Reconciling Consumer Crosswinds

Frequently, in his space, we discuss both the online and offline retail spaces as Mpayy's secure online shopping system relies first and foremost on the consumers' willingness to go shopping. However, beyond transactional data released by the Commerce Department and Comscore, there are other tea leaves that we can read to get a view into the consumer's plight.

Today we look at real estate and credit card transactions.

Underwater Real Estate

Zillow.com is an innovative online real estate research and data website that provides holistic views into cities and neighborhoods for consumers. Home-shoppers use the site to look at purchase data of homes near the addresses the potential buyer is considering. To do so, Zillow has to track publicly available purchase data nationwide.

Zillow released its Real Estate Market Report yesterday. According to Dr. Stan Humphries, Zillow's vice president of data and analytics, ""The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets. The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss." His prognosis is not rosy, predicting that "most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."



Zillow's press release mentions, "For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively."

In other words, the investment with the best track record of creating wealth, and most home-owners' largest investment is now a massive liability with exit scenarios that force a loss. Most home-owners save up for a substantial period of time before purchasing a home, and it will take time after those losses are booked before those folks are back in an equally financially healthy position they were before the purchase. This will have material consequences for discretionary spending for the foreseeable future.

Growth in Expenditures Benefits Payment Processors

Amidst the consumer damage resulting from the bursting of the real estate balloon, billions have been written off the balance sheets of banks related to illiquid auction rate securities, foreclosures, losses on home sales and defaults on credit card balances, there is significant strength among the payment processors. The American consumer continues to spend.

The chart below displays the payment processors versus the pure play credit card issuers.



However, the pure play payment processors are exhibiting unbelievable growth. MasterCard has skyrocketed over the last year, and Visa has demonstrated incredible strength since its IPO earlier this year. Visa demonstrated 8% year over year volume growth in its credit card volumes in the US and 28.5% in the rest of the world. Visa also reported more significant strength of 13.6% in its debit card volumes in the United States.

Mpayy's secure online payment processing system is a debit instrument that allows shoppers to pay online with their checking accounts. Mpayy saves the retailer money, guarantees payments and eliminates fraud liability. Shoppers receive enhanced security and cash back guarantees on top of expanding their ability to send money to their friends and family for free anywhere in the US.

Much Ado About eCommerce

With brick & mortar retail sales demonstrating a paltry 0.1% growth in June, artificially supported by rising gas and food prices, there is a concerted move among big box retailers to enhance their online sales presence.



Comscore reported last week that ecommerce sales continue to refuse to succumb completely to the weakness of the American consumer. The rate of growth has fallen by 50% year over year, but ecommerce spending continues to demonstrate growth in the low double-digits. There is faint hope that the stimulus checks will continue to provide further boost to online retail spending.

Retailers are demonstrating that the lesson of this divergence between the growth prospects of online and offline sales is not being lost on them. Internet Retailer notes that, "At Sears Holdings Corp., same-store sales at Sears and Kmart retail chains declined 8.6% for the quarter that ended May 3, the company lost $56 million and shuttered 62 stores, yet the company increased investment in its online and multi-channel operations by $10 million."

Shop.org, the online arm of the National Retail Federation & the e-tailing group have each published white papers concerning the focus of those eCommerce investments in "The State of Retailing Online 2008" and "Investing in eCommerce, Despite the Times", respectively. Universally, there is a great deal of focus on improving on-site merchandising tools, including search, personalization, and integration of product presentation for the online and internet spaces. From the e-tailing group's document:



Opportunity for Mpayy

According to Shop.org, which conducted the research in conjunction with Forrester Research, more than 75% of retailers cite the Checkout Process as a tactic and investment priority. Of that group, 80% want to improve their shopping cart page; 79% want to improve their checkout process; and, 57% want to include "Third-party Email Payment" capabilities.

Mpayy is in finishing stages of launching its Lightbox Checkout Window that will streamline the checkout process for its online retail partners. (Check back for sneak peeks.) Mpayy's offer for online retailers enables them to reduce cart abandonment and growth their sales online.

