More Home Depot details emerge

Late last week, Home Depot finally released a statement about its data breach. At least they had the decency to call the attack “custom” and not spin it as “advanced” or “sophisticated.” Even “custom” is really a euphemism, as the attack wasn’t all that different from what other retailers experienced earlier in the year. It may have been as simple as recompressing the BlackPOS malware using a different compression algorithm or compression ratio to evade antivirus.

The breach involves about 56 million cards, making it a bigger breach than Target.  Read more

Can Google compete with Paypal?

There are reports in the news today that Google may launch a Paypal-like service. Most are questioning whether Google can compete with Paypal, which boasts 72 million users.

I believe the answer is yes.Here’s why. I buy a lot of stuff on Ebay. Lately I’ve been selling too, and since the initial effort was reasonably successful, I’m going to start listing more things.

I’ll be listing for the same reason lots of people do. It’s funny how much stuff becomes redundant once you get married and your spouse moves in, and it’s cheaper than having a garage sale and you’ll usually get better prices. And, besides, for the past six weeks or so I’ve been a bit shorter on cash than I’d like to be.

Online payment systems work because a lot of people don’t want to mess with checks. It’s a pain to write a check and it’s a pain to cash one, and nobody likes waiting the 7-10 days it takes for one to clear. Money orders and cashier’s checks eliminate the waiting period, but they’re a pain for the buyer, who has to go visit the bank during working hours and pay a couple of dollars, or you have to visit the ATM and then find a convenience store that sells money orders, and pay a couple of dollars. It wastes a lot of time. And if you’re buying a $100 item, you probably don’t care about the couple of dollars, but you sure do if you’re paying for a $2 item.

The reason 72 million people use Paypal is because it’s better than dealing with checks or money orders. But it doesn’t take much.

Read through some Ebay listings though, and you’ll find lots of people who don’t take Paypal. The reasons vary, but the people who don’t like Paypal really don’t like it. Those people tout Western Union or Bidpay as alternatives, but those in reality are just an online venue to buy a money order. It saves you hopping in the car. Again, on an item whose price requires three or more digits, you probably don’t care. But they’re horrible for small transactions.

Since Paypal is so widely used but so widely disliked, there’s lots of room for a competitor.

From what I can tell, sellers of merchandise don’t like Paypal because it’s free for the buyer, but big-time sellers take a hit. (People like me who sell casually don’t.) The hit seems to vary, but resellers seem to like to tack 60 cents onto the cost of the transaction when I use it. I generally pay it, since 60 cents is a lot less than it would cost for me to use another online payment service or to buy a money order, and it’s not much more than it would cost me to mail a check.

So it seems to me that there are at least two ways for Google to compete. I’m sure they’ve done some market research on what people dislike about Paypal and they’ve looked into what they can do to provide better service. Obviously one approach they could take would be to simply charge less money.

A second possibility would be for Google to endear itself to the seller by placing the financial burden on the buyer. Charge the buyer, say, a percentage of the transaction cost, with a maximum cap of somewhere around the cost of a postage stamp. Sellers would gladly accept it if it didn’t cost them anything. Buyers won’t like it as much as Paypal since it’s not free for them, but it would give the instant gratification of Paypal while costing about as much as mailing a check. And besides, it’s the seller who sets the terms of the transaction. If the buyer doesn’t like it, the only choice is to not bid.

I believe that sellers who don’t accept Paypal are putting themselves in the same position as a brick-and-mortar store that doesn’t accept credit cards, and sometimes I’ve gotten some real bargains precisely because the seller only accepted money orders, but that doesn’t stop a lot of them.

So I don’t believe Paypal is a juggernaut. It was the first widely successful online payment service. But this field doesn’t give much credit for being first. Just ask Datapoint (inventor of what became the x86 family of processors), Commodore (first successful consumer-level computer to feature pre-emptive multitasking), Digital Research (first popular operating system for microcomputers), or any number of now-defunct pioneers.

I’m not willing to place any bets on whether Google will become the market leader in this arena, especially without having seen their service. But I also don’t think there’s much question as to whether it will survive and/or be profitable. As dissatisfied as the users of other services are, Google Wallet would have to be awfully bad to flop.

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