Payments Views from Glenbrook Partners » ECommerce

MasterCard Acquires DataCash – Game On!

Allen Weinberg — Thu, 19 Aug 2010 23:11:25 +0000

As you may have seen on PaymentsNews, MasterCard announced the acquisition of DataCash, a pan-European (and a bit beyond) gateway, this morning for $520 million.

Before I jump in, you might want to take a look at the earlier opinion piece I posted regarding Visa’s $2 billion acquisition of CyberSource, since the rationale for MasterCard’s acquisition seems similar. Also, there’s also a bit of background on gateways in general included there.

Getting back to MasterCard and DataCash, in my opinion, this is an aggressive move that makes sense for a number of reasons. First, MasterCard is not exactly a new entrant into the gateway business. It has been running MiGS (MasterCard Internet Gateway Service) in the Asia Pacific region for a number of years and has been successful with that offering. MasterCard seems to clearly believe in the strategic nature of the gateway business and the importance of expanding it beyond that region, particularly in Europe.

DataCash comes with over 300 employees and will undoubtedly speed MasterCard’s time-to-market in Europe. If MasterCard were to take the purely organic growth path in that region, it would have a lot of new hires to make and train in a short period of time—and the gateway business is competitive and moving fast.

I think it’s also important to point out a perhaps than less obvious benefit of this acquisition. It sends a clear signal to the marketplace and to MasterCard’s own employees that MasterCard is entering a new phase. It seems willing to make aggressive acquisitions and raise the competitive intensity of the battle – Game On!

Pay With A Tweet – A Social Payment System

Russ Jones — Fri, 25 Jun 2010 05:29:28 +0000

“Pay with a Tweet – A social payment system.” These aren’t my words. Instead, it is the name of a new payment concept developed by an interactive advertising agency called Innovative Thunder. Given the work we’ve been doing on social payments here at Glenbrook, we had to investigate this one.

Here’s how it works. A seller registers a URL with Pay with a Tweet that points to some digital content they want to sell, and attaches a tweet to the URL. When a potential buyer comes along, they just click on the “Pay with a Tweet” button which tweets the seller’s message from the buyer and then provides the buyer with access to the underlying digital goods.

Innovative Thunder’s observation, which I happen to agree with, is that sometimes the value of people talking about your product is much higher than the money you would get if you sold it directly. You can’t make “one million dollars” selling things this way, but I can see how it might jump start viral interest in a video or a book, etc.

From a payments perspective, Pay with a Tweet is consistent with the offer-based payments model that is so popular with social media and game sites today. The difference is that instead of accepting an offer in exchange for the goods, you simply tweet the seller’s viral message in exchange for the goods.

Some have quibbled with us whether or not offer-based payment systems are actually, well, payment systems. People point out, after all, that often times no payment is involved. But I disagree with this narrow definition. From the seller’s perspective, offer-based payment providers are just one more alternative payment method. The seller gets settlement funds on a regular basis (from the marketer that provided the special offer or survey that the buyer agreed to participate in via the offer-based payment system), transactions have to be reconciled, there are fees to be paid, disputes have to be managed, fraud has to be managed, etc. Large sellers sometime use offer-based payment as one more form of payment — small sellers sometimes use them as their exclusive form of revenue. It works both ways, and it feels like payments to me.

Where I draw the line, however, is when there is no actual money involved. So based on the power vested in me as a Payments Views blogger and Glenbrook payments consultant, I’m going to hereby amend my thinking on social payments. Rule number one is that any payment system — even social payment systems — must involve moving money between people!

Pay with a Tweet doesn’t involve money. So it might be more appropriately called “Market with a Tweet.”

Glenbrook’s Perspective on Visa’s Acquisition of CyberSource

Allen Weinberg — Wed, 21 Apr 2010 21:42:44 +0000

A number of us self-proclaimed “payments geeks” awoke this morning to learn of Visa Inc’s intention to purchase CyberSource for approximately $2 billion. Over the course of the day, Glenbrook’s been getting a flood of emails generally asking, “What’s the REAL reason Visa’s buying this big gateway company?”

Before I go on any further, it might be helpful if we step back for a second and briefly describe what payment gateways do and why nearly all eCommerce and some physical world merchants use them.

