ePayments Week: Growing demand for connected health services

Health monitoring rises, Facebook Credits gets unwanted attention, Square lands big funding

Here’s what caught my attention in the payment space this week.

Report: Connected health devices poised to take off

SparkPeople screenDo you monitor your health activity — your calories, your exercise, your sleep — on your smartphone? If so, you’re an early adopter in a movement that appears poised to become much larger, according to a recent study and white paper from IBM, “The future of connected health devices.” The report is based on an online survey of 1,300 users of home healthcare electronics, 80% of whom are chronically ill patients and 20% of whom are their caregivers. It starts with the observation that there are two pools of users already deeply involved with connected devices: those with health conditions that require monitoring (the “Chronically Monitored”) and another group of relatively healthy geeks who are interested in using technology to keep themselves healthy longer (the “Motivated Healthy”). The latter group includes the Quantified Self movement, which Gary Wolf discussed recently on Radar. It’s made up mostly of tech-savvy folks who are pushing the boundaries in monitoring and analyzing everything from their body chemistry to emotions and clothing options to improve their daily lives.

In between these groups lies a larger group of potential consumers that the report calls “Information Seekers”: “… a willing — but currently underserved — market for health device makers.” This is a broad group with widely varying needs, including weight loss, breaking destructive addictions and other habits, monitoring high blood pressure, migraines, mood swings, or ADHD. The market to serve them, the report continues, is poised to grow quickly given the convergence of a few important trends, including the improvement (and cost reduction) in sensors that can automatically monitor and transmit data from the body, the rise of smartphones and better connectivity, and better tools for analysis. Of course, the effects on any individual are just part of the story: as with any set of big data, the bigger story may arise out of the analyses that will be performed on the aggregate data from millions of these devices, connected and collecting data implicitly and explicitly.

The report’s authors expect these systems to create a new revenue stream for service providers — not just the cost of devices, which may be paid for by insurers in some cases and out-of-pocket by consumers in others, but also for monthly fees paid for premium services. Only 5% of the people IBM surveyed pay monthly fees for these kinds of services today, but 35% said they expected to be doing so within two years. Seeing the data will be valuable, but an intelligent, synthesized, human response will probably be worth even more. Sure, it’s great when my Spark People app delivers an automated message telling me enthusiastically that I’ve burned enough calories for the day. But I might pay real money for the added service of a human adviser who could coach me through the day and keep my diet on track.

Mobile research firm research2guidance conducted a survey on this topic last fall, and the results are summarized on Slideshare. Their report found that, among other things, app stores could lose their dominance as the main distribution channel for mHealth apps, with hospitals, physicians, and health websites taking over that responsibility. It’s easy to imagine that health consumers may be more likely to trust a health-monitoring app that’s been sanctioned by their care providers — though it’s difficult to imagine a mechanism for delivery that would be easier than the app stores where consumers are used to getting their apps. Still, hospitals and insurers may determine it’s worth investing in a different distribution channel, particularly if they feel that the app store owners are likely to take an unwarranted cut in their revenues.

Consumer Watchdog asks FTC to check out Facebook Credits

Facebook CreditsJust days before Facebook’s new terms requiring game developers on the world’s most popular social network to offer virtual goods only in Facebook credits, Consumer Watchdog has filed an anti-trust complaint with the Federal Trade Commission (FTC). The complaint notes that the new rules coming into force on July 1 require game developers to sell all their virtual goods on Facebook using only Facebook Credits (not credit cards, PayPal or any other method), refrain from offering those digital goods at lower prices elsewhere, and give Facebook a 30% cut on earnings. While one could argue that it’s Facebook’s sandbox and if game developers want to play in it they must play by the Zuckerberg rules, the more damning charge is that Facebook has made a joint venture agreement with Zynga, the biggest game developer on Facebook, which largely exempts it from these burdensome rules. “The agreement between Facebook and Zynga,” the complaint reads, “if published reports are correct, would therefore constitute a conspiracy between competitors and further extend Facebook’s already overwhelming monopoly power.”

While a blog post on Consumer Watchdog’s site appears to be exaggerating the significance of the new rules, saying they “could well put the Internet powerhouse on the road to dominance of all online commercial transactions,” the complaint raises an interesting question about whether Facebook’s dominance on the web will translate into dominance of online commerce. Certainly, the financial transactions among its members and developers must fall far behind those of web-native leaders like Amazon, PayPal, and the iTunes store, not to mention the much larger bundles processed by MasterCard and Visa. But as Venessa Miemis, the author of The Future of Facebook project pointed out in a recent column on Forbes, Facebook’s commercial influence may extend far beyond dollars transacted as it increasingly taps its knowledge of users’ social graphs not only to facilitate Facebook Credits transactions, but perhaps transactions based on more ethereal concepts like trust and time.

For now at least, Consumer Watchdog’s complaint looks at more familiar questions: Is Facebook abusing its monopoly on social media to coerce developers to operate under onerous conditions, and are they giving unfair treatment to one partner in particular? As Stephen Shankland points out on CNET, Consumer Watchdog has been a critic of Google, thanks in part to a grant to monitor Google’s activity, but with this charge it expands its scope, taking on another online giant.

Square collects $100 million in one swipe

How often do you get to tweet about a $100 million infusion to your company? I guess if you’re Jack Dorsey, it may not qualify as a once-in-a-lifetime experience, but it’s still worth noting that’s more than $700,000 per character in Dorsey’s tweet reporting that Square had landed another $100 million in funding.

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Thrilled to announce that Mary Meeker of @KPCB is joining @Square‘s board! And we raised $100 million. Putting more people into business.less than a minute ago via Twitter for iPad Favorite Retweet Reply

Just as surprising was the new valuation reported: more than $1 billion. Six months ago, it was $240 million. What changed? GigaOm noted the increasingly high-powered board (that now includes Mary Meeker, Vinod Khosla, and Larry Summers), “charismatic founder, [and] seasoned operator Keith Rabois” as key reasons why the company’s so hot.

I think equally important were the two new product offers that Square has introduced this year. Square Register expands on the original handheld app, but its additional capabilities are aimed at tablet users (giving them the ability to see quick analytics on their businesses) seem to raise its capabilities from the swap meet and farmer’s market to something that could be a serious retail tool. Perhaps more importantly, Square Card Case shifts the focus from the merchant to the consumer, creating a product that consumers can use — specifically, setting up tabs that let them pay quickly at their favorite places. If it takes off (and we’re yet to see if merchants enable it in great numbers) it introduces a whole new, larger class of users to Square, along with all the data and marketing possibilities inherent in those relationships.

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