In The Headlines

What’s in Your (Digital) Wallet?

Digital WalletAn increasing number of people who used to use bank cards to pay bills and buy merchandise are seeing mobile payment services as a handy alternative. That attitude concerns financial institutions, which believe services such as Venmo and Apple Pay could erode loyalty, particularly among millennials, who surveys show are more prone to switching banks than their elders. “The biggest risk for them is their relationship with their customer,” says Zilvinas Bareisis, a senior analyst at Celent, a consulting firm. Surprisingly, most banks are not putting up much of a fight. Only 5% of U.S. banks polled by Celent in November had a branded digital wallet app that works in stores for Android phones, and just 17% planned to release one in the coming 6 to 12 months. (Most third-party in-store digital wallets are incompatible with iPhones.)

Many institutions seem prepared to cede the field to Google, Apple, and Samsung, all of which have a head start. Apple Pay, introduced in 2014, appears to be getting the most traction in the U.S., where some 12 million people use it at least once a month, a number that should more than double, to 25 million, by year-end, according to Piper Jaffray analyst Gene Munster. Apple Pay is not the first digital payment technology to pose a challenge for the banking industry—pioneer PayPal has been around since 1998. But the stakes are much bigger now that Walmart stores, Starbucks cafes, and Chevron gas stations are among those retooling to handle payments through digital wallets. Researcher EMarketer estimates the value of transactions made by tapping or waving a phone at the point of sale will reach $210 billion by 2019, up from $8.7 billion last year.

“We see a day when customers are leaving home without their card,” says Jonathan Velline, head of ATM and store strategy at Wells Fargo. Already, 82% of banks are concerned about ensuring that theirs becomes or stays the most-used card in the digital wallet, while 61% worry that Apple and other tech giants may encroach deeper into their territory, according to the Celent survey. Maureen Burns, a partner in Bain’s financial-services practice, says “the worst-case scenario” for banks is that they are reduced to playing the role of a utility, in which “they have the risk and regulatory burden but do not get to participate in the best parts of the profit pool.”

Apple has never disclosed the fees it charges banks to process Apple Pay transactions, but analysts figure it collects half a cent on in-store debit card purchases and 15 basis points on credit cards in the U.S. The service generated just $15 million in gross revenue for Apple in the first year of operation, according to Richard Crone, Chief Executive Officer of Crone Consulting, a firm that specializes in mobile payments. Crone believes that figure could top $1 billion annually in five years if ad revenue is factored in.

In October, Capital One became the first U.S. institution to introduce its own wallet app that works in stores. “The irony is, when we first launched payments, people began to ask us, ‘Why would we use a bank for payments vs. digital company XYZ?’ ” says Tom Poole, Managing Vice President for digital payments. He says the wallet has been “a success” but will not say how many customers are using it. “Banks were asleep at the wheel and didn’t offer customers alternatives,” he adds.

JPMorgan Chase will unveil its own mobile wallet in mid-2016. As the largest retail bank in the U.S., it could rack up as many users in the first year as Apple Pay did in two, Crone says. Some banks are lining up behind a product completely different from a wallet. Recently, Visa announced software that feeds card data to all apps on a consumer’s device and directs consumers to the issuer bank in case of a problem. “This puts the banks more firmly into their role as the trusted third party in payments,” says Jim McCarthy, an Executive Vice President at Visa. “People won’t think about whether it’s Apple or Samsung or Google. Over time it will become the card again.”

That may be wishful thinking. “Being able to provide a fully branded experience in the digital world will probably be unrealistic,” says Celent’s Bareisis. “The world will be more fragmented.” Wells Fargo is embracing that notion: Beginning in the second quarter, account holders will be able to use Android Pay, as well as plastic, to withdraw money at thousands of its ATMs. “The convenience means that customers are going to get value out of the fact that they have a card with Wells Fargo,” says Brett Pitts, head of digital technology at the bank.


