soared since 2015 from 18 percent to 54 percent.

The study looks comprehensive, polling over 36,000 online consumers in 19 European countries. Such a huge jump is a big red flag that there is some fundamental problem in the study. The questions and methodology were not released in detail.

Another red flag with the numbers in the study is the accompanying press release that claims 86 percent of users in Israel are mobile payments users. A quick survey of a very digitally savvy co-working space in Israel showed totally opposite results. Most people answered with “no.” Some added a caveat, “Wait, is a car hailing app considered mobile payments?” or “I used digital payments in the US — I wish I could use it here.”

Perhaps downloading an app from the app store is considered using mobile payments for the sake of this study?

It is also not clear what the 100 percent here is? Is it all the people who bank? Maybe it is all the people with smartphones or all the people who have a payment app on their smartphone? How is a mobile payment user even defined? 

Luckily, other studies shed a bit more light on the adoption of mobile payments, or lack thereof.

According to 2015 data from Trustev, only 20.7 percent of iPhone users and only 14 percent of Android/Samsung users have ever used Apple, Android, or Samsung Pay. Of the users who have used these mobile wallets, a vast majority only use them once a week. 38% of users with an Android Pay or Samsung Pay app have never even used it. This is a far cry from Visa’s 54 percent mobile payments claim. 

It seems Visa uses “mobile payments” to mean “mobile commerce”. As this paragraph from the press release explains, “In the UK, over two-fifths (43 percent) purchase high-value items such as holidays and electronics on a mobile device as well as regular transactions such as paying household bills.”

Even if we take Visa’s numbers to mean mobile commerce, the picture is not that rosy. According to the World Payments Report from Capgemini and BNP Paribas, while digital payments are increasing, cards still remain the fastest-growing digital payment method since 2010, holding at 11.8 percent. Digital payments only hit a 10 percent growth rate last year, accounting for 426.3 billion transactions.

In 2013, mobile payments and mobile commerce combined, which seems to be what Visa was actually measuring, were only 4 percent of of all debit or credit card transactions that year. Even if you apply the 2015 10 percent growth rate to 2013 figures, volumes are still pretty low.   

Let me be clear, Visa: paying my gas bill on an app is not mobile payments, nor is using Travelocity.  

It was good clickbait. Chapeau.

P.S. Fintech seems to have a semantics problem, with companies saying one thing while meaning another. Earlier it happened with Lemonade and its misuse of P2P. 


Paypal adds another mobile wallet to its arsenal

PayPal is bringing mobile payments to Europe with its newest partnership.

The eBay spinoff just announced an agreement that connects PayPal to telecom giant Vodafone’s Wallet app, including capabilities to make contactless payments at over 400,000 retailers in Europe via PayPal.

“Money is going digital, and the smartphone is at the center of this transformation.” said Rob Harper, director of mobile commerce, PayPal UK. “Mobile payments have long been at the heart of what we do. As mobile technology continues to evolve, we will continue to look at new ways to make it easier and faster for our customers to pay.”

The alliance marks the third agreement PayPal has made with a mobile wallet in the past four months. Visa and PayPal got over their beef and agreed to bring PayPal to Visa Checkout in July. PayPal then cut a deal with MasterCard, opening up MC tokenization to PayPal customers.

Now that PayPal has agreements with the two biggest credit cards and a European telecom company, look for more agreements with mobile wallets. But perhaps a Venmo integration to help solve the lingering monitization question is on the horizon.

High 5! The five fintech stories we’re following this week

5 trends we're tracking in finance

Banks still not replacing core systems in face of falling tech costs

We talk a lot about the newest new thing in financial technology but that’s generally more on the periphery of the tech stack. Core banking systems aren’t being replaced. They’re being patched up. That’s why only 15% of bankers expect to build a new core in the near future. CEOs, when faced with short lifecycles in the C-suite, choose to merely maintain existing systems rather than take the pain (and cost) of building new ones.

That’s how you get 40 year old core IT systems like at ANZ. And it’s also why big banks are even contemplating creating their own digital currency for clearing and settlement.

