Electronic & Mobile Payments

Indian Bank Regulation Throws Roadblocks for Mobile Payments

2008-09-22T10:25:00.003-05:00

The Reserve Bank of India (RBI) issued anxiously awaited guidelines on Friday detailing what banks in India must do in order to offer 'mobile banking' services. The RBI had previously issued a moratorium in July on the offering of such services while it finished its recently published guidelines.

Mobile payments companies have been springing up around the globe, including Europe, Africa and Asia, in addition to the American versions. Several companies, including, "mChek, Paymate and Obopay are in the final stages of developing their micro-finance offerings, while fine-tuning their tie-ups with various MFIs to launch mobile-based financial products."

The RBI draws a distinction between 'mobile banking' services that are being offered including "balance enquiry, stop payment instruction of cheques,
transactions enquiry, location of the nearest ATM/branch etc...Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favor of pre-registered beneficiaries" For the purposes of its guidelines, "“mobile banking transactions” is undertaking banking transactions using mobile phones by bank customers that involve credit/debit to their accounts. It also covers accessing the bank accounts by customers for non-monetary transactions like balance enquiry etc. "

The Hoops & Limits

The RBI created a number of hoops that must be jumped through in order to begin offering 'mobile transaction' services:

Only banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile banking services....Only banks who have implemented core banking solutions would be permitted to provide mobile banking services. This means that mobile banking operators outside the country of India will be unable to provide services to specific banks. Rather, they are likely to be forced to white-label or license their applications to the banks before the services may be offered. FURTHER, the service provider must actually be a bank regulated within the country of India rather than just an external service provider.
The services shall be restricted only to customers of banks and holders of debit/credit cards issued as per the extant Reserve Bank of India guidelines. In other words, if you don't have an India-based account, you are out of luck.
Use of mobile banking services for cross border transfers is strictly prohibited. This requirement will limit the attractiveness of the Indian market. Companies outside the country wanted to get into the remittance game of Indians working abroad and sending money home. The inability to offer cross-border accounts from banks in the US to banks in India limits the transaction volume.
Banks shall put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service. This will limit the use of the Internet to sign up customers for 'mobile banking' services.
It is necessary that the mobile banking servers at the bank’s end or at the mobile banking service provider’s end, if any, should be certified by an, accredited external agency. This simply creates an added level of bureaucracy within the Indian government, and additional costs for the mobile banking service provider.
A per transaction limit of Rs. 2500/- shall be imposed on all Mobile Banking transactions. Subject to an overall cap of Rs. 5000/- per day, per customer. In other words, <$100 per day per customer overall.

RBI Says 'Jump'

The RBI has set up obstacles to international services to provide mobile banking solutions, requiring payer and payee have Indian accounts at Indian banks, and the money is moved by an Indian-based service, prohibiting cross-border transactions. Combined with the transaction limit, the speed and size of the Indian-based market is likely to be hindered.

New Mobile Payments Services Revive Old Model

2008-09-09T09:41:00.008-05:00

A number of new mobile payments services have been born recently, three of which have revived the model of Simpay - a defunct/reborn joint venture between Orange, Vodafone, T-Mobile and Telefónica Móviles - that attempted to create a pan-European text messaging payments standard.

Evolution of a Model

Simpay dissolved in 2005, when T-Mobile defected from the venture, but it reincarnated two years as PayforIt.

Simpay's business model is fairly simple - create a micropayments service that leverages the millions of mobile phone subscribers, allowing them to charge these sums (less than 10 Euros) to their existing cellular provider's bill.

SimPay never got off the ground because, "It was rumoured that the operator had concerns about the way the system was integrated with handsets and other payment systems," according to Finextra. As a result, Simpay went defunct, but Payforit has now emerged in its place.

PayforIt is now an option for online and mobile transactions for the 52 million mobile subscribers in the UK. New billers have to apply with each of the carriers to gain access to the new standard.

Micropayments of <10 Euros necessarily constrains purchase size and makes this purchase method most useful for digital content downloaded directly to the phone including song, premium data subscriptions, or potentially videos.

Newest Entrants

Three new companies have launched that mimic the model of SimPay/PayforIt.

Zong

Zong just launched at the TechCrunch50 conference in California. Zong's model is almost an exact replica of PayforIt's. Zong has created a REST API that allows developers to plug its payment system directly into their back ends.

Zong works with 55 carriers in 12 countries, but has two big drawbacks from what we can tell: revenue and time to collect. According to their site, you net $0.58 on the $1.00 for every payment through Zong. That is a painful amount of rent to extract before paying for any of your overhead (CAPEX, bandwidth), input costs, and labor. While it's true to some extent that digital content has limited marginal costs, where content is KING, it is expensive, and this increases the break-even sales point for whatever product you're selling.

The second problem is that Accounts Payable time period, and only once a site has reached over 100 Euros. According to their site,

"Payout is made once the amount payable has reached 100€ and around 75 days after traffic dates. Why so long?

Mobile network subscribers pay their mobile operator within 30 days. The mobile network operator pays Echovox within 30 days. Echovox pays you - a Zong client within 15 days. (30+30+15=75) "

Paymo/Mobile Merchant Services

Paymo/Mobile Merchant Services was founded by the mBlox executives. mBlox was one of the first "short code" text messaging marketing solution services. Paymo is virtually identical to Zong, with the same shortcomings.

According to their website,

" What are the costs ?

mMS charges a % of the transaction fee - typically 10% - depending on the volume of transactions you process each month. If you choose the Individual account you can get started today and there is no Setup charge and no Monthly fee.

The main costs of a mobile payment are the fees taken by the mobile carrier. In some markets the carriers take as much as 50% of the transaction value. With Paymo, you can choose to pass some or all of these costs to the consumer as a surcharge. In this way you can still get as much as 100% of the list price of the item you are selling.

How do I get paid ?

We will pay you the money for the transactions processed using Paymo. Payments are typically made monthly. The first payment will be made once you have passed a minimum revenue level and we have received the money from the mobile operators.

When do I get paid ?

We will pay you within 10-15 days of receiving money from the Paymo network. This timing is driven by mobile carrier payment cycles and varies by market. Some markets settle within 30-45 days, other markets can take several months."

mGive

mGive is a mobile donation service providing a tool to process mobile donations for non-profits and 501(c)3 organizations. The service is particularly useful in large groups, such as concerts, where Eddie Vedder says "Text DONATE to 12345" and raises tens of thousands of dollars within a few minutes.

mGive has virtually the same model as all of the companies mentioned above. However, the company's pricing model is more complex. Donations are limited to $5 per transaction, and the company takes $0.25-0.50 depending on volume. Then, the 'Mobile Giving Foundation' takes another $0.50. Add to this $100 setup fee, and a monthly service fee of $250-1,250 related to the text messaging and web features, and the non-profit is getting 80-85% of the donations minus more operating fees and their upside is limited to the $5.00 units, and the funds are held for 60-90 days for the same reasons as the other companies.

