Great write up on Zipmark ahead of our funding close.

As our friends at Google ready their competitor to Groupon and its cavalcade of imitators, one must consider some of the interesting synergies and opportunities that a larger organization like Google can create that a Groupon-type startup needs to broaden out to cover.  The world’s recent discovery over Android location tracking for their ad network is an obvious competitive advantage.  I don’t know what all the excitement is about, did you NOT think they were going to do that?   So Google can target nicely and hey, they own the OS that is on most smartphones in the demos where daily deals show most traction.

Second, and more interesting, is what Google is doing with Citi on mobile payments and mobile wallet using NFC.  If Google can turn Android phones into the deal sign-up, deal purchase and deal redemption tool, they have something.  Assuming Google can scale deal users to Grouponian customer file size (and who would bet against that?), it’s ultimately going to be a battle pitched at the retail till.  The service that makes it easiest to process, track and get paid for participating merchants will drive the greatest merchant participation.  Merchant participation is what drives the daily deal to the forefront of our family’s breakfast conversation.

“Did you see, [Insert daily deal site] has [Item, service that you would not have bought otherwise] for [Insanely low price]?”

“I already got one, why don’t you buy one too? I love that place and we pass by it all the time.”

Google’s Daily Deals Service Emerges to Take on Groupon: Tech News and Analysis «.

The developing over war of words Jack Dorsey and Doug Bergeron is a troubling move.  Strategically, it costs Verifone nothing to suggest the risk.  It’s also a problem that can only be solved by Square implementing costly end-to-end encryption.

If they choose to employ a marketing strategy of superior security in mobile, that can be a meaningful position in the market similar to the way Verizon is the serious man’s wireless network no matter what AT&T, Sprint or T-Mobile do.

YouTube – Bhattacharya Says Zipmark Fees Lower Than Card Company.

Zipmark Makes P2P Real Time

By Rebecca Sausner

There are a couple of major drawbacks to most mobile peer-to-peer payment systems in the market, including the delay between the time the sender initiates a payment and when the receiver can spend the cash. A new startup from Mobile Money Ventures co-founder Jay Bhattacharya and partner Jake Howerton uses 2D barcodes and the digital check rails to make P2P payments real time.

The payment platform’s QR code-dubbed a Zipmark-generates a secure, encrypted token. Using an iPhone or Android app, a sender generates a unique Zipmark. The recipient captures that Zipmark using another iPhone that has the Zipmark app installed. The exchange of the Zipmark creates a link between the two parties, allowing them to send and receive money from their enrolled checking accounts. MyEcheck is Zipmark’s back end, sending the money via ACH transfer. The key to managing risks, though, is that Zipmark uses funds verification tools to make sure the money is in the sender’s account before the transaction is authorized.

But even bigger than the person-to-person use case, Bhattacharya envisions billers using Zipmarks to let customers pay bills instantly. His ideal example? The monthly maintenance payment on his condo. Rather than write a check each month, the condo association could send out a Zipmark on its invoices. Tenants that have the app could use it to instantly remit the payment, cutting down paper processing and float time for billers. This use case also appeals to Bhattacharya’s professional legacy. “I’m a credit card guy. I don’t like acquiring customers, I like enrolling huge chunks of customers,” he says.

Small businesses are at the top of my list here.  Mobile payments and invoicing should be top of mind for business that collect revenue onsite via checks on delivery, cash or costly remote card processing solutions if they take cards at all.  Mobile payments also gives the ability for partial payments on completion of a project or after inspection of completed work.   These behaviors do not exist yet, but I’m sure there are many a home-delivery company who would like to collect payments  through their field agents.

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Companies looking to attract mobile-payment customers ought to be looking at 18- to 35-year-olds, according to a national study released today. Hitachi Consulting and the Bank Administration Institute (BAI) conducted the research, which shows that the “millennial” generation will likely drive mobile payment adoption in the coming years. Not only does the study help define who’s comfortable with payments on the go, but also what features are impor … Read More

via GigaOM

This is a good article about how even if you have a headstart in online, mobile can be a bear.  The question is when will customers start leaving due to lack of mobile services.

“So if money is the root I want the whole damn tree.” Dr. Dre

The recent announcement by Bank of America that it would conduct a mobile payment test in New York City followed the recently over-covered joint venture between Verizon, T-Mobile, AT&T, Discover and Barclays.  While these heavily funded examples of innovation and cooperation between ecosystem players seems like giant progress steps in the slow to develop mobile payments story, there are some questions as to the how things are structured and the motivation of these players i.e., who’s really hustling to get consumers to adopt vs. who is just trying to find a way to wall up the garden without a concern for consumers.