Many in the industry think that banks are moving more to an ecosystem model, where they focus on core things and leverage tech firms for everything else. So you get fintech startups flocking to a 126 year old Kansas bank. It certainly appears things are headed in that direction, though maybe not in Australia, where banks are refusing to open up their data to third parties.

Looks like technology will be playing more of a role in financial advisory work, too. Whatever happens with the new DoL rule and how it may change Series 7 brokerage work, it will most likely require advisors to invest more in technology. That’s because people who help make financial decisions for clients will have to better track their advice and back it up with analysis.

Banks find it hard to catch a break

It’s not easy to be a big bank these days. You’re damned if you close the branches and damned if you don’t. It’s worse: even when you close the branches, some customers keep coming back looking for them. So, you may be improving your SG&A line, but you could be losing customers to your competitors that remain entrenched in neighborhoods.

In a deep way, banks understand this conundrum and that’s why they’ve been relatively slow to cut physical branches as society catches up with technology trends. So, they look for other structural changes to lower costs and improve service levels. Like AI for helping with compliance, for example.

Mr Robot’s view on the future of money and payments

Our journalists are getting sick of me quoting this series. But I’m hooked. In the USA Networks show’s second season, it takes the financial system seizing up for the migration to cryptocurrency to begin in earnest. What happens when trust in the financial services is completely lost? Mr Robot, at its core, is a story about the end of money.

I’ll tell you what happens (no spoilers). After the financial system is brought to its knees and the majority of consumer debt erased, somewhat ordered chaos ensues. Transactions move to cash, but even fiat money begins to lose its cache. “When you get down to it, paper money is a symbolic construct. With no financial records left, what value does it really have? What value does anything have?” wrote Vulture.

Investing more in the fintech game

There’s a trend with upstart fintech firms, especially ones that face consumers, to brand themselves as a friendly alternative to traditional financial services. LendUp fits that description. The consumer credit firm bills itself as a compassionate lender that helps people build their credit history slowly with tighter credit lines. It just closed on $47 million in a round led by Y Combinator’s investment fund.

Goldman Sachs isn’t too busy building out its online bank, Marcus, to get involved with other fintech deals. The investment bank created a $100 million lending facility for Fundation, an online SMB lender.

Visa goes all in at the Olympics

One credit card company went for gold in Rio. Precious metal, that is. As a sponsor of the 2016 Games, Visa spent an estimated $32 million for 242 national airings of their commercials during the games. The firm also gave tokenized contactless payment rings to Visa-sponsored Olympians.

This prelude of the credit card company’s promotion of its contactless capabilities was followed soon after by a wider rollout of its payment rings.


Visa goes all in at the Olympics

Olympians are counting their medals, but Visa is still waiting for the judges’ scores.

Visa went for gold-or-bust at the Rio Summer Games, both on the ground and on the airwaves, making a massive media buy for commercials as the exclusive payment provider for the Olympics.

In data compiled by, Visa spent an estimated $32 million for 242 national airings of their commercials, reaching 416 million people during the Olympics. Putting that in perspective, the next four biggest banks and credit card campaigns combined for an estimated $27 million in ad spending over 182 national airings.

Visa’s most seen commercials highlighted Visa Checkout, the service designed to streamline online shopping experiences. The most aired commercial, which accounted for half of the national airings, featured Olympians making their way to Rio, paying for food and gas via chip, mobile, and NFC payment methods.

In terms of infrastructure on the ground, Visa installed and oversaw the entire Rio Olympics payment network, including the Olympic village, stadiums, and stores. The company also installed 4,000 terminals for mobile and wearable payments at Olympic venues, emphasizing Visa’s commitment to NFC technology.

Visa also gave tokenized contactless payment rings to Visa-sponsored Olympians to be used in the Olympic village. The ring is waterproof, doesn’t need charging, and once it’s set up, doesn’t need a mobile phone link. Visa announced yesterday that the ring is available for pre-order, running customers around $50.

The ring is another part of Visa’s spearheading into mobile payments, which already features Visa Checkout and Visa Token APIs.

“Visa’s first payment ring puts smart payment technology right on the hands of our athletes for convenient and easy payments,” said Jim McCarthy, executive vice president of innovation and strategic partnerships at Visa. “This ring is the latest example of how Visa is continuously innovating to deliver on its goal of universal acceptance at the games and across the world.”

