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Disruptions: Rather Than Time, Computers Might Become Panacea to Hurt

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Bits: I’m Still Waiting for My Phone to Become My Wallet

A truly mobile wallet — one that would let you easily pay for restaurant meals, subway rides or beers at a bar with a quick wave of your cellphone — has long been described as imminent. But it remains elusive. Some innovations have begun to bridge the gap, but most have been a disappointment or have not yet worked well enough for mainstream adoption.

In 2012, Square, which makes a credit card reader that can be plugged into an iPhone or iPad, worked on a credit-cardless system that let people pay for goods without ever pulling out their wallets or phones. When Square users walk into a store in its network, a Square-enabled register shows pictures of their faces, which are used as authentication for payment. But the app can be awkward to use.

Last summer, Apple introduced Passbook, a digital system for storing boarding passes, movie tickets, loyalty cards and gift cards on the iPhone. But it doesn’t do much beyond that, at least not yet. Google worked with major credit card companies and banks to create its Wallet app, which lets people pay for items at some stores by waving their phones but is available only for Android devices. Visa offers two digital wallets, payWave and V.me, but I’ve never seen anyone use them or signed up myself.  And the major mobile carriers in the United States banded together to form Isis, a mobile payments network, which has yet to roll out nationally.

Starbucks has arguably had the most success with the pay-by-phone idea in the United States. The company has persuaded millions of people to download an application that can be used to pay for their lattes. It works like a digital gift card — but only at Starbucks, obviously, so it’s limiting. (The company also invested $25 million in Square and is incorporating Square’s technology in its stores.)

When I complain to friends and colleagues about the inconvenience of fumbling around for my wallet when I’m shopping — and say I wish I could just use my phone instead — they often give me bewildered looks.

Apparently, that’s because paying with a phone today is rarely easier than paying with a credit card. Paying via phone often involves a series of awkward swipes and taps to start the transaction, and the process can be disrupted by spotty wireless connections, low batteries or other electronic hiccups.

“No one wants to be the guy holding up the grocery line at 6 p.m.,” said Joshua Reich, one of the founders of Simple, a banking start-up company that gives people free checking accounts and offers them data-rich analyses of their spending and saving habits. “You don’t want to look like that dork, the guy riding a Segway.”

Jan Dawson, an analyst at Ovum who covers the mobile industry, agreed.

“Mobile payments are trying to solve a problem that doesn’t exist for most people,” he said. “You don’t hear people moaning about how hard it is to pay with their credit cards or debit cards.”

The biggest problem for paying by cellphone is that so many kinds of businesses are competing to offer services. Companies as varied as phone carriers, banks, credit card companies and technology start-ups have had plans to get into the mobile payment business, but many are locking horns over who can profit the most, Mr. Dawson said.

“Everyone wants to be the primary payments provider,” he said.

Wireless carriers, desperate to bolster their revenue, are reluctant to hand over potentially lucrative streams to companies like Apple and Google, which already make billions from devices and the software that runs on them. Banks and credit card companies are also rolling out mobile checking services and applications, both to impress their younger users and to keep a hand in a game where billions of dollars are at stake annually, largely from the endless parade of small fees racked up with each purchase. And industry heavyweights like PayPal and Groupon are also scrambling to get their own offerings into the market.

It’s tough to persuade major retailers to spend money to work with Google Wallet or Apple’s Passbook, for example, when so many other options are still on the table. And what is popular today might be outdated in a few months.

Part of the reason that Starbucks’ own app works so well is that the company invested significantly to build out the infrastructure in its stores — sleek phone-scanning kiosks and mobile apps that work reliably and efficiently.

“There is a lot of reluctance in installing a lot of technology, especially if they aren’t sure it’ll take off,” said Rob von Behren, one of the lead engineers at Braintree, a payment services company that powers and processes transactions for popular services including Uber, the mobile taxi service, and Airbnb, the travel rental site. This reluctance leads to an “infinite waiting period and slows the growth of an industry,” he said.

Mr. von Behren was one of the creators of Google Wallet before he left to work at Square and later at Braintree. He said that while his Google team’s original goal was to simplify online purchases, it quickly realized that nudging mobile e-commerce forward seemed more urgent.