It’s probably easiest to just think of a payments gateway as hosted middleware that sits between the merchant and its acquirer’s systems. Merchants use gateways for a variety of reasons, including:

Merchants can access a number of value-added services specific to eCommerce, such as fraud prevention, shipping tools, and sales tax calculators through a single connection (a big deal for merchants) and via a single relationship;
Many eCommerce shopping cart/store builder applications come with gateway connections pre-installed, making it much easier for smaller merchants to connect to major (and often minor) payment systems;
Gateways allow merchants to switch acquirers quite easily, without any meaningful front-end systems changes (the gateway merely re-points the transactions to the merchant’s new acquirer);
Gateways reduce the complexity in accessing payments systems beyond the merchant’s own borders (e.g., a U.S.-based merchant can connect to its acquirer in the UK or Germany without having to establish and maintain separate interfaces); and
Gateways can also facilitate the process of incorporating new and alternative forms of payment on the merchant website (think PayPal, etc.).

So, back to Visa. The first thing I’d point out is that Visa stated its intentions to get into the gateway, and other merchant processing businesses, in its last investor call back in March. That’s not to say that a lot of us weren’t surprised at a $2 billion dollar acquisition by Visa – it’s definitely a lot of money, but let’s not dwell on that right now.

The big question is whether getting into the gateway business makes sense for Visa? In my opinion, absolutely! For a number of years now, many of us at Glenbrook have been advocates of how strategic the gateway business could be. For payments systems themselves, a large gateway provides them with somewhat more control than they otherwise would have, which is typical with vertical integration plays. It also provides Visa with some key components of core and more value-added acquirer back office processing, such as:

Truly enhanced fraud prevention tools (Visa and other payment system providers see much more data at the macro level than anyone else, but thus far have been largely absent from offering merchant-centric fraud prevention tools);
The ability to provide a packaged offering to merchants around the world that would streamline their path to eCommerce sales (U.S. merchants have dominated eCommerce to date, but as in most areas, that is poised to change);
Tokenization solutions for PCI compliance;
The ability to support “end-to-end” encryption from physical POS devices (maybe they can be the first to turn what’s really “point-to-point” encryption into true “end-to-end”); and
Chargeback processing.

One less obvious and perhaps more interesting point: both Visa and MasterCard have been promoting their merchant direct-connect offerings for a while now (i.e., the merchant puts a Visa or MasterCard server in their data center and routes authorization requests directly to Visa/MasterCard, bypassing their acquirer’s front-end auth systems). In theory, CyberSource could do the same, although it could be putting its acquirer relationships at risk in the process. We’ll see what happens a year or two out.

Of course, as a gateway provider, CyberSource must continue to support products and payment systems that compete directly or indirectly with Visa, both within the US and beyond (e.g., e-checks, PayPal, MasterCard, Bill Me Later, ELV in Germany, etc.). If they disadvantage competitors’ offerings, their value to merchants will be severely diminished and they’ll quickly lose volume. Having said that, Visa clearly understands and acknowledges that.

All in all, this is clearly a big deal for Visa and the payments industry. The gateway space is certainly heating up!

Field Report from 2010 ETA

Allen Weinberg — Thu, 15 Apr 2010 00:36:24 +0000

Another year has flown by and here I am at the 2010 ETA Annual Meeting. I love to walk through the exhibit hall and see “what’s hot,” what’s changed, and what never changes at this ISO conference. So here goes…

Before I arrived I tried to predict what the hot areas would be; I predicted two and pretty much missed another. The two that were no brainers were:

1) iPhone mag-stripe readers and related services (think fee-based gateways tied to the hardware, like VeriFone and Hypercom’s offerings – buy the device, pay a 15 or 17 cent per transaction fee + $15/month to use it to connect to your acquirer). In addition to the much talked about VeriFone and Hypercom offerings, there were others from Macally Peripherals and others.

I have to say that in a way, seeing all these devices was a “back to the future” experience. I can remember 5 years or so ago writing about the plethora of booths exhibiting “sleds” for Palm Pilots (remember those?) and the early Blackberry devices. They had integrated mag-stripe readers and connected to tiny thermal printers with belt loops via Bluetooth. Let’s see if the new iPhone/smartphone devices do better…

2) Not too hard to predict the myriad of PCI-centric vendors and offerings – assessors, “end-to-end” (really “point to point”) encrypted POS devices, and such. Not exactly front page news that PCI is a huge burden for smaller merchants and there are a plethora of companies happy to help. Enough said. Really.

