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Purchase Transactions on Global Cards in 2016

Purchase Transactions on Global Cards in 2016

FOR 46 YEARS, THE LEADING PUBLICATION COVERING PAYMENT SYSTEMS WORLDWIDE MAY 2017 / ISSUE 1109

Merchant Processing Fees in the U.S. — 2016 , debit, and prepaid general purpose and private label Purchase Transactions on cards issued in the generated $5.936 trillion in payments for goods and services in 2016. Processing fees, which Global Cards in 2016 (Bil.) > see p. 7 Visa /First Data QR Code Partnership 139.0 Mastercard Alipay, China’s largest QR code-based payment system, owned by 67.3 UnionPay Ant , handles the vast majority of its transactions 38.3 in its home market in the card-not-present channel. However, 54% > see p. 7 Payconiq Mobile Payments in Europe 26% Next year financial institutions in Europe are expected to 15% experience increased competition from nonbanks, which will have gained permission to operate pan-European payment businesses 5% > see p. 8 Discover/Diners Credit Shop Buys Mastercard Portfolio 7.2 JCB 2.3 Former executives from Chase, Household, Providian, and Barclays 3.0 formed the Credit Shop two years ago to offer unsecured personal Growth vs. 2015 loans and lines of credit to U.S. consumers with credit scores in 10.3% 12.7% 32.0% 0.9% 6.1% 4.7% > see p. 8 UAE Exchange Prepaid Wearable Visa MC UP Amex JCB D/D Global remittance, foreign exchange, and payment service company UAE Exchange will offer a wearable mini contactless © 2017 The Nilson Report Mastercard payment card as an option to its Gocash prepaid card > see p. 5 Global Cards — 2016

Fingerprint EMV Cards in South Africa Visa, UnionPay, Mastercard, JCB, Diners Club/Discover, An EMV-compliant Mastercard chip card with fingerprint and American Express brand general purpose cards verification capability has been tested by employees of Pick n generated 257.17 billion purchase transactions at Pay supermarket in South Africa, and is currently being tested merchants in 2016, up 13.3% — 30.21 billion more than in > see p. 5 2015. These transactions included all commercial and consumer credit, debit, and prepaid products. Debit figures Robert Carr Returns to Merchant Acquiring shown here include prepaid cards. Visa cards include Visa Heartland Payment Systems was processing $120 billion in Inc. and Visa Europe, which became a single company in card payments annually when founder Robert Carr sold it to June 2016. Global Payments in 2015 for $4.30 billion. After expiration of a > see p. 6 > see p. 9

INSIDE 2 – 4 Fast Facts CHARTS 7 U.S. Merchant Card Fees 2016 Credit and Debit Cards 2016 4 Investments & 9 Global Cards in Circulation 2016 10 Purchases by Card Type 2016 Acquisitions — April 9 Global General Purpose Cards 2016 11 Global Debit & Prepaid Cards 2016 2017 10 Purchase Transactions on Global 11 Global Credit Cards 2016

© 2017 HSN Consultants, Inc. THE NILSON REPORT VISIT US ONLINE AT WWW.NILSONREPORT.COM DAON’S IdentityX biometric authentication technology will INDEX, a provider of software that manages in-store pay- be offered to customers of Experian’s CrossCore fraud and ments, has reduced EMV card acceptance authorization to identity platform. IdentityX can provide CrossCore users one second - the fastest EMV experience in the U.S. with to multifactor authentication using fingerprint, Index 1-Second EMV is aimed at grocery stores, quick- voice, face, and other biometric identifiers. Kathleen Peters service restaurants, and apparel retailers. Index’s core pay- is Global VP, Product Management, Fraud and Identity at ment offering is built on a semi-integrated architecture and Experian, (408) 660-2166, [email protected], hosted gateway, and includes point-to-point encryption and www.experian.com. Conor White is President, Americas at remote device management. Marc Freed-Finnegan is CEO, Daon, (703) 984-4000, [email protected], (415) 901-2961, [email protected], www.index.com.

FAST www.daon.com. OF AMERICA MERCHANT SERVICES (BAMS), WORLDPAY, the 7th largest U.S. merchant acquirer, is the the 4th largest U.S. merchant acquirer, has formed a partner-

FACTS first to offer Quick Chip, technology that reduces POS ship with Bypass, provider of POS software, back-office terminal transaction times to approximately three seconds. management tools, and analytics to more than 15,000 Ian Van Buskirk is VP of Product Management, arenas, sport venues, corporate and college campuses, MAY 2017 (678) 587-1168, [email protected], hospital cafeterias, and other food and beverage operators. ISSUE 1109 www.worldpay.com. Tim Tynan is CEO at BAMS, (212) 515-0200, tim.tynan@ bankofamericamerchant.com, merch.bankofamerica.com. No paid PAYWORKS, a global payment gateway and EMV Brandon Lloyd is CEO at Bypass, (512) 217-5545, blloyd@ advertising. technology platform, has completed EMV certification with bypassmobile.com, www.bypassmobile.com. First Data Rapid Connect. Integrated software vendors, No sponsored independent sales organizations, and value-added resellers AMERICAS MARKET INTELLIGENCE has published content of working with First Data now have access to Payworks and a free white paper about ecommerce in Latin America. any kind. Ever. EMV Quick Chip without an additional integration. Michael “Insights to Win in E-Commerce in Latin America” offers Doron is Managing Director at Payworks, (212) 457-1776, guidance to merchants and financial institutions. It is never [email protected], www.payworks.com. Download at https://goo.gl/TGl4ne. permissible for subscribers to has launched a new co- TD RETAIL CARD SERVICES will give retailers the ability forward or print branded Visa with Nissan Motor Acceptance to offer in-store approval for credit using their own web- this issue. Doing so Corporation. Cardholders will earn 5 points per $1 spent on enabled computers. The new service leverages Versatile violates copyright products and services purchased at Nissan dealerships and Credit’s Web Credit Cascade platform. Kevin Lawrence is VP, for gasoline, 3 points per $1 for dining, and 1 point per $1 Sales & Marketing at Versatile Credit, (717) 620-2557, laws. for all other purchases. Tom Quindlen is CEO of Retail Cards [email protected], www.versatilecredit.com. at Synchrony, (203) 585-6244, tom.quindlen@ Mike Rittler is Head of Card Services at TD Bank, synchronyfinancial.com, www.synchronyfinancial.com. (302) 351-7599, [email protected], www.td.com.