Mpayy is a secure online & mobile payment processing system that processes payments from shoppers' checking accounts at a 50+% discount to credit cards. Mpayy provides 0% fraud liability for retailers, and guarantees payments. The application is developed by and housed at US Bank (NYSE:USB) in an environment that meets PCI DSS standards, and is compliant with USA Patriot Act, OFAC, Reg E and Reg Z.

CardLine/CardForum Article

Below is the article that was featured in CardLine/CardForum.

MPAYY SEEKS GROWTH AFTER SECURING ADDITIONAL FINANCING
Mpayy Inc., a Chicago-based alternative-payments company, says it will use
additional funding from U.S. Bancorp to grow its e-commerce, mobile commerce
and widget-based payment services. Minneapolis-based U.S. Bancorp also
provided Mpayy with funding last year. ³We want to tap into larger
retailers,² Conrad Sheehan, Mpayy founder and CEO, tells CardLine. ³They
have not been as aggressive in adopting alternative payments, and for a lot
of good reasons. Any retailer should be extremely comfortable with running
high volume through our platform.² Launched in the first quarter, Mpayy says
it provides consumers, small businesses, Internet retailers and charities
with a variety of payment options. Consumers may make person-to-person funds
transfers through Mpayy¹s online and mobile Web sites and by using a
social-networking widget found on Facebook and MySpace. Consumers can pay
for goods by linking a checking account to Mpayy. Small businesses and such
independent salespeople as taxi drivers and flea-market vendors can use
Mpayy¹s mobile-payment capability to turn their mobile phones into
point-of-sale terminals. ³It works on all phones, but it¹s particularly
tailored to the most-popular devices,² Sheehan says. New York-based charity
Alliance for Lupus Research uses Mpayy¹s widget on social-networking sites
to obtain donations. Sheehan claims Mpayy offers retailers a processing
platform that is ³50% to 60% less expensive than card-based processing.² The
company also is touting Mpayy¹s security. ³We exceed all PCI standards,²
Sheehan says. ³Retailers don¹t have to worry about storing any data because
that information is hosted on servers by U.S. Bank.²

American Banker's "Mobile Banker" Feature

Mpayy is excited about a feature we received in the American Banker today. It can be found here. Registration is required, but they have a two week free trial with no need to input a credit card.

Enjoy!


American Banker
Its Testing Done, Alt-Pay Start-Up Faces New Tests

American Banker | Thursday, July 10, 2008

By Steve Bills

Mpayy Inc., a new entrant in the alternative payments space with backing from U.S. Bancorp, is hoping that its combination of e-commerce, mobile technology, and automated clearing house services will help it stand out in an increasingly crowded market.

The Chicago company announced Wednesday that it had closed a funding round led by the Minneapolis banking company.

Conrad M. Sheehan, Mpayy's founder and chief executive, said U.S. Bancorp had also led an earlier funding round, last year, but he would not disclose the amount of funds raised.

Mr. Sheehan said his company has intentionally been keeping a low profile. "We're very focused on designing and building a great product without putting too much attention on us too early," he said in an interview Wednesday.

But after testing its Internet and mobile commerce technology since early this year, Mpayy is now ready to begin promoting it actively, Mr. Sheehan said.

A U.S. Bancorp spokesman said the company would not discuss Mpayy, though Mac McCullough, an executive vice president at U.S. Bank and a director on Mpayy's board, said in the processor's press release that the banking company is "very pleased to continue with our role in Mpayy and continue to view it as an attractively positioned player in alternative payments with a compelling and unique value proposition."

Mr. Sheehan said that in addition to its financial backing, U.S. Bancorp is hosting Mpayy's applications in its data centers.

Mpayy is positioning itself primarily as a lower-cost alternative to credit cards for online merchants, using the ACH system as a way to beat payment card interchange expenses, Mr. Sheehan said. "It's more of an e-check platform. There's also a stored-value piece" for the unbanked.