3) eCommerce gateways – OK, this is the one that I missed. Shame on me since Glenbrook is well immersed in the gateway business. What I missed was the sheer explosion of small gateway providers courting the ISO business so aggressively (e.g., Plug’n Pay, Paysentinal, YesPay, TGate, and others). We’re quite aware of all the small software developers who have written gateways – scores and scores of them have hit our radar screens and visited our conference room over the years. What I hadn’t seen in past years was such aggressive marketing to the ISOs.

So what to make of all this? Well, one impact could be some price compression, but to be honest with you, I don’t think it’ll be as pronounced as some are predicting (I’d be interested in hearing your thoughts on that: email me)

4) Where are all the ISOs? The number of “mom and pop” and smaller ISOs at the annual convention appears to be getting thinner. It was amazing to see the density of formal business suits vs. the more casual Vegas-wear at previous years’ shows. Some exhibitors I mentioned this to agreed, suggesting that the smaller ISOs were focusing on the regional ETA gatherings. In lieu of that, the ETA has become (or remained) a great place for large companies with booths to talk to their large customers/partners/mega-ISOs in other booths in the exhibit hall. Makes sense to me.

5) POS hardware. And of course, it wouldn’t be ETA without having 4 or 5 terminal manufacturers from the Far East showing their low-cost (but still impressive!) terminals, trying to break into the US market. Some nice stuff from Dejavoo, Spectra Technologies, and others. Marketing to mega-ISOs is certainly a great way to try. But alas, so few make it back from year to year.

So off to make another lap around the exhibit hall and catch up with old friends! Please feel free to post comments below or reach out via email!

Is Global eCommerce Really Such a Dark and Scary Place?

Jay DeWitt — Mon, 05 Apr 2010 14:59:05 +0000

Here at Glenbrook, we work closely with eCommerce merchants on issues and opportunities that they confront every day. Increasingly, the questions we hear surround the topic of “going global” — “What countries should I sell into? What local payment methods are important? Who can provide my company’s payment services over seas? It seems that U.S. merchants have an incredibly difficult time answering these questions… and good resources (other than Glenbrook!) are few and far between.

Why is the topic of global payment processing such a dark and scary place for merchants? Is it because of language difficulties? The perceived (and sometimes real) vagaries of foreign laws? Are domestic payment schemes on far flung parts of the world that different? Or is it because “dark and scary” is what you want if you’re selling flashlights?

Flashlight sellers? By that I mean global payment service providers such as Global Collect, Netgiro and Bibit (now part of RBS WorldPay). If you are a US merchant searching for a global processing solution, these are the providers that are going to be first up on your list — and they can certainly help you. But I’m often disappointed with their efforts to help merchants understand their options when selling online over seas. It seems that instead of educating merchants, which from my perspective should be their primary sales tool, instead they hold their global payment knowledge close to the vest, as though it were proprietary information.

Maybe Adyen, a new (to the US) global processing provider launching this week, can become not another flashlight, but a beacon for merchants trying to understand their cross-border options. Adyen says they are able to offer merchants access to a large number of countries, currencies and payment methods… all with transparent payment processing, a single contract and integration, utilizing a “try it, you’ll like it approach” with no exclusivity or long contract term requirements. Sounds good to me!

…But I want more, I want merchants to have easy access to knowledge about cross-border processing. I want them to know which payment methods are important in which countries, and to have clear choices among payment service providers. And most importantly, I want service providers to finally realize that it is much more effective to sell their services by educating merchants and selling on the strength of their offerings, rather than keeping things dark and scary and selling on merchant’s trepidations.

Maybe Adyen is this new kind of service provider… if so, I predict success. There are signs, too, that the other players are starting to “get-it” — Netgiro had a great webinar this week on Brazilian and Chinese payment options. To all providers in this space, I say “step-up”!

Glenbrook’s Model for Social Payments (A Work in Progress)

Russ Jones — Sun, 04 Apr 2010 19:38:40 +0000

I’ve been thinking a lot lately about social payments, and have reached two conclusions. The first is that a payment facilitated by a social network is not a social payment—it’s just a normal customer-not-present payment. The second is that social payments are, by definition, social in nature and involve multiple parties. Hear me out on these two thoughts.

