One More Thing

May/June 2019 www.isoandagent.com

One more thing.

Apple’s vision of the future of payments doesn’t include acquirers

001_ISO050619 1 4/25/19 1:03 PM 866.211.0738 | emsagent.com

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002_ISO050619_001 2 4/26/2019 8:18:49 AM Contents

08 Feature Story The Apple Card could be a compelling product for Apple devotees. But will merchants care if Apple doesn’t work with ISOs to promote acceptance?

Credit Cards Technology Merchants 04 12 16 How Apple Card changes Blockchain has many fans, but who Discover prepares for its Apple Pay Cash is actually using it? small-biz comeback The Apple Card offers cash-back There’s much talk about the distribut- Discover is working to reclaim the turf rewards through Apple Pay Cash, and ed ledger tech originally designed for it lost in the small-business payments in doing so it changes the rules. bitcoin. But is there anything more? market.

Credit Cards Retailers Technology 06 13 17 How Apple Card pressures banks TD overhauls its payments business Does the gig economy need its own and fintechs to aid retail stores T&E platform? The Apple Card would seem to take As more retailers close their physical Gig workers aren’t like full-time aim at other credit cards, but fintechs stores, TD is making changes to help employees — but they still have should also be worried. merchants cope. expenses.

Retailers Technology M&A 11 14 18 Cash at Amazon Go: Could How Transport for London adds What’s next for FIS after its Amazon’s reversal be a boon? 53,000 contactless users a day $43 billion Worldpay deal? The cashless retail model will soon Consumers won’t adopt contactless FIS is planning smaller steps to disrupt take cash. Is this a good thing? payments without a good reason. the status quo.

COVER ART FROM BLOOMBERG

isoandagent.com May/June 2019 ISO&AGENT 1

001_ISO050619 1 4/25/2019 2:05:20 PM Editor’s View

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1 STATE STREET PLAZA, 27TH FLOOR NEW YORK, NY 10004 • (212) 803-8200 Why Apple Card EDITOR Daniel Wolfe 212-803-8397 [email protected] Matters CONTRIBUTING EDITOR David Heun It may be just “one more thing” Apple wants its fans to ART DIRECTOR Robin Henriquez buy. Or it may disrupt the entire credit card industry.

GROUP EDITORIAL DIRECTOR, BANKING Richard Melville [email protected] The Apple Card’s card’s most compelling feature is

SALES MANAGER, ADVERTISING not its spend-tracking software or its titanium design; Philip Redgate 212-803-8543 it’s the ease at which new cardholders can obtain it. [email protected] Gone are the days when banks could attract new EXECUTIVE DIRECTOR, CONTENT OPERATIONS AND CREATIVE SERVICES customers on college campuses by offering a candy Michael Chu bar as a sign-on bonus. To get to the top of the con- MARKETING MANAGER sumer’s wallet, issuers have to make their card as easy Deborah Vanderlinder to obtain as possible. CUSTOMER SERVICE 212-803-8500 And in the case of Apple Card, that means offering [email protected] it through an app that every iPhone owner will have on their phones. It’s the same marketing tactic that draws many iPhone owners to buy AirPods or to use iMessage, despite the abundant alternatives. That said, Apple Card’s success isn’t guaranteed. It is, first and foremost, a funding mechanism for a mobile wallet. Apple Card could be a catalyst for CHIEF EXECUTIVE OFFICER ��Gemma Postlethwaite wider adoption of mobile payments, but Apple can’t do it alone. CHIEF FINANCIAL OFFICER ��Sean Kron That’s where ISOs and agents come in. If iPhone devotees are looking for a EVP & CHIEF CONTENT OFFICER ��David Longobardi place to shop using their new Apple Card, it’s up to the acquiring industry to CHIEF STRATEGY OFFICER ��Jeff Mancini make sure merchants are prepared to accept it. If the Apple Card truly is the CHIEF DATA OFFICER �� Christian Ward first card — or even the only card — in the wallets of this new generation of SVP, CONFERENCES & EVENTS �� John DelMauro cardholders, merchants’ support of the payment method may be a deciding VP, PEOPLE & CULTURE �� Lee Gavin factor in whether they see any of that spending.

ISO&Agent is published 6 times a year by SourceMedia, Inc., One State Street Plaza, 27th Floor New York, NY 10004. —Daniel Wolfe For customer service contact us at (212) 803-8500; email: [email protected]; or send correspondence to Customer Service, ISO&Agent, One State Street Plaza, 27th Floor New York NY 10004.

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003_ISO050619 3 4/26/2019 8:18:53 AM CREDIT CARDS Rewards

Richard Crone, a principal with Crone Consulting LLC. “Apple Card will be funding the Ap- ple Pay Cash balance with every purchase a customer makes, and Apple’s goal is to ignite active use by customers for shopping and P2P,” Crone said. Apple also notified customers that credit cards no longer may be used to fund P2P transfers using Apple Pay Cash. This rule blocks the possibility of leveraging the Mastercard-branded Apple Card for cash advances at ATMs, Apple said. The Apple Pay Cash fee is also meant to block fraudsters from spending funds received through Apple Pay Cash before they clear through the Mastercard-branded Apple Card, Crone speculates. “If you’re funding a payment with Apple Pay Cash and immediately go to

Bloomberg News Bloomberg spend that money at a merchant, there could be a settlement risk with delayed How Apple Card alters funding, and fraudsters could try to arbitrage that time delay,” Crone said. Apple is hoping the Apple Card’s Apple Pay Cash combination of an elegant user-inter- The Apple Card offers cash-back rewards through Apple face and instant-access rewards will pull users into a cycle of regular card Pay Cash, but adds some strings to the process. usage with the novel feature of using rewards to fund P2P transfers. By Kate Fitzgerald “No other bank can offer instant rewards paid daily and the ability to Beyond Apple’s glitzy product rollouts, Pay’s ecosystem. The fee is small—no plow those rewards right back into P2P,” the tech giant quietly notified users of less than 0.25 percent to a maximum Crone said. new policies and a fee to Apple Pay of $10—but could be significant in dis- But not all consumers may be inter- Cash, the account in which the Apple couraging users from routinely draining ested in such offers, given the plethora Card deposits rewards. their Apple Pay Cash accounts. Users of available alternatives, said Brian For the first time Apple is charging a have an alternative to move Apple Pay Riley, director of credit advisory at Mer- 1 percent fee for Apple Pay Cash users Cash funds to their bank account via cator Advisory Group. to move funds instantly to a Visa debit ACH. “The promise of daily rewards sounds account, and it’s adding the guarantee The new debit card transfer fee wonderful, but for a typical user spend- that funds will be available no later aligns with other P2P services like Ven- ing $20,000 a year on the card with an than 30 minutes. The pricing—and time mo and PayPal, which charge a fee for average return of 2 percent on rewards, promise—is in line with the Visa Direct making sure funds arrive immediately, you have the potential of $1.09 per day debit-push service. but it’s a guardrail for recycling Apple in cash-back rewards—which doesn’t But the fee is also a point of friction Card rewards back into Apple Pay-pow- even buy you a cup of coffee,” Riley that didn’t previously exist in Apple ered P2P transfers and purchase, said said. ISO

4 ISO&AGENT May/June 2019

004_ISO050619 4 4/25/2019 2:07:07 PM TECHNOLOGY Mobile Payment Alipay, WeChat Pay, and the West By David Heun