Conferences & Seminars

Digital Banking Summit 2017: Digital PayExpo 2017 (formerly NBPCA’s Power of Prepaid 2017: 2017 MWAA Conference June 12-14, 2017. The Hilton called CBN Cashless CardExpo June 21-23, 2017. The Mayflower (MWAA 2017): July 18-19, 2017. Austin, Austin, Texas. Estimated Africa 2017): June 13-15, 2017. Hotel, Washington, D.C. Estimated The Chicago Marriott Downtown attendance: 750. Cost for the three- The Eko Hotels & Suites, Victoria attendance: 150+. Cost for the Magnificent Mile, Chicago, Illinois. day conference is $1,495. Sub- Island, Lagos, Nigeria. Estimated three-day conference is $495 to Estimated attendance: 700. Cost for scribers to The Nilson Report attendance: 5,000. Cost for the $1,695 depending on registration attendee registration for the two- will receive a $300 discount. three-day conference is FREE. category. Subscribers to The day conference is $100. Subscrib- (Use code NILSON300.) Contact Davida at Intermarc Nilson Report will receive a ers to The Nilson Report will Contact Sasha Burgansky at Consulting, 234 (803) 439-4845, $200 discount. (Use code receive a 25% discount. (Use Source Media, (212) 803-6097, [email protected]. NILSON.) Contact Albert Britton at promotional code NILR17.) alexandra.burgansky@ Register at www.cardatmand- Source Media, (212) 803-8387, Contact Rod Katzfey at MWAA, sourcemedia.com. Register at mobilexpo.com. [email protected]. (770) 330-7141, rod.katzfey@ www.americanbanker.com/ Register at http://bit.ly/NILSON- credorax.com. Register at conferences/digitalbanking/. PoP. www.midwestacquirers.com.

2 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive 1 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive ePROCESSING NETWORK, a software development company specializing in transaction processing services and support for small to mid- sized merchants, has been certified by Elavon to accept EMV transactions Figures with the Castles Technology MP200 terminal. Steve Sotis is President at include eProcessing Network, (713) 880-0326, [email protected], cards www.eprocessingnetwork.com. in CONFORMANCE TECHNOLOGIES’ PreComm ToolKit identifies circulation unscrupulous merchants before acquirers provide them with payment card and acceptance accounts. The cloud-based data-gathering software simplifies spending merchant due diligence and risk evaluation and also handles Know Your for Customer (KYC) compliance requirement of Anti-Money Laundering (AML) 1,073 Card Issuers rules, the USA Patriot Act, and card brand regulations. Darrell Anderson is credit from 114 countries in all world regions President, (775) 336-5533 x155, [email protected], www.conformancetech.com. & debit SPEEDPAY, provider of electronic bill presentment and payment services, 282 Merchant Acquirers will work with DivDat, a billing and payment kiosk provider. Speedpay’s utility industry clients can deploy DivDat self-service kiosks onsite at a customer from 78 countries in all world regions service center or at an offsite location. Speedpay is a Western Union subsid- iary. Frank Lockridge is Head of Speedpay, (720) 332-0223, frank.lockridge@ westernunion.com, www.payments.westernunion.com. Jason Bierkle is in President at DivDat, (248) 399-0715, [email protected], www.divdat.com. Asia-Pacific, United States, Europe, Latin America, Featured Conference Middle East-Africa, and Canada

11TH MOBILE PAYMENT INNOVATIONS SUMMIT 2017 Order Today Two-Day Conference www.nilsonreport.com/specialreport June 20-21, 2017 Palmer House Hilton, Chicago, Illinois CARDFLIGHT offers the Swift B200 and Swift B250 mobile card readers. Both use Bluetooth low energy to support EMV card acceptance on Android Topics include: effectively branding mobile apps, omnichannel, con- and iOS smartphones or tablets that run CardFlight’s SwipeSimple mobile textual commerce, mobile wallets, friction-free secure transactions, POS software or use its SDK. The B250 also handles NFC contactless pay- value-added services that drive adoption and usage, regulations/ ments and supports Consumer Device Cardholder Verification Method, a new security, credentialing/biometrics, blockchain/global remittance, security standard for transactions originating from mobile devices. peer-to-peer payments, social media and the customer experience, Derek Webster is CEO, (646) 389-4450, [email protected], and acquiring the unbanked. Speakers represent: PayPal, Cayan, www.cardflight.com. Mastercard, First Analysis, CPI Card, Avidia Bank, Fiserv, Citi Fin Tech, City National Bank, Wells Fargo, Fifth Third, FIS, Blockchain Acad- VANTIV BizShield and Insights are new products offered by the largest U.S. emy, AZ Payments Group, CU Wallet, Western Union, IBM, Glenbrook merchant acquirer. The products use technology from Womply to provide real- Partners, Early Warning, Diebold Nixdorf, Oasis Smart SIM, IDC, time data, advanced analytics, online reputation management, and Electronic Transactions Association, and more. Cost ranges from $795 proactive threat management to help small businesses better know and to $1,395. (Use code NILSON300.) Contact Aron Barkan at Strategic engage consumers. Nicole Jass is Senior Lead, Data Products at Vantiv, Solutions Network, (561) 974-0082, [email protected]. (303) 362-2604, [email protected], www.vantiv.com. Cory Capoccia is Register at www.paymentinnovations.net. President at Womply, (310) 571-8547, [email protected], www.womply.com.

