Mobile Payments – What’s Next?

Since Softcard is shutting down this month, we have to ask ourselves about the future of mobile payments. What is next?

Right now, there are several options. The main players are ApplePay, Google Wallet, PayPal, and CurrentC. While ApplePay has gathered the most publicity, Wallet and PayPal have been around a lot longer. How did we get here?

In 2011, Google introduced its Wallet app which you could use for contact-less payments if the terminal was NFC-capable. The problem with Wallet was the access to the “secure element” of the SIM card. AT&T, Verizon, and T-Mobile would not allow Google to have its app access the secure element. Only Sprint allowed Wallet to work with tap-to-pay on its phones. Little did we know that the big 3 blocked Wallet so they could introduce ISIS as the tap-to-pay app. ISIS was a good idea, but with only Chase, Wells Fargo, and American Express on board, most people dismissed the idea of mobile payments.

The PayPal app is a good idea but requires a few steps to pay with PayPal at the terminal. PayPal could work with any phone on any provider, but the merchant had to support PayPal. CurrentC only came to the public knowledge because of ApplePay. Several large retailers like Best Buy, CVS, and others blocked all NFC-based payment methods within a week of Apple Pay coming out.

Apple Pay is relatively late to the party because NFC support wasn’t built-in to the iPhone until the iPhone 6 and 6 Plus were released. But because of the support from major banks including Bank of America and others, ApplePay has started to take off. At the same time, many retailers have to upgrade their terminals to be compliant with the new EMV regulations starting October of 2015.

We cannot forget Starbucks and their massively successful app which allows payments straight from the phone. While the Starbucks uses a similar technology as CurrentC, the combination of rewards and ease-of-use for payments makes the Starbucks app very successful as a mobile payments app.

Now that we know how we arrived here in the mobile payments space, where are we going? First, we have to acknowledge that any system will be insecure until proven otherwise. The recent Apple Pay breach shows that banks still have a long way to go before card not present (CNP) fraud is solved. The new chip cards (chip and pin / chip and signature) should reduce fraud once the cards get out in the public space.

Second, banks have to do a better job of tracking and validating stolen credit cards. If Apple Pay drops a bank because of lax approval practices, then this action or the threat of a suspension would get the bank’s attention. But there is a cost-benefit issue at play. The offending bank won’t change unless there is public pressure to change.

What would the ideal payment solution entail? The first step is to reduce the amount of information between the customer, the merchant, and the banks involved. If the information is encrypted between the customer and their bank, all the customer’s bank has to do is return the approval code and that’s it. This is what chip-and-pin is supposed to do with the one-time token. If the mobile payment solution can work in a similar manner as the new chip and pin, we could have the first steps to resolve credit card fraud. But until banks can resolve the issue of stolen credit cards, we will still have problems no matter the transmission method.

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Softcard says Goodbye

As of March 31, Softcard will no longer work. Their webpage and emails direct users to download the Google Wallet application.

After that date, the Google Wallet app may be updated to support tap-to-pay functionality. I think the carriers will allow the new functionality on most phones. But for those requiring the secure element like the Galaxy Note 3 and similar vintage, it may be a long wait.

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It’s official: RadioShack files for bankruptcy

RadioShack filed for Chapter 11 bankruptcy protection this afternoon. We’ll know more once the first day orders go out. 2,000 stores could be closed a part of the initial filling but that is up to the bankruptcy court.

WARN notices have gone out in Texas for 1,000 layoffs at the corporate headquarters.

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Watching the clock on RadioShack

Today, Bloomberg announced that RadioShack is in talks to sell half of their stores to Sprint and shutter the rest. The reason for this action is to prepare the company for Chapter 11 reorganization. Unfortunately, this proceeding may become a liquidation. There are several signs that any RadioShack shutdown will be quick.

First, the New York Stock Exchange has suspended trading in the stock and will remove RadioShack from the exchange due to insufficient capital requirements.This was expected as RadioShack stock has been hammered lately after a lackluster holiday season. The money is running out.

There are some rumors that some store managers have been told to ship inventory such as smartphones and other items to other stores prior to the filing. The Dallas Morning News reports that some stores are running clearance sales and that store managers know they are closing between 30 and 90 days from today. Based on these reports, the first wave of store closings will be complete between March and early May. The chain will be all but gone soon thereafter.

What beat RadioShack? First, the service has been going down for years. Second, the insane focus on smartphones by the chain overshadowed the other nice things that could have saved the company. The Maker movement could have saved the company. Now, Mouser, Digi-Key, and Monoprice offer a better selection of parts and cables with fast shipping. Other places offer the same or better items than RadioShack. Why go to the store when you can go online? Or even better, a visit to Fry’s Electronics was in order if the item was needed right now.