  1. – BusinessWeek
  2. – Banking Technology

Digital Streaming Comes to Sports

Digital StreamingIf you want to see the impact that digital technology is having on traditional media, look no further than sports. Live sporting events are seen as the glue holding together the classic TV bundle, as they are now considered the only real must-see live viewing. But while sports may be key to keeping subscribers hooked into traditional TV, some bolder sports and media companies are looking to new sorts of services to keep fans—especially younger ones—interested. “The reason why baseball is skewing so young today and getting so big today is our fans are enjoying their game on a phone, on a mobile device,” said MLB’s President of Business and Media, Bob Bowman. “That’s where all the eyeballs are. That’s what advertisers know.”

In order to cater to that digitally savvy millennial audience, MLB has offered a streaming video app that is totally separate from the TV bundle. Now, for about $85 annually, fans can pay to watch all their team’s games, or can pay $110 a year for a league-wide package. Subscribers can watch through Roku on their giant flat-screen TV, or on their smartphone. No cable or satellite TV package required—just a broadband connection. The league’s app has been so successful that it is planning to spin off its digital unit, MLB Advanced Media. It is already providing the infrastructure for a range of new “over-the-top,” direct-to-consumer apps. MLB Advanced Media took over streaming and app development for the National Hockey League, creating its new lower-cost subscription package. Its other clients include HBO, the WWE, the PGA Tour, and it even handled the live streaming of the Super Bowl.

Now MLB’s Bowman is applying his digital expertise to an ambitious new venture: He is bidding on a range of sports rights to build a new kind of digital version of ESPN, and he is hoping to launch within a few months. “We’ve been trying to cobble together rights with an eye towards building an app, a first-class app, streaming high quality and putting it on the device consumers want most,” said Bowman. Unlike ESPN (owned by Disney), NBC Sports or Fox Sports 1, he does not want his consumers to have to sign into a pay TV service to access the content. This is designed for cord cutters or so-called cord nevers. “Direct to consumer is going to be a fast and deep-growing business, and that’s why we’re in it,” said Bowman. “Whether or not we’ll win it, time will tell.”

In contrast, ESPN says it does not have plans to launch a stand-alone streaming service anytime soon, but it is making its content available to subscribers on any device. “We have authenticated television. All of our content is available on any device,” said ESPN President John Skipper. But ESPN will not just be competing against the service MLB has in the works. Sports fans already have other places to find highlights from sporting events for free. Skipper, at the Re/code media conference, argued that no one can compete with the ESPN brand or the depth of its coverage. “We drive a good business with highlights, and don’t believe people will abandon ESPN to watch highlights elsewhere.”

In the meantime ESPN is experimenting outside the traditional TV bundle, in ways that do not threaten it, by offering up content it does not show on TV. “We are certainly interested in pursuing opportunities in “over-the-top,” and have already. We sold World Cup of Cricket last year “over-the-top,” we generated 100K subscriptions at $100 apiece. So, we know how to do it, we will continue to look for other opportunities for content that do not exist on our current linear networks, to put over-the-top,” said Skipper.

The idea is that ESPN could keep acquiring rights, perhaps even to something like e-sports video game competitions, to offer a whole assortment of digital subscriptions on top of its traditional TV bundle. The question is how soon ESPN will be pushed to offer a direct-to-consumer service with its mainstream programming, outside its TV deals.

Sports costs continue to rise, putting pressure on ESPN’s bottom line. And now that Yahoo is a buyer—it aired its first NFL game last fall—and Google has expressed interest, those costs could continue to push higher. But Skipper said he has no problem with how much more he has been paying for sports because he has locked in the most desirable rights, such as the NBA deal he closed last year, at triple the cost of ESPN’s last NBA deal. From where Skipper is sitting, those deep-pocketed digital rivals circling do not have a lot to snap up—at least for now.


1. – CNBC
2. – USA Today

The Good News Is . . .

Good News • New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up across the board. The Commerce Department said that orders for durable goods, items meant to last three years or more, surged 4.9% last month. January’s increase was the largest since March. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 3.9%.

