There is no such thing as a boring week in payments, of course. Every seven-day period is good for at least one unexpected twist. But this week wasn’t good for just one big twist – it was something of a parade of surprises with twists and turns, one after the other, from start to finish.
The headline maker of the week was, unsurprisingly, Amazon – though in a twist of how this usually goes, the eCommerce giant captured headlines for a space it was retreating from, rather than one is was expanding into. After heavy speculation that not all was proceeding smoothly in the deal to put one-half of Amazon’s second headquarters in Long Island City, New York, Amazon announced via a blog post that the deal is indeed off.
The Crystal City, Virginia HQ2 plans are still underway, as are plans for a new operations hub in Nashville.
And, far from a lock for the top spot, JPMorgan Chase announced its creation of the blockchain-based JPM Coin, the first major bank-created digital token for real-world use. The coin will not be for retail customers, and is currently being tested for internal use by institutional customers looking to move large sums of money.
On the one hand, a move on blockchain isn’t terribly surprising on its own, as JPMorgan has already done that with a variety of investments, including R3 and Quorum. And, to be fair, the JPM Coin bears some resemblance to the Utility Settlement Coin (USC), which banks like Barclays and Credit Suisse have been developing – and Ripple Labs claims it is working with the 200 banks and payment providers on its RippleNet network to use USC. And JPMC has long touted the merits as the blockchain as a technology type.
Still, there was something a little bit surprising in JPMC being the first big bank to make the first big move with crypto as blockchain processing rails, given the years’ worth of colorful remarks that CEO Jamie Dimon has offered on blockchain’s best-known use case: bitcoin. His commentary about bitcoin over the years has included the words “stupid” and “a fraud,” along with threats to fire any employee caught trading it. The most positive thing Dimon could ever bring himself to say about the cryptocurrency seemed to be that he doesn’t care enough about it to be the official spokesman against it.
Dimon’s version of that explanation had slightly more profanity intermixed.
And those were just the stories above the fold this week. There were plenty of other surprise twists and turns.
Kroger Brings Another “Pay” to the Party
After a period of relative quiet in the proliferation of mobile wallets on the digital market these days, a new “Pay” has popped up on the landscape, brought about by the largest U.S. grocery chain, Kroger.
Kroger Pay, as it is officially called, is a QR code-based mobile wallet that allows customers to save both their payments and loyalty program information so they can simultaneously pay for groceries and rack up rewards.
“Kroger Pay is one of the few mobile wallets that pairs loyalty and payment,” said Mary Ellen Adcock, the group VP of operations at Kroger. “The application of this exciting technology is another step in our front-end experience transformation.”
The launch of the new mobile wallet will be paired with a Kroger Rewards debit card due out this spring, which will reportedly offer double rewards for customers when used concurrently with Kroger’s new mobile wallet.
The program, which was introduced in Columbus, Ohio, will be piloted in 10 markets before a nationwide rollout later in the year.
“Our new Kroger Rewards debit card is a lower-cost payment option, enabling us to offer our customers additional savings when they are shopping in a store or online or fueling up,” said Gary Millerchip, CEO of Kroger Personal Finance and corporate strategy integration lead.
The surprising part of the announcement is perhaps the timing – two years ago, when everyone in retail and payments was pushing their own version of “Pay,” the news would have fit right in. But today, it is a bit surprising to see a Kroger Pay pop up, considering all the difficulty with ignition that the other Pays have all experienced. According to PYMNTS mobile adoption statistics, among all of the major mobile wallets we track – Apple Pay, Android Pay and Samsung Pay – not one has a regular use rate above 10 percent.
Walmart Pay, the mobile wallet that Kroger Pay most strongly resembles in terms of the use of the QR code and the connection to loyalty and rewards bonuses, is the most successful of the bunch, as nearly a quarter of its app users have at least tried it. But Walmart is bigger than Kroger and sells a much wider variety of goods, making it a wider single-store platform from which to push mobile payments.
Kroger has taken the additional step of adding a decoupled debit product to the mix – but as Karen Webster recently noted, the only thing harder than igniting a mobile wallet might be igniting a decoupled debit product. They’ve sprung up as a solution before – and by and large failed, because consumers never seem to get all that excited about them.
“Detailed financial models showed merchants the billions they would save using new schemes that sidestepped the card networks,” Webster wrote. “Yet all of them were devoid of the reality of how consumers want to pay merchants, and the underlying benefit of using payment cards. Many of those schemes have either fizzled and died, or are today found sputtering. The only real success story, the Target REDcard, has plateaued.”
Kroger might be the player that makes the marriage work between two products that consumers have historically shrugged off with a resounding “meh.” Given the recent and more distant history of both products, there is something a bit surprising about seeing a midwestern grocery conglomerate take on a task that seems to carry an astonishingly high difficulty rating.
But then again, Apple announced it is saving online journalism this week, so it’s not like Kroger assigned itself the hardest task on the to-do list.
Apple’s Bid to Save the News (Over the Protests of Many News Outlets)
Has Apple come to save online journalism – or to bury it? That seems to be the question of the week, with the Cupertino-based company’s announcement that it is planning a new service that has widely been called “the Netflix of news.” Some believe Apple’s idea will solve the monetization problem that has plagued online news outlets in the era of clickbait and social media-curated news content.