What if I used my Visa card to buy a cat flap being sold by a cat flap merchant on a social network? How is that really any different than buying a toaster from a merchant with a Yahoo store? It’s not. One merchant, one buyer, one transaction.

What if the merchant had a Facebook storefront and I was using my card on file in a Facebook wallet? I still say no difference. What if the merchant was enabled by Facebook to accept Facebook credits as a form of payment, and the merchant was subsequently funded by Facebook, minus normal Facebook payments acceptance fees? I’m still not biting. This would be intriguing in a Facebook-centric world, but still not a social payment in my mind. Still one merchant, one buyer, one transaction.

I’ve concluded that for something to be a social payment, it’s got to be social. It’s got to involve multiple parties paying at once. Or multiple parties being paid at once. Or one party buying and another party paying. On and on. The more I look at this, the more examples I find. Here’s a couple obvious ones:

Group payments. This is multiple people all on the same team, in the same club, or part of the same informal group funding a single payment. Everybody kicks in $18.73, for example, to cover chips and sodas for the little league team party. CircleUp comes to mind as an enabler in this category –– who’s paid, who hasn’t paid, etc.
Contingent payments. This is multiple people, maybe even strangers, all making partial payment towards funding an artist to create a community sculpture or a filmmaker to create a documentary. It’s all contingent, because if the overall funding goal isn’t met, all the transactions reverse and everybody gets their money back. KickStarter is a good example here.
Networked payments. This is little Sally buying something and then passing the hat around between her grandparents until she has enough to finalize the purchase. More formally, a promise to pay passed through a network of friends until the obligation is settled. Kwedit comes to mind here, particularly the “Pass the Duck” feature on a Kwedit Promise.
Dual-party payments. This is one person buying, another person paying. Happens all the time in business payments. But in the world of social payments this is Alice shopping online and having the bill sent to her mother. BillMyParents is the poster child here, but eBillme also comes to mind.
Parallel payments. One person with a bunch of IOUs or items in their shopping cart from various merchants, settles everything—in parallel with each party—though a single transaction. A good example is here is TwitPay. Payvment, a new multi-merchant shopping cart, also facilitates parallel payments. Note that in both cases, it’s PayPal Adaptive Payments doing all the work in “parallel” payment mode.

I’m sure other examples will emerge, and maybe even other categories. I just saw a new company called WePay profiled on TechCrunch. It passes my social payments smell test and falls into group payments. A WePay account is a PayPal-like account owned by the members in a group. Multiple people can fund the account, and the WePay system facilitates group purchasing. The group can even attach a WePay Visa debit card to the shared account. Put that in the annual report!

I’m still thinking about old-fashioned P2P payments (I love that P2P is considered old-fashioned, by the way) and don’t know if they fit or not. On one hand its pretty social. Grandma sending Gretchen money for her birthday. On the other hand, it doesn’t feel multi-party enough. Grandma could have done the same thing with a check and I’m pretty sure that’s not a social payment!

One might argue that all these social payment examples are just “applications” that take advantage of core payment systems. But I believe there is more to it, particularly when you start thinking about a single payment trigger setting off multiple payments, transaction reversals in a multi-party context, buyer recourse, consumer protection, multi-party fee structures, etc. It feels like something important is happening.

Social payments are intriguing, but they’re just one part of the emerging Web 2.0 payments ecosystem. My partner Erin McCune and I will be addressing this topic in more detail at the NACHA Payments 2010 conference in Seattle in a session entitled “Web 2.0 and the Emergence of Social Payments.” In addition to social payments, we’re be talking about the other Web 2.0 payment building blocks — micropayments, virtual currencies, game currency cards, offer-based currencies, and bill-to-mobile — and will be trying to put it all together so that it makes sense.

Be sure to look us up if you’re going to be at the conference. We’d love to hear your feedback on our model and learn more about what you’re thinking about the Web 2.0 payments space.

If you’re not going to be at NACHA Payments 2010, Glenbrook will also be exploring this topic in an upcoming webinar. Social Payments – Scenario Analysis will be held May 5th, 2010. Registration is open now.

