Friday, November 4, 2011

Overview of TimeWarner's Current Business(es)

Since everyone else is posting theirs....

Google Ponders Pay-TV Business

And so it begins...

The Wall Street Journal reported this morning that Google is looking to crash the cable TV party, which the Digital Media and Entertainment group predicted in our view of the 2016 landscape for the sector, that software companies such as Google would soon become a force in the home video market. While Google has launched (rather unsuccessfully) the Google TV platform, they lacked the deals with major distribution companies like Walt Disney (ABC), CBS, NBC Universal (owned by Comcast), Time Warner, and others, to really compete in the offering of traditional TV service to consumers. This move would certainly address those concerns. What's interesting in this story is that Google recently hired a former cable-TV executive (Jeremy Stern) in September to hold talks with media companies on possible distribution deals. By relying on an insider, Google is clearly serious about entering this business, even though they continue to downplay their efforts.

As reported in the article, it will be interesting to see how Google fits this move into its YouTube strategy of offering free, ad-supported online channels, which it is currently rolling out with deals with celebrities and production companies. Could YouTube be their platform for delivering traditional TV content?

I also think their choice of Kansas City as the test market for this service is very intriguing. This market is reportedly serviced by Time Warner Cable, Dish Network, and DirecTV. Comcast doesn't appear to have a foothold in this market, so Google looks to have chosen a region where the nation's leading cable provider cannot put up much of a fight.

Thursday, November 3, 2011

MasterCard in the payment processing industry


MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the Purchase, Harrison, New York.Its primary business is to process payments between the banks of merchants and the card issuing banks or credit unions of the purchasers who use the "MasterCard" brand debit and credit cards to make purchases.

In the year 2010, MasterCard reported revenues of about $5.5B , Net Income of $1.8B and Operating Margin of about 49.7%. MasterCard generates revenue by charging fees to their customers for providing transaction processing and other payment-related services and by assessing it's customers based primarily on the dollar volume of activity, or gross dollar volume (“GDV”).The reported GDV for the year 2010 was $2.7T. MasterCard had about 2.6 B cards in use in the year 2010.

Competitive Bench-marking
MasterCard primarily competes against AmericanExpress, Discover and Visa. MasterCard has market cap of about $45 B as compared to $58B for AmericanExpress , $12.95B for Discover and $62.82 B for Visa. MasterCard's quarterly revenue growth in the year 2010 was about 22% which was second only to Visa which had a quarterly growth of about 70%. MasterCard's operating margin is 51 % as compared to 57% for Discover and 59% for Visa.

Relationships and their Implications for MasterCard

The figure on the right displays MasterCard's Ecosystem.

This ecosystem comprises of Financial Institutions , Telecom Companies, eCommerce Platforms, Mobile Platforms, Merchants , Government Agencies and Transit Authorities.
If MasterCard wants to survive and grow it must forge alliances and relationships with key players in the ecosystem. As we will see in the next sections, some very interesting relationships have emerged in this ecosystem which are giving birth to innovative business models and services thus creating greater value for the customers.

MasterCard - Google : Google Wallet

Google Wallet is an app jointly developed by Google and MasterCard which lets users pay for goods by tapping their mobile phones against special wireless readers which are powered by MasterCard's contactless "PayPass" technology.The app works via "Near Field Communciation" technology. In the early trial stages some users wanted to know where they can use Google Wallet and MasterCard's PayPass locator helped figure out the locations by displaying PayPass locations on the google maps. The app’s official launch gives Google an edge over the crowd of companies angling for a share of the emerging mobile commerce/payments market.This technology gives Google a head start in the mobile commerce market and MasterCard drives more Gross Dollar Volume. Its a win win situation for both.

