Day 2 Field Report from NACHA's Payments 2008
Glenbrook's Allen Weinberg and Jim Salters are attending this week's Payments 2008 conference in Las Vegas. Here's Allen's second report from today's sessions including his notes on the panel he chaired this afternoon titled “Payments aren’t about Payments Anymore”.
One of the things I love to do at conferences such as NACHA and ETA is to walk the exhibit hall floor and look for interesting companies and trends – specifically what products and services are a lot of exhibitors focusing on, especially compared to prior years. What really struck me this year was the plethora of companies offering remote deposit capture hardware (check readers) and services.
The hardware appears to be getting cheaper and cheaper, which is great to hear since the banks and vendors I spoke with all agree that the demand from SMBs (small/medium sized businesses) is exploding. I remember in the early days of Check21 thinking that it would take years for remote deposit capture to become popular with SMBs, but it is happening much faster than I thought. Also, I had concerns about SMBs willingness to pay for remote deposit capture.
Well, the check reading hardware is now being rented to SMBs for as little as $10 or $20 per month (compare that to credit card terminals being rented/leased to merchants at $30 to $40 per month), while the monthly services fees are as low as $10 per month plus per check charges. Even better, the service providers at NACHA were offering ASP solutions, making it much easier for banks and their customers to implement and maintain the applications. Net-net, no one likes to take time out of their day to go to prepare deposits, walk to the bank, and wait in the “express” business banking line. This service has no place to go but up in terms of demand and associated revenue opportunities.
Today, I moderated a panel discussion titled “Payments aren’t about Payments Anymore”. I was lucky enough to have representatives from Google Checkout, PayPal, Bill Me Later, and a new entrant, TrialPay participating (note: a Glenbrook White Paper on TrialPay can be downloaded from the Glenbrook website at www.glenbrook.com/reports-trialpay.html) .
The focus of the session was how the payment mechanism increased merchant revenues versus just lowering payment acceptance costs. Panelists cited much higher conversion rates compared to bank cards (e.g., consumers initiating a payment with PayPal, Google Checkout, or Bill Me Later via their email address and password, versus entering their MasterCard/Visa info – 16 digit account number, 4 digit expiration date, 3 digit CVC2/CVV2, billing address, shipping address, and perhaps even a Verified by Visa/MasterCard SecureCode password. And if the person’s wallet was in the car or upstairs when they’re going through the checkout process, email address and password will often prevent an abandoned shopping cart for the merchant.
Others cited extended geographic reach (PayPal has 149 million accountholders in dozens and dozens of countries, while Google Checkout expanding overseas as well). Other factors discussed leading to increased merchant sales/revenues included offering additional purchasing power (Bill Me Later and PayPal PayLater), security/not sharing personal information with merchants, and other factors. At the end of the day, the payment firms cited very impressive statistics on higher shopping cart conversion rates, higher tickets, etc.
There were also great questions from the bankers (and others) in the audience. One person wanted to know what percent of PayPal purchases were funded by bankcards vs. ACH and funds on deposit in a PayPal account (PayPal declined to release that figure). Another asked about Bill Me Later’s loss rates (answer – “in line with bank cards”). Another person (I think a Microsoft employee I recognized from way back) asked the panelists about CardSpace, which all dismissed as not being on their radar screens). Note that CardSpace was designed to offer consumers many of the convenience and security benefits offered by Google Checkout, PayPal, and Bill Me Later.
So I’m off to another session – please feel free to call or email me if you’d like some additional information on the panel discussion.
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