ISSUE NO. 68– July 2019
Rough Start for Facebook's Libra
Facebook’s Libra has had a difficult start and has faced a cold reception from regulators, banks and payment processors. As predicted by CardLinx in its May 3 Elinx Flash, security and fraud have taken center stage among chief concerns about Facebook’s crypto-currency. Regulators also feel threatened by Facebook’s intention to assume a quasi-governmental role in issuing its own global currency that has a value tied to a basket of national currencies.
New market entrants in payments and fin-tech often underestimate the rigorous demands of security and collaboration required to deliver scale for their new products. Facebook has a spotty record when it comes to security and fraud. This past week it announced it had been fined a record $5 billion by the FTC for failing to safeguard consumer data.
Collaboration with regulated incumbents is also a key to success in payments. Not a single major bank or payment processor (other than PayPal) has agreed to participate in Facebook’s Libra.
This rough start is a cautionary tale for innovators in this space. Great security and a sophisticated partnership strategy with incumbents are critical ingredients for success in fin-tech.
Rakuten to Launch US Bank and Card Issuing Business
CardLinx member Rakuten announced today that it would launch a bank and card-issuing business in the USA. Rakuten is headquartered in Japan, where it is the number one e-commerce site and has rapidly become a top Japanese card issuer with its Rakuten Card payment card. In the USA, Rakuten owns the leading online-to-online affiliate network and has grown to become a leading online-to-offline affiliate network with RCLON (Rakuten Card-Linked Offer Network). In Europe, Rakuten has already been a card issuer for several years and also owns the popular social media and messaging app called Viber.
Rakuten’s announcement confirms the accelerating trend for e-commerce and technology companies to also become meaningful global players in credit cards, payments, and off-line commerce. Earlier this year, Apple announced it would launch its own companion credit card. Facebook also announced a new payment crypto-currency to accompany its popular Facebook and Instagram social media businesses.
The increasing importance of payments to e-commerce and technology businesses is clear. The need for payments and offers is driven by the intense competition to drive digital engagement for consumers.
Groupon and GasBuddy Team Up on Consumer Discounts
CardLinx member companies GasBuddy and Groupon announced a deal to enable GasBuddy customers to earn discounts on gas by shopping at Groupon merchants.
The new product developed through a collaboration between two CardLinx members signals the dynamic innovation that has been accelerating in the Card-Linked industry. Rather than simply providing cash back offers, the new product drives increased foot traffic for local retailers. However it also drives value for complimentary gas retailers who will benefit by becoming the first consumer choice for local gas. Industry participants should expect additional new products like this one to hit the market soon.