Today Experian released the Q4 2016 Experian/Moody's Analytics Main Street Report. The report offers deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary around what certain trends mean for credit grantors and the small-business community as a whole. Delinquency Rates Decline Sharply Small business delinquency rates fell throughout 2016 at a slower pace compared to 2015. Q4 saw a sharp decline in delinquency across multiple industry sectors. Oil pricing may be what's drivingThis was likely due in part to OPEC's announcement to cut supply over the next several months. Small Businesses Feeling Confident as Balances Increase Q4 loan balances increasing 7.7 percent from the third quarter and 10.3 percent from last year. Despite this activity, utilization remains below 40 percent, leaving plenty of capacity for businesses to expand using available credit. Business sentiment among business owners remains positive with the National Federation of Independent Business Owners reporting a sharp increase in small-business owner confidence in November and December. Nevada Roars Back Nevada was particularly hard-hit during the Great Recession. Small businesses in the state have struggled with credit ever since. In the fourth quarter Nevada's severe delinquency rate fell to 8.94 percent, the lowest level observed in the available history for the state. Eight of eleven industries in Nevada saw delinquency rates decline from the third quarter of 2016. Experian has published the contents of our report in an interactive web page, complete with interactive charts and graphs.      

Loan stacking is a small but serious problem for Online Marketplace Lenders (OMLs). Often invisible to the issuers of commercial capital, businesses that engage in this insidious practice are significantly more likely to become delinquent on their payments and even default entirely on their obligations. If you manage a company that issues commercial credit, you need to be diligent in weeding out these bad players to protect not only yourself but your industry as a whole. What is Loan Stacking? Simply put, loan stacking is the opening of multiple credit lines within a short period of time. (Sometimes as little as 24 or 48 hours.) Because there is a natural lag in credit reporting, the lenders involved usually are unaware that other companies are transacting with the same customer. On the personal credit side, loan stacking is a potential problem for borrowers who run their multiple credit lines near – or up to – their maximums and then find they can no longer meet all of their monthly obligations. However, it’s not uncommon for individuals to carry multiple credit cards, and most credit card companies already have reliable systems in place to ensure borrowers don’t get more credit than their incomes justify. Things are different on the commercial side. Today, a lot of short-term borrowing occurs online through Merchant Cash Advances (MCAs). Repayment takes the form of weekly or even daily debits against the businesses’ cash receipts pulled directly from the borrower's checking account. For example, a restaurant may take out a $10,000 cash advance, the lender then taking five percent of that restaurant’s daily receipts until the advance is repaid – with interest. MCAs  are not technically considered “loans,” and thus are not subject to the same regulations and oversight as traditional commercial lending.  Such advances usually cover a period of four to eight months. Some can go as long as 12 months, but rarely do they go longer. MCAs are most popular among retail stores and have helped many small businesses get funding when needed. However, problems arise when a business takes out several cash advances at the same time. Instead of paying, say, 5 percent of daily receipts to a single lender, the restaurant loses perhaps 20 percent to four lenders simultaneously. At this rate, the business becomes unsustainable and defaults. Not only is commercial loan stacking a risky practice, it can be legally problematic. Many MCA providers are now placing anti-stacking language in their contracts that require borrowers to pledge not to promise their receipts to any other companies. Stacking loans violates this provision and thus may be tantamount to fraud. How common is commercial loan stacking? Based on our research and analysis, we believe that between five and six percent of all merchant cash advances are stacked. In 2013, the MCA market accounted for about $3 billion in transactions. By December 2016, that number had probably doubled. That means that between $150 million and $360 million in commercial loans are stacked. Granted, that's a drop in the bucket for the $1.9 trillion commercial lending industry, but for a small company just getting in the business of making such credit advances, it could be a serious threat to their portfolio's health. Why loan stacking occurs Why do MCA lenders allow themselves to be pitted against each other in this fashion?  