GLOBAL PAYMENTS will offer merchants in Taiwan the ability to accept Subscribers to The Nilson Report SAVE will receive a $300 discount. credit and payments via . Frank Young is SVP, Global Product and Innovation at Global Payments, (770) 829-8226, $300 [email protected], www.globalpaymentsinc.com.

© 2017 HSN Consultants, Inc. THE NILSON REPORT MAY 2017 / ISSUE 1109 / THE NILSON REPORT 3 © HSN Consultants, Inc. 2015 THE NILSON REPORT MAY 2017 / ISSUE 1108 / THE NILSON REPORT 2 SOVCOMBANK in Russia is using a survey-based credit scoring product CONCARDIS, Europe’s 35th largest merchant acquirer and the largest credit from EFL and FICO to offer young people their first credit card. EFL developed card merchant acquirer in Germany, has linked to the score, which uses psychometrics and behavioral data to measure credit Iyzico in Turkey. Merchants from German-speaking Europe can offer Turkish risk based on answers to questions in an online assessment. FICO markets customers local payment options. Marcus Mosen is CEO at Concardis, the EFL score in Russia and other markets. Jim Wehmann is EVP of Scores 49 (69) 7922-4700, [email protected], www.concardis.com. at FICO, (612) 758-5617, [email protected], www.fico.com. Barbaros Ozbugutu is CEO at Iyzico, 90 (0216) 599-0100, barbaros@ Jared Miller is CEO at EFL, 51 (1) 715-2954, [email protected], iyzico.com, www.iyzico.com. www.eflglobal.com.

Investments & Acquisitions — April 2017

Below is a list of 20 acquisitions and 20 investment software, money transfers, processors, cryptocurrency, transactions that occurred in 12 countries in April. payment networks, and ecommerce. Europe led with 16 deals, followed by the U.S. with 15, Asia- Of the 40 transactions listed here, financial terms were Pacific with 8, and Latin America with 1. disclosed for only 13. Their value totaled $774.5 million, led by Transactions involved mobile payments, micropayments, the acquisition of RetailMeNot for $629.5 million. loyalty programs, hardware, lending, prepaid cards, merchant acquiring, business-to-business payments, consulting, Prior issues: 1107, 1105, 1103

Investments & Acquisitions April 2017

Amount Amount Company Buyer/Investor (mil.) Country Company Buyer/Investor (mil.) Country

AUTOMATED CLEARING HOUSE Kudo Grab 1 * Indonesia Bics Nets 1 * Singapore Ongo Nat’l Bank of Canada 11 * Myanmar B2B PAYMENTS MONEY TRANSFERS Openpay BBVA 1 * Mexico Sonect seed funding 12 * Switzerland Paymetric Vantiv 1 * U.S. PAYMENT NETWORKS CONSULTING Compte Nickel BNP Paribas 1 * France PayVisors Zift 1 * U.S. PERSONAL FINANCE CRYPTOCURRENCY Pockit Series A 6 $3.7 U.K. Factom Series A 2 $8.0 U.S. PREPAID nChain High Tech Private Equity 1 * U.K. AccessPay debt fi nancing 13 $2.5 U.K. Remitsy Wyre 1 * U.K. BICIS Nets 1 * Singapore ECOMMERCE Blue Star Sports Genstar Capital 14 * U.S. Flow Series A 3 $16.0 U.S. Domiserve La Banque Postale 1 * France FRAUD PROTECTION Emtek Ant Financial 15 * Indonesia PayPlug Natixis 4 * France The Members Group Co-op Financial Services 1 * U.S. HARDWARE Meniga undisclosed round 16 $8.0 U.K. Ledger Series A 5 $7.0 France Mondido Payments undisclosed round 17 $1.1 Sweden LENDING Token Series A 18 $15.7 U.S. Upgrade Series A 6 $60.0 U.S. Tuxedo Money Fallstrom and Tuczka 1 * U.K. LOYALTY PROCESSING Pomona seed funding 7 * Indonesia AcceptOn Payline 1 * U.S. RetailMeNot Harland Clarke 1 $629.5 U.S. SECURITY MERCHANT ACQUIRING CyberGRX Series B 19 $20.0 U.S. 2Checkout Avangate 1 * U.S. SOFTWARE HelloPay Ant Financial 1 * Singapore DadeSystems undisclosed round 6 $2.0 U.S. MertzCo CardConnect 1 * U.S. SST Group 1 * Ukraine OP Financial Nets 8 * Finland 1 2 3 1 *Terms not disclosed. Acquisition. Led by Tim Draper. Led by Bain Capital Ventures. Ratepay Advent/BainCapital * Germany 4Purchased majority stake. 5Led by MAIF Avenir. 6Investors not disclosed. 7Led by Frontier MICROPAYMENTS Capital. 8Purchased merchant acquiring business. 9Led by Gree Ventures. 10Will merge in Eyeo 1 * Sweden a stock and cash transaction. 11Purchased 22% of the equity. 12Led by PostFinance. 13From Clydesdale and Yorkshire Bank. 14Majority equity investment. 15Formed payment MOBILE PAYMENTS processing joint venture. 16Led by Industrifonden. 17Led by Collector Ventures. 18Led by 9 Ayopop seed funding $1.0 Indonesia Octopus Ventures. 19Led by Bessemer Venture Partners. 10 Fit Pay NXT-ID * U.S. © 2017 The Nilson Report

