I have recently joined a company in the digital payments space.  Unfortunately I need to follow an existing policy that prevents me from blogging any further at this time.  

This website will continue to be available for the foreseeable future.

Happy Holidays and All the Best for 2013!

How does PayPal Wallet work?

My focus is to review the two implementations of the digital wallet PayPal is currently developing/implementing for off-line shopping and how the company's acquisitions will help enrich the experience.  This means not discussing other PayPal efforts in the mobile space such as PayPal Here.  

PayPal Wallet on PayPal Rails - This is the implementation of PayPal Wallet that is currently available to be used at Abercrombie & Fitch, Abercrombie Kids, Hollister California, The Home Depot and Jos. A. Bank.  

1)  It is a cloud-based digital wallet that you can access at the merchant's point-of-sale by entering your phone number + password or swiping your PayPal card + password.  The phone number and the card are just different ways of entering the token that identifies a wallet in the cloud (there is a unique link between an ID and a wallet).  The password is the way to authenticate the user. 

In fact, the cloud-based digital wallet I am talking about is the same PayPal account that many of us are accustomed to using for certain online transactions.  Allowing users to access it at the point-of-sale is a 'natural' extension of its traditional functionality, although it requires new technology and new partnerships to implement.

2)  Off-line transactions, just like on-line transactions, travel on 'PayPal's rails' and are also processed by PayPal.  Changes in the software running in the point-of-sale devices and in the middleware that connects the merchant with its processor, along with back-end integration with the merchant systems, is what allows acceptance of phone number + password and the direct connection between the merchant and PayPal.  

PayPal's agreements with hardware manufacturers - such as Verifone and Ingenico - and middleware providers - such as AJB - have made this system possible.

3)  PayPal is the merchant of record for all transactions.  In fact, in the 'Account Activity Summary' (step number six in the app sequence provided at the end of this post) the user can see all the steps the payment process goes through.  First, it is instantly authorized by the issuer of the card linked to the account.  Hours later (as part of a batch process), there is first a cash transfer from the card issuer to a PayPal account and then a cash payment from the PayPal account to the merchant account.  

The graph below illustrates this process - in a very simplified manner - using the example of MasterCard as being the preferred method of payment.

4)  It is not an NFC-based solution.  PayPal is developing a truly digital wallet, not a mobile wallet.  As such, the company wants to enable users to pay without using any device (as is the case with phone number + password), which precludes it from utilizing NFC technology.  

One could easily argue that swiping a PayPal card breaks this paradigm but, most likely, allowing for this method of payment is just part of the educational process.  The company's first priority is to teach consumers to think about PayPal when paying at the store, swiping is what most people are comfortable with doing.  

Another reason that may be behind the issuance of the cards is that only the most advanced POSs can support the upgrades required to accept phone number + password as method of entry.  The changes required to accept the card are simpler.

Below are pictures of the PayPal card.

5)  The phone plays a limited role (please refer to the bottom of this article for a description of the steps required to make a payment using PayPal).  When checking out at a store, the consumer is interacting directly with the POS.  It is only after the transaction has taken place that the user will receive notifications on her phone regarding transaction status.  She will also be able to see a form of electronic receipt with full information on the merchant, amount paid (broken down by retail price, sales tax and other expenses such as handling, shipping or insurance) and item description.  

6)  The wallet can house loyalty / reward cards and coupons.  These benefits will be used automatically at POS.

Although the on-line account has been revamped for users of PayPal's off-line services, no options are yet available to set preferred method of payment based on merchant or amount.

PayPal Wallet on Discover Rails - This implementation of the wallet is enabled by the PayPal / Discover agreement made public on August 22nd of this year.    Let's focus on the differences:

1)  This deal enables PayPal to ride Discover rails once the system goes live (spring 2013), thus no new hardware or software is required for merchants to accept PayPal's card.  Loyalty, gift, coupons and offers will be easily displayed and redeemed through the wallet.

PayPal will continue to process the transactions.

2)  PayPal will issue payment cards to its more than 50 million active users in the U.S as soon as the deal goes live. The new card will have a Discover Issuer Identification Number, or IIN, a code that identifies the card holder, and will allow users to buy from the merchants that are part of Discover's network. All that the user needs to do is swipe the card at the existing check-out machine and enter a four digit PIN. 

3)  PayPal will charge merchants when users pay with the new cards, and, in turn, will pay Discover for access to its network, on a per-transaction basis.  PayPal will define charges based on merchant type and will probably also negotiate special deals with certain merchants.  

4)  This deal places PayPal in the same league as the issuing banks in terms of its ability to issue a card that is accepted over an open-loop network.