Blame the internet. The same internet that gives us the benefits of virtually instantaneous credit applications, reviews and approvals also makes it possible for businesses to easily make multiple applications within a 24- or 48-hour period. Many commercial credit reporting companies may provide updates as quick as 24 hours in some cases, a commercial MCA lender receiving a cash advance application may experience a slight delay in knowing if other lenders are working with the same customer. As for borrowers, most don't stack because they are not intending to commit fraud or otherwise game the system. They're doing so because, at the time, they believe they have no choice. Running a small business is difficult. Businesses often operate on thin margins and owners may, at times, struggle to make payroll. If there's a sudden setback or cash flow suddenly stalls, an owner may need a sizeable cash infusion just to keep the doors open. Being an optimistic lot, most owners who get multiple MCA loans do so in the belief they can quickly get over the hump, recover their losses, rapidly pay back what they owe and no one will be any the wiser. Sometimes, this strategy works. But too often, it does not. And that's when things get nasty. How to avoid loan stacking customers If you are an MCA lender and wish to avoid loan stacking customers, you have three tools at your disposal: Before making a cash advance, ask to see a full year of checking account activity. If you see a pattern of weekly or daily debits in a similar dollar range, this could be a sign that the business already has an MCA in place. If the business is relatively new, check their credit report for a high number of UCC (Uniform Commercial Code) filings. A large number of hard credit inquiries often indicates the owner is doing a lot of loan shopping, and this can indicate loan stacking. Sign up for Experian's custom short-term industry specific risk model consulting services. Signs of loan stacking, particularly in young companies with excessive UCC filings, can often be spotted using this service. For MCAs and all other forms of commercial lending to work, all parties have to play by the rules. Discouraging loan stacking not only benefits lenders, but also the borrowers who depend on the services these lenders provide.  

This year’s Marketplace Lending and Investing Conference explored issues of transparency, partnership, consistency and sustainability.  There was healthy debate on each of these topics and the audience, presenters and panelists frequently returned to the theme of the relationship between Marketplace Lenders, Fintech, Banks and Investors.  As the conference unfolded I thought about the role of small businesses in the relationship between these stakeholders.  How do mom and pop small businesses fit into these complex, rapidly evolving relationships? In mid-2015 The Federal Reserve of Cleveland published a report.  The title was “Alternative Lending Through The Eyes of ‘Mom & Pop’ Small-Business Owners: Findings from Online Focus Groups”.  The report found that the small business owners participating in the online focus groups had a number of common concerns: Marketplace Lenders’ sites are attractive … but how secure? How private is the information the small business provides? It is difficult to compare product offerings, features and pricing The small business owners bank is a source of advice but is not necessarily considered as an option for funding There are some clear parallels with the conference’s focus on transparency, partnership and sustainability.  See if any of these sound familiar: Regulators at the federal and state level are researching the Marketplace Lending industry and exploring ways and means of regulating the space. They are particularly focusing on issues of disclosure, fairness, privacy and governance.  The CFPB – Consumer Financial Protection Bureau has been particularly active.  There are two recent examples that illustrate increasing protection for small businesses. Dwolla was hit with a $100,000 fine in March of 2016, directly related to data security practices.  Then, in late September LendUp was fined $3.5 million for deceiving its customers.  The list of lenders who have strayed from fair and transparent business practices is long and growing.  Fortunately, regulatory supervision of the online marketplace is here to stay. Banks largely abandoned the small business segment post 2008. Lack of profitability is most often cited as the reason for the exodus.  Marketplace Lenders entered the space, delivered a wide range of product offerings, high levels of responsiveness and a relatively painless customer experience.   Now, eight years later, banks and Marketplace Lenders are partnering to make the most of their relative strengths – deep customer relationships and the capability to deliver exceptional customer choice and experience, through technology. Leaders in the various stakeholder organizations are still focused on surviving, meeting goals for growth, managing risk and optimizing returns.  In the past these may have conflicted with the small business owners interests.    In late 2016, they are in alignment … and that is good news for small business owners throughout the US economy. If you would like to hear more of what I learned at Marketplace Lending and Investing, check out the Live Marketplace Lending & Investing Q&A I recorded from the conference.          