Photo credit: burge5k via / CC BY

49ers score big with mobile payment app

Located in the cradle of technology, Levi’s Stadium may be one of the most technologically advanced stadiums in the world. The $1.3 billion dollar home of the professional football team, the San Francisco 49ers, comes with nearly every bell and whistle a stadium could ask for, and the most interesting feature may be the availability of mobile payment features.

Instead of building a stadium and then figuring out how to enable it with technology, Levi’s Stadium was designed with wireless networks in mind. Opened in 2014, the venue opted for internet access points to be placed underneath seats instead of the traditional placement below decks above users, as the shorter distance leads to better service.

Levi’s Stadium also features mobile payment capabilities throughout the stadium. According to Roger Hacker, director of corporate communications for the San Francisco 49ers, Levi’s Stadium is one of the first venues in the U.S. with a mobile payment infrastructure embedded throughout the venue. Powered by Visa Checkout, fans can purchase concessions using Visa-supported mobile wallets from designated walk up windows.

Although mobile payment functionality is a great feature, the most unique element of the stadium is a state-of-the-art app meant to enhance fan experiences. Developed by VenueNext, the Levi’s Stadium mobile app was an essential part of stadium design, since fan experience is essential for repeat visits.

“We always want to make the event experience more enjoyable and convenient for our fans and we were able to build Levi’s Stadium with those plans in mind,” said Hacker. “As our leadership team was envisioning the type of stadium and fan experience they wanted for 49ers fans, it became obvious that the Levi’s Stadium App would be the key to creating that environment.”

What Levis stadium ended up with is an app that provides multiple fan services, including mobile payment capabilities, like ticketing management and purchasing parking passes. However, the most interesting feature may be the ability to purchase food, drinks, and merchandise for express pick up or in-seat delivery. By linking their credit cards to the app and ordering concessions in advance, fans can bypass lines and get the most out of their experience.

The mobile app may be essential to overcoming the biggest obstacle facing stadium attendance, the comfort of home. To convince fans to watch games from a seat in the stadium instead of their couch, the 49ers utilize technology to provide a can’t-miss live experience.

“Stadiums in every sport are being forced to confront the comfort of the in-home viewing experience and many organizations and venues are looking to enhanced technology as a means to keep those fans coming to the stadium on a regular basis,” remarked Hacker.

Not everything has been smooth sailing for the Levi’s stadium app. In February, the NHL Stadium Series outdoor hockey game took place at the venue, and there were reported issues with connectivity. One fan’s account details issues that limited the ability to log onto the stadium app. Once users got connected and placed food delivery orders, fans experienced long delays, mostly due to the system getting overwhelmed with order volume that was 50% higher than normal. According to Hacker, the issues were never experienced at any other event and were corrected by the stadium’s tech staff.

On the other hand, the potential of the app was perfectly showcased at last year’s Super Bowl. Even though attendance was similar to the trouble-ridden hockey series, connectivity and mobile app usage at the Super Bowl worked very well. According to networking partners and industry experts, over 10 TB of data was transferred during Super Bowl 50. Levi’s Stadium also set a record for Wi-Fi speed in a stadium, hitting 3.67 Gbps and continuous speed for 3.0 Gbps for more than four hours.

In terms of users, the app saw a 46% adoption rate, and 3,284 food and beverage orders were placed, up 67% from the previous high, with a median time-to-deliver drinks to fans in their seats at less than 10 minutes. The stadium also saw strong purchases for mobile merchandise, selling out inventory before kickoff with an average order size of $212, compared to the previous best of $77 at a concert event at the stadium.

“The performance of Levi’s Stadium’s connectivity was nothing short of amazing,” said NFL chief information officer Michelle McKenna-Doyle. “It blew away all our previous records and provided strong consistent connectivity for our fans to share their memories. We were very pleased.”

As the at-home experience becomes more “real”, stadiums are developing experiences that attempt to lure fans away from their big screen TVs and surround sound systems. An integrated mobile app is a feature other stadiums are taking a hard look into. After its work in San Francisco, VenueNext has already signed agreements with the Orlando Magic, Minnesota Vikings, Dallas Cowboys, and New York Yankees to develop new stadium apps.

