Mobile technology is driving towards an all-encompassing device that will consolidate your communicator, payment system, house key, car key and identification.  We aren’t there yet, but there is a lot of the effort focused on enabling payments from a smartphone; worldwide mobile payments is a $172B business and is expected to grow to $617B by 2016.[1]

There are dozens of companies already chasing after this market and every few months, a new entity seems to jump in – each with its own business model, proprietary technology and merchants.  What are the key requirements of a successful mobile payment platform? At the risk of over-simplifying, the four critical ingredients are:

  1. Security to protect access and transaction payments – often executed with a password, PIN number, photo or distance limit.
  2. Financial institution support – access to finances, whether it be a bank account, credit card or something else.
  3. Communication technology between the customers’ mobile device and the merchants’ transaction device – could be physical, radio or cloud-based.
  4. Widespread merchant acceptance – customers need to be able to use their mobile payment platform at a sufficient number of stores and services.

 There is lots of sprinting to grab first mover status because this is an industry with network effects that is destined to tip towards one platform, at least in the United States.[2]  The real challenge of winning the platform war is to execute especially well on points three and four: Communication Technology and Merchants.  (Note: that is not to say that the first two points are less important, but rather they are table-stakes to even be at the Mobile Payments table).  Surveying the leading platforms, it appears that there are two major customer-focused paradigms that mobile payment entrants consider:

  1. Hardware play – require customers to buy the device with the special hardware that enables payments.
  2. Software play – require customers to download the app that enables payments.

The hardware paradigm typically refers to the NFC chip (near field communication) inside of a smartphone as the authentication and security mechanism.  The benefit of NFC is that it is quick to process a sale and works only within a few inches of the sensor, so it is safer.  This is the system that has been adopted by Google Wallet[3] (via Android phones) and Isis[4] (the recently announced joint venture between AT&T, T-Mobile and Verizon).  The main downside for consumers is that the most popular handset does not include an NFC chip; the iPhone is 33.4% of all smartphones compared to Samsung’s Galaxy S3 representing significantly less than 25.6% of the market.[5]

The software paradigm traditionally just requires the customer to open an app and display a barcode of sorts for the merchant to scan or capture.  The benefit of this system is that it can work on any smartphone as long as the customer downloads the app.  This is the payment system that has been adopted by Square, Paypal, LevelUp, and perhaps one day: Apple’s Passbook.

With both paradigms, there is also a merchant-side challenge: it is expensive to install NFC terminals and barcode scanners – even if it is just an iPad – into every checkout counter of every McDonalds (14,000 US restaurants), Gap (2,550 stores) and Walmart (4,300 US locations).

 It is premature to predict which paradigm will win out – much less which company’s platform – but if I had to guess, it would be the software paradigm.  The reason: it is challenging enough to convince merchants to adopt this new payment system (even if the terminals were given away for free), but it may be even more difficult to sell customers an NFC-enabled smartphone.

In this highly competitive battle for market share, there have been many interesting strategies to onboard customers and merchants alike:

  • LevelUp – attracts merchants with their 0% payment processing (as opposed to 3-4% for standard credit cards)[6].  They also have built both NFC and QR-code scanners into their merchant hardware.[7]  LevelUp claims it has 3,600 merchants as of September 2012.
  • Square – got deeply intimate with Starbucks by taking in $25m in strategic financing and adding Starbucks CEO Howard Schultz to its board of directors.[8]  No surprise, before Christmas 2012, Square will be accepted in all 7,000 US Starbucks locations.[9]  As of August 2012, Square boasted 2M merchants.[10]
  • PayPal – recently invested in a national TV campaign – starring the endearingly-paranoid Jeff Goldblum – to raise awareness of its availability  (watch the commercial here).  This past May, the company announced 15 new merchants including Toys R Us, Abercrombie & Fitch, Barnes & Noble and Home Depot.[11] PayPal claims it reaches 40m point-of-sale systems as a result of a partnership with Ingenico payment terminals.
  •  Apple Passbook – just launched as part of iOS6 and the iPhone 5.  Passbook enables barcode scanning for loyalty cards and airplane tickets, but no mobile payments yet.  If that day comes, the tens of millions of iPhone owners will be an influential buying force.

The race to be the ubiquitous mobile payment platform will explode in the coming months and years.  We will likely see bitter rivalries, confused customers, frustrated merchants, and tumultuous failures before a winner is finally crowned.