5)  This solution, which only works with a PayPal card, completely violates the digital wallet paradigm we discussed above by not giving the choice of using a phone number instead of the wallet.  Again, PayPal's vision is a digital wallet but its first priority is to win share-of-mind in off-line payments.  The solution is clunky but it is a first step.  Additional iterations may provide much more utility.

Once again, the graph below illustrates this process - in a very simplified manner - using the example of MasterCard as being the preferred method of payment.

Note:  What is in it for Discover?  The company should pick up additional transaction volume as result of this deal while allowing the card network to fully participate in this new growing payments ecosystem.

How does Google Wallet 2.0 'stack up' against the criteria listed at the beginning of this series (click here to review the list)?

The intention is to 'rate' the solutions as they exist today.  In most cases, the wallets I am reviewing are flexible platforms that, with the right partnerships and infrastructure in place, can provide a very enriching shopping and payment experience.  But that is all in the future.  As promising as they may sound, I am comparing them against each other as they stand today.  

For this reason, this table only includes PayPal Wallet on PayPal Rails, considering the locations where it is currently available  (Abercrombie & Fitch, Abercrombie Kids, Hollister California, The Home Depot and Jos. A. Bank).  Hopefully, I will update my review in 2Q2013 after PayPal Wallet on Discover Rails launches or earlier as the number of features and relailers increase.

Reliability and Transaction Speed
It is as reliable as the well proven and tested on-line solution.  It is also a lot faster than the on-line solution, to the point that, as far as I can see, there is no noticeable difference in transaction processing speed compared to a traditional card.

Security
From a transactional perspective:  The security level when swiping the card is actually higher to the security achieved with a  traditional mag-stripe card because it uses swipe + pin rather than swipe + signature.  Unfortunately, there is quite a bit of concern around entering phone number + pin given that a) a person's number is often a relatively 'public' piece of information and b) the more information you have to enter on the key pad, the more difficult is to protect yourself from eavesdropping.  In any case, there is no dynamic authentication mechanism embedded in the process.

From a storage perspective (i.e. keeping payment credentials safe):  The fact that all credentials are in the cloud and that you need to use an ID + password to log into your account (whether on-line or on your mobile) makes the solution very safe.

In addition, it is the first non-banking payments mobile service that I have signed up for where you can feel they take 'know your customer' requirements extremely seriously.  Before allowing me to open an account, I needed to upload photos of my driver license, my social security card and a utility bill.  Inconvenient but important.

Ease of Use
The fact that the wallet must be managed on-line is a disadvantage.  The mobile app allows you to send/request money to/from another consumer, to find local businesses that accept PayPal and check in with them and to view your transactions.  Any changes you may wish to make to your payment methods (include a card, change preferences...) needs to be done from their website.
 
Wallet Functionality
It is good from the perspective that you can include all types of credit/debit cards, bank accounts, loyalty/gift cards, coupons...  The experience could be improved in three ways:  1)  Although it is in the roadmap, at the moment, you cannot set payment rules based on merchant or size of purchase;  2)  The user cannot override the preferred method of payment at the POS (via the POS or the mobile app) and not everyone is granted the 'grace period'; 3)  Issuer presence is kept at a minimum (totally absent from the mobile app and only in the form of digits, no branding, on-line), making PayPal a relatively unfriendly channel for banks that are struggling to keep customer's share of mind.

Acceptance
It is only available at a handful of stores (Abercrombie & Fitch, Abercrombie Kids, Hollister California, The Home Depot and Jos. A. Bank), none of them day-to-day retailers.

Device Availability
The app is available for iOS-, Android-, BlackBerry- and Microsoft-enabled devices. 

Valud-add Apps
Although PayPal (or eBay) has acquired a large number of companies that can bring a lot of value to the wallet (Where, RedLaser, Zong, Milo, Card.io...), none of them are yet integrated in the wallet.  Although X.commerce, a development plaform, launched over 9 months ago, it is difficult to find value-add apps built on the wallet.

Food for Thought 
I believe that we all agree that the consumer needs to be educated about mobile and digital payment options.  For this reason, I was surprised not to see any posters explaining about PayPal as a payment option at the till or even brochure on the topic.  Talking to one of the cashiers (Thank you Mary!  You know who you are) I found out that PayPal employees had visited the shop the day PayPal launched at Home Depot but that they had not visited the store since (at least, as far as she knew).  Cashiers had been given fliers and brochures that first day but they had not been replenished after they ran out.  Is PayPal not providing and requesting Best Buy to share this material or is Best Buy refusing to do so?

PayPal's current strength is on P2P transactions because it allows consumers (as well as small- and medium-size retailers) to accept cards with minimal hassle.  How is Visa's plan to bring P2P payments to U.S. account holders going to affect PayPal?

Will startups like WePay, with increased ease of integration and reduced merchant fees, gain enough momentum to affect PayPal's (or Google Checkout, for that matter) business model?