Standard Chartered, MasterCard and Airtel Join Hands in Africa

Airtel Kenya subscribers can now use their mobile phone devices to transact all forms of businesses from paying utility bills to boarding Trotros (commercial vehicles) in the country.
The latest mobile innovation - the result of a partnership between Airtel Africa, MasterCard International and Standard Chartered - will enable airtel money subscribers in Kenya to buy products online for the first time. PayOnline allows customers of airtel money to buy goods from a wide range of Master Card merchants online, without needing a debit or credit card. Using funds from their “mobile wallets,” they can request a single use card number. The number expires 24 hours if not used, protecting customers against online phishing, making this arguably the safest method to shop online. Currently exclusive to airtel money customers in Kenya, the virtual card is expected to launch in other African markets.

This partnership gives MasterCard an opportunity to grow into fast emerging mobile commerce space and a foothold in emerging markets. A successful implementation of this service would imply MasterCard can replicate this model across other emerging countries including BRIC in partnership with telecommunication operators and banks.

NJ Transit and Master Card join hands to drive a better commuter experience

MasterCard in conjunction with NJ Transit launched PayPass pilot program in June 2010 to test if people like using a single debit/credit card to move between NJ Transit, the PATH, and the MTA. This new program is contactless—commuters simply tap their MasterCard PayPass card at sensors in the transit systems, and get billed accordingly. Out of this relationship MasterCard gets a higher GDV and commuters gets a better commuting experience.

Network Map
Lets see what the map of all these relationships looks like.

It is important to look at this relationship map from the perspective of overall growth strategy for MasterCard. MasterCard wants to focus on three key areas for growth :
  1. Online or eCommerce
  2. Mobile Commerce
  3. Growth in emerging markets
Its relationships with Google and DataCash is formed with the objective to drive its online or eCommerce business. Its relations with Google in Google Wallet is formed with the objective of capturing the mobile commerce market, its relationships with Airtel Africa in kenya is formed with the objective of leveraging the growth and exploiting the full potential of emerging markets.

Financial Services: PayPal

PayPal is an American-based global e-commerce business allowing payments and money transfers to be made through the Internet. It operates in 190 markets, and it manages more than 232 million accounts, more than 100 million of them active. It was acquired by ebay in the year 2002.

The video below will take you through an introduction to PayPal, its current standing in the industry, its network diagram and also some latest news on the firm.

Let's look at the network diagram of PayPal. Below is an overview of the network diagram of PayPal.

As you can see, there are three kinds of firms that PayPal interacts with. The small triangle in red here is for the firms that paypal acquired. The blue square is for the Platinum partners of Paypal and the big green circle is for Gold Partner with Paypal. There is a fourth category of members, which is not shown in this diagram. Let's now have a look at a detailed network diagram.

So, in a sense, Paypal has a partner program wherein the three levels of Partners – Platinum, Gold, and Member, receive benefits such as Marketing support, Integration support, Merchant support and other type of support system from Paypal. There are around 23 platinum partners, 51 gold partners and 60 members. It is interesting to see that the network of companies for PayPal is mostly small software solution firms which use PayPal's existing capabilities, apply their services on top of it and deliver a complete solution to the end consumers. This is different from the networks I am seeing for other companies in my sector and it would interesting for me to see, as we progress in the project, the synergies that can be formed among all these companies.

Connections in the Digital Media and Entertainment Industry

The Media and Entertainment Industry is heavily involved in strategic partners and it is clear from the network diagram that even after paring down partners it is quite congested. There are many partnerships and rivalries throughout the industry, and the role of relationships is constantly changing as the utilization of content continues to shift.

By reviewing the connections between our key network partners, it is clear to see where strategic partnerships could play into strategy in the future. For example, both Netflix and Amazon count on many of the same content providers for their streaming services. If either company were to sign exclusive contracts with those content providers, it would detract from the streaming offerings of the other. Therefore, the evolution of partnerships is something important to keep an eye on in the future.

As we continue to examine the existing partnerships between companies and the potential for new partnerships, we expect to see many opportunities for raising the stakes in the value of content to be streamed online, as revenue continues to grow for digital entertainment and the streaming companies fight for viewers, holding content in its role as king.

