Ginny, Dick and Zuck

Was it just me, or did you do a double take at the hoopla around IBM’s announcement to partner with Twitter (following on the heels of the equally odd partnership with Apple)? Ginny Romety and IBM have a big problem, so does Dick Costolo and Twitter. Neither is going to be saved by the other, and both will be hard pressed to keep up with Zuck and Facebook.

Here’s why.

IBM is buying back lots of their stock. It’s about the only way they can make their numbers work until they find the next path to reinvention. IBM’s problem is the decline of MIPS and associated services they sell, globally. Don’t get me wrong, they are a stable franchise that will continue to be embraced by large enterprises, with large data enterprise needs. But, that isn’t where growth is and they’ll continue to miss their numbers. That is where stable is. Maybe they can bail Twitter out of their non-revenue and declining user interest challenge – but Twitter isn’t going to do much for IBM. (Ask your Millennial when they last Tweeted.)

What does IBM need? A next generation growth engine. There is a lot of talk about Watson. Why isn’t there a Watson ap on the iPhone or in the Google Store – it must be smarter than Siri. Give it an end point presence.

Twitter has an equally big problem. They have a real struggle to find a revenue model, sustainable engagement model and to beat out Facebook. Facebook’s experience is much richer, engaging and offers a better platform for capturing ad dollars. The only way IBM will save them is buy them and make them someone else’s problem. They will see a big uptick in use during the upcoming election cycle, but is that really going to drive revenue?

So to Facebook. Zuckerberg got pounded for being forward thinking and over investing in new ideas. See above. My money would be on Zuck. One of these days he and the team at Facebook are doing to figure out how to engage us all in a Facebook-What’s Ap-Oculus Rift world. IBM and Twitter beware.

MCX and Applepay Debate

There has been some interesting feedback on the MCX and Applepay assertions in the last post. Most of it on why I would think MCX will fold, not whether Applepay will succeed or not. But to some degree they are closely related to the Adoption-Distribution matrix.

The Adoption-Distribution matrix is a tool I use to evaluate certain types of investments. In the impact world, products are often easy to adopt by end consumers, but hard to distribute. Typical consumer commodities are widely Adopted and widely Distributed. So what does this have to do with MCX and Applepay.

Apple excels at leveraging this model – it is one of Steve Job’s greatest legacies. Think about the evolution of music on iTunes – he moved music distribution from hard to use, buggy and inconsistent to a platform that made it fast, inexpensive, easy and elegant to download music. Then added other products (movies, TV shows, books, etc) leveraging the base investment.

Applepay does the same thing. For minimal investment, Apple can experiment with making the payment platform available, making it a great experience that is easy to adopt and distribute and see what happens. It leverage investments already made and expands on the idea.

MCX faces the opposite challenge. Consumers will have to act to use it – download an ap, install it, tie it to a bank account – then fumble with it using Q-codes at the register. Most people don’t even know what Q-codes are or how to use them. They are sitting at Hard/Hard on the Distribution/Adoption matrix, Apple is sitting at Easy/Easy.

The majority of consumers don’t want complicated check out processes, fumbling at the register – really even thinking about do I use this or that to pay. Apple has been refining this process at it’s store’s where checkout is a swipe away from the nearest Apple store employee.

In spite of the feedback, I stand by the following:

  • Apple may or may not succeed at Applepay on a wide scale, but it will get market and grow because it’s easy to use on a platform that exists and adoption by consumers is relatively easy.
  • MCX will whither under complexity and infighting and migrate to one of the consortium as their own payment network funded by their competition – my money is on Wal-Mart to make this final end game.

What MCX is Missing Blocking ApplePay.

MCX made a “strategic” move to block ApplePay at several merchants in lieu of CurrentC. MCX is a consortium of large retailers building their own network in an attempt to reduce transaction fees and have greater access to consumer data. So why block ApplePay? Because they think it’s a good idea to offer consumers a more complex and inconvenient payment experience, and to limit options. Not really very strategic.

Experience has shown consumer priorities for mobile payment systems. For the most part, customers will continue to pull out and swipe their physical payment cards until that is no longer an option (sort of like writing a check). Apple comes the closest in concept to making it about as easy as it gets to install-then tap, pay and go. But that doesn’t help you if you don’t have an iPhone.