A large portion of shopping begins on cellphones, but getting to the final checkout remains a challenge because entering payment information on a small screen is clumsy. And most traditional big-box retailers that could build infrastructure to support mobile payments came of age “in an era where there wasn’t network connectivity,” making it harder to update their cashier software, payment methods or loyalty programs, Mr. von Behren said.

He ultimately decided that working with legacy retailers to create a system for in-store shopping with cellphones was a “tremendous juggling act.” He added, “It kind of worked and it kind of didn’t.”

BUT a new generation of innovation is coming, he said, so he thinks that wide use of pay-by-cellphone systems will arrive eventually. Braintree recently acquired Venmo, a company that lets people send money to one another via simple text messages. In addition, some promising newcomers say they are working on more complete alternatives.

Clinkle, a start-up, has persuaded a notable roster of venture capitalists to funnel $25 million into its mysterious and forthcoming mobile payment services. And a new company, Lemon, is working on its own digital wallet.

I guess I’ll have to wait and see. For now, I’ve come up with my own workaround for hot weather: securing my credit card and driver’s license to my iPhone with a rubber band. But it’s not what I had in mind when I pictured paying with my phone.

Your Money: Rules for Reverse Mortgages May Become More Restrictive

Right now, practically anyone who is breathing can qualify for a reverse mortgage — no underwriting or credit scores necessary. But that might be about to change.

Most reverse mortgages, which allow homeowners 62 and older to tap their home equity, are made through the Department of Housing and Urban Development, whose Federal Housing Administration arm insures the loans. But declining home prices after the housing crisis took a big toll on the federal program. So did the popularity of one type of mortgage, which allowed homeowners to withdraw the maximum amount of money available in a big lump sum.

The F.H.A. eliminated that type of loan this year. And over the last few years, in an effort to strengthen the program, the agency raised its fees and reduced the amounts people could borrow.

But now, the F.H.A. says it will need to take even bigger steps by the beginning of its new fiscal year in October.

Because of the turmoil in the housing market and because many borrowers in the program didn’t have enough money to pay their property taxes and homeowners insurance over the long term, the F.H.A. wants to require borrowers to undergo a financial assessment. It may also factor in borrowers’ credit scores, something it has not done in the past.

Before the agency can do either, it needs Congressional approval. The House gave its assent last month, but it’s unclear whether the Senate will follow suit.

If the F.H.A. fails to get Congress’s blessing, it will have to take more draconian actions in the coming months, according to F.H.A. officials who did not want to be named because they were still working with Congress on the issue. That means that effective Oct. 1, yet another of its reverse mortgage products will probably be eliminated, leaving borrowers with options that would allow them to get access to 10 to 15 percent less cash than they can now.

“Instead of using a scalpel, they will have to use a hatchet,” said Christopher J. Mayer, professor of real estate, finance and economics at Columbia Business School, who is also a partner in a start-up company, Longbridge Financial, that provides reverse mortgages.

Borrowers who are now contemplating what is called a HECM (pronounced HECK-um) Standard (for home equity conversion mortgage) reverse mortgage should know that it could disappear in the fall. (Of course, that doesn’t mean borrowers should rush out and get one. We will probably know the fate of the loan sometime next month.)

With all reverse mortgages, the amount of cash you can obtain largely depends on the age of the youngest borrower, the home value and the prevailing interest rate. The older you are, the higher your home’s value and the lower the interest rate, the more money you can withdraw. You don’t have to make payments, but the interest is tacked onto the balance of the loan, which grows over time. When borrowers are ready to sell (or when they die), the bank takes its share of the proceeds from the sale, and borrowers or their heirs receive whatever is left, if anything.

Right now, using a “standard” reverse mortgage, a 65-year-old borrower with a home worth $400,000 could tap about $226,800 in cash or a line of credit after various fees, according to calculations by ReverseVision Inc., a reverse mortgage software company.

Borrowers can receive the money in several other ways, too, including payments over the life of the loan or in installments in higher amounts over a specific term.