SnapPay has grown rapidly in its role nese tourists and residents. SnapPay much revenue.” as an acquirer and payments gateway cites research stating 32 million tourists In that regard, SnapPay spends a for Chinese mobile payment accep- traveled to North America in 2017 and lot of time and money on marketing tance in North America, and it is ready spent $132 billion U.S. dollars while the acceptance of mobile payment to show merchants the next step. here. methods. In bringing Alipay and WeChat Pay SnapPay says that as many as 95% That sort of pitch makes SnapPay’s to merchants in Canada and the U.S., of Chinese tourists are willing to use offering stand out far more than simply the Toronto-based company is illustrat- mobile payment methods they are enabling Alipay and WeChat Pay in ing how important — and technically familiar with in China when travelling North America, said Thad Peterson, straightforward — it is for merchants overseas. senior analyst with Boston-based Aite to accept all payment types and begin Most recently, SnapPay provided the Group. embracing mobile for its ability to do technology for Canadian grocery chain “They are providing merchants with so. FoodyMart to accept the Alipay wallet the ability to accept any tender type in Alipay and WeChat Pay aren’t just from tourists. But it doesn’t happen any use case, and that is a huge step the favored payment method of Chi- simply by connecting an Alipay or forward in terms of removing friction in nese tourists. They are also inherently WeChat Pay enabled QR code reader payments,” Peterson said. mobile, and if SnapPay can set up mer- to a merchant terminal. “The mobile wallet is poised to chants to work with these two wallets, “That is not the field of dreams,” transcend its original bridging function it opens the door to a more fully digital Renton said. “If you have acceptance from a card form factor to contactless merchant relationship. at your business and no one knows it transactions, to something of a ‘univer- “Mobile payments have been pretty is there, youslp_ad_2nd-edition.ai are not going 4/23/2013 to generate 6:23:18 PM sal translator’ for payments.” ISO nascent for quite some time, which is true for a lot of payments technology in North America over the last decade or two with Near Field Communication and EMV chips,” said Chris Renton, Managing a Consumer chief growth officer for SnapPay, which Lending Business 2ND EDITION also operates as an acquirer for Union-

Pay payments. C WHAT THEY ARE SAYING

“What is different this time is that M “A comprehensive tool kit and the revenue opportunity is quite high Y management guide for making in a time of declining brick and mortar CM consumer loans.” sales and increasing e-commerce MY “Entry level and seasoned sales,” Renton said.

CY veterans will ﬁnd this book well “That is why this technology is worth reading.” going to really take off from a mobile CMY “The book translates technical perspective, and for the merchant it K material into readable language.” is complementary to other mobile payment technology like Apple Pay or Starbucks.” $75.00 The numbers bear out the revenue For information or to order: potential, particularly in the case of Visit our website, www.solomon-lawrence.com, or call 212.866.2395 accepting mobile payments from Chi-

isoandagent.com May/June 2019 ISO&AGENT 5

005_ISO050619 5 4/25/2019 2:08:40 PM CREDIT CARDS Credit Cards | Mobile Payment Mobile Payment

tive, PSD2, as a way to build their own at Apple stores or in the app store, will ecosystem around banks’ payment almost automatically drive traffic to the products. new services Apple announced. If Apple’s new services take off, it will In addition to its streaming content have a meaningful head start on pro- service, Apple also introduced several viding news, TV and gaming subscrip- new initiatives, including a personalized tion services. mobile-optimized aggregated subscrip- Even for consumers who don’t want tion service for more than 300 maga- to pay a monthly fee for media, news zines and newspapers; and a gaming and gaming services, the Apple Card service that’s an alternative to Google’s piles on features to make it the top-of- Stadia. wallet choice. “It is to banking what the iPod was The card bundles instant issuance, to the music industry, what the iPhone loyalty, accounts, social P2P transfers, was to wireless carriers and iPads were contactless mobile payments and to the laptop industry, or what Uber is personal financial management as to taxis,” Liebenguth said. part of the same relationship and user Goldman Sachs will issue Apple experience. Card, which will be usable over the These services exist at hundreds of global Mastercard network. banks and fintechs, but usually not in Goldman Sachs’ Apple card collab- the same product — and rarely come oration has existed for months, and

Bloomberg News Bloomberg with incentive pricing for movies, TV gives the financial institution a way to and games. move beyond its traditional role as an Apple Card pressures “What makes it hard for financial in- investment bank and wealth manage- stitutions to compete with this is Apple ment partner. Pay is primarily on the iPhone, and will Apple was seeking to replace a banks and fintechs be able to give instantaneous feedback similar partnership it had with Barclays The Apple Card would seem to take aim at other card ... not just for each transaction but also that never came to fruition. Because for where you are spending and with none of the companies disclosed any issuers, but fintechs should also take notice. categories,” said Heidi Liebenguth, a details last year, it was never quite clear payments consultant with Crone Con- when, or if, Apple and Goldman could By John Adams sulting. deliver on cobrand payment card. This is more of a benefit for users During Apple’s presentation, Apple The new Apple Card wasn’t just one “We envision a future in which every than for Apple. Jennifer Bailey, vice boasted about low fees, though it did product of many announced at the payment is made this way.” president of Apple Pay, said Apple can not provide specific pricing for the Steve Jobs Theater — it was the glue The Apple Card wouldn’t be as use machine learning and map data Apple Card and some of its services. that binds all of Apple’s new services compelling if it was used only for the to rewrite the credit card statement “We’re lowering rates, creating compel- together. occasional Apple Store purchase or in- into plain English, but that Apple itself ling rewards and providing security and The Card’s 3 percent cash-back re- app microtransactions. doesn’t get this level of visibility. privacy,” Cook said. ward tier applies only to Apple purchas- In launching multiple media services “Apple doesn’t know what you Using the Mastercard network es, making the new Apple TV+ stand alongside the new card, Apple created bought, where you bought it or how would potentially open the card to out in a growing sea of monthly media a digital ecosystem that will pump a much you paid for it,” Bailey said. Ap- interchange rates. Mastercard did not streaming services including Amazon steady flow of monthly payments into ple’s spend-tracking tools use “on-de- answer questions about fees. Prime, Netflix and Hulu. the digital card account. vice intelligence, not Apple servers,” she “The digital first card ... also opens “We want to take the Apple Pay In this way it’s not only a threat to said. the pathway to opening up new ways experience further to another funda- banks but to fintechs as well. Many Apple Card, which includes incre- to pay for things that you didn’t think mental method of payment,” Apple fintechs saw the data-sharing benefits mentally larger cash-back offers for possible,” Craig Vosburg, president of CEO Tim Cook said during the event. of Europe’s Payment Services Direc- using Apple Pay, or making purchases North America for Mastercard, said in