Mpayy Mobile Payments - Faster, Less Expensive & More Secure

Each of the companies listed above is an intermediary providing a mechanism for billing charges to users' cell phone bills. Their use of the cell phone carriers results in exhorbitant rents being extracted from the merchant or non-profit organization, and significantly eroding margins. Further, the time to collect for these solutions is likely to be unacceptable to many merchant/content solutions. The transaction size and volume will also continue to be limited by the carriers' willingness to float the credit risk.

Mpayy has one challenge vs. these companies - Mpayy requires a subscription before users can make payments to merchants or charities. However, once a subscription is opened, Mpayy is the least expensive, most secure, fastest solution out there. At just $0.20 + 2.00%, Mpayy Mobile Merchant accounts enable 0% fraud liability transactions from any mobile-web enabled cell phone. Further, those funds are available for withdrawal within just 48 hours from Mpayy's advanced Cash Management console.

Mpayy also offers enterprise ecommerce payment solutions as well as secure payments through social networks.

Mobile Phone Sales Not Insulated from Consumer Downturn

2008-08-19T11:31:00.002-05:00

The NPD Group released data today revealing a 13% year over year drop in unit sales of mobile phones in the United States. 28 million units were shipped, though sales were down just 2% to $2.8 billion.

NPD's numbers confirm the data discussed here that there is a rotation towards SmartPhones. 28% of the phones sold in the second quarter had a QWERTY keyboard, vs. just 12% in the same quarter of 2007. Smartphones comprised 19% of all total phones sold in the quarter, up 9% from the same quarter a year ago.

The average selling price of handsets was up year over year, but down $3 from Q1 2008 to $84.

Two hypotheses for this change are as follows:

- Consumers are squeezing more out of their phone the same way they are with other parts of their wallets
- Phones are getting more sophisticated and durable

The move to SmartPhones continues to benefit Mpayy, as Mpayy's secure payment accounts can be accessed from Mpayy's website, Mobile website, or social networks like Facebook and MySpace.

Reconciling Consumer Crosswinds

2008-08-13T14:48:00.006-05:00

Frequently, in his space, we discuss both the online and offline retail spaces as Mpayy's secure online shopping system relies first and foremost on the consumers' willingness to go shopping. However, beyond transactional data released by the Commerce Department and Comscore, there are other tea leaves that we can read to get a view into the consumer's plight.

Today we look at real estate and credit card transactions.

Underwater Real Estate

Zillow.com is an innovative online real estate research and data website that provides holistic views into cities and neighborhoods for consumers. Home-shoppers use the site to look at purchase data of homes near the addresses the potential buyer is considering. To do so, Zillow has to track publicly available purchase data nationwide.

Zillow released its Real Estate Market Report yesterday. According to Dr. Stan Humphries, Zillow's vice president of data and analytics, ""The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets. The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss." His prognosis is not rosy, predicting that "most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."

Zillow's press release mentions, "For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively."

In other words, the investment with the best track record of creating wealth, and most home-owners' largest investment is now a massive liability with exit scenarios that force a loss. Most home-owners save up for a substantial period of time before purchasing a home, and it will take time after those losses are booked before those folks are back in an equally financially healthy position they were before the purchase. This will have material consequences for discretionary spending for the foreseeable future.

Growth in Expenditures Benefits Payment Processors

Amidst the consumer damage resulting from the bursting of the real estate balloon, billions have been written off the balance sheets of banks related to illiquid auction rate securities, foreclosures, losses on home sales and defaults on credit card balances, there is significant strength among the payment processors. The American consumer continues to spend.

The chart below displays the payment processors versus the pure play credit card issuers.

However, the pure play payment processors are exhibiting unbelievable growth. MasterCard has skyrocketed over the last year, and Visa has demonstrated incredible strength since its IPO earlier this year. Visa demonstrated 8% year over year volume growth in its credit card volumes in the US and 28.5% in the rest of the world. Visa also reported more significant strength of 13.6% in its debit card volumes in the United States.

Mpayy's secure online payment processing system is a debit instrument that allows shoppers to pay online with their checking accounts. Mpayy saves the retailer money, guarantees payments and eliminates fraud liability. Shoppers receive enhanced security and cash back guarantees on top of expanding their ability to send money to their friends and family for free anywhere in the US.

Much Ado About eCommerce

2008-08-05T10:01:00.007-05:00

With brick & mortar retail sales demonstrating a paltry 0.1% growth in June, artificially supported by rising gas and food prices, there is a concerted move among big box retailers to enhance their online sales presence.

Comscore reported last week that ecommerce sales continue to refuse to succumb completely to the weakness of the American consumer. The rate of growth has fallen by 50% year over year, but ecommerce spending continues to demonstrate growth in the low double-digits. There is faint hope that the stimulus checks will continue to provide further boost to online retail spending.

Retailers are demonstrating that the lesson of this divergence between the growth prospects of online and offline sales is not being lost on them. Internet Retailer notes that, "At Sears Holdings Corp., same-store sales at Sears and Kmart retail chains declined 8.6% for the quarter that ended May 3, the company lost $56 million and shuttered 62 stores, yet the company increased investment in its online and multi-channel operations by $10 million."

Shop.org, the online arm of the National Retail Federation & the e-tailing group have each published white papers concerning the focus of those eCommerce investments in "The State of Retailing Online 2008" and "Investing in eCommerce, Despite the Times", respectively. Universally, there is a great deal of focus on improving on-site merchandising tools, including search, personalization, and integration of product presentation for the online and internet spaces. From the e-tailing group's document:

Opportunity for Mpayy

According to Shop.org, which conducted the research in conjunction with Forrester Research, more than 75% of retailers cite the Checkout Process as a tactic and investment priority. Of that group, 80% want to improve their shopping cart page; 79% want to improve their checkout process; and, 57% want to include "Third-party Email Payment" capabilities.

Mpayy is in finishing stages of launching its Lightbox Checkout Window that will streamline the checkout process for its online retail partners. (Check back for sneak peeks.) Mpayy's offer for online retailers enables them to reduce cart abandonment and growth their sales online.

Mpayy is a secure online & mobile payment processing system that processes payments from shoppers' checking accounts at a 50+% discount to credit cards. Mpayy provides 0% fraud liability for retailers, and guarantees payments. The application is developed by and housed at US Bank (NYSE:USB) in an environment that meets PCI DSS standards, and is compliant with USA Patriot Act, OFAC, Reg E and Reg Z.

CardLine/CardForum Article

2008-07-15T10:11:00.001-05:00

Below is the article that was featured in CardLine/CardForum.