Hosted Payment Pages and Fields

Allen Weinberg — Thu, 01 Apr 2010 01:49:32 +0000

As a volunteer at several non-profits, I have, of course, jumped or gotten pulled into those organizations’ payment issues. Accepting donations over the Internet is increasingly important and there are a staggering array of specialized service providers that offer turnkey payment acceptance.

Over the past year though, we at Glenbrook have noticed more and more traditional ecommerce merchants choosing to reduce the scope of their PCI compliance efforts via utilizing “hosted payments pages” and its close cousin, hosted payments fields. And we’re not talking about just mom and pop businesses – we’re hearing about merchants doing hundreds of millions in dollar volume (even in the billion dollar range) seriously investigating this approach.

If you’re not familiar with hosted payment pages (HPP) and order fields, it’s essentially the notion of redirecting a customer to a separate, secure website/page to enter their confidential/sensitive payment data. That page, or pages, have the same look and feel of the merchants’ own website, but are hosted by a trusted third party such that the merchant never touches the payment data.

Hosted order fields are an interesting variant whereby the payments page is still hosted by the merchant, but the actual field where the consumer enters their payment data is served up by a third party. Often that allows more control and flexibility for the merchant.

As one might imagine, both are natural adjunct services to tokenization for card-not-present merchants – since they close the “data in-flight” air gap inherent in many standard tokenization solutions (e.g., the auth request with full PAN and other data originates from the merchant server, and the tokenized value for storage/future use is returned with the auth response).

One of the things we’ve been noticing is that some of the more innovative HPP providers have been taking some of the traditional friction out of the process for merchants – specifically the often complicated/time consuming process of updating the payments pages hosted on someone else’s systems.

A few companies that have hit our radar screen, such as CRE Secure, Commerce Lab from IP Commerce, CyberSource, and Pay.On in Europe and Asia, have focused on minimizing the friction that used to be inherent when the merchant made changes to its payments pages. Said another way, the hosted pages stay up to date as the merchant’s site design may change in the future.

If you are aware of other companies offering similar capabilities, I’d greatly appreciate it if you could bring them to my attention (allen@glenbrook.com) – we at Glenbrook love to stay up to date on all the great offerings out there! Also, if you have a feel for how widespread the adoption of HPP and hosted order fields is in the US and beyond, please let me know!

Localization of Payments: Lessons from Online Travel

Jacqueline Chilton — Wed, 03 Feb 2010 17:39:29 +0000

Written by Jacqueline Chilton based on a speeches and panel discussion at ATPS 2009 – Airline and Travel Payments Summit (Link to presentations) – Save the date for ATPS 2010 in San Francisco, Nov 30 – Dec 1, 2010

Localization is one of the key trends influencing the future of payments. At Glenbrook we believe that although businesses and consumers travel, sell and source globally, payments are inherently local. Many merchants are looking to expand Internationally and as they do so are confronting domestic payment options in foreign markets. Many are wondering whether or not acceptance of these incremental payment methods will improve the bottom line.

The most important thing in selling anything – a service, digital goods or physical goods – is to get paid. Lower cost is nice, but growing the top line is even more important than reducing expenses

So why consider local payment alternatives? There are three reasons: 1) the promise of increased sales, 2) lower transaction costs and 3) improved processes.

At the Airline Travel and Payment Summit, Colm Lyon (CEO of Realex Payments – a leading European payment service provider- suggested you need to be in appropriate payments, not every payment type. Much like the alternative payments discussion of the day before (See “Alternative payments and Airlines”), making a solid business case in choosing which payment and where is critical.

Driving Sales

In markets where international credit card penetration is low, local payments become essential. It is important to assess the local preference for debit, bank transfers or cash, at what ticket size, which channels and for what types of merchants. Local payment options can add to consumer convenience and potentially increase consumer adoption.

New customer segments can be targeted that are not interested in, or are unable to get international cards. We heard from paysafecard at ATPS 2009 that cash payments can attract new customers. They measured that 52% of customers using their cash ticket vouchers for online payment were new customers to the airline on which they bought a flight.

Reducing Costs

Local payments can also have significantly different acceptance costs and fraud rates and access to dynamic currency conversion. Some payments use a good funds model with lower disputes and chargebacks, such as iDEAL in the Netherlands. There is a clear need to understand the risk framework for disputes, chargebacks and fraud as these can drive up the cost of acceptance.

