Archive for February 2010
Moneygram settlement
MoneyGram settles suit for $80 mln over subprime
The regulators and the exec team fell down on the job in this one. Lesson for MTO organizations: don’t put your settlement funds into instruments you don’t understand.
Mobile Payment: “Picture This”
23 February 2010 (updated 4 March)
Related Posts
For those that read my blog… I’ve been rather tough on mobile payment start ups run by execs that have no payment background (ex Obopay). Rather then continue to put vendors through the ringer (a penchant from my Gartner days), thought I would talk about something positive. Although I do disagree with most of SquareUp’s approach, I do agree that there is a market need for cash replacement and ease of use in a “Craigslist purchase”. Banks and the cards networks are actively working to increase use of cards in this space, with the idea that everyone agrees with: enabling cell phones to be a cash register. Although banks and card networks love the idea of expanding card use, merchants have other options that are available today which present both substantially lower costs AND provide for improved fraud management.
USAA has such an application available today: Deposit@mobile and it is just fantastic.
In the background, USAA has integrated into the shared fraud database used by both Telechek and most of the banks (at the teller line). This provides the merchant with ability to see if check is valid, if drawn on a “good account” and assess fraud (among other things). This is what really impresses me… this is not JUST a slick application that was build by some non-bank. This application has solid risk management. My only recommendation for USAA is to change the restaurant use case to a yard sale or Craigslist purchase. Other potential uses:
- Any customer that receives any type of check in the mail… no more trips to the bank
- Landlords
- Small Merchants doing BIG sales (since it takes 90 seconds)
- Yard sales/Flee markets/Craigslist purchase
- People in remote locations (Farms, military bases, …)
Merchant benefits are substantial:
- No transaction costs (savings of 150-350bps)
- Simplified sign up
- Same day availability of funds
- Fits existing consumer behavior pattern (checks)
- Instant verification, risk and fraud management
- Leverages bank imaging systems and processes (regulatory and consumer receipt)
- Notification/receipt to consumers
Other Vendors such as EasCorp’s Depozip provide similar functionality. Would love to hear from readers… As a buyer, which would you rather do? Let someone swipe your card or give them a check?
As a seller? Take a card (knowing that you bear fraud risk for 60 days) and bear costs of 150-350bps? Or take a check with instant availability of funds and a much more limited risk (no reg Z)?
Western Union 4Q09 – Flat
23 Feb 2010
From DJ News wire
Fourth-quarter earnings fell 6.6% as the company was pessimistic about business this year. Western Union posted a profit of $223.7 million, or 32 cents a share, down from $239.6 million, or 34 cents, a year earlier. Revenue increased 1.7% to $1.31 billion though it fell about 1% on a constant-currency basis.
Analystsestimates were for earnings of 32 cents on revenue of $1.31 billion.
Operating margin fell to 24.2% from 25.9% because of acquisition costs, reductions in pricing and promotions.
Revenue in the dominant consumer-to-consumer segment rose 1.7% but fell about 2% in constant currencies. Transactions increased 5%, while global-payments revenue grew 4% because of the acquisition of Custom House, a business-to-business payments provider
I would place a solid sell here. WU’s management team may see much opportunity in growing the electronic channel (remitter) from current 2%, however e-channel revenue growth will put them squarely in competition with the banks that serve them (Citi GTS). This same competitive dynamic will hold for their new business payments group (currently 14% of rev), the core of which is the result of their recent Custom House acquisition.
As they morph their distribution strategy to e-channels and business why are they taking 30% of operating cash ($400MM) for stock repurchases? This does not speak well of internal investment opportunities and a company which is certain of growth.. It feels like the start of an end game. Additionally, WU’s current crown jewel (physical distribution) is being threatened in emerging markets by mobile operators leveraging their own agents for money transfer services. Perhaps this is why WU is looking “up market” into higher margin business payments.
This does not feel like a business plan for a “market outperform” stock to me. As an investor I would be looking for opportunities that leverage (and enhance their distribution), partnering with other networks (banks, governments and MNOs) will be a key opportunity. Let us see if they the current team can grab it.
