Building the Digital Supermarket

March/April 2017 www.isoandagent.com

BUILDING THE DIGITAL SUPERMARKET Kroger payments chief Kathy Hanna, one of 2017’s Most Influential Women in Payments, is bringing the grocery store to the connected consumer

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001_ISO030417 1 2/28/2017 4:11:46 PM Inside 03/04.2017 Cover Story

Building the Digtial Market 18 In her role as Kroger's senior director of enterprise payments, Kathy Hanna is recognized this year as one of the Most Influen- tial Women in Payments.

Risk Risk Loyalty 06 | A New Approach to 16 | Fraudsters Target P-to-P 36 | A DIY Approach to Chargebacks Account Security Loyalty and Rewards In the post-EMV world, e-commerce Person-to-person payment services Merchants have long experimented merchants are facing a wave of are catching on as tools for e-com- with different ways to promote their chargeback fraud. But there is a dan- merce, and fraudsters are taking loyalty and reward programs, often ger in pushing back too hard. notice. How can merchants respond? by tying into a bank-issued payment card. Would it help to hand control over to the consumer? Point of Sale Technology 08 | A Complex Response to 30 | An ISO App Strategy Mobile Mastercard's Simple Rule Merchants could get a major marketing benefit if they make better use of As a result of a new Mastercard 38 | Attacking Apple Pay the technology in the palms of their account numbering system, some at its Core hands. merchants are being told they need The ongoing dispute in Australia to buy new terminals. But Mastercard between Apple and the country's says this is not the case. What's really Risk largest issuers could have global happening? consequences for any company that 34 | The State of Post-EMV accepts Apple Pay. E-Commerce Fraud Risk We've heard all along that web fraud E-Commerce 14 | Compliance Lessons would spike after EMV takes hold at 46 | Opportunity from China from Amsterdam the point of sale. And indeed that's what happened. But why did fraud- China represents two big potential The legal marijuana market is a new markets for payments: Travelers who high-risk merchant category, but it's sters succeed if we knew they were coming? need to spend money overseas, and not uncharted territory. Many U.S. merchants who want to sell across merchants can learn from how cof- borders. feeshops operate in Holland.

2 ISO&AGENT March/April 2017

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EDITOR Daniel Wolfe 212-803-8397 [email protected] CONTRIBUTING EDITOR David Heun ART DIRECTOR Monica Pizzi GROUP EDITORIAL DIRECTOR, BANKING Richard Melville The Value of Diversity [email protected] VP, RESEARCH EVERY YEAR, THE EDITORS OF ISO&AGENT AND PAYMENTSSOURCE Dana Jackson recognize the most influential women in our industries, and every year I NATIONAL SALES MANAGER, ADVERTISING Hope Lerman learn something new from the experiences these honorees share. 312-475-0649 One thing that stands out is the importance of having a diversity of per- [email protected] VP, CONTENT OPERATIONS AND CREATIVE SERVICES spectives in the top ranks of any company. Whether it’s a diversity of gender, Paul Vogel ages or cultural backgrounds, each new insight these individuals bring has DIRECTOR OF CREATIVE OPERATIONS Michael Chu the potential to change the course of a company and open new markets that DIRECTOR OF CONTENT OPERATIONS a less diverse executive team would not have seen. Theresa Hambel MARKETING MANAGER In this year’s profiles — a selection of which are published in this very Deborah Vanderlinder issue — our honorees share how their newer colleagues have challenged FULFILLMENT MANAGER their own viewpoints and opened their eyes to new possibilities. In such a Christopher Onyekaba CUSTOMER SERVICE dynamic market as the payments industry, every person’s voice can be vital 212-803-8500 to staying at the cutting edge of innovation. [email protected]

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© 2017 ISO&Agent and SourceMedia, Inc. and ISO&Agent. ISO&Agent is published 6 times a year by SourceMedia, Inc., One State Street Plaza, 27th Floor New York, NY 10004. For customer service contact us at (212) 803-8500; email: help@sourcemedia. com; or send correspondence to Customer Service, ISO&Agent, One State Street Plaza, 27th Floor New York NY 10004. For more information about reprints and licensing content from ISO&Agent, please visit www.SourceMediaReprints.com or contact PARS International Corp. (212) 221-9595. Those registered with the Copyright Clearance Center (222 Rosewood Drive, Dan- vers, Mass., 01923) have permission to photocopy articles. The fee is $10 per copy. Copying for other than personal use or internal reference is prohibited without express permission. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax, or other professional service. ISO&Agent is a trademark used herein under license.

4 ISO&AGENT March/April 2017

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005_ISO030417 5 2/28/2017 4:12:00 PM RISK E-COMMERCE

A New Approach to Chargebacks E-commerce merchants are more concerned than ever about the potential for payment fraud and chargebacks. But added vetting could make the process worse. BY AUTUMN CAFIERO GIUSTI

hen e-commerce fraud spikes, it can be tempting for merchants to pile on more controls and riskW turning away otherwise legitimate transactions that appear to be fraudulent. The alternative is often to shut off these controls altogether and leave themselves vulnerable to criminals. Neither extreme is ideal, and acquirers say merchants need to start taking a more systematic approach when setting fraud controls to avoid this dilemma. “Though extremely effective when methodically applied, fraud control parameters can be absolute and un- forgiving when set inappropriately and can unintentionally defeat legitimate transactions,” says Marcus Smith, senior vice president of risk management for merchant acquirer iPayment Inc. partial matches, with the unintended was able to come up with a more effec- Smith points to one of his clients, a consequence being that the system tive approach to tweak the fraud control large online sporting goods retailer, as would block transactions processed settings. one example of how the all-or-nothing whenever the address verification sys- Once the merchant reconfigured its approach to fraud controls resulted in a tem was offline or unsupported by the filters, sales volume losses dropped from nearly 14% decrease in the merchant’s card issuer. 14% to less than 2%, and chargeback sales volume – just before the holiday After enabling these fraud controls, ratios fell back in line. shopping season. the merchant noticed that charge- Not having the proper fraud controls The merchant attempted to address a backs continued unabated. With more in place could be fueling an ongoing spike in fraud and chargebacks without legitimate sales being blocked, the trend in sales losses, as false positives understanding the root of the problem; chargebacks-to-sales ratio actually in- are taking a chunk out of revenues. it set the address verification service creased. The merchant then responded Among digital goods merchants, 34% of filters to only allow transactions with an by disabling all fraud controls, further their customers’ declined transactions exact match on numerical address and exacerbating the problem. are believed to be legitimate, according zip code. But in doing so, the merchant Upon closer examination of the fraud to an October report by Javelin Strategy prevented the system from making and chargeback patterns, the merchant & Research.

6 ISO&AGENT March/April 2017

006_ISO030417 6 2/27/2017 3:10:14 PM The future of medical payments is here.

007_ISO030417 7 2/28/2017 4:12:01 PM POINT OF SALE CARD ACCEPTANCE

Mastercard’s Not-So-Simple Rule A straightforward rule from Mastercard is causing a lot of confusion among merchants and acquirers. What should be a simple software upgrade is seen by some as a directive to put new devices in place. BY KATE FITZGERALD

housands of U.S. merchants payments, citing the Mastercard rule. to stop accepting payments. are still holding out against There is already confusion in the The push for the new 2-series BIN EMV because they see no market over whether this upgrade (bank identification number) cards immediate threat from requires new hardware or only new began years ago, and this year Master- counterfeit card fraud, and software. The answer will vary from card began introducing card account Tbusiness goes on. But a less obvious merchant to merchant, and the clock numbers beginning with “2,” joining change in payment card acceptance is ticking: Mastercard set a deadline its existing range of account numbers may finally force them to upgrade. of June 30, 2017 for merchants to be beginning with “5” to accommodate As Mastercard expands to its new able to accept 2-series cards, and if explosive card account number growth 2-series card account numbers this they don’t comply their acquirers could in recent years. (The original compli- year, some merchants are hearing from be subject to fines of up to $25,000 per ance deadline for merchants was Jan. 1, their vendors that they must upgrade month, the company said. Mastercard 2017, but Mastercard last year extended equipment or lose support for card says it would not require the merchant it by six months, to June of this year.)

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Acquirers are bearing most of the hardware operational well past that Mastercard said it’s unlikely it will burden of readying merchants to ac- range. need to levy fines on merchants in concept 2-series cards, which requires a “There are lots of terminals out there nection with the 2-series introduction. software update sent to terminals, said that are discontinued and should have “Noncompliance doesn’t always result Chiro Aikat, Mastercard’s senior vice already been replaced, which have no in a direct fine,” Mastercard’s Aikat said, president of product delivery. software support,” said Rick Oglesby, adding that “it is hard to predict” the For the vast majority of U.S. mer- a principal with AZ Payments Group. level of effort that will be required by chants, the switch to accept 2-series Common payment terminal models like acquirers and merchants to complete cards will be seamless, but Aikat ac- the VX510 may technically be capable the transition to the 2-series. knowledged that some terminals may of handling a software update, Oglesby Mastercard recently began a “mys- be too old to handle the necessary added, but acquirers are no longer tery shopping” process to gauge how software updates. providing software for them. many merchants are ready to accept “Terminals that are 15 or 20 years It costs a lot for acquirers to create the 2-series cards and it’s too early to old will probably require replacement, terminal updates and distribute them, draw any conclusions. and it’s hard to know the exact numbers so reducing the number of terminals “We had to respond to a shortage of of those,” Aikat said. supported helps reduce costs, added card account numbers that’s been exac- But even merchants with newer ter- Tim Sloane, vice president of payment erbated by tokenization and other market minals are being told by their merchant innovation at Mercator Advisory Group. forces,” Aikat said, noting that growth services providers that Mastercard’s “Just because a payment terminal of mobile wallets and e-commerce are 2-series initiative will require them to could be updated with software doesn’t driving rapid consumption of 16-digit replace their hardware this year. mean it will be,” Sloane said. In most account numbers as more merchants Raleigh, N.C.-based First Citizens cases, acquirers will contact merchants use tokens, or replacement account Bank notified a merchant in Scottsdale, with equipment too old to easily sup- numbers, to guard sensitive payment Ariz., who declined to be identified, port software updates and discuss new card data. that his single Verifone VX510 payment terminal options, which may or may not “We’re also seeing more card growth terminal, which was new in December cost extra, Sloane predicts. in general, from the rise of financial 2011, will no longer accept cards ac- Acquirers that can support the 2-se- inclusion in emerging markets and ceptance after June 30, 2017 because ries BINs through a software update are prepaid cards, which means we need it’s not equipped to receive the 2-series working to meet Mastercard’s deadline. more capacity for account numbers.” software update. A replacement termi- Cayan has made changes within its Visa, American Express and Discover nal—which includes EMV and software gateway and cloud-based platform to face similar challenges but each is tack- update support—will cost $250. drive updates to merchant customers ling the problem differently, Aikat said, According to Verifone, this terminal so they will automatically be able to including expanding account numbers model is capable of receiving software process 2-series card numbers, and within their existing BIN ranges. updates. It is a manual process, not an it’s testing the system throughout its “We felt that expanding account automated one, handled through the network now. “We are using education, numbers within existing BIN ranges acquirer. awareness and increased support and was a stop-gap measure, so Mastercard Other small businesses could face research to make sure there are no had the foresight years ago to reserve similar challenges, and the scope of disruptions in authorization,” Cayan’s a new range of BINs in anticipation of this group is unknown. Castrechini said. reaching the point now where we need “There’s still a segment of the small- The Electronic Transactions Associa- them now,” he said. and midsize business market that’s using tion also has been working closely with Merchant services providers have legacy payment equipment, and in this Mastercard for several months to ensure several options for exploring the poten- case (requires) a terminal replacement, a smooth transition to the 2-series ac- tial effect of the 2-series push on their but we’ve seen this to be the exception,” count introduction, said Amy Zirkle, customer base, experts say. explained Marc Castrechini, vice presi- the ETA’s vice president of industry Mastercard offers 2-series test cards dent of product management at Cayan. affairs. “We’ve conducted webinars and to show if terminals can process the new Analysts say payment terminals had discussions with senior executive BIN range, said Xavier Ayala, CEO of typically have a lifespan of five to seven groups to get the word out and make Eureka, Calif.-based OneSource Busi- years, but many merchants keep their sure merchants are ready,” she said. ness Advisors.

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010_ISO030417 10 2/27/2017 3:08:47 PM 011_ISO030417 11 2/28/2017 4:12:17 PM TECHNOLOGY INNOVATION

Reflecting on the Point of Sale When is a cash register not a cash register? Oak Labs takes its technology through the looking glass in an effort to change the way people pay for clothes. BY KATE FITZGERALD

uying clothes can be a te- dious process of waiting in lines to get into the dressing room, and then waiting in line again to make a pur- Bchase. As it turns out, eliminating the second half of this process can also reduce the first half. The San Francisco startup Oak Labs is introducing its Oak Checkout concept, building on an interactive fitting-room system based on mirrors that’s been in development since 2015 at stores from designers including Ralph Lauren and Rebecca Minkoff. The new version adds Near Field Communication technology to accept payments from within each dressing room booth. Founded by former eBay executive Healey Cypher and colleagues, Oak Labs aims to wipe out the pain points that still exist in physical retail stores. Its interactive mirror serves as a live merchandise catalog, improving stores’ efficiency and reducing shoppers’ various frustrations, according to Cypher. room isn’t a good one,” Cypher said. formation displayed on the mirror to In addition to handling payments, “You’re in there with your pants off and browse different sizes or styles, and to the mirror can also allow shoppers to you need another size, but you have no request help. Store personnel receive pick different sizes and styles, just as easy way to signal you need help from notifications through the Oak Labs app they would be able to when shopping busy store associates.” on their mobile device and can signal online; the system can then signal the Through its app, Oak Labs supports a they’re on the way back to the fitting shopper’s choice to a store associate. system for merchants to equip products room with information or additional In doing so, Oak Mirror reduces the with an RFID tag containing detailed merchandise. average time spent in a fitting room product information, which appears in “We’re at the beginning of the next by 40%, cutting overall waiting time for condensed form on the mirror when wave of retail, kind of the post-Amazon fitting rooms, Cypher said. a customer wears it in a fitting room. era, where retailers are competing now “The typical experience in a fitting Shoppers can tap the product in- on the experience,” he said.