Others have accused Apple of making a land grab and attempting to gouge publishers for access to its platform. While Netflix is one descriptor, perhaps a better one might be the “Spotify of news,” as the service will essentially resemble Apple Music: Users pay one fee that includes access to a wide variety of publishers’ materials.
In theory, the concept has gotten support.
“It supports the notion that good journalism is worth paying for, and makes it easy for casual readers to do so without having to manage multiple subscriptions to different paywalled sites,” one Slate writer noted in her review. “At the same time, it bolsters paid subscriptions as a business model, which encourages publishers to prioritize quality over clicks.”
The devil is, as always, in the details – in this case, the details over profit sharing. Apple, according to reports, plans to keep about 50 percent of the revenue from the subscription service. That’s a very different deal than what Apple offers video distributors like HBO, which can keep as much as 85 percent of any revenue generated by a subscription sold through Apple’s App Store. Developers can keep as much as 70 percent to 85 percent of the revenue their apps generate via Apple.
Many news publishers don’t like it, though opposition is far from even. And there is near-universal agreement that Apple is taking too large of a cut. Perhaps unsurprisingly, The New York Times, The Washington Post and The Wall Street Journal have all been holdouts so far, and seem to be eschewing access to Apple’s news platform over that 50 percent. All three have built rather successful digital subscription businesses of their own, and as of yet don’t see the increased distribution benefits that would incline them to pay a high price for Apple News real estate.
But not every news site has quite the reach of the three best-known papers in the United States, and according to reports, a lot of publishers are going along with Apple because they control over half of the U.S. smartphone market and can be counted on to use that leverage to promote the new service. Netting potentially millions of new readers might be worth the cost of signing half of one’s gains away to Apple.
So can Apple save online journalism? It will depend on the brands they can sign, as consumers won’t pay $10 a month for a news subscription that only carries niche news sources any more than they would pay for Apple Music if it only featured indie artists and no major labels. The major labels of music got onboard with Spotify and Apple Music when they felt they no longer had a choice, and some “major labels” of daily U.S. journalism are, thus far, not feeling the same way.
It’s not impossible that Apple might be able to thread the platform needle and do it here.
It’s also possible that they are about to learn why so many other efforts at saving digital journalism have run squarely into a brick wall.
But even if they do, the market is full of many newly legal ways to kill the pain – on sale in places you probably would not expect.
CBD Comes to Neiman Marcus
When one hears of storied, high-end chains like Neiman Marcus or Barneys – or even solidly middle-market chains like DSW – their first thought probably isn’t “cannabis-adjacent cosmetics.”
But going forward … well, you might be surprised. As it turns out, there is a race in retail to catch a piece of the emerging CBD market.
“There is a demand for high-end CBD products,” Kim D’Angelo, a cosmetics buyer for Neiman Marcus, told CNN Business. “CBD products are the next big thing in beauty.”
Neiman’s isn’t alone – Barney’s and DSW have both started stocking CBD products in their beauty aisle. Barney’s also threw in some gold rolling papers to keep the mood festive.
CBD is the non-psychoactive cousin of THC, that intoxicating element in marijuana. Its legal status is a little sketchy. CBD, when extracted from hemp plants (which were made legal by last year’s Farm Bill) is legal – though it is not legal if it is extracted from marijuana plants. And even in places where it is legal, the better term might be “legal-ish,” because CBD’s legal status is murky and defined on a state-by-state basis. Retailers, it seems, are riding this wave of slight confusion – but very little repercussion – around selling CBD. The industry is expected to grow to $22 billion over the next three years, according to research firm Brightfield Group.
And, in some cases, retailers are in diving in while the legalities sort themselves out.
Neiman Marcus is selling a handful of CBD brands online and at beauty counters in five stores for around $30 to $50 a bottle. DSW has been running a small test in stores, and has now announced plans to expand CBD products to close to 100 stores.
Products include body lotions and washes, muscle balms and foot creams – the latter of which high heel-wearing fashionistas swear by.
Neither brand has disclosed specific sales figures, though DSW did note that during a 10-week test, they sold 74 percent of CBD products offered on its shelves, far above company projections.
Regulators have taken some recent interest in foods containing CBD, but so far cosmetics seem to be below their radar – though the FDA notes they are definitely keeping an eye on this.
“We’ll also continue to closely scrutinize products that could pose risks to consumers,” FDA Commissioner Scott Gottlieb said in December after the Farm Bill passed. “Where we believe consumers are being put at risk, the FDA will warn consumers and take enforcement actions.”
Until then, however, it seems somewhat cannabis-infused cosmetics will be appearing on more makeup shelves nationwide.
We look forward to reports about confused people attempting to smoke their anti-wrinkle serum.
But at least we won’t be surprised when we learn they bought it at Barney’s.
And while we’d like to say that after this week, probably nothing in payments or retail or commerce could come as much of a shock, we know we’d be lying.
Whatever happened this week, something next week is just waiting to top it.
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