MPAYY SEEKS GROWTH AFTER SECURING ADDITIONAL FINANCING
Mpayy Inc., a Chicago-based alternative-payments company, says it will use
additional funding from U.S. Bancorp to grow its e-commerce, mobile commerce
and widget-based payment services. Minneapolis-based U.S. Bancorp also
provided Mpayy with funding last year. ³We want to tap into larger
retailers,² Conrad Sheehan, Mpayy founder and CEO, tells CardLine. ³They
have not been as aggressive in adopting alternative payments, and for a lot
of good reasons. Any retailer should be extremely comfortable with running
high volume through our platform.² Launched in the first quarter, Mpayy says
it provides consumers, small businesses, Internet retailers and charities
with a variety of payment options. Consumers may make person-to-person funds
transfers through Mpayy¹s online and mobile Web sites and by using a
social-networking widget found on Facebook and MySpace. Consumers can pay
for goods by linking a checking account to Mpayy. Small businesses and such
independent salespeople as taxi drivers and flea-market vendors can use
Mpayy¹s mobile-payment capability to turn their mobile phones into
point-of-sale terminals. ³It works on all phones, but it¹s particularly
tailored to the most-popular devices,² Sheehan says. New York-based charity
Alliance for Lupus Research uses Mpayy¹s widget on social-networking sites
to obtain donations. Sheehan claims Mpayy offers retailers a processing
platform that is ³50% to 60% less expensive than card-based processing.² The
company also is touting Mpayy¹s security. ³We exceed all PCI standards,²
Sheehan says. ³Retailers don¹t have to worry about storing any data because
that information is hosted on servers by U.S. Bank.²

American Banker's "Mobile Banker" Feature

2008-07-10T10:56:00.003-05:00

Mpayy is excited about a feature we received in the American Banker today. It can be found here. Registration is required, but they have a two week free trial with no need to input a credit card.

Enjoy!

American Banker
Its Testing Done, Alt-Pay Start-Up Faces New Tests

American Banker | Thursday, July 10, 2008

By Steve Bills

Mpayy Inc., a new entrant in the alternative payments space with backing from U.S. Bancorp, is hoping that its combination of e-commerce, mobile technology, and automated clearing house services will help it stand out in an increasingly crowded market.

The Chicago company announced Wednesday that it had closed a funding round led by the Minneapolis banking company.

Conrad M. Sheehan, Mpayy's founder and chief executive, said U.S. Bancorp had also led an earlier funding round, last year, but he would not disclose the amount of funds raised.

Mr. Sheehan said his company has intentionally been keeping a low profile. "We're very focused on designing and building a great product without putting too much attention on us too early," he said in an interview Wednesday.

But after testing its Internet and mobile commerce technology since early this year, Mpayy is now ready to begin promoting it actively, Mr. Sheehan said.

A U.S. Bancorp spokesman said the company would not discuss Mpayy, though Mac McCullough, an executive vice president at U.S. Bank and a director on Mpayy's board, said in the processor's press release that the banking company is "very pleased to continue with our role in Mpayy and continue to view it as an attractively positioned player in alternative payments with a compelling and unique value proposition."

Mr. Sheehan said that in addition to its financial backing, U.S. Bancorp is hosting Mpayy's applications in its data centers.

Mpayy is positioning itself primarily as a lower-cost alternative to credit cards for online merchants, using the ACH system as a way to beat payment card interchange expenses, Mr. Sheehan said. "It's more of an e-check platform. There's also a stored-value piece" for the unbanked.

Initial customers include Lawbooksforless.com and the Alliance for Lupus Research, which Mr. Sheehan said is using an Mpayy application known as a "widget" to add a payment system to social networking sites.

Mpayy's mobile payment capability uses the same secure Web interface but with a streamlined design, he said. "It turns your cell phone into a mobile point of sale."

Commercial users — such as taxi drivers, flea market sellers, and multilevel marketers who sell using the home party method — could save half or more compared to bank cards, and Mpayy offers free person-to-person transfers.

Big banking companies have begun placing some bets on alternative payment technologies. Bank of America Corp. last week took an equity stake in mFoundry Inc., a developer of mobile banking and payments software. Citigroup Inc. is pursuing a variety of strategies, testing mobile-phone payments with technology from Obopay Inc. and forming a joint venture with the South Korean wireless carrier SK Telecom Co. Ltd. to develop mobile technology.

Bruce Cundiff, a research analyst at Javelin Strategy and Research, said Mpayy could break through by offering its service online, on mobile devices and through social networking widgets.

"I like the fact that they are going after multiple markets here. They're not putting all their eggs in one basket," Mr. Cundiff said.

But like other entrants in the alternative payments market, Mpayy faces what Mr. Cundiff called a "chicken and egg" predicament in trying to develop both a merchant base and a customer base, similar to the issue that eBay Inc.'s PayPal unit faced in e-commerce in the early part of this decade before beating out rivals.

"Mpayy's key differentiator is being able to integrate with U.S. Bank's robust merchant services business," he said. "I think that dovetails nicely with U.S. Bank's merchant strategy."

© 2008 American Banker and SourceMedia, Inc. All Rights Reserved.

Hard Data on Mobile Usage

2008-07-09T13:27:00.003-05:00

Nielsen Mobile put out new data today based on a global survey of 1 million mobile subscribers' use of the web on their phones, and the numbers continue to point to a growth narrative that is one of the strongest in the American economy.

Monthly Usage & Upside

Nielsen's data demonstrates that 40 million Americans access the Internet via their cell phones as of May 2008, which is 15.6% of the mobile subscribers in the US. This data is very consistent with what the Pew Center found that we discussed here. However, even more exciting is the fact that fully 95 million Americans have access to the mobile web through their cell phone service provider either by directly paying for it, or bundled with their other services. That number is up 28% from Q1 2007, but still accounts for just 37% of the 254 million mobile phone subscribers in the US.

These numbers are very exciting for Mpayy demonstrating that the installed untapped base is already 55 million strong. Further, continued growth of the mobile web subscribers to even 50% will more than triple the number of users today. Mobile data packages account for $1.7 billion in annual sales, and the average subscriber is spending $11 on monthly data plans.

Specific Uses

Nielsen's data contradicts what we discuss yesterday, demonstrating that the iPhone is #2 in the device list with 4% penetration, still a ways behind the 10% occupied by the Motorola Razor.

As far as the specific browsing habits, Nielsen reveals that 40% of mobile Internet users find their favorite sites through search engines, and 22% type in the exact URL. Just 17% of users find their sites through carrier portals, a number that is likely to continue to decline as iPhone, SmartPhones and imitators continue penetration.

Further, 5 million users in the US are accessing mobile banking websites that mostly just allow them to view their account balances and make a few payments. This number shows massive potential for breakout for Mpayy's Personal accounts that allow electronic payments to friends and family as well as roving salespeople that use Mpayy's secure Mobile Merchant account. As you can see from the left, email, weather and sports continue to lead mobile web usage, but watch out for Mpayy!

SmartPhone & iPhone Penetration Continue

2008-07-08T15:07:00.003-05:00

This blog has covered mobile web usage growth as reliable numbers come out. A couple of interesting data points have been released lately that point to a high probability for the continuation of this trend.

SmartPhone Numbers

Nielsen Mobile put out numbers on SmartPhone penetration last week. The numbers are consistent with the Pew Research numbers we discussed here. Fully 63.9% of SmartPhone users are below 45, with 35.9% below the age of 35.