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013_ISO030417 13 3/1/2017 12:37:56 PM RISK PAYMENT PROCESSING

The biggest hurdle comes when these seed companies want to accept online payment mechanisms such as Visa, MasterCard and PayPal, Margerison said. Online payment providers will not Lessons from Amsterdam provide services to such companies. The inconsistent legalization of marijuana sales in the U.S. is raising many questions about While there are ways to get around risk management and compliance. Perhaps the answers can be found from a region with a this blockade—setting up dummy web- much more mature legal cannabis market. BY BAILEY REUTZEL sites, using middlemen that take high fees or finding unscrupulous companies in China—none of the options are very reliable. Amsterdam Genetics recently dealt with the latter, having set up a hen there’s talk of partnership with a company in Hong Amsterdam, many Kong that promised service provision but people immediate- payment never came, Margerison said. ly conjure up the “It’s very frustrating; we want to run skunky smell of a professional, open and transparent marijuanaW emanating from coffeeshops. business but brick walls are put up at And they wouldn’t be wrong. The Dutch city is known for its lax laws surrounding soft drugs like cannabis and psychedelic mushrooms. And it’s been that way for several decades. But even still, cannabis companies have trouble landing banking relationships, much like similar businesses in the US. “It’s quite a complex issue just the same as in the States,” said Oliver Mar- gerison, director at Amsterdam Genet- ics, a producer of cannabis products that are then sold to coffeeshops and dispensaries. “Every cannabis-related company in the Netherlands has or has had issues with banking facilities.” How much contention with financial institutions is dependent on the sector the business falls in, and whether or not it can be fully honest about its operations, said Margerison. For instance, coffeeshops which also sell food and drink are categorized as Barney's Coffeeshop is one of the legal marijuana sellers operating in The Netherlands. horeca businesses, a sector that also includes restaurants that don’t sell not delve deeper, you most likely will cannabis companies to secure bank cannabis. acquire the facilities and once you have accounts and accept PIN debit trans- “If you say to the bank you are a cof- received the facilities, it is very difficult actions. feeshop, there is no way you will acquire for the bank to then retract the facilities Seed companies can fall under several a bank account or any other facilities,” if they have not done a full investigation business categories and so, accord- said Margerison. “If you say to a bank into the company in the first instance.” ing to Margerison, don’t have many you are a horeca company and they do This legal loophole allows some problems acquiring banking services.

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014_ISO030417 14 2/27/2017 3:11:54 PM The biggest hurdle comes when these every turn,” he said. but law enforcement is tolerant of it. seed companies want to accept online While Margerison says banks and But the production and cultivation (the payment mechanisms such as Visa, bureaucrats are the ones holding back back door) of cannabis is completely MasterCard and PayPal, Margerison the cannabis industry, Dave Birch, direc- unregulated and illegal. To Margeri- said. Online payment providers will not tor at Consult Hyperion, wrote in a Jan. son, this makes the industry seem too Lessons from Amsterdam provide services to such companies. 10 blog post about pushback from the shady for financial institutions to do The inconsistent legalization of marijuana sales in the U.S. is raising many questions about While there are ways to get around industry to accepting cards. coffeeshops business with. risk management and compliance. Perhaps the answers can be found from a region with a this blockade—setting up dummy web- seemed fine with the move, but other But “the whole industry has been much more mature legal cannabis market. BY BAILEY REUTZEL sites, using middlemen that take high stakeholders such as backend distribu- professionalizing over the past few fees or finding unscrupulous companies tors were worried, according to Birch. years,” he said. “I really think most in China—none of the options are very And that’s because laws in the Neth- shops would accept all cards without reliable. Amsterdam Genetics recently erlands regarding the cannabis industry question.” dealt with the latter, having set up a are a bit inconsistent. Amsterdam Genetics is currently partnership with a company in Hong One of the biggest issues hindering trying to acquire payment provision Kong that promised service provision but the cannabis industry in Holland is the through banking institutions in Euro- payment never came, Margerison said. front door/back door regulatory mess. pean countries that have relaxed laws in “It’s very frustrating; we want to run Since 1976, the sale and consumption recent years. But this is difficult unless a professional, open and transparent (the front door) of marijuana in the the company has a headquarters in the business but brick walls are put up at country has been regulated; it’s illegal country.

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THE YO U PERFECT GET 100% Barney's Coffeeshop is one of the legal marijuana sellers operating in The Netherlands. SPLIT Travel and Remote Tech Support included cannabis companies to secure bank accounts and accept PIN debit transactions. Michael Katz 404-642-0959 Lloyd Katz 561-676-1978 Seed companies can fall under several [email protected] [email protected] business categories and so, according to Margerison, don’t have many www.highriskagentsnetwork.com problems acquiring banking services.

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015_ISO030417 15 3/1/2017 5:35:56 PM RISK P-TO-P PAYMENTS

istration methods is not lost on financial executives. “The risk associated with P-to-P is a product set that has long kept many payments execs up at night,” said Julie Fraudsters Target P-to-P Security Conroy, research director and fraud As person-to-person payment systems are finding more use in mobile wallets and expert with Boston-based Aite Group. e-commerce, fraudsters are eager to tap into this flow of cash. BY DAVID HEUN “That’s one of the reasons why we’ve historically seen it tightly controlled with rigorous registration procedures, as well as rules and velocities once a new user is registered.” To more closely monitor P-to-P pay- raudsters are licking their ment activity, banks use directory, chops at the thought of in- or look-up, services that can verify a filtrating person-to-person customer’s account number or corre- payment systems and en- late a confirmed account number to a abling a never-ending flow proxy such as a mobile phone number, Fof small-value transactions — with Conroy added. the potential to strike bigger accounts. “While some of the directory services After all, they have to adjust their will alleviate some of those issues, I think targets significantly in the wake of a lot of fraud execs are still concerned EMV chip card technology shoring up that the bad guys will find the loopholes security at the point of sale and renewed before the good guys can seal them up,” emphasis on deterring fraud from shift- Conroy said. “I think analytics are one ing to card-not-present payments. of a variety of services that will help “We are watching P-to-P risk expo- mitigate the risk.” sure closely because the small-value, Banks are keenly aware of how high-volume formula is something fraudsters like to hijack a P-to-P money fraudsters are looking at,” said Sasi Mudigonda, head of financial crime and compliance for Oracle Financial Services. PAYPAL INVESTS IN THE UNDERBANKED VIA ACQUISITION, PARTNERS As a way to control risk, banks can PayPal has agreed to acquire TIO Networks, which sells limit P-to-P use by transaction size software that powers bill payment processing, particularly or by protecting it behind the same for underbanked consumers. PayPal will pay $2.56 per share in cash, or about $233 authentication layers applied to online million, based on TIO's stock price on Jan 9, 2017 when it and mobile banking. But as the payment entered into negotiations with PayPal. method expands to other platforms, as are increasingly relying on the speed reliance on cash, Mudigonda said. Crimi- ªWorldwide, more than 2 billion people do not have affordable access to basic financial services, making it it has in some countries, keeping trans- of P-to-P methods to pay vendors and nals looking to breach digital payment difficult and expensive for consumers to carry out basic actions safe will call for more advanced suppliers. networks are equally focused on what’s financial tasks, including bill payment. TIO's digital platform, machine-learning security measures, In the U.S., nonbanks such as Face- happening in those markets, he added. and physical network of agent locations make paying bills simpler, faster, and more affordable,º said Dan Schulman, Mudigonda said. book and Snapchat have already added By comparison, the U.S. is in the president and CEO of PayPal, in a release. P-to-P can be a lucrative hunting payments to their messaging platforms, early stages of P-to-P advancements TIO is based in Vancouver and is one of North America's ground for fraudsters, considering which many users stay connected to and adoption, even though the country’s largest multi-channel processors, handling more than $7 billion in consumer bill payments in fiscal 2016. It serves some South American and African mar- perpetually. large banks are getting behind the more than 14 million consumer bill pay accounts with a focus kets already rely on P-to-P for a major Oracle is monitoring digital payment Zelle network, and various third-party on financially underserved consumers. portion of money transfers, payments advancements in India in the wake of providers such as PayPal’s Venmo are It has a network of more than 10,000 billers, enabling TIO to process transactions such as telecom, wireless, cable and and even payroll delivery. Accounting that country’s recent moves to spur the establishing strong user bases. utility bill payments. departments at banks and businesses use of electronic payments and reduce Still, the task of securing P-to-P reg-

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016_ISO030417 16 2/27/2017 3:13:21 PM istration methods is not lost on financial transfer service to send funds from a for AI because there is enough data to executives. compromised bank account to a “mule” learn from.” “The risk associated with P-to-P is account the fraudster controls. But any Some payment forms, including wire a product set that has long kept many sort of P-to-P payment is fair game as transfers, don’t have enough volume payments execs up at night,” said Julie fraudsters worm their way onto mobile or data to allow banks to benefit from Fraudsters Target P-to-P Security Conroy, research director and fraud commerce platforms. machine-learning algorithms. As person-to-person payment systems are finding more use in mobile wallets and expert with Boston-based Aite Group. Though P-to-P payments differ in “We have a lot of information on card e-commerce, fraudsters are eager to tap into this flow of cash. BY DAVID HEUN “That’s one of the reasons why we’ve some ways from other mobile or remote data about user spending patterns and historically seen it tightly controlled commerce transactions, the increase lifestyles and there are many things with rigorous registration procedures, in fraud in those areas indicates fraud- we can do with machine-learning from as well as rules and velocities once a sters’ intent. card data,” Mudigonda said. “Much of new user is registered.” The mobile channel experienced that sophistication is not available in To more closely monitor P-to-P pay- an increase of 40% in successful fraud the P-to-P arena, but there is data that ment activity, banks use directory, with debit cards in 2016, compared to can be gathered through high volume.” or look-up, services that can verify a 24% in 2015, while staying at a level of Oracle provides software to its bank customer’s account number or corre- 45% both years in successful credit card clients that provides machine learning late a confirmed account number to a fraud transactions, according to a 2016 and building of security techniques to proxy such as a mobile phone number, fraud cost report from risk solution protect financial transactions, including Conroy added. provider LexisNexis. the P-to-P options. “While some of the directory services P-to-P payments are positioned to Five years ago, Oracle supported will alleviate some of those issues, I think benefit from more extensive machine- rules-based risk management tools, a lot of fraud execs are still concerned learning or Artificial Intelligence screen- but has since concentrated on build- that the bad guys will find the loopholes ing, mainly because of the high volume ing machine learning into its platform. before the good guys can seal them up,” moving along P-to-P rails. There’s a big reason for that. Conroy said. “I think analytics are one “In emerging markets, banks are “Card-not-present fraud is higher of a variety of services that will help quicker to adopt P-to-P technology than P-to-P fraud right now and prob- mitigate the risk.” and are seeking ways to monitor the ably will be for some time,” Mudigonda Banks are keenly aware of how activity in an account,” Mudigonda said. “But I am certain that P-to-P fraud fraudsters like to hijack a P-to-P money said. “The high volume makes it ripe will catch up.”

PAYPAL INVESTS IN THE UNDERBANKED VIA ACQUISITION, PARTNERS PayPal has agreed to acquire TIO Networks, which sells Its network got a boost through an acquisition of software that powers bill payment processing, particularly ChangeSmart from Verifone in 2014. for underbanked consumers. The company's consumers typically access the service PayPal will pay $2.56 per share in cash, or about $233 at more than 900 self-service kiosk, 65,000 retail walk-in million, based on TIO's stock price on Jan 9, 2017 when it locations and mobile and online sites. entered into negotiations with PayPal. PayPal's efforts to reach underserved markets also reliance on cash, Mudigonda said. Crimi- ªWorldwide, more than 2 billion people do not have include a collaboration with venture capital firm Village affordable access to basic financial services, making it Capital. nals looking to breach digital payment difficult and expensive for consumers to carry out basic Village Capital supports and mentors seed-stage networks are equally focused on what’s financial tasks, including bill payment. TIO's digital platform, entrepreneurs focused on financial inclusion through happening in those markets, he added. and physical network of agent locations make paying bills its startup development program, which grants at least simpler, faster, and more affordable,º said Dan Schulman, $50,000 of investment capital to the top two graduates. By comparison, the U.S. is in the president and CEO of PayPal, in a release. Through its partnership with PayPal, it aims to help about early stages of P-to-P advancements TIO is based in Vancouver and is one of North America's 40 startups focused on improving financial access to low- and adoption, even though the country’s largest multi-channel processors, handling more than $7 wealth individuals, families and small businesses through billion in consumer bill payments in fiscal 2016. It serves technology and innovation. PayPal employees in each large banks are getting behind the more than 14 million consumer bill pay accounts with a focus market will act as their mentors and advisors. Zelle network, and various third-party on financially underserved consumers. PayPal has worked for the past several years to improve providers such as PayPal’s Venmo are It has a network of more than 10,000 billers, enabling TIO its ability to spot and foster new payments technology to process transactions such as telecom, wireless, cable and from third party developers, an effort that has included an establishing strong user bases. utility bill payments. expansion of its Blueprint program. Still, the task of securing P-to-P reg-

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017_ISO030417 17 2/27/2017 3:13:25 PM Kroger payments chief Kathy Hanna, one of 2017's Most Influential Women in Payments, is bringing the grocery store to the connected consumer BUILDING THE DIGITAL SUPERMA RKET

an a grocery store operate with no cashiers? The concept isn’t completely outland- ish — many stores already have a few self- checkout lanes, and the Amazon Go concept demonstrates how to operate a whole store this way — but grocery stores serve a wide range of consumers who are very much set Cin their habits. This means balancing the needs of traditional, check-writing shoppers with those of impatient, digitally savvy customers. Many retailers are watching Amazon Go as a test case for their own innovations. But from the perspective of Kroger payments chief Kathy Hanna, it’s Amazon that can learn from her. “It’s a very interesting idea,” said Hanna, senior director of Enterprise Payments & Store Support for the Cincinnati- based grocery chain and one of PaymentsSource’s 2017 Most By John Adams Influential Women in Payments. “They’re all trying to do what Photograph by Clay Cook we are already doing, which is using digital to make it faster