I recently had a discussion with a successful bank executive about a key learning for me in the transition from corporate officer to startup builder: ambition in a big company revolves around self promotion and individual success with company value being generated as a byproduct.  In a startup, you do everything possible to get operators who willingly link their success to the company’s success.  When I look at how MUCH the payment ecosystem has to change, given regulatory, consumer, technology and competitive pressures, the actors in these mobile payment pilots have to act like it’s a startup.  Not unlike 1966 when the Interbank Association joined with HSBC to become Master Charge and Bank of America franchised their card network to become Visa.  No that was hustle!

The Big Joint Venture:  Who owns the user experience? For consumers and merchants? Are the investors really aligned?  Which one of them is going to get f-cked?

The fundamental issue around the success of this JV is who makes the user comfortable with this new fangled product?  Telcos have not exactly done a phenomenal job on the customer side of their business; let’s not get into the banks.  Historically, banks and card issuers have never even considered merchants to be “users”:  The relative size of investment in merchant services vs. consumer marketing is testament to that.  So the JV has to not act like a bank or a telco, while pulling a management team from those organizations.

“No matter where you go, you are what you are player
And you can try to change but that’s just the top layer
Man, you was who you was ‘fore you got here “ –Jay Z.

I am also not convinced that these companies can be a useful board of managers for this joint venture business.  Corporate investors, especially banks and telcos, tend to exhibit qualities that really suck for the CEO of the Newco:

• Groupthink: I have a growing theory that groupthink actually was invented in the consumer banking world.  How else could everyone’s card product do the exact same thing and cost exactly the same. Every time.  Groupthink is useless to the manager of a new business attempting to create new customer behavior.
• Experience: Good VCs have done 100 to 1000 times the deals that any of these corporate operators have done.  They have seen and experienced analogous development in other industries that are underwritten by technologies.  Score another for new payment startups.
• Courage: It takes big balls to start a new payment system.  Real courage, not false powerpoint bravado.  As I’ve advised others, be prepared for your business to nearly fail once a quarter.  That kind of fortitude is hard to find in these big companies.

As far as which of the investors here is going to get f-cked, we can save it for another post, but there are obvious signals in the size of the companies at play.  Also for fun, everyone should Google which banks do treasury, M&A advisory and other such activities for AT&T, Verizon and T-Mo.

Bank Of America: A shot at success? Don’t bank on it.

The B of A test seems more about form factor change rather than an actual system change.  DeviceFidelity themselves refer to their technology as a bridge to integrated NFC.  This suggests that B of A is simply trying to measure customer reaction.  But a handful of employees and consumers in New York?  Welcome to the upper west side, circa 1998:

“And in New York, after a dismal start, Chase Manhattan Bank–Mondex’s New York trial partner–simply gave customers living in the area a new debit or credit card equipped with a Mondex chip in it. It also put at least $5.00 of its own money on each card. More than 40,000 local residents received a card, yet the smart card remains as unpopular in New York as it is in Guelph. In both places, after an initial flurry of interest, card use has dropped to near zero.”
–Forbes, July 1998

In the end though there are some key characteristics that need to be exhibited by the winners in consumer mobile payments, whether big or small:

Understanding the changing consumer: Fundamentally, this is where banks fail over and over again.  Beaten up by government at regular intervals, they simply cannot manage inertia to modernize at pace with the consumer.  For example, smartphone payment means smart ass consumers.  That means the solution will need to be inherently smart.

Treat the merchant like a customer: This is a big one that nobody seems to get.  They didn’t get in 1998 and they still don’t get it.  Retailers continue to pay the ever increasing vig on card transactions because they are addicted to that crack.  They aren’t going to try your new NFC crack unless it is better or cheaper.  Incentivize them instead of selling them some no rational line about increased basket size.  Pay for the readers and throw some money at them for participation.

Let people mess around with it: Yes it’s risky to put beta product out in financial services, but you need to get real people to try this to read behavior.  Then listen to the users and get the right functionality in the next revision.  And tell the CTO it should be released in 6 weeks instead of 6 months.

This latest IDC report seems to pile on to more of the “importance of the mobile channel” argument that I had been hearing (and delivering) since 2006.

Now that we’ve established that mobile phones are somewhat popular, banks need to put some of that old school, segmentation in the mobile channel.  Wake up those data analytics guys and the direct marketing managers.  Build some models around smartphone behavior or the Net Receivables value of a Droid X owner. Put the test cells together and see who’s got the propensity to buy.  Once you have that you can sell them something.

Mobile Banking Use Rising, But Customers Say No to Paying More.

Tough sell to smaller business owners who would be forced into more of a sticky relationship with their cell phone company.  Do small business owners love AT&T enough?  Can AT&T be like American Express in the small business finance ecosystem?

AT&T Seeks a Piece of the $633B Mobile Payment Pie http://ow.ly/28cp9