Further, focusing on this market exposes companies to some of the highest paid Americans with 35.1% having incomes over $100,000, according to Nielsen's data. These users are spending over $200 for their device and over $100 on their monthly plans, and 52% of those users are paying for the plans themselves as opposed to their companies remitting these fees.

Many Apples a Day

The Apple 3G iPhone launches on Friday, and though it is still 4th in the SmartPhone race, this year promises to be a barnburner. Apple expects to sell 5.1 million iPhones in Q3 2008 and another 6.5 million iPhones in the 4th quarter, according to numbers quoted by Silicon Alley Insider. Some analysts are estimating that Apple will sell 45 million iPhones in 2009.

SmartPhones and the iPhone are driving the move of functionality from the internet to the mobile web. As more and more of these phones come online, more people will begin to use Mpayy for free person-to-person money transfers, and independent salespeople and small businesses can use these phones as mobile Points of Sale. Check out our mobile website with advanced account management features.

Mpayy Widget Update - MySpace Approval, Embeddable Video Donation Widgets, etc.

2008-06-20T10:16:00.006-05:00

Payment Applications Live on MySpace

Mpayy's global headquarters are a flurry of activity preparing for a relaunch of the website next weekend that will demonstrate Mpayy's utility in specific instances, and be a far more engaging website.

In the meantime, Mpayy has been making more headway with its widget. Last week, I announced the launch of the Lupus widget on Facebook.

Since then, Mpayy's Mpayyment Widget, and the Secure Lupus Donation Widget have received approval on MySpace. Interestingly, we do not see quite as much uptake on MySpace as we do on Facebook, and suspect that MySpace may have fewer "joiners" than Facebook where users are accustomed to amassing groups and applications on their profiles. However, MySpace does seem to be a more commercial site than Facebook, and we do have some expectation that the Mpayyment widget will experience greater usage on MySpace where people already sell music from their profiles. We'll have to wait and see.

I will share that the process for getting approval on MySpace was far more arduous than for Facebook. Fox Interactive Media's regulations of applications on its platform are more restrictive, specifically when it comes to payment applications. The MySpace Developer Terms of Service note:

7.3 If your MySpace Application collects any payment or account information from Users you must comply with the then current rules and regulations of all payment networks you use and the Payment Card Industry Data Security Standards available at http://www.pcicomplianceguide.org/pci-basics.html. Such collection of payment or account information may not occur on a MySpace Profile or any page within the MySpace Website, but may occur on your MySpace Application Canvas Page if the Canvas Page is hosted outside of the MySpace Website (e.g., i-framed displaying information from a non-MySpace website).. In addition, you must clearly and conspicuously disclose that any such collection is directly by you, and not by MySpace or FIM.

We were very happy when we saw this, because it lends itself to the security infrastructure of Mpayy, although it did require some modifications to allow us to provide a logo that demonstrates that Mpayy is unaffiliated with MySpace and Fox Interactive Media, delaying our launch for a few weeks. However, given the universality of payment widgets, when we created it, we specifically decided to NOT ask for a password until the popup enables the user to see Mpayy's URL and Verisign logo, so they can validate they are not providing their credentials to a fake widget masquerading as Mpayy.

Video Donation Widgets - Political Donations, Charities

Mpayy is pitching a number of charities right now, and we created the widget below to demonstrate the capabilities. This widget allows charities to embed a video for users to see that may tug at the heartstrings and drive viewers to make a donation. Mpayy adds another $1 to the ALR for donations from new accounts through that widget. I anticipate we will move to a model similar to this when we get better video for the ALR.

However, as the election season heats up, and down-ticket campaigners try to capture some of the magic that the 'Barama' campaign has found, they should consider embedding inspiring candidate speeches in a widget like this to help drive donations. Almost all campaigns' online donations are credit card only, and check donations come through snail mail. Mpayy allows these parties to receive check donations online with 50+% savings vs. credit card, and to put this donation capability anywhere on the Internet. If you know anyone running, send them our way!

Reconciling Retail Data

2008-06-12T08:46:00.002-05:00

The Commerce Department reported retail sales numbers grew 1% in May, and revised April retails sales growth to 0.4%, up from the original estimate of 0.2%. This data is somewhat promising in light of the other troubles the consumer is facing - rising joblessness, falling home prices, and rising consumer prices including food and gas.

The retail sales report also demonstrated a 1.2% increase in sales among general merchandise stores, such as WalMart. Much of this spending increase could be related to the $300 checks received from the government stimulus package. Auto and home sales continued to show weakness in light of rising gas prices, and lends credence to the notion that much of the spending surge could be tied to the stimulus checks.

The promising retail data comes just one week after the Labor Department reported the largest one month increase in the unemployment rate to 5.5%, up from 5.0%.

There is some evidence that the offline world's performance can have some impact on the online world. TNR reports that online display advertising growth slowed to 8.5%, about half the pace of the previous year. Online advertising continues to grow faster than tv's, newspapers and other media. Similarly, non-store retailers - i.e. ecommerce and catalog companies - continue to maintain the strongest growth on a relative basis vs. other retail scenarios. eMarketer is forecasting that ecommerce sales will still top 14% in 2008.

Whether these online trends continue to be insulated from the offline trends will determine the overall economic outlook for 2008.

Join the Fight Against Lupus

2008-06-05T15:11:00.002-05:00

Mpayy has officially joined the fight against Lupus with the Alliance for Lupus Research. Together, Mpayy and the ALR are working to leverage Facebook traffic to fight against Lupus. See the ALR's donation widget at http://apps.facebook.com/curelupus.

Mpayy will match each new donation account with a $1 donation to the ALR.

As the Consumer Goes....Must eCommerce Follow?

2008-06-04T10:50:00.006-05:00

Endless Growth?

Last year, eCommerce sales grew 21.8% to $165.9 billion, vs and overall growth of just 3.9% for the broader retail industry. According to Internet Retailer, even big box retailers are turning to eCommerce sales more and more as that growth far outpaces the traditional stores, the share of revenues grows north of 30%. Even L.L. Bean, which made its bones through phone catalogue sales now counts almost 60% of their sales through their website.

Online sales continue to show growth this year in light of paltry overall economic growth of just 0.9% in the first quarter. According to Comscore, ecommerce sales are up an average of 12.5% in each of the first four months of 2008. The press release points out that after a weak March of just 9% growth, eCommerce rebounded in April to put in 15% year over year growth, though some of that may have to do with tax refunds hitting consumers' wallets.

The question is whether rising consumer prices that are compounding an already difficult economic environment will put an end to the growth in eCommerce. A gallon of gas is now at or over $4/gallon. Food prices are massively on the rise. Consumer confidence has fallen below 50 to 45.7 vs. 100 last September and 33.6% of the people surveyed anticipate a worsening business environment over the next 6 months according to the Conference Board.

Will retail in general and eCommerce specifically be able to sustain this growth?

What Do Payments Cost?

Internet Retailer digs into what the true costs of credit card processing are in attempting to educate its readers on how to pick among the various merchant acquirers. IR counsels that the Base rate, which is the rate many people think they're actually paying for each transaction, can be misleading. There are so many fees that go into credit card processing that the Base Rate can be less than half of the overall rate a merchant pays for a transaction.

