FOR 45 YEARS, THE LEADING PUBLICATION COVERING PAYMENT SYSTEMS WORLDWIDE SEPTEMBER 2015 / ISSUE 1072

Global General Purpose Cards — Midyear 2015 Credit, debit, and prepaid cards carrying Visa, UnionPay, MasterCard, American Express, JCB, and Diners Club/Discover brands generated $9.879 trillion in purchase volume of goods > see p. 11 PURCHASE VOLUME Rewards/Loyalty Platform for Europe’s SMBs Middle East/Africa Izicap offers a cloud-based platform acquirers use to offer small and midsized businesses (SMBs) rewards and loyalty programs, Market Shares as well as analytics to support marketing campaign management. of $286.71 Bil. in Purchase Volume 2014 > see p. 6

Featurespace Machine Learning Fraud Fighting 57% 39% 3% 1% Predictive models using adaptive behavioral analytic tools operating on a machine learning-based platform is the business Visa MasterCard Amex Diners of fraud fighter Featurespace. The company says that card issuers 78 > see p. 10 Change in Basis Points Chase Freedom Mobile App 2014 vs. 2013 Chase Freedom is a cash back credit card product available since -14 2003 from the largest credit card issuer in the world. Cardholders -32 -32 earn 1% cash back from most card purchases and 5% in select > see p. 5 Purchase Volume ($Bil.) in 2013 vs. 2014 CashStar Private Label Prepaid Visa 136.9/162.1 A Series D funding round led by FTV Capital has brought another MasterCard 97.4/112.9 $15 million to private label prepaid card provider CashStar. Amex 8.1/8.6 Total venture funding in CashStar has reached $50 million. The Diners 3.0/3.1/3.1 > see p. 12 © 2015 The Nilson Report Mobile Payments in Austria Payment Services Austria (PSA), which is owned by Austrian banks, provides debit card issuing and ATM acquiring services in Austria. Cards in the Middle East and Africa PSA outsources debit card account processing to Switzerland-based Credit, debit, and prepaid cards issued in the Middle East > see p. 8 and Africa region with the MasterCard, Visa, American Express, and Diners Club brands generated $786.32 billion U.S. Commercial Cards — Part 3 in total volume in 2014. This included purchases for goods Commercial and consumer credit, debit, and prepaid general and services as well as cash transactions at ATMs and purpose cards in circulation in the U.S. in 2014 combined to over the counter at branches. Total volume grew 16.3% generate $4.440 trillion in purchases of goods and services. from 2013. Purchase volume for good and services only > see p. 9 > see p. 7

INSIDE 2 – 4 Fast Facts CHARTS 7 Middle East/Africa General Purpose Cards 2014 vs. 2013 5 PerformLine Marketing Compliance Platform 9 Purchase Volume U.S. Cards 2014, Consumer & Commercial 8 Zazoo Mobile Virtual Cards 11 Purchase Transactions on Global General Purpose Cards 10 Merchant Litigations Update Midyear 2015, Credit and Debit

© 2015 HSN Consultants, Inc. THE NILSON REPORT VISIT US ONLINE AT WWW.NILSONREPORT.COM CONSUMER FINANCIAL PROTECTION BUREAU has BANK OF AMERICA is promoting two new MasterCard fined Fifth Third Bank $500,000 and required it to provide credit cards to passengers of Amtrak. The Amtrak Guest Re- an estimated $3 million in relief to eligible cardholders for wards World MasterCard offers a complimentary companion deceptive marketing practices associated with insurance coupon, one class upgrade, and a single-day Club Acela pass products that promised to cancel payments owed due to job when accounts are opened, 20,000 Amtrak Guest Rewards loss, disability, hospitalization, or other hardship. Fifth Third bonus points after spending at least $1,000 within 90 days is the 11th U.S. issuer to be fined by the CFPB for deceptive of account opening, 3 Amtrak Guest Rewards bonus points marketing practices of credit card add-on products. for every $1 spent with Amtrak, and more. Michael Simpson is Executive for Co-Brand Partnerships BLUE STAR PAYMENT SOLUTIONS has become the at Bank of America, (302) 432-0511, michael.simpson@ FAST preferred processing partner of ParkHub.com’s Prime bankofamerica.com, www.bankofamerica.com. mobile POS platform. Jerry Mooty is President at Blue Star Payment Solutions, (972) 525-0685, jmooty@bluestarpays. ALLIANCE DATA SYSTEMS will provide private label FACTS com, www.bluestarpays.com. Jarrod Fresquez is CMO at credit cards and support services for Toyota and Lexus in the ParkHub, (214) 663-0505, [email protected], U.S. It will also assume ownership of an existing Visa co- www.parkhub.com. branded card program currently owned by Toyota Financial SEPTEMBER 2015 Savings. Melisa Miller is President, Card Services at KOUNT, a top provider to card-not-present merchants of ISSUE 1072 Alliance Data, (614) 729-4900, melisa.miller@ fraud detection and sales support, has integrated into its alliancedata.com, www.alliancedata.com. SaaS platform Emailage, a technology that gives merchants Objective, the ability to assess and leverage risk based on a user’s VERIFONE’S EMV-compliant, NFC-enabled UX Solutions independent email address. Brad Wiskirchen is CEO at Kount, unattended payment devices have been certified by Moneris (208) 489-3389, [email protected], www.kount.com. reporting for Solutions. Shan Ethridge is VP and GM, North American Rei Carvalho is CEO at Emailage, (480) 226-6822, Financial Services Group at Verifone, (770) 754-3432, 45 years. [email protected], www.emailage.com. [email protected], www.verifone.com. Chris Lee is President of North America Strategic Partnerships at No paid EMERGENT PAYMENTS, formerly Live Gamer, will Moneris, (502) 296-8457, [email protected], advertising. integrate into its payment acceptance platform Optimal www.monerisusa.com. Payments’ Neteller service and Net+ Card Stored Value No sponsored products. Neteller offers more than 100 payment options PAYMENT DATA SYSTEMS’ wholly-owned subsidiary, content of through a single API connection. Emergent Payments FiCentive, is offering a reloadable prepaid card that busi- any kind. focuses on emerging markets. Lorenzo Pellegrino is EVP at nesses can use for disbursements to customers, contractors, Optimal Payments, (646) 595-9212, lorenzo.pellegrino@ and employees. The Stream Prepaid MasterCard, issued optimalpayments.com, www.optimalpayments.com. by Metropolitan Commercial Bank, supports the delivery of Mitch Davis is CEO at Emergent Payments, (917) 671-8201, commissions, rewards, and other payments. Houston Frost [email protected], is SVP, Prepaid Products at Payment Data, (210) 249-4080, www.emergentpayments.net. [email protected], www.paymentdata.com. Conferences & Seminars