Reporting business data to Experian is an important and essential part of the credit ecosystem. Data provides a more complete credit history and in turn helps small businesses grow. Small businesses that have limited tradelines can sometimes face difficulty qualifying for loans and getting access to capital, so lenders and commercial trade partners who report data to Experian are giving small businesses the credit they deserve. How to report data to Experian You can start the process of reporting data to Experian by following a simple 8-step process outlined in this video. Our data acquisition specialists are standing by to help onboard new business data contributors and can answer questions to make it a seamless onboarding experience. You can also find more information on our data reporting page experian.com/datareportingbusiness. We have also created a handy Infographic which describes how to contribute both consumer and small business data. Get Started Reporting to Experian

Experian met with LendIt Conference Chairman Peter Renton recently and during our talk he shared some valuable insights on marketplace lending and the growing Chinese peer-to-peer lending industry. Why do so excited about the Chinese peer-to-peer lending industry? I think there are two things, one is that it is massive, the Chinese market is so big it’s bigger than the rest of the world, combined.  And so that, I think, it’s an opportunity for everybody, and western platforms and Chinese platforms. But that’s not all, I think one of the things I think is most interesting about China is how they use technology particularly in the mobile space. The way these platforms operate on the borrower acquisition side, on the investor side it’s all done through mobile. And that is very different to what’s done in the West, so we’ve got a lot to learn. The Chinese experience is probably 3 to 5 years ahead of what the West is going to be. We all talk about “Well, we are going to move to mobile eventually” but it hasn’t happened yet and you talk to most platforms and the still the majority of their traffic is coming from through the desktop so that’s not the case in China it’s something like 80% or 90% coming on mobile sometimes even more. Some companies have nothing other than mobile traffic, they don’t even have a website. That’s why I think China is interesting and we can really learn a lot from the Chinese. Will we start to see U.S. companies make investments in China? I think the first thing were going to see from U.S. companies is them trying to attract Chinese capital, that is already started we have already seen some Chinese capital coming in, there’s been publicly available information like with one of SoFi’s investors is a Chinese company. The Chinese are making more equity investments in this space, we’re also starting to see debt capital coming from China into the U.S., so that’s definitely I think one of the ways that we will be connecting the two countries. The other is eventually we’re probably down the road two to three years minimum we are going to see western platforms going to China and either buying a Chinese platform or starting operations there. We’ve seen all of the major banks have done that, China such a big market, it can’t be ignored. If you want to be a global player you have to be in China so I think that’s probably the secondary second step, the first step is attracting capital. Is the Chinese market primarily consumer lending or using lending to small business? So it’s similar to the U.S. where really the consumer lending sector has led the way in marketplace lending and I think the same thing is true in China. There is definitely small business lending in fact small business lending is probably even needed more in China than the West because small business owner’s, entrepreneurs in China have very few options when it comes to obtaining financing, so these platforms are setting up to really fill that massive void. What goal should marketplace lenders consider when partnering with traditional lenders? If you talk about traditional lenders if you are talking about banks I think that is something that we’re seeing more and more just at LendIt today we had a whole session on bank partnerships, there’s been several other mentions we had Avant’s Al Goldstein this morning talking about their new partnership with Regions Bank. Regions Bank is a top 20 bank in the U.S. I think what’s in it for the platforms obviously is, if you look at the Avant deal they get two things, they’re sort of licensing their technology and their underwriting box helping these banks reach difficult to obtain customers and underwrite customers in ways that a bank necessarily wouldn’t have the expertise to do. So they are doing that and then with Avant they’re also getting referrals so the bank may have people coming to them for loans that they can’t or won’t underwrite so then they can refer them on to Avant, so I think that’s the best example. You talk about the Chase OnDeck deal, I’ve spoken with Noah Breslow about that and he’s mentioned that it was a long process. Chase is the biggest bank in the country, they’ve got a massive compliance department, they had to check every single box and so I think platforms they really need to be like professional grade shall we say. All of their compliance systems – he said it took OnDeck many months to get up to the standard that Chase was comfortable with, so I think having that sort of rock-solid compliance in place it’s great for a platform not just by partnering with banks but dealing with regulators they can see that they are checking all the boxes just like a bank would. What can you tell us about the new Marketplace Lending Association? It’s something that I’ve been passionate about for a long time.  We are probably a year or two overdue on having this association coming to be, but it’s better late than never. I think we really need to come together as an industry and have a unified voice when we’re dealing with Washington, dealing with lawmakers. Every industry that has an association that can be heard in Washington that represents the entire industry and I feel like, we just started, we just launched it a few days ago but I think it’s overdue and having that will help us not only just raise up the profile of the industry but really help us to talk directly with regulators and regulators aren’t going to say this is just one company with their own agenda this is the industry talking and they’ll pay more attention I think.