If the F.H.A. were to eliminate the standard mortgage, the same borrower could instead use the “saver” reverse mortgage, which has lower fees but permits you to withdraw less: this homeowner could withdraw about $194,800, or 14 percent less than the “standard,” in cash or a line of credit, after all fees. (Another “saver” option would also be available; see the chart accompanying this article for more specifics).

F.H.A. officials told me that they would prefer to keep all of the agency’s mortgage offerings and instead put rules into place that would help ensure that they accept only borrowers who can actually afford to pay their property taxes and homeowners insurance, which is required to avoid foreclosure. Nearly 10 percent of reverse mortgage borrowers are in default because they failed to make those payments.

Bits Blog: Why Asian Internet Companies Struggle to Become Global

Bobby Yip/Reuters Tencent, one of China’s most valuable technology companies, owns WeChat, an online messaging service that’s growing in popularity across borders.

Asia is home to nearly half of the 2 billion Internet users in the world. It makes most of the hardware — laptops, smartphones, tablets and other gadgets — that is used to gain access to the Internet. In countries like South Korea and Japan, it has some of the fastest wired and wireless networks for carrying Internet traffic.

Yet in one aspect of the high-technology economy, Asia still struggles. It has yet to create an Internet company with the global scale of a Google, Facebook or Amazon. A report published Wednesday by the Economist Intelligence Unit, a research outfit affiliated with the Economist magazine, examines some of the possible reasons for this.

In some cases, the study says, Asian Internet companies have simply been held back by a lack of international ambition. In countries like China or India, domestic markets are so big that expanding abroad has not always been seen as a necessity. Other companies are reluctant to tackle the cultural challenges of operating in the West, according to the report, whose conclusions were reached after interviews with Internet entrepreneurs and others.

But that is starting to change. A new generation of Asian Web companies is seeing rapid cross-border growth — including, in some cases, in the West. These include online messaging services like Line, from Japan, and WeChat, which is owned by a Chinese Internet business, Tencent. Social gaming companies, like GungHo of Japan, have also achieved strong international growth.

Meanwhile, Alibaba, an e-commerce giant in China, has increasingly international ambitions, and is expected to offer stock to the public soon to finance them. Another Asian e-commerce company, Rakuten of Japan, has moved to expand abroad through acquisitions of companies like PriceMinister of France, and it has adopted English as its official language.

Yet these are the exceptions. The study says Asian Internet companies have been hobbled by factors like a lack of trusted online payment systems, a reluctance among Internet users to pay for digital content and restrictions on hiring foreign workers. The report also highlights burdensome regulations, including laws in countries like India and Thailand that make Internet companies responsible for the content posted on their sites.

“In many markets around the region, change must begin with a better understanding, on the part of governments, of the specific challenges facing Internet businesses, and a more general recognition of the growth opportunity that online commerce represents,” the authors write.

Asia is not alone in struggling to export home-grown Internet services. If anything, Europe has had an even harder time — despite lesser regulatory, linguistic and cultural hurdles to international expansion.

The report was sponsored by the Asia Internet Coalition, a group that was formed by five American Internet companies — Google, Facebook, Yahoo, eBay and Salesforce. The Economist Intelligence Unit says it was written independently. But some of the issues that are highlighted – especially the effect of regulation – do mirror the complaints from American Internet entrepreneurs and executives about operating in Asia.

In addition to the well-known restrictions that American Internet companies face in China, where services like Facebook and Twitter are blocked, Silicon Valley giants have also struggled in some other Asian markets. In South Korea, for example, the Internet search business is dominated by two local players, Naver and Daum, and not by Google.

The report makes clear recommendations for stimulating the Internet economy in Asia, urging governments there, for instance, to make regulatory changes to allow efficient online payments systems to develop.

Who would be the main beneficiaries? That is less clear.

Trying to Be Hip and Edgy, Ads Become Offensive

Some of the biggest names in marketing, including Ford Motor, General Motors, Hyundai Motor, Reebok and PepsiCo, have been forced recently to apologize to consumers who mounted loud public outcries against ads that hinged on subjects like race, rape and suicide.

PepsiCo found itself meeting this week with the Rev. Al Sharpton and the family of Emmet Till — the teenager whose death in Mississippi in 1955 helped energize the civil rights movement — to try to quell multiple controversies involving its Mountain Dew brand.

