Monday, October 6, 2014

New Era Cash Registers Will Be Apple Pay Signals

Not a single purchase has been made with Apple’s new payment system, Apple Pay, which will allow people to pay for everyday goods with their smartphone. But the service, expected in the coming weeks, already has the technology industry scrambling to profit from a future in which apps could regularly replace cash, checks and credit cards.

If doubts remained about the far-reaching implications of Apple’s entry into the market, they were almost surely cast aside on Tuesday. In a surprise announcement, the e-commerce giant eBay said it would spin off PayPal, long the dominant digital payment service — a move meant to make PayPal more nimble in a fast-changing market.

“The era of digital payments is upon us,” said John Donahoe, chief executive of eBay, announcing the split to investors.

It remains far from certain that Apple Pay, which uses the fingerprint reader on recent iPhones to confirm identities, will become a hit. The promise of convenient and secure mobile payments has long been hailed — by start-ups and powerful companies like Google and Verizon. That promise has remained largely unfulfilled.

But the swift reaction by companies in the three weeks since Apple Pay was unveiled makes clear that how we normally pay for goods and services is ripe for transformation. Square, a prominent payment start-up, plans to allow merchants the ability to accept Apple Pay transactions in the future. Stripe, a payment processing start-up based in San Francisco, has agreed to work with Apple to help more small businesses accept Apple Pay.

EBay’s announcement, meanwhile, was an abrupt about-face. This year, facing calls by the activist investor Carl C. Icahn to split the company in two, eBay’s executives vehemently argued that eBay and PayPal were more valuable together. PayPal probably has the most to lose if Apple Pay becomes successful.

“It used to be the case that the Internet was kind of the Wild West,” said John Collison, co-founder and president of Stripe. “Ten years ago, people were scared of checking out on random websites. Now, consumers are no longer unfamiliar with online commerce.”

Each previous form of mobile payment has run into one problem or another. Google Wallet, for example, was hamstrung by limitations on the types of phones and cellular networks with which it was compatible, leaving Google to focus its mobile commerce efforts elsewhere. Softcard, the product backed by major wireless carriers, has seen little enthusiasm for its mobile wallet for similar reasons.
As a result, cash and credit cards remain the norm in physical stores. So consumers have been unconvinced that paying with a phone at the register is any faster or safer than doing so with a credit card.

And online, only 11 percent of e-commerce spending happened on mobile devices in the second quarter, according to data from comScore, an Internet market research firm. The rest is made on desktop computers, largely because it is easier to enter payment information on a desktop than a smartphone.“Apple Pay is good for everyone in the payments ecosystem because ultimately, it increases the amount of transactions that are happening on mobile,” Mr. Collison said.

With Apple Pay, which is expected to be available within a month, people can pay online or in person with their phone, using an iPhone’s fingerprint sensor to check out, an experience that Apple says will be faster and safer than offerings from its predecessors. Many major restaurant and retail chains, including McDonald’s, Whole Foods and Macy’s, have signed up to accept payments this way.
Part of the scramble among companies comes from Apple’s reputation for upending other industries. The iPod, for instance, revolutionized how consumers buy digital music. The iPhone has changed the way people use their cellphones in their daily life.

Companies large and small think Apple’s payments service could potentially have the same effect.
“Apple in particular has a reputation of harnessing and mobilizing an ecosystem,” said DenĂ©e Carrington, an analyst at Forrester Research.

Perhaps no company has more to lose from a new payment system than PayPal. Started in 1998 by a handful of entrepreneurs, PayPal quickly grew to become the dominant online payment company, widely recognized as a safe and easy way to send and receive money over the Internet.
In 2002, eBay bought PayPal for $1.5 billion, and PayPal has continued to grow. It now has more than 150 million regular users, and last year, it had revenue of $6.6 billion.
“Everyone is gunning for PayPal,” Ms. Carrington said. “PayPal needs speed and flexibility to effectively defend and grow its business.”

Shortly after Apple unveiled its payment product in early September, PayPal took out a series of full-page print advertisements in several major newspapers, criticizing Apple for its perceived weaknesses in software security.

When a purchase is made, the iPhone wirelessly transmits a one-time code along with encrypted customer data, which the company says is more secure than swiping a traditional credit card.
“We the people want our money safer than our selfies,” the advertisement read, an apparent reference to a recent episode in which some celebrities had nude photographs stolen from their Apple online storage accounts.

