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Biometric payments
Payment companies around the world continue to astound and delight with improbable alternatives to tapping your card or phone on a Verifone VX820.
UK based Walletmoor announced it has already sold 1000 payment implants. Walletmoor supplies the devices but you have to find your own doctor to inject the chip under the skin of whichever part of the body you feel would most benefit from contactless payments. Less intrusively, Azerbijan-based Smile Pay claims to have processed 3,000 transactions from 418 users at local supermarket chains. It works through facial recognition. Smiling isn’t obligatory. A perplexed grin should work just fine.
Meanwhile, Amazon has installed “pay with palm” in 65 Wholefood Stores in California but its “checkout free” Amazon Go! technology seems a more likely winner. Here’s a good round-up from Computer Weekly of where the technology – from Amazon and other vendors - has landed. Many are concerned that the cameras and sensors remain very costly for retailers to install. Most likely, we’ll see more self-scanning as merchants look to redeploy staff and reduce overheads.
eCommerce – on track or maybe not?
As eCommerce sales surged during lockdown, many experts were saying that “we’d seen ten years of digital growth in ten months.” Now that most major economies are back to normal, the picture is less clear-cut. Shopify, the eCommerce platform, surprised the market in saying that its sales growth had stopped growing exponentially.
“We bet that the channel mix—the share of dollars that travel through e-commerce rather than physical retail—would permanently leap ahead by five or even 10 years . It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point.”
According to Ben Evans, one of the sharper tech observers, the question of what’s happened to eCommerce is more complicated that it first appears. Lockdown permanently transformed a small number of sectors but many others have bounced back to roughly where they would have been. Stepchange or trend reversion? You can have whatever answer you want depending on which denominator you choose.
One vulnerable sector is certainly last mile delivery. A hit with consumers during lockdown, especially as investors were happy to subsidise a slew of new market entrants, local shipping companies are now under severe pressure. Shoppers are unwilling to pay the full cost of delivering small quantities of groceries to their doorstep. As energy bills rise, we can expect the public to abandon these “affordable” luxuries in droves.
But it’s also clear that the pandemic has reinforced consumer preferences for brands that support seamless customer journeys across all available channels.
We’ve been talking about omni-channel since 2009. It’s probably time for a new buzzword. One candidate is phygital which well describes eating robot-made pizza supplied by vending machines in soulless suburban carparks.
Q2 listed company results
Payment companies regard themselves as inflation-proof. Their fees are largely ad valorem so, when prices go up, so does the merchant service charges. However, this can lead to a sense of over-confidence. Low double digit payment volume growth is less impressive when consumer prices are also rising at the same rate.
Visa marginally outpeformed Mastercard in Europe during Q2 with payment volume up by 17% compared to 14% for its rival.
Nexi (+18%) and Worldine (+30%) both grew share in the consolidating European market. Of the global players, both FIS and Fiserv called out the impact of inflation on their cost bases and warned of headwinds in H2. Nuvei and Paysafe also fretted about the crypt-meltdown and a slowdown in European gaming.
Adyen disappointed. Despite growing payment volume 60% in the quarter, the incremental €46bn processed generated just 9bps net revenue and no EBITDA at all. Even the announcement of an in-house designed range of payment terminals didn’t help its sagging stock price.
Cardmeggeddon part 25
Forecasts of the demise of payment cards have been around pretty much since they were invented in the 1960s. Yet in 2022, we may finally be seeing the beginning of the end. The Brazilian central bank predicted that credit cards may soon case to exist, which it puts down to the stunning lockdown success of PIX, a QR-based acceptance mark that gives easy access to the country’s new instant interbank payment network.
Similarly, Poland’s Blik claims 78% share of eCommerce transactions and is fast growing in POS too. And with Mastercard as a shareholder, Blick is now moving international through the take over of a Slovak rival. Other nations want a piece of the action. Ireland’s banks, spooked by the rapid growth of Revolut in P2P, have hired Nexi to build a local mobile payment brand.
In Europe, openbanking payments are thought likely to replace many card transactions but, in the absence of standards and acceptance marks, the pace of adoption may be slower than many expect.
Most action is still in theUK. Natwest announced that its PayIt openbanking payment mark has processed £1bn. The bank has built its own openbanking API aggregator rather than using one of the many commercial products available. In contrast, Lloyds used Bottomline Technologies for its “FundBy Bank” solution. Bottomline has the funding to prosper but many of the numerous openbanking API aggregator start-ups may not be as fortunate. Yolt, closed down by its frustrated parent (ING Bank), will not be the the final casualty.
SoftPOS may be one way for cards to fightback, especially in preventing P2P mobile payment schemes hoovering up too much micro-merchant business. It’s good enough to sing about.
Crypto meltdown?
I sat in on a crypo-payment conference just before the pandemic. The sense of energy and excitement was palpable. None of the presentations made any commercial sense but I assumed that all these clever, ambitious and well-funded entrepreneurs would come up with something useful for society. A bit like the non-stick frying pan spun out of NASA’s space programme. Instead, the crypto Bros just kept building bigger casinos.
The bubble may have burst but there’s still a pipeline of increasingly implausible crypto announcements from old economy players who should know better. For example, Deloitte apparently believe that 75% of retailers plan to accept crypto payments within two years. And Gucci has become the first (and possibly last) major brand to accept Apecoin.
The card schemes have to walk a fine line with crypto. They are smart enough to realise the ridiculousness of the situation but need option value in case everything we think we know about crypto is plain wrong. But should Mastercard really be lending its trusted brand to the likes of Binance?
We’ve not heard Liz Truss’s views on CBDCs although Rishi Sunak, her main rival to be UK Prime Minister, is reportedly a fan. In evidence to US Congress, the main payment brands are not convinced there is much point to a digital dollar. This insouciance was echoed by the Chair of the Minneapolis Fed who said he was baffled by what problem CBDCs are trying to solve.

At a recent UK Finance focus group on how to implement CBDCs, nobody on the call could explain what they these digital pounds could do that all the other digital pounds in my bank account could not. Incidentally, the answer about how to implement CBDCs is very carefully.
And finally
A much more real and present threat to the card schemes than openbanking or cryptocurrencies are the looming court cases surrounding Pornhub and Visa’s liability for “ knowingly facilitating the distribution of child pornography.” If payment companies are liable for their customers’ bad behaviour, we can expect quite a shake out in the high-risk end of the business.