Citigroup to Offer Branded Phone for Payments

Many apologies for not writing much this week.

I did see one interesting story concerning one form of mobile payments - Near Field Communication (NFC). NFC has taken hold in Asia, and there are convenient stores and other brick and mortar locations where shoppers can simply swipe their phones within a certain range of a Point of Sale system, and the system will debit some sort of stored value. That could be hooked up to a credit card, a bank account, or there could be value pre-charged onto the chip like a Gift Card.

NFC payments requires the payment company to put a chip into the device, since it is the device's proximity to the Point of Sale system that results in the payment. NFC is a much more realistic option for mobile payments in Japan, where ITT DoCoMo has upwards of 80% market share, and can effectively make changes across the board for all of its customers. In the United States, this is a less realistic option because of the fragmentation among device makers and the networks.

Getting "designed in", that is having a new version of an existing device or a new device created with your chip in it is a multi-year process even after the deal has been reached. The ability for a startup to work with Original Design and Original Equipment Makers (ODM, OEM) is very difficult without significant backing. Further, beyond the chip in a device, the system has to be compatible with hardware in stores, though that is simpler as everyone from Gas Stations to Fast Food joints have created keychain swipe tools.



Easier for a Bank

CardForum is reporting that Citigroup is going to offer a branded mobile device with its own NFC chip built in. Citigroup is a multi-billion dollar institution with huge credit card and other consumer banking operations. Credit card companies typically fight for "share of wallet" or "top of wallet" positioning, meaning to be the card of first resort for any given shopper who is making a purchase. The beauty of the mobile device is that people often carry their phones in places they don't bring their wallet or their credit cards. If Citigroup can own the device, they can take a greater share of the wallet, and possibly extract rents for other payment options.

Citigroup, like Visa, MasterCard and others has conducted many tests of NFC around the world, but CardForum indicates that this device is targeted primarily at the US market, and complies with FCC rules for NFC transactions. Further, being a massive card issuer, has much significant power to persuade merchants to adopt new card reader functionality.

An interesting question is what does this say about Citigroup's association with Obopay, a mobile-to-mobile payment provider. Further, if the banks begin moving into the mobile space, what does it say for mobile wallet solutions like Firethorn and mFoundry? Stay tuned.

BillMeLater to get BilledNow by Credit Crunch?

The credit crunch that is striking at the heart of Wall Street's largest, oldest and most venerable firms also has impacts in the payments industry. Bear Sterns, an 85 year old investment bank was sold to JP Morgan for pennies on the dollar last weekend. Today, the New York Times is reporting that CIT Bank tapped its entire line of credit in order to fund its on-going operations. That line amounted to $7.3 billion in emergency credit.

CIT is a diversified financial institution including student loans and commercial lending. However, CIT is also responsible for the financing offered at Dell computers and by alternative payment processor, BillMeLater.

BillMeLater has a large cadre of internet retailers, including WalMart.com, and provides an instant line of credit to consumers in the checkout process. There has been angst about both the high rate of rejection of some customers, and the impact on your financial score the way the company pulls your credit report. Both those factors could get worse.

Consumers are being hit by hiking of credit card interest rates regardless of payment history, mortgage lenders are also increasing rates to reflect a risk premium in the housing market.



If the tightening of credit standards reduces CIT's ability to offer credit, and it has trouble selling "non-strategic" assets or finding someone to merge with, the BillMeLater experience could go downhill quickly.

Mpayy - Alternative Payments for YOU

Mpayy continues to look for new ecommerce retail partners to provide consumers with a secure alternative for secure payments directly from their checking accounts. Mpayy provides 1% Cash Back on purchase amounts over $50, and the same Chargeback protections as credit cards. Certainly, Mpayy doesn't extend credit to its Personal account-holders, but it does offer the best consumer protections for online shopping available.

Obopay Adopts Mpayy Thin-Client Single Step Payment Process

Glenbrook Partners, which covers the payments industry and strategies, ran a story today that Obopay has moved away from their 2-step "Store & Forward" approach and to the Mpayy model of enabling payments directly from users' checking accounts.

