Interesting working relationships have popped up over the last year. At the same time, some existing ones have dissolved, corporations are splitting up for better or worse, and some competitors continue to antagonise one another.
What a year for payments! Here are our favourites.
1, Break-up – Visa and Monitise
Monitise’s shares plunged in mid-September when Visa announced an ‘assessment’ of its 5.5 per cent stake in the company. Visa invested in Monitise as a14.4 per cent owner in 2009, and had slowly reduced its stake to 5.5 per cent by September 2014. Visa is withdrawing its support for external mobile payments resources all round as it develops its own.
But it wasn’t all doom and gloom for Monitise this year. Santander, Telefónica and MasterCard agreed in November to invest a combined £49.2 million to accelerate the roll-out of Monitise’s platform.
2. Make-up – Banks and alternative finance start-ups
It shouldn’t be surprising that banks have recognised the huge developments in fintech over the last year, but their readiness to partner up is interesting.
P2P lenders have had the most banking suitors. In June, Santander announced that customers it is unable to supply loans to will be directly transferred to FundingCircle, which, in return, will promote the bank’s current account and cash management services.
The US has seen a similar partnership between P2P lender UnionBank.
Barclays, MasterCard, Rabobank and Lloyds are among those older financial institutions who are also turning into investors by funding accelerators, offering to offer cash and mentoring to support newer start-ups in exchange for equity.
The next year should see a much more competitive financial services industry as banks race to keep up with better services offered by start-ups.
2. Break-up – PayPal and eBay
This is one spin-off that is could actually benefit both companies as they pursue new partnerships that would have been off limits were they to stay as one company.
eBay could start allowing third-party wallets as payments options. Our thoughts go to Alipay, but that is just one of many options in an increasingly crowded marketplace that will be split by consumer preference. PayPal will have to work harder to keep the 33 per cent of their profit that comes from eBay, which will only bring in more money for eBay.
But 75 per cent of PayPal’s transactions comes from outside eBay. The company’s focus in 2014 can now be on working with more merchants to build on the places that it is accepted. A recent survey found that consumers trust PayPal with their payment data much more than they do eBay – a difference that PayPal can capitalise on thanks to the 2015 split. It also has an IPO to look forward to in 2015, which will definitely be one to watch.
3. Make-up – MPesa and the world
M-Pesa has nearly 17 million active customers and as many as 186,000 agents worldwide. Customers make more than €900 million (US$1.1 billion) worth of person-to-person transactions a month. It has allowed the un-banked to make internal and cross-border transactions to loved ones throughout Africa, between some of the most-used remittance corridors in the world. It has also seen rapid expansion and similar services launched in Asia and the Middle-East.
Having become a serious competitor in the fight against cash, the service was introduced in Romania in August. The company said that they were focusing on the Eastern European country because so few people have bank accounts.
MoneyGram, one remittance company which formerly had a stranglehold on the money transfer industry opted to allow remittance payments to be paid directly into MPesa accounts this year. Now, a number of start-ups are challenging the near-monopoly held by banks. Azimo also allowed direct transfers from Europe to MPesa subscribers in October.
4. Break-up Apple Pay and its competitors
Apple Pay had only just launched when US pharmaceutical chains Rite Aid and CVS blocked the service in their stores. It seemed that they were contractually obligated to switch off the service due to another agreement with Merchant Customer Exchange, a group of US retailers including WalMart, Best Buy and Gap, which is planning to launch its own mobile payments service in 2015.
CurrentC will use QR-codes rather than NFC, meaning that other NFC payment services such as Google Wallet and SoftCard will not be able to access MCX-affiliated stores either. Critics have slammed CurrentC for having a clunky user experience. Many believe that the reason retailers are opting for CurrentC because it allows them access to user data, which Apple’s product refuses to do.
It was also rumoured this week that Samsung was in talks with LoopPay to partner over an Apple Pay competitor for its new smartphone in 2015.
5. Make-up – Apple Pay plays nice
On the other hand, Square has openly hinted at plans to allow Apple Pay payments. Jack Dorsey’s company is planning to rework its hardware to accept Apple Pay in 2015. Apple has also started to accept PayPal payments on Apple.com, marking a small reconciliation between the two.
Alipay and Apple have been dancing around one another for some time. Most recently, Alipay made its app Apple Pay-friendly by allowing users to authenticate transactions using the new iPhone’s fingerprint authentication system.
While Alipay’s footprint is largest in China, where it has 300 million users, this latest move could extend its international reach by allowing users to securely pay for goods on their iPhone using the Alipay app. Apple could also benefit from transactions made via Alipay on the iPhone, as Apple Pay is not yet available in China, where the iPhone faces strong rivalry from both Samsung and China’s domestic manufacturers such as Xiaomi.
The tech giant has been pursuing closer ties with Alipay as well as China UnionPay, with whom they signed a deal last month to allow Chinese consumers to link their UnionPay debit or credit cards to Apple’s app store.
6. And the ultimate break-up: Nobody trusts banks or retailers anymore.
No wonder alternative financial services are having a field day.
The Target breach saw the theft of 70 million records, 40 million cards (debit and credit) contributed to a 46 percentage drop in Target profits in Q4 2013 over the year prior. The breach cost the payments ecosystem close to a billion dollars, as multiple providers had to cover the cost of fraud and reissuing cards.
Okay, so it wasn’t in 2014, but the year did see dozens of copy-cat breaches, which hastened the long-awaited adoption of EMV cards in the US.
Banks haven’t had that much fun either. Many faced charges for allowing FX manipulation because of the carelessness of their risk-management systems, while others are under investigation for direct fraud. This month, the New York Department of Financial Services decided to investigate whether Barclays or Deutsche Bank used algorithms to manipulate foreign exchange rates.
A lot is still missing, but listing them all would take us up to the end of 2105! Let us know what we’ve missed in the comments below.
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