018_ISO030417 18 3/1/17 12:25 PM BUILDING THE DIGITAL SUPERMA RKET an a grocery store operate with no cashiers? The concept isn’t completely outland- ish — many stores already have a few self- checkout lanes, and the Amazon Go concept demonstrates how to operate a whole store this way — but grocery stores serve a wide range of consumers who are very much set Cin their habits. This means balancing the needs of traditional, check-writing shoppers with those of impatient, digitally savvy customers. Many retailers are watching Amazon Go as a test case for their own innovations. But from the perspective of Kroger payments chief Kathy Hanna, it’s Amazon that can learn from her. “It’s a very interesting idea,” said Hanna, senior director of Enterprise Payments & Store Support for the Cincinnati- based grocery chain and one of PaymentsSource’s 2017 Most Kathy Hanna Influential Women in Payments. “They’re all trying to do what Senior Director of Enterprise we are already doing, which is using digital to make it faster Payments & Store Support Kroger, Cincinnati

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and easier to shop. They’re just taking online ordering into Samsung’s re- things Kroger, a knowledge fed by “The KAMILA CHYTIL a different approach.” frigerators. Samsung has additionally Kroger Story,” a book about the life of MoneyGram Kroger’s been adding online tools signed Mastercard to power payments Barney Kroger, the chain’s founder. Chief Global Operations Officer at a rapid pace over the past year. The for its web refrigerators. Kroger’s “humble beginnings” are an company’s Kroger ClickList enables The hook of most of these initia- inspiration for Hanna. MoneyGram’s Kamila Chytil people to order groceries online, choose tives is the repeat order and memory. “I spent five years in the stores, when is assuming a new position at the a pickup time and retrieve items at the company amid major changes. store. But it’s not skimping on the per- This year for MoneyGram sonal touch. A store employee greets the “With such a large market share in the U.S., could not be more dynamic. shopper and helps load the groceries. [Kroger] can’t afford to fall behind.” The company’s about to play a “ClickList makes it easier for cus- key role in the expansion plans tomers to engage with us,” Hanna ‑David Livingston, supermarket industry analyst of one of the world’s largest e- said. “They are extremely busy and commerce companies — Alibaba’s Ant Financial — and the have children and parents, jobs, etc. Consumers tend to order many of the I first started my career at Kroger,” said money transfer industry could soon bear little resemblance The digital platform helps make the same items each week, so the online Hanna, who graduated from Tennessee to what it looked like just a few years ago. grocery experience a lot easier.” order is saved and can also be paired Technological University in 1986 with Kamila Chytil, one of PaymentsSource’s Most Influen- Consumers pay at the point of pickup, with coupons or suggestions for other a degree in business and accounting. tial Women in Payments for 2017, will be at the center of it though Hanna said Kroger is develop- purchases. She also holds a Doctorate of Jurispru- all. Named MoneyGram’s chief global operations officer ing an online payment option, which is As payments and grocery shopping dence, Law from the Nashville School in May, she’ll be responsible for tasks as varied as global already active in a few stores. ClickList give way to omnichannel order memory, of Law. “I worked as a bagger [and] a servicing, partner integrations, financial paper products, is live at more than 300 stores, with the pressure’s on for Kroger to stay cashier, learning the operations of the contact centers and strategic operations. more expansion coming each week ahead of the pace of innovation. store. Then I spent many years in the Alongside Chytil’s own changing role, MoneyGram is and expected throughout the next year. “Kroger is following what its competi- accounting department.” poised to become a part of Ant Financial, the payments af- “We want to make that smooth as it ties tors are doing,” said David Livingston, At each stop, there were profes- to our loyalty program,” Hanna said. a supermarket industry analyst. “With sionals who mentored her and put And there you have it: The cashier- such a large market share in the U.S. her in position to help Kroger meet free grocery shopping experience. they can’t afford to fall behind too long.” the challenge she faces today as the The process gives Kroger an e- Kroger’s online service also stores grocery industry and Kroger embrace ARCHANA ªARCHIEº PURI commerce feel at a time when grocery and tracks orders to make repeat shop- the change brought about by mobile Senior Product Manager, Payments and Platform Products stores are accelerating their move ping easier and embeds with market- apps, digital payments and omnichan- Braintree online. The bigger threat from Amazon ing programs for expanded sales and nel shopping. And leading her staff isn’t Amazon Go but AmazonFresh, service, making it a dynamic app, ac- through the changes as well. Throughout her payments technology career, colleagues the e-commerce giant’s online grocery cording to Hanna. “The pace of change is sometimes have pointed to the steady hand of Archana “Archie” Puri service. AmazonFresh launched near “It’s still early on with ordering gro- too fast and other times too slow,” as one of her key traits. Seattle in 2007 and has been picking ceries from web connected appliances Hanna said, adding either way can As the senior product manager for payments and platform up steam, adding Boston, Northern to know how that’s going to turn out,” lead to unexpected consequences products at PayPal’s Braintree, Puri has needed that consis- Virginia, Baltimore, Chicago, Dallas Hanna said of how Kroger will ultimately that can negatively affect customers’ tency in her work to stand out. It’s more than a metaphor. and London in the past year. It’s also mix with ‘Internet of Things’ initiatives. experience or associates’ work. “My “During the summer between high school and college, available in Los Angeles, San Francisco, “We’ve seen washers and dryers and younger colleagues have an aptitude I taught myself calligraphy,” Puri said. “It’s a skill that I San Diego, New York, Philadelphia and now refrigerators, we’re not sure what’s for change and even a desire for rapid became good at and it required a very steady hand.” Sacramento. going to take hold.” change at times that far exceeds our Puri was able to take the focus needed to “create some- Other online grocers are encroach- Hanna’s ties to Kroger couldn’t be more established teammates. While I thing truly beautiful and consistent, like calligraphy” into her ing on the traditional market, including deeper. She’s been in her current job think that is normal, I’ve found that it professional career at Braintree since 2012 and previously FreshDirect, a New York-area online for seven years, but that’s just part of helps me as a leader to encourage my at Yahoo for nearly eight years as a senior product manager supermarket that last year partnered her story. Hanna worked in accounting organization to move more quickly to and program manager. with Samsung to embed grocery shop- and treasury posts for years, and has meet their needs.” “It taught me to look at all the little pieces that go into ping into the tech company’s web- held other jobs at Kroger dating to the making a big project successful,” Puri added. “Every small connected Family Hub line of refrig- early 1980s. Visit our website for the full listing of Most detail in calligraphy requires a steady hand and requires erators. ShopRite, another traditional These experiences have given her Influential Women in Payments Honorees. the same amount of focus for each stroke to make sure it’s supermarket chain, is also embedding a deep history and knowledge of all A selection of profiles begins next page. perfect and beautiful.”

20 ISO&AGENT March/April 2017 isoandagent.com March/April 2017 ISO&AGENT 21

020_ISO030417 20 3/1/17 12:25 PM things Kroger, a knowledge fed by “The KAMILA CHYTIL filiate of Chinese e-commerce giant Alibaba and the operator Kroger Story,” a book about the life of MoneyGram of Alipay. Ant has announced plans to acquire MoneyGram Barney Kroger, the chain’s founder. Chief Global Operations O cer for $880 million. Kroger’s “humble beginnings” are an “The combined company will have an expanded global inspiration for Hanna. MoneyGram’s Kamila Chytil footprint and offer a suite of hybrid solutions that will provide “I spent five years in the stores, when is assuming a new position at the more people around the world access to a reliable financial company amid major changes. connection to loved ones,” Chytil said. “Together, we will This year for MoneyGram provide greater access, security and simplicity for users “With such a large market share in the U.S., could not be more dynamic. around the world.” [Kroger] can’t afford to fall behind.” The company’s about to play a As big as that sounds, there’s more than meets the eye. key role in the expansion plans The deal could wind up in the political crossfire, given -David Livingston, supermarket industry analyst of one of the world’s largest e- Alibaba head Jack Ma’s stature in China and the country’s commerce companies — Alibaba’s Ant Financial — and the potential rivalry with U.S. President Donald Trump, who I first started my career at Kroger,” said money transfer industry could soon bear little resemblance has promised a trade war with the nation. Hanna, who graduated from Tennessee to what it looked like just a few years ago. Even without the drama, Ant’s deal is its first major foray Technological University in 1986 with Kamila Chytil, one of PaymentsSource’s Most Influen- into the U.S. market—most earlier moves by Chinese pay- a degree in business and accounting. tial Women in Payments for 2017, will be at the center of it ment players such as Ant and UnionPay to extend beyond She also holds a Doctorate of Jurispru- all. Named MoneyGram’s chief global operations officer China’s borders have been focused on short-term travelers dence, Law from the Nashville School in May, she’ll be responsible for tasks as varied as global who shop at airports. of Law. “I worked as a bagger [and] a servicing, partner integrations, financial paper products, MoneyGram was already facing major challenges from cashier, learning the operations of the contact centers and strategic operations. startups using emerging technology like blockchain to store. Then I spent many years in the Alongside Chytil’s own changing role, MoneyGram is disrupt the transfer market, with companies like Ripple accounting department.” poised to become a part of Ant Financial, the payments af- making a splash. At each stop, there were profes- sionals who mentored her and put her in position to help Kroger meet the challenge she faces today as the grocery industry and Kroger embrace ARCHANA “ARCHIE” PURI She thinks of that discipline the change brought about by mobile Senior Product Manager, Payments and Platform Products when she gets tired, as “if you apps, digital payments and omnichan- Braintree let go of your focus, the project nel shopping. And leading her staff can turn out entirely different.” through the changes as well. Throughout her payments technology career, colleagues From a more technical stand- “The pace of change is sometimes have pointed to the steady hand of Archana “Archie” Puri point, she more easily learned too fast and other times too slow,” as one of her key traits. how to work with databases. Hanna said, adding either way can As the senior product manager for payments and platform “It’s helped me with my job lead to unexpected consequences products at PayPal’s Braintree, Puri has needed that consis- at Braintree by giving me the that can negatively affect customers’ tency in her work to stand out. It’s more than a metaphor. freedom to not depend on engi- experience or associates’ work. “My “During the summer between high school and college, neers to do something for me,” younger colleagues have an aptitude I taught myself calligraphy,” Puri said. “It’s a skill that I Puri said. for change and even a desire for rapid became good at and it required a very steady hand.” Puri has been in her current role at Braintree since No- change at times that far exceeds our Puri was able to take the focus needed to “create some- vember of 2016, but was product leader for payments and more established teammates. While I thing truly beautiful and consistent, like calligraphy” into her card processing at the San Francisco-based company the think that is normal, I’ve found that it professional career at Braintree since 2012 and previously three previous years. helps me as a leader to encourage my at Yahoo for nearly eight years as a senior product manager The admiration of her co-workers was apparent when a organization to move more quickly to and program manager. sheet of paper stating “You’re Awesome” turned up on her meet their needs.” “It taught me to look at all the little pieces that go into desk after an especially rugged week of work punctuated making a big project successful,” Puri added. “Every small by numerous meetings. Visit our website for the full listing of Most detail in calligraphy requires a steady hand and requires “Despite not knowing where that message came from, Inﬂ uential Women in Payments Honorees. the same amount of focus for each stroke to make sure it’s it came at a time when I needed a little bit of extra motiva- A selection of proﬁ les begins next page. perfect and beautiful.” tion,” Puri said. “To this day, that note still sits on my desk.”

20 ISO&AGENT March/April 2017 isoandagent.com March/April 2017 ISO&AGENT 21

021_ISO030417 21 3/1/17 12:25 PM 2017 MOST INFLUENTIAL WOMEN IN PAYMENTS

JENNIFER ROBERTS payment system. AMY PARSONS President of Strategic Alliances JPMorgan Chase has put years of work into Chase Pay, SVP of Global Commerce and Loyalty Solutions dating to an earlier merchant services initiative with Visa Discover JPMorgan Chase called ChaseNet. As Chase Pay’s development progressed, the input from younger staff was accompanied by an invest- As senior vice president of For one of her bank’s larg- ment in LevelUp, a mobile payment company with youthful global commerce for Discover, it est and most important forays leadership. is no surprise that Amy Parsons into digital transaction technol- “With my tenure in the industry, it’s great to get fresh says “my desk is in whatever ogy, JPMorgan Chase’s Jennifer perspectives from younger colleagues, both at JPMorgan country I happen to be in.” Roberts turned to the people Chase and our partners. A great example is our partner Her workspace is more digital most in tune with the next era Seth Priebatsch from LevelUp,” said Roberts. Priebatsch is than physical: Parsons makes ex- of financial services. LevelUp’s CEO — or, as he prefers to be called, Chief Ninja. tensive use of her phone to communicate with others around “It was very important to get input and feedback from Roberts’ faith and openness to new ideas from new the world, takes photos of new innovations she encounters our younger colleagues as we developed Chase Pay,” said people is apparent beyond the Chase Pay initiative. Given and, mostly, tries out the various new mobile wallets and Roberts, president of strategic alliances and loyalty solu- the constant state of flux in the payments industry, fresh payment platforms. tions for JPMorgan Chase and one of PaymentsSource’s perspectives are vital to her leadership style. She says it’s “It helps me to speak to our business partners and un- Most Influential Women in Payments for 2017. “Digital refreshing to spend time with people who aren’t bogged derstand their concerns and excitement about the changes solutions are second nature to the millennial generation, down by thinking about how far we’ve come and bring new in the way consumers are paying for items,” said Parsons, so it’s important we listen.” energy to inventing the future. A lot is riding on Chase Pay’s success. It’s a big play for “The payments industry is going through tremendous the financial services giant, as it seeks to fill the void in the change now, with even greater innovation on the near ho- merchant-focused mobile wallet market left by the Mer- rizon,” said Roberts, a graduate of Towson University who chant Customer Exchange’s suspended CurrentC mobile holds an MBA from the University of North Texas.