Mobile payment capabilities and the integration of in-seat delivery are important parts of the fan experience stadiums want to provide. The comfort of food and drink delivery is great for fans and increased revenues are great for the stadium. As more venues integrate mobile payments and unique apps, it will be interesting to see how much of a staple a solid mobile app will become to arenas. Soon, the integration of mobile payments into stadiums may be as important and common as the Jumbotron.

Photo credit: brandonzeman via VisualHunt / CC BY-SA

Hi Five! The five fintech stories we’re following this week

5 trends we're tracking in finance

Forget DIY banking. Build your own bank.

More banks are creating interfaces for startups and other fintech partners so they can connect directly into their plumbing. Rather than weaken the role of the incumbent financial institution, this platformification of banking re-entrenches the bank at the center of financial services. In this setup, the bank manages the UI and customer experience, plugging in partners’ technology and services via APIs.

Alas, this type of model means that banks can afford to get slimmer – Radius Bank recently closed its branches. The industry is already on an employee diet, shedding branches and people with them. With up to 50% of the global financial services workforce at risk of losing their jobs, it begs the question. What should the industry do with all these people?

PayPal, powered by Visa, coming soon to a store near you.

A new deal with Visa paves the way for PayPal to enter into retail. PayPal will no longer discourage customers from funding accounts with a credit card. Interesting move by Visa, for sure, but it brings PayPal closer to being a true competitor in the digital wallet space, according to Tradestreaming’s Josh Liggett.

For PayPal users, that could mean more time spent fumbling with the new-fangled credit card reader in a store. Go ahead and spend with wild abandon, though. The CFPB wants to shield consumers better from creditor calls with new regulations it’s working on. All’s good — the agency really just wants consumers to pay what’s rightfully theirs to pay.

Those wacky hedge funds.

Hedge funds are interesting beasts. In a way, despite their antics, they provide windows into understanding our own humanity. That’s why this story, about sex, fear, and video surveillance at Ray Dalio’s shop, the massive Bridgewater Associates, is particularly scintillating. Beyond the he-said, he-said, Dalio likes to emphasize his firm’s radical transparency. But one employee said in a complaint earlier this year that the hedge fund was like a “cauldron of fear and intimidation”.

Across Connecticut, Steven A Cohen’s hedge fund family office, Point72 made a bet on a startup fintech firm, Quantopian. For its part, Quantopian lets people build their own quantitative investing strategies and make money by licensing these algorithms back to the firm, which invests in them. The equity investment for Cohen was relatively modest, but his firm pledged up to $250 million to be invested in Quantopian strategies in a move that illustrates a growing interest in quant strategies for some of the largest asset managers.

As Goldman Sachs enters online lending, peer to peer lending is dead.

“The little guy’s opportunity to earn yield like a Wall Street bank has been replaced with actual Wall Street banks,” wrote deBanked’s Sean Murray. GS is set to enter the online lending space and with that, the excited, democratic ethos behind peer to peer lending is all but gone. In its stead are traditional financial services moving into this new online domain. Distributed, personalized capital sources have been replaced with large lines of credit and lending facilities.

Prosper is said to be pitching a fund that would invest in its loans. Executives are meeting with potential clients this week to pitch the Prosper Capital Consumer Credit Fund, according to a person familiar with the matter who asked not to be identified discussing confidential talks. The fund’s managers are targeting returns of 6 percent to 8 percent. Not sure of those returns? Here’s why marketplace lending fund returns don’t look good.

Everyone’s getting in, online

Not everyone has gone whole hog over fintech. Some firms have taken their time, dallied in a partnership or two, before launching a full-fledged online offering. Fidelity fits that bill, launching its own retail robo offering, Fidelity Go, after breaking up with standalone roboadvisor, Betterment.

The mortgage industry is also finally finding a way to really embrace the web and not just for lead generation. A whole slew of firms are finally working on improving the home buying process –  75 percent of home buyers would use online mortgages if they knew they could speak with someone when needed. “I was frustrated by how offline, opaque and inefficient the mortgage application experience was,” said Rajesh Bhat of Roostify, one of the new upstarts.