Rates paid by merchants vary with the type of card, and the Interchange Rates vary as well, and can boost the Net Rate to well over 4%. Internet Retailer examines 6 different credit cards and the Interchange rates they face on an imaginary $169 transaction. The same article says 2.2% + $0.30 is the typical Base Rate for a mid-sized retailer. Compared with Mpayy's max price of $0.20 + 2.00%, the savings abound.

That chart shows at least a $3 cost savings on the part of the retailer for every transaction!

Further, a recent CyberSource Survey shows that not only can Mpayy bring online retailers around the country cost savings on their payment processing and 0% fraud liability, but it will boost conversion!

Mpayy has a good pipeline of new clients, but we are lightweight, easy to implement and infinitely scalable. We look forward to hearing YOU knock on our door.

As growth starts flattening due to a weak consumer, Mpayy is the place to turn to grow your online business!

Blue Steel & Other New Mpayyment Widget Skins

2008-05-22T18:24:00.008-05:00

Lipstick on a Lamborghini

One of the things I planned to do when I started this blog was to document the empirical record of birthing and nurturing a startup. I've neglected it because at the end of the day, it's difficult to broadcast to the Internet's permanent record many things along the continuum from a lapse of concentration to tactical errors. Many times, one can become naturally reluctant to call attention to decisions and actions you've taken that materially improve the situation.

One thing that I am really enjoying is the depth of the hands-on education that becomes a necessity. I've alluded many times to the painful status of our front-end. It's like we've put a cover on the car the makes our underlying Lamborghini payment application has the shape and power of a Saturn coup. We'll be lifting the veil with a much more exciting front-end in the next few weeks that I think people will understand and enjoy. Matt Shea joined us about 5 weeks ago, and we will make the most of his skill set.

For my part, though, I have finally had the time to study and learn some basic web development skills with specific tasks that go into production. I've been working with websites since August, 2001, though I had to learn through work in connection with developers. My Poli Sci/Econ undergrad did nothing to prep me, and I started to get a grasp because I had a PHP developer and Oracle DBA who vituperatively despised one another. Through Zacks and Orbitz I became adept at writing Requirements documents, shepherding projects through design and development, and testing and maintaining the bug lists for a number of sites. As my career went on, I've dealt with sites at increasing levels of sophistication and transaction numbers, our present front-end notwithstanding.

The first full site pages I've ever created are the new micro-site for the...

Secure Payment Widget

Mpayy re-launched our Secure Payment Widget last Saturday with a new skin -- "Blue Steel" created by Matt Shea. We added some DHTML popups to help people through the system. Additional improvements to the widget were the ability to specify a new skin. We've created three initial skins in the forms of an iPhone, a Chocolate, and a kind of sad Blackberry. Mpayy's mobile payment processing system is now available as a phone skin on your blog or favorite social network.

(The widget micro-site denoted by the black buttons is a Trace Johnson original. Compliments and invectives are equally encouraged.)

The other exciting new piece of functionality we added to the widget was the ability to co-brand it with your own logo. This was necessary first to comply with MySpace application Terms of Service which stipulate that any payment applications must make perfectly clear that the application is unaffiliated with MySpace and Fox Interactive Media.

We went ahead and customized a bunch for fraternities and sororities @ our Gone Greek page also within the microsite.

Widget Commerce Tool

I was annoyed today when I saw a Payments News story on a UK company with a new Facebook widget to send money to friends, though they charge the sender 1% up to 0.50 euros. Mpayy is set to empower charitable donations, digital music & online auction sales directly through any social networking page. Mpayy's Mobile Merchant account is just $0.20 + 2.00%, less than PayPal, and more secure than most other online money transfer services being hosted within US Bank's data centers.

Internet Impotent in Music-Buying Decisions?

2008-05-19T17:27:00.007-05:00

Last month, I discussed the troubles companies have driving revenues through online music services. Sonific had shut down and Snocap was sold to Imeem for what was rumored to be fire-sale prices. On Friday, the Pew Center for Internet Research provided some data that may explain some of the trouble these folks are having.

The Pew report cites an ABC news story pointing to the crux of the problem:

"Shipments of CDs peaked at 942.5 million units in 2000 and fell by 25% to 705 million units in 2005. Figures released earlier this year show that album sales fell by 9.5% in 2007, even though digital sales grew by 45% in this period." (
Alex Veiga, U.S. Album Sales Down, Digital Up. Associated Press, January 8, 2008. Available online at: http://abcnews.go.com/Business/wireStory?id=4081901. Accessed on May 8, 2008.

Among internet users who research the music they buy online, their methods are varied (picture left), but only 32% of those who said they used music said their online research was definitive in making their purchasing decision. In order, the top 5 effects of online music research were:

Learn more about the band
Learn about new artists
Save money on music purchases
Buy more music than was planned
Changed their mind about the artist or song they were going to purchase.

By and large, it is offline influences that continue to drive the music purchasing decision according to the survey data.

Now, the 70+% of users who say that friends and family are impactful in driving their music purchases could certainly include folks interacting on social networking sites like Facebook or MySpace. Applications such as iLike on Facebook that allows friends to dedicate songs to others can be source of new music.

Activities for online music research are also varied, and certainly skewed towards the younger generation. The Pew Center caveats this report with the fact that litigation fears may drive many people to not respond in the positive to the question of whether or not they download music.

Given the large concentration of offline influences and purchases, it becomes more understandable why a fragmented strategy towards digital content sales may not drive the fortunes of many companies and the benefits continue to be concentrated in the likes of iTunes and Amazon. However, Apple's recent success in surpassing WalMart in music sales is evidence that more sales may move to digital. In the meantime, it will be interesting to see how the content vs. free advertising-supported listening shakes out. It's not likely to resolve itself in the same timeframe as BluRay vs. HD DVD.

Atomized vs. Aggregated - Social Networking Value Search Continues

2008-05-15T08:58:00.006-05:00

Membership has its Privileges

Given my career in ecommerce and marketing, I probably have among the highest click-through rates of online ads. A click from the Drudge Report sent me to American Express' Travel social network that provides interaction between Members and their privileges. American Express has long cultivated a brand identity of exclusivity vs. Visa's brand identity of universality.

At its core, MembersKnow is a 3 parts premium restaurant listing, 1 part recommendation engine. A search of "Where are Other CardMembers Dining?" yields:

Digging into the "Conversations" reveals something a bit more like Yelp, except far less well-organized:

It makes me wonder whether AMEX had a conversation like this one in The Office:

The added value to American Express' members of the social network is not immediately apparent given i) the limited user-generated content and ii) the apparent lack of a direct role of AMEX in creating value for users of the social network. What does it say about the possibility for niche social networking?

Social Portability & Niche/Vertical Social Networks

Google this week confirmed the Google FriendFeed that is its initial foray into leveraging the Open Social Consortium to add social networking features to any website. Google's Innovation Machine has created an unreal number of tools that people can grab to enhance their sites including most significantly, in my opinion, Google Analytics.

