SOURCE: Financial DNA, LLC

June 22, 2005 10:19 ET

Financial DNA Releases Its Assessment of Last Week's Major Payment Events -- Why Google Doesn't Stand a Chance Against PayPal and the Implications to the Security Breach at Card Systems

SAN FRANCISCO, CA -- (MARKET WIRE) -- June 22, 2005 -- Financial DNA, LLC (, the foremost source of Financial Technology insight for industry professionals and investors, has released its analysis of last week's watershed payment events -- the supposed entry of Google into PayPal's domain and the security breach at the Card Systems data processing center.

According to Financial DNA:

"What Google lacks is a clear-cut market need -- an obviously underserved online transaction environment that requires or is capable of supporting a brand-new online payment type. The online payments marketplace is hardly complete -- micropayments and worker remittances are two examples of sub-segments that are likely to see considerable further development in the years to come. But with a few exceptions, online payments have come a long way since before the introduction of PayPal. At PayPal's inception, eBay auctions presented a clearly addressable market need for online payment services. Now that PayPal has filled that need and indeed expanded its appeal to a broader set of merchants, small businesses and the like, we question where Google Wallet is likely to fit in the online payments market: alongside a potential online classifieds site? as an addition to Froogle?

In our view, the real news last week was not Google Wallet. Instead, the most important developments in the payments industry were twofold: 1) PayPal's bold move into the merchant acquiring/payment gateway segment and 2) the unprecedented breach of security at third-party processor Card Systems Solutions. With the introduction of Website Payments Pro (allowing merchants to use PayPal to process credit card payments directly from their own website), PayPal has become a fully fledged merchant acquirer and payment gateway and the low-price leader in the marketplace by a wide margin. Separately, the Card Systems Solutions breach is likely to lead to further scrutiny, regulation and consolidation of the card processing industry. Both of these headlines signal that both improved quality and lower cost in payment processing services are on the horizon. PayPal's entrance into the merchant acquiring/payment gateway market will, in our view, lead to lower prices for merchant processing services and vertical integration among competitors that should generally improve service levels; regulation of card processors (who are not currently covered by Gramm-Leach-Bliley) should lead to improved security and decreased fraud."

Financial DNA, LLC provides investors and industry executives a comprehensive set of research, advisory and communication services. It holds regular industry conferences designed to bring investors and industry professionals together, including its next Financial Technology conference on Unbanked Financial Services Innovation Conference (Merchants Exchange Club in San Francisco, September 14, 2005). Financial DNA, LLC is currently engaged on a number of assignments comprised of Business Development, Investor Communication, Mergers & Acquisition, and Strategic Advisory services.

The entire text of its current research can be found at

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