“It’s like the Wild West,” said Paul Malmstrom, a founding partner of the New York office of the Mother ad agency.

Advertising experts offer a long list of reasons for the increasing frequency of such incidents, but the primary reason they keep happening, they say, is the growing anxiety on Madison Avenue to create ads that will be noticed and break through the clutter.

“It’s the pressure to create ‘viral’ advertising, the urge to get more views online, that leads people to push the envelope,” said Tor Myhren, president and chief creative officer at Grey New York. He added that another contributing factor was the focus on younger consumers. “There’s so much ‘How do we speak to millennials?’ in meetings,” he said.

The toll that those controversies are taking on the ad business is in some instances more than just embarrassment. Two senior creative executives at JWT India, including a managing partner, lost their jobs after the company produced fake ads for the Ford Figo hatchback that showed women bound and gagged in the trunk as celebrities like Paris Hilton and Silvio Berlusconi sat behind the wheel.

JWT apologized, as did Ford, although there was nothing to suggest that the carmaker had either approved or known about the fake ads.

The celebrities in the Ford India ads appeared without consent, but even instances where stars agree to work with a brand can be fraught with risk.

Those celebrities, particularly rappers and actors with images as rebellious rule-breakers and risk-takers, often appeal to marketers’ youthful target audiences and have huge followings on social media. That is what drew Mountain Dew to Lil Wayne, the rapper who signed a multimillion-dollar celebrity endorsement deal with the soft-drink brand last year. The brand severed ties with the artist last week, however, after the Till family took issue with an ad that referred to Till with vulgar lyrics sung by Lil Wayne on a remix of “Karate Chop,” by the rapper Future.

As part of its efforts, the family also brought attention to an offensive Mountain Dew video ad created by the hip-hop producer and rap artist known as Tyler, the Creator. The spot featured a battered white waitress trying to identify her assailant from a lineup that included African-American men and a goat. Mountain Dew dropped the ad on May 1.

On Wednesday at the PepsiCo offices in White Plains, company executives, including Frank Cooper, the chief marketing officer for global consumer engagement for Pepsi, and Till family members gathered for a private meeting with Mr. Sharpton.

In a telephone interview, Mr. Sharpton described the meeting as good and its tone as respectful. He said, “The family explained the pain that they have gone through since the killing” and Pepsi executives “repeated their apology and said they would have nothing to do with Wayne and his tour.”

In a statement, the Till family said: “We look forward to ongoing and meaningful collaborations which bridge the music community, corporations, grass-roots organizations and youth.” A representative from PepsiCo agreed that the meeting had been amicable but declined to provide details.

David Schwab, senior vice president at Octagon First Call, a division of Octagon, the sports and entertainment marketing agency, said that brands used stars “to build awareness and create differentiation.”

“But a celebrity who can be a difference maker can come with a high risk,” Mr. Schwab warned, meaning “there is more pressure on brands to be careful.”

Bingham McCutchen Partner to Become SEC General Counsel

By Andrew Ramonas All Articles 

The National Law Journal

January 10, 2013

A Washington, D.C.-based Bingham McCutchen partner will succeed Mark Cahn as the Securities and Exchange Commission's general counsel, the agency announced on Monday.

Geoffrey Aronow, a Bingham partner since 2008 and the head of the Enforcement Division of the U.S. Commodity Futures Trading Commission from 1995 to 1999, will become the SEC's chief legal officer later this month. Cahn left the SEC last week. The agency said in December that the former Wilmer Cutler Pickering Hale and Dorr partner would return to the private sector.

Aronow said in a written statement that he is "truly honored to re-enter public service" at the SEC.

"It is humbling to lead a dedicated staff of so many talented and distinguished lawyers in the Office of the General Counsel, and I look forward to working with them closely as we provide the wisest advice possible to Chairman [Elisse] Walter, the other Commissioners, and agency staff," he said.

Walter said in a written statement that Aronow has "the ideal combination of practical knowledge, expertise, and common sense" for the job.

"Geoff is a faithful steward of the securities laws with a comprehensive understanding of law enforcement who shares our commitment to excellence and passion for investor protection," Walter said.

This article first appeared on The BLT: The Blog of Legal Times.