Google is leveraging user id's and activities on social networking sites Facebook, Google Talk, hi5, Orkut, or Plaxo IDs in a manner similar to FriendFeed's use of Flickr, MySpace, Twittr and Yelp. These tools bring the richness of user interaction from open and aggregated social networks to any website that wants to add a touch of social interaction to their site. Effectively leveraging these data stores will ultimately improve targeting of advertising and possibly website features. It also could push to the side services like AMEX's social network. Why would I want to spend time creating content for a single site when I could make it more portable and bring it along with me? If a review/networking site wants to remain viable, will they need to integrate to the Open Social API? Would TripAdvisor benefit from leveraging the information I provided to Yelp? Probably. Will there be a trade-off? It remains to be seen.

Further, what of sites like Ning and Wetpaint? These sites create platforms for the most discrete social networks to exist, but the aggregation allows them to extract advertising revenues from the combined traffic, as well as creating more extensive targeting abilities to specific groups. Would they not benefit further if they could know what I was doing on my facebook Causes application right before I came to my Underwater Basket Weaving group on their sites?

The question of how to extract monetary value from social networking sites remains, but in the meantime, every social network will need to decide what impact the meta-identity tools will have on their existing networks.

What Value Widgets?

2008-05-06T10:38:00.002-05:00

ReadWrite Web continues to questions the ability of facebook to monetize its platform. The general potential of facebook and other social networks is an issue I've blogged about here and here. It has not stopped the venture community from continuing to pour money in, including a $20 million investment in meebo at a $200 million valuation most recently.

RWW notes that most of the successful facebook applications are strictly fun ways to communicate with your friends - I totally just superPoked your demon. Applications that actually have utility tend to not have the viral component that many of these applications which just reach out and touch/invite facebook friends. Further, it remains difficult to engage users while on facebook. Further, for applications that are related to one's personal activities - calendars, reminders, blog readers - it is strains reason to assume that people will bother their friends with invitations.

None of this has stopped folks like Adonomics from continuing to espouse the limitless earning potential of facebook applications. According to a February blog post everything on the web will be remade for facebook which will create a marketplace and incomes for developers of facebook applications along the lines of eBay for Power Sellers. However, to date, the income from the widgets has come only through advertising with networks like Gigya and WidgetBucks.

These networks may extract the ad rents from facebook, assuming they can produce more success than ads on the network itself. My personal experiment with ~15 different ads failed to yield a click-through rate above 0.04%, at which point the company stops serving your ad until you increase the Cost-per-Click bid to something in the Google levels - read $1.50. The site does have the ability to deliver impressions, but the value of that given its users' unwillingness to engage calls into question its ability to drive value. (Companies can use larger images, but to do so, you need a $50,000 guaranteed budget, and who knows whether that is on an impression or click basis.

Online ads certainly continue to garner more of the discretionary funds of large advertisers. The battle for the clicks that make these ads useful will continue to go on between the multiple players providing each piece of a web page.

Widget Payments

Mpayy continues to offer its secure payments services through a syndicated widget that can also be found on facebook. Mpayy will relaunch its widget with configurable logos, skins and payment fields on May 18th. Stay tuned.

As the Consumer Goes, How Goes eCommerce?

2008-04-30T21:23:00.002-05:00

The Federal Reserve released its Q1 GDP economic growth number today, indicating that the first of two quarters of negative growth necessary to trigger the technical definition of a recession did not open 2008. However, there is evidence that the consumer pullback that has been all but inevitable took another step. Consumer spending rose just 1%, the lowest level since the second quarter of 2001, and less than half the 2.3% that it rose in Q4 '07.

This morning (May 1st), the Commerce Department released lagging consumer spending numbers for the month of March. At first glance, the number is up 4%, but when you strip out inflation, that number falls to just 0.1%.

The litany of issues facing the American consumer continues to grow - rising fuel, food and other prices, falling home values, and increasing credit card rates - and those factors place pressure on the American consumer's ability to drive the economy forward.

This may not be as bad for ecommerce shopping if last year's experience is any guidance, but we're still waiting for new data from Comscore on Q1 online shopping.

Exploring Digital Content Revenues

2008-04-22T18:06:00.004-05:00

As Mpayy continues to look for transactions that its Secure Payments Widget can enable, one industry we considered was digital content. The theory was that a Do-It-Yourself model could be enabled allowing artists to host songs on Mpayy's servers, or somewhere within the cloud that we would enable streaming of the music as a preview, and then download.

Mpayy's model is uniquely well-suited for selling digital content online because we do not require the billing address that is a piece of the Address Verification System associated with credit cards. Thus, the checkout process can be simplified, improving incrementally what is the largest concern of ecommerce retailers of all varieties - simplifying the checkout process to improve cart abandonment rates. In the Do-It-Yourself digital content industry, there are a number of players with varying levels of success, and it begs the question...

Can any Money be Made in Digital Content?

Sonific founder Gerd Leonard announced today that the company will shudder its doors. Sonific's mission included:

Sonific.com and Sonific.net reflects our philosophy that offering better tools for music discovery and providing new, free platforms of exposure is what will really sell music, going forward, and that the viral nature of the Internet is perfectly suited to help get the word out for new and established artists and their music.

Leonard discusses the prohibitively costly option of paying for permission to the largest music studios; it is essentially economic suicide. Thus is the danger of abiding by the law, which is the path Sonific was pursuing.

Sonific's fall comes on the heels of Imeem's acquisition of Snocap, which was Napster founder Shawn Fanning's startup. TechCrunch speculates the sale price was less than $5 million, even though the company raised more than $25 million. Last.fm, which is now pulling in 1.7 million monthly unique visitors according to Quantcast has driven a significant rise in its click-through affiliate based sales with Amazon. However, PaidContent.org cites a Jupiter report revealing that digital sales have compensated less than 1/3 of the loss seen by the music industry since 2004.

MySpace recently concluded a new deal with the studios, but the prospects are questionable, because, according to New Zealand's Stuff:

But the MyStores widget proved a bit of a flop. Slightly more than 100,000 of MySpace's 5 million artists embedded the store on their profile, and few sales followed. What's more, rival Imeem has since acquired Snocap – likely to add its own download-to-own service as well. Expect MySpace to either terminate its Snocap deal outright or simply wait for member artists to dump the app on their own.

Industry-backed iLike is the leading music application on Facebook that also leads through to Amazon and iTunes, though no numbers are released.

The Register article I read that pointed me toward Sonific speculates that it was YouTube's disregard for copyrights led to its success as a home for music video viewership. If that's the case, and those are combined with Chinese sites I StumbleUpon frequently with NO respect for digital rights, do Hulu and MySpace have it right that the only way to get money from digital content consumption is through advertising?