The PayPal Wallet in Action

This are the steps I followed to pay at the self checkout at a Santa Clara Home Depot.

This is what I 'saw' happening in my PayPal App.

How does Google Wallet 2.0 work?  In a nutshell:

1) All payments will be made using a Pre-Paid Virtual MasterCard (VMC) issued by BanCorp Bank that, in turn, is linked to the user's preferred credit/debit card. All credentials for this VMC will be stored in the phone's Secure Element (SE), all other card credentials will be stored in the cloud. No need for Google to negotiate with issuers / networks to include them in the SE, as was the case with the first Google Wallet (GW) iteration. 

Note:  At the moment, there is one notable exception to this rule:  Citi MasterCard, Google's first - and still only - banking partner.  Citi MasterCard credentials are stored in the SE.

2) Google is acting as 'merchant of record'.  The merchant will authorize/settle transactions with Google - paying fees based on the use of a present pre-paid debit card.  The VMC credentials will be sent via the MasterCard network to the issuing bank (BanCorp Bank).  In turn, and in real-time, BanCorp will map the VMC to the user's preferred method of payment and will seek authorization with the card issuer - paying standard fees related to the chosen card, probably as Card Not Present (CNP). Basically, the VMC is used by Google/BanCorp as a directory entry to link to the user's 'actual' card. These are two back-to-back processes. 

The graph below illustrates this process - in a very simplified manner - using the example of AmEx as being the preferred method of payment.

Note:  Citi MasterCard cards will not be processed directly by Citi, without the intermediation of BanCorp given that they are also present in the SE.  

Note:  Although AmEx has not approved Google to include its cards in GW, a user can link his/her AmEx card to GW.

3) The payment process may be a bit slower due to the need to perform these back-to-back processes. Google is probably making a loss with each payment given the difference between the fees they are charging to the merchant and the fees issuers are charging them. 

4) Google/BanCorp have now full access to all payment information, making it extremely easy for them to work with merchants to develop loyalty programs and with consumers to organize their spending. I believe issuers still receive all (or most) of the transactional information and can apply rewards and protection programs to the transactions, although Google makes it very clear that it is up to the issuer to decide how to treat these transactions and whether or not rewards and protections apply. 

5) GW can be implemented using an NFC-enabled phone but also just a plastic card (with mag stripe, contact or contactless technology) or even an NFC sticker.  These alternative options would provide a much poorer experience and less security but they may be a way to get consumers comfortable with using Google as a payment method (this is precisely what PayPal is trying to do through their partnership with Discover).   In any case, each transaction could always be instantly recorded in the cloud and immediately sent to the user's phone. 

6) You can store a number of payment methods in your GW account but only have one linked to the VMC at any given time, meaning that you cannot change the card you are using to pay at the till. This seems to be a bit limiting...  But it could easily be changed to, either have a set of rules to determine which card to use based on merchant and payment amount or to be able to choose the specific card you want to use at the till.  

7) Google's approach for the 2.0 version of its wallet differs greatly from the approach it took when it developed the first version.  At the same time, this approach seems to resemble that of PayPal - although with a different implementation - or, another way of seeing it, Google CheckOut with NFC capability.

How does Google Wallet 2.0 'stack up' against the criteria listed at the beginning of this series (click here to review the list)?

Reliability, Transaction Speed and Security:
It is an NFC-based solution, connecting the merchant (or Google, as the merchant of record) to the banks through the traditional processors and card networks.  This means the highest standards in reliability, speed and security.  Because in this case we have two back-to-back transactions (between the merchant and BanCorp and then between BanCorp and the actual issuer), speed may suffer but I am assuming not enough to make it noticeable.  

Ease of Use:
Again, as an NFC solution, use at point of sale is extremely simple - just tap-and-go.  The interface is also simple and intuitive enough.

Wallet Functionality: 
From a functionality perspective, it seems to be a bit limited.  This could be easily changed but, at the moment, only one card can be linked to the VMC.  This means that, although you may have all your cards stored with Google, you can only use one at the store.  You need to log into your account online to change your preferred method of payment.

Also, given the limited involvement banks currently have with this solution, it is difficult for them to use the wallet to create a more direct link with their customers.  

Acceptance:
There is a limited number of NFC-enabled POS in the U.S.  A much lower number than in Europe or other geographies.  This will change in April 2013, once acquirer processors and sub-processor service providers will be required to support merchant acceptance of EMV chip transactions by Visa and all other card networks.  This mandate will greatly accelerate migration of POS to provide support to, at a minimum, EMV contact cards and, in most cases, EMV contactless and NFC-enabled devices.  