So, my predictions. keeping in mind the prime concept of payment use adoption – convenient, secure and reliable.

1) ApplePay will grow among Apple enthusiasts. They will make it a great experience that grows in value over time and as “tap and pay” devices become more common, adoption will grow.

2) MCX will deploy CurrentC – and within 12-24 months it will fail under it’s own weight, as consumers don’t see the value or ever bother to take the steps to install it. Infighting breaks out among the consortium. WalMart (most likely or Facebook) or other merchant player will buy out the switching capability for a fraction of the development cost – and create a Starbuck’s like closed loop system for their own use funded by the other less savvy participants.

3) Paypal and Google will be niche players, not finding firm seating or wide scale use but still fill their role among payment schemes.

4) I stand by the concept of a Facebook driven payment scheme. I still think they should buy Discover card and build around that core capability or wait for MCX to fail as a venture and buy the procession asset.

5) MasterCard and Visa (American Express and Discover in their roles) will continue to dominate the global payment acceptance and switching landscape – because their networks just work. They are convenient, secure and reliable. See above.

MCX is showing its hand. It’s weak and won’t end well.

Apple Pay, Face-pay, Tweet to Pay – or Plastic?

Starbucks knows or should know quite a bit of information about me.   What would the data reveal – I drink medium roast Vente drip coffee, in the afternoon, I travel frequently, that I almost buy a sweet of one kind or another.  Boring I know, but important to them.  How do they know?  The Starbucks payment ap which I’ve used almost since the clumsy first day they offered it.  Visa knows I reload a Starbucks card roughly once a month.  Starbucks has the fine grain data – all in trade for one free drink for every 10 and a special offer now and then, and convenience.  They do $1.5B per year on their closed loop system – arguably the largest most successful virtual payment application ever.

Today – my IPhone cheerfully let me know that I could start to use the new Apple payment ap inside Passbook.  In 2 minutes (post installing the iOS8.1 update), my credit card on file magically appeared in a virtual image of itself in Passbook waiting for service – store purchases, in ap purchases.  Touch it to a NFC reader at Target (well maybe not Target), a temporary number is generated lowering risk and off I go.  Apple made it simple, almost elegant.  So Apple has now interjected itself more fully into my life.  In all the fine print, they can track what I buy and where (although they say they don’t) – and then pass along the relevant payment completion data through the settlement process – but they’ve got the golden data goose of my digital contrails.  They know who am I, what I buy, where and when.

Twitter has launched a pilot Tweet-pay initiative with a European bank.  I haven’t seen it, but word is – you can Tweet a payment to anyone once you’ve set this up.  I presume they did this in a bit of an out of site way to test the concepts and work out the kinks in case things go awry.  Early returns say it posts payments as a Tweet – that seems like a terrible idea.

I believe, but don’t know, that Facebook has its sites on a payment play through their messaging platform(s). I like that idea the best.

AT&T has been futilely trying to make a go of Isis (now a terrible name choice over a terrible product offering).  Google has made equally marginal progress.  Paypal has split from Ebay to find itself and become more broadly relevant.

Who wins and why?  The provider(s) that offer(s) high, consistent trust and ease of use – and an incentive or value add to change behavior. Will consumers change behavior?  I believe it’s too early to know – and will take several years to unfold and remake the dominant plastic payments landscape. 

My near-term prediction – Starbucks will continue to run a largely successful payment program built to suit their own purpose – and serving as a model for niche signle entity payment systems with unique customer insight.  The others will fragment along specialized lines.  Facebook may get small merchants and person-to-person with their Face-pay.  Apple knows how to make simple experiences elegant and cool – they might get there with payments – but adoption will be slow.  Twitter will be marginalized much like Google and AT&T.

In the meantime, be mindful of who you let interject into your payment life – if you care at all about data privacy and the value of your personal predictive spending patterns and information.  And think about who are you going to call when you use Twitter to pay Staples with your Visa card backed by Bank of America.

Will Facebook Finally Disrupt Payments?

Premise 1 – Payments are messages. Me to you, you to me – the content of which is the exchange of value.

Premise 2 – For consumers and merchant to adopt new payment technologies and move from legacy technologies (physical credit cards, cash, etc) they have to be global, frictionless and assured/secure consistently.