[1] “Gartner Says Worldwide Mobile Payment Transaction Value to Surpass $171.5 Billion.”  Gartner Research.  May 29, 2012.

[2] The two sides of the platform are consumers and merchants.  While there are somewhat low multi-homing costs for consumers (at the app level), the costs for merchants are considerably higher: multiple hardware apparatuses, accounts receivable to manage, etc.  As such, the market will tip because merchants do not want to simultaneously support multiple technologies.

[3] Google Wallet FAQ.  October 24, 2012.

[4] “Isis Announces Its Pilot Programs Are Now Up and Running.”  Mobile Payments Today.  October 22, 2012.

[5] “One in Three U.S. Smartphone Subscribers Use Apple’s iPhone.”  Apple Insider.  September 27, 2012.

[6] “LevelUp for Businesses.”  Website.  October 26, 2012.

[7] Empson, Rip.  “On a Mission to Be Mobile Payment Agnostic, LevelUp to Roll Out NFC-Capable Terminals.”  TechCrunch.  September 6, 2012.

[8] Ha, Peter.  “Square Partners with Starbucks, Raises $25M for Series D.”  TechCrunch.  August 7, 2012.

[9] Perez, Sarah.  “Starbucks’ Square Rollout Gets a Launch Date.” TechCrunch.  October 5, 2012.

[10] Kim, Ryan.  “Why Starbucks is Betting on Square.”  Gigaom.

[11] Perez, Sarah.  “PayPal Rolls Out to 15 More National Retailers.”  TechCrunch.  May 25, 2012.


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If those three tweets from the Presidential Debates don’t ring a bell then I’ll be so bold as to declare that you have probably been living under a rock for the month of October. In fact it could imply that you may now constitute one of those elusive political ‘undecideds’, so expect your phone to be ringing off the hook for the next week. I should preface by saying I’m a political junkie. But while I was once a passive Twitter follower, this election season has made me a loyal user – and Twitter’s explosive growth in engagement and influence should make other tech companies nervous.

During the three Presidential Debates nearly 25 million Tweets were collectively sent (1, see image of 1st debate Tweets below). As I sat there watching the debates, Twitter functioned as part news outlet, part interactive game, and part civic duty to tweet as well as follow a stream of comments. Tweets and memes dominated post-debate news coverage and Twitter set up a special page, #debates, to increase engagement and facilitate easy aggregation of top tweets (2).

In 2012, there were 1.8 million Tweets every six minutes; that’s the entire volume of tweets on Election Day 2008 (3). Engagement is critical for any social media platform and this increase in engagement makes Twitter highly influential and valuable. According to eMarketer, Twitter has 28 million active users in the United States compared to Facebook’s 141.2 million users. However, Twitter is expected to grow 20.7% as compared to 6.6% for Facebook in 2012 (4). Most importantly, Twitter extends outside the walls of your social circles allowing users to Tweet publicly, follow more anonymously, and has become a top destination for breaking news. You get news first and fast on Twitter. As for Twitter’s bottom line, this level of engagement and attention helps drive the sale of promoted tweets. For example, during the Vice Presidential Debate, Joe Biden’s declaration of “Malarkey” led the Obama-Biden campaign to a rapid sales buy of Promoted Tweets on that term (#malarkey), which drove Twitter users to the Obama campaign website and donations page (5).

This go to source for news is an increasing threat to Google and Facebook. In the past, an online user would first Google say “Romney big bird”, see ads, and review Google News aggregated links or he would first scour their News Feed on Facebook. But given the explosive growth in Twitter, many highly engaged users (myself included) are first starting on Twitter to find breaking information. The Presidential Debates highlight how Twitter has become the first stop for breaking – and shaping – news. If you believe the future of the internet is a battle for eyeballs with competition over which platform will be a user’s portal to the web, Twitter is well-positioned to capture this highly valuable audience for marketers. With each new tent-pole event such as Election Day 2012, major sporting events, even natural disasters, Twitter’s user base, relevance, influence, and ad revenues will increase as people are driven to the site for breaking news. For this user, since the first presidential debate on October 3rd, I’ve had my Twitter feed open every day and have clicked on a handful of promoted tweets and donated to 4 different candidates and causes. For that little blue Twitter bird, the sky’s the limit.