Mr. Donahoe said multiple factors played into the decision to split eBay and PayPal, including the successful Wall Street debut of Alibaba, the huge Chinese e-commerce company. By being separate from eBay, Mr. Donahoe said, PayPal would have more agility, an attribute some analysts and tech insiders have said that PayPal has lacked for years.

“PayPal hasn’t innovated in the United States in a decade, and it shows,” said Keith Rabois, a partner at Khosla Ventures and a former PayPal executive. “You’ve seen the rise of companies like Braintree, Stripe and Square” — three fast-rising payment start-ups of the last few years — “and all of them happened right under PayPal’s nose.” PayPal bought Braintree last year.
And some people said PayPal, especially if standing alone, could benefit from Apple Pay’s introduction.

“For one, there is no equivalent yet of Apple Pay on Android devices,” said Colin Sebastian, an analyst at Robert W. Baird and Company, referring to devices that run Google’s operating system. Android smartphone users, he said, could flock to PayPal, which runs on both Apple and Google operating systems.

And other competitors to Apple — like Samsung or Microsoft, which manufacture millions of smartphones, or Alibaba, which has its own highly successful payment operation in China — could more heartily support PayPal in the future.

In an appearance on CNBC, Mr. Donahoe said: “The way technology’s evolving, the way mobile technology’s evolving, we think you’re going to continue to see profound changes in how consumers shop and how they pay.”

You Want To Borrow Money? Online Lending Sites Is Alternative To Traditional Borrowing [Community Resources]

Traditionally, consumers who wanted to consolidate loans or credit card debt, or borrow for a vacation or a wedding, had two basic choices: Visit a local bank for a personal loan, or use another credit card.
But a new group of online lenders is offering alternatives. It includes so-called peer-to-peer, or marketplace, lenders like Prosper and Lending Club, which recently announced plans for an initial public stock offering. These sites bring together borrowers who need financing with investors who have cash to lend.

And now Kabbage, an online lender focused on small businesses, has introduced a personal-loan arm called Karrot, which began operating last week.
The upstarts aim to fill the gap between banks and credit cards and the often pricey — and risky — payday lenders that make small loans at high interest rates pegged to the receipt of a paycheck. They offer an option for consumers who may not be eligible for home equity loans, which have proved harder to get after the recession.

The new sites make up a mere sliver of the overall consumer lending market, but they are growing. They’re not banks themselves, but they team up with banks — often Utah-based industrial banks — to make the loans. The sites say that since they don’t have brick-and-mortar branches, they can offer lower interest rates than many banks and credit cards.

They offer fixed-rate loans, generally up to $35,000, for terms of either three or five years. Interest rates range from just over 6 percent to as high as 28 percent or even, in the case of Prosper, 35 percent. (Whether the rate you’re offered is a good deal for you depends on the rate you’re already paying, or the rate you would pay elsewhere; credit card rates average 21 percent, according to Karrot.)
The loans typically have no prepayment penalty, and do not require any collateral.
“There are not a lot of unsecured credit products available to normal people,” said Aaron Vermut, chief executive of Prosper. Prosper’s average loan is $13,000, he said, and interest rates are typically 8 to 12 percent.

The sites also offer a faster application process, which combines traditional means of assessing applicants, like checking credit scores, and the sites’ own underwriting methods.
Karrot, for instance, considers the number of credit cards a borrower has, any liens on his or her property, and other factors. It also requires applicants to provide their bank account numbers and online passwords so their income can be verified through an analysis of deposits. “We figure out if your income matches what you said on your application,” said Rob Frohwein, chief executive and co-founder of Karrot.

(A Karrot spokeswoman said the process was handled by Yodlee, which provides the "plumbing" for many banks’ online systems; Karrot doesn’t have access to consumers’ credentials and doesn’t store the information.)

The analysis also helps Karrot schedule automatic loan payments at optimum times, Mr. Frohwein said, like the day after an automatic deposit is scheduled. (Borrowers may pay by check, but they’ll pay an extra fee for that.The site received thousands of applications in its first week of operation, Mr. Frohwein said, with about 65 percent designated for debt consolidation, 12 percent for the funding of new businesses or home improvements, and the rest for a litany of other purposes.

Brian Bauman, 50, an accountant near Chicago, said he had three personal loans with interest rates ranging from 21 percent to 25 percent, and combined monthly payments of more than $800. He was familiar with Kabbage from clients who had used the site to finance their businesses, so last week, when he received an email from its new affiliate, Karrot, he decided to try it.