Ramy Mora, VP of Marketing at Obopay notes that the decision was made as a result of focus groups and not the careful study by Obopay employees study and testing of Mpayy's service. We'll take them at their word.

Obopay, which has taken $46 million in Venture Capital financing, started with a "fat-client" solution. A "fat-client" requires the download of software onto a mobile device, requiring a team of developers to ensure that each Operating System put out by Motorola, Apple, Nokia, LG, Samsung, etc. is compatible with the subsequent releases. This is hugely capital intensive pursuit requiring a huge team of developers. In fact, as recently as January, the company added support for Blackberry users through specific software on the device.



Obopay moved to a thin-client solution based around a WAP site, but maintained its "Store & Forward" model. It will be interesting to see what Obopay does with their payment lags and accounting opening process now that the money goes directly from Person A's checking account to Person B's Obopay account where it can be withdrawn with an ATM card. This introduces significant credit risk, and we'll look to see how they handle it.

Obopay does have a slick front-end, something Mpayy can not claim presently, and they do have a relationship with Citigroup, but usage has fallen since the partnership was announced. Perhaps this most recent change will pick the traffic back up.



Recent Press for Mpayy



Mpayy has received two "also ran" mentions in sidebars and lists of mobile payment companies of note.

In the Nilson report, Mpayy was included in a list of alternative payment systems that was a sidebar to an article covering Steve Case's startup, Revolution Money, which recently concluded a deal with Fifth Third Bancorp to accept the Revolution Card in bricks & mortar stores.

Today, Mpayy got word that it would be mentioned in Javelin Strategy's "Mobile Person-to-Person Payments and Transfers: Security and Timing Are Everything" report.

Don't shell out $2,250 to learn about Mpayy, though, as this is evidently the extent of our honorable mention. We very much appreciate the coverage, though, and enjoy being mentioned in the same breath with Visa, Mastercard, PayPal, Obopay, Textpayme, etc.

CrunchBase Information

obopay

Information provided by CrunchBase

CrunchBase Information

Mpayy

Information provided by CrunchBase

CrunchBase Information

Revolution Money

Information provided by CrunchBase

On Web Growth & Web $Growth$

Much has been made of Internet company valuation, and with the order of magnitude money has been flying at startups in the Valley, much demands investigation. Valuation is an inherently subjective process that can be made to conclude anything depending on methodology and assumptions. Value investors who prospered in the crash of 2000-1 were vindicated that company value is derived from a string of revenues, and the stock value is a claim on that string. The followers of Benjamin Graham's approach will only invest in stocks of companies with strings of positive Free Cash Flow that have a Net Present Value to the stock-holder.

Venture Capital Investing a Different Animal

Now, Venture Capital investing is far different from buying stocks listed on the NYSE, NASDAQ and S&P 500. Venture Capital investors have the flexibility to demand very sharp hook-clauses into the Term Sheets they give out. I just finished my MBA at the University of Chicago where we studied how to structure a Term Sheet to limit downside risk, and ensure a positive return with near certainty, while still having significant exposure to the upside should a startup venture succeed.

It's a powerful piece of knowledge to have as an asset manager who is renting money from wealthy individuals and institutions. In order to raise future funds, an asset manager must show returns greater than the stock market and other asset classes. The first Case Study in Professor Steven Kaplan's Entrepreneurial Finance & Private Equity class is a study of David Swenson, Chief Investment Officer of Yale's Endowment.

The Boston Globe wrote a story about a study by Josh Lerner of Harvard with colleagues:

It shows that $1 billion invested at the end of 1991 by the average US college or university endowment grew to $3.68 billion at the end of 2005, a gain of 268 percent over the 14-year period. That was slightly less than the 278 percent compounded growth of the benchmark Standard & Poor 500 stock index in the same period.

By contrast, a $1 billion investment by "Ivy Plus" school endowments turned into $5.88 billion, a gain of 488 percent. The Ivy Plus group was defined as Ivy League schools - Harvard, Yale, Brown, Columbia, Cornell, Dartmouth, Princeton, and Pennsylvania - plus the Massachusetts Institute of Technology, Duke University, Stanford University, and the California Institute of Technology.