A Fresh Look @ Costs of Online Giving

2008-04-17T12:17:00.009-05:00

The first decade of the 21st century has seen a meteoric rise in the levels of charitable giving due in part to massive disasters like 9/11 and Hurricane Katrina. In 2006, charitable giving reached $295.02 billion, according to Giving USA 2007, the yearbook of philanthropy published by Giving USA FoundationTM and researched and written by the Center on Philanthropy at Indiana University. Charitable giving en masse was up 4.2% after inflation.

Online giving, on the other hand, has been rising much more quickly.
2006 donorCentricsTM Internet Giving Benchmarking Analysis released a study last year that demonstrated online donors had grown at an average of 101% over the previous three years vs. 6% for offline donors. 56% of online donors, in fact, made their first contribution.

What's the Story w/ Online Donations?

Mpayy has an open offer to process online donations for free, i.e. with zero transaction costs. There are a number of sources both for online donations, and researching non-profit companies, and what they do with their money.

Network for Good and FirstGiving are two companies that provide platforms for non-profits and charities to accept donations. FirstGiving is the US version of JustGiving, a British company that allows the similar collection of donations. For those charities and non-profits, the charity director must contact the company, which consults an online resource called GuideStar, which collects the 1099's non-profits must file with the IRS. From GuideStar, when someone researches a specific charity or non-profit, they are one click away from making a donation to the charity.

Further, the facebook group, Causes,, lets donors click through to Network for Good to make their donation. Causes has approximately 80,000 daily users, which is #74 on the daily users list, and #20 on the total number of installs, according to Adonomics.

According to sources, Network for Good charges 4.75%, while FirstGiving charges up to 7% in transaction costs to the charities. In other words, only $0.93-0.9525 of each dollar of a donation actually reaches the charity. Network for Good, in fact, doesn't actually get permission from charities, but rather has an opt-out program if charities do not wish to have Network for Good collect donations for them. According to the FAQ's on the Network for Good's website, they send the money on to the charities through electronic funds transfer or a paper check on the 15th of every month.

So, in other words, the Network for Good is taking 4.75% and then holds the money for up to 31 days before moving it on to the charity. Network for Good is itself a non-profit, but those fees and the benefit of that negative float provide serious financial benefits to Network for Good far above the cause to whom the donor actually wanted to provide money to.

There are other companies, like Acteva and Blackbaud, that do the same thing, but also provide a number of online promotion tools, including database management and event registration items.

Mpayy Free Donation Processing

Mpayy's offer of free donation processing obviously benefits Mpayy in the form of account opening, but even if we were to charge the charity, we would charge $0.20 + 2.00% or less for a Mobile Merchant or Retailer Pro account. Further, as Mpayy hits critical mass, we create the ability for someone on stage to ask 50,000 people to give $1 a piece to Save Darfur with their cell phones, and it will happen with no fees for the charity.

Mpayy is in talks with a number of charities - small and large alike - and has approached a number of the organizations listed here. The question is, as a donor, do you want your money - ALL OF IT - going to the charity, or to the platform provider?

Series B Closed - The $$$ is in the Bank!

2008-04-11T18:08:00.006-05:00

Mpayy has just CLOSED a Series B round of financing. All private and institutional investors from the prior round participated in this round to maintain or increase their stakes in the company. Plus, we welcome new investors into the fold.

Mpayy will use this money to improve the look and feel of its front-end, broaden and increase its marketing program, and work with new ecommerce merchants to integrate what will become the new standard in payments into their websites.

On Monday, Mpayy will welcome a new VP of UI Engineering, and next Saturday, we will relaunch our site for Mobile Merchants who wish to take their stores on the road.

For now, we've finished the bottle of Dom, and moved onto the beer, and Monday, we will redouble our efforts for both commercial and consumer adoption.

Eyeballs Aren't Enough

2008-04-11T08:41:00.004-05:00

I've been having a discussion with an acquaintance who is starting a venture incubator about what startups really need in a strategic partner. He contends that personnel and advice are critical to a startup, and that the proper guidance can make most business models work. My argument is that the foundation HAS to be a solid business model - with very few notable exceptions - or in the long run it will fail, and there are a number of examples out there right now to draw lessons from.

The Many Faces of Social Networking

I've discussed at length the potential overvaluation of many startup companies, and the overcrowding of specific markets caused by the herd mentality. However, that does not stop money from flowing into those markets whether or not they prove profitable.

Three years ago, Fox bought MySpace for $850 million, and Google bought YouTube in 2006 for $1.65 billion. AOL spent the same amount as Fox to buy Bebo last month, and Microsoft's investment in facebook that valued the social network at $15 billion has been widely documented.

As of now, the only business model producing revenue for these companies is advertising, and acquiring companies possess successful advertising businesses that the acquired properties are expected to drive forward. In fact, Google paid Fox News $900 million for the right to sell advertising on the popular MySpace property. Yet, that bet doesn't seem to be panning out, as Investor's Business Daily reports.

The story does say that Fox's revenues from "Other" grew significantly, and guesses that may be related to improved targeting in it advertising.

Targeted Ads to Drive Revenue through IM/Chat?

In the Spring of 2006, I wrote a paper on instant messaging startup Meebo for a Technology Strategy class at the University of Chicago. I'll dig the document out and post it here as soon as I get a chance. The thesis behind our paper was that Meebo's power would leverage the universality of instant messaging by allowing users to log in to multiple instant messaging services at the same time. While there are a number of other services that allow this, meebo's thin-client application was unique in that it would not be blocked by firewalls and download restrictions that businesses put on instant messaging, and users could use meebo through a browser from anywhere. The traffic has certainly come.

While we were correct in our forecast that the company would benefit from the zero costs of homing among instant messaging networks, and meebo would free ride on the dollars that Yahoo, AOL, Hotmail, and others had spent to build out their instant messaging memberships. These features, combined with their successful launch of chat rooms, has generated incredible success. The challenge, we concluded, would be to monetize the traffic for long-term viability.

Meebo has attempted to turn its traffic into a sale to both Fox and AOL at a valuation of around $250 million, but is now searching for a new round of funding at a valuation of $175-200 million. The company has only thus far created around $1 million in revenue.

Meebo hired a Chief Revenue Officer, CNet and Warner Music vet Carter Brokaw, to help it launch its long anticipated advertising offering. According to Read/Write Web,

"Users will be able to opt-in to sponsored experiences that are targeted to them specifically, based on their demographics and behavior. Negative feedback on a particular ad will teach the ad server not to serve the same ad to a particular user and there will be a leader board on the site displaying the most popular ads according to user response.

Meebo says that in tests, they are experiencing 2 to 4% user engagement with these new types of ads, a far higher percentage than banner ads see. "

If meebo can replicate its click-through rate at scale, it will certainly earn a premium for its advertising and could grow into a significant moneymaker. However, if, like on facebook and others, users remain too engaged in the process of networking and chat, rather than commerce and advertising, meebo will continue to struggle to justify its valuation.

Sneak Peek to New Mpayy Mobile Site

2008-04-07T13:01:00.015-05:00

Mpayy developers have been hard at work on a new mobile site that enhances the account features available through https://mobile.mpayy.com. Mpayy's Mobile Merchant accounts provide direct salespeople, taxis, and online ebay sellers with a free mobile point of sale system through any web-enabled cell phone. The new functionality being ported to the Mpayy mobile site will make it easier for sellers to process transactions and returns.