6 ISO&AGENT May/June 2019 isoandagent.com

006_ISO050619 6 4/25/2019 2:09:31 PM CREDIT CARDS Credit Cards | Mobile Payment

tive, PSD2, as a way to build their own at Apple stores or in the app store, will an emailed statement, citing TSYS re- making services and enhancements to ecosystem around banks’ payment almost automatically drive traffic to the search that found 68 percent of people Apple Pay a key part of the company’s products. new services Apple announced. who have loaded a debit or credit card plans going forward. If Apple’s new services take off, it will In addition to its streaming content to a mobile wallet said they expect Other services, such as Apple TV, have a meaningful head start on pro- service, Apple also introduced several to make at least half of their in-store can introduce more mobile and recur- viding news, TV and gaming subscrip- new initiatives, including a personalized purchases using a digital wallet within ring payments through that system. tion services. mobile-optimized aggregated subscrip- two years. Consumers already make numerous Even for consumers who don’t want tion service for more than 300 maga- Vosburg said Mastercard is also purchases off Apple TV, either movie to pay a monthly fee for media, news zines and newspapers; and a gaming integrating contactless technology in rentals or purchases, or other apps and and gaming services, the Apple Card service that’s an alternative to Google’s 20 transit systems in the U.S., includ- streaming services — all through their piles on features to make it the top-of- Stadia. ing New York, in the next few years, Apple ID and linked payment card as wallet choice. “It is to banking what the iPod was opening Apple Pay and Apple Card to subscription revenue for traditional The card bundles instant issuance, to the music industry, what the iPhone ticketing and payments for subways cable television declines. loyalty, accounts, social P2P transfers, was to wireless carriers and iPads were and buses. “Apple expects 5G to negatively contactless mobile payments and to the laptop industry, or what Uber is Apple Pay’s merchant acceptance is impact existing cable providers,” said personal financial management as to taxis,” Liebenguth said. also growing, and now stands at great- Tim Sloane, vice president of payments part of the same relationship and user Goldman Sachs will issue Apple er than 70 percent in the U.S., Cook innovation at Mercator. “Apple wants to experience. Card, which will be usable over the said in his presentation. have a solution for the growing wave of These services exist at hundreds of global Mastercard network. These new services come as Apple cord cutters enabled with 5G deploy- banks and fintechs, but usually not in Goldman Sachs’ Apple card collab- battles a relative slump in iPhone sales, ment.” ISO the same product — and rarely come oration has existed for months, and with incentive pricing for movies, TV gives the financial institution a way to and games. move beyond its traditional role as an “What makes it hard for financial in- investment bank and wealth manage- stitutions to compete with this is Apple ment partner. Pay is primarily on the iPhone, and will Apple was seeking to replace a be able to give instantaneous feedback similar partnership it had with Barclays ... not just for each transaction but also that never came to fruition. Because for where you are spending and with none of the companies disclosed any categories,” said Heidi Liebenguth, a details last year, it was never quite clear payments consultant with Crone Con- when, or if, Apple and Goldman could sulting. deliver on cobrand payment card. This is more of a benefit for users During Apple’s presentation, Apple than for Apple. Jennifer Bailey, vice boasted about low fees, though it did president of Apple Pay, said Apple can not provide specific pricing for the use machine learning and map data Apple Card and some of its services. to rewrite the credit card statement “We’re lowering rates, creating compel- into plain English, but that Apple itself ling rewards and providing security and doesn’t get this level of visibility. privacy,” Cook said. “Apple doesn’t know what you Using the Mastercard network bought, where you bought it or how would potentially open the card to much you paid for it,” Bailey said. Ap- interchange rates. Mastercard did not ple’s spend-tracking tools use “on-de- answer questions about fees. vice intelligence, not Apple servers,” she “The digital first card ... also opens said. the pathway to opening up new ways Apple Card, which includes incre- to pay for things that you didn’t think mentally larger cash-back offers for possible,” Craig Vosburg, president of using Apple Pay, or making purchases North America for Mastercard, said in

isoandagent.com May/June 2019 ISO&AGENT 7

007_ISO050619 7 4/25/2019 2:09:32 PM How the Card widens the rift with ISOs CREDIT LINE HERE LINE CREDIT

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008_ISO050619 8 4/25/2019 2:11:02 PM How the Card widens the rift with ISOs Apple’s vision of the future of payments doesn’t include acquirers.

By David Heun

AS IF THEY NEEDED ANOTHER REMINDER THAT THEIR BUSINESS models might not have a place in the modern payments landscape, independent sales organiza- tions are left wondering what role — if any — they will have in launching the Apple Card. ISOs knew they were up against the flow of technology a decade ago, when the launch of Square under- mined their business model. ISOs resolved to become tech savvy to stay relevant, and many ISOs were making that adjustment and even finding newer technology was easier to sell and provided faster ways to register merchant accounts. And then came the Apple Card announcement which, like the mobile point of sale market, operates without regard to the role of ISOs. “With the success and momentum of Apple Pay, we’ve learned a lot about credit cards,” said Apple CEO Tim Cook when announcing the product. “While we all need them, there are some things about the credit card experience that could be so much better.” Cook clearly wants to convey that Apple has the CREDIT LINE HERE LINE CREDIT

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009_ISO050619 9 4/25/2019 2:11:03 PM experience and vision to launch this foundation from which to launch It will be up to Apple to drive product on its own. But Apple may be — and one that would likely leave consumer and merchant adoption on hurting its prospects by ignoring the traditional merchant acquiring on the its own, Kapadia added. “I don’t see value of working directly with ISOs. sidelines. Apple Pay as a merchant acquisition “The problem the ISO industry “They will be priming the pump for play, as its [focus is] entirely on the has, as well as Apple, is they do not merchant adoption by funding Apple issuing side with the card.” understand how to work with or even Pay Cash, with every credit transac- Apple has agreements with Bar- approach each other,” said Paul Mar- tion rewarding the prepaid account,” clays and Citizens for in-store financ- taus, merchant acquirer consultant said Richard Crone, chief executive ing for devices at Apple stores, as well and industry researcher. of San Carlos, Calif.-based payments as Goldman Sachs on the card-issuing Martaus said he sent a letter to consulting firm Crone Consulting LLC. front. Apple works with Mastercard, Apple five years ago to introduce the “Apple Pay Cash would be accepted Discover, Green Dot and Visa on its technology giant to the acquiring in- by all merchants who accept Apple card products, including prepaid. dustry and that the company needed Pay online, in-app or in-store.” “All of these will have to coexist in to enlist ISOs “because they own all of Apple Pay Cash, currently carried my opinion,” Kapadia added. “Apple the merchant relationships” needed to over the Discover network, likely would still has not figured out payments, and expand Apple Pay. be no more expensive to a merchant ultimately, Visa and Mastercard are “They responded that the banks are than a traditional PIN-based debit here to stay.” taking care of that for them,” Martaus transaction. The physical Apple Card titanium said. “They don’t understand that the “All merchants prefer debit and this card — meant for merchants that banks are not the best way to go all of will ignite their open-arms acceptance can’t accept Apple Card payments the time to acquire merchant con- of Apple Pay Cash,” Crone said. “And through Apple Pay — answers the tracts.” debit has to have a choice of two net- question about merchant adoption to The difference with Apple Card is it works for routing, and you would have a certain extent. fundamentally changes how mer- to think maybe the other one is Mas- “Where a merchant doesn’t take chants accept payments. The physical tercard, giving Apple major brands Apple Pay in-store, that’s why there card is an afterthought; it exists only across all of their accounts.” is a physical Apple Card,” said Alyson for the merchants that didn’t get on Neither Apple, Discover nor Mas- Clarke, principal analyst for digital board with the evolution of mobile and tercard responded to inquiries about business strategy at Forrester. digital payments. their current or future roles in the It doesn’t address mail order or on- Apple Card isn’t just about one Apple Card transaction network or line purchases that don’t accept Apple product; it’s about building an ecosys- merchant acquiring facets. Pay, Clarke added. tem. Cash-back rewards get funnelled In past years, some merchants have “But I expect that Apple and Mas- into the Apple Pay Cash virtual card resisted accepting Apple Pay, either in tercard are working to solve this,” she account, giving Apple fans a new pool an attempt to push their own branded said. “There has to be a way with an of money to spend in the digital realm. wallet or because they feared the 15 app or something that can generate a They can put it toward Apple’s new basis points that Apple charges issuers one-time card number for the cus- news, gaming and media services — per transaction could trickle down to tomers to use for those purchases that or Apple could, if it so desired, allow them in other fees. need a credit card number.” consumers to spend those funds at “The adoption of Apple Pay has It would be a mistake to assess the other merchants. been lackluster and I’m not sure the Apple Card as simply another new “The ISOs say they will sell Apple Apple Card is the silver bullet to adop- financial product, Clarke said. Pay to merchants, but they want to tion,” said Kalpesh Kapadia, former “It already is more than that and be paid to do so,” Martaus said. “And Wall Street analyst and current CEO has the potential to be even more,” there’s the disconnect, right there. and founder of credit-card issuer De- she added. “Apple brings distribution Apple isn’t interested in paying or serve. “Visa and Mastercard have also to the table with its customer base, keeping track of ISO contracts.” launched contactless products that but if they extend the relationship with Apple views its Apple Card network are fast, safe and easy to use, making Goldman Sachs and add in the power and supporting players as a strong Apple Pay less compelling.” of Siri, this changes banking.” ISO

