The future is bright for PayPal and digital payments


In Spring 2014, PayPal was in talks to become part of the ApplePay lineup of preferred payment processors. But eBay CEO John Donahoe pushed a separate deal to have PayPal included on the Samsung Galaxy S5. Apple did not like this and effectively closed the door on PayPal‘s inclusion in the Apple Pay launch. But with the coming split from eBay, PayPal is poised to become one of the new leaders challenging the plastic card and magnetic stripe hegemony.

PayPal is a behemoth in its own right with 153 million accounts globally and 26% annual volume growth (compared to 9-12% for Visa & Amex). Over the past year, PayPal processed about $203 billion in payment volume with only $67 Billion coming from eBay. Paypal’s system is actually cheaper for merchants than ApplePay – since Paypal’s funding is attached to consumer bank accounts which incurs lower fees, as opposed to ApplePay’s credit card based system that has swipe and merchant account fees.

One of the first benefits for PayPal after splitting from eBay will be the ability to partner with disparate retailers beyond eBay. A major roadblock to PayPal’s growth has been the perception that its corporate parent was a rival to many other large online retailers. Now with that conflict out of the way, accepting payments for Amazon and Alibaba is possible – and that opens up huge growth opportunities.

Physical retail store transactions made via mobile devices are expected to hit $3.5 billion in the U.S. this year and balloon to $118 billion by 2018. Last year, Paypal acquired mobile payment startup Braintree, who currently serves as the processor for Uber and Airbnb. Braintree will continue to grow as the defacto engine for start-ups to process mobile payments in this burgeoning market.

Additionally, PayPal has a network of BLE Beacons in-store by way of their PayPal Beacon pilot program. The pilot hasn’t really taken off but that existing infrastructure can be built upon. PayPal can now focus on innovation like this since management won’t need to focus on supporting eBay’s core marketplace business anymore.

The brightening of PayPal’s future also bodes well for ApplePay and the payment ecosystem in general. Whether ApplePay adds PayPal to their offerings doesn’t really matter as long as there is another player out there popularizing the digital payment marketplace. And for the overall payment marketplace, it is better to have multiple major payment systems because competition is good. If ApplePay was the only game in town, then hackers would be singularly focused on cracking that system. But with an equally valuable target in PayPal, it can split and complicate hacker efforts.

While some would say it’s the convenience of a digital wallet that is going to motivate adoption, it really comes down to security. The Chip & PIN system was the plastic card half-step attempt to secure the handling of credit card transactions by retailers. But PayPal presents an option to pay that doesn’t leave your hand, cannot be skimmed (at least currently) and strengthens the entire payment system by offering an alternative. And that is a bright future for us all.

Responsive Cities: How can data improve the transit experience?


At Control Group, we think a lot about how people move through shared spaces, particularly transit spaces. Understanding customer behavior has implications around advertising, transaction, station design and wayfinding. When we build products and experiences for shared spaces, we consider how they can intuitively meet the needs of customers without any direct interaction on their part. This is what we call a “responsive environment”– one that anticipates needs.

Our “On The Go” digital communication kiosks, for instance, could display real-time arrival information more often on a platform where we detect many passengers waiting for trains; or provide nearby points of interest with real-time arrival information on platforms where we detect that most people are exiting the train and leaving the subway system completely.

Currently, the only way to understand passenger flow at a subway station is via turnstile data. It’s a dataset the MTA has released on its open data portal, and one that hasn’t gotten a lot of attention. This is likely because there are some limitations of the data– it’s only updated every four hours and is aggregated by turnstile bank (usually one bank per entrance). Furthermore, there is often no connection between bank and line/direction, often providing little additional information about passenger behavior.

But we can still explore the potential of turnstile data to inform our efforts. We selected the 86th Street (4/5/6) station that has one turnstile bank per platform with no connection between the two. Since there are “On The Go” kiosks on each of the uptown and downtown platforms, what could looking at turnstile data do for us? Looking at the raw entry/exit data for the uptown and downtown platform at 86th Street, we found that the downtown side has many more entries than exits; on the uptown side we found the reverse:

Broken down into 4 hour blocks over a day, the data looks like this:

Rush hours see more entries and exits consistent with the general pattern; but there is frequent activity at the station throughout the entire day. What does it mean? What insights can we gain from this?

