A snippet of recent news:
(May 5, 2006) Online search giant Yahoo! Inc. is developing what appears to be a person-to-person payment service and may be weeks away from introducing it, but details of the new service remain unclear. ... Industry speculation about a possible payments product at Yahoo! was fueled last month when the company was granted a patent on a P2P “money-exchange” system for which it had applied nearly six years earlier. Also, Yahoo! is not without experience in P2P payments, having operated a platform, called PayDirect, from July 2000 until it shuttered the service in November 2004.
So that brings Yahoo into line with Google and eBay/Paypal. We are now looking at a herding structure where all the big players copy each other. Back to the future again! All we need is for Microsoft to join the club.
The reason Microsoft has not done payments before is because when they mentioned their desires back in the mid 90s, the banks jumped liked they'd been slapped. Banks might not have known what the Internet was, but they knew what Microsoft was, back then, as they had those DOS and Windows3.1 machines scattered all through their offices. DigiCash, First Virtual, and a few dozen other names were no serious threat, but Microsoft? That was distribution. That was scary.
Off to Washington DC they trotted and fairly soon on, the message filtered back to Microsoft - that's not a good idea, pick on someone else's soft underbelly.
This time, the structure of the sector is fundamentally different. Then, it was hype and greed and ignorance. This time it's Paypal, user bases, spreadsheets, ROI. Google has been working on it for probably a year or more, using the Paypal model upgraded to remove the bugs, and Yahoo have also no doubt taken the same advantage.
Washington DC no longer has anything to say, in the banks' defence. Now, the banks are distracted with phishing and trojans and Walmart, and wearily eyeing the security offerings of smorgasbord companies like RSASecurity. They could be forgiven for wondering whether it was worth it.
Also, it's been a full decade of more progress on securitization, so the banks structure is no longer so rigid. On the surface, the banks might even look as though they are doing this themselves:
IDC and Financial Insights have announced results from a recent study concluding that financial institutions are increasingly looking to third parties to manage entire payment functions, rather than the process alone. IDC estimates that U.S. spending on payments BPO services reached $3.3 billion in 2005 and will grow at a five-year compound annual growth rate (CAGR) of 4.2% to reach $4 billion by 2010.Posted by iang at May 12, 2006 03:34 PM | TrackBack