Device Availability:
At the moment, GW only works on a few devices on Sprint's network.  This is an extremely limiting factor.  Given that GW requires an NFC-enabled phone with access to its SE, there may be a long road to travel to good device availability.

Value-add Apps:
In theory, GW can support all types of value-add apps to enrich the user's experience and make the wallet truly valuable.  Unfortunately, at the moment, there are no (or very few) apps available.

Food for Thought  
Considering that PayPal, Visa and MasterCard (among others) are already also providing, or plan to provide, other payment services such as P2P or remittances (we will discuss these capabilities in detail when reviewing each solution), shouldn't Google also take a stance in those areas?  

Edit (08/30/2012) - It hasn't even been a week since I posted this blog and I already need to make an update!  Google has spoken about the possibility of including P2P payments in its GW.

TED Talk at University of Essex by David Birch (May 2012):  Birch is a director of Consult Hyperion, an IT management consultancy that specialises in electronic transactions. Described by the Oxford Internet Institute as "one of Britain's most acute observers of the internet and social networks", in The Telegraph as "one of the world's leading experts on digital money" and by the Centre for the Study of Financial Innovation as "one of the most user-friendly of the UK's uber-techies". He is a media commentator on electronic business issues and has appeared on BBC television and radio, Sky and other channels around the world.

Trish's Comment:  My focus in the last couple of weeks has been to compare some of best known digital payment systems currently available or under development in the US - Google Wallet, PayPal, Square and V.me among others.  It is exciting to see that we are clearly moving away from mobile payments to digital payments - a much broader and 'liberating' concept - and that they all explicitly identify digital banking and digital commerce as key capabilities to be included in the wallet, albeit at a later stage.  But the wallets, given their (mostly) open architecture and their ability to communicate with the outside world (for example, via NFC), can be much more.  In fact, they can be almost anything.  

And it was while pondering about the endless possibilities of the wallet that I came across David Birch's video on Dr. Who's Psychic Paper.  For those of you not familiar with Dr. Who, it is a British science fiction television program produced by the BBC in the 1960s.  The main character, The Doctor (or Dr. Who) is a time traveling, humanoid alien with two hearts that explores the universe in his TARDIS (Time And Relative Dimension In Space) ship, which has the shape of a blue British police box (a long gone sight in British streets).  Or, as Birch describes him, he is the 'greatest living scientist in England and a beacon of true and enlightenment to all of us'.

Whatever description you chose, his Psychic Paper is exactly what a digital wallet should aspire to be:  A means to show the exact elements of your identity that are required at any given time.  Nothing more and nothing else.  So, what does a bartender need to know about you?  That you are over 18 and that you are not bared from the bar.  What does a retailer need to know?  Your PIN (in an encrypted form).  And the bouncer at a party?  Your invite.  Or even further, what do you need to know before letting a stranger with a Comcast uniform into your home?  That she is indeed the Comcast employee scheduled to come at 3 pm.  

Well, there is only one difference between the Psychic Paper and the wallet.  The Psychic Paper will show whatever you want it to show.  That is, it will show the bartender that you are over 18 regardless of your actual age or the bouncer an invite even if you have not been invited.  The wallet will only show that you are over 18 or your invite if in fact you are over 18 and you have an invitation.  

Of course, as Birch points out, everybody would need to have their own Psychic Paper and everybody would need to be able to read the relevant bits during each interaction.  It would need to be a convenient utility supported by a ubiquitous infrastructure.  It does sound like a job for NFC-enabled (or other type of proximity communication technology) phones and devices.  Something that we always carry with us, that we would quickly miss if it was lost, that could be easily protected from unauthorized access (via a pin or with some other recognition technology).

Thank you David Birch for painting a clear picture of what a digital wallet should aspire to be!

I have spent the last couple of weeks thinking about and testing some of the best known digital payments systems currently available or under development in the US - Google Wallet, PayPal, Square, V.me and PayPass Wallet Services.  Having just recently moved to the Bay Area from London, where - except for PayPal - they are not available, it is actually exciting to have the opportunity to play around with them.  

So, in the next few posts, I will be providing an in-depth look at how each of these digital wallets works and how valuable they are to the key players in the ecosystem.  

In order to allow for comparison across the different solutions, I will use the following criteria (taken from The Smart Card Alliance White Paper titled 'The Mobile Payments and NFC Landscape:  A U.S. Perspective') applied to consumers, merchants, MNOs and issuers.

1)  Reliability at POS:  Transactions that work every time and that are fast, robust and reliable.
2)  Security:  Keeping safe credentials and transaction information is paramount.
3)  Ease-of-use and convenience:  Key to promote adoption among consumers and merchants.
4)  Wallet functionality:  Ability to easily store and use different payment methods by amount or merchant, transfer info to a new phone, enable preferred payment instruments and establish branding.
5)  Acceptance at Merchants:  Particularly at day-to-day stores, along with all other payment methods.
6)  Device deployment/availability:  Available across most phones independent of manufacturer, Mobile Network Operator (MNO) and Operating System (OS).
7)  Value-add apps:  Most wallets are being built as open (or semi-open) platforms to enable companies to develop apps on top of them. 