• The Priceline, Group Inc., a leading provider of online travel and related services, reported earnings of $12.63 per share, an increase of 16.4% over year-earlier earnings of $10.85 per share. The firm’s earnings topped the consensus estimate of analysts by $0.83. The company reported revenues of $2.0 billion, an increase of 8.7%. Management attributed the company’s results to the accelerating growth in the number of hotel room nights booked.

• Atlanta utility giant Southern Co., said it will buy PowerSecure International for $431 million in cash, giving it an edge in distributed power technologies. PowerSecure’s stockholders will receive $18.75 in cash for each of their shares. PowerSecure’s shares jumped almost 80% in after-hours trading. Southern said the combination will expand its opportunities to provide customized energy products to customers.


  1. – US Dept. of Commerce
  2. – CNBC
  3. – The Priceline Group, Inc.
  4. –

Planning Tips

Strategies for Tax Planning in Volatile Markets

Tax Planning in Volatile MarketAlthough volatile markets can give an investor many headaches, they also offer several opportunities to lower his or her tax bill. Recent volatility in the financial markets has given smart investors a chance to take advantage of lower prices and asset values. Below are some strategies that you can use to profit from a volatile market on your tax return. Be sure to consult with your tax advisor to determine if such strategies are appropriate for your situation.

Convert your IRA to Roth IRA – If your traditional retirement plans and accounts have experienced significant losses in the markets over the past few months, then this might be a good time to convert them to Roth IRAs. The lower prices in these accounts mean lower taxable balances that must be reported and thus a lower tax bill. If you already converted your plan balances to Roth accounts in the past few months, then you may be able to re-characterize (undo) your conversion and do it again now when prices are lower. This strategy can be especially effective if you are currently unemployed or your taxable income is lower than usual for any other reason, as it may allow the entire conversion balance to be taxed at a lower tax rate.

Take advantage of low equity prices – If your portfolio is heavily weighted towards fixed-income securities or other conservative holdings, then this may be a good time to start buying into the markets if the turbulence persists. A dollar-cost averaging strategy is a great way to take advantage of market volatility and lower your investment costs. The simplest way to do this is to find a good stock mutual fund with a solid long-term track record and start buying a set dollar amount of shares each month. This way, you will buy more shares when prices are lower and fewer shares when prices rise.

Tax-loss harvesting – If you have investments in taxable retail accounts that have lost value in recent months, then you may be able to lower your tax bill by selling off your depressed holdings and then buying them back again. This way, you can generate investment losses that will lower your overall tax bill. Just be careful to obey the IRS Wash Sale Rule, which mandates that you have to wait for at least 31 days before you can buy back a materially identical security after selling it if you intend to declare the loss. This does mean that if the price of your security rises during the waiting period that you will have to buy it back at the higher price at the end of the waiting period. In some cases, you may be wise to simply purchase an exchange-traded fund (ETF) that holds a basket of securities that are similar to the one that you sold.

Exercising employee stock options – Workers with “nonqualified” options, the most common type, usually owe taxes on the difference between the options’ grant price and the shares’ current value when they exercise the options. A market decline often lowers this tax cost. For example, if an option was granted at $30 and the share price rises to $45, the employee who exercises at that point will owe income and payroll taxes on $15. But if the stock drops to $35 and the worker exercises then, taxes are due on $5. If the shares are held for more than a year after exercise, the growth can be taxed at lower long-term capital gains rates when they are eventually sold.

Gifting strategies – If you are looking to reduce your taxable estate and gift cash or assets to children or other beneficiaries, then volatile markets can provide you with a way to transfer assets at depressed prices and thus reduce your estate by a larger amount. Lower prices mean that you can gift more shares of stock to your recipient without exceeding the annual dollar limitation, and then when prices rebound, your beneficiary will profit accordingly and so will you with a smaller remaining estate.


1. – Investment News
2. – CNBC
3. – Investopedia
4. –
5. – Wall Street Journal