Follow me @blandro, #politicaljunkie


(1)    Text & Image,,  “Twitter and the #Debates,”

(2), “Twitter Launches Dedicated Presidential Debate Page”,

(3), “Not Your Grandmother’s Presidential Debate,”

(4)    eMarketer, “Facebook US User Growth Slows, but Twitter Sees Double-Digit Gains”,

(5)    Mashable, “Obama Campaign Buys Ads for Malarkey Hashtag on Twitter”,

1st Presidential Debate Tweets

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Ever since I got my first iPod a decade ago, I’ve been a loyal Apple fan. Apple’s amazing products made it easy for me to forget the pains that came along its excessive reliance on closed systems and proprietary hardware. But this weekend, Lightning pushed my patience with Apple to a new level.

Like a dozen times before, I forgot my iPhone charger during a spontaneous trip to New York. But this time, the hotel couldn’t save me. My phone didn’t fit into the room’s dock and to my surprise the concierge didn’t have any extra cables. The manager told me he didn’t want to pay the “ridiculously overprices” $29 adapters for his 100+ rooms and hopes that Apple would “become reasonable” in offering businesses a discount for upgrading to the new connector standard. My disappointment turned into deep frustration when I had to visit three retailers because the first two had no stock. I began to wonder what the point is of Lightning and concluded that there is none.

To a certain degree, closed systems make sense in improving the integration of software and hardware. But Apple has taken this approach too far. A mini or micro USB cable would have fulfilled the same purpose of being smaller and more durable than Apple’s old 30-pin connector. I could have easily borrowed a USB cable at the hotel last weekend or just bought it across the street. Moreover, moving towards a USB industry standard for phone connectors would be more environmentally friendly. The European Union lobbied for this change since 2010 (more here).  I don’t buy Apple’s propaganda that the proprietary cable is materially better than USB because of its stronger charging power, additional data pins, and security chip. I can’t see (or understand) the benefits over the micro USB connection that worked perfectly fine with my Samsung S3.

I am even more puzzled about the careless manner in which Apple has managed the transition to the new cable standard. Stock outages of Lightning cables and adapters as well lacking support for businesses that need to pay for the costly transition significantly damage the iPhone user experience. In a world where Android is holding 68% market share and offers highly competitive devices, many Apple fans could be tempted to bid farewell to their iPhones. Apple should have reduced the price of its 30pin to lightening to its production cost of $5 to $8 and made it widely available upon launch to not raise questions about why the cable was introduced in the first place.

Given Apple’s recent lack of groundbreaking innovations and major product fiasco with Maps, the company should refocus on its core strength of developing amazing products. Can a cable ever amaze ? How far should Apple go with its closed systems?

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Payment is probably the only area in tech that hasn’t had any major innovations in the past ten years.  By looking at recent startups, I strive to summarize a few trends in the payment and offline merchant space.

Your credit card will not be just a card (or whatever the next payment device is)

Today, your credit card is merely a way to pay, even though it contains an incredible amount of information about you and your consumption patterns.  And after the transaction, there is no good way for merchants to interact with their consumers again, because of privacy concerns.

A few startups are building out loyalty programs in their products.  These products aim to replace the punch cards that we get from cafeterias.  If you have a way to ID your customers (either via credit card or via a mobile app), then you can offer discounts or benefits to your most loyal customers.  Square and LevelUp have such functionalities in their broader product offerings, while FiveStars and Thanx are pure loyalty products.  Another startup, CardSpring, allows developers to pull data from each card transactions.  As a result, developers or card companies could do a lot of interesting things with the data.  For example, once I link my AMEX card with my twitter account, every time I twit about a certain merchant, I would be entitled to a coupon to that merchant and it is embedded in my card for automatic redemption in the future.

Offline merchants are in desperate need of sales and marketing services

As they say at Facebook, local is mobile, or vice versa.  The last wave of eCommerce companies aimed at helping merchants who sell physical goods to reach a wider customer base.  However, nothing much has been done in the service-oriented merchant space.  As a matter of fact, there is no real good way for these merchants to market and advertise themselves.  Daily deal sites (such as Groupon) provided a way, but the effectiveness of these programs is still under debate.  Moreover, these programs tend to attract a more inferior customer base that tends not to return in the future.

All these happen under the backdrop of decreasing interchange fee required by regulators.  The chunk of interchange fee (about 1.7% out of 2.5%) is earned by the issuing bank for putting up a 30-day loan.  However, when the whole economy deleverages including consumer credits, this fee will go away.  As a merchant, wouldn’t you want to spend the money saved on interchange for marketing and advertising?

