Virtual currencies and social network payments

If you are a bit confused about the ramifications of mobile payments, so is just about everybody else. The common sense notion is that "mobile payments" is principally about using a mobile phone, in some way, to buy things, in scenarios where cash, a credit card, a debit card or perhaps a check typically is used instead.

At least part of what some of us might say is growing confusion about mobile payments is that "payments" are part of the "buying," "shopping" or "commerce" activity, and there now are growing ways to embed "promotion," "coupons," "offers," "daily deals" and "loyalty" into a shopping experience. You hear the term "mobile wallet," for example, which is how some of these related processes might be integrated and handled in the future.

To complicate matters further, shopping for "virtual goods," or "content" goods, as well as real world goods, are seen as essential parts of the mobile payments business. In other words, you might use your mobile to checkout from a retail location, buy a song or video, as well as purchase virtual goods for use in a game that is played on a mobile.

Then consider a growing interest in the ability not only to buy virtual goods with real money, but then to export virtual money to other applications or retailers, in some cases as another version of virtual currency, but possibly even as "money" in the classic sense.

You can go into a Wal-Mart right now and pay cash (or check) for a Facebook payment card, to be used in virtual gaming with such companies as Zynga. That doesn't seem to trouble regulators. But many believe there are advantages to allowing points, credits or tokens to be accumulated and then redeemed back into some form of actual real world currency. And that means there now are banking and other regulations that come into play.

Virtual currencies and social network payments

In-App Purchases of $20 or More Account for 51% of Revenues

According to Flurry just 0.5 percent to six percent of mobile game app players spend money in free games. Spending on virtual currency

Just one percent of people who play Zynga's games are thought to account for between 25 percent and 50 percent of the company's revenues.

Now data published by mobile analytics company Flurry indicates that "whales" (big spenders)  are also a key source of income for freemium games on iOS and Android. The company analysed in-app purchases by 3.5 million mobile gamers, and found that the average transaction value was $14.

About 71 percent of all transactions are for amounts under $10, Some 16 percent of transactions are for $10 to $20 and 13 percent of sales are for amounts greater than $20.

In-app purchases for less than $10 account for 31 percent of the revenues. In-app purchases between $10 and $20 account for 16 percent of transactions and 18 percent of revenues.

In-app purchases of more than $20 account for a mere 13 percent of transactions, but 51 percent of revenues. In fact, five percent of all in-app purchases were for more than $50.

What is Money?

What is money, or currency? According to Bitcoin, money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. In Bitcoin's case, "money" is a peer-to-peer exchange of value using a "Bitcoin," with no use of any central banking institution. http://bitcoin.org/

When the virtual currency bitcoin was released, in January 2009, it appeared to be an interesting way for people to trade among themselves in a secure, low-cost, and private fashion. Cryptocurrency

The Bitcoin network, designed by an unknown programmer with the handle "Satoshi ­Nakamoto," used a decentralized peer-to-peer system to verify transactions, which meant that people could exchange goods and services electronically, and anonymously, without having to rely on third parties like banks.

Its medium of exchange, the Bitcoin, was an invented currency that people could earn—or, in Bitcoin's jargon, "mine"—by lending their computers' resources to service the needs of the Bitcoin network. Once in existence, bitcoins could also be bought and sold for dollars or other currencies on online exchanges.

For small person to person transactions, there typically are no fees, thought complicated transactions might require some amount. Transaction_fees. But there is a problem. There are not many things a user actually can buy with a Bitcoin, transaction volume seems to be dropping, providing little incentive for real-world or digital goods merchants to accept them for payment. One take on Bitcoin

People have come to see it primarily as a way to make money. In other words, instead of being used as a currency, bitcoins are today mostly seen as (and traded as) an investment.

So just now the bitcoin boom of the past year looks not so much like the birth of a new currency as like a classic bubble. And this has created a real paradox for Bitcoin enthusiasts. The best thing for Bitcoins would be for people to stop thinking of them as an investment and start thinking of them as a currency. That probably requires the Bitcoin investing bubble to burst.

One of the reasons people seem to be hoarding Bitcoins is that there is a firm limit of 21 million Bitcoins in total, and the number of coins cannot be increased. That means Bitcoin value can fluctuate based on market demand, but cannot be bebased by "printing more Bitcoins." Controlled Supply

Bitcoin might wind up being an interesting experiment. Other similar systems might emerge. It appears almost certain that regulatory opposition from national governments will be an issue if any of the systems start to get serious traction. There are legitimate concerns about money laundering, criminal activity and tax evasion, for example.

So it is not likely "virtual currency" in the sense of a medium of exchange that supplements or competes with other existing currencies, is going to escape scrutiny by regulatory and governmental agencies. But it is interesting.

Right now, there is more interest in "captive" forms of value in the form of points, tokens or other "virtual" stores of value used within closed communities, and often for use within games such as Farmville. But as those activities grow, there is bound to be growing interest in virtual currencies that actually can be exchanged for "real world" currencies.