The idea is to have, at the end of this series, an easy-to-read table that will compare how each digital wallet ranks on each criterium.  

Digital wallets are constantly evolving so the information I post may soon be out of date.  I plan to update it as this happens.  Also, I will be analyzing some systems that have not yet been fully launched and some others for which we don't have full information on their inner workings, which will force me to make assumptions.  Again, if my assumptions are not accurate,I will update the post as new information comes available.  As always, I welcome any comments or info that correct any misconceptions and increase the value of the articles.

Having just recently moved from London to the San Francisco Bay Area, I am going through the process of learning about the best payments and technology groups, forums and clubs in this area.  Many of these groups also have on-line resources that make some, and in some cases most, material easily accessible to everybody.  Below is a list with some of the best groups I have found for your reference.

BayPay Forum: If you are a member of the payment industry, you are invited to join BayPay, a networking group of the Silicon Valley focused on payments and composed exclusively of members in the payment community or investors in this area.

• Within LinkedIn:  Search for BayPay in the Groups Directory.  It is a very active group with almost 3,000 members.  Aside from being a great source of news and information, its greatest value resides in the interaction among members.  
  
  From my experience, everybody is very responsive and posts turn into meaty conversations frequently.  All members are payment experts and most are willing to continue conversing off-line either on the phone or in person.    
  
  
• BayPay Website:  Registering is free and easy to do.  It will give you access to 1) A list of BayPay organized and sponsored events around the world;  2) Videos of past presentations;  3)  Key payment news and 4)  Access to other payment experts.
  
  
• Make sure to introduce yourself to Daniel Chatelain, Founder and Managing Director of The BayPay Forum.  He is very knowledgeable and has many great contacts in the area.

PYMNTS.COM and NYPAY:  Although these organizations are not based or focused on the Bay Area, they are also great sources of information and contacts.  Most people linked to BayPay are also active in PYMNTS.COM and, although NYPAY seems to be much more ‘popular’ among East Coast professionals, it is growing fast around the world.  Both have LinkedIn Groups as well as their own websites.  I would also recommend reaching out to David True, President and Board Member of NYPAY - another great contact to have in the industry.

Link Silicon Valley: It is a directory with over 10,700 companies comprised of IPO companies, startups, acquired or liquidated companies, and VC firms. It helps its users connect with the people who build and fund the technology companies of Silicon Valley.  

The core information provided includes contact information of key management, outside board members, VCs, customers, strategic partners, and other information typically found in corporate press releases. You can view information, which is updated daily, from lots of different angles and ‘connect all the dots’. 

You can access some of the information for free and then subscribe to have full access.  Give it a try.  It’s worth it!  And do not hesitate to also reach out to Bob Karr, the CEO and Founder of Link Silicon Valley.  He is fun, extremely welcoming and always in-the-know.

Churchill Club:  Their focus is ‘to cultivate a one-stop-shop of world-class people—people like yourself—that ignites the kinds of conversations that lead to new ideas, enlivened dreams and personal motivation.’  The Churchill Club, with over 6,500 members, hosts between 30 and 40 events each year, all of them featuring industry and government local and national leaders.  The events are a great opportunity to learn, be inspired and meet very interesting people. 

MIT/Stanford Venture Lab:  It is ‘the San Francisco Bay Area chapter of the MIT Enterprise Forum, a non-profit organization dedicated to promoting the growth and success of high-tech entrepreneurial ventures by connecting ideas, technology and people.’  Although I have not yet attended any of their events (they do not run any in July, August and December), a few friends of mine have raved about them.  No wonder considering that MIT and Stanford are involved!

SVForum: It ‘fosters innovation, entrepreneurship and leadership within the Silicon Valley ecosystem of individuals and businesses participating in emerging technologies.’  It focuses on ‘1) Creating connections and community; 2) Providing education and access to resources’ 3) Linking the global business community to Silicon Valley, and 4) Facilitating the exchange of unbiased knowledge, insights and best practices.’

They have developed 12 different Special Interest Groups (SIGs) that range from Business Intelligence and Health Care IT to Digital Media and E-Commerce.  Whatever your interest, they are probably covering it!

MeetUp:  A lot of Bay Area groups post their activities and meetings on MeetUp.  It is free to register / use the site and it has many tools to help you find interest groups near your location.  For example, it was via MeetUp that I follow SVForums Marketing SIG activites and that I found Women Entrepreneurs of the Bay Area (WEBA).