However, the key should be to offer a strong incentive for consumers to join

While the demand is sizeable on the merchant side, I do think in order for such platforms to succeed, they have to create a strong enough incentive for consumers to join.  In the payment relationship, consumer is still the side that has more power.  Unless you have consumers on your side, it is very difficult and inefficient to acquire merchants.  And I am not sure if loyalty programs alone could do the trick.  Loyalty program is a nice-to-have, but I am not sure if it is strong enough.  So what could you provide as a strong incentive for consumer to join?


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By now, all retailers know that digital marketing exists.  And by now, I would guess that a significant portion of them know that “digital” is more than just e-commerce, but rather social media and search with the goal of cultivating a brand, a loyal customer base and awareness. What is surprising is how slow luxury brands are to embrace this shift. Online ad network Martini Media revealed that luxury brands are spending only 31% of their overall ad budgets online (1).   The good news is that this is changing. Talk to any CMO or head of marketing at a luxury brand, and you will be hard-pressed to find one that does not reference “digital” as a key focus going forward.  What worries me is that many brands are not realizing that they have an entirely new consumer on their hands: the omnichannel consumer.  Nowhere is this more prevalent than in the luxury space, where aspirational loyalists and actual spenders help build up the brand mystique. Luxury brands need to cultivate a strong presence across channels to ensure that they grow their aspirational customers and strengthen their relationships with their existing consumers.

One aspect that luxury retailers need to optimize for is mobile. In 2011, 39 million Americans made at least one purchase via mobile phone (2).   We are seeing this trend in the luxury space as well; according to Aaron Shockey, the VP of Digital Marketing and Advertising at Neiman Marcus, mobile phones account for nearly 20% of their US sales, and 75% of their customers rely on digital channels when making a purchase decision.  Neiman Marcus is in fact embracing the omnichannel customer more than other department stores; while optimizing its online experience, it has created the NM Service App, which is being piloted in four stores, and is targeted to customers having information on their smart phones while in store. Another example of a pioneer in the omnichannel experience is digital wunderkind Sephora.  Heralded as a “Genius” by luxury think tank L2 when it comes to “Facebook IQ,” Sephora has also been able to channel the growth of their online platform to further develop their in-store experience and tie it all together.  According to Julie Bornstein, SVP of Digital at Sephora, the focus for Sephora digital now is looking at digital, in-store and e-commerce and looking at how they connect together.  This is immediately evident when you walk into some key Sephora stores (like the new Meatpacking location in New York), as iPads displaying interesting online features and allowing for comparison shopping are placed strategically around the store and iPhone check-out has become the norm (3)

 No luxury brand has generated such a buzz when it comes to marrying bricks with clicks than digital darling, Burberry.  Burberry has continually been ahead of the curve when it comes to embracing innovation in marketing and media compared with its luxury peers; whether it was launching on Instagram early or being a pioneer in an online sampling campaign on Facebook. The storied British brand took it up a notch when it recently opened its 44,000 square foot store in Regent Street in London developed as a physical expression of, fully immersing shoppers in a combined digital and physical experience (4).  From the tallest indoor retail screen in the world, to RDIF chips woven into apparel and accessories as well as triggers with bespoke multimedia content relevant to the products, Burberry is definitely setting the bar when it comes to servicing the omnichannel customer.

 To be sure, investing in the omnichannel customer takes a considerable amount of resources.  First, some luxury brands that have been afraid of diluting their brand by embracing digital marketing and e-commerce need to crawl out from underneath that rock.  Online is no longer a choice, it’s inevitable, and the brands that truly differentiate themselves will be the ones that elevate their customers via digital platforms such as social media and e-commerce.  Second, luxury brands that feel they are extremely successful when it comes to pure digital marketing and pure in-store experience are missing a key piece when they fail to examine how to integrate the two.  While this area may seem nascent now, consumers will respond very favorably to brands that spend the time and money unifying the experience across all channels. Countless leaders in the industry remind us that luxury is all about the experience, and there is no better way to enhance the experience than to innovate when it comes to the omnichannel shopper.



 (1) “What’s Next for Luxury Brands Online?”

(2) “39m Americans made a purchase via mobile last year: stats”

(3) WWD, 9/26/2012, “A Look at What’s Pivotal in Digital”

(4) Luxury Daily, “Burberry unleashes tech expertise, heritage with most advanced brand flagship”



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