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010_ISO050619 10 4/25/2019 2:11:03 PM RETAILERS Cashless Stores

customer has left the premises. Observers expect Amazon Go will add a work-around for customers who want to pay with cash that won’t inter- fere with the core concept. “Amazon Go is based on the ‘just walk out’ idea, so cash-paying customers likely will check in like any other shopper via the app, but they’ll select ‘cash’ and walk to a kiosk at the side where they can preload cash to cover their purchases in advance,” said Richard Crone, a principal with Crone Consulting LLC. The effect could be that Amazon Go’s cash-centric customers will end up storing cash within the Amazon Go app for future use at those stores or for shopping online with Amazon, Crone theorizes. “Using machines probably from the

Bloomberg News Bloomberg same companies that make ATMs, Am- azon Go could create its own national Cash at Amazon Go: cash-reload network along the lines of what Walmart and PayPal and Western Union have done at stores,” Crone said. Could it be a boon? This could provide relief for Facing pressure from local governments, Amazon Go is cash-centric customers whose brick- and-mortar shopping options are nar- planning to take cash. Could this help its model? rowing, with more widespread closures of chains like Payless ShoeSource. By Kate Fitzgerald Amazon reportedly plans to open up to 3,000 Amazon Go stores in the next Amazon Go is caving to rising pressure Amazon Go. Paying cash at Amazon two years, primarily in high-traffic areas from cities and states banning cash- Go will work as you would expect: You’ll where quick checkouts are in high de- less stores and planning to introduce check out, pay with cash, and then get mand. Many other retailers, such as the cash-acceptance to a model whose your change,” an Amazon spokesperson sweetgreen restaurant chain, eschew entire premise was about eliminating said in an emailed statement. CNBC cash in a more traditional retail model. the friction of checkout with a seamless, first reported the move, leaked from a The growing number of restau- card-based checkout. company meeting. rants moving to a cashless model for The decision may turn out to be Amazon did not explain how it will efficiency drew the ire of lawmakers in a benefit for Amazon, resulting in a factor cash acceptance into its stores, various jurisdictions from New York to cash-reload network that could be- which are designed to register cus- California. come a gateway to its e-commerce em- tomers by scanning a mobile app at a For Amazon Go, these laws created pire. This would solve another growing turnstile, then tracking their purchases a dilemma. For example, a new law in problem for marginalized cash users, as as they go through the store. New Jersey bans cashless businesses, more brick-and-mortar stores close. Amazon Go charges these sales to a and Amazon operates a cashless book- “We are working to accept cash at card on file when the store detects the store in Paramus, N.J. ISO

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011_ISO050619 11 4/25/2019 2:11:37 PM TECHNOLOGY Blockchain Are blockchain’s fans close to actual use? There’s much talk around blockchain, the distributed ledger tech developed for bitcoin. But is there any action?

By David Heun

When cutting through the noise of developing its own cryptocurrency, generated by the highs and lows of but also for the technology’s ability to Sushil Prabhu, CEO of OpenCrowd. cryptocurrency value, the underlying potentially stabilize some of the privacy blockchain technology is poised to keep and access issues for which Facebook a payment to someone else would have advancing toward mainstream pay- and other social media channels have that transaction entered into the net- ments. been receiving bad publicity. work, transmitting it to all of the other Blockchain — the distributed ledger But JPM Coin is the one undergoing nodes. technology originally designed for actual testing now for payments in “Blockchain cryptographically con- bitcoin payments — underpins many JPMorgan’s wholesale division. firms that the payment came from per- ongoing efforts to streamline payments “I was happy with JPM Coin because son A to pay person B and it is accept- and reduce cost. it validates the blockchain, but it is dif- ed by all nodes, or it does not become But it doesn’t always live up to the ferent because it is payments between part of the system,” Prabhu explained. promise. institutions,” said Sushil Prabhu, CEO of That type of certainty will fuel the “Blockchain technology currently OpenCrowd, which creates blockchain growth of payments on the blockchain, is slow and not mature, but when it solutions for its global investment-bank Prabhu said. becomes fast and more efficient, it will clients and startups. “But it is very “Cryptocurrency has a bad name, disrupt the current banking industry,” encouraging that JPMorgan did that, and it is said there is no asset behind said Garbiel Wang, analyst with Aite because if they are doing it as a pilot, it, but I think micropayments will prove Group. “At that time, banks that were others will watch and see where it can that wrong and establish an actual use slow to wake up to blockchain will go from here.” for it and blockchain,” he added. be asking why they didn’t adopt this The path for JPM Coin will be of spe- With micropayments, a person can earlier.” cial interest to the bank’s competitors, pay a blogger or adviser on the Internet Recent developments include JPMor- namely blockchain provider Ripple and with a fraction of a cent to have access gan developing its JPM Coin to operate other traditional financial institutions to read an article or ask questions of on the bank’s blockchain as well as still determining how far to go with their the author. Square touting its creation of a crypto own blockchain projects. Micropayments made through a team to further research and advance At its core, blockchain relies on blockchain would operate almost in cryptocurrency and blockchain poten- decentralization, or making the trans- the same manner as an instant P2P tial. actions on the ledger available and payment, Prabhu added. Square CEO Jack Dorsey has in- documented on thousands of nodes or Because blockchain provides the vested in the Lightning Network, a new machines within a network. platform for micropayments doesn’t blockchain initiative operating on the Because of that setup, blockchain mean banks couldn’t possibly offer that promise to improve the technology’s will ultimately have many different use option, Aite’s Wang said. speed and capabilities — thus, the cases, but payments certainly represent “Banks have the technology to do it, scale of cryptocurrencies. a big one in any discussion on block- but they just couldn’t make any money Facebook has hired blockchain chain potential. from it, and banks are looking at new experts, reportedly with the strategy Under blockchain, a person making business for profits.” ISO

12 ISO&AGENT May/June 2019

012_ISO050619 12 4/25/2019 2:12:14 PM RETAILERS Going Digital

formance. They’re problems that don’t have obvious solutions — but banks can still play a role in countering these trends. “We have to partner with them to figure out how to navigate that change,” Boss said. That means figuring out a way to match new payment, shopping and marketing techniques to stores, rather than fixing a category. It’s an attempt to go beyond the idea that stores have to have a mobile app, or new rewards programs, or be omnichannel. Each retailer can have a different mix. “What digital capability do we bring, what kind of loyalty can we bring? We’re thinking about online as an experience. How do you engage consumers in or out of a store?” said Boss, who

Bloomberg News Bloomberg has a mix of transaction technology, modern marketing techniques and new TD overhauls payments channels on his resume. He joined TD Bank from Australia’s ANZ, where he served as managing to aid retail stores director of products and marketing and As more retailers close their stores, TD is making changes also had responsibility for digital channels and assets, end-to-end marketing, to help merchants cope. data and analytics. He also worked for Bank of America for 12 years, leading By John Adams teams in North Carolina and Chester, England, with roles covering product Traditional U.S. retail is in crisis at the talk about banks transforming, it pales marketing, credit cards and strategy. hands of e-commerce. Bankers have in comparison to what’s happening in The bank is approaching different a role to play to stop the bleeding retail,” Boss said. retailers with different digital and tai- through a combination of service, in- In the first few months of 2019, store lored elements that fintechs are using centives, and payments technology. closing announcements were up nearly to try to pry retailers away from banks. “The headlines around retailers never a quarter from 2018’s pace—a year in For Ethan Allen, a high-end furniture stop,” said Matthew Boss, who became which more than 5,500 traditional retail retailer, there is the option to build TD Bank’s head of U.S. credit cards stores closed in the U.S., according a Klarna-style installment payment and unsecured lending in February as to Coresight Research, adding retail feature for higher-ticket purchases. part of a TD Bank reorganization that bankruptcy filings as of early February “There’s a huge opportunity to do more united its retail card, U.S. Bankcard, were already at 33% of 2018’s total financing,” Boss said. U.S. partnerships and personal lending bankruptcies. For the bank’s fitness clients, TD is operations. The reasons, according to Coresight, working on digital sales, and an offering “Bricks and mortar are closing include e-commerce, rising interest that’s a hybrid of subscription and thousands of stores. As much as we rates and flat sales-per-location per- installment payments. ISO

isoandagent.com May/June 2019 ISO&AGENT 13

013_ISO050619 13 4/25/2019 2:12:48 PM TECHNOLOGY Technology | Contactless Contactless

“We are also now working with other world cities to share our experience and knowledge to help them introduce a similar ticketing system in the coming years,” said Shashi Verma, chief technology officer at TfL, in an email. Contactless fare payment was introduced in London in 2014, and within a year the TfL was named the fast- est-growing contactless merchant in Europe. TfL averaged about 1.5 million contactless payments a week at launch, reaching 17 million weekly by April 2018.

