Facebook’s Libra cryptocurrency coalition starts to crumble

Internet financial services giant PayPal is the first member of the Libra coalition to jump ship and probably won’t be the last.

When Facebook announced its audacious cryptocurrency ambitions earlier this year it derived a lot of its legitimacy from persuading a bunch of major financial services providers to formally back the project. Within days, however, regulatory authorities around the world expressed major concerns about the project and indicated they were unlikely to let it go ahead. Stories later emerged of some of the partners getting nervous about the amount of regulatory heat the project was getting.

Now this first of them has formally bailed on the whole thing, with PayPal notifying US media that it has decided to forgo further participation in the Libra Association before muttering about focusing on the day job. It also slightly hedged its position by saying it still thinks Libra is a great idea and it still wants to be friends with Facebook.

If the Libra Association’s response is anything to go by, PayPal’s hopes that Facebook won’t take this personally seem forlorn. The statement it provided to media started by opining that it takes guts to be involved in such an ambitious project and concluded by indicating that it’s pleased to be rid of any wimpy companies that can’t handle a little bit of adversity as early as possible.

That’s a good dig, but Libra should be careful what it wishes for. The coalition is a very loose one, with the members only having gone so far as to back the idea in principle, without committing to anything more substantial, so it’s very easy to bail out at this stage. Having said that, what did the participants expect when they announced their intention to create a new global currency? Of course there was going to be resistance and PayPal looks, at the very least, naïve for losing its nerve so quickly.

Apple credit card is up-and-running

As promised by CEO Tim Cook during the last earnings call, the Apple Card is set to debut this month, with the team already taking applications from consumers.

To start with, randomly selected Apple customers who signed up months ago have gotten access, though the team is now building a list of iLifers who would like to receive the card upon full-launch. To start with, the credit card will only be available to US citizens, though we can’t imagine it will be too long before the ambitious Applers spread their wings internationally.

For Apple, this is another step towards decreasing reliance on the iPhone, a product which has dominated the profitability column for quite some time. In the years of gluttony, few would have complained about this reliance, but nowadays, with smartphone shipments slowing down globally, the desire for diversification has intensified.

Working alongside Goldman Sachs, Apple has said customers can register their interest in the card in less than a minute, which perhaps seems irresponsible considering the seriousness of applying for credit. This little dose of reality will create little concern for either partner, both of whom will be relying on consumer over-indulgence to fuel profits.

That said, there are some interesting gimmicks being included with the service.

When using the card, all purchases will appear in the customers app, as is norm for the industry, but graphics will offer greater insight into spending habits. As you can see below, the distribution of colour on the card image and the graphs below detail how you are spending your money. Pink is for entertainment, yellow for shopping and orange for food, it is an interesting way to display purchasing patterns.

Apple Card

Other features include cash back and lower interest rates, though it is missing some of the perks which are so heavily hyped with traditional credit card providers.

What will be interesting to see over the next couple of months is the receptiveness of customers to a smartphone manufacturer entering into the financial world. Apple has one of the most admired brands worldwide and a cult-like following of customers, but whether this translates into something as important as financial services remains to be seen.

Prepaid market is an operator blind spot – research

Some new research commissioned by mobile financial services company Juvo has concluded operators are wasting loads of cash through prepaid churn.

The research was conducted by Strategy Analytics, which is having a busy day. It took a look at eight prepaid-dominant markets: Argentina, Brazil, India, Malaysia, Mexico, the Philippines, South Africa and Thailand; and concluded that in these markets alone, operators wasted $670 million last year replacing lost prepaid subscribers.

Otherwise known as PAYG or contract-free, the prepaid market probably gets a bit overlooked in developed markets as there’s nothing operators like more than signing someone up to a nice, fat two year contract. But as well as being a big piece of the action in developed markets, it tends to dominate developing ones.

Now, on one level remarking that churn is an issue in a market with no contractual obligation involved seems like a bit of a redundant statement. Of course punters are going to shop around and exhibit minimal loyalty. But the apparent point of Juvo commissioning this study is to show there are still plenty of things that could be done to efficiently reduce this churn.

It should also be noted that Juvo, in common with all other companies, doesn’t tend to just commission surveys for a laugh. It contends that what it has to offer can help operators with this prepaid lack of stickiness and has consistently messaged on the matter of prepaid churn. But that said, the findings of this study still have independent merit.