Process Improvements

Integrating to domestic processing can improve speed of payment processing and also support local customer service in response to payment questions. The challenges come in the implementation, potentially in settlement timing / workflow and increased complexity in back office and banking relationships.

The panel discussing local payments at ATPS 2009 was:

Klas Bäck , President, Netgiro North America
Paul C. McTaggart, Sr Product Manager Global Payments & Risk, Expedia, Inc.
Katherine Abbott, Vice President & Treasurer, Orbitz Worldwide, Inc.
James Filsinger, CEO and GM, Moneydirect

Netgiro is a full service payment solution provider for e-merchants around the world. They provide global payment processing as part of the Digital River Group Global ecommerce solutions company. Klas identified the key decision criteria in selecting local payment options and discussed how to identify where to be in the future. New payments can be evaluated with a business case and the implementation needs to be justified with sales. Netgiro supports online companies like Expedia and Orbitz in simplifying their acceptance of local payment types in foreign countries.

Expedia is taking a ‘go local’ approach to optimize the costs of payments and offer local payment methods. Orbitz is also taking a local payments approach. Both discussed the benefits in customer acceptance and challenges in implementation. In particular they pointed to the complexity of the number of foreign banking relationships required to accept direct deposit from all domestic banks. In looking at local payments options, the payment settlement timing and how it fits to the current order to delivery process are key considerations.

Moneydirect is focused on the complexity of business-to-business payments in the Airline and Travel space. James highlighted the complexity of collecting net payments from travel agents, paying hotels for airline crew lodging and transportation, paying suppliers for ancillary content, providing appropriate vouchers for stranded passengers, keeping up with regulatory compliance and making it all reconcile despite the multiple countries and currencies. Solutions like Moneydirect (an Amadeus and Sabre joint venture) provide multi-channel payment processing solutions to support business-to-business payments in the travel industry globally.

Payments organizations looking to expand their local payments options should consider their payments vision – What is motivating the company to consider local payments options? Payments can organizational cut across many departments that need to be heard as the local payments strategy is developed. With the vision in mind, a business case should be built with local knowledge of payment acceptance, expected incremental sales, processing costs and implementation considerations for work-flow and banking relationship requirements.

Peeling The Blippy Onion

Russ Jones — Fri, 15 Jan 2010 18:39:19 +0000

Where are you? What did you buy? How much did you pay? Did you get a deal? This might sound like your teenager on their phone, but it’s what a new company called Blippy hopes to answer with a new Web 2.0 service.

Here’s the basic premise. What if you could broadcast everything you bought in real-time to friends that breathlessly follow your whereabouts? I’m at Starbucks and just ordered coffee. I just swung by Best Buy and got a great deal on an LG flat panel. I’m at Macys and just bought a new Le Creuset pot. You get the idea. Sort of like Mint meets Twitter. Yeah, the company says, there might be some privacy issues, but what if you logically separated your payment cards into ones for private purchases and ones for public purchases? A designated Blippy card so to speak!

Lets set aside whether this idea will get, or deserves, any traction and focus instead on how it works and the compromises that had to be made to get this sort of a service off the ground. Broadcasting something to a community of friends or followers in real-time in today’s hyper connected, super integrated world is easy if you know what to broadcast. And knowing what to broadcast only requires access to real-time purchase data. Ah, there’s the rub.

Let’s dig into the purchase data problem first. The initial challenge is that the open loop payment model is inherently private to some degree. Whether that is noble by design or an historical accident is open to debate. Nevertheless, very few, if any, participants have a full view of the purchase.

Merchants know, for example, what you buy, but don’t know who you are. Banks that issue cards know who you are, and where you shop, but don’t know what you buy. The payment networks see their branded transactions, but don’t have any idea what they represent. And because there are multiple payment networks, nobody has a total view of all transactions. That’s a gross over simplification, and there are exceptions to every one of these points, but it’s good way to think about it. The only party with a full view of all purchases is you, the individual cardholder.