KARA KAZAZEAN priorities — a necessity in our Director of Payment Services ever evolving industry,” she said. Walmart It has all given her a better understanding of “servant For Walmart’s Kara Kazazean the sound of success is leadership” and how to lead in very much like that of a clarinet. situations where a leader has “While it is a skill completely removed from the pay- accountability, but not formal ments industry, the fact that I can play the clarinet is a skill authority, in today’s “matrixed with a tremendous impact on my career,” said Kazazean, organizations,” she added. one of PaymentsSource’s 2017 Most Influential Women in After joining Walmart in 2011 Payments honorees. and serving as the company’s In high school, Kazazean joined the marching band and global gift card manager for two competed to be a leader for the clarinet section. As part of years, Kazazean took on her current role at a time when the selection process, aspiring section leaders participated EMV was approaching and mobile wallets were joining the in a rigorous leadership training program. payments landscape. She has spent the last year involved “This was my first exposure to servant leadership, and in helping the retailer develop its Walmart Pay mobile app, the concept that leaders don’t win unless those around them the first in what figures to be more moves into omnichannel are successful,” said Kazazean, who has been at Walmart offerings for Walmart customers. for six years. Prior to joining Walmart, Kazazean deployed point of sale Kazazean has carried those clarinet leadership skills to devices for Radiant Systems, which is now a part of NCR. her payments career. She also spent eight years at RaceTrac Petroleum, leading “The early leadership lessons also put me in situations that the company’s electronic payments team and overseeing developed my ability to be agile and adaptable to changing its Triple-DES ATM upgrades.

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022_ISO030417 22 3/1/17 12:25 PM payment system. AMY PARSONS who is being recognized as one of PaymentsSource’s Most JPMorgan Chase has put years of work into Chase Pay, SVP of Global Commerce Influential Women in Payments in 2017. dating to an earlier merchant services initiative with Visa Discover “Whenever I hear about a new application that facilitates a called ChaseNet. As Chase Pay’s development progressed, part of the payments process, I download it and immediately the input from younger staff was accompanied by an invest- As senior vice president of begin exploring it,” Parsons added. “This is how I can experiment in LevelUp, a mobile payment company with youthful global commerce for Discover, it ence my job, allowing me to more effectively communicate leadership. is no surprise that Amy Parsons across the industry.” “With my tenure in the industry, it’s great to get fresh says “my desk is in whatever That sort of experience and interest in new technology perspectives from younger colleagues, both at JPMorgan country I happen to be in.” has helped Parsons cultivate her communication skills Chase and our partners. A great example is our partner Her workspace is more digital throughout her 13-year career at Discover. Seth Priebatsch from LevelUp,” said Roberts. Priebatsch is than physical: Parsons makes ex- Parsons has been in her current role nearly two years, LevelUp’s CEO — or, as he prefers to be called, Chief Ninja. tensive use of her phone to communicate with others around but in that time she has overseen the formation of a busi- Roberts’ faith and openness to new ideas from new the world, takes photos of new innovations she encounters ness development team, the integration of the Pulse debit people is apparent beyond the Chase Pay initiative. Given and, mostly, tries out the various new mobile wallets and network, and widened global acceptance and global com- the constant state of flux in the payments industry, fresh payment platforms. merce for the card brand. perspectives are vital to her leadership style. She says it’s “It helps me to speak to our business partners and un- She has been an executive in strategic merchant services refreshing to spend time with people who aren’t bogged derstand their concerns and excitement about the changes relations, head of global acceptance and a senior vice presi- down by thinking about how far we’ve come and bring new in the way consumers are paying for items,” said Parsons, dent for Pulse’s global expansion. energy to inventing the future. “The payments industry is going through tremendous change now, with even greater innovation on the near ho- rizon,” said Roberts, a graduate of Towson University who holds an MBA from the University of North Texas.

priorities — a necessity in our ever evolving industry,” she said. ARE YOU EMV READY? WHY CHOOSE PAYWORKS? It has all given her a better understanding of “servant Let Payworks take the guesswork FASTER INTEGRATION TECHNOLOGY leadership” and how to lead in situations where a leader has out of EMV acceptance. accountability, but not formal SHORTER TIME TO ROI authority, in today’s “matrixed organizations,” she added. LATEST CARD ACCEPTANCE TECHNOLOGY Payworks serves leading ISVs, ISOs, MSPs After joining Walmart in 2011 and serving as the company’s and Financial Institutions with Card Present global gift card manager for two EMV ACCEPTANCE FROM START WITH NO ADDED SETUP payment gateway technology required to years, Kazazean took on her current role at a time when EMV was approaching and mobile wallets were joining the accept modern day card payments at the WHITE-LABEL SOLUTION AVAILABLE payments landscape. She has spent the last year involved Point of Sale. in helping the retailer develop its Walmart Pay mobile app, INTEGRATE ONCE, SELECT FROM MULTIPLE the first in what figures to be more moves into omnichannel PROCESSORS GLOBALLY offerings for Walmart customers. Prior to joining Walmart, Kazazean deployed point of sale devices for Radiant Systems, which is now a part of NCR. Contact us today to find out how Payworks can work for you! She also spent eight years at RaceTrac Petroleum, leading the company’s electronic payments team and overseeing Michael Doron | [email protected] | (212) 457-1776 | www.payworks.com its Triple-DES ATM upgrades.

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023_ISO030417 23 3/1/2017 1:10:58 PM 2017 MOST INFLUENTIAL WOMEN IN PAYMENTS

CHRISTINE LARSEN Data through its initial public offering in October of 2015, JANET ESTEP EVP and COO helping establish an infusion of new equity into the company. President and CEO First Data “I am very proud to be a part of an incredible team that NACHA is dedicated to constant improvement for its clients, part- Curiosity may not be the best ners, investors and employees,” said Larsen, who calls a Janet Estep has been one of approach for a cat, but Christine commemorative baseball bat from First Data’s IPO “the the most visible figures in the Larsen finds it to be a lifesaver in most valuable thing on my desk” because it represents the faster payments movement, bat- her role as executive vice presi- $2.8 billion that was raised during the IPO and company’s tling for years to get reluctant dent and chief operations officer ongoing transformation. banks on board with this vision. for First Data. “The IPO was a terrific milestone on our journey and the Estep, the president and “I have always been a very bat is a constant reminder of the work we are doing and what CEO of the electronic payments curious person,” said Larsen, one of PaymentsSource’s 2017 we have already accomplished,” Larsen added. association Nacha and one of Most Influential Women in Payments honorees. “In my job She says it is an exciting time to be in the payments in- PaymentsSource’s Most Influential Women in Payments you have to take what appears to be negative or adversarial dustry because of the many technological concepts being for 2017, scored a major breakthrough in that battle last and dig into what is going on.” formulated. But there is such a thing as too much excitement. year. The Fed set its same-day ACH plans to match Nacha’s, Combining that natural drive with a keen ear for listen- “What frustrates me the most is there isn’t enough time in effect making “faster payments” a reality after years of ing to clients always helps obtain all of the essential facts in the day to act on all of the fabulous ideas that could be stagnation in the U.S. needed to solve an issue in a business situation, Larsen said. implemented for our clients in the industry,” Larsen said. But Estep, who has frequently spoken and written about Since coming to First Data nearly four years ago, the com- “Of course, we prioritize and get to the biggest ones first, pany has essentially transformed from a payment processor but there is so much to evaluate and keep track of, and so to a technology innovator. In that time, listening and asking many great ideas coming to fruition.” a lot of questions are skills that have served Larsen well. Larsen oversees 13,000 employees in her roles as the Larsen was part of the management team that took First leader of the company’s global operations.

SERENA SMITH overseeing delivery of FIS finan- SVP, Head of International Payments, CAO cial services software products FIS with the company’s large Global Retail Payments division. She Serena Smith isn’t sure if her personality trait of “never also spent five and a half years taking no for an answer” is a skill to take pride in. managing the company’s elec- But the senior vice president, head of international pay- tronic funds transfer platform, ments and chief administrative officer at FIS is certain about becoming a lead figure in the one thing: “It does demonstrate my passion and perseverance formation of the EFT Advisory when faced with obstacles that need overcoming.” Council. Since joining FIS in the That sort of drive has helped Smith earn a spot on Pay- Dallas-Fort Worth area in 2003, mentsSource’s 2017 Most Influential Women in Payments list. Smith has carried the title of a “It is very scary early in your career to step out on that senior vice president. often narrow branch and be the sole voice that is pushing Smith is a proponent of having things done faster because back and asking to move forward when the popular answer she knows FIS clients and consumers are pushing for pay- is to stop,” said Smith, who has been in her current role at ments and fund transfers to be quicker and more efficient. FIS for a year and part of the company’s executive team for But it’s not about being faster just for faster’s sake. 14 years. “Faster as in yesterday — and with quality and polish,” “I have found that over the years, this trait helped me to Smith said of services delivery and data gathering. “We sharpen my skills in negotiation as well as boost my confi- have to continue to challenge the norm and push for new dence in my capabilities, which have led to the roles that I efficiencies and greater availability and ease of use of the have been fortunate to be a part of,” Smith said. data. Nothing frustrates me more than knowing we can get Those roles include nearly four years as chief client officer, the information we need, but that it will take us days to get it.”

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024_ISO030417 24 3/1/17 12:25 PM Data through its initial public offering in October of 2015, JANET ESTEP the banking industry’s global migration toward faster pay- helping establish an infusion of new equity into the company. President and CEO ment processing, also possesses a keen sense of balance, “I am very proud to be a part of an incredible team that NACHA knowing that a faster society also brings new challenges. is dedicated to constant improvement for its clients, part- “Frustration is caused by wanting to read and absorb ners, investors and employees,” said Larsen, who calls a Janet Estep has been one of everything, and simply not having the time to do that,” commemorative baseball bat from First Data’s IPO “the the most visible figures in the Estep said. most valuable thing on my desk” because it represents the faster payments movement, bat- “The best lesson I’ve learned from a younger colleague $2.8 billion that was raised during the IPO and company’s tling for years to get reluctant is to practice patience. Patience, combined with close listen- ongoing transformation. banks on board with this vision. ing, can actually help an individual take action more rapidly “The IPO was a terrific milestone on our journey and the Estep, the president and than if patience is not practiced.” bat is a constant reminder of the work we are doing and what CEO of the electronic payments Patience is, in fact, not an enemy of speed and can actually we have already accomplished,” Larsen added. association Nacha and one of help move projects forward, according to Estep. She says it is an exciting time to be in the payments in- PaymentsSource’s Most Influential Women in Payments “Patience truly allows for good listening, which is essential dustry because of the many technological concepts being for 2017, scored a major breakthrough in that battle last to understand all sides of an issue or to gain knowledge of formulated. But there is such a thing as too much excitement. year. The Fed set its same-day ACH plans to match Nacha’s, facts required to answer a question,” Estep said. “With the “What frustrates me the most is there isn’t enough time in effect making “faster payments” a reality after years of acquired background and information, decisions can be in the day to act on all of the fabulous ideas that could be stagnation in the U.S. made to move the industry forward or to make solid deci- implemented for our clients in the industry,” Larsen said. But Estep, who has frequently spoken and written about sions required of a leader.” “Of course, we prioritize and get to the biggest ones first, but there is so much to evaluate and keep track of, and so many great ideas coming to fruition.” Larsen oversees 13,000 employees in her roles as the leader of the company’s global operations.

overseeing delivery of FIS financial services software products FROM POSSIBILITY TO PERFECTION with the company’s large Global Retail Payments division. She Make business bloom with cross-border also spent five and a half years eCommerce payments that are simple, managing the company’s electronic funds transfer platform, global and secure. becoming a lead figure in the formation of the EFT Advisory Deliver the ultimate in simplicity, global connectivity Council. Since joining FIS in the and security to merchants with ACI’s white label UP Dallas-Fort Worth area in 2003, Smith has carried the title of a eCommerce Payments solution. With a single senior vice president. integration, you’ll enable connectivity to more than Smith is a proponent of having things done faster because 350 market-relevant alternative payment methods she knows FIS clients and consumers are pushing for pay- and card acquirers, while ensuring PCI compliance. ments and fund transfers to be quicker and more efficient. But it’s not about being faster just for faster’s sake. “Faster as in yesterday — and with quality and polish,” Smith said of services delivery and data gathering. “We LEARN MORE at aciworldwide.com/ecommerce have to continue to challenge the norm and push for new efficiencies and greater availability and ease of use of the data. Nothing frustrates me more than knowing we can get the information we need, but that it will take us days to get it.”

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PAM JOSEPH services provider. LOU ANNE ALEXANDER President and COO “I feel that I’ve learned more in the last five years than I Group President, Payments TSYS did in my first 20, and it’s all because my younger colleagues Early Warning have been able to successfully keep pace with the rate of For decades, the payment change,” said Joseph, TSYS’ president and COO, and one of processor TSYS had been noth- this year’s Most Influential Women in Payments. “Moore’s In a financial services career ing if not a rock of stability, law (which states that computing power doubles every two that dates back to 1983, Lou Anne touting a senior management years) has opened our eyes to the exponential growth and Alexander has experienced up- team dating to the 1970s, a progress we’re going to see from technology.” heavals of the status quo of pay- reliable processing record and Joseph has also been a repeated honoree for Payments- ment technology. years of steady growth. Source’s Most Influential Women in Payments and American But few have had more mean- But the age of mobility has Banker’s Most Powerful Women in Banking. ing for the group president of payments at Early Warning turned the entire industry on its TSYS CEO M. Troy Woods recruited Joseph to TSYS than her current focus on younger consumers. head, requiring a nimble response in a world where transac- last year, bringing someone with a unique mix of talent and “One of the most valuable lessons I’ve learned revolves tion processing and scale have become commoditized. It’s experience to address the challenges TSYS faces. Joseph around the preferences our younger generation have for a world that required TSYS to make fast and meaningful had been head of U.S. Bank’s Elavon processing arm for a technology experiences,” said Alexander, who has been changes. It’s spent billions of dollars on acquiring Trans- decade and was responsible for electronic payment lines and named one of PaymentsSource’s 2017 Most Influential First and Netspend, and perhaps more importantly, made card types, just the type of skills needed as TSYS diversifies. Women in Payments. “Growing up digital, they expect fast, substantial adjustments to its management team to accom- As TSYS, Joseph is responsible for improving speed to modate retirements. market, and guiding a new generation of payment experts. It also lured longtime U.S. Bank exec Pam Joseph out “My younger colleagues…[have] an entirely new perspec- of retirement to help steer the company’s evolving busi- tive compared with someone like me who still primarily uses ness strategy as it morphs into a multi-channel merchant my iPhone as, well, a phone.”