43 VISIT US ONLINE AT WWW.NILSONREPORT.COM OrderOrder Back Back Issues Issues / Preview / Preview Upcoming Upcoming Conferences Conferences / /View View Newsletter Newsletter ArchiveArchive UAE Exchange Prepaid Wearable from page 1... customers. Gocash began five years ago as a reloadable mag- card available in one of three currencies. Today, Gocash is a dual-interface chip card loaded with up to six currencies on a single card. UAE Exchange Flybuy MiniFOB measures 15mm x 25mm, supports its reloadable prepaid cards with a including an antenna and a chip. It can be inserted recently launched loyalty program. into what OT calls a Flybuy Keeper — a soft silicon UAE Exchange sees the waterproof sleeve (see photo) that can be attached mini Gocash card’s appeal as a to wristbands, key chains, jewelry, fitness trackers, convenience to travelers, especially watches, or any other wearable item or device. businesspeople and students who The first Flybuy MiniFOB was deployed in go to London where contactless December 2016 in Australia by Inamo, a company payments are popular. Gocash formed to sell wearable prepaid payment products. ACTUAL cards can be used for travel on the Inamo Curl is a Visa prepaid wearable marketed to SIZE Metro. The mini contactless card surfers and beachgoers. Funds are held on deposit at will be offered first in the U.A.E. Heritage Bank. and then in other Gulf states and in Africa, beginning in Kenya. OT’s Flybuy MiniFOB technology UAE Exchange is the second largest provider supports the mini prepaid card. worldwide of retail foreign currency exchange services behind Travelex. It holds approximately 7% of the global remittance market. Payment services Nicholas Raffin is Head of Strategic Marketing and available from UAE Exchange include bill payments, Innovation at Oberthur Technologies in Colombes, mobile phone top-ups, installment loan payments, France, 33 (6) 0804-2570, [email protected], insurance premiums, and payroll cards. UAE www.oberthur.com. Exchange has been a member of Swift since 1993 and Rajesh Gk is Chief Product Officer at UAE Exchange a principal member of Mastercard since 2008. in Abu Dhabi, U.A.E., 971 (2) 307-3103, rajesh.gk@ OT (Oberthur Technologies) Flybuy MiniFOB uaeexchange.com, www.uaeexchange.com. technology supports the mini Gocash prepaid card. OT is also the supplier of dual-interface, standard Prior issue: 1062 sized Gocash cards.

Fingerprint EMV Cards in South Africa from page 1... by employees of Absa Bank in exists with fingerprint sensors that country. At a variety of on smartphones. merchants, fingerprint verification Absa Bank, a subsidiary on the test cards has been of Barclays Bank, believes successful more than 80% of the fingerprint verification can time. One problem is weather, provide an alternative to which can affect fingerprints, PINs, which can be stolen or forgotten. It ...an alternative to PINs, which can is considering be stolen or forgotten. expanding the Cardholders will register their small test to a thumbprint at an Absa branch typical pilot test where it will be converted into an making it more difficult for the phase with 100 bank employees encrypted template and stored sensors in the card that capture and, if justified, a full rollout in 9 on the chip that operates their fingerprints. The same problem to 12 months. credit or debit card. At checkout, > see p. 6

© 2017 HSN Consultants, Inc. THE NILSON REPORT MAY 2017 / ISSUE 1109 / THE NILSON REPORT 5 Fingerprint EMV Cards in South Africa from page 5... cardholders will insert their card card. There is no external database. opportunities to deliver fingerprint into an EMV-compliant POS POS terminals can be from any cards at scale in multiple markets. terminal while holding their EMV-compliant manufacturer Mastercard will also have and they can be connected to any multiple providers of fingerprint merchant acquirer. verification technology. In South Africa, Absa is the Idex ASA (Oslo Stock largest acquirer. It dominates Exchange: IDEX) provided the card payment processing at the biometric sensor technology for country’s largest retailers. Absa’s Mastercard product. Absa has 1.6 million of the Norway-based Idex has worked 6 million active credit card with Mastercard since 2015, customers in the country. developing sensor technology that There are 3 million active Absa captures a fingerprint and creates a debit cards. template, as well as the proprietary thumb on the card’s sensor, which A second generation version algorithms, which on subsequent is embedded in the upper right- of the fingerprint card will transactions match a fingerprint to hand corner. be contactless. a template. The thumbprint will be Power for the verification Geoffrey Lee is Head of Card and verified against the template. The function will come from the Payments at Absa in Pretoria, South issuer will receive confirmation wireless connection between an Africa, 27 (20) 246-4035, geoffrey. of fingerprint verification in the NFC card reader and the card’s [email protected], www.absa.co.za. payment authorization request as embedded antenna. Mark Elliott is Division President, they do with PIN verification. Morpho is the card vendor Southern Africa at Mastercard in Merchants do not need to make for the Absa test, although Johannesburg, South Africa, 27 (11) any hardware or software upgrades Mastercard is working with several 780-3926, mark.elliott@. or hire systems integrators because top manufacturers to create com, www.mastercard.com. all verification is executed on the

Robert Carr Returns to Merchant Acquiring from page 1... one-year noncompete clause, Carr is back with a new merchant acquiring business called Beyond. In addition to front-end and back-office payment processing services, Beyond will provide lending products to merchants, payroll processing, and human resources (HR) services. It will focus on select small and midsized industries including as a mini enterprise resource planning (ERP) system. restaurants and dealership management. Payments, payroll, and HR will be common to all Beyond customers. Custom applications for hardware Front-end and back-end processing will be created for each vertical market segment. platforms will be provided by TSYS. Beyond will also offer fundraising and event management systems for nonprofit organizations. Some profits from Beyond will be donated to Give Beyond will be owned 50% by Carr, 30% by Something Back, a charity established in 2003 by employees, and 20% by investors. Front-end and Carr. The charity has distributed $35 million to back-end processing platforms will be provided by prepay college and university scholarships. TSYS. Merrick Bank will be Beyond’s Robert Carr is CEO at Beyond in Princeton, New Jersey, for Visa and Mastercard transactions. (603) 790-0255, [email protected], Proprietary technology from Beyond will include www.getbeyond.com. software that small and midsized businesses can use