Those very large endowments had access to the best VC funds and startup deals, with terms that would most benefit investments by Endowment managers in the role of Limited Partner. The investments grew the endowments of the Ivies so significantly that the schools are substantially liberalizing their tuition assistance. Here is Harvard's 3-Point Initiative to lower Expected Family Contributions.

To an entrepreneur, the experience can look more like this anonymous posting on thefunded.com.

The term sheet provided to us was astonishing, the most rapacious I have seen in 20 years. The terms were far from even remotely resembling market: extreme liquidation preferences, antidilution ratchets, wiping out of the previous investors. Most unbelievably, an absolute requirement for the management team and Board to resign, to be replaced in their entirety at [their] sole discretion[edited].

How Blogerrific Can You Get?

Mr. Blodget, 35, gained fame among American investors after correctly predicting in 1998 that the share price of Amazon.com would soar to $400. But that fame turned to infamy as Amazon and many others among the Internet stocks he recommended plunged. Several companies that Mr. Blodget praised in published reports and television interviews, including Pets.com, a unit of IPET Holdings, and eToys, failed before ever turning a profit.

...Through all of 1999 and well into last year, Mr. Blodget advised investors to buy virtually every stock he covered. Boyishly handsome with a charmingly casual manner, he became a fixture on CNBC and in the financial press, making the case for companies that were losing lots of money selling diapers or dog food over the Internet.(New York Times, November 15, 2001)

When Henry Blodget left Merrill Lynch, this was his Wall Street epitaph in the New York Times. Blodget's departure came at at a point when everyone felt burnt by Internet companies, and they perceived him as a cheerleader. A quick perusal of the stories about his stock picks on theStreet.com reveals positivity on the likes of Yahoo, Amazon, and Priceline.com, all of whom produced profitable businesses to the tune of many billions in profits.

However, Henry Blodget, who edits the very poignant Silicon Alley Insider is credited with arguing TechCrunch at $100 million, which TechCrunch Founder Michael Arrington disputes in this interview on Charlie Rose.



Whose Rents are they Anyway?

AOL announced plans to buy social networking company, Bebo for $850 million giving it access to 40 million members worldwide and rich video content like the online production house that arose out of lonelygirl15 fame on YouTube. In fact, Avatar of WidgetsLab predicted the move made sense for AOL over a month ago. Zach Hurst of 1Dawg notes that values Bebo users at $21.25/user, and that facebook users would be $300 per person at the $15 billion valuation given by its Microsoft investment.

The facebook valuation has driven many associated investments, and thus more venture capital into social networking websites. Adonomics is a facebook only VC fund, widget valuation tool and marketplace for orphan widgets. The company publishes its theoretical valuations of the Top 100 widgets on facebook by users. According to its valuation, the Top 100 facebook applications are worth $1.2 billion and each instance of use is worth $27.09.

So, if facebook is worth $15 billion and the ecosystem that drives facebook usage is worth over $1.2 billion, what is the valuation of the ad networks that plan to use widgets as marketing tools and advertising vehicles? Gigya received $9.5 million this week and WidgetBox received a CEO from Hummer Winblad who helped it raise $14.5 million with several other firms.

The final answer to the question of how much value facebook users create, and for whom will be fascinating. It's interesting and important for investors and entrepreneurs alike to ask now which investments will deliver profits, and which shall be attrited.

Widget Commerce w/ Mpayy

Mpayy's Secure Payments Widget hopes to securely produce this stream of revenues. We are a highly scalable commercial application, and can enable either our Person-to-Person money transfers or Internet Point of Sale web services through its widget or with simple integration to any website. For charities, non-profits, and charities, we'll process donations for free.

Check us out and play the Mpayy Bracket Challenge!

Countdown to NCAA March Madness TipOff

The Countdown has Begun

On March 2nd, we launched the Mpayy Bracket Challenge to entice users to sign up for Mpayy. Bracketology experts, fanatic followers of conference champions and underdogs alike, 18-45 year old guys who anxiously await the release of a blank bracket sheet & plan to check their scores on their wireless devices are our sweet spot.

I've placed a countdown widget on the blog to the right until the time of tipoff on March 20 @ Noon. I'm looking for one that's slightly less futuristic looking, but you get the idea.