REETIKA GREWAL Head of Payments Strategy and Solutions ers a few questions. Grewal Silicon Valley Bank would interview customers and study hours of tape of Executives in the payments industry know the key to consumers in action to fully future technological advances rests solely in the hands of understand their mindsets. the consumer. Without consumer adoption, advances in “This intense focus on payments quickly collect dust. the customer and under- Reetika Grewal understands this reality particularly well, standing their experience because of her background in consumer research that has has really helped to shape been a major driver in her job as the head of payments strat- my approach to product de- egy and solutions at Silicon Valley Bank the past four years. sign and development,” said “One of my first jobs out of college was as a user-centered Grewal, who has a payments design consultant at a boutique consulting firm that was industry career spanning focused on leveraging ethnographic research to help design 15 years. products and services,” said Grewal, who has been named Prior to joining Silicon Valley Bank, Grewal worked as a a 2017 Most Influential Women in Payments honoree by vice president of payment strategy at JPMorgan Chase for PaymentsSource for the third time. nearly two years, and was involved in product strategy and “Our research process entailed observing and inter- business development at Clairmail for nearly four years. A viewing consumers in their most intimate environments to short stint at the biometric payment company Pay By Touch understand the drivers behind their behaviors,” she added. in 2007 came after nearly five years as vice president of online “This approach allowed me to develop a deep and holistic payments product management at Wells Fargo. understanding of the customer.” At Silicon Valley Bank, Grewal helped launch Commerce. This was not just the conventional method of asking custom- Innovated in 2015, an accelerator jointly run by MasterCard.

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026_ISO030417 26 3/1/17 12:25 PM services provider. LOU ANNE ALEXANDER simple and safe solutions.” “I feel that I’ve learned more in the last five years than I Group President, Payments Studying the likes and dislikes of younger consumers did in my first 20, and it’s all because my younger colleagues Early Warning has helped Alexander and her team shape major payments have been able to successfully keep pace with the rate of products. change,” said Joseph, TSYS’ president and COO, and one of In a financial services career “We’ve done so much more user testing to best apply these this year’s Most Influential Women in Payments. “Moore’s that dates back to 1983, Lou Anne lessons to our experience design for huge initiatives, such law (which states that computing power doubles every two Alexander has experienced up- as Zelle,” Alexander said of the venture that Early Warning years) has opened our eyes to the exponential growth and heavals of the status quo of pay- obtained through its acquisition of clearXchange, a bank- progress we’re going to see from technology.” ment technology. backed person-to-person payments network. Joseph has also been a repeated honoree for Payments- But few have had more mean- Zelle has been positioned in the industry as the banks’ Source’s Most Influential Women in Payments and American ing for the group president of answer to third-party P-to-P payment options that have Banker’s Most Powerful Women in Banking. payments at Early Warning than her current focus on been piquing the interest of younger consumers, but with TSYS CEO M. Troy Woods recruited Joseph to TSYS younger consumers. less emphasis on social media sharing and more focus on last year, bringing someone with a unique mix of talent and “One of the most valuable lessons I’ve learned revolves trusted bank brands and keeping payments private. experience to address the challenges TSYS faces. Joseph around the preferences our younger generation have for “It’s this fresh approach to thinking about how technol- had been head of U.S. Bank’s Elavon processing arm for a technology experiences,” said Alexander, who has been ogy can blend seamlessly into your life that I’ve come to decade and was responsible for electronic payment lines and named one of PaymentsSource’s 2017 Most Influential appreciate from all the younger colleagues I work with,” card types, just the type of skills needed as TSYS diversifies. Women in Payments. “Growing up digital, they expect fast, said Alexander. As TSYS, Joseph is responsible for improving speed to market, and guiding a new generation of payment experts. “My younger colleagues…[have] an entirely new perspective compared with someone like me who still primarily uses my iPhone as, well, a phone.” PAYMENTS TODAY AND INTO THE

TERMINAL SOLUTIONS

MOBILE SHOP ers a few questions. Grewal SOLUTIONS VENDING would interview customers FUTUREFUTURE EAT SOLUTIONS and study hours of tape of Apriva POS solutions give companies consumers in action to fully the ﬂexibility to choose the devices INTEGRATED SELF-SERVICE understand their mindsets. KIOSK SOLUTIONS “This intense focus on and processors that work best for their the customer and under- markets. By connecting to all major standing their experience wireless carriers, more than 30 T INTEGRATED has really helped to shape payment processors, over 40 hardware R TICKETING SOLUTIONS PARK my approach to product de- providers, plus robust API/mobile A N sign and development,” said integration, EMV certiﬁcations, and S INTEGRATED PARKING SOLUTIONS Grewal, who has a payments self-service solutions, Apriva P O industry career spanning empowers merchants to sell anything, R 15 years. anywhere, now and into the future. T Prior to joining Silicon Valley Bank, Grewal worked as a vice president of payment strategy at JPMorgan Chase for Learn more at Apriva.com/ISOAgent WASH INTEGRATED VEHICLE nearly two years, and was involved in product strategy and 877-277-0728 WASH SOLUTIONS business development at Clairmail for nearly four years. A short stint at the biometric payment company Pay By Touch in 2007 came after nearly five years as vice president of online payments product management at Wells Fargo. At Silicon Valley Bank, Grewal helped launch Commerce. Innovated in 2015, an accelerator jointly run by MasterCard.

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027_ISO030417 27 3/1/2017 1:11:04 PM RETAILERS DISRUPTION

social sites such as Facebook, Fodor said, adding connected devices such as in-car computers are also advancing at a rapid pace. “These experiences are out there First Data in the Age of Amazon to be had now and will evolve quickly,” When the very nature of retail is changing, how can traditional payment companies keep up? Fodor said. BY JOHN ADAMS Merchants will play a key role in this as they reach consumers through these new channels, Fodor said, noting Alexa’s introduction to CVS as an example of a personalized digital shopping experience (Alexa is the name of Amazon’s mazon and other e-com- digital assistant, typically accessed merce disruptors are turn- through its Echo and Fire consumer ing long-held retail models devices). upside down, but in doing First Data is upgrading its technol- so they create a lifeline for ogy to accommodate the expansion of retailersA who see them as an opportunity digital commerce and how that will rather than a threat. There really is no reason for retailers to defend their current point of sale setup when Amazon and its peers are demonstrating the flaws in that model. If anything, merchants can view projects like the Amazon Go checkout-free store as free demonstrations of what they could do with newer technology. “Some savvy merchants will adapt accordingly, and we’re training our sales force on that. This is what their pitch needs to be,” said Glenn Fodor, First Data’s senior vice president of strategic intelligence in an interview that followed a First Data webcast on payment industry trends on Wednesday. Mobile payments, new marketing and other staples of startups are applicable to traditional retail, Fodor said, while Amazon has grown to substantial size, other retailers to accelerate development adding not all merchants may respond accounting for 60% of e-commerce of omnichannel strategies, Fodor said, to that message. “That is the ultimate growth, and only 17% of U.S. households predicting retailers will recast larger outcome…you will have the haves and don’t use Amazon, Fodor said. stores as distribution centers, where have nots.” “Retailers will have to experiment people shop and later have goods de- During First Data’s presentation, and grow sales in ways that may not livered. And the sheer size of Amazon, which also touched on issues such as be considered core,” Fodor said during which is bigger than most of the largest the increased collaboration among pay- the event. brick-and-mortar retailers combined, ment companies and the winding down Amazon has wandered from its tra- pressures the traditional retail industry. of the EMV migration, Fodor noted ditional core, experimenting with new Retailers must additionally respond to stores are struggling, closing locations delivery methods and retail environ- connected commerce innovations, such and suffering poor quarterly earnings. ments. The Amazon Go store will spur as bots, which allow selling through

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028_ISO030417 28 2/27/2017 3:14:49 PM social sites such as Facebook, Fodor transform the retail environment. It has for processors comes from an increas- said, adding connected devices such opened its Clover point of sale system to ingly fast moving e-commerce and as in-car computers are also advancing external developers and has partnered mobile environment, coupled with the at a rapid pace. with Silicon Valley Bank to boost its incredibly fast growth of some of the “These experiences are out there visibility into the technology industry. emerging payment companies such as First Data in the Age of Amazon to be had now and will evolve quickly,” The rate of change in payments is Adyen, Stripe, Braintree and others, When the very nature of retail is changing, how can traditional payment companies keep up? Fodor said. accelerating and the space is becoming said Rick Oglesby, president of AZ BY JOHN ADAMS Merchants will play a key role in this more complex, said Thad Peterson, a Payments Group. as they reach consumers through these senior analyst at Aite Group, adding “Not only is e-commerce growth new channels, Fodor said, noting Alexa’s consumers are driving merchants to dramatically outpacing that of retail, but introduction to CVS as an example of a deliver seamless omni-channel experi- the companies that have got it right are personalized digital shopping experiences and the number of competitors growing at a pace that is dramatically ence (Alexa is the name of Amazon’s in nearly every category is increasing. faster than that of established proces- digital assistant, typically accessed “To maintain share and stay competi- sors,” Oglesby said. through its Echo and Fire consumer tive, processors much offer capabilities “So the processors are seeing e- devices). that their customers need. It’s not a commerce as both a threat and an op- First Data is upgrading its technol- differentiation play, it’s a ‘keeping up portunity,” he added. “Sitting on their ogy to accommodate the expansion of with the Joneses’ play,” Peterson said. laurels and doing what they have always digital commerce and how that will The added technology acceleration done doesn’t make much sense.”

other retailers to accelerate development of omnichannel strategies, Fodor said, predicting retailers will recast larger stores as distribution centers, where people shop and later have goods de- livered. And the sheer size of Amazon, which is bigger than most of the largest brick-and-mortar retailers combined, pressures the traditional retail industry. Retailers must additionally respond to connected commerce innovations, such as bots, which allow selling through

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build bundles for merchants, including a marketing or advertising program with sales performance or human resources—all tasks that are beyond payment processing, according to Dumbrell. An App Strategy for ISOs “An acquirer that specializes in res- Could an app strategy be all that ISOs need to take their marketing to the next level? taurants can create a restaurant bundle, BY JOHN ADAMS with gift cards, a loyalty app, payroll and customer satisfaction surveys, for example,” Dumbrell said. Before its entry into North America, Aevi entered into other partnerships to add breadth to its app store. Last spring, SOs and agents have a firm hold the company allied with Wirecard, Evo on selling payment terminals, but and Fime to support contactless pay- that’s not where the real action is. ments, compliance and processing. Aevi Today, merchant acquiring is about has also partnered with Commonwealth tying payments to things such Bank of Australia to boost acquiring Ias advertising, marketing and loyalty technology. programs. Aevi hopes the expanding app store It’s a challenge for an industry that’s can convince merchant acquirers that not regarded as being robust adopters targeted advertising, cross-merchant of new technology, but Aevi hopes the loyalty, inventory management and app store concept and a series of col- human resources tied to the point of laborations can help merchant acquirers sale system are not a threat from dis- embrace innovation. ruptive startups, but an opportunity for “A merchant should be able to select traditional merchants. apps on their phone that they see value “I come from a background of work- in,” said Jeff Dumbrell, general man- ing with closed ecosystems and closed ager of the Americas Region for Aevi, operating systems and payment ter- a German unit of Diebold Nixdorf that minals,” Dumbrell said. “What we’re operates a cloud-based white label B-to- doing is opening the ecosystem where B app store called Global Marketplace merchants can add services that make and a tablet based point of sale system sense to them.” called “Albert.” Aevi just announced its Aevi’s operating in a competitive expansion into North America. market, where the established payment The app store is designed to use open processors are already adding merchant development to create a suite of business service apps to web-connected payment apps that acquirers offer to merchants. terminals. First Data is using technology These apps include products such as from its acquisition of Spree Commerce Alldox, a business document storage to add flexibility to its Clover tablet point app; Epos now, a retail and hospitality of sale system. data reporting app; Appointedd, a book- And Leaf deployed an app store for ing tool; and dozens of others. app store. Aimed primarily at retail and based marketing. merchants years ago, in advance of “It’s kind of like a buffet for third hospitality merchants, Smart Engine For example, the ads can include con- Heartland’s acquisition of the company. party apps,” Dumbrell said. enables acquirers to build point-based nections with tailored real-time offers Poynt and Verifone’s Carbon are also Aevi’s North American expansion marketing and advertising campaigns at associated stores within a network designed to bring elements of mobile comes as it enters into a collaboration that operate across a network of payment of participating retailers, based on a commerce to merchant acquisition. with Smart Engine International to add terminals, creating an ecosystem of consumer’s payment history. Given the mix of technology solutions loyalty and advertising apps to Aevi’s interactive advertisements and offer- Acquirers can use these campaigns to available, it’s possible for merchants to