6 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Alipay/First Data QR Code Partnership from page 1... expansion to in-store and other (Mynt), and card-present channels is growing Indonesia (Emtek). Alipay’s U.S. in-store acceptance began in 2016 with First Data, which terminals and sent to Alipay piloted QR code payments in New by First Data’s newly acquired York and California. Expansion Acculynk payment gateway of that partnership has begun. subsidiary. Alipay will approve the The 500,000 small and transactions and fund First Data, midsized merchants that have which will fund its merchant. purchased First Data’s Clover If the Clover program is as point-of-sale devices will be successful as the partners believe offered Alipay. Those merchants it will be, Alipay will be offered will either add a QR code to their to Wells Fargo, Bank of America, countertop to be scanned by an and all other U.S. joint ventures, quickly in China, and Alipay is Alipay customer’s smartphone or alliance partners, and revenue expanding outside China to give customers will present a QR code sharing partners of First Data. its customers After that, First Data could offer in-store 500,000 merchants have purchased Alipay in other countries. payment Clover POS devices from First Data. Acculynk already works with opportunities Alipay. It acts as a gateway for when they travel U.S.-based web merchants that to other countries. on their phones to be scanned by offer Alipay acceptance online. In Europe and Asia, Alipay the Clover merchant. Ashish Bahl is CEO at Acculynk has formed partnerships with Every Alipay QR code is in Atlanta, Georgia, (678) 894- acquirers and gateway providers. unique. They are comprised of 19 7017, [email protected], It is also growing through to 30 digits. Those digits will be www.acculynk.com. investments and acquisitions in bundled with 20+ digits created India (), the Philippines for all transactions at Clover

Merchant Processing Fees in the U.S. — 2016 from page 1... include interchange, paid by U.S. merchants to and prepaid general purpose and private label cards handle all card payments, were $88.39 billion. Visa, was 1.49% in 2016. Mastercard, American Express, Discover, and private label (store, gasoline, medical, etc.) credit cards accounted for a combined $3.347 trillion in purchase U.S. Merchant Card Fees 2016 volume. This amounted to 56.38% of all card Fees Purchase Weighted spending including debit and prepaid. Credit cards Type (bil.) Vol. (bil.) Average accounted for $69.79 billion in processing fees, equal V/MC credit $47.53 $2,242.02 2.12% to 78.96% of total processing fees paid by merchants. American Express $16.41 $695.44 2.36% Visa, Mastercard, and PIN-based EFT system debit card payments generated $2.589 trillion in V/MC debit $15.21 $2,083.65 0.73% purchase volume in 2016 and accounted for 43.62% PIN debit $3.39 $505.73 0.67% of all spending for goods and services including credit Private label credit $3.37 $287.86 1.17% cards. Debit cards generated $18.60 billion or 21.04% Discover $2.48 $121.47 2.04% of the total processing fees paid. Total $88.39 $5,936.17 1.49% The weighted average of processing fees paid as a The ilson Report percentage of purchase volume from all credit, debit,

© 2017 HSN Consultants, Inc. THE NILSON REPORT MAY 2017 / ISSUE 1109 / THE NILSON REPORT 7 Credit Shop Buys Mastercard Portfolio from page 1... the 575 to 675 range. All loan of the acquisition of last recession, Credit Shop sees originations are handled online. the Cabela’s portfolio. opportunities with this group. After introducing Credit Shop plans to launch Credit Shop’s executives those card products developed in-house have managed card portfolios products, later this year. during downturns in the U.S. the plan Credit Shop’s noncard economy. They believe their was to unsecured lending portfolio has proprietary analytics and risk and follow with 35,000 accounts. The average loan marketing models will identify credit card is $2,500. It plans on growing creditworthy consumers for products. that business through affinity account origination. partnerships. Credit Shop received Most other online-only lenders $35 million in Series A funding focus on larger loans and are in January 2015. This followed particularly attractive to people $4.5 million in seed funding Credit Shop bought 6% who want to consolidate credit in March 2014. Chairman of of Barclaycard’s U.S. portfolio last card debt. Credit Shop focuses on the Board at Credit Shop is Joe month, equal to $1.60 billion in smaller loans aimed at consumers Saunders, the former CEO at Mastercard outstandings. Most who experience unplanned Visa Inc. of those accounts are seasoned, expenses such as active, and in good standing. car repairs and Will rank as the 22nd largest Visa/ TSYS will continue to provide medical bills. Mastercard credit card portfolio. cardholder account processing Consumers and related services. with credit The $1.60 billion in credit card scores in the 575 to 720 range David Duncan is CEO at Credit outstandings are sufficient to rank are more likely to use revolving Shop in Austin, Texas, (512) 633- Credit Shop as the 22nd largest credit. Because larger lenders have 2873, [email protected], U.S. Visa/Mastercard credit card been more risk averse since the www.creditshop.com. issuer assuming completion by

Payconiq Mobile Payments in Europe from page 1... with access to all consumer and business bank There are also mobile apps for in-store contactless accounts. Those competitive threats, made possible by payments that operate only within individual the European Payment Services Directive 2 (PSD2), countries. They hold global brand and domestic- will be omnichannel — in-store, online, mobile web, only card brand products. Those apps include and in-app. PayLife in Austria, in Denmark, Paylib in Currently, mobile payments in Europe include France, and Twint in Switzerland. Only Swish in the the initial efforts of Mastercard (Masterpass), as Nordic countries is multinational, though it is not well as those of Apple pan-European. (Apple Pay), Samsung ...a response to competitive threats There are a number (Samsung Pay), and of domestic-market– made possible by PSD2. Google (Android Pay). only mobile wallets that Those wallets hold Visa, currently operate only Mastercard, and American Express credit and debit in channels other than in-store. Barclaycard, HSBC, cards and have access to all NFC and Starling Bank offer ’s Pay By Bank terminals in Europe and worldwide. However, only in the U.K. to connect ecommerce merchants to a select handset models are capable of participating. consumer’s . MTS Money Wallet in The same is true for such as Deutsche Bank, Russia, Blik in Poland, and iupay! in Spain are also which offers mobile payments from a proprietary app ecommerce only. Vipps in Norway is P2P only. Betalo that is limited to select Android handsets. > see p. 12