I sat down with Gavin Harding, Sr. Business Consultant with Experian who is attending American Banker’s Marketplace Lending & Investing Conference in New York City this week to get his perspectives. Interview with Gavin Harding Gary: Hello and good evening my name is Gary Stockton and I’m with Experian Business Information Services in Costa Mesa. I’m joined by Gavin Harding who is with our global consulting practice. Gavin is at the Marketplace Lending and Investing show in New York, Gavin how are you doing in New York? Gavin: Good evening Gary it’s good to be here. It’s a tremendous show this year. Very high-energy, very dynamic a little different to some conferences that we’ve participated in over the last couple of years. So some evolving themes. Two years ago, three years ago at this type of conference it was all about growth. Maybe a year ago it became more about regulation and compliance, kind of a more pragmatic approach. And this year it has evolved one more time into a core question of sustainability. How can marketplace lenders build a solid foundation that incorporates compliance, growth, risk, basic core principles of governance to make sure they become profitable and that they are still here in 3 to 5 years? So it’s really interesting to see those themes emerge over the last couple of years. Gary:  So marketplace lenders it seems like they are getting their houses in order right? We’ve had a few things happen in the last six eight months that kind of rattled the industry but I think a lot of them have taken a step back from that rapid growth pace to get you know compliance and things like that in order, and a lot of them are pursuing partnerships with lenders right? Gavin: That’s right. So, some of the key drivers have changed over the last year have been some things in the news that kind of shook the industry up a little bit, caused both marketplace lenders themselves and the investment community and the banks and bank partners to stand back a little bit and pause, and address some really key fundamental questions. So, one of the questions, I want to take this from a bank perspective. There was a great program this morning. Four panelists -  one banker and three marketplace lending lawyers, and the question was about the interaction between banks and marketplace lenders, and it was really interesting questions that were asked and one of them was, if every marketplace lender has its core competency, it’s target market, the thing it does differently and better than anybody else the differentiator, the key question for the bank partner is how real is that? How do we know? How do we document that? So there’s definitely more of a, it’s great to share the story with the bank partner, now the bank partner is saying that’s great I like the story, now let me show or let me see some evidence how it works, show me that you are adhering to your model consistently. Show me that you were documenting what you’re doing. Show me that you are being fair and disciplined in your credit decisions. Prove to me that when you say your portfolio is grade A+, that it actually is grade A+. So, not so much a skepticism, more a real life pragmatism to fully engage with the marketplace lender and to understand their model down to a granular level in terms of process, in terms of business governance, management practices and so on. So I see it as a convergence of the new innovative approaches of marketplace lenders, and the more traditional approaches of banking. So I see the two as coming together being more engaged and aligning more closely and again that overall pragmatic approach is prevailing. Gary: Are you seeing, last year there were a lot of international companies starting to come on the scene there were a number of Chinese marketplace lending companies, is that kind of still the case or is it pretty much domestic US marketplace lenders? Gavin: So with this particular event this year it seems it’s mainly U.S. based however there are some global players. I’m not seeing a lot of participants and attendees from Asia for instance where at prior events we would have seen more of them. Gary:  And so looking at the agenda are there any sessions that you personally are looking forward to? Gavin: Today the one that really resonated with me was the session on bank partnerships, exactly how they can work and the one theme that was a central core statement from that is, compliance is now a price of entry. Compliance is not a want to have. The marketplace lender has to have solid documented procedures in place to have a conversation with a bank. This doesn’t mean that there needs to be an exact mirroring of the bureaucracy and really deep compliance processes in a bank, but it means that the marketplace lender has to understand the banks perspective, has to speak the banks language and needs to understand the regulations