The $25,000 Mpayy Bracket Challenge is a hosted tournament open to all Personal and Mobile Merchant account-holders. The tournament Terms & Conditions can be found here. Users go through our quick (and increasingly friendly in-line validated forms) registration process and continue through to the Dashboard seen here:



Users click through to the hosted Mpayy White Label website, specify a password, and get to the Picks page. As you can see, the pool is all ready to be loaded with bracket the moment it comes out.



Reaching Bracketology Experts

Mpayy is the perfect way to accept fees for online NCAA March Madness bracket tournaments and office pools. Users can just sign up for a Personal account to send and receive money from users checking accounts. If you've ever run a friendly pool or Fantasy sports competition, you know what a pain in the arse it is to collect money from even your friends. Mpayy provides no excuse to not have paid. Just sign up and beam the funds to whomever is running the pool. No fees to either of you. PayPal will let you do this for 5 players without charging you. Mpayy wants to help you run your whole pool.

In order to get in front of college basketball fanatics, Mpayy has launched coordinated display and search engine marketing programs to find highly networked individuals through financial websites, social networks, and those looking for the tools to run brackets online. You don't have to go find those ads, just sign up to accept free online payments for your March Madness College Basketball tournament.

New Mobile Web Usage Data

The Pew Center for Internet Research is one of the best sources for unbiased data you can find. The non-profit conducts survey and publishes them openly on their websites, and unlike a number of other sources, it's a safe bet no companies have funded the research that can have a deleterious impact on data integrity.

The center conducted a survey of 2,054 people in December and published the results on their website.

At Least 17 Million Daily Mobile Web Users

One of the most difficult numbers to find for us has consistently been the number of mobile web users, as distinct from those who use text messaging. A number of sources, though, point to the total number of Mobile Web users to be around 46 million, confirmed by this research that indicates 19% of the 240 million mobile phone users to have accessed the mobile web. 7%, or 17 million people, access the mobile web on a daily basis.



Note, I am looking only at the line item for accessing the internet for news, sports, or weather information. Another 27% have played a game, though the survey does not distinguish between web-based and locally. 19% used it for email, 14% for map information and 10% to watch a video. The email users probably includes BlackBerry users, and map information could be web-based such as Gmaps or MapQuest, or it could be built into the OS like Google Maps on the iPhone. Videos are becoming more ubiquitous with YouTube, Treemo, and others, as well as being served up through ads.

The moral of the story is that the number of mobile web users may be much higher.

The Internet and Mobile Web are certainly perceived as a young person's game, but here is some data:



96% of mobile phone users under 30 have participated in one of these activities. That is pretty incredible. I do have to give my folks credit for bumping up the 50-64 category.

The study also has some ethnographic data, but I'm not sure what meaning to impute from that.

I'll leave you with the fact that more young people would rather give up the "Interwebs" than their cell phone. Where do you rank in this category?

Mpayy Free Donation Processing for Charities & Non-Profits Featured

Allan Benamer, who writes at Non-Profit Tech Blog featured Mpayy's open offer to charities and non-profits to process donations for free. The Mpayyment widget will allow them to take donations through their website or on their social networking pages directly.

Below is the Mpayy excerpt from Allan's blog, read the full story here,

Charities & Non-Profits can secure get free donations here.

www.mpayy.com

Mpayy is another electronic payment service akin to Paypal or Google Checkout for Non-Profits. However, Mpayy works by tying a donor’s checking account to their Mpayy account thus making it possible to send electronic checks. Even better, Mpayy can do this via mobile phone via SMS text messaging.

Full disclosure on this though: We’re considering using it for socialmarkets.org not as a replacement for Google Checkout but because bigger donors would rather use their checking account instead of their credit cards. They can also used as an ACH (electronic checking) backend instead of just a mobile payment service.