Facebook has 1B users globally. They have two messaging platforms that have global scale and significant numbers (Messenger at ~200M and What’s Ap at ~500M). Facebook, under the leadership of David Marcus, has declared an intention to enter payment messaging market. The large card players watch but largely dismiss the social networks as potential competitors. The traditional view is ultimately a transaction will still cross their rails, so either way they benefit.

But – bear witSAMSUNG CSCh me across some leaps. What if Facebook changed the game, as they have in so many other ways?

None of this attributable to any industry sources – just speculation on one possible path.

  • Facebook leverages Messenger and What’s Ap to launch “FriendPay”. On this platform – one friend pays another via enhanced messaging. If we are friends (whether individual or merchant) – a payment can be sent.  If we both are on Facebook, then we just need to be Friend or Followers.
  • Facebook acquires Discover card providing their own payment rails and reduce dependency on the other payment networks and their fee structures. To join FriendPay, users would agree to credit terms and conditions similar to acquiring a Discover card – but branded under the FriendPay (Have you ever had the strong urge to run out and get a Discover card?).
  • How much does Facebook charge? $0 – not to the individuals or merchants, which turns the traditional industry model on its head. Why? Facebook already has your social graph, this rounds out their insight into not only what you do, but what you pay for. The large card players are still trying to get this model right – it’s right there in Facebook. All they have to figure out is strong payment messaging. This increases their targeting capability many fold.

No “wallets”, low friction, free – all the parts are there. My money would be on Facebook.

Attending SOCAP 2014

I’m grateful and excited to be attending my first SOCAP since starting Omvestments in March 2013.  I continue to be amazed at both the opportunities and challenges of creating impact.  There is so much need across many geographies and global turmoil does little to help advance mindful investing.  It’s always harder to operate and see clearly in an environment of emerging fears.

I’m looking forward to being among like minded entrepreneurs, investors, global organizers and thought leaders to connect on many topics, share ideas and stories from the last mile of success, failure and lessons learned in the field.  And maybe play a little too.

Impacteri2Of particular interest are exploring discussions involving Impacteri.  We are looking for partners seeking to take their impact idea, venture, products or technology into new markets but don’t have the capacity to do it alone.  We’ve tested the idea, continue to evolve the model – and look to scale up Impacteri impact in 2015.

If you would like to meet or talk about your venture, share investment ideas or challenges – I’d welcome a chance to get together.  Send an email to Richard at Omvestments dot Com and I’ll be as responsive as possible.  See you at SOCAP.

Interest Rates and Information Symmetry

NY FedAre interest rates set up to remain low or near zero for longer than the markets and observers expect? How long? Perhaps as long as another 5-10 years. Based on what and why?

First, Janet Yellen is taking an appropriately conservative stance on raising rates at present. Appropriate because she 1) sees what’s happening in Europe with the collapse of rates; 2) is wisely not trying to slow down QE and raise rates at the same time.

Second, information symmetry is at work. A lot of attention is given to information asymmetry – one party having an advantage over another. This often gets applied to sophisticated trading strategies or market information advantages. But today, almost anyone watching the global markets and geopolitics sees things happening at the same time, in near real time and reacts accordingly – thank you CNBC, Twitter and CNN. That is a different dynamic than has existed to this extent – and acting on the market and economic activity in unexpected ways.

What are the dynamics in place that are widely observed and reported on:

1)    The US is just barely moving out of the recession and the fuel that has driven it is liberal monetary policy. If the flow is funds is slowed and rates rise – the economy is going to back slide.

2)    The European markets are weak to anemic at best – and they are continuing to lower rates just sustain some minimal level of economic activity.

3)    Global economic activity remains choppy and sluggish and a slowing of US economic activity by the raise rates/stop QE twins could drive a even broader global slump.

And you can pretty much observe this by keeping an eye on readily available, widely accessible information – information symmetry.

The Fed has another 6-12 months of assessing the realities of slowing down their spending. If that is digested by the economy without excessive heartburn (which it may not be) then maybe a 25 basis point raise is possible – maybe even 50 basis points. Then what? Economic activities slows – and investors still don’t have a compelling reason to shift to Treasuries or interest rate products.

