RIP Bitpass Part Deux

Follow on to Jim’s earlier post on this issue. A lot of the buzz surrounding this is taking a “BitPass vs. Peppercoin” slant. Not an altogether invalid comparison, considering the two companies started at about the same time and had the similar vision…

…of capturing the vast opportunity that is micropayments. The comparison begs further analysis. Peppercoin recognized relatively early in their existence that digital content (or even limiting themselves to internet-only transactions, digital or physical goods) wasn’t going to be a sustainable business model. I think that’s a big part of it. It was a very limiting factor for BitPass and certainly contributed to their demise.

Although I don’t see this solely as a “BitPass vs. Peppercoin” story, the comparison is valid. Peppercoin cast a wider net, and is still a viable business. I’m sure that BitPass had visions of an expansion beyond digital purchases/sales, but either wasn’t able to expand the business model (as Peppercoin was), or saw it as more of a future aspiration.

The path is littered with former companies that thought consumers would flock to use their “better [micropayments] mouse trap,” but none has really made the pure digital content play work. Some have suggested that there is an inherent “inside the box” line of thinking with all micropayments solutions. After years and dozens of examples, I’m inclined to agree, which is why I was excited when Peppercoin expanded their vision beyond digital content, and beyond internet transactions. We’ll see if they (and others, for that matter) can continue to choose the road less traveled, and whether that will make the difference.
http://www.javelinstrategy.com/2007/01/22/rip-bitpass-part-deux/

BitPass provided payment services to significant content producers like MSN, Time, Disney, and ABC. And the micro-content market, primary users of the BitPass service, is growing in leaps and bounds.

How is it then, even with all these pluses, good technology, strong backers, and an experienced management team, BitPass isn’t financially viable?

Is it even possible for other alternative payment systems, bank or not, to enter the online or near-line market any more? Back in July, I posted on this question. My conclusion was that if anyone, banks especially, wanted to get on board they had better hurry up and do so. PayPal and Google aren’t waiting.

The thing is, the value of a payment system is in proportion to the number of people who are signed up to use it. So the key question is not how cheaply you can make a payment, but how you can get enough users to create a self-sustaining network that will support the system.

It is my view that any alternative payment system that is not intrinsically linked to a transaction flow is doomed to failure. Google is tied to Adwords. PayPal to EBay. Even Oyster, the payment system used by the London Tube, backed by Barclays Bank, is tied to payments for fares. BitPass was not intrinsically linked to such a transaction flow.

Mobile telephones, especially in the context of mobile banking, are a source of transaction flow where there is still opportunity, albeit one where the door is already starting to close on banks. Clearly, telcos have an interest in protecting their existing customer relationships, but they also have an interest in getting them to use more data. Mobile banking, coupled with a clever payments play might be one way to do that.

http://bankervision.typepad.com/bankervision/2007/01/hasta_la_vista_.html

If you are interested in additional items a merchant should ask about when considering an online payment provider, please feel free to ping me directly:
jamynigri [@] gmail.com or
jamy.nigri [@] clickandbuy.com.

At ClickandBuy, we consider ourselves a resource to the industry and help our Clients find their best alternative, even if it is not our Solution.
All the best