Wednesday, November 2, 2011

Education Sector: Group and Individual Projects

This word cloud represents word use frequency among all the group-written text in our "Education Sector" Google Site. The larger the word, the more times that word appears in the written text. Rather than read through 20 pages of text, this image allows much faster interpretation of the trends and insights contained within the Site.

Click on the word cloud to travel to the IS714 "Education Sector" Google Site, containing both our group and individual project work.

Additional goals of the Google Site:

  • Share our project interactively with our professors and classmates: All pages are readable and may be commented on by visitors.
  • Allow our work to be revised easily over time: As we make new discoveries in different areas of the education sector, this site allows us to go back and build those discoveries across different boundaries of the project (via linking, etc).
  • Reflect the nature of our sector: online collaboration tools are a critical area of development for education, and we set out to experience this firsthand through the use of a Google Site.

This Google Site is also optimized for viewing on mobile devices.

American Express in Payment Processing Sector

American Express is a major player in the payment processing sector, but it is also a larger global financial services company providing a range of products and services that include Credit Card and Charge cards, Expense Management, Consumer and Business Travel services, merchant acquisition and processing, point-of-sale, servicing and settlement. Its customers include Consumers and Businesses of size small to large corporations. The network diagram below shows the map of company’s products, customers and the channels it uses to market its products and services to its customers.

American Express is unique among Credit Card networks. Major networks such as MasterCard and Visa do not directly issue cards to consumers. Distributor institutions such as Bank of America or Citibank issue Visa or Mastercard to their customers. American Express credit cards are also distributed through Banks, but unlike Visa or Mastercard, Amex is also a direct lender to cardholders. Thus, in addition to card processing fees from distributors, it also earns direct income from cardholders through interest charges, late fees and annual fees.

Because of its unique model, American Express is the largest credit card network by revenue, even though Visa dwarfs it transaction volume. Amex’s estimated 2011 revenue is $31.3B out of which $14B are from credit card products. 

The network diagram below shows Amex’s relationships in the market. The nodes in this diagram represent companies with Amex at the center and the connections represent the recent deals, partnerships and acquisitions that it has made. Analysis of each connection reveals Amex’s strategy to continue to be relevant in the fast-changing payment processing sector.

Through Amex’s network analysis and its comparison to the market network, we can identify Amex’s strategy for each layer in this sector. The sector stack diagram shows the nature of Amex’s presence in different layers of this sector.

A new layer of Payment Intermediaries are emerging in this sector. These intermediaries are essentially a platform which handle all types of payment transactions and create a new value proposition for not just the merchants but also consumers. Paypal is the major player in this layer. Amex launched its own payment processing platform, called Serve. 

Delivery Mechanism, or the choice of multiple payment modes in an existing layer but is being transformed because of digital and wireless technologies. Online payment option has existed since the time ecommerce began. However, credit card is still the most used payment option. In recent times though, Credit Card themselves are changing. All major players have launched credit cards with built-in wireless chip that enables a contactless payment at POS. American Express too has ExpressPay card that makes contactless payment possible.

Mobile technology is transforming this layer in a big way. 

There are mainly two ways companies are using mobile technology to enable payments. One way is that when a consumer purchases a product at a store, instead of providing their credit card, they can just give their phone number and the amount would be charged on their mobile bill. Amex has partnered with Payfone to enable this type of mobile payment. This mode is gaining traction is lot of emerging countries where mobile penetration is much more than the credit card penetration.
Another way of mobile payment is the Google Wallet way, where the smartphone itself acts as credit card. When a consumer purchases a product at a store, instead of providing their credit card, they can just wave their smartphone as if it were a card and the payment would be charged on their credit card account. Google, in partnership with Mastercard, Citibank and Sprint recently launched Google Wallet. Visa is working on a similar initiative but Amex does not yet have any partnership or alliance to enable mobile payment in this way. Instead Amex is focusing on making its Serve a unified platform for processing transactions and is relying on Payfone to handle the customer’s POS payment experience.

