ISSUE NO. 64 – MARCH 2019
Facebook’s Instagram Goes Amazon
Instagram, Facebook’s photo sharing platform, is enabling consumers to tap and buy products right from the app. Checkout, the new shopping feature, circumvents traditional merchants and allows manufacturers of popular brands to sell direct through the Instagram feed without the user even having to leave the Instagram. Consumers enter their payment card details and billing address on their first purchase and the details are saved for the next transaction.
Checkout creates a new revenue stream for Instagram’s parent company Facebook, as Checkout includes a selling fee for the brands that use it. Instagram will not change the price of the items for consumers. Only organic posts from the partner merchants will feature Checkout buttons, and ads aren’t eligible. Instagram is betting that streamlining the purchasing process will also result in higher purchases of Instagram ads and encourage brands to advertise more on Instagram
Facebook’s move is both defense and offense at the same time. Amazon has been pressuring both Facebook and Google as major new advertising platform. Until this product, Facebook had no way to fight back because it did not sell goods directly like Amazon. Now it does – and Checkout enables brands to sell directly to consumers for a fee. While Amazon has cornered online utility shopping, Instagram is aiming to be the go-to app for discovery shopping. Brands are the principal source of advertising revenue on Google, Amazon and Facebook.
Apple Announces Integrated Credit Card
Apple unveiled its much-anticipated credit card that fully integrates with Apple Pay. The Apple Card offers cash back on purchases, 1% with the physical card—made from titanium with no visible numbers—and 2% with the mobile app. Apple has partnered with a CardLinx member, MasterCard, as the payments network and Goldman Sachs as the bank issuer.
Apple Card innovates with the immediate gratification of Daily Cash funding, as opposed to an end-of-month deduction on the cardholder’s monthly balance. The Wall Street Journal recently cited that 92% of card purchases in the U.S. are made with cards that have cash back or card-linked offers, and Apple adds to the list of prominent tech companies that leverage consumer credit to drive digital engagement, including Uber, Rakuten, and Yelp. We’re looking forward to see how Apple rolls out new features such as digital coupons and merchant-specific offers.
WorldPay Inks Deal to Enable Amazon Pay
Worldpay one of the top 10 payment acquirers and processors in the US announced a deal to enable Amazon Pay as payment option alongside MasterCard, Discover, Visa and other popular payment methods. Amazon Pay is today primarily used on Amazon and not commonly used outside of that eco-system.
Earlier this week WorldPay agreed to be acquired by CardLinx member company FIS. WordPay’s deal is significant because it signals Amazons intention to be accepted at both online and instore merchants outside of the Amazon eco-system. Amazon is believed to control about 50% of online spending in the US. This deal with Worldpay could extend AmazonPay’s reach into the 90% of in-store spending where it is not currently a significant player. The move by Amazon is occurring at the same time as instore merchants including Walmart and Target are positioning themselves to compete more with Amazon in its traditional area of strength, online e-commerce.
FIS to Acquire WorldPay
FIS, also known Fidelity National Information Services, has entered into an agreement to acquire e-commerce payments processor WorldPay. WorldPay is one of the top 10 US payments processor and itself was a result of the merger of Vantiv and Worldpay. This acquisition will propel FIS, a CardLinx member, into the top echelon of payments players globally. Consolidation in the fintech ndustry has been intensifying. In January, Fiserv entered into an agreement to acquire payment processor First Data for $22 billion.
The FIS/Worldpay deal is worth $43 billion and the combined company will keep FIS’s name and headquarters in Jacksonville, Florida. FIS CEO Gary Norcross will remain chairman and chief executive, and FIS will hold seven of 12 board seats.
FIS’s acquisition of WorldPay illustrates that the drive for scale is an important component for innovation and growth in the fintech industry. Just as retailers are seeking strategies to capture both online and in-store sales, payments companies are also looking to expand their products and influence to both in-store transactions and e-commerce payments. The newly combined FIS will be a formidable competitor in the payments industry. The deal continues the rapid pace of consolidation within the fintech space with the leading companies bulking up to achieve scale in products, data and services to both merchants and banks. We expect this consolidation to accelerate in other segments of fintech also.
Mastercard to Acquire Transfast
Mastercard is expanding its range of worldwide payment options with an agreement to acquire Transfast, a global cross-border account-to-account money transfer network. Transfast brings enhanced compliance capabilities and more robust foreign exchange tools. Mastercard is focused on all methods of payment transactions whether it is B2B, P2P or other flows. The combination of Transfast and Mastercard will create solutions for businesses that experience higher costs, compliance requirements, and limited predictability for cross-border payments. Mastercard seeks to support financial institutions, digital platforms and other partners as they provide people and businesses the ability to send and receive money how and when they want to virtually any end point across more than 100 markets.
Mastercard’s agreement with Transfast comes after they allowed their offer for Earthport to lapse. Earthport is another company focused on cross-border payments that provided a global payment network. Mastercard’s focus on cross-border transactions is in-line with increasing travel especially among millennials in every country. Additionally, P2P payments is an expanding area of growth with Venmo, Zelle, PayPal, Square Cash and more recently Apple Pay Cash, all vying for a piece of the P2P payments market.
Amazon to Open New Grocery Chain
According to the Wall Street Journal, Amazon is planning to start a brand new grocery store chain that would be a better vehicle for its ambition to transform retail shopping. Amazon plans to open the first store in Los Angeles and has signed two additional leases although Amazon may not go ahead with these new stores. Amazon has tried other in-store strategies including buying a grocery chain with their Whole Foods acquisition, creating cashier-less AmazonGo stores and opening bookstores. The strategy for these new (yet-to-be-named) Amazon grocery stores would allow Amazon to expand their digital marketing, increase availability of lower cost in-store products and focus on customer pick-up and delivery.
Amazon has not transformed the experience of grocery shopping overnight, even with their Whole Foods acquisition and AmazonGo stores. Sales at Amazon’s physical stores, including Whole Foods, Amazon Go and their bookstores, declined 3% in the fourth quarter from a year earlier.
Amazon follows a familiar tack in its approach to the grocery industry: introduce lots of of products then seeing what will stick. Just as Amazon is releasing a slew of Alexa-enabled small electronics from microwaves to wall clocks, with the notion that even if only some of these ideas catch on with consumers, it will set them up to be the leading home computing operating system. Amazon is playing the long game in the grocery industry and is adding weapons to its arsenal. Stock prices of its grocery competitors tumbled after the WSJ article was published. But this also indicates that disrupting traditional industries like grocery or payments is not as easy as it seems, even for a company with vast resources.
Augeo has partnered with ME to WE, a social enterprise that creates socially conscious products and experiences to help support the WE charity. Essentially, as a result of this new partnership, millions of employees who use the Augeo loyalty platform will be able to convert points or other forms of loyalty currency into life-changing impacts in developing communities in Africa, South America and Asia. Current programs provide access to clean water, education, health, food security, and more.