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030_ISO030417 30 2/27/2017 3:15:55 PM build bundles for merchants, including a be overwhelmed. the needs of the merchant, then it’s marketing or advertising program with “The technology may be getting entirely possible for the program to sales performance or human resourc- a bit ahead of the implementation,” fail,” Peterson said. es—all tasks that are beyond payment said Thad Peterson, a senior analyst at The Kohl’s example is one that tries to processing, according to Dumbrell. Aite Group. “In loyalty and promotion marry several existing areas of in-store An App Strategy for ISOs “An acquirer that specializes in res- it’s essential to have clear objectives marketing and payments under a thin Could an app strategy be all that ISOs need to take their marketing to the next level? taurants can create a restaurant bundle, and a solid economic model to track layer of new technology. BY JOHN ADAMS with gift cards, a loyalty app, payroll performance.” The Kohl’s Pay app is based on the and customer satisfaction surveys, for New tools like real-time couponing retailer’s strengths in getting consumers example,” Dumbrell said. and point of sale loyalty are powerful to use its private-label card and redeem Before its entry into North America, if they support the merchant’s overall rewards. The store emphasizes the abil- Aevi entered into other partnerships to business objectives, Peterson said, ity to earn rewards by using its wallet add breadth to its app store. Last spring, adding Kohl’s integration of promo- app rather than carrying a separate the company allied with Wirecard, Evo tion, loyalty and payment into its app loyalty or payment card. and Fime to support contactless pay- simplifies things for the consumer and But it doesn’t block out other payment ments, compliance and processing. Aevi the employee. methods; the retailer also supports Apple has also partnered with Commonwealth “If on the other hand a new application Pay and enables customers to link their Bank of Australia to boost acquiring requires significant behaviour change Kohl’s card as a funding source within technology. by the consumer or doesn’t fully meet Apple’s mobile wallet. Aevi hopes the expanding app store can convince merchant acquirers that targeted advertising, cross-merchant loyalty, inventory management and PROCESSING human resources tied to the point of sale system are not a threat from dis- YEARS ruptive startups, but an opportunity for traditional merchants. “I come from a background of working with closed ecosystems and closed INTRODUCES operating systems and payment terminals,” Dumbrell said. “What we’re doing is opening the ecosystem where merchants can add services that make sense to them.” Aevi’s operating in a competitive Premier Plus market, where the established payment processors are already adding merchant service apps to web-connected payment terminals. First Data is using technology from its acquisition of Spree Commerce to add flexibility to its Clover tablet point • Our Secure EMV and MSR Bluetooth Card Reader of sale system. • Supports iOS and Android And Leaf deployed an app store for based marketing. merchants years ago, in advance of For example, the ads can include con- Heartland’s acquisition of the company. eProcessingNetwork .com nections with tailored real-time offers Poynt and Verifone’s Carbon are also 800-296-4810 at associated stores within a network designed to bring elements of mobile of participating retailers, based on a commerce to merchant acquisition. consumer’s payment history. Given the mix of technology solutions eCommerce Bill Pay QuickBooks Texting Level 3 CDM Inventory Acquirers can use these campaigns to available, it’s possible for merchants to

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031_ISO030417 31 2/28/2017 4:47:33 PM COMPLIANCE HIGH-RISK PAYMENTS

panies operating in, or considering, the cannabis space have special consider- ations. A lot rides on what stance the Trump administration takes. Despite the substance’s illegal status under A High-Risk Role Model federal law, the Obama administra- New markets such as legal cannabis aren't exactly uncharted territory. They can learn a lot tion decided not to interfere with state from how payments have been handled in other high-risk industries. BY CHERYL WINOKUR MUNK laws legalizing cannabis. However, that’s subject to change under a new president who has strongly criticized illegal drug use. Also notable is that Trump’s recently confirmed pick for attorney general is Alabama Sen. Jeff Sessions, a politician with a history of anti-marijuana statements. “Payment companies are operating in a legal gray area that extends from the Obama administration,” Ogden says. Given the uncertainty and the stigma of marijuana, many payment providers and banks are still hesitant to work with cannabis merchants. There are, however, a growing number of companies focusing on or looking to enter the market. Some are taking a back-door approach by classifying transactions under improper MCC codes, but others are more forthcoming about their efforts. “The key to high-risk areas and

INDIA'S BHARAT QR LAUNCHES WITH PAYMENTS INDUSTRY SUPPORT India's latest government-supported payments initiative, Bharat QR, has officially launched, aiming to provide an interoperable mobile payments platform linking small merchants and consumers across channels via several major card payment networks. Bharat QR, led by the Reserve Bank of India and the Indian Banks Association, will roll out in phases with the goal of eventually connecting 57 million of India's smallest The recently confirmed pick for Attorney General, Alabama's Jeff Sessions, has a history of speaking out against marijuana. merchants for broadly accessible mobile payments, according to a press release from Mastercard. ayment companies thinking have exceptionally strong underwriting, “This is how the other high-risk The payment card networks will play a key role in Bharat QR's development, alongside India's National Payment about a future in the cannabis due diligence and risk-management industries have managed to thrive in Corp. (NPC), which operates RuPay, the nation's domestic market have much to learn practices. They also need a thorough a high-risk space,” says Anthony L. payment card network. from the past experiences of understanding of applicable laws, regu- Ogden, an attorney in Beverly Hills, Mastercard is supporting Bharat QR via Masterpass QR, a payments method developed in India; Visa will link to the other high-risk industries. lations and card brand rules. Addition- California, who runs BankCardLaw. new platform via mVisa, its own QR code-based approach; PFirst off, this up-and-coming mar- ally, it’s critical that they advocate for com, a provider of legal and consulting and American Express is developing a similar QR code-based ket—which is still illegal under federal cannabis merchants proactively and services to the payments industry. approach for its cardholders, Mastercard explained in the law—requires payment companies to reactively, if issues arise. Certainly, banks and payment com-

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032_ISO030417 32 2/27/2017 3:17:03 PM panies operating in, or considering, the banking relationships is to have a strong based company that provides expert cannabis space have special consider- compliance program and transpar- investigative due diligence services ations. A lot rides on what stance the ency,” says Braden Perry, a partner for potential investors and businesses Trump administration takes. Despite at Kennyhertz Perry LLC in Kansas in the cannabis industry. the substance’s illegal status under City, Missouri, and a former federal Payments providers also need to A High-Risk Role Model federal law, the Obama administra- enforcement attorney. be able to identify which accounts are New markets such as legal cannabis aren't exactly uncharted territory. They can learn a lot tion decided not to interfere with state He also recommends payments play- linked with marijuana businesses—so from how payments have been handled in other high-risk industries. BY CHERYL WINOKUR MUNK laws legalizing cannabis. However, ers arrange for independent compli- they can be monitored appropriately in that’s subject to change under a new ance audits of their legalized cannabis the event of increased federal scrutiny, president who has strongly criticized businesses. she says. illegal drug use. Also notable is that Lamine Zarrad, chief executive and Even with these efforts, however, the Trump’s recently confirmed pick for founder of Tokken, a Denver-based cannabis space remains a dangerous attorney general is Alabama Sen. Jeff company that extends payments and business proposition, says Theodore Sessions, a politician with a history of banking services to high-risk busi- F. Monroe, a Los Angeles attorney anti-marijuana statements. nesses, says knowing your customers whose clients include payments and “Payment companies are operating in is critical in the cannabis space. processing businesses. a legal gray area that extends from the “KYC is a major tenant in doing He points to Operation Choke Point, Obama administration,” Ogden says. work with cannabis—just like it is in an initiative that turned the screws on Given the uncertainty and the stigma gambling, adult entertainment, pawn banks and third parties that did business of marijuana, many payment providers shops, liquor stores and so forth,” says with controversial—yet legal—indus- and banks are still hesitant to work with Zarrad, a former federal bank examiner. tries such as ammunition sales, escort cannabis merchants. “You also have to know about the busi- services, get-quick-rich schemes and There are, however, a growing num- ness and the baseline of its activities.” online gambling. ber of companies focusing on or looking Payments companies should be pre- Something similar could happen to enter the market. Some are taking pared to demonstrate that their mer- in the emerging cannabis space, he a back-door approach by classifying chants are compliant at the state level. predicts. transactions under improper MCC “This might provide some protection “There’s only so much [payment com- codes, but others are more forthcoming against legal action,” says Tanya Hoke, panies] can do to protect themselves,” about their efforts. founder and managing director of Galen Monroe says. “They need to be careful “The key to high-risk areas and Diligence, a Cambridge, Massachusetts- who they do business with.”

INDIA'S BHARAT QR LAUNCHES WITH PAYMENTS INDUSTRY SUPPORT India's latest government-supported payments initiative, February press release announcing the launch. Bharat QR, has officially launched, aiming to provide an To pay with Bharat QR, consumers open their bank app or interoperable mobile payments platform linking small third-party mobile wallet and scan a participating merchant's merchants and consumers across channels via several QR code, opting to make the payment directly from their major card payment networks. bank account or a linked payment card, according to the Bharat QR, led by the Reserve Bank of India and the press release. Indian Banks Association, will roll out in phases with the ªWe are looking forward to leveraging our technology goal of eventually connecting 57 million of India's smallest backbone and partnering with the government and the The recently confirmed pick for Attorney General, Alabama's Jeff Sessions, has a history of speaking out against marijuana. merchants for broadly accessible mobile payments, industry to create a robust, safe and secure digital payments according to a press release from Mastercard. ecosystem,º said Porush Singh, Mastercard's corporate “This is how the other high-risk The payment card networks will play a key role in Bharat country officer for India, in the release. QR's development, alongside India's National Payment Fourteen banks in India already have pledged to support industries have managed to thrive in Corp. (NPC), which operates RuPay, the nation's domestic Bharat QR, including HDFC Bank Ltd., ICICI Bank, Yes Bank, a high-risk space,” says Anthony L. payment card network. State Bank of India, Union Bank of India, Axis Bank, Bank of Ogden, an attorney in Beverly Hills, Mastercard is supporting Bharat QR via Masterpass QR, Baroda, Bank of India, Citi Union Bank and DCB Bank Ltd., a payments method developed in India; Visa will link to the among others. California, who runs BankCardLaw. new platform via mVisa, its own QR code-based approach; In Bharat QR's static mode, users must enter the com, a provider of legal and consulting and American Express is developing a similar QR code-based purchase amount, in addition to scanning the merchant's QR services to the payments industry. approach for its cardholders, Mastercard explained in the code and entering a PIN. Certainly, banks and payment com-

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033_ISO030417 33 2/27/2017 3:17:05 PM RISK EMV

this makes sense. A huge doubling of security investments is unlikely. Instead, only incremental investments will be made as retailers and financial institutions figure out how to protect The State of Post-EMV Web Fraud all channels most effectively, she said. Merchants expected that fraud would shift online after EMV chip security came to the point of This confluence of channels is one of sale. But did their advance knowledge actually help deter fraud? BY BAILEY REUTZEL the factors causing a fair amount of pain. “Merchants want to engage customers in an omnichannel way yet their fraud systems aren’t prepared to keep up with that omnichannel environment,” Conroy said, offering an illustration. If a fraudster with a stolen credit card loads $100 into a merchant’s mobile app then goes into the store and buys five $20 gift cards, it could take days for the consumer whose card was stolen to notice and alert the bank, who then

ou’d think financial institu- quarter of 2015. So what’s happening? officer at InAuth, an online and mobile tions and retailers in the According to industry experts, most device security company that works with U.S., with a long list of EMV of the card-not-present fraud is likely four of the five top banks and nearly 50 migration examples to look targeting smaller merchants and finan- merchants. to in other countries, would cial institutions that don’t have as many Despite this clear trend, InAuth haveY been prepared for fraudsters shift- resources available to start securing hasn’t seen a spike in new clients stem- ing their attention to e-commerce after digital channels. ming from the EMV transition, Lynch security improved at the point of sale. Smaller institutions “may not have as said. Most of its clients are larger com- But according to late 2016 data from many people in the fraud strategy and panies that were prepared for EMV, but fraud prevention company iovation and prevention roles … and may not have smaller merchants may not have the research firm Aite Group, there’s been the development, technical resources funding to catch up. a 35% increase in online credit card and funding to implement those solu- According to Julie Conroy, retail fraud since the EMV shift in the third tions,” said Mike Lynch, chief strategy banking research director at Aite Group,

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034_ISO030417 34 2/27/2017 3:19:35 PM this makes sense. A huge doubling alerts the merchant, by which time the said Conroy, who has seen a number of of security investments is unlikely. fraudster is long gone with the fraudu- large merchants lose significant money Instead, only incremental investments lent gift cards. to online fraud, mainly those that do will be made as retailers and financial Even seeing a rise in card-not-present most of its business via brick-and-mortar institutions figure out how to protect fraud, some merchants are hesitant to locations and don’t invest as much into The State of Post-EMV Web Fraud all channels most effectively, she said. deploy tighter security, namely because digital channels. Merchants expected that fraud would shift online after EMV chip security came to the point of This confluence of channels is one of added steps in the checkout process Another reason larger enterprises are sale. But did their advance knowledge actually help deter fraud? BY BAILEY REUTZEL the factors causing a fair amount of pain. could lead to cart abandonment. still getting hit is because fraudsters’ “Merchants want to engage custom- These merchants “do understand techniques are becoming more sophisti- ers in an omnichannel way yet their the risk, but see this as a necessary cated, said Lynch, who used to work on fraud systems aren’t prepared to keep evil in working in the digital space,” Bank of America’s authentication and up with that omnichannel environment,” said Lynch. fraud strategy before joining InAuth. Conroy said, offering an illustration. Although, that doesn’t mean the For instance, he said, botnet attacks If a fraudster with a stolen credit card industry isn’t investing at all. where one master source distributes loads $100 into a merchant’s mobile app “Currently merchants are trying to malware to many unsuspecting comput- then goes into the store and buys five find the right balance between the best ers that then continually create logins $20 gift cards, it could take days for customer experience and keeping fraud or accounts have been on the rise. “Dis- the consumer whose card was stolen levels flat,” said Lynch. tributed architecture is a lot harder to to notice and alert the bank, who then Big merchants are also vulnerable, defend against,” Lynch said.

officer at InAuth, an online and mobile device security company that works with four of the five top banks and nearly 50 merchants. Despite this clear trend, InAuth hasn’t seen a spike in new clients stem- ming from the EMV transition, Lynch said. Most of its clients are larger companies that were prepared for EMV, but smaller merchants may not have the funding to catch up. According to Julie Conroy, retail banking research director at Aite Group,