With 2 Big Deals Approaching, Rosneft Stands to Become a Global Oil Power

At the heart of the maneuvering is the country’s third-largest oil company, articles about TNK-BP." href="http://topics.nytimes.com/top/news/business/companies/tnk_bp/index.html?inline1=nyt-org">TNK-BP, which is a joint venture between the British oil giant BP and four Russian billionaires. Rosneft is negotiating to buy out one or both partners.

If either or both of the sales are concluded, Rosneft, whose headquarters is a mansion across the Moscow River from the Kremlin, is sure to expand its power on global oil markets. If both deals get done, Rosneft would become the world’s largest publicly traded oil company in terms of crude oil production, with the Russian government as the majority owner. The transactions would also lift the fortunes of Igor I. Sechin, a former spy and close aide to President Vladimir V. Putin, who has championed them as Rosneft’s chief executive.

The company has been trying to play down negative associations with state ownership. Rosneft is like a teddy bear, Mr. Sechin told a group of investors in London this month, in a video posted on the company’s Web site. “We love our teddy bear. We clean it, look after it and take care of it.”

The shift of BP’s Russian operations from private to state hands is fraught with risks, both for the company and the Russian industry more broadly.

BP’s partnership with private sector billionaires has yielded a return of 34 percent annually since it began in 2003. BP has earned $19 billion in dividends on an $8 billion investment and is now poised to sell its stake for a reported $25 billion to $28 billion.

BP’s investment in Rosneft stock from 2006, when the state company held an initial public offering, brought BP a loss.

“The state is tempted to milk the oil industry as a cash cow,” Peter Westin, the chief equity analyst at Aton, an investment bank in Moscow, said by telephone, referring to both high taxes and expanding government control.

The Kremlin, eager for investment to maintain the flow of oil that props up Mr. Putin’s popularity and the improved living standards of ordinary Russians, has sought both control and market-oriented policy changes under Mr. Putin.

Rosneft is listed on the London Stock Exchange and is among a group of oil companies that are owned or closely affiliated with governments that control access to oil reserves but are also open to private sector investment, like Petrobras in Brazil and Statoil in Norway.

The company has taken pains to emphasize that it will be run efficiently, hiring former executives from Exxon Mobil and TNK-BP in anticipation of the deal with BP. It has also reaffirmed its privileged access to new exploration sites in the Arctic Ocean after Mr. Sechin blocked a proposal by a liberal wing of the Russian government to open offshore drilling to competition.

Cliff Kupchan, an analyst at the Eurasia Group, which conducts risk analysis on Russian politics and economic policy for large investors including oil companies, wrote in a research note that Rosneft’s expansion could tempt the Russian government to use it strategically, just as Aramco, the Saudi Arabian company, is used to influence oil prices. This would come with a distinction: unlike Saudi Arabia, Russia would be unlikely to coordinate such moves with the United States.

Rosneft, if the acquisitions are completed, would pump about four million barrels of oil a day, or about 40 percent of the output of Saudi Arabia.

Oil analysts say Russia is unlikely to withhold oil, even as this becomes more feasible, because shutting down continent-spanning oil pipelines is too expensive. Also, many Siberian oil wells cannot be stopped without destroying them because permafrost surrounding their upper portions would freeze the well bore solid.

BP is hoping a deal with Rosneft might follow a similar arc of profit as its deal with the oligarchs.

BP made a fortune in Russia by applying Western oil field techniques to Soviet-era wells and infrastructure, which worked well despite BP’s blundering technical reputation after the Gulf of Mexico spill.

Sometimes, engineers made adjustments as simple as opening the spigot wider at the mouth of a well because the previous owners, following the Soviet axiom that they would pretend to work for pretend pay, had never bothered to check if more oil could flow.

From the mid-1980s to mid-1990s, Russian oil output dropped by half to just more than six million barrels a day, before deals like the creation of TNK-BP helped reverse the trend.

Overall production is now at about 10 million barrels a day, about tied with the levels of Saudi Arabia, but again in decline.

But future growth from fixing sloppy late Soviet work is unlikely, and a new chapter is opening in the history of the Russian oil industry.

