February 27, 2013
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PayPal co-founder Max Levchin says he has recently launched his new payments firm to better compete in the rapidly growing
field of mobile payments. The new company will be called Affirm.
Levchin told us that Affirm will use customers' Facebook accounts to authenticate their identity, allowing them to buy items
on sites with just two clicks.
"Affirm brings two-click checkout to any mobile retail experience and frees up abandoned shopping carts," the company website
The new payments company gets away with using such basic information and security by paying goods for the shopper and then
giving them 30 days to fully enter their details at the firm's website to pay them back.
It will make its money back by charging sellers "a small fee". eCommerce retailers are likely to want to sign up with Affirm
to stop mobile shoppers giving up on purchases when the required information entry is too complex or takes too long for smaller
phones or when they're not in a position to whip out their credit cards.
Levchin's startup firm is by no means the first to try to simplify shopping on the go by getting people to buy now and pay
later. In the U.K., PayForIt allows merchants to sign up with a processing party which collects money from wireless network
operators who then go on to grab the cash from their customers, with both the processor and operator taking a commission.
And Swedish company Klarna also offers a similar service to Affirm in a number of European countries, with options to pay
for each item after receiving them or pay monthly for all goods and then spread payments out. The company says it processed
about € 1.8 billion in transactions last year alone.
Although there are plenty of established competitors in the rapidly growing payment segment, Levchin clearly thinks that
a "low-digit millions" funded startup still has a chance in today's economy.
“I just think there is so much more to do. Technology has come a long way since PayPal," added Levchin. “Payments online are
still too difficult. We started the revolution with PayPal and democratized payments for small businesses, but we stopped
short of changing the system. The world is now awash in data and we can see consumers in a lot clearer ways," he said.
But that data is both a blessing and a curse for online and mobile payment companies all over the internet. Levchin is
hoping to authenticate users with Facebook, zip codes and mobile device IDs, and will also be using that information to assess
whether someone is likely to pay up when the time comes.
However, the newly proposed system is going to need pretty sophisticated fraud-detection software to stop any coordinated
efforts at online crime and will become unpopular pretty quickly if it's essentially rejecting people for credit.
There will also be the inevitable cries over privacy violation, whether warranted or not. We will keep you posted on this
and other developments.
In other e-commerce news
Ahead of its February 19 fiscal second quarter earnings call, Barnes & Noble is already reporting a very disappointing
nine-week Holiday period, and the news aren't good.
B&N said today that its retail segment, which consists of the Barnes & Noble bookstores and BN.com internet businesses, had
revenues of just $1.2 billion, decreasing 10.9 percent over the 2011 comparable sales period.
Barnes & Noble attributed the drop to an 8.2 percent decline in comparable same store sales, a few store closures and lower overall
Core comparable store sales, which exclude sales of Nook products, also decreased 3.1 percent as compared to the prior
year due to lower bookstore traffic.
Unlike rival Amazon, which saw record sales of its Kindle eReaders and tablets, B&N said sales of its Nook products in the
retail segment declined during the holiday period due to lower unit volume and decreased average selling prices.
The Nook segment, which consists of the company’s digital business (including eReaders, digital content and accessories),
had revenues of $311 million for the nine-week holiday period, decreasing 12.6 percent as compared to a year ago.
Digital content sales increased 13.1 percent, while Nook device unit sales declined during the holiday period as compared
to the prior year.
Digital content sales are defined to include digital books, digital newsstand, and the apps business. "Nook device sales
got off to a good start over the Black Friday period, but then fell short of expectations for the balance of the holidays,"
said William Lynch, CEO of Barnes & Noble.
"We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going
forward," he added.
As a result of the Nook sales shortfall, the company now expects fiscal year 2013 Nook Media revenues of approximately $3
billion, and Nook segment EBITDA losses at a comparable level to fiscal year 2012.
In contrast to Barnes & Noble, Amazon said its line of Kindle eReaders and tablets once again broke Black Friday and Cyber
Monday sales records for the company, something that some analysts were already expecting.
In other eCommerce and retail news
The latest monthly report by the SSL Labs project reveals that many eCommerce sites still remain vulnerable to the Beast Malware
attack, more than a year after the underlying security vulnerability was clearly demonstrated by security researchers all over
a network sniffer to decrypt the encrypted cookies that a targeted website uses to grant access to restricted user accounts.
October numbers from SSL Pulse survey of 179,000 popular websites secured with the ubiquitous secure sockets layer (SSL)
protocol demonstrates that 71 percent or more than 127,000 websites are still vulnerable to the BEAST attack.
And the latest numbers show little change from September figures, down just one percentage point from the 71.6 percent
vulnerable to the BEAST attack recorded in August.
Exposure to the so-called CRIME attack was also rampant, 41 percent of the sample support SSL Compression,
a key prerequisite of the attack in the first place.
The so-called Crime technique lures a vulnerable web browser into leaking an authentication cookie
created when a user starts a secure session with a website. Once the cookie has been obtained, it can be
used by hackers to log in to the victim's account on the site.
The root cause of the BEAST attack, first outlined by security researchers in September 2011, is a vulnerable
ciphersuite on servers. The dynamics of the CRIME attack are more complex but capable of being thwarted at
the browser or completely neutralized on a properly undated and configured server.
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