with which the bank is complying. That’s now the expectation from banks of their marketplace lending partners. And that changes the world significantly for them. There is a demand for better alignment and mutual understanding, high levels of transparency and the application of fundamental principles of management and good governance so for me that session today resonated. I think it was a long time coming, and it was good for the group to hear that. Gary: That’s great so you’re there tomorrow and you’re speaking at the conference right? Gavin: Tomorrow afternoon we have a session that should be pretty interesting, it’s a panel session and it is centered on building sustainability in your portfolio. Let me tell you kind of where that comes from and why we’re talking about this. So there has been over the last year and a half, a tightening in terms of the availability of capital for marketplace lenders, a heightening in the demand from investors and from bank partners and others, heightening in the demand for additional information and more granular data on what’s in the portfolio, portfolio content, predictive performance, risk profiles and so on and so forth. To continue to address those needs marketplace lenders need to look within their portfolio to add components in terms of reporting, in terms of upfront origination discipline, ongoing management so that as they approach partners to look at these portfolios and invest in them, the partners can gain a level of confidence that the portfolios are as presented. So tomorrow I will be speaking with two other panelists, one from the world of regulation compliance in an advisory capacity working for a law firm in DC with a long history of working in the regulatory and supervisory market. And the perspective of the other panelist is from a firm that assesses portfolios, stress tests portfolios, establishes valuations and so forth, again related to our conversation on investment, the investment community, the reduced availability in capital of capital and the demand for more information and then I’ll be giving some examples of some work we’ve done with clients in terms of trying to understand the portfolio. Of presenting the portfolio in industry-standard approaches, industry-standard scores, industry-standard analytical approaches that can help bridge a portfolio to the investment community, and help that investment community gain a level of comfort that they need. So I think it will be a lively discussion, I think we got some great diversity in the panelists, and from what I saw today I think the audience is going to be very engaged and ask some tough questions. Gary: That’s great so do you think you might have time tomorrow to give us another recap from the event? Gavin: I’d look forward to that. Gary: OK. Well I want to thank you for taking time out I know that you very busy there it’s in the evening so thanks for staying back and giving us your update and we’ll look forward to another chat tomorrow around the same time. Gavin: You’re welcome thank you Gary.

We know that small business is the heart of the U.S. economy, driving the majority of private-sector employment. But just how successful in managing credit is the average small business owner compared with the average consumer?  In a new data study titled The Face of Small Business, Experian examines key credit and demographic attributes of both groups and uncovered distinct differences. Experian presented the full research from our data study in a webinar recently. Watch Webinar Experian took a random sample of 2.5 million small businesses and 1 million consumers to base the research. Findings show that small-business owners outpace consumers when it comes to credit management. For example, the average personal credit score for a small-business owner is 721 — 48 points higher than the average consumer score of 673. Small-business owners also have a higher amount of available credit, with an average credit limit of $56,100; while consumers have an average credit limit of $26,900. Debt load, however, is also higher for small-business owners, with the average total balance of all trades being $195,000 versus $96,000 for consumers. Small business owners have higher monthly payment obligations with an average payment of $2,032 compared to $954 for consumers. Despite these differences, only a relatively small percentage of small-business owners (5.9 percent) have one or more revolving bankcard trades that are 90-plus days beyond terms in the past 24 months compared with 7 percent of consumers. Download our Infographic “Since the health of small business tells the tale of how the overall economy is performing, it is encouraging to see that while small-business owners have an exceptional amount of credit available to them and carry a higher debt load, they have done a great job managing their payment