Powered by Visa, PayPal comes to a store near you

Late last week, Visa and PayPal announced a new partnership, granting the former eBay subsidiary easier account funding options and a foothold into retail payments. The alliance ends the long-standing fight between PayPal and Visa, curtailing PayPal’s previous tactic of discouraging customers from funding their accounts with a credit card.

PayPal had a habit of pushing users to fund accounts via bank accounts, known as ACH, instead of credit cards, in an effort to avoid higher transaction fees that come with credit card processing. Visa hasn’t appreciated PayPal pushing customers away from credit cards. At JP Morgans’s Technology, Media, and Telecom Conference in May, Visa CEO Charlie Scharf called PayPal a “foe”, challenging PayPal to change tactics, or face the consequences.

“We’d love to figure out a different model with them where it’s consumer choice first where they are not disintermediating,” said Scharf. “If we can figure that out with them great we’ll think of them more as a partner they need to do things differently in order to do that. The other door is where we go full steam and compete with them in ways that people have never seen before because you’ve never seen us go target PayPal in the marketplace in any meaningful way.”

The partnership with Visa introduces new mobile payments capabilities for PayPal. Customers with Visa debit cards can now deposit and withdraw funds between their accounts. Previously, it took around a business day to transfer funds in and out of Venmo and PayPal, but with the new agreement, users with Visa debit cards will have instant money transfers.

The deal also paves the way for PayPal’s entry into the Visa Digital Enablement Program. By entering into VDEP, PayPal can use the Visa Token service, making it a viable payment option at all retailers using the Visa contactless payment.

“Giving consumers choice in how and where they pay is essential to our goal of being a customer champion and we welcome the opportunity to work with more partners like Visa who share our vision,” said Dan Schulman, PayPal president and chief executive officer in a recent press release.

The mobile payment war for a share of the retail payments market is being waged between Apple, Google, and Samsung, but with its new partnership with Visa, PayPal becomes another formidable mobile payment competitor. A more seamless Venmo integration also sets PayPal up nicely in mobile payments.

“The value proposition for brick and mortar merchants is pretty exciting, since customers will now have the ability to pay with via PayPal seamlessly.” said David Datny, fintech consultant and former product and growth manager at Fundbox. “Customers who had once used PayPal simply as a payment option once in a while when they transacted on online sites which offered PayPal will be able to pay with PayPal daily almost anywhere where Visa is accepted.”

It remains to be seen, though, if  users will chose PayPal over other payment options. “Time will tell if customers will want to use their PayPal or Venmo accounts to pay for goods and services in the offline world, but if they do, it will surely be a big win for PayPal,” he concluded.

The partnership also benefits Visa in a few ways. First, it may encourage more users to use Visa debit cards to take advantage of the integration. Second, PayPal will no longer encourage Visa cardholders to use ACH over Visa credit and debit cards. Finally, the integration should bring more credit card transaction volume to Visa and help Visa gain market share.

Analysts have come out on both sides as to who benefits most from the deal, as well as the short and long term financial implications of the partnership. Patricia Hewitt, CEO of PG Research & Advisory Services, feels that while the short term benefits may swing Visa’s way, PayPal may be the long term winner. “While on the face of it, Visa has tipped the scales to increase market share of net new transactions and financial institutions have the opportunity to shift transactions from the expense-side (ACH) to the income-side (debit), the long-term benefit may be for PayPal,” Hewitt said.

PayPal’s intention is to build out a financial hub and will have to make more deals like this one to stabilize its financial services platform.  “That’s not possible without network transactions in the mix, solving for real-time clearing, smoothing out their POS experience, and overcoming barriers to depository accounts in other countries,” explained Hewitt. “This deal, and perhaps those to follow with other networks, is one of the critical channels to make this strategy a reality.”

