Market watchers, tech enthusiasts and payments passionistas alike are scientifically incapable of being unaware of Square’s IPO last week. After what can only be described as a saga, the world watched avidly — and then spent the rest of the week picking apart Square’s debut and opening day rally and pontificating about what it will all mean for payments going forward.
And while Square offered the most dramatic set of tea leaves for the reading last week, theirs weren’t the only leaves worth reading. Last week also saw swipe fees stir up the latest round of litigation, Amazon up the holiday game for everyone and more signs that mobile is in the equivalent of payments purgatory.
Ready to be the most informed fortune teller today? Then it’s time to dive into the data.
When people nationwide are offering up their annual list of what they are thankful for in a few days, we imagine American Express CEO Ken Chenault is probably noting his extreme gratitude that 2015 is almost over.
It’s been a tough year.
And one that seems resolutely determined to keep getting tougher.
Last week saw San Francisco file a lawsuit against American Express on accusations that the payment network has leveraged anti-competitive practices against the city’s merchants that essentially forced them into inflated fees.
The suit was filed by City Attorney Dennis Herrera, who said for the filing in a released statement:
“The party is over for American Express, and the bill is coming due in California,” he wrote. “The federal court ruling earlier this year merely confirms what millions of retailers, economists and U.S. Justice Department officials have known for years: American Express has rigged the game. They shook down merchants, stifled competition and shifted costs for their extravagant member perks to even cash-paying consumers.”
Let’s just say that it’s pretty unusual for a CITY to sue a card network over interchange fees. But San Francisco is known for being trendy and ahead of the curve.
If successful in court, the city’s suit could cost American Express billions of dollars to pay back merchants. The case follows a February federal court decision that found American Express in violation of antitrust laws. That suit was filed by the U.S. Justice Department and 17 state attorneys general.
Herrera, in the formal complaint, noted merchants make up around $2.25 billion in swipe fees to Amex per year and that the card network’s 3 percent fee per card transaction is in excess of what Visa and MasterCard charge. The suit further notes that Amex bars its merchants from actively encouraging consumers to use alternate payment methods (discounting for example or surcharging). This is the issue that American Express ultimately lost on in federal court earlier this year.
“Barred from assessing surcharges or offering discounts — or even expressing a simple preference for cash or competing cards — sellers’ uniform pricing mandates effectively forced all consumers to subsidize the high fees and generous rewards American Express continues to lavish on its generally affluent cardholders,” the compliant alleges.
Under the state’s Unfair Competition Law, Herrera said each charge card transaction warrants a $2,500 penalty.
An Amex spokeswoman stated that the company does not believe the suit has merit, and noted that the network intends to fight the allegations.
The San Francisco case joins a similar case over swipe fees American Express is currently in settlement negotiations over in Brooklyn. A settlement has been reached in that case.
If merchants hated Amex that much, they could just stop accepting Amex. Consumers, especially the well-heeled ones who live in San Fran, likely have a wallet full of cards to choose from. Just saying.
The latest Accenture mobile payments study is in and it is more of the same old song. A majority of customers — 52 percent of the 4,000 or so surveyed in the U.S. and Canada — know mobile is out there as an option, but when it comes time to actually using it in physical stores instead of a card, most consumers seem to be saying “no thanks.”
Only 18 percent of respondents reported using mobile payments. Some people we know are having more people over for Thanksgiving dinner than are using mobile payments, according to this survey.
So why aren’t consumers using mobile?
Another familiar story. Because there’s no reason to. Or more appropriately, consumers aren’t being plied with enough goodies to tickle their fancy: 79 percent of smartphone users note that if incentives were in play, particularly loyalty-based pushes, they might be more likely to engage with a mobile payment method.
Accenture also notes that despite all reports to the contrary, cash is very much alive and well in the consumer economy, with 67 percent of consumers reporting using it at least once a week.
“Overcoming the habits and simplicity of reaching into a wallet and pulling out cash is very hard to beat, even with the most sophisticated devices,” the report concludes.
Notably, when questions are put to consumers in a future looking way, they at least anticipate a more mobile — and far less cash-inclusive — future.
“When we asked the consumers about what they expect to be using for payments and frequency in 2020, one of the notable points is, with cash, they actually expect to be using it quite a bit less,” the survey noted.
Digital payments are reportedly looking at a 50 to 80 percent increase.
Then again, we all know that what consumers say and what they do can be worlds apart.
Amazon has gotten very good at getting customers their online orders fast. But Amazon’s larger and more established brick-and-mortar competitors have formulated a fairly solid response in 2015 – buy online and pick up in store (aka BOLPUIS).
Arguing that consumers don’t have to wait a day or two (or face any last-minute anxiety) to get their packages to get the online ordering experience, the biggest brick-and-mortar players from Walmart to Bloomingdale’s are embracing a model that allows a consumer to order online and pick up their goods in-store within a few hours.
Which, while both convenient and fast, is not quite as convenient as having those same goods come to you within a few hours.
But Amazon, it seems, has its own game changer to throw into the mix: same-day shipping.
Currently, Amazon’s same-day delivery service, Prime Now, is operational in 24 metropolitan areas, giving Amazon access to 75 million consumers, according to Bloomberg.
“Prime Now is an absolute game changer for the holidays,” Josh Neblett, CEO of Etailz (an online retailer that sells on marketplaces like Amazon), told Bloomberg in an interview. “It opens the door to a whole new group of on-demand customers.”
Amazon that same day, combined with its emerging status at a starting point for shopping experiences will make it an even more dominant retail force. A joint study by PYMNTS and Amazon titled “Innovation and The Digital Shopper,” indicates that through 63 percent of shoppers start from Google when they are looking for information; 45 percent will start on Amazon when they are searching for a product.
“The places where people shop online has changed. Five years ago, when a retailer talked about an omnichannel leader, it meant store, online, mobile. Today, online itself is a plurality of channels that is very different. Five years ago you would have found that marketplaces wasn’t the first place people went to buy. You probably would have seen search and their favorite merchant on the very top of the list. What we’ve been seeing is both the coming of age of marketplaces of all sorts — both big and small — and also the early emergence of social media,” Patrick Gauthier, VP of Amazon Payments, said in an interview in August.
However, while consumers may find the same-day shipping option attractive, it is an expensive offering for Amazon. According to Guru Hariharan, the founder of Boomerang Commerce, Amazon ends up spending four times more on same-day deliveries than the costs of next-day deliveries. That means Amazon must make 3-4 deliveries an hour to make it cost effective.
But they might just get it, if it turns out the ideal customer experience is the maximally convenient, where anything can be obtained from anywhere – and received nearly instantly.
Even Santa needs a whole night to make that happen.
So what did we learn this week? It seems 2015 is not done having fun with American Express yet, consumers aren’t as of yet feeling the in-store mobile payments fun and Amazon is having a great time turning traditional retail upside down with same-day delivery, though it could be a very expensive form of fun.
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