On Thursday, he applied online, and in roughly 30 minutes was approved for a $15,000, 36-month loan at 17.7 percent. His new lower payment is $541 a month. While he was skittish about providing his bank account password, he said, he was impressed by how quickly he received his funds: The money arrived in his bank account on Saturday.

Here are some questions about alternative lending sites:

Must I have good credit to use the sites?

Both Prosper and Lending Club make personal loans to borrowers with credit scores that are considered prime — at least 640 for Prosper, and 660 for Lending Club. (FICO credit scores range from 300 to 850.) Karrot doesn’t specify a minimum, but a spokeswoman said scores tended to be “near prime and up.”

Do the sites charge fees?

Typically, the sites charge borrowers origination fees of 1 percent to 5 percent of the loan amount, depending on the term of the loan and the borrower’s creditworthiness. Consumers should factor that into their calculations when deciding if the loan makes sense.

Is my payment record reported to the credit bureaus?

Once you accept the loan offer and begin repayment, the sites report your record to the credit bureaus. So late or missed payments can affect your credit score, and you will be subject to the lender’s collection policies if you fail to pay. While the peer-to-peer label may suggest a friendlier approach, said Christine Pratt, a senior analyst with Aite Group, the sites attract serious investors expecting a return on their money. “These are basically finance companies,” she said.

Sunday, October 5, 2014

What To Consider Before Buying A Home

Buying a home will be one of the biggest purchases of your life. When you’re ready to make the commitment, it can be an incredibly rewarding experience. But timing is important. Purchasing before you are financially and emotionally ready can lead to tough financial choices in the future.
Instead, choose the path of responsible homeownership and hold off on buying a home until you can purchase with financial confidence.

Here are three signs you shouldn’t buy a home right now.

1. You Have Little or No Savings

There are multiple costs associated with buying a home. With conventional financing you’ll have to put down at least 5% of the purchase price. For a $200,000 loan that’s $10,000. There are some mortgages that don’t require a down payment, such as the VA loan. But even these loans have other out-of-pocket costs such as appraisals and inspections. Do a little research into the out-of-pocket costs you’ll incur, then establish a savings plan to ensure you can cover these costs before moving forward.
Now let’s assume you have enough to cover the minimum down payment and out-of-pocket costs associated with the loan. Your next consideration is whether you need additional savings to cover household expenses your first year as well as any emergencies. As a homeowner you’ll have expenses that come up that you wouldn’t have to pay as a renter. Depending on the age and state of repair of the home you purchase, these expenses may be minimal or they may be very large.
You need a safety net in place to cover both planned and unplanned expenses and emergencies. You don’t want the first unexpected home repair to throw a wrench in your finances. Determine how much you’ll need to establish a comfortable savings for these costs in your first year. If you aren’t sure where to start, consider saving 1% of the purchase price each year for maintenance plus an amount equal to several months’ worth of mortgage payments.

2. You Don’t Have a Budget

If you want to buy a house, you need to know how much you can comfortably afford. Your lender will tell you how much they’ll lend, but that number doesn’t necessarily correspond with how much you can afford.
Purchasing a home without consulting a budget may set you up for a monthly payment that exceeds your comfort level. You need a budget so you can look at factors your lender may not consider. For example, you might contribute funds to a local charity or help a relative from time to time with their expenses.

If you don’t have a budget, now is the time to make one. Failing to consider all your monthly expenses can lead to tough calls down the road. Don’t buy a home until you have a clear understanding of your budget in order to find a monthly payment you can truly afford.

3. You Haven’t Looked at Your Credit Report

Have you looked at your credit report lately? If your answer is “no,” then you’re not ready to buy a home. Credit reports play an integral role in loan approval. In 2013, a Federal Trade Commission study found that 5% of consumers had errors on their credit reports that caused a big enough change in their credit scores to subject them to higher interest rates. Therefore, errors on your credit report could lead you to pay more for your mortgage.

You won’t know if there are errors without reviewing reports from each of the three major credit bureaus. Furthermore, correcting errors on a credit report takes time. You don’t want to find the home of your dreams and then watch it slip away because you didn’t take the time to correct errors before starting the homebuying process. Pull your credit reports before shopping for a home and get to work on correcting any errors now — you can get your credit reports for free every year through It’s also a good idea to check your credit scores to see where you stand and determine if you need to build your credit in order to qualify for a loan (and better rates). There are resources, like, that give you free access to your credit scores.

