Thursday, May 26, 2011

The Google-PayPal showdown

In late January of this year Osama Bedier, PayPal’s VP of New Ventures has moved to Google, where he now serves as VP of Payments. Today Google announced the Google Wallet, an initiative to bind credit cards and offers to an NFC-enabled mobile phone. Soon after we’ve learned that PayPal filed a lawsuit against Google, Bedier and Stephanie Tilenius blaming them for misappropriating of trade secrets, breach of obligations and interference of contractual relations . Just as we thought that the week was going to wind down, we get some prime time PayPal and Google action.

First, let’s look at the Google announcement. Apart for repeating “innovation” a bit too much, what did we see? Google is partnering with a bank and a card company (MC is definitely going the partnership route, as opposed to Visa) to provide users with an account they can attach a credit card to, and pay with using a tap. For phones without NFC capabilities Google will offer an NFC sticker that you can connect a credit card to and put on your phone to create a wallet-like experience.

Sounds familiar? If it doesn’t, it’s probably because you don’t live in Palo Alto and this BlingNation experiment – powered by PayPal – failed before it reached you.

So what’s really new in the Google Wallet? The way I see it, nothing. Apart for a strong statement from Google that it is betting on NFC, there is not much new here. Google is going the PayPal route of sign-up-and-attach-a-card which I find challenging and to some extent futile and tying in offers to enable the online-offline connection that is expected to give eCommerce a boost. Are these real problems, unsolved by others, that grant a major investment in this market? I don’t think so: attaching a credit card to an app is basic functionality, and NFC is admittedly far from prevalent. Still, if you’re Google, creating an offers and payment scheme to drive adoption and use of Android phones while gaining some access to end-customer payments is not necessarily a bad idea; but it’s not “innovation in payments”. If you’re looking for signs either way, check out the pricing scheme that the wallet will offer merchants and conversion metrics: a really innovative solution will either solve the onboarding or payment economics issues, which will be reflected in one of the above. Based on the partnerships Google has come up with, I’m guessing none of these issues has been solved (side note: one of the reasons Square is innovative is because it has a unique signup incentive: catering to a previously underserved industry segment and solving a real pain).

Should PayPal feel threatened? Absolutely. Although it has a tremendously strong brand and network, PayPal has its own issues. Losing a products executive like Osama Bedier to a competitor, at such a sensitive time, and when this executive allegedly takes with him actual trade secrets – that’s a potentially big blow. The company is investing a lot of efforts in becoming a serious, bank-like financial services company while eyeing retail; since it doesn’t own any hardware platform or direct relationships with a large community of developers, its product roadmap and strategic partnerships are its main assets. Those are the two matters that Bedier has been heavily involved with. The lawsuit acknowledges that and provides a peak into how PayPal approached the mobile payments market (and to what extent it is aware of what’s happening in its employees’ laptops).

What does the future hold for mobile payments? Obviously some more vicious fights inside and outside the courtroom. However the lawsuit exposes how the big players are thinking about payments: a simple product driven by strategic partnerships and very basic economics. I beg to differ, and with me quite a few interesting small to medium startups (Klarna, where I serve as chief risk officer, is only one of them). I’ll take a look at a few of those in the next few months.


Dear clearXchange: really? Three banks partnering to allow the use of an email address or phone number is “an innovative game-changer in electronic payments”? The year 2000 NEVER occurred to your while writing this press release? I wonder.

Wednesday, May 18, 2011

Risk Management for Risky Times - a Deck

I'm embedding the slides from a presentation I gave at Amazon lately. A great group of professional risk folks!

Wednesday, May 4, 2011

Klarna acquires Analyzd

Today we've announced that Klarna has acquired Analyzd, our payment risk consulting firm. This is an exciting step for me, as I will be assuming the chief risk officer position for a company whom I view as a contender for a substantial piece of the international payments market.

Short term credit is, from my perspective, one of the two most interesting approaches to disrupt payments in the next few years and I look forward to developing new ways to grant credit responsibly and accurately and create an unprecedented payment experience for customers, and a super effective checkout for merchants.

Find the TC post here.