Paypal Ready to Fail Again | The Smartphone Champ


Paypal has done away with the NFC capabilities of their app they just added last year.  For those that may not be aware, last year Paypal released a new form of peer to peer Paypal payments that allowed you to pay someone buy tapping your phone against their phone.  I said it then and I’ll say it now, that was and is a stupid idea.  I don’t want to tap my phone to pay my friend who’s standing in front of me, and I’d think most people would echo my sentiments.  Unsurprisingly that functionality was a massive failure and Paypal has now pulled out of the NFC race.  Instead now Paypal wants to move forward with a mobile payment solution that does not involve the use of NFC.  Their concern with NFC is that retailers with NFC capable terminals are not very widespread yet.  Paypal’s vision instead is for you to be able to go to the checkout counter, select Paypal as a payment option, input your phone number and then a pin, and then your purchase is complete.  A receipt would then be emailed to you.  While this may sound nice in theory, Paypal would still face the exact same problem NFC faces today, there wouldn’t be very many retailers with compatible terminals.  I don’t see very many retailers going out and upgrading terminals just for Paypal.  Chalk this one up as another Paypal effort that will fail miserably.

Source:  Wall Street Daily

via Paypal Ready to Fail Again | The Smartphone Champ.


NFC vs. cloud-based payments: Which will reach scale first?

NFC vs. cloud-based payments: Which will reach scale first?


February 14, 2012

Google has suspended new prepaid cards for Google Wallet

Following a flurry of announcements around NFC-enabled mobile payments last year from Google and Isis, there has been very little news on the NFC front so far this year while cloud-based payments such as is offered by PayPal appear to be picking up some steam.

Google’s NFC-enabled mobile wallet took a hit this week when the company said it would suspend new prepaid cards for Google Wallet after security flaws were detected in the app that make users’ information vulnerable. At the same, there is growing interest in cloud-based solutions that address some of the issues with NFC but have their own issues as well but, will it last?

“There is momentum behind cloud-based solutions,” said Lara Albert, senior director of global marketing at Globys, Seattle. “But I wouldn’t count NFC out yet – you have some of the biggest players in mobile behind these services,” she said.

“I think people are realizing that there are alternatives to waiting for NFC and Secure Element chips to be embedded in all of the mobile phones,” she said. “Solutions that do not require large infrastructure investments such as merchants having POS terminals capable of communicating with an NFC enabled mobile handset to carry out purchase transactions have their advantages.


“Then again, let’s face it, if or when Apple’s next iPhone contains an NFC chip in it, the whole game changes.”

Ecosystem issues
Companies are beginning to take a closer look at cloud-based solutions because they want to hurry along the potential in mobile payments and NFC may be moving too slowly for their taste.

Google Wallet and Isis – a joint venture of Verizon Wireless, T-Mobile USA and AT&T – were both introduced with a lot of fanfare. However, nothing is likely to happen on the Isis front until April, when its two test markets in Austin, TX, and Salt Lake City, UT, go live.

Google is dealing with limited availability.

Currently, Google Wallet is only available on Samsung Galaxy Nexus phones from Sprint. However, once the Google deal to acquire Motorola goes through, new phones with Google Wallet could be out by the end of the year.

“Everybody is out there thinking about how to leverage mobile and most of it has ecosystem issues,” said Mark Beccue, senior analyst at ABI Research, New York.

“Making purchases on a smartphone through a Web site or an app – that is rolling along and growing pretty well,” he said.

“Proximity payments, whether software based or online – these are moving slowly. What we really need to see this year for the momentum to carry on is handsets that have the wallets loaded.

Part of the problem around NFC is the complexity associate with it as a payments option.

There are a lack of standards and a complex ecosystem of stakeholders, which makes NFC a more expensive proposition.

As a result, cloud-based solutions make look more appealing.

“I think that more companies are looking at cloud-based payment options,” Globys’ Ms. Albert said. “In a way they have been forced to look at alternative enablers that have the potential to accelerate adoption of mobile payment systems.

“The cloud-based payment solutions that require only downloadable applications for both consumers and retailers may make things easier,” she said. “I suspect there may be more openness toward security and payment card credentials being stored in the cloud rather than having to store and manage the credentials in the consumer’s mobile device.”

Retail strategy
Still, Google is a formidable player and has built up a strong retail strategy.

Google Wallet is available at a number of retailers in five markets – including Subway, CVS and Walgreens. Together, these retailers have a significant number of retail outlets.

“Google knew they could not control too much of the handset stuff right now but they could be smart about getting the right retail partners, which they have done,” ABI’s Mr. Beccue said.

“They went out and got Subway, CVS and Walgreens,” he said. “Most consumers are going to run across a CVS, Walgreens or Subway as they go about their day – that was a good strategy.

While is also looking to create a strong retail strategy, it faces its own challenges as well.

“PayPal is totally dependent on the quality of the mobile network in those places,” Mr. Beccue said. “In a very busy cell, or somewhere rural, the speed of getting things done is going to be dependent on the network.