Initial customers include Lawbooksforless.com and the Alliance for Lupus Research, which Mr. Sheehan said is using an Mpayy application known as a "widget" to add a payment system to social networking sites.

Mpayy's mobile payment capability uses the same secure Web interface but with a streamlined design, he said. "It turns your cell phone into a mobile point of sale."

Commercial users — such as taxi drivers, flea market sellers, and multilevel marketers who sell using the home party method — could save half or more compared to bank cards, and Mpayy offers free person-to-person transfers.

Big banking companies have begun placing some bets on alternative payment technologies. Bank of America Corp. last week took an equity stake in mFoundry Inc., a developer of mobile banking and payments software. Citigroup Inc. is pursuing a variety of strategies, testing mobile-phone payments with technology from Obopay Inc. and forming a joint venture with the South Korean wireless carrier SK Telecom Co. Ltd. to develop mobile technology.

Bruce Cundiff, a research analyst at Javelin Strategy and Research, said Mpayy could break through by offering its service online, on mobile devices and through social networking widgets.

"I like the fact that they are going after multiple markets here. They're not putting all their eggs in one basket," Mr. Cundiff said.

But like other entrants in the alternative payments market, Mpayy faces what Mr. Cundiff called a "chicken and egg" predicament in trying to develop both a merchant base and a customer base, similar to the issue that eBay Inc.'s PayPal unit faced in e-commerce in the early part of this decade before beating out rivals.

"Mpayy's key differentiator is being able to integrate with U.S. Bank's robust merchant services business," he said. "I think that dovetails nicely with U.S. Bank's merchant strategy."

© 2008 American Banker and SourceMedia, Inc. All Rights Reserved.

Hard Data on Mobile Usage

Nielsen Mobile put out new data today based on a global survey of 1 million mobile subscribers' use of the web on their phones, and the numbers continue to point to a growth narrative that is one of the strongest in the American economy.

Monthly Usage & Upside

Nielsen's data demonstrates that 40 million Americans access the Internet via their cell phones as of May 2008, which is 15.6% of the mobile subscribers in the US. This data is very consistent with what the Pew Center found that we discussed here. However, even more exciting is the fact that fully 95 million Americans have access to the mobile web through their cell phone service provider either by directly paying for it, or bundled with their other services. That number is up 28% from Q1 2007, but still accounts for just 37% of the 254 million mobile phone subscribers in the US.

These numbers are very exciting for Mpayy demonstrating that the installed untapped base is already 55 million strong. Further, continued growth of the mobile web subscribers to even 50% will more than triple the number of users today. Mobile data packages account for $1.7 billion in annual sales, and the average subscriber is spending $11 on monthly data plans.

Specific Uses

Nielsen's data contradicts what we discuss yesterday, demonstrating that the iPhone is #2 in the device list with 4% penetration, still a ways behind the 10% occupied by the Motorola Razor.


As far as the specific browsing habits, Nielsen reveals that 40% of mobile Internet users find their favorite sites through search engines, and 22% type in the exact URL. Just 17% of users find their sites through carrier portals, a number that is likely to continue to decline as iPhone, SmartPhones and imitators continue penetration.

Further, 5 million users in the US are accessing mobile banking websites that mostly just allow them to view their account balances and make a few payments. This number shows massive potential for breakout for Mpayy's Personal accounts that allow electronic payments to friends and family as well as roving salespeople that use Mpayy's secure Mobile Merchant account. As you can see from the left, email, weather and sports continue to lead mobile web usage, but watch out for Mpayy!

SmartPhone & iPhone Penetration Continue

This blog has covered mobile web usage growth as reliable numbers come out. A couple of interesting data points have been released lately that point to a high probability for the continuation of this trend.

SmartPhone Numbers

Nielsen Mobile put out numbers on SmartPhone penetration last week. The numbers are consistent with the Pew Research numbers we discussed here. Fully 63.9% of SmartPhone users are below 45, with 35.9% below the age of 35.