“We are ... now working with other world cities to share our experience and knowledge.”

That growth coincides with broader contactless adoption in the U.K., where

Bloomberg News Bloomberg more than half of all in-store payments News Bloomberg are now contactless, according to The How TfL adds 53K Guardian, which added overall contact- an overall modernization of the system, less jumped 30% in the past year. which is plagued by overcrowding, London’s record — along with the and an effort to sunset the system’s contactless users a day expense of transit systems managing MetroCard closed-loop ticketing and Consumers won’t adopt contactless payments unless what amounts to their own currency, payment system. and general consumer preference for Ticketing modernization projects there is a compelling reason — and an ecosystem. open-loop payment systems — pro- like New York are attracting Apple and vides an argument for other systems Mastercard, and others such as Google, By John Adams to upgrade, and banks and payment who believe London’s performance is providers to participate in the projects. transferable to the U.S. In some U.S. Contactless transait fare systems are signs of slowing. “Some of these fare collection sys- cities transit payment modernization drawing lots of investment despite More than 21.6 million journeys per tems are at the end of their life cycle, projects have been underway for years, several false starts in the U.S. But new week are made on London public tran- such as New York,” said Randy Van- though the difference now is the better numbers out of London show there are sit using contactless payments. More derhoof, director of the U.S. Payments potential to pair transit journeys with clear and multiple benefits if the infra- than 53,000 new contactless cards Forum, which consults with transit other shopping. structure can catch up. or new mobile contactless payments systems on ticketing modernization. “Do The impact of Uber and other More than 55% of all payments in enter the TfL each day, and one in eight the systems continue to invest in and ride-sharing apps, which support the London transit system are made via contactless journeys come via Apple support the legacy systems with their a seamless payment that exists in contactless instead of the legacy Oyster Pay, Google Pay, Samsung Pay, or other own cards and readers and software, concert with other transactions, also card, according to TfL figures for early mobile wallet apps. or do they make the investment in suggests a mobile experience can work April provided to PaymentsSource. While it didn’t provide specific data, something that supports more mobile for transit and other transactions. And that’s just the tip of the iceberg, TfL reports there is a link between con- technology usage.” “People want to be able to pay as as the rapid uptake of contactless pay- tactless transit payments and contact- the go using whatever ‘payment prod- ments on London’s transit system and less being adopted more generally by Across the pond uct’ they have with them,” Vanderhoof overall contactless usage show little consumers in the U.K. The New York MTA’s project is part of said. “That’s the vision of open loop.”

14 ISO&AGENT May/June 2019 isoandagent.com

014_ISO050619 14 4/25/2019 2:13:25 PM TECHNOLOGY Technology | Contactless

“We are ... now working with other world cities to share our experience and knowledge.”

That growth coincides with broader contactless adoption in the U.K., where more than half of all in-store payments News Bloomberg are now contactless, according to The Guardian, which added overall contact- an overall modernization of the system, It’s here where London’s experience New York MTA riders, Thacker said. less jumped 30% in the past year. which is plagued by overcrowding, also provides a guide. A number of TD’s success will depend on match- London’s record — along with the and an effort to sunset the system’s stations in high traffic/high shopping ing upgrades of transit systems and expense of transit systems managing MetroCard closed-loop ticketing and areas, or areas where the Underground EMV at merchants, which in the U.S. what amounts to their own currency, payment system. connects with commuter rail — includ- happened later than Europe, and also and general consumer preference for Ticketing modernization projects ing Blackfriars, Shoreditch High Street, includes contactless capabilities. This open-loop payment systems — pro- like New York are attracting Apple and Canary Wharf and Clapham Common will make it easier for the dual transit/ vides an argument for other systems Mastercard, and others such as Google, — are consistently seeing more than merchant contactless migration that to upgrade, and banks and payment who believe London’s performance is 60% of all pay-as-you-go journeys happened in London and other mar- providers to participate in the projects. transferable to the U.S. In some U.S. made using contactless, according to kets to take place in the U.S., according “Some of these fare collection sys- cities transit payment modernization TfL. And close to half a million contact- to Thacker. tems are at the end of their life cycle, projects have been underway for years, less payments are made from Oxford such as New York,” said Randy Van- though the difference now is the better Circus every week, the equivalent of 50 “We’ve always debated the derhoof, director of the U.S. Payments potential to pair transit journeys with cards touching in every minute. benefits of contactless, which Forum, which consults with transit other shopping. “The New York [transit payment has been successful in Australia, systems on ticketing modernization. “Do The impact of Uber and other news] gives a tailwind push,” said Jason Canada and Europe.” the systems continue to invest in and ride-sharing apps, which support Thacker, an executive vice president support the legacy systems with their a seamless payment that exists in and head of U.S. deposits and con- “Time will tell if this time will be dif- own cards and readers and software, concert with other transactions, also sumer payments for TD Bank. “We’ve ferent, but we think there’s a real ben- or do they make the investment in suggests a mobile experience can work always debated the benefits of con- efit,” Thacker said. “Everything is real something that supports more mobile for transit and other transactions. tactless, which has been successful in time now, everything moves quicker. It’s technology usage.” “People want to be able to pay as Australia, Canada and Europe but not crazy to say shaving 10 to 20 seconds the go using whatever ‘payment prod- as much in the U.S. thus far.” by removing a [transit card] is a big Across the pond uct’ they have with them,” Vanderhoof TD Bank’s debit card rollout includes deal, but when we talk to consumers The New York MTA’s project is part of said. “That’s the vision of open loop.” more than 350,000 consumers who are that is what they rave about.” ISO

isoandagent.com May/June 2019 ISO&AGENT 15

015_ISO050619 15 4/25/2019 2:13:27 PM MERCHANTS Small Business

check. In the fourth quarter, Discover reported that its rewards rate was 128 basis points, up five basis points year over year. This increase was due to both portfolio mix, which continues to shift toward the Discover It product with its slightly higher average rewards rate, as well as a decision to feature warehouse clubs in the 5% rewards, according to R. Mark Graf, Discover’s chief financial officer, in an earnings call. Despite higher potential reward costs, the small-business credit card market is very attractive to card issuers such as Discover, which are seeking growth outside of the hyper competitive consumer card market. Financial consulting firm Mercator Advisory Group- predicts that the annual purchase volume from small business credit cards is set to grow at a compounded annual

Bloomberg News Bloomberg growth rate (CAGR) of 6.8% between 2017-2022. This CAGR will drive the an- Discover wants small-biz nual purchase volume on small business cards from $493 billion in 2017 to $686 billion in 2022. to come back to it “It’s really a sweet spot for Discover. Discover is working to reclaim the turf it lost in the They were in the business card market before the recession and unceremo- small-business payments market. niously backed away from it. They did well with those cards so their new em- By Michael Moeser phasis on it plays well,” said Brian Riley, director of the credit advisory service at Discover is no stranger to small busi- related to expense tracking, for exam- Mercator. ness, as it had been courting business ple, that don’t come up in a typical According to Forbes, business cards owners in the mid-2000s as the market consumer relationship. carry higher risks than consumer cards began to really take off. However, after “One of the biggest differences with for the cardholder since the product the recession of 2008-2010 the com- how a small business operates differ- category was exempted from the con- pany quietly backed away from the ently than a consumer is on the back sumer protections given Credit CARD market. end, with the organization of purchases. Act of 2009. Now with the September 2018 launch We found that small business owners One straightforward example is that of the Discover Business It Card, the cite keeping track of expenses as a the business owner is liable for em- company is clearly seeking to capitalize top concern,” said Meera Sridharan, ployee purchases, so it’s key to track all on this market opportunity with a new director of small business at Discover charges to a business card. Discover card for small businesses. Financial Services. However, the ability to have multiple Serving the small-business market Rewards are another factor, but that people on a single account is one of requires more than just rebranding a introduces the balancing act of keeping the key reasons small businesses are so plastic card. There are certain functions Discover’s own rewards expenses in attractive to issuers. ISO