Services is the new layer that is being added in this sector. Virtual currency ( for ex, for in games purchases ), Local Deals ( like Groupon ) and automatic coupon redemption are the areas in which Amex is very active to create greater value proposition for its consumers. On the Business side, Amex acquired Accertify which provides fraud protection. Amex is also selling technology based information products and services to its business customers. With Amex’s presence or partnership in each layer, it is in advantageous position to provide BI and Analytics services.

As technology is transforming this sector, Amex is putting its energy in making Serve a unified payment processing platform. Consumers can create a Serve account and use any type of credit/debit card or their bank account to find their serve account. With the Serve account they can seamless make payment to anyone. For ex, they can make payment to their friend to share the dinner bill. Or they can use Serve account to make a mobile payment for an online or in-store purchase.

To summarize, layers in this sector are in transformation stage. American Express is working on a unified digital payment platform, but it does not have a digital wallet solution. Depending on which mobile payment approach becomes dominant, Amex may have to enter into new partnerships. The Serve platform is in nascent stage and most of the partnerships have only been announced. If it is able to execute on its Serve platform, Amex will remain a major and relevant player in this sector in 2015.

Tuesday, November 1, 2011

Payment Processing ( Financial Services ) Industry Analysis

The evolution of the payments has come a long way since the bartering days. Digital technologies have made a great impact in the payment processing industry and today companies in the industry are facing the challenge of innovating in order to keep up with the technological advances. The payment processing industry had typically involved four parties in its transaction. Card Networks who provided the services necessary for distributors which were mostly banks to issue debit and credit cards to their customer. In turn these customers used these cards in different merchants to acquire goods. Digital technologies have impacted the industry and now there are three other layers involved in the process. Payment intermediary companies like PayPal have had a great impact on mobile payments, the delivery mechanisms are now not only credit or debit cards but payments can be done through other methods like online or through mobile phones. Lastly the industry now provides a wide range of services from fraud prevention to analytics.

Several technological trends are affecting the industry and the different companies that belong in it are making important moves in order to keep up with them. On the online front we see that new forms of currency like virtual currency have gained great importance. New payment services like Fraud protection have become a major concern for financial institutions. Mobile payments appear to be the future of the industry based on the high adoption rate of smartphones. There are several ways that mobile payments can be implemented that go from near field communication to much newer concepts like “bump to bump” devices. All of these trends have resulted in partnerships and acquisitions between financial companies and technological companies. Companies in this industry want to make sure they maintain their position in the industry and are securing this by creating relationships that will enhance their capabilities. 

The following video shows a condensed history of payments, from the time of cavemen to today

You noticed in the above video that today's credit card and payment processing sector is very different than what it was 5 years back. However, to really understand the how this sector's landscape has changed, look at the network map of the major players in the sector.

It may be hard to look at this map but the clutter of outbound connections at major nodes tell the story that the sector is expanding through multiple acquisitions and partnerships. We truncated this map to focus on few select players in this network. The truncated map is below.

Analyzing the connections through this map, the following stack represents our view of the current state of the industry:

In the following presentation, we discuss different layers of this stack, aggregated from our insights from the network analysis of the sector.

Continuing our insights from the network connection, now we will take you through an in-depth discussion of the recent technological trends that are affecting the payment processing industry.

As we can see there are major trends affecting the payment processing industry and by the looks of it this is just the beginning. While many of these trends have been in the industry for a while they have yet to gain a more widespread availability due to the competing interests and fragmentation of the markets. It will be very interesting to see how the different players will begin to collaborate in order to be able to reach a critical mass and which players will end up dominating the industry. It may still be too early to predict anything but what remains true is that the future retail payment systems will likely include many new and emerging payment methods, giving consumers and business a wider range of options for making payments.