8 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Global Cards — 2016 from page 1 Visa cards generated 54.06% overtaking Mastercard credit were 64.42% debit, up from of all purchase transactions cards, which had a 12.87% share. 63.91%. Mastercard purchase worldwide on global brand UnionPay credit cards had a 7.59% transactions were 50.82% debit, share, and UnionPay debit cards up from 49.99%. UnionPay Global Cards in Circulation had a 7.32% share. American purchase transactions were Credit & Debit 2016 Express had a 2.81% share, 49.08% debit, up from 46.90%. followed by JCB cards with 1.15% The total volume of consumer Brand Share and Diners Club/Discover cards and commercial purchases at UnionPay 54.9% with 0.91%. merchants added to cash advances Visa 27.7% UnionPay cards had the and withdrawals obtained using 11.15 Mastercard 15.0% largest percentage increase in credit and debit cards reached bil. Amex 1.0% purchase transactions. Combined, $26.044 trillion last year, up 6.4% JCB 0.9% UnionPay Diners/Discover 0.5% credit and debit Visa cards generated 54.06% of all card purchase The ilson Report purchase transactions worldwide. transactions at merchants grew general purpose cards last year. by 32.0% in 2016. — $1.560 trillion more than in Visa brand debit cards accounted Debit and prepaid cards 2015. Mastercard and Visa cards for 34.82% and Visa credit cards accounted for 55.44% of purchase combined generated 57.41% of accounted for 19.23%. Mastercard transactions, up from 54.64% in total volume, up from 56.55%. debit cards had a 13.30% share, 2015. Visa purchase transactions > see p. 10 Global General Purpose Cards 2016 vs. 2015

Dollar Volume (bil.) Transactions (bil.) Cards Brand/Card Type Total Chg. Purchases Chg. Cash Chg. Total Chg. Purch. Chg. (mil.) Chg. Visa Credit $4,074.19 6.7% $3,778.99 8.3% $295.20 –10.4% 50.82 7.8% 49.46 8.8% 1,007.6 1.4% UnionPay Credit $3,235.35 6.1% $3,189.97 6.4% $45.39 –13.3% 19.73 26.0% 19.52 26.6% 465.0 7.6% Mastercard Credit $2,534.58 6.9% $2,349.43 7.2% $185.15 3.5% 33.87 10.6% 33.09 10.8% 781.0 2.6% American Express Credit $1,037.50 0.9% $1,023.76 1.0% $13.74 –3.0% 7.35 1.1% 7.23 0.9% 109.9 –6.7% JCB Credit $241.22 4.5% $234.01 4.8% $7.21 –2.3% 3.02 6.0% 2.96 6.1% 103.2 10.1% Diners Club/Discover Credit $160.98 4.2% $148.73 3.5% $12.24 13.9% 2.41 4.9% 2.34 4.7% 56.8 –1.7% CREDIT CARD TOTALS $11,283.83 5.9% $10,724.90 6.6% $558.93 –5.8% 117.21 10.7% 114.61 11.3% 2,523.4 2.7% UnionPay Debit & Prepaid $6,415.81 3.9% $5,312.70 0.6% $1,103.11 23.0% 22.71 30.8% 18.81 38.2% 5,660.0 13.0% & Prepaid $6,051.28 8.0% $3,403.02 11.6% $2,648.27 3.7% 110.77 9.2% 89.56 11.2% 2,079.3 6.6% Mastercard Debit & Prepaid $2,292.85 11.8% $1,165.01 7.6% $1,127.84 16.4% 44.43 14.3% 34.20 14.6% 887.9 15.2% DEBIT CARD TOTALS $14,759.95 6.7% $9,880.73 5.0% $4,879.22 10.4% 177.91 12.8% 142.57 15.0% 8,627.2 11.6% Visa Totals $10,125.48 7.5% $7,182.01 9.8% $2,943.46 2.1% 161.59 8.7% 139.02 10.3% 3,086.8 4.8% Mastercard Totals $4,827.44 9.2% $3,514.44 7.3% $1,313.00 14.4% 78.30 12.6% 67.29 12.7% 1,668.9 8.9% Visa & Mastercard Totals $14,952.92 8.0% $10,696.46 9.0% $4,256.46 5.6% 239.89 10.0% 206.31 11.1% 4,755.8 6.2% UnionPay Totals $9,651.16 4.6% $8,502.66 2.7% $1,148.50 21.0% 42.44 28.5% 38.33 32.0% 6,125.0 12.6% CREDIT & DEBIT TOTALS $26,043.78 6.4% $20,605.62 5.8% $5,438.15 8.5% 295.11 12.0% 257.17 13.3% 11,150.6 9.4% Includes all consumer and commercial credit, debit, and prepaid cards. Some prior year fi gures have been restated. Currency fi gures are in U.S. dollars. Change fi gures for dollar volume refl ect a year-over-year comparison in local currency. Visa includes Visa Europe and Visa, , and Interlink brands. The Visa card fi gure excludes -only cards (with no Visa logo). Mastercard excludes and Cirrus fi gures. American Express, Diners Club/Discover, and JCB include business from third-party issuers. JCB fi gures include other payment-related products and some fi gures are estimates. © 2017 The Nilson Report