There are endless opportunities to learn and network in the Bay Area and I am happy to now be local and have easy access to all of them!  Let me know of other groups that have been helpful to you.

From the Financial Times by Elaine Moore:  Mobile phones will take over from plastic cards and cash as the principal method of payment before the end of the decade, according to new industry forecasts.  But payment providers admit that concerns about the security of cashless transactions – heightened by this week’s software failure at RBS – may deter consumers for some time.  Continued.

Trish’s Comment:  Many companies have launched mobile payments initiatives ahead of London 2012 wanting to take advantage of the great showcasing and testing opportunities The Games provide.  Moore lists some of them:  Visa’s partnerships with Samsung promoting contactless cards and NFC-based mobile payments, Barclay’s PayTag – a payment tag that sticks to the back of your phone and allows payments of up to £15 - and Pingit – an app that allows you to send money to others using their cell number – and O2 Wallet.  Other interesting ones are PayPal’s inStore – it is being trialed at the Auroria Fashions Group stores and it allows you to pay using a barcode that uniquely identifies your PayPal account – and QuickTap – payment app launched by BarclayCard in collaboration with Orange for NFC-enabled phones.

Now that we are well into the second week of the London 2012 Games, the question is:  Have all these initiatives been able to leverage the Olympics as expected?  Have they gathered the attention and generated the hype that they may have been hoping for?

In my opinion, the answer is yes for Visa and its partnership with Samsung and no for the rest of them, at least not in the very short term.  The focus is on what is happening in the Olympic venues, where Visa – as a key sponsor of London 2012, as of all Olympic Games in the last 25 years – has the exclusive rights to provide payments services.  This leaves everybody else pretty much out of the game for these two weeks.

So, how are Visa and Samsung faring?  Have they managed to make the best of this opportunity?

The answer may be yes from an ‘educational’ perspective.  They have grabbed the opportunity to educate the public about contactless and mobile payments and clearly tied both to the speed and performance of the athletes.  The commercial titled ‘Usain Bolt vs. London’ is a great example of this:  It shows all three ways of paying with Visa – swipe (well, its European version with chip & pin), contactless using a card and contactless using a phone.  All working fast and helping you keep life flowing.

Samsung, as part of the partnership, launched a special version of its revolutionary Galaxy S3 smart phone to tie in with London 2012.  Each and every athlete was given one of these NFC-enabled phones sporting the Visa payWave app.  This allows the Olympiads to easily make payments around the Olympic Village and all around London. 

This very same phone became available to the general public to be purchased exclusively at the Carphone Warehouse from August 1st.  No numbers are yet available but, in all likelihood, this special edition will be extremely popular in the UK and will completely sell out.  This could be an important development for the mobile payments industry.  

In order to help users become more familiar with NFC technology, Samsung has partnered with the Holiday Inn in Stratford City (where the Olympic Park is located) to use the handset during the Olympics as keycards to the rooms, control lighting, change TV channels and act as an in-room phone extension.  

Being a key sponsor of London 2012 and the exclusive provider of payments services throughout all Olympic Venues seems to be paying out for Visa.  According to Visa itself, international visitors to London spent nearly $700 million on their Visa accounts during the opening week (July 23rd to 29th) with the top spenders being Visa account holders from the US, Japan, France, Italy and Australia.  

Unfortunately this sponsorship has also brought some troubles for Visa.  The biggest, and most publicized, issue took place on Sunday, July 31st, as tens of thousands of fans attended soccer games taking place in iconic Wembley Stadium.  Due to issues with the local IT system, debit and credit cards could not be accepted as payment.  At the same time, because most of the cash machines at Wembley had been removed – they were powered by Link and not Visa – access to cash was extremely difficult.  The long queues that formed in front the ATMs and then the refreshment stands were hot-beds for strong criticism of Visa, even if, as the company has repeatedly explained, the fault lays with the local IT Team as Visa’s network was up-and-running at all times. 

From my perspective, it doesn’t matter whose fault it is.  What matters is the learning we can take from it:  Payments is such a vital activity that we cannot leave it to a single provider or accept just having a single method available.  There needs to be two or more payment alternatives available at all times.  Systems fail but life - and the transactions that fuel it - must go on!

The O2 Wallet launched in the UK on April 26th.  O2 described it as 'A seamless and secure digital wallet service that will deliver the benefits of mobile money to more UK consumers than any other product or service currently available.'  It is available to all UK consumers regardless of carrier or bank on iOS (iPhone and iPad), Android and BlackBerry.