But the biggest failure had to be the lack of foresight with the proper use of its mailing list. The mailing list was an untapped gold mine. The marketers at RadioShack failed to see the value in its mailing list. When was the last time you saw a flyer from RadioShack? I would receive emails from the chain, but they did not show anything I wanted based on my shopping preferences. Amazon actually suggests items to buy which is very useful.

Next Web leads with the headline “Adios RadioShack and thanks for all of the Batteries.” That pretty much sums up my sentiment about the company. It’s time to say farewell to RadioShack and relegate them to the dustbin of history.

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Saw this coming – Google buying Softcard

According to multiple reports, Google is in talks to buy Softcard (formerly Isis). This is a very interesting development in the mobile payments space.

Isis was formed as a consortium in direct response to Google Wallet and its “tap to pay” functionality. AT&T, Verizon, and T-Mobile formed this consortium to set up their own mobile payments system. The key to the system was the “Secure Element” located in the SIM card. Google wanted to access the secure element as part of the payment process. But since the big three wanted to see Softcard succeed, Google was forced to reduce its Wallet app to a loyalty card holder.

With the advent of Apple Pay, it looks like Softcard has a lot of intellectual property related to mobile payments but can’t make it work. While Apple Pay signed up many banks and credit card processors, Softcard only had three – Chase, Wells Fargo, and American Express. This left a lot of people out in the cold who could have used a mobile wallet to make payments.

Apple Pay is only available now on the iPhone 6 and 6 Plus while Softcard is available on many Android phones. If Google can make this deal work (valued at $100 million), Google would gain the intellectual property. If the three wireless providers will allow Google to implement the Softcard functionality in the Google Wallet app, then we will see a real competitor to Apple Pay.

I’m not holding my breath as to when Google Wallet will have tap to pay on more smart phones. But I’m sure Softcard wants to sell and get something for its assets. The purchase is a no-brainer for Google and it will be a matter of time before we see Softcard functionality in some new or existing app.

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Two more may go

It looks like two more teen retailers are in trouble because they can’t keep up with the likes of Forever 21 and H&M. Wet Seal may file for bankruptcy soon even after shutting 41 stores as previously announced.

Abercrombie & Fitch is also in trouble. We’ll have two see how these two retailers fare in January

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Market-Ticker for Sale?

It looks like Karl Denninger is going to sell his blog and associated domains.

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Black Friday and Retail Dead Pool

Let’s face it – Black Friday was not the savior this year that was hoped by a lot of retailers. Some reports put the real drop at 11% compared to last year. Shoppers will realize that the better deals will come in the next few weeks. The deals will go right up to the 23rd and 24th. Here are my observations:

  • Sears and K-Mart are done in 2015. K-mart did very little advertising while Sears did a lot more leading up to Black Friday. We may see another push starting a week before Christmas but I don’t believe it.
  • JCPenney has been quiet on the advertising. Are they finally done?
  • RadioShack had advertised some but they are knocking off a lot of items at 50% or more. RadioShack may end up doing an orderly shutdown of its stores and fade from the retail scene mid-2015.
  • Best Buy has improved their stores and targeted their advertising. I think Best Buy is getting stronger and would see and incremental increase in business from a RadioShack shutdown.

Keep an eye out for announcements in January of 2015. We should know more once the Christmas shopping season is done.

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KitKat 4.4.4 on Verizon Galaxy Note 3

I’ve had a few days to play with 4.4.4 on the Note 3 and here are my observations.

  • Battery life has improved. I don’t have to recharge as much as I used to. While the battery is new, I did notice a difference in 4.4.4 from 4.2.2.
  • Apps seem to work faster. Facebook and Twitter are two examples. The pages scroll by very fast
  • Updated Firefox browser looks great on 4.4.4.
  • Bluetooth does not consume a lot of power now compared to previous releases.

Here are some of the things I was expecting but did not see:

  • Updated TouchWiz so I could scroll the apps like the Galaxy Note 4. I hope it comes in 5.0.
  • Updated Google Wallet to use NFC without the “Secure Element” part of the SIM. I was hoping to use “tap to pay” in Google Wallet but it didn’t happen.

According to different reports, the Galaxy Note 3 will receive Lollipop sometime in early 2015. KitKat 4.4.4 takes care of some bugs and much needed fixes.

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Galaxy Note 3 and KitKat 4.4.4

The new software version 4.4.4 is now available for the Verizon Galaxy Note 3. I’ll post a review later.

It’s an early Christmas present from Verizon.

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