Photo credit: Janitors via Visualhunt / CC BY

Hurry up and wait: Chip and PIN payment technology in the US

emv stalls in the US

U.S. retailers are increasingly unhappy with how the adoption of so-called chip and PIN credit cards is playing out in the market, and it’s not simply because the uptake has been slow. It’s because retailers feel the card companies themselves, worried about competition and profits, haven’t actually been encouraging the use of PINs, which allows for the most secure processing of card payments.

Last month Walmart, the largest U.S. big-box chain, sued Visa for allowing customers to simply sign their names rather than enter PIN numbers when using a microchip-enabled debit card.

In its lawsuit, Walmart says that by not requiring those using chip-enabled debit cards to enter a PIN, Visa, the largest issuer of credit cards in the United States, is robbing customers of added security. Walmart also accuses Visa of taking financial advantage of merchants, as transactions processed via signature often have a higher fee than those processed via PIN code, according to media reports.

Retailers have invested in chip technology

Walmart’s concerns are felt by merchants across the board, especially after they have invested in the new equipment required to read the chip cards. The Merchant Advisory Group, a trade organization that represents large U.S. merchants and is dedicated to improving the payments field, recently asked federal auditors to look into the legality of card-issuers, including Visa, of not requiring PINs for purchases made with chip-enabled debit cards.

“Merchants want issuers to enable PINs on all financial products because they are a form of multi-factor authentication that only the account-holder knows, and that ultimately helps prevent against fraudulent transactions,” said Liz Garner, vice president of the Merchant Advisory Group. “Not having a PIN associated with a card or an account would be like asking someone to sign into their email with just their email account and no password.”

Chip and PIN credit cards, also called EMV cards, which have been in use in Europe for a decade and a half are still relatively new in the U.S. market, which only began switching to the model last year, when new regulations shifted the liability for fraud damages to the party with the lowest level of security technology, whether that be the merchant or bank.

How chip and PIN works

In addition to the traditional magnetic strip across the back, the cards contain a small, embedded metallic-looking microchip, which can be read by a special machine. To complete the purchase, customers must also input a four-digit PIN or sign their name while the card is being read. The chip is more secure than the magnetic strip because it allows information to be encrypted and less accessible to hackers. The PIN then adds another layer of security.

According to the U.S. Federal Reserve, chip transactions accompanied by a PIN are seven times more secure than those processed with a signature.

The Retail Industry Leaders Association, another trade group representing merchants, is also pushing for the required use of PINs, calling the use of chip-and-signature cards “a half step.”

The pressure seems to be up on card companies, with the CEO of Discover Card stating at a conference in May, days after Walmart sued Visa, that the card-issuer would consider requiring PINs, even though its website currently states there is “no PIN required except at ATMs.”

A slow rollout

While most European and Asian markets almost always require PINs, the EMV chip system was designed to be flexible, according to each region’s needs, leaving it to regulators and market forces to decide if signatures or PINs should be required.

“The EMV Chip Specifications provide a comprehensive toolbox to help payment networks and other industry participants throughout the world,” Sarah Jones, a spokeswoman for EMVCo, an organization made up of six major credit card companies, including Visa and MasterCard, to facilitate worldwide acceptance of secure payment transactions, wrote in an email. “The specifications are designed to be flexible and can be adapted regionally to meet national payment network requirements and accommodate local market needs.”

EMVCo. is not involved in setting policies about whether PINs should be required, Jones wrote.

Other concerns about the change-over to such cards include the fact that most people have not even upgraded to these cards, and questions linger about their ultimate relevance in a world where mobile phone payments may be just around the corner to becoming mainstream.

Only 1% of card transactions in the United States in 2015 were with chips, compared to 97% of transactions in Europe, according to EMVCo., an industry organization comprised of credit card and other payment companies. And only 37% of merchants in the United States have purchased the equipment to process the cards, according to a survey by The Strawhecker Group.

The U.S. market accounts for about half of all credit fraud, and this is mainly due to the lack of chip-enabled cards in the market there, according to the Nilson Report, a trade newsletter covering the payments industry.

Competing technologies

The change-over to chip cards also comes at a time of increased volatility in the sector, with new mobile and contactless payment methods being introduced. So in addition to the migration to chip and PIN, credit card companies are occupied with figuring out whether these new systems are threats or opportunities, and are investing heavily in developing their own innovation, according to analysts.