Your typical nonprofit scenario…
Charity ball and your donors are pleasantly buzzed and going strong. One of them has just won an auction and now wants to pay for the art they just bought. Knowing your donors, they have a cell phone that can access the web and receives SMS. They go to Mpayy’s site and they’ll see something like this on their cell phone:



It’s not yet the most elegant interface but you can guess what’s happening. Mobile payments for mobile donors. I’ve talked to the Mpayy folks — they definitely want nonprofits on board and are willing process transactions for free. Trace Johnson, their product VP says:

For now, charities/non-profits can just fill out our Retail Application https://www.mpayy.com/info/requestRetailMerchant.do?_path=retailMerchantRequest and specify they are a non-profit in the business profile section for business type. We’ll follow up with them, check in Guidestar, and change the fee amount on the back end.

Announcing Mpayy Secure Payments Widget & Bracket Challenge!

It's 3:40 AM on Sunday morning, but I'm giddy as a school-boy and felt it important to announce the exciting new functionality we've just completed launching.

Secure Payments Widget is Here!

I've forecast the Mpayy Secure Payments Widget a number of times in this space, but finally it is in production and ready for all to use.



(Here it is, though the blog post CSS is changing the color of the background in this post.)

Mpayy is utilizing the Clearspring Launchpad Widget syndication platform in order to make it one-click to the addition of the widget anywhere our Members wish to use it.

The Development and Product teams at Mpayy and US Bank discussed Widget security extensively. The question of, "Why did PayPal redirect the payment piece to their own website" with the subtext of, "clearly these guys know a whole lot about security." The concern about "spoofing" is very real. Clearspring makes it incredibly easy to grab some part of a website as a Widget, and it would be simple to take the front end from PayPal, Causes, or others and change the Widget file to use JavaScript that posts sensitive User Names and Passwords to another source. The criminal could then use the User Names and Passwords on the real site to steal money.

As a result, we decided to pop up a small version of the website so users can verify our SSL certificates and see the URL and iconic Padlock to demonstrate the security of the page. Only then do we request Password. I spoke with Joel Pulliam, VP Product at Clearspring about providing a Verisign-esque service to validate the source of the Widget, but they declined to do so due to concerns about spoofing the certification. If you look at NOCA's One-Click Pay literally asks you to put your Bank Routing Number and Account Number into a facebook page. Caveat emptor, pal.

Mpayy's widget can be used by any of its Members, and provides a simple and easy way for Online Sellers and Charities to add the payments widget to any page they wish with limited technical prowess. On 3/16, we will make it server driven so Members can pre-populate Payee, which will be more helpful. Mpayy will process payments for non-profits and charities for free, and hopes to see it employed very frequently with large charities.

Get Paid w/ Mpayy - Mpayy Bracket Challenge

Mpayy announces the (up to) $25,000 "Mpayy Bracket Challenge" for all Personal and Mobile Merchant account-holders.



Our good friends at PoolTracker have a wonderful White Label system that allows us to customize with our own header. Sign up now, and submit your bracket before the tournament starts on March 20th.



The payouts to the Bracket Challenge can be found here. We will obviously pay users into their Mpayy accounts where they can withdraw it directly to a Linked Bank account or send to someone, and soon to shop online.

Other New Items

Three other notable items:

• Free Donation Processing - Mpayy will process donations for free for Charities, Non-Profits, and political campaigns. Zero transaction fees will be taken through any of the Mpayy Channels - online, mobile, social networking
• In-Line Validation - We added local JavaScript in-line validation to the Personal Information page of each account. We require a number of fields for the identity check, and when we launched, we had some unfriendly validation rules around Mobile Phone number, email address and Date of Birth. Those have hopefully been ameliorated.
• Person-to-Person Text Notification - We originally did not send an immediate text message notification for Person-to-Person transactions, but determined it was a necessity to communicate immediately the action taken when paying a friend for dinner, quick loans or other expenditures, especially in the world where folks are paying each other through our mobile site.

Many Praises for US Bank

At my last job, subsequent builds made me feel as if we were getting worse at our jobs. In days subsequent to builds products, or the whole site was dusted for hours and days on end. This build went off without a hitch, with just about 45 minute delay. Our partners at US Bank (NYSE: USB) have an incredible amount of experience in developing software generally, and enterprise payment & mobile applications specifically. We remark regularly that in many ways we are a non-startup startup. We mean this in the fact that US Bank is an incredible Partner to have, and from day 1, we piggy-backed on world class security, operations and development assets.

More to come, now SIGN UP, it's FREE!