The Wallet combines four functions:

1. Money Message:  Enables consumers to securely transfer up to £500 from a bank account or Visa pre-paid card to any UK mobile phone number as easily as sending a text.  Both, the sender and receiver, need to have an active O2 Wallet.
2. Shopping:    A comprehensive barcode and search engine function compares the prices of millions of branded goods from more than 100 online retailers and allows the user to make purchases directly from their phone.  This function includes daily discounts and deals. 
3. Phone as Wallet:  It enables consumers to digitise their existing debit and credit cards making it quick and easy to pay for things via their mobile. Money can be loaded onto the Wallet via a debit card, by receiving a Money Message or with cash at more than 30,000 locations including O2 stores, PayPoint and epay retail outlets.  Transaction history can help the Wallet owner keep track of spending.
4. Money Account Card:  The Wallet offers both a virtual and a physical card based on a Visa prepaid account.  The cards are ideal for on-line and off-line transactions respectively.

Review

Setup

The O2 Wallet can be used by any consumer with a number of mobile phones (iOS iPhones and iPads, Android and BlackBerry devices) regardless of their service provider.  I have an iPhone running on the '3' network.  As far as I could tell, I did not experience any constraint, limitation or additional burden compared to O2 customers.   

Having said this, the setup itself was slow and complicated because:

1. I needed to setup four different passwords - with different requirements - that I was then asked to enter multiple times during the setup process, making it rather a laborious task.  One password is to access the wallet, another to 'keep it safe', another to access the Money Account and yet a fourth one to authorize transactions.
   
2. Each credit / debit card entered was checked via 'Verified by Visa'.
3. Each account entered was checked via a small money transfer made by O2 that included a unique code I then had to enter into the phone.
4. Any error I made in setting up a card or account sent me back to the beginning of the setup.
    

All in all, setup took well over an hour although I did not enter all my accounts & cards.  All the passwords and checks may be necessary to comply with security requirements set by banks and credit card companies and perhaps help customers overcome their safety concerns.  At the same time, it would seem that O2, along with all other mobile wallet providers, will need to innovate in order to help customers get over this first hurdle in mobile wallet adoption.  

Using the App

As shown in the presentation above, the app itself is very clean, well designed and very easy to use.  It works exactly as advertised but the user will quickly realize its shortcomings:

1. Lack of NFC is a major issue since it, effectively, precludes you from using your phone to buy off-line.  O2 will include NFC capabilities in the wallet at a later stage, probably once it feels the infrastructure (contactless POSs and NFC-enabled phones) is in place.  Meanwhile, the carrier mitigates this issue by linking a physical card (a pre-paid Visa card provided by O2) to the wallet.  This card can be used to pay at stores and also to withdraw money from cash-points.  Nevertheless, needing a physical card to buy at the high-street (even in those locations with contactless POSs) feels a bit clunky.
2. Vouchers are a welcome feature but, until they are better tailored and personalized to each consumer, its essentially the same as offers you could get from Groupon.  O2 needs to improve this capability in order to differentiate itself.
3. The scanning function is a very good idea but the technical implementation is far from perfect:  It has great difficulties pickup small barcodes and it often misreads the larger ones.
4. 'Money Messages' are a good idea, although the same functionality can be achieved via PayPal and PingIt.  The main drawback is that the receiver needs to have an O2 Wallet installed.  This means that they will need to go through the painful setup described above to receive the payment.  

Last Thoughts

1. The O2 Wallet seems to be more of a service competing with PayPal transfers or with PingIt than a full-blown wallet.  As much as I admire O2's determination to be first to launch a mobile wallet in the UK, it feels like a 'half-baked' product launched in a rush to have a presence during the 2012 London Olympics given that Project Oscar has been delayed due to the in-depth investigation being carried out by the European Commission.  
   How will O2 tie the Wallet to the Olympics?  We are only a couple of days into this big event but, for the moment, I have not found the link.
2. It is not yet clear the costs and fees associated with the wallet.  For example, transfers expected to remain free for the first 6 months but then 15p will be charged to the sender for each transaction.  Withdrawing money from cash machines with the physical card has a £1 fee associated. 
3. All information - passwords, credit card numbers, account numbers, transaction history... - is stored in the cloud, not on the phone.  This, along with the four different passwords necessary to open and use the wallet, gives a high level of security to this payment method.  From my perspective, they will need to finetune the number of passwords necessary to operate the wallet - four are just too many to remember and too cumbersome to use - but it is an aceptable starting point given the importance of security concerns.

London 2012 provides mobile players a fertile ground to test numerous payment initiatives.  Let's see how this one fairs against the rest.  Meanwhile, enjoy The Games!

From TechCrunch by Sarah Perez:  DrChrono, a startup focused on bringing medical records and more to the iPhone and iPad, is announcing a big update today which introduces mobile payment feature to its platform, as well as a new way for physicians and patients to access their health insurance information from mobile devices.  Continued.

