Card Issuers Face Huge Revenue Challenge

"From a bank perspective, here is why we care about mobile payments: debit, prepaid and credit products are predominantly dependent on interchange revenues that could become less profitable, with a huge negative impact on earnings,” says Philip Philliou, partner at the firm of Philliou Selwanes.

In part because of new regulatory changes and pressures card issuers may find card economics getting worse. “It is inevitable that the revenue side of the business will change downward, so profitability will be affected massively,” he says.

How massive? He expects “more than half the profit for debit and credit businesses” will be affected. Right now, a card issuer can typically expect revenue of perhaps $85 and about $40 of expense, per customer, per month. But the industry expects the economics might fall to something like average revenue of $38 and $40 in expense, so the typical card issuer is “under water,” says Philliou.

Mobile Marketing and Technology

Will Isis Attempt to Replace, or Work With, Existing Payment Processors?

You could get a good debate, almost any day, over the potential impact new players in mobile payments might have. Isis, the joint venture between AT&T Verizon Wireless, T-Mobile USA, Barclays and Discover Networks might be seen as a case of a venture that aims to displace some of the current players.

Others argue that will be very difficult (it will) and that the more-logical route is some sort of grand partnership, that focuses less on shifting market share in the “payments” business and focuses more on creating new forms of value that have more to do with eliminating overhead, improving customer service and creating more convenient ways to advertise, deliver coupons and promotions, or create loyalty.

David Schropfer, a partner at the Luciano Group, says it is not clear what will happen. But there is some logic to the notion that the current “four-party system involving a merchant, a consumer, and the banks that the user and retailer use, was created long ago, and could be redesigned for an Internet-connected, mobile world, operating more efficiently at the same time it creates more value-added platforms.

Mobile Marketing and Technology

Apple Mobile Payments: What Should Banks Do?

Apple's rumored plans to get into mobile payments can be seen in several ways. If Apple decides to disrupt the "four-party" existing retail payments model, the company might be a threat. If it decides it wants to do something else, it could be a banking partner.

The natural instinct for some is to put Apple in the same camp that many have put PayPal Inc. and Wal-Mart Stores Inc., that of the enemy. But banks that look for ways to work with Apple might find themselves getting a new distribution channel.

"If we as a banking industry don't get our head around payments, we risk the chance of an Apple or Google or anybody else being a disrupter in the space and taking some of the volume, very similar to the way PayPal has become a disrupter in the industry," said Jeff Dennes, the director of online and mobile services at Huntington Bancshares Inc.

The big issue is how, and where, Apple decides to play within the ecosystem. Right now, the retail payments business is anchored around a four-party model that includes merchants, consumers, acquiring and the banks used by the consumers and retailers. Everything else basically revolves around those four key actors.

But Apple might try to invent something new, possibly linking existing customer accounts to iTunes, a setup similar to what eBay Inc.'s PayPal does. This could cause banks to lose some of the revenue they would normally gain through card transactions, as Apple would insert itself into the ecosystem.

Apple's iTunes Store, which could serve as the mobile wallet used to store payment information on a consumer's payment-enabled device, generated net sales of $1.16 billion in its 2011 fiscal first quarter ending Dec. 25, according to Apple.

In Apple Mobile Pay Plans, a Possible Opening for Banks - American Banker

Netflix on CLEAR 4G: Wireless Issues are Clear

When Netflix recently released data on Netflix high-definition video performance on a number of networks, it included Clearwire's 4G wireless network among all the other fixed networks. That a 4G wireless network would rank behind wired DSL, cable, and fiber optic networks in terms of experience, when the content being streamed is high-definition video, would not surprise anybody who follows such things.

Larry Dignan at ZDNet notes that "looking at the Netflix data you’d think Clearwire was a dog." He argues the opposite is true. Clearwire’s 4G service is fast enough for consumers to stream Netflix, and he sees that as a plus.

Still, the study, which might be criticized on some grounds, suggests the issues wireless service providers will have as video becomes a more-important application on all networks.

See http://www.techzone360.com/topics/techzone/articles/139170-ranking-isp-performance-no-simple-matter.htm, for example.

Netflix Streaming on CLEAR 4G

AT&T Earnings

LinkedIn Ad Revenues $18 Million a Quarter

LinkedIn has 90 million members. They are a little bit older, professional, and wealthy than average, which makes them an interesting demographic for at least some advertisers.

So far, LinkedIn has not been able to convert its audience into ad revenue at a high rate. In the three months ending September 30, 2010, LinkedIn generated just $18 million in advertising revenue.

Advertising might be the key, or most important, revenue source for some sites. But it is harder than you might think to create a big ad revenue stream even for popular social media sites.

LinkedIn Revenues Prove Social Media Advertising Is Still A Lousy Business

Verizon Buys Terremark to Support Cloud Services

Verizon’s $1.4 billion acquisition of cloud and hosting company Terremark has some analysts putting a bevy of Internet infrastructure companies on the “to be acquired list.

The bet seems to be that large incumbents like AT&T may have to go shopping to beef up their enterprise units.

In a research note, Oppenheimer analyst Tim Horan argued that "the transaction highlights the attractive fundamentals of the Internet infrastructure space driven by the ongoing migration to cloud computing."

"Other providers in this space that represent potential targets include Savvis, Rackspace, Cogent Communications Group, Level 3 and Limelight Networks. Potential suitors include the incumbents AT&T, Verizon, CenturyLink, Windstream and foreign carriers."

Verizon's Terremark purchase puts Rackspace, Savvis on shopping list