16 ISO&AGENT May/June 2019

016_ISO050619 16 4/25/2019 2:14:00 PM TECHNOLOGY Gig Economy

In this model, workers must still file for reimbursement. Guillaume Bouvard, another Extend founder, said that in his experience working in travel expense processing, that’s about 20% of corporate employee expense payments. “That’s a potential loss for the employer, since the personal credit card gets the rewards for payments,” he said. Within the gig economy, a common solution is to use faster payments to employees who cover their own expenses, such as a Lyft driver who requests an immediate fare payment to cover the cost of the next tank of gas. This system is less palatable in situa- tions where expenses vary day by day, and the payment may not come until the end of a project. Extend’s founders say a virtual card — linked to the employer’s card ac- Extend co-founders from left: Guillaume Bouvard, Danny Morrow, Andrew Jamison. count — provides an answer for those scenarios. “It’s a challenge for an employee Does the gig economy or a freelancer or contractor to file an expense report,” Jamison said. “Of- need a T&E platform? ten these expenses go to the worker’s credit card for later reimbursement. Gig workers are more like contractors than full-time That’s further complicated by younger employees, but they still have expenses. freelancers that may not have a credit card. Then there’s the reimbursement By John Adams process, which can take weeks to process.” The gig economy presents many But it also draws on those apps for Extend’s bank clients, which it did challenges in its reliance on a freelance inspiration. not identify, enable their business workforce. Among those is the task “We look at it as incorporating what clients to send virtual cards to named of managing corporate spending for consumers would do to move money employees—usually a freelancer or workers that don’t use a corporate card seamlessly via a Venmo type experi- a full-time employee who works for or expense platform. ence,” said Andrew Jamison, one of a small business or who does not A New York-based fintech Extend Extend’s founders. “With two or three travel frequently. It’s not a true funds hopes its virtual cards can stand in for fields you can move funds.” transfer—the recipient accesses and conventional expense management The trend in corporate T&E has requests the credit line through their systems. actually been moving in the reverse email address. Extend charges the The challenge for Extend is that it direction, with enterprises turning to the cardholders a 0.5 percent per transac- must make the case that its product likes of Uber and Airbnb as a way to tion with no fees for the recipient. makes more sense than simply reim- cut costs while providing consistent and These transactions gain points for bursing workers through common P2P clear documentation for reimburse- the employer and provide transparency apps like Venmo and Zelle. ment. into purchases. ISO

isoandagent.com May/June 2019 ISO&AGENT 17

017_ISO050619 17 4/25/2019 2:14:35 PM M&A FIS-Worldpay

are active on one side or the other. its Worldpay acquisition, it’s tackling Combine that with the smorgasbord of business payment automation and payment channels and tools still being hoping to seize on momentum that used out there, from checks to virtual suggests businesses may finally be cards and it becomes quite a headache ready to automate supply chain trans- for any corporate looking to modernize. actions. “These big payment deals undoubt- FIS will rely on open development edly do help these players in being and advocacy for faster payments via better able to provide automation in the ACH rails to boost digital B2B. corporate payments,” Ubaghs said. FIS of course is also pushing its API “The key benefit [to the mergers] is for business payments strategy, as it really just in the breadth of services awaits the completion of its acquisition being offered, enabling real end-to-end of Worldpay. service provisioning.” FIS did not comment further on the Few payment types are more frus- merger’s impact by the deadline for this trating for technology upgrades than business transactions. In an upcoming PayThink column, Nvoicepay CEO Karla Friede describes B2B as being of Why Worldpay? The logic behind FIS’ pick staggering size, more than $36 trillion The FIS-Worldpay merger is the largest international in yearly volume, yet still behind in dig- payments deal to date, significantly topping the recent Fiserv-First Data merger that turned heads at Bloomberg News Bloomberg itization despite the opportunity to use the beginning of the year. But the FIS deal’s strategic digital business payments to open up implications could be more interesting than the raw lending, discounting and other services. numbers. What’s next for FIS after Worldpay was on the list of companies some predicted Friede’s not alone, as other exec- could be a good fit for FIS in the wake of the Fiserv- utives such as FPX chief experience First Data deal, but it was far from the only choice. And $43B Worldpay deal? officer Mark Bartlett have bemoaned Worldpay may not have even been the most attractive pick, given that it was still in flux from a $12 billion FIS is planning smaller steps to disrupt the status quo, the lack of automation in supply chain takeover by Vantiv that closed barely over a year ago. payments, while Coupa Senior Vice Two large U.S. payment processors are often after the major step of buying Worldpay. discussed as possibly going into play in the current M&A President Ravi Thakur has warned environment—TSYS and Global Payments. fintech merchant acquirers are a clear As the world’s largest acquirer, Worldpay brings a By John Adams threat to banks and merchant acquirers deep stable of international and online retailers and a track record of experimenting with emerging commercial that can’t upsell digital B2B. technology that could refresh FIS’ business model at a FIS’s $43 billion agreement to acquire long-standing hindrances that keep Still, more than half of B2B transac- critical juncture. Worldpay and Fiserv’s $22 billion deal businesses entrenched in paper billing. tions happen by check, despite the am- FIS already had global reach, with operations in 130 countries. But the $43 billion deal (which counts to buy First Data are largely closing the To further these goals, “it’s helpful to ple cost and time benefits of automat- $9 billion of Worldpay’s debt) will significantly expand gaps between financial technology and have multiple assets coming into our ing business transactions. FIS’ own data the processor’s global reach and increase its market negotiating power, analysts say. This could particularly merchant acquiring. ecosystem,” said Elena Whisler, head points to the complexity of business benefit small and midsize merchants that have long been But these mergers are only the first of global product management, open payments that usually involve thou- the backbone of revenue for Vantiv, which completed of many steps. payments for FIS. sands of suppliers for most companies, its acquisition of Worldpay early last year and took Worldpay’s name. What comes next will be relatively Commercial payments in general re- which a mix of dashboards, APIs and FIS has been interested in building more direct smaller projects to disrupt the status main fragmented with a lot of disparate digital faster payment could streamline. connections to merchants—evidenced by recent loyalty quo, such as makingopen banking more legacy systems operating independent- “Even if there is a better or different deals it’s cutting directly with retailers like Shell and BP— and Worldpay’s mix of merchants can bring them much accessible for financial institutions, ly across payment transactions, said grocery store, you’re still going to use closer to that goal, according to Richard Crone, an analyst which previously have seen PSD2 as Gilles Ubaghs, a senior analyst at Aite. the older store you’re accustomed to with Crone Consulting LLC. a costly compliance headache. The For most corporates, accounts payable — even if the newer one is easier,” said “Buying Worldpay is a vertical-integration move,” Crone said. deals also smooth the road to develop- and accounts receivable still often run Whisler. Toward that end, FIS will benefit from some of the ing digital ID and cutting through the on distinct systems, and most vendors As FIS preps to get much larger via