The high number of entries on the downtown side suggests most customers enter the station to wait for a train. The fewer exits from the downtown side tell us that most people do not get off here from stations above 86th Street. On the uptown side, the high number of exits suggests most customers get off here; the low number of entries tells us few board a train at 86th Street to go north. This suggests that our “On The Go” units could show more arrival information on the downtown platform. On the uptown platform, we could show arrival information coupled with information about the area surrounding the station– including special offers or featured destinations.

In the future, technologies like Bluetooth LE and other sensors will provide more granular data in real-time, allowing signage to be more dynamic and customized to the particular place in a station where the sign is deployed. Until then, the turnstile data we have suggests that there are “micro climates” of customer behavior out there that we have yet to understand and will need to be explored if we’re to build a truly responsive city.

Special thanks to the MTA and Chris Wong and Mike Mommsen for their data and tools used in this analysis.

Control Group Adds David Koenig to Expand West Coast Operations


David KoenigWe are excited to announce the addition of David Koenig as Managing Director, Los Angeles. This expansion in leadership demonstrates our commitment to helping more private and civic organizations create transformative and profitable customer experiences that are enabled by the Internet’s expansion into the physical world.

David brings more than 20 years of executive leadership experience as an entrepreneur and corporate leader, specializing in launching and overseeing the operations, strategy, product and business development of successful creative technology companies. At Control Group, David will lead our west coast operations and business development efforts to support our continued growth and expansion.

David is an inspiring entrepreneur and business leader, both starting and managing businesses focused on creating innovative customer experiences. From artificial intelligence to gaming and proximity, his expertise is perfectly aligned with what we do and where we’re going.

Most recently, David was a Sr. Director of Business Development at Qualcomm where he played a key role in developing Gimbal, the groundbreaking contextual awareness technology that enables location-based experiences using beacons and geofences. Prior to Qualcomm, David was General Manager at DreamWorks Animation, CEO at StudioGPU, and CEO at XLT, Inc. David also co-founded Gigawatt Studios, a Hollywood-based independent game developer with sales in excess of $100 million. He also managed the development of artificial intelligence systems at Cognitive Systems Inc. earlier in his career.

Welcome David!

Thinking Beyond Beacons: Macy’s Shopkick Rollout



The Magic of Macy’s

Macy’s recently announced the largest deployment of beacon technology in retail, with more than 4,000 ShopKick devices planned for installation across all of its stores in the U.S.  While it is encouraging to see a retailer the size of Macy’s embracing proximity marketing, we think there is a lot more that Bluetooth can enable for brands.

Commercial platforms like ShopKick are limited in their ability to connect a customer experience to the brand. Instead, they generalize an experience across multiple brands by gamifying the in-store experience into a scavenger hunt for “kicks”– points that are awarded to users for performing various in-store tasks. In fact, many users have figured out how to exploit apps like ShopKick to get more points since the application will award “kicks” for scanning the barcode of certain products in-store (assuming that the user would have to walk through the store to find the item). Sites have popped up that let ShopKick users share barcodes so they can print them out, walk into a store, and then immediately scan the UPC codes without needing to find the product on the shelves. Yes, it gets customers in the store, but is it really optimizing dwell time and engagement?

Additionally, commercial apps that are separate from a brand’s app divorce the customer’s intent from a deeper interaction with a brand like Macy’s. Instead they replace potentially meaningful brand engagement  with another incentive around gathering points to cash in for other items. And those prizes include competitors to Macy’s, such as gift cards to Target, TJ Maxx, JC Penney, and other retailers. Conceivably I could walk around a Macy’s store gathering “kicks” and then trade those in for a gift card to a competitor without ever spending a dollar in Macy’s.

Furthermore, ShopKick diminishes a brand’s ability to tailor notifications, and risks flooding the shopper with a deluge of notifications with little thought given to targeting or contextualization. (How can they provide meaningful information if they don’t know your brand or your customers?) One of the biggest challenges with beacon deployments like this is user retention: consumers will opt-out if the notifications don’t provide value.

Our perspective is that technology should make sense and provide value for both the brand and the customer. Unfortunately, off the shelf deployments tend to fall short on delivering those experiences. Retailers should invest in technology that is cohesive with the brand and integrated with their loyalty programs. It should also enable more granular control over how, when, and why they engage their customers.

NYC BigApps Competition: Big Ups to Heat Seek


Heat SeekRecently, the folks at Heat Seek NYC presented their work at NY Tech Meetup, and the project– highly deserving of its many awards– is a great example of the future of tech and civic innovation in New York City.

Why? Because it works to improve city services in a tangible way, brings the Internet out of our “computer boxes”, and leverages the growing capabilities of small startups like Heat Seek to manufacture and build Internet-connected objects. And soon, New York City will become even more friendly to such projects.