“The landscape going forward looks a lot less attractive than the experience of the last 10 years,” said Peter Hutton, an analyst at RBC Capital Markets. Referring to the revival of old fields in Siberia using Western technology, he said: “TNK-BP has been able to get fairly low-hanging fruit in the brownfield revolution. Getting additional reserves is going to be a lot more difficult.”

One senior oil company executive close to BP said the partnership could similarly transfer know-how to Rosneft.

“Mr. Sechin and Mr. Dudley have known each other for years,” he said, referring to BP’s chief executive, Robert W. Dudley, a former director of TNK-BP. “There is a willingness on the part of the leadership of Rosneft to get expertise and people from BP to improve the capability of Rosneft.”

Andrew E. Kramer reported from Khanty-Mansiysk, Russia, and Stanley Reed from London.

Child Murder Case Pushes Miami Prosecutor to Become Judge

 Monica Gordo
Photo by Candace West

Miami-Dade Circuit Judge Monica Gordo knew she wanted to be a lawyer since she was a little girl. She discovered she wanted to be a judge after prosecuting the case of another little girl, killed by an AK-47 round as she played in the front yard of her Miami neighborhood Liberty City home.

Sherdavia Jenkins died in her mother's arms. She was 9 years old.

"It really affected me," Gordo said. "I thought, this shouldn't happen in America -- that children die at the front door of their house."

The case took three years. Gordo was pregnant with her second son by the time it finished. When she came back from maternity leave and stepped into a new position as a division chief in the Miami-Dade State Attorney's Office, she discovered she had a new ambition: to become a judge.

"Something happened in that process," she said. "That was when I realized that my passion was different. It changed."

Becoming a prosecutor, and eventually a judge, almost didn't happen.

"It's funny, because in law school I never even took criminal law," she said. "I went to law school thinking I would be some kind of corporate transactional type. I might not even practice law."

Gordo was born in Miami in 1975, the daughter of a doctor and one of the first woman vice presidents at Miami-based Eastern Airlines. Watching them work two and three jobs each and enduring three years of separation so her father could go to medical school in the Dominican Republic inspired her.

"He had an absolute passion for what he wanted to do in life," Gordo said. She followed his example, just not into medicine. "What I did want to do is find something I had a passion for."

Gordo graduated high school at age 16, and got her bachelor's in business at the University of Miami when she was 21. She went straight into UM's school of law. In her third year, she took a litigation skills course just to make sure her education was well-rounded. The professor pushed her into an internship at the state attorney's office.

Child Murder Case Pushes Miami Prosecutor to Become Judge

 Monica Gordo
Photo by Candace West

Miami-Dade Circuit Judge Monica Gordo knew she wanted to be a lawyer since she was a little girl. She discovered she wanted to be a judge after prosecuting the case of another little girl, killed by an AK-47 round as she played in the front yard of her Miami neighborhood Liberty City home.

Sherdavia Jenkins died in her mother's arms. She was 9 years old.

"It really affected me," Gordo said. "I thought, this shouldn't happen in America -- that children die at the front door of their house."

The case took three years. Gordo was pregnant with her second son by the time it finished. When she came back from maternity leave and stepped into a new position as a division chief in the Miami-Dade State Attorney's Office, she discovered she had a new ambition: to become a judge.

"Something happened in that process," she said. "That was when I realized that my passion was different. It changed."

Becoming a prosecutor, and eventually a judge, almost didn't happen.

"It's funny, because in law school I never even took criminal law," she said. "I went to law school thinking I would be some kind of corporate transactional type. I might not even practice law."

Gordo was born in Miami in 1975, the daughter of a doctor and one of the first woman vice presidents at Miami-based Eastern Airlines. Watching them work two and three jobs each and enduring three years of separation so her father could go to medical school in the Dominican Republic inspired her.

"He had an absolute passion for what he wanted to do in life," Gordo said. She followed his example, just not into medicine. "What I did want to do is find something I had a passion for."

Gordo graduated high school at age 16, and got her bachelor's in business at the University of Miami when she was 21. She went straight into UM's school of law. In her third year, she took a litigation skills course just to make sure her education was well-rounded. The professor pushed her into an internship at the state attorney's office.

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