18 ISO&AGENT May/June 2019 isoandagent.com

018_ISO050619 18 4/25/2019 2:15:13 PM M&A

are active on one side or the other. its Worldpay acquisition, it’s tackling article. Fiserv also did not comment which means by controlling data and Combine that with the smorgasbord of business payment automation and by deadline. Fiserv’s B2B automation processing across the value chain, there payment channels and tools still being hoping to seize on momentum that strategy includes a collaboration with should be opportunities to develop and used out there, from checks to virtual suggests businesses may finally be DadeSystems, with Fiserv providing a deliver more coherent B2B payments,” cards and it becomes quite a headache ready to automate supply chain trans- connection for financial institutions to Grover said, adding FIS could use for any corporate looking to modernize. actions. access DadePay’s accounts receivable Worldpay’s gateway Paymetric to plug “These big payment deals undoubt- FIS will rely on open development SaaS product. into a range of ERP systems, thousands edly do help these players in being and advocacy for faster payments via Both FIS and Fiserv have assets of software companies in its integrat- better able to provide automation in the ACH rails to boost digital B2B. such as bank processing, interbank and ed payment roster and a network of corporate payments,” Ubaghs said. FIS of course is also pushing its API retail payment networks, electronic bill millions of merchants. “The key benefit [to the mergers] is for business payments strategy, as it payment and presentment networks, Fiserv will have similar benefits, really just in the breadth of services awaits the completion of its acquisition cards and merchant processing that according to Grover. being offered, enabling real end-to-end of Worldpay. they can leverage for B2B, said Eric Any move to digital payments will service provisioning.” FIS did not comment further on the Grover, a principal at Intrepid Ventures. create more data faster, which can aid Few payment types are more frus- merger’s impact by the deadline for this “Their ecosystems are getting larger, the argument for B2B automation. ISO trating for technology upgrades than business transactions. In an upcoming PayThink column, Nvoicepay CEO Karla Friede describes B2B as being of Why Worldpay? The logic behind FIS’ pick staggering size, more than $36 trillion The FIS-Worldpay merger is the largest international technology Worldpay has recently adopted to expand in yearly volume, yet still behind in dig- payments deal to date, significantly topping the merchants’ commerce and payment options. recent Fiserv-First Data merger that turned heads at Worldpay in July 2018 rolled out Mastercard’s Pay by itization despite the opportunity to use the beginning of the year. But the FIS deal’s strategic Bank app for its merchant clients, leveraging Mastercard’s digital business payments to open up implications could be more interesting than the raw Vocalink technology enabling consumers to pay for online lending, discounting and other services. numbers. goods directly from their bank accounts through their Worldpay was on the list of companies some predicted bank’s app. Friede’s not alone, as other exec- could be a good fit for FIS in the wake of the Fiserv- Through a collaboration with Klarna two years ago, utives such as FPX chief experience First Data deal, but it was far from the only choice. And Worldpay also has built up experience delivering instant- officer Mark Bartlett have bemoaned Worldpay may not have even been the most attractive credit options to merchants, a fast-growing trend. pick, given that it was still in flux from a $12 billion Buying Worldpay will also bring FIS into the expanding the lack of automation in supply chain takeover by Vantiv that closed barely over a year ago. payment facilitator arena, where Worldpay is a key player. payments, while Coupa Senior Vice Two large U.S. payment processors are often Payment facilitators take on merchants by enrolling them discussed as possibly going into play in the current M&A as sub-merchants, streamlining the complex primary- President Ravi Thakur has warned environment—TSYS and Global Payments. merchant enrollment process and off-loading certain risks. fintech merchant acquirers are a clear As the world’s largest acquirer, Worldpay brings a Square and Stripe were pioneers of the payment threat to banks and merchant acquirers deep stable of international and online retailers and a facilitator concept, which is disrupting traditional track record of experimenting with emerging commercial merchant acquiring relationships. Worldpay handles that can’t upsell digital B2B. technology that could refresh FIS’ business model at a the processing for about 80 percent of all payment Still, more than half of B2B transac- critical juncture. facilitators, according to a report equity research firm tions happen by check, despite the am- FIS already had global reach, with operations in Keefe, Bruyette & Woods published last month. 130 countries. But the $43 billion deal (which counts TSYS—through its 2012 acquisition of ProPay—ranks ple cost and time benefits of automat- $9 billion of Worldpay’s debt) will significantly expand second in processing transactions for payment facilitators, ing business transactions. FIS’ own data the processor’s global reach and increase its market followed by First Data and Chase Paymentech, KBW said negotiating power, analysts say. This could particularly in its report. points to the complexity of business benefit small and midsize merchants that have long been Global Payments, which has been buying many payments that usually involve thou- the backbone of revenue for Vantiv, which completed independent software vendors in recent years, is well sands of suppliers for most companies, its acquisition of Worldpay early last year and took positioned to survive any shocks from growth in the Worldpay’s name. payment facilitator model, whose long-term trajectory is which a mix of dashboards, APIs and FIS has been interested in building more direct uncertain, according to KBW. digital faster payment could streamline. connections to merchants—evidenced by recent loyalty Combining FIS’ banking platform with Worldpay’s “Even if there is a better or different deals it’s cutting directly with retailers like Shell and BP— network of merchants also creates the possibility for FIS- and Worldpay’s mix of merchants can bring them much Worldpay to route transactions from merchants directly grocery store, you’re still going to use closer to that goal, according to Richard Crone, an analyst to core banking systems for debit transactions, bypassing the older store you’re accustomed to with Crone Consulting LLC. the payment networks, said Rodman K. Reef, a consultant — even if the newer one is easier,” said “Buying Worldpay is a vertical-integration move,” Crone with Reef Karson Consulting LLC. said. This type of shortcut caused friction with Visa when Whisler. Toward that end, FIS will benefit from some of the First Data tried it in 2002. As FIS preps to get much larger via

isoandagent.com May/June 2019 ISO&AGENT 19

019_ISO050619 19 4/25/2019 2:15:14 PM PAYMENTS Cash vs. Web

transaction,” Shader said. “Commerce is not a key growth area for PayNearMe today, but we’re looking at new ways to leverage our technology and help businesses serve customers with any tender, including cash.” For PayNearMe, the changing retail landscape creates fresh growth opportunities for its network of 27,000 participating retail locations in the U.S. that include 7-Eleven, CVS and other outlets, Shader said. RockAuto.com partnered with PayNearMe two years ago to sell merchandise to consumers who prefer to pay in cash. Madison, Wis.-based RockAuto directs consumers who want to pay with cash to select “retail” payment when checking out. Shoppers receive a bar code generated by PayNearMe enabling them to pay with cash at a

Bloomberg News Bloomberg nearby 7-Eleven, Casey’s General Store or Ace Cash Express, to immediately Marginalized cash users complete the purchase. Greyhound Bus Lines and Wish.com have also integrated with PayNearMe welcomed online for customers who want to pay in cash Cash users are finding fewer options to shop in stores — for online purchases, Shader said. due to closings or the cashless movement. “We call it the post-order model, where consumers can shop online and as soon as they take cash into a partic- By Kate Fitzgerald ipating PayNearMe outlet, the transaction is complete,” Shader said. As more stores either close down or expanding cash-payment options for E-commerce currently is a small try to ban the use of cash, they aren’t customers shopping online. niche for PayNearMe. But the compa- necessarily driving cash users to cards That trend could accelerate as more ny, a unit of Handle Financial, is alert and mobile wallets. Instead, they are brick-and-mortar stores close, accord- to opportunities that could include driving some to an environment that is, ing to PayNearMe CEO Danny Shader. companies looking to accept cash pay- counterintuitively, more cash-friendly Payless ShoeSource, working through ments for online sales, Shader said. than ever: e-commerce. bankruptcy this year as it closes 2,100 Cash-centric consumers are also PayNearMe, which enables cash U.S. stores, enlisted PayNearMe in 2018 getting emboldened by cities and states users to complete a purchase in person to help move online merchandise for pushing back against cashless stores using a retailer-generated bar code, customers who could only pay with with proposals to mandate cash. doesn’t have a ready solution for cash, Shader said. “I think eventually commerce will consumers trying to pay with cash at “Payless customers could make their grow for us, because the shift to online sandwich shops like New York’s Artiserie selections online with shipping options, commerce continues even though many that only accept cards, but PayNearMe choose ‘cash’ and go to a participating consumers still prefer to pay with cash,” is seeing more demand from retailers PayNearMe location to complete the Shader said. ISO