obligations and keeping utilization low. In order to explore possibilities and pursue opportunities, consumers and small-business owners alike need to master the credit management skills that will allow them to achieve their dreams — whether that dream is to start or expand a business or to finance a new home or vehicle.” Pete Bolin Director of Consulting and Analytics Experian Demographic differences In terms of demographic characteristics, small-business owners are more likely to own a home and have a higher income than the average consumer. For example, the average income for small-business owners is $91,600 versus $70,400 for consumers. Also, 62 percent of small business owners own a home compared with only 47 percent of consumers. Small-business owners tend to be a bit older and are more likely to have pursued higher education than the average consumer. The average age of a small-business owner is 56, and the average age of a consumer is 51. From an education perspective, 68.6 percent of small business owners have attended some college and beyond, while only 53.5 percent of consumers have done so. Other highlights from the report: The average mortgage balance for small-business owners is $192,000 versus $147,000 for consumers. The average number of open trades for small-business owners is 7.4 versus 4.4 for consumers. The balance-to-limit ratio for small-business owners is 29.5 percent compared with 30.1 percent for consumers. A higher percentage of small-business owners are married, with 68.3 percent having tied the knot versus 53.4 percent of consumers. The average gender breakdown for small-business owners is 65.6 percent male and 31.2 percent female. For consumers the mix is more equal, with 46.4 percent female and 47 percent male.

Latest Main Street Report findings offer cautious optimism as small business bankruptcy rates and delinquencies decline Experian has released the Q2 2016 Experian/Moody's Analytics Main Street report. The report offers a unique quarterly snapshot into the health of small business credit in the United States. The report states current credit conditions for small businesses are improving across most of the country. Overall small-business delinquencies decreased slightly from last quarter, with dropping levels in every stage of delinquency. The total bankruptcy rate fell as well, although at a slower pace than the previous year. "Small business owners have done a great job of managing their financial commitments and paying their bills on time over the past few quarters. This has led to an increased level of available capital which could enable them to expand or invest in their business to grow their enterprise. It will be very interesting, however, to watch the current trends unfold throughout the rest of the year as administration and potential policy changes, as well as the impact of Brexit and other global events could affect U.S. business behavior." Gavin Harding Sr. Business Consultant, Experian "Small businesses are doing well, and their near-term prospects are good. Delinquencies and bankruptcies are steadily declining, reflecting solid sales, low interest rates, and generally light debt loads. The only blemish is for businesses in the still struggling energy and related industries." Mark Zandi Chief Economist, Moody's Analytics   While current conditions enable small businesses to have an abundance of credit available to them, the average utilization rate was down almost 22 percent from the same period in 2015. The report found that this decline is the result of a slight increase in credit limits and a steady increase in balances. Other Q2 2016 highlights: The mining industry experienced the sharpest increase in severe delinquencies and bankruptcies across all industries in the second quarter. The transportation and utility industries also experienced a decline, with the average severe delinquency rate increasing by 30 basis points during the quarter. Construction has seen the strongest improvement, with severe delinquencies dropping by nearly one third in the last year and a half. Construction bankruptcy rates, however, remain high in West Virginia and New Mexico, with rates of 0.59 percent and 0.44 percent, respectively. Bankruptcy rates along the Eastern Seaboard tend to be below the national average. About the Experian/Moody's Analytics Main Street Report Developed by Experian and Moody’s Analytics, the Experian/Moody’s Analytics Main Street Report brings deep insight into the overall financial well-being of the small-business landscape, as well as provides commentary around what certain trends mean for credit grantors and the small-business community as a whole. Key factors comprised by the Main Street Report include a combination of business credit data (credit balances, delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, investments, etc.)  