“The next five years are likely to see rapid changes in the nature of the payment business as cards are slowly replaced by electronic payment methods,” Jim Sinegal, an analyst at Morningstar Equity Research wrote in a recent report on Visa.

But the adoption of these mobile and other alternative pay systems has been slow, with cards still remaining the most common way to pay. Because of this, and the rising stakes in preventing fraud, merchants say the use of PINs in place of signatures is more important than ever, and they would like banks and credit card companies to work harder to increase the use of PINs.

“At the end of the day, a transaction where a PIN is entered is way more secure than signature,” Garner said. “And if Walmart or any other retailer wants to require a customer to enter a PIN when it’s available on the card, they should be able to do so as it will help mitigate overall fraud in the system.”

Photo credit: Miradortigre via Visualhunt / CC BY-NC

High Five! The top 5 fintech stories we’re following today

5 trends we're tracking in finance

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletters .[/alert]

1. What’s the fuss about LendingClub?

The largest U.S. marketplace lender is in a whole lot of trouble. It’s unclear whether LendingClub’s current financial troubles are a result of the shady dealings of its (now ex-) CEO Renaud Laplanche or whether it’s a broader company issue. Either way, it’s a big deal. Here’s why.

2. How DailyWorth turned a newsletter into a roboadvisor for women

It’s a good time to be a woman investor. At DailyWorth, founder and CEO Amanda Steinberg is using the data amassed from her 7 year relationship with her 1 million newsletter subscribers to develop a roboadvisor to help women become smarter investors. DailyWorth’s wraparound roboadvisor service, which provides financial education, guidance, encouragement, and even some humor, is just one in a series of new fintech initiatives to empower women. To get your full girl power fix, read on about SHE: The ETF that trades on Female Empowerment, and Ellevest, Sallie Krawcheck’s new digital investment platform that wants to change how women manage their investment strategies.

3. Big banks stake fintech claims with patent application surge

Big banks are getting into the fintech frenzy by … filing patent applications.  The prominent financial institutions are firing off patent applications on technology that has already been integrated into existing products, speculative products, and up and coming key technologies. Just how many patents are we talking about? Since 2013, big banks have filed a whopping 2,679 patents (at least!) in hot areas such as blockchain, analytics and cybersecurity, a surge of 83% from the prior three years. These patents, when granted, would allow big banks to protect their innovation investments. However, this tactic comes with a price. Many of the technologies that big banks are trying to patent are network-effect technology; the more walls big banks erect, the less these technologies are able to grow.

4. How Charles Schwab fought back against roboadvisors

In June 2014, roboadvisors and the startups launching them were looming large on the investment horizon. Instead of hiding its head in the sand, Charles Schwab decided to embrace this new technology by creating its own roboadvisor service, Schwab Intelligence Portfolios, within the year. Here’s how Schwab did it. By using questionnaires to gauge clients’ investment goals, risk comfort, and a number of other factors, Schwab Intelligence Portfolios matches clients with investment portfolios tailored to their individual investment profile. However, according to Michael Kitces, Schwab may have to make some adjustments to the service fairly soon, in order to comply with the upcoming DoL fiduciary rule.

5. Why it’ll be Visa and MasterCard – not tech start-ups – that truly disrupt banking

Credit cards hardly seem disruptive – maybe because they’ve been around since the Roaring Twenties. Nevertheless, Alexander Vityaz argues (persuasively, we think) that credit card companies are already leading a quiet revolution in the finance industry. Thanks to their global, digitalized presence, Visa and MasterCard are slowly transforming into banking corporations, leaving banks acting like subsidiaries of the credit card companies. At the end of this process, Vityaz sees banks becoming faceless utility providers, much like your electric or gas company.

Photo credit: Loozrboy via Visual hunt / CC BY-SA

New technology turns smart cars into payment devices

payment technology turns the car into a credit card

Payment technologies in cars have gained a lot of momentum in the past few months. From the recent successes of Uber, GetTaxi, and Lyft, to the prospective idea of a fleet of driverless Tesla-Uber vehicles, financial technology companies have been able to enter into the taxi world through providing payment services. However, the establishment of strategic partnerships in the last year has given insight into a new, and bigger, concept: Turning the personal automobile into a credit card.