For the opportunity that Blippy is chasing, this is a big problem. The best they can hope for is that the name of the merchant is indicative of what is being purchased. Perhaps people can figure out that Crystal Village Laundry is a laundry service, but good luck figuring out what purchases from Higgins represent. And while everybody recognizes Macy’s, no party in the open loop model really knows that you bought a Le Creuset pot except you and Macy’s (and they don’t know it’s you).

The second challenge is real-time aspect of the value proposition. Whether or not the issuing bank knows a purchase has happened depends on the type of card being used, the nature of the purchase, and the business practices of the merchant. A debit card used with a PIN authorizes and clears in real-time, actually in a single transaction. By the time you leave the store, a PIN debit purchase has already posted to your bank account along with the merchant’s truncated descriptor name. This is the best case scenario.

A credit card purchase or a signature debit purchase, on the other hand, is a two message transaction: one message to authorize the transaction (and hold the funds) and a second message to complete the transaction and capture the funds for the merchant. For many merchants, this happens at the end of the day or the next business day if on the weekend. Even though you were in Starbucks on Tuesday morning, the transaction might not clear and post to your account until Wednesday morning.

Taken together, it becomes somewhat unlikely that Blippy can broadcast in real-time where you are and what you are buying with any consistency. But no worry. Blippy has been able to come out of beta and get started. The company has shifted its focus to online merchants. Because these merchants hold actual purchase data that is mapped against user accounts, Blippy users can just share their username and passwords to relevant sites in order for Blippy to scrape the purchase history and broadcast it to friends. Blippy is up and running now with their scraping engine optimized for about a dozen leading merchants, including Amazon.com, iTunes,and Zappos.com. A far cry from the 500,000 plus online merchants in the US, but a start.

Focusing on online merchants is perhaps not quite what the company had in mind when it set out. But it’s an interesting starting point that clearly demonstrates the model. That’s probably what matters most right now. And while I probably won’t be sharing my account names and passwords with them anytime soon, it is fascinating to watch what people are buying in real-time. Even if I don’t know them.

It’s the Online Holiday Season!

Russ Jones — Wed, 16 Dec 2009 19:44:52 +0000

It’s the holidays and the online retail sales are… well… who knows? We’re seeing data points all over the map. comScore is reporting better-than-they-expected 4% growth over the the previous year.

U.S. online holiday spending has grown 4% to nearly $21 billion during the first 43 days of the November-December shopping season, according to comScore Inc. (SCOR). The Internet researcher, which had forecast a 3% increase from a year earlier, attributed the better-than-expected results partly to retailers’ heavy promotions. During the most recent week ended Dec. 13, spending reached a record $4.74 billion. The previous record was $4.7 billion during the week ended Dec. 16, 2007.

- WSJ

But in Chase Paymentech’s eCommerce holiday index, transactions and sales are both up — way up — from a year ago.

Even with the big online retail promotions from Black Friday and Cyber Monday behind us, e-commerce has continued to grow at a healthy pace vs. last year, and this past week maintained the trends seen in the first days after Thanksgiving. In the second full week of holiday shopping, transactions grew by over 25.3 percent, while sales were up 14.8 percent. Average value per ticket, meanwhile, was still down 5.9 percent, but that decline has narrowed from previous weeks.

- Chase Paymentech

Why the big difference? As is always the case, it’s all about context. comScore is judging online sales from the start of November, which is apparently the new definition of the holiday season. Chase Paymentech is more traditional, and only looking at holiday sales post Thanksgiving. Either way, it’s nice to see things going up instead of down.

There are big differences, also, in terms of methodology. comScore’s technique for assessing eCommerce sales is based on a panel survey of two million online consumers that asks what they bought. Maybe comScore blends this with some observed website traffic analysis. I’m not sure. It would be nice to better understand this.

Chase Paymentech, on the other hand, measures actual purchases processed from 50 of the top 250 Internet Retailer merchants. A little more definitive in my opinion. As the largest eCommerce processor in the United States, they have visibility into a significant percentage on online purchase and can base their index on transaction volume and purchase volume. For all I know, they might even include returns! Oh, maybe that index doesn’t start until after the holidays.

On a more serious note, the National Retail Federation anticipated consumer spending was going to be down this year, based on some early consumer surveys done in October. Given the eCommerce numbers being reported now, particularly from Paymentech, we’re wondering if this season might represent a significant inflection point in the shift towards online retail?