Prepaid accounted for 71% (5.7 billion) of global mobile connections and 32% ($265 billion) in service revenues in 2018. In developing economies those numbers move strongly in the direction of prepaid, for example is accounts for 94% of connections and 80% of revenue in Africa. SA also says it’s more profitable than you might think, with EBITDA margins of 40-55% in developing markets (apart from India, where Jio has thrown a spanner in the works).

SA Juvo 1

This background is designed to set up the punchline which is, of course, churn. The second chart below shows monthly prepaid churn of 3.1-6.5% across the countries studied. This equates to 37-80% annually meaning that, on average, operators have to totally replace their prepaid subscriber base every couple of years.

SA Juvo 2

“Until now, the industry has been in the dark on the scale of the costs associated with prepaid mobile churn, and the portion of prepaid OPEX spent on reacquiring the same customers,” said Phil Kendall of SA, the author of the report. “What this research allows us to do is to confidently calculate the profit that can be unlocked when prepaid churn is reduced. Success in the highly volatile, promotion-fueled prepaid market will go to those operators who can improve customer loyalty, allowing them to make strategic choices between OPEX reduction, accelerated growth or investment in service differentiation.”

“The market opportunity here is 5.7 billion customers and over $265 billion in annual revenue,” said said Steve Polsky, CEO of Juvo. “However it is hampered by huge churn and missed opportunities. As an industry, we need to talk about prepaid, we need to change our approach and we need to put identity at its heart. Prepaid customers in emerging markets consistently churn because they are constantly told ‘no’. No you’re out of airtime. No you don’t have enough money. We have to start with ‘yes’.”

The report, called ‘Death by a thousand nos’, offers a deeper dive into the prepaid churn issue, as well as some top tips on what to do about it, and can be downloaded from the Juvo website. With a major driver of the postpaid demand – the smartphone market – in significant decline, it seems likely that prepaid will become a bigger deal for all operators. So it’s probably a good idea to start thinking about how to make the most of it.

Square stands up for small retailers in the mobile era

US mobile payment processing outfit Square reckons its new stand will empower small businesses in a way that traditional financial services have failed to do.

Square was launched to much fanfare, thanks to being founded by the bloke who also founded Twitter – Jack Dorsey, in the US in 2009. The first product was a little dongle that you plug into the headphone jack of your phone that allows you to take card payments on it by swiping the magnetic strip.

None of that made it over here for a while though, with Square making its first appearance in the UK via a contactless card reader last year. We met Jesse Dorogusker, Hardware Lead for Square, and he explained that’s because they didn’t support Chip and PIN until then, with the US still reliant on the magnetic strip or even (shudder) those anachronistic carbon paper counterfoil things.

Now Square is adding a stand to its UK offerings, which is designed to support a tablet and turn it into an instant point-of-sale terminal. Before Square Dorogusker spent years heading up the accessories division at Apple and that influence is clear in the design of the stand and the card reader, both of which go hard on the smooth white plastic theme.

The whole bright idea from day one was to utilise all the powerful technology that was being put in people’s hands thanks to Apple and Android, to help smaller businesses get access to the latest, mobile-powered, financial services.

Dorogusker SquareThe barriers to entry for SMEs to get into modern financial services are too high and I would say that’s on purpose,” Dorogusker (pictured) told Telecoms.com. “The mainstream industry sees too much risk in serving small business owners and as a result they’re very underserved, especially in technology transitions where the introduction of additional ways to pay like contactless.

“The smartphone industry has done an amazing job of making incredibly powerful devices widely available at shockingly low prices for how technologically packed they are. We’ve built complementary pieces of technology that connect to these amazing devices and give consumer-grade experiences to small businesses.”

It’s hard to argue with the premise. Imagine the amount of sales lost by, say, stallholders at a music festival because potential customers have run out of cash. The Stand product also comes with point-of-sale software to use on the tablet and even a swivel base so the retailer can present the sale to the customer for approval. As advertised it give small businesses the point-of-sale power of much larger setups and that seems pretty compelling.

Dorogusker also thinks this is something the telecoms industry needs to be aware of. People have challenges with connectivity and we’re now in a world that requires an online connection to make a payment, verify it and issue a digital receipt,” he said. “A lot of networks are focused on peak speeds and not as focused on coverage. 75% of Square’s customers in the UK are outside of London, maybe not near a bunch of cell towers, and they need coverage – not ten bars, one bar will do.

The Stand product launched in the UK today and is on a half price promotion for a month. We’re now off to the street market on Tottenham Court Road where you can buy a delicious Thai green curry and rice with just a tap of a phone. Now that’s progress.