Heat Seek focuses on an issue that is deeply in need of a data-driven approach: tenant heat complaints. Looking at the data, this is a common dispute in our city. While Heat Seek won’t completely eliminate these disputes, it can blanket an entire building with temperature sensors, making more honest building-wide measures possible. In fact, the system has value to all three stakeholders: tenants get data-driven, pre-filled city forms for heat complaints; landlords can optimize energy usage with visibility into where to insulate (a task for which grant programs also exist) and happy tenants; Heat Seek sells hardware.

Secondly, the project is more than a “USB dongle” one attaches to a computer. It’s an object that residents both young and old can see, understand and deploy. With it’s “hub and node” networking model, the nodes can be given out to less tech-savvy residents and require zero setup or configuration– just batteries. The hub (which has a more complex set-up) can be owned by a landlord or a nerdy neighbor.

As an entry for the NYC BigApps competition, the project stands out further given it engages the local manufacturing scene, one of the City’s stated economic development targets. Companies like Heat Seek, Tomorrow Lab and others like them working on “Internet of Things” devices, coupled with NYC-based online manufacturing platforms like Machine Made, can produce products at scale and distribute them to their eager customers. Might New York become the place to launch that new Internet-connected product?

Looking to the future, the City’s recent Payphone of The Future initiative– which will deliver public Wi-Fi access to every borough of New York City– might create a world where these devices can be shipped to connect to free City Wi-Fi by default, creating a zero-configuration, take-it-out-of-the-box-and-it-works experience for many of its customers in New York City.

Heat Seek is a clever answer to a thorny problem. Having created a device that sits at the confluence of a currently expensive, labor intensive process (311 apartment heat inspections), changing consumer technology and manufacturing trends, and engaging under a strategy that delivers real value to both landlords and tenants (skirting the conflict that usually relates those two), I think Heat Seek might become a new model for digital civic startups and citizen engagement.

This post was written in collaboration with Victoria Dower (who was super impressed by Heat Seek’s NYTM demo). 

What does Apple Pay mean for retailers?


Apple PayYesterday Apple announced a contactless payment technology in the iPhone 6 and iPhone 6 Plus called Apple Pay, which will allow consumers to buy products in-store with just a tap of their iPhone. Apple Pay leverages a combination of iPhone hardware including NFC technology, Touch ID, and Secure Element — a dedicated chip that stores encrypted payment information — to process payments and ensure the security and privacy of personal data. In fact, both Apple and the retailer won’t know what shoppers are buying because a one-time payment number and a dynamic security code will be used to complete the transaction.

This comes at a time when Chip-and-PIN systems are becoming standard security. The Chip-and-PIN system experienced a fragmented roll-out and low user adoption in the U.S. due to high hardware costs and slow credit/debit card transition to chips, but it has been widely adopted in Europe over the years. But now both strips and PINs are showing their insecure vulnerabilities. Recently, a video went viral that shows how easy it is to steal a PIN with cheap and easily accessible infrared cameras (that attach to iPhones no less!). 

In typical Apple fashion, Apple Pay puts consumer needs first, so anonymity of purchase data was touted as a major feature. With Apple’s understanding of refined user-interaction, the secure finger scan and NFC swipe is positively frictionless compared to typing in a PIN number, which is the security mechanism used by Google Wallet and other digital wallet platforms. And now with Apple leading the market into NFC acceptance, NFC reader penetration at point-of-sale should be much higher. It may also accelerate the killing off of retailer-specific apps by moving the “Uber model” of payment from a specific app into the Apple ecosystem. All of this may be the perfect salve for jittery consumers who are frightened after the Target and Home Depot data breaches.

But is also means that retailers will lose a tremendous amount of value and customer insight found in credit card purchase data. While the loss of transaction data may seem like a huge hit to retailers and their omni-channel efforts, Apple Pay does present some great opportunities for them:

  • Allows retailers to offload security concerns to the consumer (rather than holding a treasure trove of credit card numbers and names).
  • Provides opportunities for MUCH more flexible mobile POS options and pop-up shops.
  • The “no card present” fees that Apple negotiated are way lower than standard retailers were able to get from financial institutions. This really moves the needle for retailers by reducing a major hard cost.
  • Provides motivation for the rest of the digital wallet marketplace to follow Apple’s lead. This should eventually lead to greater and faster consumer adoption.
  • Retailers can still use a combination of loyalty programs and proximity sensors to respond to their customers.