20 ISO&AGENT May/June 2019

020_ISO050619 20 4/25/2019 2:15:43 PM www.isoandagent.com

THE MOST INFLUENTIAL WOMEN IN PAYMENTS

March/April 2018 www.isoandagent.com

Suneera Madhani is an industry rarity: a female entrepreneur who built a fast-growing payments company from scratch

001_ISO030418 1 2/28/18 11:49 AM As small merchants try to reach bigger audiences, ISO & Agent shows them the way

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021_ISO050619 21 4/26/2019 8:18:53 AM d33449_ISO&Agent_house ad.indd 2 11/1/18 5:13 PM TECHNOLOGY Real Time

Bloomberg News Bloomberg platform to manage high volumes of Pay.UK has been developing a New payments more securely than today’s Payments Architecture for the U.K.’s U.K. real time payments antiquated platforms.” retail and bulk payment infrastructures. Payments Canada is developing It will announce a technology supplier three ISO 20022-based systems: the in Q2 2020 for the New Payments Ar- are a warning to others Real-Time Rail, supporting 24x7 retail chitecture’s core clearing and settle- The U.K. was fast to adopt real-time payments, but be- payments; the Lynx RTGS replacing the ment layer, which will be implemented existing Large Value Transfer System; after 2021. ing an early adopter invites other challenges. and the Settlement Optimization The New Payments Architecture will Engine, a retail batch clearing sys- encompass processing of Bacs trans- By Robin Arnfield tem replacing the existing Automated actions and Faster Payments including Clearing Settlement System. Paym, and its systems will be based on The speed of technological change and its CHAPS high-value payment “Neither Canada [nor] Australia had ISO 20022. Using this standard, pay- is forcing Britain’s retail payments network, introduced in 1984, are being real-time retail payments systems,” said ments services providers (PSPs) will be authority Pay.UK to redesign its core replaced for the same reasons. Bacs Francesco Burelli, a payments industry able to add enhanced data to custom- infrastructure. was updated in 2004, when it moved to consultant. “Compared to Australia ers’ payments, such as the transaction’s Britain was among the first to an IP-based core platform. and the U.K., Canada has the most purpose; tax information; and underly- introduce real-time payments in 2008, The U.K. is paying for being quick far-reaching initiative, with a radical ing business transaction details. but its system is outdated. The plat- off the mark in real-time payments, as redesign of its clearing and settlement “Bacs and Faster Payments will use form needs to be overhauled due to modernizing existing infrastructure is infrastructure across retail and whole- ISO 20022-based messaging to enable rising digital payment volumes, surging more expensive and takes longer than sale payments.” banks and fintechs to more easily fraud, non-bank competitors, and the new deployments. Australia’s NPP offers overlay develop overlay services,” said Burelli. emergence of the ISO 20022 messaging “Britain’s Faster Payments needing services such as Osko, a P2P transfer “This initiative is complementary to the standard. overhauling after 10 years is a warning system using recipients’ mobile num- U.K.’s rollout of open banking/PSD2.” The U.K.’s Bacs batch payments to the U.S.,” said Sarah Grotta, Mercator bers as their PayID. Canada’s Real-Time One overlay service Pay.UK will system, its Real-time Gross Settlement Advisory Group’s director of debit and Rail will also enable payment system make available to PSPs to offer con- service, which was launched in 1996, alternative products. “Those building participants to offer overlay services. sumers is Confirmation of Payee, which

22 ISO&AGENT May/June 2019 isoandagent.com

022_ISO050619 22 4/25/2019 2:16:11 PM TECHNOLOGY

real-time U.S. payments platforms must “Australia’s NPP initiative is closer realize their platforms will need con- to the U.K.’s real-time scheme,” said stant, substantial investment.” Burelli. “PayID resembles the Paym P2P Australia launched its real-time service offered by U.K. banks, which payments system, the New Payments uses recipients’ mobile numbers.” Platform, in February 2018. Payments The U.K.’s payments administration Canada, which administers Canada’s has undergone reorganization, with payments infrastructure, will launch an the separate retail and bulk payment ISO 20022-based real-time system in schemes being combined in 2018 in 2020 as part of its payments modern- Pay.UK. Since 2017, the Bank of En- ization program. gland (BofE), which is responsible for the RTGS service, has directly managed “Britain’s Faster Payments CHAPS. needing overhauling after Pay.UK encompasses Faster Pay- 10 years is a warning ments, the real-time scheme which to the U.S.” also runs Paym; the Cheque and Credit Clearing Company, which handles “I appreciate Payments Canada’s paper check and credit clearing plus term ‘payments modernization,’ as check imaging; and Bacs Payments that’s the goal,” said Grotta. “It’s not Schemes, responsible for direct debits about speed, but about developing a and Bacs direct credits. platform to manage high volumes of Pay.UK has been developing a New News Bloomberg payments more securely than today’s Payments Architecture for the U.K.’s antiquated platforms.” retail and bulk payment infrastructures. will warn payors if payee names and BofE has a goal of creating a more Payments Canada is developing It will announce a technology supplier account numbers don’t match. This will efficient, competitive system so smaller three ISO 20022-based systems: the in Q2 2020 for the New Payments Ar- combat the surge in authorized push players can connect directly and don’t Real-Time Rail, supporting 24x7 retail chitecture’s core clearing and settle- payment fraud via Faster Payments. have to use the banks they compete payments; the Lynx RTGS replacing the ment layer, which will be implemented The BofE plans to migrate CHAPS with.” existing Large Value Transfer System; after 2021. and the RTGS service to ISO 20022, The U.K. allows non-bank PSPs to and the Settlement Optimization The New Payments Architecture will and has requested tenders for a tech- have direct access to Faster Payments Engine, a retail batch clearing sys- encompass processing of Bacs trans- nology supplier to develop the new and the underlying RTGS system, pro- tem replacing the existing Automated actions and Faster Payments including RTGS system at a maximum price of vided they are licensed by the Financial Clearing Settlement System. Paym, and its systems will be based on £150 million. The contract winner will Conduct Authority as payment institu- “Neither Canada [nor] Australia had ISO 20022. Using this standard, pay- be announced in May 2020, with the tions or e-money institutions. However, real-time retail payments systems,” said ments services providers (PSPs) will be project completed in 2025. so far, just four fintechs have become Francesco Burelli, a payments industry able to add enhanced data to custom- “The reason for the RTGS upgrade direct members of Faster Payments. consultant. “Compared to Australia ers’ payments, such as the transaction’s is because the BofE recognizes that The Canadian government is intro- and the U.K., Canada has the most purpose; tax information; and underly- its existing systems have flaws and ducing legislation to allow non-bank far-reaching initiative, with a radical ing business transaction details. that they don’t support its mandates,” PSPs to become associate members redesign of its clearing and settlement “Bacs and Faster Payments will use said Gareth Lodge, senior analyst with of Payments Canada. This will enable infrastructure across retail and whole- ISO 20022-based messaging to enable Celent. “The first is reducing market fintechs to have direct access to Can- sale payments.” banks and fintechs to more easily risk from participants that settle high ada’s Real-Time Rail, provided they are Australia’s NPP offers overlay develop overlay services,” said Burelli. volumes. The BofE has actively encour- authorized and regulated. services such as Osko, a P2P transfer “This initiative is complementary to the aged smaller banks to connect directly Australia only allows fintechs to have system using recipients’ mobile num- U.K.’s rollout of open banking/PSD2.” to the RTGS, rather than via larger indirect access to its New Payments bers as their PayID. Canada’s Real-Time One overlay service Pay.UK will banks, to ensure more transparent risk Platform. Directly-connected NPP Rail will also enable payment system make available to PSPs to offer con- management. So RTGS membership members must be one of Australia’s 150 participants to offer overlay services. sumers is Confirmation of Payee, which has more than doubled. Secondly, the authorized institutions. ISO

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