So here is an observation – we are years away from a sustainable rising interest rate environment and investors seeking yield need to think about sticking with alternative strategies to get both yield and appreciation or it’s going to be a very long wait to invest.

Detroit What If?

I bought a Shinola watch not long ago, and then another, and one more. They are beautiful timepieces, well engineered, creatively designed, manufactured and marketed. Vintage Detroit. Find more at Shinola (“Where we will reclaim the making of things that are made well.”)

(Stay with me on this.)

I’ve been traveling in Africa and meeting with existing and potential impact investments.  Africa is a continent rising with high aspirations – big, diverse, resource rich, young population. There are challenges (many) – and it’s not a one solution fits all place. South is different than West, West different than East, etc.

But I’ve heard an interesting common theme. Africa doesn’t have a historical legacy of precision manufacturing – high quality tooled precision electronics or enclosures for example. A natural solution is – China. Great for Apple, where they run their own production facilities at local rates and make sure precision levels are met and maintained.

What if you are a small (impact) venture, manufacturing in the 1,000’s to 100,000’s, not millions. Results are far less predictable, mistakes are costly and the choice is lower quality standards or build elsewhere.  Where do you go?  What about back to the US?

What if in a global turnabout – Detroit became a global destination for high quality, well priced manufacturing for this emerging continent. Detroit has all the right aspirations and many of the capabilities – build capacity, precision engineering experience and hunger for re-growth of a decimated inner core. Plus, the Detroit airport is large scale, world class and could support major distribution links to Africa and Middle East distribution points.

My background is not engineering or logistics, it’s banking consulting. But I’m a passionate impact investor – and Africa aspiration meets Detroit manufacturing could be a win/win on many fronts. What do you think Dan Gilbert?

Five Parting Thoughts on Wallets, Shoeboxes and the Changing Social Payments Landscape

  1. Digital wallets are a poor investment and use of corporate capital. Until paying with a mobile device is frictionless, well designed in form, functional and well priced (free) it will never be more than a curiosity.
  2. The Shoebox concept, unified and integrated, will be a $1B business opportunity for the player or players that pursue it.
  3. It will likely take a combination of players that don’t often work together – Facebook plus Acxiom, MasterCard and Amazon/Apple, Visa, Dropbox, AT&T.
  4. The concept will scale globally and impact emerging markets. Mobile infrastructure and use rates are there to support it.
  5. The concept needs a better name and Apple like design sensibility to make it work. Then users will be more than happy to pay across the same platform.


Digital Shoebox 4 – Industry Moves and Observations

I’m continuing to write on this topic, because in spite of my passion for Impact Investing, I’m getting quite a bit of response and interest on this.

Paypal and David Marcus Moving to Facebook

Re/Code wrote about this major industry move – but I don’t agree with their point that this isn’t about advancing Facebook’s payment agenda:

This is what Facebook said in their news release:

  • “Messaging is a core part of Facebook’s service and key to achieving our mission of making the world more open and connected,” Facebook said in its announcement about Mr. Marcus’s new role.

Payments are an exchange of value encapsulated in a message format. That’s what makes the MasterCard and Visa global networks hum – message passing about financial information, exchanges of value between counter-parties. Facebook could have hired a lot of smart people that know about messaging. They likely got quite a few in the recent purchase of What’s Ap and in the development team of Slingshot. But David Marcus has the combination of messaging and payments smarts from Zong and PayPal.

Well coordinated, secured and managed – all things Marcus understands – Facebook could become a major contender in the Payments and Digital Shoebox race, with Messenger, What’s Ap and Slingshot becoming ways to communicate financially as well as personally.

Acxiom and Scott Howe

Never heard of Acxiom. Most people haven’t. They are your “Digital Shoebox” of sorts, you just don’t know it. Acxiom collects massive amounts of data on all types of transactions, manages it, organizes it and sells it to marketers – banks, retailers, publishers – helping them to target ads and campaigns. Under the CEO Scott Howe’s leadership, you can now get a glimpse into your profile at – You can register and get transparency into the information about you, update history and even Opt Out. But this is a bit of outsourcing magic – getting the consumer to improve their information product accuracy.

What if they offered you a way to monetize the data yourself – maybe working with a partner (like Facebook or MasterCard) – and help you manage, control and use the data of your life. They’ve gone part of the way.