Mpayy's current mobile site rates a 4-Good by Ready.mobi's mobile website tester, which is certainly not bad.

However, one of the things we wanted to do was to make sure that we followed all of Ready.mobi's guidelines, including providing the ability to differentiate the experience based on the 10 best distributed cell phones, and we will launch with this device targeting ability. The new site does meet the guideline test as seen here (Dev URL is masked):

Mobile Dashboard

The Dashboard on the Mpayy Mobile Homepage still includes the Make Payment options, but a new piece of information and several new features, including Balance Information, a Withdrawal button and a Help Center.

From the Dashboard, any user can select to make a Withdrawal directly to their Linked Bank account, and get the payment batched up and ACH'd that night.

Payment Activity

Mpayy takes large steps to make sure that all communications are authenticated, including the creation of a Digital Signet at account opening. The Digital Signet is a piece of user-generated content that we place at the top of text messages and emails, so you know it comes from us. Payment recipients, whether they are free Personal money transfer accounts, or Mobile Merchant accounts for AVON/Mary Kay salespeople, Tupperware sellers, Passion Partiers, etc. who are taking direct payment, the Activity list will provide confirmation that the payment was made beyond the text message receipt.

Beyond checking their activity, sellers on the road can also process refunds with the new mobile website. This image is what happens when you drill down to a specific payment by either scrolling and selecting it, or using an AccessKey number to jump to the payment and make the selection.

When a Merchant selects to make a Refund of the specific transaction, the screen looks like this.

Secure Mobile Payments

Mpayy offers free mobile payments for anyone with a mobile web enabled cell phone. Money can be moved from any bank within the United States. On the receiving end, it is free to receive transfers, but traveling salespeople can get guaranteed payments with very low transaction costs and 0% fraud liability. Sign up, and check it out. You'll be glad you did!

Venture Capital Not Insulated from Broader Market Turmoil

2008-04-03T11:24:00.007-05:00

Investors opening up their 401K statements for the first quarter of 2008 will probably need a large supply of Pepto-Bismol to assuage their pain with the Dow Jones Industrials offer more than -500 points. A rally on the first day of the second quarter was quickly dispatched by Fed Chairman Ben Bernanke's sick April Fool's joke that the economy could very possibly contract in the first half of 2008 sending stocks tumbling.

While at first glance, the Venture Capital industry should be insulated from the broader market and economy, new data out from the National Venture Capital Association and Thomson Financial indicates that may not be the case.

Short Line @ Exit Sign

The NVCA provided data on Venture Backed Exits in the First Quarter of 2008. In short, this is a count and measure of the magnitude of liquidity events - Mergers & Acquisitions (M&A), Initial Public Offerings (IPO) - by companies that were previously financed through venture capital funds.

The number of M&A deals was down -31% to 56 deals, from the first quarter of 2007, and even more significantly when compared with the Q1 2006. The value of those deals was down -45% to $2.491 B.

Further, the data reveals that 38% of the M&A transactions valued the venture-backed startups at less than the initial VC investment.

Even starker is the IPO trend. In Q1 2006, Venture Backed companies accounted for 18 IPO's with a combined value of $2.2B, and an average of $121.7 million. In the first quarter of 2008, those numbers were 5 deals for $282 million, and an average deal of $56 million.

According to the Wall Street Journal & Dealogic (registration required):

There were fewer IPOs in the first three months of 2008 than in last year's first quarter in every major region of the world. Globally, the number of IPOs fell 60% to 100 deals and the amount raised slid 10% to $35.9 billion, according to data from Dealogic. In terms of the number of new offerings, it was the worst period world-wide since the third quarter of 2003, by Dealogic's count.

Now, the IPO market is typically very sensitive to the overall trend in the market, and venture capitalists, entrepreneurs and investment bankers alike will often postpone an initial public offering when the market is going through a correction. IPO's are meant to allow founders and VC's to take some money off the table as well as create a publicly valued currency that allows the company to engage in some of its own M&A activity. However, the magnitude of the slide is significant, and if you strip out the Visa IPO, everything looks a bit less rosy.

Plenty of $$$ for Now, Financing is NOT the End Game

While the exit picture isn't so rosy, plenty of money is still out there, particularly if you call yourself an Open Source technology company. Further, VC's are so desperate for deal flow that in some instances, they are willing to buy out the owners personal stakes according to the founder of thefunded.

It is important for entrepreneurs to manage their burn rates and work to produce revenues quickly, though, because this funding could easily dry up. Smaller deal size could be a leading indicator for a slowdown in the supply of funding, especially in light of falling confidence among VC's, according to Silicon Valley Venture Capitalist Confidence Index.

Citigroup to Offer Branded Phone for Payments

2008-03-28T16:49:00.006-05:00

Many apologies for not writing much this week.

I did see one interesting story concerning one form of mobile payments - Near Field Communication (NFC). NFC has taken hold in Asia, and there are convenient stores and other brick and mortar locations where shoppers can simply swipe their phones within a certain range of a Point of Sale system, and the system will debit some sort of stored value. That could be hooked up to a credit card, a bank account, or there could be value pre-charged onto the chip like a Gift Card.

NFC payments requires the payment company to put a chip into the device, since it is the device's proximity to the Point of Sale system that results in the payment. NFC is a much more realistic option for mobile payments in Japan, where ITT DoCoMo has upwards of 80% market share, and can effectively make changes across the board for all of its customers. In the United States, this is a less realistic option because of the fragmentation among device makers and the networks.

Getting "designed in", that is having a new version of an existing device or a new device created with your chip in it is a multi-year process even after the deal has been reached. The ability for a startup to work with Original Design and Original Equipment Makers (ODM, OEM) is very difficult without significant backing. Further, beyond the chip in a device, the system has to be compatible with hardware in stores, though that is simpler as everyone from Gas Stations to Fast Food joints have created keychain swipe tools.

Easier for a Bank

CardForum is reporting that Citigroup is going to offer a branded mobile device with its own NFC chip built in. Citigroup is a multi-billion dollar institution with huge credit card and other consumer banking operations. Credit card companies typically fight for "share of wallet" or "top of wallet" positioning, meaning to be the card of first resort for any given shopper who is making a purchase. The beauty of the mobile device is that people often carry their phones in places they don't bring their wallet or their credit cards. If Citigroup can own the device, they can take a greater share of the wallet, and possibly extract rents for other payment options.

Citigroup, like Visa, MasterCard and others has conducted many tests of NFC around the world, but CardForum indicates that this device is targeted primarily at the US market, and complies with FCC rules for NFC transactions. Further, being a massive card issuer, has much significant power to persuade merchants to adopt new card reader functionality.

An interesting question is what does this say about Citigroup's association with Obopay, a mobile-to-mobile payment provider. Further, if the banks begin moving into the mobile space, what does it say for mobile wallet solutions like Firethorn and mFoundry? Stay tuned.