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035_ISO030417 35 2/28/2017 4:49:36 PM LOYALTY CARD REWARDS

from which categories they could earn rewards. Millennials were even more enthusiastic, with 75% expressing an interest in such an offer, according to the Auriemma study. Opportunity for DIY Rewards “We know not all cardholders are For ages, merchants have devised new and inventive ways to entice consumers to participate the same, and therefore shouldn’t be in their loyalty programs. But why not give consumers control over which rewards treated the same,” Holmes said. “Some they earn? BY DAVID HEUN gravitate towards co-brand cards, will- ing to save over a longer period of time for sizeable redemption, while others tend to look for everyday savings in their wallet.” Offering a program that allows customers to choose their rewards categories holds appeal for a large cross-section of consumers, Holmes added. “I don’t believe any programs currently offer an open-ended rewards selection, beyond selecting rotating quarterly rewards.” Card issuers should find that feedback valuable when deploying digital and mobile technology to enhance plastic card features. Mobile technology has actually accelerated some of the popular features of plastic cards, particularly in the rewards arena, where consumers are increasingly able to earn and monitor points and cash them in through mobile transactions. Some aspects of the relationship between consumers and their rewards

MASTERCARD BETS ON THE ALLURE OF FREE WIFI AS A CARD REWARD Mastercard is adding a new perk for elite customers by extending free airport and in-flight WiFi around the world for customers with certain cards targeting high-end global travelers. Through a partnership with WiFi services provider Boingo Wireless, Mastercard is providing wireless access at more than 1 million global hotspots, including onboard thousands of flights, Mastercard said. hile cash back re- “We’ve tackled rewards preferences U.S. during December of 2016 to de- HSBC is the first card issuer to sign on for the service for mains a popular re- from a variety of angles over the past termine rewards card preferences and its HSBC Premier World Mastercard in Argentina, China, ward, consumers year, and we increasingly see cardhold- provide issuers with data to consider Hong Kong, Malaysia, Singapore, the United Arab Emirates and the U.K., according to the release. would like to see ers express a desire for choice,” Jaclyn for better positioning those cards not Providing free WiFi is a key convenience for travelers, said a rewards card in Holmes, senior manager of payments in- currently at top-of-wallet for consumers. Marti Beller, Mastercard's senior vice president of loyalty which they would have a choice to es- sights for Auriemma Consulting Group. Nearly 70% of respondents said they solutions, global products and platforms. W ªConsumers increasingly rely on digital experiences tablish a program they consider most Auriemma conducted a web-based would accept an offer from a credit card relevant. survey of 800 adult cardholders in the issuer that gave them the option to select

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036_ISO030417 36 2/27/2017 3:21:09 PM from which categories they could earn cards have not wavered much — 81% say programs and something we will be rewards. Millennials were even more they own such a card and the majority, at keeping our eye on moving forward.” enthusiastic, with 75% expressing an 58%, prefer cash back as a main feature. In addition to a growing interest in interest in such an offer, according to Just more than half of consumers being able to choose a rewards pro- the Auriemma study. surveyed said they have more than one gram for a card, consumers are also Opportunity for DIY Rewards “We know not all cardholders are rewards card in their wallet, while 92% expressing a desire to redeem card For ages, merchants have devised new and inventive ways to entice consumers to participate the same, and therefore shouldn’t be indicated they use a rewards card most rewards at the point of sale, Holmes in their loyalty programs. But why not give consumers control over which rewards treated the same,” Holmes said. “Some frequently. said. “This is already an option for some they earn? BY DAVID HEUN gravitate towards co-brand cards, will- Still, 32% of rewards cardholders cards programs, but I would expect it ing to save over a longer period of time said they don’t hold a card that offers to become more an expectation and for sizeable redemption, while others rewards in their preferred categories. norm over time.” tend to look for everyday savings in They cited the top reason, at 43%, as Consumers on occasion transfer their their wallet.” having too many cards already to add rewards points to another program, Offering a program that allows cus- another, though 21% said it was because with 38% of those who have done so tomers to choose their rewards catego- they had not been offered that type of citing the need to supplement points ries holds appeal for a large cross-section card. for a specific redemption offer. of consumers, Holmes added. “I don’t It is not surprising that cash-back This should alert issuers that by of- believe any programs currently offer an features remain popular with card- fering the option to roll over or transfer open-ended rewards selection, beyond holders, but the high average monthly points, they can increase cardholder selecting rotating quarterly rewards.” spend on cash-back cards is surprising, spend and loyalty, while possibly giving Card issuers should find that feed- Holmes said. a secondary card in a wallet a boost in back valuable when deploying digital and Average monthly spend on all cash- usage, the report noted. mobile technology to enhance plastic back rewards cards combined in a wallet Nearly 50% of rewards cardholders card features. Mobile technology has was $1,452, not far behind the highest said they keep an infrequently used actually accelerated some of the popular average for airline/frequent flier rewards account open in case they need addi- features of plastic cards, particularly in cards at $1,725. tional credit, while 34% said they fear the rewards arena, where consumers are “Spend on airline is almost always that canceling a card could negatively increasingly able to earn and monitor high due to the nature of those purchases affect their credit score. points and cash them in through mobile and flight redemption, but cash-back But 22% said they keep the account transactions. spend seems particularly strong,” she open in hopes that the issuer or co-brand Some aspects of the relationship added. “This may be a testament to the partner will make favorable changes to between consumers and their rewards recent enriching of cash-back rewards the rewards program.

MASTERCARD BETS ON THE ALLURE OF FREE WIFI AS A CARD REWARD Mastercard is adding a new perk for elite customers by everywhere they go, and they have a very strong need to extending free airport and in-flight WiFi around the world access WiFi to stay connected wherever they go,” Beller said, for customers with certain cards targeting high-end global noting she expects other Mastercard issuers to adopt its travelers. Boingo services soon for elite-level travel cards. Through a partnership with WiFi services provider Boingo In the U.S., the HSBC Premier World Mastercard requires Wireless, Mastercard is providing wireless access at more a minimum deposit of $100,000, though the card carries no than 1 million global hotspots, including onboard thousands annual fee. of flights, Mastercard said. Boingo typically costs about $9.95 per month if U.S. during December of 2016 to de- HSBC is the first card issuer to sign on for the service for purchased separately. termine rewards card preferences and its HSBC Premier World Mastercard in Argentina, China, Mastercard isn’t the first to dangle WiFi as a perk to provide issuers with data to consider Hong Kong, Malaysia, Singapore, the United Arab Emirates cardholders. American Express Co. provides customers with and the U.K., according to the release. its $450-a-year Platinum card with 10 free WiFi passes per for better positioning those cards not Providing free WiFi is a key convenience for travelers, said year from GoGo, another provider of in-flight and airport currently at top-of-wallet for consumers. Marti Beller, Mastercard’s senior vice president of loyalty WiFi services. The Expedia+ Voyager credit card from Citi Nearly 70% of respondents said they solutions, global products and platforms. provides customers with a $100 credit that may be applied “Consumers increasingly rely on digital experiences toward travel fees, including WiFi. would accept an offer from a credit card issuer that gave them the option to select

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037_ISO030417 37 2/27/2017 3:21:10 PM MOBILE APPLE PAY

made banks and merchants in other parts of the world angry about Apple Pay, such as the closed NFC access. Apple would seem to have the upper hand, since Australian regulators have Bankers AttackApple at its Core already issued a preliminary ruling Apple Pay has steadily spread across the globe with little pushback on its terms from preventing the banks from collective merchants and card issuers. But a handful of banks in Australia may change things for bargaining with Apple, citing potential everyone. BY JOHN ADAMS harm to competition. The ruling is not final, however, and both sides have continued to make their case. A final ruling is expected in March. An authorization from the govern- he group of Australian banks ment would provide protection from that want to collectively court action for conduct that might bargain with Apple over otherwise raise concerns under the terms of its Apple Pay app competition provisions of the Com- have sharpened their focus petition and Consumer Act 2010, said Tto Apple’s smartphone technology policy, Duncan Harrod, a spokesperson for the an area the technology giant is likely Australian Competition and Consumer to defend fiercely. Commission, the regulator overseeing The four banks, Bendigo and Ad- the Apple/Australian bank dispute. elaide Bank, Commonwealth Bank of “Broadly, the ACCC may grant an Australia, National Australia and West- authorization when it is satisfied that pac, have narrowed their application to the public benefit resulting from the Australian regulators to focus solely on conduct outweighs any public detri- access to Near Field Communication ment,” Harrod said. (NFC) as terms of collective bargaining The Australian banks didn’t directly with Apple. Previously their arguments state that their narrow focus on NFC also addressed the fees Apple charges access was in response to the ACCC’s to Apple Pay issuers. earlier unfavorable draft ruling regard- The NFC argument is vital because ing fees. But it’s clear their hope is by whoever controls the NFC hardware con- tying the dispute to technology “open- trols which other parties can access it. ness” rather than transaction income, This played out most openly years they’re more likely to win a favorable ago when three U.S. carriers refused outcome next month. Google access to the NFC secure ele- “[The banks] would like the oppor- ment on any handset on their networks, tunity to have their wallets compete effectively blocking the NFC Google to other mobile contactless payment a spokesperson for the four banks in alongside Apple Wallet on iPhone, and Wallet app until the tech giant could providers, creating a closed system. the Australian/Apple dispute. “Yet this for the consumers to decide which is come up with a software-based work- The Australian banks want Apple to be infrastructure was built and paid for by best and most convenient,” Blockley around. The carriers only backed down more open, enabling other apps to work the Australian banks and merchants for said. “This does not mean locking out after their own mobile wallet venture alongside Apple Pay on smartphones. the benefit of all Australians.” or preventing Apple Wallet from oper- failed, selling the assets of that venture “By locking out any independent Apple Pay launched in Australia ating here in Australia, just allowing to Google in 2015. access to the NFC function on iOS in 2015, with American Express as competition side by side.” Apple’s approach is little different devices, apple is seeking for itself the its initial partner, though some credit Apple did not return a request for from what the U.S. carriers implement- exclusive use of Australia’s existing unions and community banks now sup- comment. Apple and the Australian ed. To execute transactions, Apple places NFC terminal infrastructure for the port the app. Since launch, the larger banks have been battling for months, encrypted payment credentials on the making of integrated mobile payments banks have tried to pool their leverage with the banks accusing Apple of trying iPhone, and does not provide access using iOS devices,” said Lance Blockley, to combat some of the issues that have to limit competition and Apple contend-

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038_ISO030417 38 2/27/2017 3:25:27 PM made banks and merchants in other ing its policy is based on security, at months before the other because of the parts of the world angry about Apple one point using the word “cartel” to differences in policies between Apple Pay, such as the closed NFC access. describe the Australian banks’ posi- and Android. Ever since Google began Apple would seem to have the upper tion, and accusing the banks of being supporting Host Card Emulation as an hand, since Australian regulators have the party trying to extract extra fees alternative to accessing the NFC secure Bankers AttackApple at its Core already issued a preliminary ruling from transactions. element, banks and retailers have used Apple Pay has steadily spread across the globe with little pushback on its terms from preventing the banks from collective The Australian banks aren’t the first the same technology to bring their own merchants and card issuers. But a handful of banks in Australia may change things for bargaining with Apple, citing potential organization to oppose Apple’s policies. wallet apps to market. everyone. BY JOHN ADAMS harm to competition. The ruling is not In November, George Throckmorton, For example, Capital One and Wells final, however, and both sides have managing director of the Payments Fargo have contactless wallet apps on continued to make their case. A final Innovation Alliance, called on Apple Android, but support Apple Pay as a ruling is expected in March. to take a more option posture toward separate service for iPhone users. Banks An authorization from the govern- NFC access. And access to iPhones has around the world have also complained ment would provide protection from caused squabbles and even merchant- about Apple Pay’s fees. Though gen- court action for conduct that might led shutdowns since the early days of erally not confirmed by Apple, these otherwise raise concerns under the Apple Pay. fees are known to be between 10 and competition provisions of the Com- It’s also not unusual for a new mobile 15 basis points per transaction, which petition and Consumer Act 2010, said payment app to have a staggered deploy- eats into the interchange fees banks Duncan Harrod, a spokesperson for the ment, launching on one operating system charge merchants. Australian Competition and Consumer Commission, the regulator overseeing the Apple/Australian bank dispute. “Broadly, the ACCC may grant an authorization when it is satisfied that the public benefit resulting from the conduct outweighs any public detri- ment,” Harrod said. The Australian banks didn’t directly state that their narrow focus on NFC access was in response to the ACCC’s earlier unfavorable draft ruling regarding fees. But it’s clear their hope is by tying the dispute to technology “openness” rather than transaction income, they’re more likely to win a favorable outcome next month. “[The banks] would like the opportunity to have their wallets compete a spokesperson for the four banks in alongside Apple Wallet on iPhone, and the Australian/Apple dispute. “Yet this for the consumers to decide which is infrastructure was built and paid for by best and most convenient,” Blockley the Australian banks and merchants for said. “This does not mean locking out the benefit of all Australians.” or preventing Apple Wallet from oper- Apple Pay launched in Australia ating here in Australia, just allowing in 2015, with American Express as competition side by side.” its initial partner, though some credit Apple did not return a request for unions and community banks now sup- comment. Apple and the Australian port the app. Since launch, the larger banks have been battling for months, banks have tried to pool their leverage with the banks accusing Apple of trying to combat some of the issues that have to limit competition and Apple contend-

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039_ISO030417 39 2/28/2017 4:52:01 PM TECHNOLOGY BIOMETRICS

Biometrics vs. Cart Abandonment Biometric technology is often marketed as a security tool. But now that consumers are more comfortable with sharing their fingerprints and other traits, can biometrics address other pain points? BY TANAYA MACHEEL

ew York-based security company Hypr Corp. is working to use biometric authentication as a glue for the currently Nfragmented state of mobile and online payments. Online shopping suffers from a number of concerns right now. Beyond the high level of credit card fraud (which accounts for $7.6 billion in annual losses to U.S. card issuers, according to Lex- isNexis), many checkouts are slowed down by the need to type in account numbers, passwords and PIN codes that shoppers may not have committed to memory. Biometric authentication can address all of these pain points, Hypr says. “We’re moving towards a more convenient, cashless ecosystem whether we like it or not,” said Hypr chief executive George Avetisov. “The easiest way to get there: remove PINs and passwords.” Once older authentication methods are replaced, older payment methods tion during the merchant’s checkout. experience. When they arrive and the will likely go with them. “People won’t Hypr’s offering differentiates itself checkout screen, they receive a notifica- be walking around with plastic in 10 by letting the retailer choose which tion on their mobile device prompting years,” he added. traits to authenticate and how many to them to authorize the payment, rather Other companies are taking a similar use at once. For example, a retailer may than inputting their password in the approach to replacing passwords with require customers authenticate with a browser. biometric authentication, including fingerprint for a $50 purchase, finger- The user’s biometric traits, once reg- Mastercard. The card networks’ Iden- print and face for a $1,000-purchase or istered, never leave the device. Hypr’s tity Check, commonly known as Selfie a combination of five biometric traits authentication system turns the user’s Pay, enables card issuers that support for a higher-value purchase. biometric data into a token that is used SecureCode (Mastercard’s version of For desktop shoppers, the process to confirm payments instead of storing 3D Secure) to prompt for facial recogni- is an omnichannel biometric shopping traits on a server.