Further, focusing on this market exposes companies to some of the highest paid Americans with 35.1% having incomes over $100,000, according to Nielsen's data. These users are spending over $200 for their device and over $100 on their monthly plans, and 52% of those users are paying for the plans themselves as opposed to their companies remitting these fees.

Many Apples a Day

The Apple 3G iPhone launches on Friday, and though it is still 4th in the SmartPhone race, this year promises to be a barnburner. Apple expects to sell 5.1 million iPhones in Q3 2008 and another 6.5 million iPhones in the 4th quarter, according to numbers quoted by Silicon Alley Insider. Some analysts are estimating that Apple will sell 45 million iPhones in 2009.

SmartPhones and the iPhone are driving the move of functionality from the internet to the mobile web. As more and more of these phones come online, more people will begin to use Mpayy for free person-to-person money transfers, and independent salespeople and small businesses can use these phones as mobile Points of Sale. Check out our mobile website with advanced account management features.

Mpayy Widget Update - MySpace Approval, Embeddable Video Donation Widgets, etc.

Payment Applications Live on MySpace

Mpayy's global headquarters are a flurry of activity preparing for a relaunch of the website next weekend that will demonstrate Mpayy's utility in specific instances, and be a far more engaging website.

In the meantime, Mpayy has been making more headway with its widget. Last week, I announced the launch of the Lupus widget on Facebook.

Since then, Mpayy's Mpayyment Widget, and the Secure Lupus Donation Widget have received approval on MySpace. Interestingly, we do not see quite as much uptake on MySpace as we do on Facebook, and suspect that MySpace may have fewer "joiners" than Facebook where users are accustomed to amassing groups and applications on their profiles. However, MySpace does seem to be a more commercial site than Facebook, and we do have some expectation that the Mpayyment widget will experience greater usage on MySpace where people already sell music from their profiles. We'll have to wait and see.

I will share that the process for getting approval on MySpace was far more arduous than for Facebook. Fox Interactive Media's regulations of applications on its platform are more restrictive, specifically when it comes to payment applications. The MySpace Developer Terms of Service note:

7.3 If your MySpace Application collects any payment or account information from Users you must comply with the then current rules and regulations of all payment networks you use and the Payment Card Industry Data Security Standards available at http://www.pcicomplianceguide.org/pci-basics.html. Such collection of payment or account information may not occur on a MySpace Profile or any page within the MySpace Website, but may occur on your MySpace Application Canvas Page if the Canvas Page is hosted outside of the MySpace Website (e.g., i-framed displaying information from a non-MySpace website).. In addition, you must clearly and conspicuously disclose that any such collection is directly by you, and not by MySpace or FIM.

We were very happy when we saw this, because it lends itself to the security infrastructure of Mpayy, although it did require some modifications to allow us to provide a logo that demonstrates that Mpayy is unaffiliated with MySpace and Fox Interactive Media, delaying our launch for a few weeks. However, given the universality of payment widgets, when we created it, we specifically decided to NOT ask for a password until the popup enables the user to see Mpayy's URL and Verisign logo, so they can validate they are not providing their credentials to a fake widget masquerading as Mpayy.


Video Donation Widgets - Political Donations, Charities

Mpayy is pitching a number of charities right now, and we created the widget below to demonstrate the capabilities. This widget allows charities to embed a video for users to see that may tug at the heartstrings and drive viewers to make a donation. Mpayy adds another $1 to the ALR for donations from new accounts through that widget. I anticipate we will move to a model similar to this when we get better video for the ALR.

However, as the election season heats up, and down-ticket campaigners try to capture some of the magic that the 'Barama' campaign has found, they should consider embedding inspiring candidate speeches in a widget like this to help drive donations. Almost all campaigns' online donations are credit card only, and check donations come through snail mail. Mpayy allows these parties to receive check donations online with 50+% savings vs. credit card, and to put this donation capability anywhere on the Internet. If you know anyone running, send them our way!