“PayPal has some momentum,” he said. “What will be interesting is if, over a 6 month period, to see what the market acceptance is. If it does not work fast, that will be the determining factor.

The challenge both solutions face is getting enough consumers to adopt them for a meaningful reach.

To reach scale, these experiences have to be convenient, easy, and worthwhile from the standpoint of having enough participating merchants.

The key will be delivering personalized, relevant communications based on knowing, for example, that a user has registered in the last 14 days but has yet to make a purchase.

“Enabling mobile wallet providers to identify the contexts associated with certain behaviors, access real-time contextual profiles of customers, take action when a customer enters a context, predict the likelihood a customer will enter a context, and recommend the right tip, information, alert, incentive, etc. given a customer’s context is what is needed to minimize the fall out and get more people using a mobile payment option,” Ms. Albert said.

BAI | Banking Strategies | Distribution Channels | Mobile | Going Slow in Mobile is Going Prudently

Going Slow in Mobile is Going Prudently

By proceeding cautiously in mobile banking, banks are following the same prudent course they pursued with remote deposit capture.


Feb 8, 2012  |  0 Comments

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The Federal Deposit Insurance Corp.’s (FDIC) most recent Supervisory Insight quarterly report posted in December acknowledges myriad security risks related to banks’ mobile banking products and offerings. As FDIC policy analyst Jeffrey Kopchik writes, “Financial institutions are challenged to ensure their mobile banking service is designed and offered in a secure manner …”

This cautionary statement by the FDIC reflects concern across the industry about the risks associated with mobile banking. However, it only makes sense for banks to be cautious. As a software vendor of many years to banks’ payments processing operations, we believe that banks are taking the same approach with mobile banking adoption as they have with remote deposit capture (RDC): rolling it out in a paced and deliberate manner so as to effectively identify, manage and contain potential risk.

Risk Management Mindset

It is understandable that banks have not aggressively extended RDC benefits to their commercial or merchant customers, much less to individual account holders; they are simply acting in accordance with their risk management reality and mindset. Based on what we hear from first-party sources among top tier institutions and their service providers, banks are poised to regain the technology and customer service high ground by rolling out tried-and-true RDC and mobile banking services with a multi-media marketing blitz in 2012.

Banks have been weighing the potential benefits/risks of extending the branch capture model to commercial customers or individual account holders in the form of RDC for some time now. More recently, mobile deposit, an evolution of RDC to a mobile banking technology, has come under similar scrutiny.

The current FDIC report casts considerable light on the risk factors of mobile banking services in general. It points out the need for secure authentication protocols to protect the vulnerabilities of customers’ mobile devices (lost, stolen, or misappropriated); device malware and virus protection; data transmission security awareness related to gaps in mobile telecommunications; and ensuring that institutions’ compliance responsibilities related to data storage and encryption effectively extend throughout their mobile offerings.

The last requirement falls directly on banks’ shoulders. Mobile device development and transmission-related data delivery is not banks’ core mission and will be hashed out by experts to meet industry demand and standards, as have providers of RDC image scanning and transmission technology.

One of the compelling observations from our perspective will be how successful the banks are at “connecting the dots” that will be created by the increased electronic payment transaction volume and the overarching implications on risk management. The widespread adoption of mobile banking will create a new, more diversified mix of payment types. Detecting and interpreting patterns and anomalies in this mix will be critical to managing risk in this environment, if banks are to remain competitive in the payments arena.

Now that banks have had the opportunity to “test drive” RDC, they have identified new payment anomalies, and have taken steps to manage the risk introduced by this new source of payments. As Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Federal Reserve Bank of Atlanta, blogged in late November: “To date, banks and other financial institutions have successfully managed risks for commercial RDC services. Whether by restricting the use of the service to only its most vetted commercial clients or limiting the value of allowable remote deposits, banks have implemented risk controls to effectively minimize their risk and fraud exposure associated with RDC.”

Banks that have taken the time to perfect their internal RDC deployments are in a perfect position to offer a practical, and attractive, payment alternative to their trusted customer base. This same prudent approach will hold true for mobile banking as well. Prudence, in the context of banking especially, means time testing new capabilities and new channels. Frequently, it means banks take a more circumspect approach than that which drives the marketplace in general.

Like RDC, mobile banking is transformational, which is why its adoption will be incremental based upon the development of secure, reliable devices and transmission infrastructure. From banks’ perspective, the fundamentals must apply, including: “know-your-customer” due diligence, comprehensive training and instructional resources and the execution of shared agreements that protect banks and ensure their recourse against fraud.

Simultaneously, in anticipation of the inevitable advent of mobile banking, banks need to be modeling and preparing for the imminent, although likely not immediate, spike in electronic transactions. What will at first be unfamiliar territory teeming with unforeseeable risks will, we expect, create a more highly evolved banking environment that better serves bank customers.

Mr. Charles is CEO of CONIX Systems, Inc., a national provider of payment processing solutions to the financial services industry. He can be reached at

via BAI | Banking Strategies | Distribution Channels | Mobile | Going Slow in Mobile is Going Prudently.