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040_ISO030417 40 2/27/2017 3:26:36 PM We Give Solution Announcing the Exciting Line of RiO POS Systems!

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041_ISO030417 41 2/28/2017 4:12:26 PM TECHNOLOGY AI

using expert knowledge to even attempt to find those nonlinear interactions.” Consumers with several chargeoffs in their histories would most likely be considered high-risk borrowers by most Can AI Improve Credit Scores? traditional models. But an AI engine To many, credit scores are a mysterious and misunderstood number. Artificial Intelligence can might perceive mitigating variables; change the status quo, but will it make scores clearer or more opaque? BY PENNY CROSMAN though the consumers might have skipped payments on three debts in the past 24 months, they have paid on time consistently for the past year and have successfully obtained new lines of credit. consumer’s credit score “It looks like that bad performance used to be a commonly or bad history is in your past,” Von- understood number — the Dohlen said. “That would be a simple time-honored FICO score example of how an AI world might help — that banks all used in cast data in a more positive and more theirA underwriting. But banks increas- accurate light.” ingly are relying on dozens of scores that reflect a variety of data sources, analytics and use of artificial intelligence technology. The use of AI offers lenders the ability to get a precise look into someone’s creditworthiness and score those previously deemed unscorable. But such scoring techniques also bring uncertainty: What it will take to convince regulators that AI-based credit scores are not a black box? How do you get a system trained to look at the interactions of many variables, to produce one clear reason for declining credit? Data scientists at credit bureaus and banks are working to find answers to questions like these.

The benefits of AI credit scores credit history to calculate the odds of artificial intelligence can find things There are two main reasons to use that they will repay. in the data that wouldn’t be apparent artificial intelligence to derive a credit Machine learning can take a more otherwise. score. One is to assess creditworthi- nuanced look at consumer behavior. And instead of considering one ness more precisely. The other is to “A neural network more closely variable at a time, an artificial intel- be able to consider people who might mimics the way humans think and ligence engine can look at interactions not have been able to get a credit score reason, whereas linear models are more between multiple variables. in the past, or who may have been dogmatic — you’re imposing structure “It’s harder for the workhorse, lo- too hastily rejected by a traditional on data as opposed to letting the data gistic regression, to do that,” said Dr. logistic regression-based score. In talk to you,” said Eric VonDohlen, chief Stephen Coggeshall, chief analytics and other words, a method that looks at analytics officer at the online lender science officer at ID Analytics. “You certain data points from consumers’ Elevate. The more complex reasoning have to do a lot of data preprocessing

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042_ISO030417 42 2/27/2017 3:27:39 PM using expert knowledge to even attempt AI-based credit scoring models let Peter Maynard, senior vice president to find those nonlinear interactions.” Elevate make sharper predictions of of global analytics at Equifax. Consumers with several chargeoffs credit risk, approve the right people “Before, if you gave me a million in their histories would most likely be and offer better pricing to people who observations, it would take a week to considered high-risk borrowers by most deserve it, VonDohlen said. sort through it,” Maynard said. Can AI Improve Credit Scores? traditional models. But an AI engine Elevate is deploying its new, AI- ID Analytics uses what it calls “con- To many, credit scores are a mysterious and misunderstood number. Artificial Intelligence can might perceive mitigating variables; based models gradually, starting with volutional neural nets,” a flavor of deep change the status quo, but will it make scores clearer or more opaque? BY PENNY CROSMAN though the consumers might have 1% of potential borrowers, testing the learning, in its fraud and credit scores, skipped payments on three debts in results, and gradually applying them Coggeshall said. For its Credit Optics the past 24 months, they have paid to more people. Full Spectrum credit score, AI engines on time consistently for the past year Credit bureaus are starting to adopt look at consumer payment data from and have successfully obtained new AI in their credit scores, too. wireless, utility and marketplace loan lines of credit. Equifax calls the machine-learning providers, to score consumers who “It looks like that bad performance software that it uses in credit scores have “thin” or no credit bureau files, or bad history is in your past,” Von- NeuroDecision Technology. including young people and new credit Dohlen said. “That would be a simple Technologies like Hadoop, which seekers. example of how an AI world might help allow massive amounts of data to be FICO also offers a score called XD cast data in a more positive and more stored and analyzed quickly, are making that’s based on telephone and utility accurate light.” AI-based credit scores possible, said bill payments and property records. It

of artificial intelligence can find things in the data that wouldn’t be apparent otherwise. And instead of considering one variable at a time, an artificial intelligence engine can look at interactions between multiple variables. “It’s harder for the workhorse, logistic regression, to do that,” said Dr. Stephen Coggeshall, chief analytics and science officer at ID Analytics. “You have to do a lot of data preprocessing

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043_ISO030417 43 3/1/2017 5:38:10 PM TECHNOLOGY AI

gives high marks to people who have Now for the confusing part and CFPB and got a positive response. faithfully paid their phone, oil and gas The cons of AI-enhanced credit ID Analytics said it worked closely bills and who have not moved around scores include the risk that the full with lawyers, compliance officers and too much. underwriting process will be hidden regulators to assure the technology Experian is taking a more cautious from consumers and that the practice complied with various lending rules. approach. It uses traditional logis- would raise transparency questions Another challenge to using artificial tic regression methods for its credit among regulators. intelligence, specifically neural net- scores, but in its labs it experiments Last month, the Consumer Financial works, in credit scores and models, is with machine learning. Protection Bureau imposed $23 million that it’s harder to provide the needed When the technology seems to make in fines to TransUnion and Equifax, not- “reason code” to borrowers — the a significant difference in performance, ing they claim banks use their scores explanation of why they were denied. the company will provide credit scores to determine creditworthiness, when Concerns about the reason code based on machine learning, said Eric that isn’t always the case. are the main reason many businesses Haller, executive vice president of “In their advertising, TransUnion don’t use nonlinear machine-learning Experian’s Global DataLabs. For now, and Equifax falsely represented that models for credit scores yet. he sees machine learning giving only the credit scores they marketed and “A lot of the confusion and heart- a nominal lift in results. provided to consumers were the same burn is around, ‘How do you boil an “The opportunity is not building the scores lenders typically use to make extremely data-rich learning process next VantageScore, because believe it credit decisions,” the CFPB said in a into a marginal rationale for declining or not, those scores work really well,” press release announcing the fines. a loan?’ ” VonDohlen said. he said. “In fact, the scores sold by TransUnion However, neural networks, which To let clients experiment with ma- and Equifax were not typically used are essentially designed to think like chine learning, Experian offers an by lenders to make those decisions.” a brain, can also be used to help find analytical sandbox with its credit data Some say the regulator was mis- the one variable that represents the loaded into it. guided. “Both scores being sold by greatest risk. “They can load their own data in and TransUnion and Equifax, VantageScore “It’s almost never the case that you we’ll sync it up with historical credit and the Equifax RiskScore, are real would decline someone for a rat’s nest archive data, and we’ve overlaid it with credit scores that are Equal Credit of variable relationships,” VonDohlen a set of machine-learning tools,” Haller Opportunity Act compliant, are com- said. The reasons for credit denial, he said. Most large financial institutions mercially available to lenders and are, said, “are almost always very clear.” are using the sandbox today, he said. in fact, used by lenders,” said credit Equifax has developed a proprietary TransUnion, the other major credit expert John Ulzheimer. algorithm that can generate reason rating agency, did not respond to re- Equifax says it ran all of its AI-based codes for consumers, Maynard said. quests for an interview. scoring technology past the OCC, Fed Experian is also working on techniques that would make AI credit-based score decisions more explainable and Two faces of AI-based credit scores auditor friendly. Credit score providers and banks are taking a cautious approach to “We’re not operating under any artificial-intelligence-based credit scores, with good reason assumption that a black box credit scoring model would even work or Pros be accepted in the market,” Haller More precise scores, Ability to consider said. “We are 100% focused on how through more nuanced consumers that linear do we bridge the gap such that we can evaluations of data models would reject bring better performance to models, but still maintain the same integrity, Cons where they can be explained to the Risk that regulators will Challenge of providing OCC and our clients are comfortable consider the score one clear reason for with understanding how the models a”black box” credit denial are working and the results they’re getting.”

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CMY

045_ISO030417 45 3/1/2017 1:04:40 PM E-COMMERCE CHINA

An Opportunity from China As more global travelers bring their money into and out of China, a new market emerges for handling their payments. BY JOHN ADAMS

he growing number of Chi- nese consumers traveling to the U.S. and other countries is becoming a two-for-one opportunity for payment Tcompanies. The market’s gigantic and growing — and it has a lot of trouble executing transactions. For many Chinese travelers today, “transactions redirect to a hosted payment system that’s in China,” said Paul Levine, a senior vice president at Planet Payment. “That comes with a lot of issues.” Removing friction from the payment transaction trail for Chinese travelers, particularly for card not present transactions, has almost become a category in and of itself. Planet Payment has entered a collaboration with UnionPay fails because their browser crashes—it’s for both credit and debit cards, it can International and United Airlines to a frustration for the user.” attract U.S. merchants and Chinese con- handle reservations and other ticket- Through an existing integration sumers to broader shopping scenarios ing purchases either online or through with UnionPay, Planet Payment of- that don’t involve travel. call centers. fers merchants access to UnionPay’s “We want to enable more e-commerce The integration allows travelers to SMS-based authentication and online transactions from merchants outside of use UnionPay to book directly with processing systems. Cardholders enter China to consumers that are inside the United, avoiding the workaround to details into the payment page with a mainland,” Levine said. execute cross-border payments between PIN to authorize the cross-currency Planet Payment is working with China and the U.S. That helps reduce transaction. UnionPay on further enhancements that transaction abandonment by improving The Chinese consumer pays in Chi- will allow it to reach a broader base of the user experience, Levine said. nese renminbi, while the merchant retailers and consumers, Levine added. “In addition to the rerouting, there receives U.S. dollars. “The travel vertical is the early test are also browser issues with the Chinese The United partnership is starting bed for digital,” said Andy Schmidt, internet firewall, so there’s an abandon- with UnionPay credit cards, and debit an executive advisor at CEB, adding ment problem,” Levine said. “By the time cards will be added at a later date. Planet resolving deployment issues for travel the consumer selects a flight, chooses a Payment hopes that by luring travelers payments can help expand to other seat and tries to make a payment—but to online payments without a redirect categories later.

46 ISO&AGENT March/April 2017

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isoandagent.com March/April 2017 ISO&AGENT 47

047_ISO030417 47 3/2/2017 4:40:32 PM TECHNOLOGY INTERNET OF THINGS

A Hub for the Internet of Things The Internet of Things is a growing collection of disparate high-tech devices. To enable commerce, these products may need a central hub. BY KATE FITZGERALD

odoPayments is fresh off a string of new customer implemen- tations with COIN, its payment “hub” Mapproach for merchants and banks, and it’s already looking ahead to bigger prospects with the emerging Internet of Things (IoT). “COIN acts like a bridge, handling payments from the accounting and settlement to encryption and compliance, freeing companies up to work on their business processes without having to worry about deeply integrating payments into core functions,” said Bruce Parker, a payments industry veteran who previously held senior executive “When I saw MCX’s CurrentC app such as enabling businesses to more roles at Fidelity National Information fizzle, I realized that if the U.S.’s biggest easily pay freelancers and contractors Systems (FIS) and ACI Worldwide, be- merchants couldn’t find common ground in different countries. fore launching ModoPayments in 2010. for a one-size-fits-all mobile payments Last year Sweden’s Klarna also ad- It took many twists and turns for app, there was little hope for us to suc- opted COIN to enable faster e-commerce ModoPayments to hit on its current ceed at anything similar,” he said. checkouts; and earlier this year Verifone concept, Parker admits.The company ModoPayments shifted gears to and FIS rolled out Verifone Points Re- was originally focused on developing devise COIN, a digital payments hub demption, an app that uses COIN to con- broad mobile payment solutions, but two that aims to transfer monetary value to nect payment terminals and merchant years ago Parker decided merchants’ a destination that could be within the data, allowing consumers to pay with needs were too varied to corral in a same room or across the world, without accumulated points from merchant single payments app. requiring either partner to modify their loyalty programs. The cautionary tale was the Merchant systems, according to Parker. Parker is now eyeing the IoT as a Customer Exchange, a multi-retailer One of ModoPayments’ first big deals potential new frontier for COIN. venture with the backing of Walmart, with COIN was a strategic relationship “The IoT presents a huge opportunity Target and others. The MCX merchants announced late last year with Bank of for us because it’s going to involve a lot wanted to build a one-size-fits-all mobile America Merrill Lynch, enabling the of objects—vehicles, appliances, equip- payment platform called CurrentC, but bank to support cross-border corporate ment—that typically have no payment the app never made it past the pilot disbursements. BofAML sees many terminal or card-swipe mechanism, phase. distinct uses for the implementation, ideal for a payments hub,” he said.

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