In just one week, Augmented Reality (AR) proved itself to be the Next Big Thing in popular entertainment. Within days of Niantic Labs release of Pokémon Go, in which players "hunt" and "capture" fantastical creatures using their smartphone cameras, tens of millions of Americans have become hooked on the game. According to media reports, the app has already been installed on twice as many phones as Tinder™, is used twice as much as Snapchat, and is surpassing the all-powerful Twitter in its number of daily active users. The skyrocketing value of parent company Nintendo's stock price has provided further testament to the game's perceived long-term stamina. Beyond its nostalgia value -- the game is based on the popular Japanese cartoon and videogame series from the 1990s -- Pokémon Go is winning over hearts, minds and dollars due to its artful blending of fantasy game play and real-world locations. To play the game, participants must move through the physical world, often traveling many blocks or even miles in search of their elusive digital prey. Such material engagement -- and the physical exertion required to complete many of the quests -- is a far cry from the sedentary "couch potato" stereotype so long associated with video-gaming. Marketing opportunities for local businesses It's also offering surprisingly lucrative marketing opportunities for many local businesses. Shops, restaurants and other commercial operations who find themselves near one of the game's many "Pokéstops"(virtual pit stops) and "gyms" (digital combat arenas) are seeing a marked uptick in foot traffic. Many stores are actively advertising via social media their proximity to game elements and the Pokémon that players have found nearby. Chicago's famed Art Institute received wide coverage for their boasting of various Pokémon found within their hallowed galleries, complete with iPhone screen shots of cartoon monsters perched amidst the Renoirs and Chagalls. Pokémon have invaded the Art Institute! Catch them if you can and find 14 PokéStops around the museum. #PokemonGO pic.twitter.com/MICPddACuf — Art Institute (@artinstitutechi) July 11, 2016 Assuming the appeal and popularity of AR is more than just a passing summer fad, the short-and long-term potential for local businesses appears to be huge. For example: Referrals: A referral program is one fast and easy way for local businesses to take advantage of the Pokémon Go phenomenon. For example, shop owners can offer to play for players' "incense," a virtual commodity used to attract the game's creatures, in exchange for the use of screenshots showing rare Pokémon that show up near their establishment. They can offer players similar rewards for store photos and check-in’s that players post on social media sites such as Yelp or Facebook. Shops can even offer game-based "bounties" for the capture of Pokémon found in or near their stores, thus driving up foot traffic. Local Sponsorships: Seeing a cash cow (or cash chiamander) when they see one, Niantic, Inc., is reportedly developing a program that will allow local businesses to actively sponsor themselves as Pokéstops or Pokémon hiding locations, virtually forcing eager monster-hunters through their doors. Sponsors will be charged on a "cost per visit" basis -- similar to "cost per click" fees on the Internet -- according to Niantic CEO John Hanke. National Sponsorships: As the success of Pokémon Go spurs the creation of other AR games and experiences, national sponsorships may provide developers with yet another, highly lucrative source of income. "National branding could be huge," said Mark Schaefer (@markwschaefer), globally-recognized speaker, educator, and business consultant. "Imagine, a Pokémon character drinking a Coca-Cola. That would be hilarious. The Nintendo stock price went through the roof because of that very idea." But such commercialization of the Pokémon Go experience must be done with discretion, according to Schaefer. "The whole Pokémon Go game experience is built on passion for this product; passion and trust," he explained. "Most players loved Pokémon as children. It's an emotional trigger. If the game starts to look like a NASCAR jacket, with ads all over it, people are going to reject it. But I think that, in this day and age, people expect a certain amount of sponsorship. There can even be a certain amount of surprise and delight associated with sponsorships. The key is to make such sponsorships integral to -- and in the spirit of -- the game itself." In a sense, Pokémon Go is the "Space Invaders" of AR, a breakout game that serves as a "proof of concept" for a whole new entertainment platform. Expect more, increasingly immersive and engaging games that seamlessly blend the physical and virtual worlds to follow. And with them, more opportunities for businesses large and small to generate real-world business by becoming part of the gaming experience. If you are a local business looking for some creative ways to capitalize on the Pokémon craze, check out Fundera's great blog post - How to use Pokémon Go to Drive Business.