Because the $7.2 billion swipe fee settlement with Visa and MasterCard doesn't really settle the issue but merely delays it for eight months, Starbucks stock may ultimately benefit from the alternative payment processing path it is blazing.
Nineteen major retailers, including Starbucks, Wal-Mart, and Target, along with the National Federation of Independent Business, are opting out of the settlement and are considering pursuing new litigation against the credit card processors and the big banks like Bank of America, which are the ultimate recipients of the fees charged.
They allege the settlement does little to change an unfair system that costs consumers about $50 billion annually. Considering Visa and MasterCard agreed to pay $6 billion to settle the lawsuit, plus delay imposing the fees again for eight months -- a move that would cost them another $1.2 billion -- it amounts to little more than chump change when they reimpose the fees.
Yet some retailers are exploring alternatives to credit and debit card payments that can mitigate the cost of using plastic. Home Depot, for example, is pioneering the use of PayPal to complete a transaction at the cash register. The swipe fee issue was one reason the eBay payment solution is now available when you walk up to checkout, and the service has signed up 23 national retailers thus far, including Abercrombie & Fitch, American Eagle Outfitters, and J.C. Penney.
But the more interesting option to my thinking is the mobile wallet solution, where you can quickly use your smartphone to pay for a product or service. The industry is still in its infancy, but market researchers at Berg Insight think it will turn into a $35 billion industry by 2017, though that's obviously still just a small portion of overall credit and Ceramic tile use. Still, it offers a path for retailers to follow.
Starbucks is the trendsetter here with a stupid-simple smartphone app, so easy to use, in fact, that of the $500 million worth of goods and services purchased last year using mobile wallet apps, almost all of them were conducted in a Starbucks. That underscores the statements made earlier this year by CEO Howard Schultz, who said the coffee slinger was processing 3 million mobile payment transactions a week.
If other retailers follow suit, creating equally easy-to-use apps that consumers can readily access (apparently not every mobile wallet app is as clean as Starbucks'), they could bypass the credit and debit card issuers and processors altogether, saving themselves and consumers billions.
The proliferation of smartphones combined with a simple-to-use app could lead to the decline of Visa and MasterCard. Not everyone is going to release their grip on plastic, of course, but I think the market researchers may be underestimating its potential, and there's little reason to doubt that Starbucks, as a first-mover here, will see its stock becoming one of the biggest beneficiaries of the coming boom.
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One of the smallest schools in the district brought home one of the biggest prizes last week! The Fort McMurray Christian School recently won the Oil Sands Discovery Centre “Science Olympics 2013”.
“We weren’t surprised they won,” said Principal Joe Champion, speaking of the team of grade 7 and 8 students who competed at last Thursday’s event. “They are smart kids and they put a lot of time and work into it. They were pretty excited to come back to the school and tell us the good news!”
The guidelines of the event were straight forward: Each team of six students was given two projects to work on in advance, while a third was kept secret until the end of the event. The Christian School Team – called SOTWACA (Science Olympic Team With A Cool Acronym) won the first event — the Golf Ball Tower. In this event, each team was asked to construct a tower using only plastic straws, 50 centimeters of tape, 30 paper clips and one index card. “It was hard because we didn’t have much tape,” said grade 7 student Celine Nyange. “But we practiced a lot and made it work!” In 30 minutes the students created the highest tower that would independently support a golf ball for at least one minute. “Our golf ball was still standing at the end of the afternoon” added Caleb Odeleye proudly.
The second challenge — constructing and flying a plane — turned out to be a little different. It worked, but it wasn’t the best! So the race to win the final “secret” event was on!
“Gravity is very Egg-Citing” was the name of the egg dropping adventure. All teams were provided with one cup of Styrofoam peanuts, some tissue paper and felt, a sheet of cardboard with scissors and wire, some string, tape, a 1 L milk carton and one raw egg. In 40 minutes the students made a container with just the right engineering skill to make sure it dropped from a distance equivalent to the top of an oilsands dump truck to the bull’s eye — without breaking the egg! Out of 8 teams, very few achieved this goal, and only one of them — The Christian School — was right on target! “We were really excited that we had a good drop” said Caleb, the “dropper” of the egg.
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