/// Is There a "Big Win" for the Payment Startups?

January 18, 2013  |  All Things Digital

Image copyright trekandshoot When you say “PayPal,” everyone working in digital knows what you’re talking about. It’s one of the great online success stories, and one that’s even more impressive considering the challenges within the payment business. Security breaches, massive fraud vectors, state and international laws make it hard enough, and then the business must operate at the whims of massive national banks and clearinghouse companies. More than a decade after PayPal’s introduction to the market, a new crop of startups, including Square and LevelUp, have entered the space with hip technological payment solutions. However, the problem is that none of these companies are filling a hole the same way PayPal did, and there’s no reason to believe that any of them can unseat the entrenched monsters dominating the market. In fact, one player, Verifone, is already exiting the mobile payment game. If established giants like Verifone can’t win in the payment processing space, where is the opportunity for the new venture funded entrants to profit? Customer relationship management and data mining are two likely, albeit difficult, potential models. None of the new crop of startups can overcome the daunting economics of defeating existing payment processors on price alone. PayPal is widely known because it solved an unmet need for online commerce, but now, every small business already has a credit card processing system. And if they don’t, merchant account vendors are likely beating down the door to sign them up. Other small businesses are far less sophisticated, employing cash registers that are barely one step above a shoebox, with the sole function of storing cash.

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Is There a "Big Win" for the Payment Startups?

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