Microsoft Payment System?
BillG makes a comment at Davos about a paper he read, and the world goes off into wild speculation. It’s pleasing that people still give us so much credit. But integrity is important; let’s not elevate an idle comment to the level of vaporware and FUD. My responses to some of the speculation:
Undercutting credit card companies: That’s not what the remark says. The point is that you can’t have an ecosystem of micropayments with high cost-per-transaction. Xbox solves that problem by using Microsoft Points. Apple solves the problem by batching up your purchases at iTunes music store and charging your card once certain limits have been met. One is pre-pay, the other is post-pay. Neither strategy is exclusive. Prepay is not new; Starbucks floats hundreds of millions of dollars on Starbucks cards — but they aren’t about to wipe out Citibank.
More competitors, more intense: We’ll see. The banks are nervous about Paypal; Paypal is nervous about Google Checkout. The banks would probably be happier if Paypal’s space was fragmented, just like Paypal would be happy if Google didn’t have a search monopoly and a long tail of adoption. Everyone is nervous because the trends are to centralize, not because there are more entrants.
Microsoft’s play: Microsoft has had payment systems for at least 5 years. Points have been shipping for more than a year. Obviously, having payment systems is strategic for our own business, and we would be insane to adopt Google Chekout (for example). But between having internal-only systems and going public, there is a huge range of possibilities. Since we have no product in the spaces where Citibank, Paypal, and Google checkout play; it’s a bit strange to think that we would launch a product that tries to compete with all of them at once (or even any of them). Until you see a v1, and a v2, it’s just crazy to be speculating about the future direction. It’s much more fruitful to look at where the established players already are, and what their competition dynamics are.