© 2017 HSN Consultants, Inc. THE NILSON REPORT MAY 2017 / ISSUE 1109 / THE NILSON REPORT 9 Global Cards — 2016 from page 9 UnionPay debit cards accounted UnionPay debit cards generated Purchase Transactions for more total volume last year the most purchase volume, on Global Cards 2016 than any product from the other followed by Visa credit brands with $6.416 trillion. cards, Visa debit Credit Cards Chg. in However, some of these UnionPay cards, UnionPay credit cards, Brand share Share Basis Pts. cards are used for consumer and Mastercard credit cards, Visa 43.2% –102 commercial real estate and other Mastercard 28.9% –13 large-volume transactions as cards, American well as for purchases on online Express cards, JCB 114.61 UnionPay 17.0% +206 wholesale marketplaces. cards, and Diners bil. Amex 6.3% –65 Purchase volume for goods Club/Discover JCB 2.6% –13 and services, which excludes cash cards. Diners/Disc. 2.0% –13 advances on credit cards and Mastercard cash withdrawals on debit cards, and Visa cards Debit Cards was $20.606 trillion, up 5.8% combined generated Chg. in over 2015. $52 of every $100 Brand Share Basis Pts. in purchase Visa 62.8% –214 volume in 2016 142.57 Mastercard 24.0% –8 compared to $50 bil. Purchases by Card Type in 2015. UnionPay UnionPay 13.2% +222 2015 vs. 2016 cards generated © 2017 The Nilson Report

VOLUME ($TRIL.) $41 of every $100, down from $43. Visa declined 233 basis points, but 0.01.0 2.0 3.0 4.0 5.0 cards accounted for $35 of every its 53.77% share topped Visa Visa Credit $100, up from $34. Mastercard and Mastercard combined. Visa’s V eit generated $17 of every $100, the share increased 204 basis points MasterCard Credit same as in 2015. to 34.44%, and Mastercard’s Debit cards generated 47.38% share increased 29 basis points Debit MasterCard of Visa’s purchase volume, up to 11.79%. UnionPay Credit from 46.63% in 2015. Debit Cash advances against lines UnionPay Debit cards generated 33.15% of of credit and cash withdrawals Mastercard’s purchase volume, from funds on deposit combined Amex Credit up from 33.07%. UnionPay increased by $425.81 billion in JCB Credit debit cards generated 62.48% 2016 and increased as a percent Diners/Disc. Credit of its purchase volume, down of total volume to 20.88% from from 63.79%. 20.47%. For Visa, cash accounted TRANSACTIONS (BIL.) When comparing credit card for 29.07% of total volume, down

0 20 40 60 80 purchase volume only, Visa’s from 30.60%. For Mastercard, Visa Credit market share of 35.24% was cash accounted for 27.20%, up up 54 basis points. UnionPay’s from 25.95%. For UnionPay, cash V eit share declined by 5 basis points accounted for 11.90%, up from MasterCard Credit to 29.74%. MasterCard’s share 10.29%. For Diners Club/Discover, MasterCard Debit increased 12 basis points to cash accounted for 7.60%, up from 21.91%. American Express’s 6.96%. For JCB, cash accounted UnionPay Credit share dropped 53 basis points for 2.99%, down from 3.20%. For UnionPay Debit to 9.55%. JCB’s share slipped 4 American Express, cash accounted Amex Credit basis points to 2.18%, and Diners for 1.32%, down from 1.38%. Club/Discover’s share fell 4 basis Credit, debit, and prepaid cards JCB Credit The ilson Report points to 1.39%. in circulation totaled 11.15 billion Diners/Disc. Credit When comparing debit card at the end of 2016, up 9.4% over purchase volume, UnionPay’s year-end 2015. UnionPay added

10 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive the most cards (683.0 million), an increase of 12.6%, For Mastercard, 53.20% of its cards were debit, up while JCB had the second highest percentage increase from 50.33%. in cards (up 10.1%), adding 9.4 million cards. Visa Visa, Mastercard, American Express, and Discover added 141.4 million cards (up 4.8%), Mastercard brand credit cards issued in the U.S. generated added 136.9 million cards (up 8.9%), American 47.95% of global credit card purchase volume, up Express had a reduction of 7.9 million cards (down from 47.59% in 2015. 6.7%), and Diners Club/Discover declined by 1.0 For Visa, the percent change in credit card million cards (down 1.7%). purchase volume was greater on cards issued inside UnionPay accounted for 54.93% of global brand the U.S. (up 15.3%) than those issued outside the U.S. cards in circulation, up from 53.41%, followed by Visa > see p. 12 with 27.68%, down from 28.91%, Mastercard with Global Debit & Prepaid Cards 14.97%, down from 15.04%, American Express with Visa Mastercard UnionPay 0.99%, down from 1.16%, Category 2016 Chg. 2016 Chg. 2016 Chg. JCB with 0.93%, up from Transactions per Card 53.27 2.5% 50.04 –0.8% 4.01 15.8% 0.92%, and Diners Club/ Purch. Trans. per Card 43.07 4.3% 38.51 –0.5% 3.32 22.3% Discover with 0.51%, down Purch. Trans. Share 80.85% 145 bps 76.96% 18 bps 82.85% 443 bps from 0.57%. Cash Trans. per Card 10.20 –4.7% 11.53 –1.5% 0.69 –8.0% Of the total cards in Cash Trans. Share 19.15% –145 bps 23.04% –18 bps 17.15% –443 bps circulation, 77.37% were debit, up from 75.89%. Avg. Amt. per Trans. $55 –1.1% $52 –2.2% $283 –20.6% Debit cards in circulation Average Purch. Amt. $38 0.4% $34 –6.1% $282 –27.2% grew by 894.8 million Average Cash Amt. $125 2.2% $110 2.7% $283 18.3% compared to a 67.1 million Total Volume per Card $2,910 1.4% $2,582 –3.0% $1,134 –8.1% increase for credit cards. Purch. Vol. per Card $1,637 4.7% $1,312 –6.6% $939 –10.9% Debit cards accounted Purch. Volume Share 56.24% 181 bps 50.81% –197 bps 82.81% –267 bps for 92.41% of the UnionPay Cash Vol. per Card $1,274 –2.7% $1,270 1.1% $195 8.9% card base, up from 92.06%. Cash Volume Share 43.76% –181 bps 49.19% 197 bps 17.19% 267 bps For Visa, 67.36% of its cards were debit, up from 66.25%. © 2017 The Nilson Report Global Credit Cards

