Omar Qari

co-founder at abacus

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How We’re Killing Expense Reports

The expense report is broken. The entire concept was a necessity of a previous era when it was simply more cost effective and efficient to process stacks of paper in batch. Today, the secular shift in customer expectations that has fueled market challengers in B2B services like accounting (Xero) and payroll (ZenPayroll) has put pressure on the rest of the back office to mirror the experience that customers have come to take for granted in their personal lives. It’s not enough anymore for a SaaS provider to just offer an online expense report - that’s essentially the digital equivalent of giving businesses a faster horse.

We’re building Abacus. We intend to eliminate the need for expense reports altogether. Ted, Josh and I are reimagining the expense management workflow born mobile, from the ground up to mirror the speed and simplicity of sending a tweet. To understand the impact...

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Response to Matt Harris’ Square Puck

Matt Harris wrote a thought-provoking post over the weekend, where he tries to break down how today’s offline payments landscape is reacting to Square and makes some bold predictions on where we’re headed.

I personally enjoyed reading it and wish more VCs were as thoughtful on the topic of financial technologies. That being said, I want to address a few key assertions Matt makes in the post where my view differs.

Are the payments incumbents actually heading in the wrong direction, wasting their resources and time?

While I agree that the specific piece of the value chain (i.e. acquiring processing) that incumbents are targeting in Square’s backyard (i.e. the micro-merchant segment) is unprofitable, we cannot underestimate the intentions underlying this approach. Of course BofA and TSYS know it’s unprofitable – in the same way that Square clearly views the play as a loss leader to get...

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Why Facebook Really Axed Credits

There was a lot of noise in the press last week about what Facebook’s Developer Blog post on the axing of Credits did or did not mean. Frankly, most of it missed the point.

In order to understand Facebook’s decision to wind down the virtual currency after dipping its toes into the space for the past 3 years, we first have to take a step back and look at what’s happening in the global payments industry. Driven mainly by the inability of financial services providers to differentiate themselves, historical integrated payments business models are being replaced by a disaggregated payments stack.

The base infrastructure layer makes up the industry’s rails, i.e. banks, schemes and processors. A critical component of the stack, the infrastructure layer acts as the basic toll road over which transactions travel, providing scale as the main benefit and presumably therefore cost...

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The Epitome of Lean Startup

This is Emile’s motorcycle in the Sahara Desert - 12 days ago, it was a car.

Traveling across North Africa in his Citroen 2CV, Emile hit a roadblock in Morocco due to military conflicts in the area and decided to casually loop around through the desert. Eventually, he snapped a swing arm on his vehicle. Stranded and too far to safely travel by foot, Emile decided the best course of action was to disassemble his vehicle and construct a motorcycle from its parts.

12 days later (and seemingly less clothed than when he began), he managed to construct the above. Check out the original article (in french) along with shots of the stripped down Citroen.

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The Commodity Effect

Everyday payments products (e.g. credit cards, checks, remittances, etc…) are becoming increasingly difficult to differentiate. In a free market, as the basic product in an industry becomes more commoditized, pressure from competition, regulators and technological advances will inevitably break apart the value chain. Each segment of the chain comes under attack by new market entrants leveraging disruptive new advantages. While the Energy industry is certainly the poster child for such a shift, Mobile Telecoms arguably experienced even more growing pains in their transition.

Energy: 15 years ago, under pressure from legislators and rapid technological innovation, new competitors forced apart the energy industry into 5 segments – extraction, processing, wholesale, delivery and retail. 5 years later, the gas sector further separated, followed by electricity as delivery split into...

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Payments: Market Sizing

To give you a sense of the market opportunity in electronic payments today, online transactions alone result in $63 billion in annual revenue for service providers (e.g. PayPal 1Q12 Revenue = $1.3 billion, 32% CAGR YoY). Revenue generated from offline electronic payments (e.g. credit card swiped at point-of-sale) amounted to 10x as much.

Just to clarify, this does not represent the amount of transaction throughput that is processed - that figure would be roughly 50x the revenue generated.

In terms of the opportunity for growth, 80% of global transactions today are still performed in cash (declining at 4% p.a.).

The key secular trends driving the electronification of payments (not profit, but rather the underlying transaction throughput) are increasing penetration (more consumers gaining access to electronic forms of payment), increasing acceptance (more merchants accepting electronic...

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