Monday, October 13, 2008

Creating an Advantage in the Alternative Payments Space

The Commoditization Of Alternative Payments

In the past three years, alternative payments have gained considerable market value with no loss of momentum in sight.

Alternative payments currently account for roughly 15 percent of total e-commerce volume. However, by offering a superior value proposition to buyers, alternative payments pose a threat to traditional payment methods.  This, according to a new report from Celent, LLC promoting  their  assessment that the strongest value is derived from the creation of sales lift.  

Editor's Note: You think?  The trick lies within creating an innovative way to do so. It is my strong contention that the Live Search CashBack program recently introduced by Microsoft has the potential to be sculpted into a true alternative payments masterpiece.  Here's a little backgrounder for those unfamiliar with the program...

Reward your Customers with cashback on Purchases

Live Search cashback is a new program that combines the power of Live Search with a comparison-shopping engine to bring consumers some of the best deals on the Web. The program rewards consumers with a cash back rebate for a purchase, and gives advertisers the opportunity to sell on a cost-per-acquisition (CPA) basis.

Both Microsoft and it's Online Retail Participants are providing consumers with a "cashback" loyalty program.  But what's missing is a way to provide participating online retailers with a cashback program of their own.  (to help offset the costs.)   I believe HomeATM's PIN Debit Solution  when properly placed can emerge as the missing piece to this puzzle.

HomeATM significantly reduces the cost of processing web based transactions conducted via the CashBack platform.   By simply providing a "SwipePIN" device to consumers who sign-up for the Cashback program, MS would be "enabling" them to purchase using their PIN's. (thereby significantly reducing the cost of the transaction)  Those savings, in turn, offset some of the costs of the cashback program.  It's perfect harmony. Microsoft provides cashback to consumers and HomeATM provides cashback (in the form of a significant reduction in processing costs) to Internet Retailers. 

So how do we get consumers to start swiping and entering their PIN numbers?   Offer them the SwipePIN device a reward for signing up.  (we could charge them $2.95 shipping to offset some of our costs) 

MS creates further incentive to get consumers to participate by offering higher "cashback" percentages to those who utilize HomeATM's more secure SwipePIN device.  Think of it as a "platinum" vs. a "gold" rewards platform.  Platinum rewards go to those who use the "SwipePIN" device. 

The consumer wins because it's a more secure transaction, the Internet Retailer wins because they can save up to 100 basis points, Microsoft wins because it drives participation and, of course, HomeATM would benefit mightily as well.  More on all of this later... I just got going because I happen to agree that an alternative payment differentiation that provides an advantage over others is an alternative payment that creates a sales lift.

Back to the article:

In less than a decade, alternative payments have evolved from "dot bomb" burnouts to widely accepted, widely recognized forms of online payment, Celent notes.
Alternative players' business models once relied on their solutions' status as "something new" or the only way to pay in a particular online environment.

However, they now focus on providing greater value than payment cards. Card brands and issuers stand to forgo $345M in volume in 2010 and about $1.7 B in volume in 2015 to alternative payment.

Given cards' historical dominance over online payments, this market is the card industry's to lose, Celent says. Every time a bank account is debited via ACH rather than a card, the card industry loses roughly 1.5 - 2.4 percent or more of the transaction size.

The card industry must pay attention to alternative payments, which can be categorized as enablers, quasi-disruptors, or disruptors, in order to prevent further losses.
  • Enablers offer a technological "wrap around" for payment cards that lead to increased card volume when cards are used as the source of funds, Celent found. 
  • Quasi-disruptors are players that allow for both cards and other funds sources (e.g., bank accounts) to be used. Should bank accounts be used instead, these same players take on disruptive qualities
  • Disruptors are solutions in which the card industry plays no role whatsoever.
However, the outlook is not entirely rosy for alternative payments. "Alternative payments players have already become commodities in terms of security, convenience and pricing.

The real differentiator is their ability to induce purchases and affect a corresponding sales lift. 

"The greatest threat to the card industry is a disruptive alternative payments solution that has figured out how to increase online merchants' sales."  "
The spoils will go to those players who understand that their role is no longer simply making shoppers able to pay. Instead, such players realize that, going forward, they must make shoppers want to pay," he adds.


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World Bank Hacked

World Bank Hacked, Sensitive Data Exposed - Desktop Security News Analysis - Dark Reading
The World Bank Group has been hit by a series of hacker attacks on its network over the past few months, possibly exposing sensitive data held by the anti-poverty agency, according to a published report.

A WBG spokesperson acknowledged in the report that the agency had “repeatedly experienced hacking attacks on its computer systems,” but that no hackers had “accessed sensitive data in its treasury, procurement, anti-corruption, or human resources departments” as reported Friday.

According to the report, World Bank employees have been ordered to change their passwords three times in the past three months in the wake of the attacks, which spanned somewhere between 18 and 40 of its servers in multiple hacks, which began last year. The published report says there were six major break-ins in the past year, and that at least five servers containing sensitive data were exposed. FoxNews apparently obtained an internal email message and memos from the World Bank in response to the attacks that illustrate the complicated series of events and the agency’s response to them.

The revelation of breaches at the World Bank could not come at a worse time given the global financial crisis, but security experts say the hacks were coincidental and unlikely to be tied to the economic developments. The World Bank provides financial and technical assistance to developing countries, and includes 185 member nations on its board.

“We really don’t know at this moment what information was stolen,” says Graham Cluley, senior technology consultant for Sophos. “It’s just as possible that it was a bunch of college kids breaking into something they shouldn’t be as [it is for] some political or financial motivation. At the same time, economic and financial institutions basically bleed because of a [loss] in confidence and trust....

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What Online Shoppers Research Before They Buy

What Do Shoppers Research on the Web? - eMarketer
What Do Shoppers Research on the Web?
OCTOBER 13, 2008

Examining the pricey stuff online

A growing body of market research shows the rising impact of Internet research on store spending. Many consumers prefer to shop for high-touch and expensive products in stores where they can feel items and talk in person with a sales associate.

A survey of what Internet users worldwide ages 16 to 54 research reveals several pricey items at the top of the list. Besides travel, more than one-half of respondents researched consumer electronics—and subsets such as digital music players and mobile phones—according to data released in September 2008 by Universal McCann.

Products and Services that Active* Adult Internet Users Worldwide Have Researched Online, 2008 (% of respondents)

Consumers have researched electronics online for years. In October 2007, STORES magazine published results of a study of online shoppers in the US conducted by BIGresearch and sponsored by Microsoft. Respondents named electronics at the top of the list of products they researched online before purchasing in a store.

Products that US Online Shoppers Have Researched Online before Purchasing in a Store*, 2007 (% of respondents)

The impact of online product research is greater on store sales than Web sales. In 2008, Web-influenced store sales will reach $625.2 billion, eMarketer forecasts. From 2007 to 2012, online-influenced store sales are expected to grow at a 19% average annual rate. By 2012, every $1 of online sales will equal about $4.68 in store sales influenced by the Internet.

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