Visa Mastercard American Express UnionPay JCB Diners/Discover Category 2016 Chg. 2016 Chg. 2016 Chg. 2016 Chg. 2016 Chg. 2016 Chg. Transactions per Card 50.44 6.3% 43.37 7.7% 66.90 8.4% 42.43 17.1% 29.30 –3.7% 42.41 6.8% Purch. Trans. per Card 49.09 7.3% 42.37 8.0% 65.75 8.2% 41.97 17.6% 28.74 –3.6% 41.28 6.6% Purch. Trans. Share 97.32% 88 bps 97.70% 24 bps 98.27% –15 bps 98.93% 48 bps 98.07% 12 bps 97.35% –20 bps Cash Trans. per Card 1.35 –19.9% 1.00 –2.6% 1.15 18.9% 0.46 –18.9% 0.57 –9.5% 1.12 15.3% Cash Trans. Share 2.68% –88 bps 2.30% –24 bps 1.73% 15 bps 1.07% –48 bps 1.93% –12 bps 2.65% 20 bps Avg. Amt. per Trans. $80 –1.0% $75 –3.3% $141 –0.1% $164 –15.8% $80 –1.3% $67 –0.7% Avg. Purchase Amt. $76 –0.4% $71 –3.3% $142 0.1% $163 –15.9% $79 –1.2% $63 –1.2% Avg. Cash Amt. $217 10.4% $237 3.5% $108 –12.5% $214 –0.6% $124 –2.0% $192 0.5% Total Volume per Card $4,044 5.2% $3,245 4.2% $9,440 8.2% $6,958 –1.4% $2,338 –5.0% $2,835 6.1% Purch. Vol. per Card $3,751 6.8% $3,008 4.5% $9,315 8.3% $6,860 –1.1% $2,268 –4.8% $2,619 5.3% Purch. Vol. Share 92.75% 138 bps 92.69% 24 bps 98.68% 5 bps 98.60% 31 bps 97.01% 21 bps 92.40% –64 bps Cash Vol. per Card $293 –11.6% $237 0.8% $125 4.0% $98 –19.4% $70 –11.3% $216 15.9% Cash Vol. Share 7.25% –138 bps 7.31% –24 bps 1.32% –5 bps 1.40% –31 bps 2.99% –21 bps 7.60% 64 bps © 2017 The Nilson Report

© 2017 HSN Consultants, Inc. THE NILSON REPORT MAY 2017 / ISSUE 1109 / THE NILSON REPORT 11 © 2017 HSN Consultants, Inc. THE NILSON REPORT All Rights Reserved. Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for any purpose is strictly prohibited and may violate the intellectual property rights of HSN Consultants, Inc. dba The Nilson Report.

Global Cards — 2016 from page 11... (up 3.9%). The number of Visa credit card purchase For American Express, the percent change in credit transactions increased by 2.81 billion inside the U.S. card purchase volume was greater on cards issued compared to a 1.17 billion increase outside the outside the U.S. UnionPay accounted for 54.93% of U.S. (up For Mastercard, the percent change global brand cards in circulation. 10.8%) than in credit card purchase volume was on those greater on cards issued outside the U.S. issued inside (up 7.6%) than those issued inside the U.S. (up 6.2%). the U.S. (down 3.0%). The number of American The number of Mastercard credit card purchase Express credit card purchase transactions increased transactions increased by 2.64 billion outside the U.S. by 0.27 billion outside the U.S. compared to a 0.20 compared to a 0.60 billion increase inside the U.S. billion decline inside the U.S.

Payconiq Mobile Payments in Europe from page 8... in Sweden is money transfer and consumer deposit accounts offer using APIs. Consumers verify bill payment only. Payconiq. It will be live in the the amount to be paid and Payconiq wants to be the Netherlands and another country confirm their identity with a PIN. omnichannel mobile payment by year-end. Merchants get access to their funds service European Union (EU) Payconiq is in the process of the next day. Payconiq receives obtaining a payment services a fee from the merchant and license, which will allow it to guarantees payment. There is no expand throughout the EU. Banks cost to the consumer. to the Payconiq app through Payconiq continues to develop an API. its omnichannel offering. Online The Payconiq app can operate payments are QR code-based. on iOS and Android devices. When App-to-app will be introduced to banks use to give consumers consumers want to make an in- complement person-to-person and a direct link to their funds on store purchase, the GPS on their person-to-business payments. deposit for purchases in-store, phone identifies online, in-app, and on the mobile participating ...to give consumers a direct link to web. It is not a wallet. No card merchants in their funds on deposit. data is stored. There is no funding the area. of a prepaid account. Consumers Payconiq sees PSD2 as select the merchant they want to Currently, ING Bank in the triggering a race to create a pay by clicking on the corporate Netherlands owns 100% of scalable pan-European mobile logo that appears on the screen Payconiq. Other banks will become payment service competitor of their phone. They input the equity shareholders. to nonbanks. amount to be paid. Duke Prins is CEO at Payconiq in The company currently operates Connections are opened Amsterdam, the Netherlands, in Belgium, where banks that between the consumer, their 31 (65) 126-1063, duke@ represent more than half of all bank, and the merchant’s bank payconiq.com, www.payconiq.com.

David Robertson, Publisher May 16, 2017

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