Trish’s Comment:  Ever since the Health Information Technology for Economic and Clinical Health Act (HITECH Act), enacted as part of the American Recovery and Reinvestment Act of 2009, was signed into law to promote the adoption and meaningful use of Health Information Technology (HIT), HIT firms have experienced significant growth.

Particularly, this has been the case for Electronic Health Record (EHR) Companies thanks to the EHR Incentive Programs, which specifies that each physician within a practice can qualify for $44,000 in Medicare Incentives or $63,750 in Medicaid Incentives for adopting a Certified EHR. 

This is the main reason behind the explosive growth experienced by innovative small startups in this area, such as DrChrono and Practice Fusion.  What is DrChrono and why has it caught my attention?

DrChrono is a freemium SaaS solution for doctors that is built on top of Apple’s iOS platform.  It offers an online service and iPad app that doctors can use to schedule patient appointments, write or dictate notes via audio, take pictures, write prescriptions, enable reminders, access lab results or input health records.  It is experiencing strong growth going from 5,000 users during the summer of 2011, to 15,000 at the beginning of 2012 to around 23,000 this month.   The best way to get a feel for DrChrono is to review the following short video.

It has caught my attention for four main reasons:

• Michael Nusimow, DrChrono’s CEO, says:  ‘We’re a non-health care company in health care …  A tech company looking for tech solutions.’  And thus, when defining their business and revenue models, they studied and analyzed other tech companies.  Although they are a big data company, they, at least so far, have not gone down the same path as PatientsLikeMe where aggregate patient information is used – and sold – to look for trends in drug performance, disease evolution or geographical distribution.  This is the revenue model favored by other EHR companies such as Practice Fusion.  
  
  In the case of DrChrono, it has chosen a freemium model, with many features offered for free while others, such as speech-to-text, medical billing and insurance checks, are available as in-app purchases.  And it seems that its users are behaving much like users of other freemium-based technology companies, such as DropBox or Evernote, regarding the split between free and paid customers.  

• Although the company launched its product on the iPad first, it initially had plans to port their software to other platforms, most notably Android.  As of late, it has decided to focus 100% on iPad and other Apple products, betting its future in the iPad being the best suited for doctor’s use.  This is a bold bet!
  

• As far as I know, it is the first EHR company to include Square-based mobile payments into its processing flow – directly connected to its billing system.  It makes perfect sense since DrChrono is targeting the smaller scale doctors’ practices (up to ten doctors), where traditional POS systems can prove to be an expensive solution. 
  
  According to Nusimow, it not only makes sense but it is also something doctors really want to use because it is ‘something sexy …  It makes them feel modern’.  Well, no harm in that!

• Finally, it keeps adding very innovative features, the latest being real-time medical insurance checks, available through an iPad app for the very first time.  It allows doctors to easily find out details of a patients’ current coverage and provides patients with details regarding co-pay, deductibles and procedures covered.
  
  DrChrono is a platform and, as such, the possibilities for new features and solutions to be added are limited only by imagination.

DrChrono has already raised over $4 million from the likes of Yuri Milner, Matt Cutts, Paul Buchheit and Charles River Ventures.  It is sure to continue to raise interest as it adds new features and services.  I will keep you updated!

Knowledge@Wharton Podcast - C. William Hanson, III, author of 'Smart Medicine:  How the Changing Role of Doctors Will Revolutionize Health Care', director, surgical intensive care, at the Hospital of the University of Pennsylvania, interviews Eric Topol, author of 'The Creative Destruction of Medicine:  How the Digital Revolution will Create Better Health Care' and also cardiologist, director of the Scripps Translational Science Institute and co-founder of the West Wireless Health Institute in La Jolla, California:  Access the interview here.

Trish's Comment:  The podcast is a great opportunity to hear Hanson and Topol, both greatly experienced doctors with a common vision of the future of medicine, discuss and review Topol's latest book, 'The Creative Destruction of  Medicine:  How the Digital Revolution will create Better Health Care', published on February 12th of this year.

Dr. Topol explains in his book how medicine works today, where treatments are based on statistics and probabilities, not the individual.  Digital medicine, which would be possible today if it were not for the medical community's profound resistance, has the power to change this through the use of wireless sensors, genomics, imaging and electronic health records.  For the first time we can capture all the relevant information from each person to enable precision therapy.  In Dr. Topol's words: 'This is a new era of medicine, in which each individual can be near fully defined at the individual level, instead of how we practice medicine, in which each individual can be near fully defined at the individual level, instead of how we practice medicine at a population level, with mass screening policies for such conditions as breast or prostate cancer and use of the same medication and dosage for a diagnosis rather than for a patient.'

Listening to the interview will give you a taste for Dr. Topol's views and proposals and, if you are like me, it will leave you wanting to learn more!