While this article might seem to be all doom and gloom, there really is a light at the end of the tunnel. You can overcome each and every one of these hurdles. And when you do, you’ll be thankful because you’ll know that you’re entering into a long-term commitment you can truly afford. While the path to responsible homeownership may be a little longer, the security it provides is completely worth it.

Saturday, October 4, 2014

How To Be Financially Secure Working A Regular Job in 2015 [Community Resources]

Here's everything you need to know in order to make your first million.
While you may be looking to make your first million off of your business alone, the fact of the matter is that becoming a millionaire does not just come about by raking in profits from your business. It arises from the decisions that you make in your day-to-day life as well. There are more millionaires than ever nowadays, and it's not because the financial market is good; in fact, it is pretty common knowledge that the economy has definitely seen better days, and the people able to find success in it know how to act accordingly. To become the next millionaire, you will need to blend business practices with responsible financial decisions in order to both maximize profits and squirrel away some cash for the winter. Even though this is easier said than done, the things that you have to do to become the next millionaire are theoretically fairly easy.

Buy The Things That You NeedEven though one of the reasons people strive to become millionaires is to be able to afford the things that they want to do, living in a house far too big for your needs or shelling out on a vehicle more luxurious than you require is going to set you back in your goals.

Spend Less Than You EarnThis is saving money and accruing wealth 101, but even old advice can be good advice, and such is the case with this.

Make Sure That You Can Pay Off the Things That You BuyAnd the quicker you can pay them off, the better! This will enable you to search for a job that you love and will therefore be more conducive to putting you closer to your goals.

Exercising PatienceIt may be really tempting to up your quality of living or your lifestyle expectations as you begin accruing more money and assets to make you into a millionaire, but you will not reach your goal by taking some out of the pot.

Utilize Automatic Paycheck DeductionsYou cannot spend what you do not have, so having these set up with your bank is going to help you save money better than many other tactics will.

Pay Off Your Credit Cards Every MonthHaving a good credit score is always a strong financial situation to be in, but making sure that you can afford what you are spending is even better when you are trying to become a millionaire.

Use Time to Your AdvantageThe quicker you start saving, the better. If you begin saving in your twenties or thirties, you will be able to take advantage of compounding interest and put yourself in a better position without having to do much extra work.

Realize That Money Doesn't Buy HappinessWhen you are working for a wholesome goal instead of a ploy to satisfy material urges, your goals will come to you faster and easier.

Realize That 'Life Happens'Having a bit of money on the side separate from your millionaire fund will keep you on a steady track toward that goal; after all, you never know when a financial emergency will rear its ugly head.

Focus on Being Debt FreeEven if you have income coming in every month, if you have any sort of debt, you need to be deducting that from your gain--if it comes out negative, you are not financially free, and will not be able to achieve your millionaire dreams yet. In order to be the next millionaire, you have to make sure that your debts are all paid.

Work Hard And DiligentlyIf you keep putting in the effort, it will be easier to make amends after a financial mishap.

Get a Second JobNot only will it add to your savings that much faster, but also if you stay busy you will have no time to spend the money that you are trying to save.

Don't Be Afraid to Have a Big VisionMost modest savings plans do not end up panning out as the people who made them would have liked. Having a vision larger than what you can currently deliver will actually be the best way to ensure that you meet your goal.

Have Good Money Management SkillsKeep up to date on what you need to know to manage your money, and realize that without good management, it will never grow or mature into what you would like it to be.

Do What You EnjoyWorking in a field you enjoy will be one of the fastest routes to financial freedom and success, as you will spend more time at work and excel at it, putting you in a better position for promotions and pay increases.

Pay Yourself FirstThis will keep you satisfied and will help you achieve financial success with your goals.

Go Out And Find Your MoneySimply saving and hoping that it will come to you will never be good enough. You will only receive what you earn.

Invest in YourselfWithout furthering your education or professional development, there will be nothing to set you apart from others, and no reason for your employer to aid you in your goals.

Invest in Property When You Do Buy AssetsHaving property on hand is always going to be a good asset, as there are always buyers for property and property values are beginning to climb again, healing from the collapse in 2008.

Realize That There Is More Than One Way to Approach a ProblemBeing versatile will lead you quickest to the solutions for your problems.
There's certainly no surefire way to becoming a millionaire. After all, if there was, everyone would be making millions. However, if you manage to blend the right business practices with solid personal finance skills, there's no telling where you'll end up. Follow these 20 guidelines, and you, too, can become the next millionaire.