Braintree takes Venmo Touch international with AMEX > what it means for credit
With Simple and now AMEX on board as preferred marketing partners in the US and UK, expect Braintree to follow a similar playbook in future markets. There also could be some significant competition in these initial two markets from other payment card companies (Visa, Mastercard, Discover, etc.) seeking to get their cards installed into Venmo’s valuable default payment card real estate.
Spot on, multiple card selection on mobile within 1 click payments / facilitated payment (à la Uber) is not a UX problem to solve. It just won’t happen.
This is why it is so smart from Simple (disclosure, Anthemis is an investor) and AMEX to partner with Braintree to become the default card. But the implications are much more important. With a single default card, the position of credit card is put at risk. Credit Cards are tools made for a card selection environment, with people doing arbitrage while looking at their wallet between debit, credit, credit limits and points. This behaviour is not possible in a 1 click environment, even less in a seamless environment.
Additionally, studies show Gen Y is moving away from credit cards (I am definitely part of that population). According to a recent FICO study (http://www.learnvest.com/2013/06/gen-y-shuns-credit-cards/). “16% of people aged 18 to 29 had no credit cards in 2012, up from 9% in 2005. As a result of lower credit usage, Generation Y’s average outstanding credit card debt was $2,087 last year, down 32% from a $3,073 average for young people in 2007.” According to Frederic Huynh at FICO “it stands to reason that the Great Recession has influenced, to a certain degree, consumer credit behavior as well.”
There is also pressure to move some or all of payments off the card network to direct debit. A potential in Paypal’s acquisition of Braintree is for Paypal to export its arbitrage business model to Braintree. And Dwolla’s effort in building an alternate network is the ultimate push in the direction of direct debit.
This is a great opportunity for credit innovation. What we are seeing in B2B online lending with Kabbage, Paypal and Amazon will very soon spill over in the consumer world. B2B is the low hanging fruit as the market places (Ebay, Amazon), einvoicing networks (Tradeshift), online accounting tools (Xero) act as booth data providers to support credit risk scoring and aggregators to improve cost of origination. But Consumer Credit will be next and the mobile payment providers have an amazing opportunity to act as the future credit platforms. New Banks, such as Simple will also be the winners of this world. The card is only a tool for payment, credit is better managed within the budgeting, goal setting, savings experience of a smart bank.
Credit Card is an obfuscation, the credit and the payment mean are two disconnected products, the digital unbundling machine will soon make it a reality.