MasterCard and the payment key fob

Mobile payment companies have entered the personal automotive market in two distinct ways. The first is turning the key fob into an Internet of Things (IoT) item. By embedding physical objects with network connectivity in order to exchange data, normal objects are transformed into payment devices. MasterCard, using its Digital Enablement Service, has partnered with General Motors to release an IoT key fob in 2016. In this alliance, MasterCard has partnered with a multitude of companies in various sectors, including fashion (Adam Selman), wearables (Ringly and Nymi), auto (GM) and tech (Qualcomm, NXP, and TrackR). Through this partnership, MasterCard has broadened its Digital Enablement Service product line, allowing customers to pick a more specific wearable that fits their needs and desires.

MasterCard’s partnership with GM is an excellent way to capitalize on current products and technologies. However, it’s more focused on providing customers with “another” way to use payment services on the go, not turning the car into a credit card. With that in mind, we move to the second way mobile payment companies are entering into the automotive world: Turning the car itself into an IoT object.

Turning the car into a payment device

Visa unveiled a new partnership with Honda and ParkWhiz at the Mobile World Congress in Barcelona earlier this year. Visa is providing accessibility to its Token and Checkout services to Honda, integrating one-touch payments into the car dashboard/head unit.

While both the Visa dash unit and MasterCard key fob allow payments on the go, that’s where the comparisons end. Honda has developed two apps, allowing consumers to purchase gas, convenience items, and public parking time while remaining seated in their car. Due to the full-dash integration, the apps/Visa have seamless access to the consumer’s car. When low on fuel, the car provides an alert and GPS guidance to the closest gas station, the precise amount of fuel needed to fill the tank, and automatically pre-pays the exact fuel cost at the pump.  Instead of waving an IoT device at a hotspot on the pump, the whole transaction takes place on the car dashboard, turning the vehicle itself into a mobile payment platform. The three companies are aiming to start product testing later this year.

Apple’s a dark horse

There is another company that may be attempting to accomplish the goal of turning the car into an IoT object: Apple. There have been countless reports about Apple’s “Project Titan,” including hiring employees from Tesla, strange noises coming from Apple’s Sunnyvale complex, and even a “secret car lab” in Germany. Although there is no confirmation that the project even exists, it can be assumed that Apple will integrate its Apple Pay system into the car’s dashboard.  Unlike Honda, Apple would be able to work straight with app developers in order to maximize the potential of an IoT car. With Apple’s already established mobile payment system, the transition into the car dashboard seems like a smooth and easy concept.

Although nothing tangible has been released for public use, the concept of an integrated payment system in the dashboard of the car is enticing for both consumers and business alike. Once the integration into the car dashboard has been smoothed out, the opportunities for strategic partnerships are vast. Companies will have to make strategic alliances similar to Visa and Honda, leading to opportunities for financial technology companies to link as many services together and to become assets to car manufacturers.

Sky’s the limit

Other than the gas and parking examples, which companies are already working on, other use cases include:

  • Purchasing food from a restaurant while driving there, and the kitchen being informed of when to cook the food in accordance with traffic and arrival time
  • Purchasing groceries while driving to the supermarket, while the supermarket knows when you will be arriving to allow curbside delivery
  • Emergency mechanical situations, where the car guides the driver to the nearest mechanic, with the part needed to be fixed already waiting and paid for before the car arrives

Although these examples seem incredible, some people may not be comfortable with having a fully integrated IoT car. For those who don’t embrace this concept, they can still use products like MasterCard’s key fob to pay on the go. However, an IoT car may be essential for many purchasers in coming years. This level of connectivity may be a deal-breaker for millennials, the next generation of car buyers. Especially with connected cars, the integration of in-dash payment processing may be a requirement for car companies to maintain market share. The next “most popular car” may be the one that best turns the car into an IoT object, providing the best services for on-the-go payments. However, if companies continue to team up and innovate together, we may see some truly remarkable features in the next generation of IoT automobiles.

Photo credit: steakpinball via Visual Hunt / CC BY