NFC Solutions Summit 2015: ETA Strategic Leadership Forum Mobey Day 2015: October 14-15, 2015 WSAA Annual Conference: October 7-8, 2015. The Arizona 2015: October 13-15, 2015. The JW 2015. The CosmoCaixa, Barcelona, October 28-29, 2015. The M Resort Grand Resort, Phoenix, Arizona. Marriott Scottsdale Camelback Inn Spain. Estimated attendance: 300. Spa Casino, Henderson, Nevada. Estimated attendance: 250. Cost Resort & Spa, Scottsdale, Arizona. Cost for the two-day conference is Estimated attendance: 1,000. Cost for the three-day conference is Estimated attendance: 450. Cost for $1,508 (+21% VAT). for the two-day conference is $99. $1,020 for members and $1,270 the three-day conference is $1,295. Subscribers to The Nilson Contact Xavier Ayala, President, for nonmembers. Subscribers to Subscribers to The Nilson Report will receive a 25% WSAA, (707) 445-5401, The Nilson Report will receive Report will receive a $100 discount. (Use code MD1525%.) [email protected]. Register at a 20% discount. (Use code discount. (Use code NILSON.) Contact Shalini Sharma at www.westernstatesacquirers. PDDSC.) Contact Bill Rutledge at Contact Del Baker Robertson at Mobey Forum, shalini.sharma@ com. Smart Card Alliance, (212) 866- ETA, (202) 828-2635 x204, dbaker@ mobeyforum.org. Register at 2169, [email protected]. Register at electran.org. Register at http://mobeyday.com. www.nfcsolutionssummit.com. www.electran.org/slf15.

2 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive 1 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Seventh Edition NACHA’S Payments Innovation Alliance has formed a team to explore topics 7th Edition related to mobile wallets, including best practices, provisioning and accep- Figures Largest tance issues, and implementation challenges. The Alliance has more than 200 include cards member organizations. George Throckmorton is Managing Director, Advanced Payments Solutions at NACHA, (804) 737-8200, [email protected], in circulation www.nacha.org. Card Issuersand and spending VISA has designed a biometric specification that can be integrated with EMV for Merchant Acquirerschips to support “match-on-card” authentication. Absa Bank in South Africa credit Over 1,000* Card Issuers will use it at ATMs, where cardholders will use a fingerprint reader rather & debit from 115 countries in all world regions than a PIN. John Sheets is Senior Director of Risk Products at Visa, (415) 805-4078, [email protected], visa.com. card *includes over 700 outside the U.S. SAM’S CLUB, a division of Wal-Mart Stores and the 8th largest U.S. issuers retailer, will accept American Express cards beginning October 1, 2015. Anré Williams is President, Global Merchant Services at American Express, (212) 640-8809, [email protected], www.americanexpress.com. 275* Merchant AcquirersWorldwide from 65 countries in all world regions a 2015 Nilson Report Publication MUFG UNION BANK in the U.S. has launched a commercial card program *includes over 190 outside the U.S. offering Purchasing, T&E, ePayables Virtual Cards, and other products. The

© HSN Consultants Inc. 2015 THE NILSON REPORT, www.nilsonreport.com/specialreport. Reproducing or allowing reproductioncards are MasterCard branded. Ray Fattell is Head of Product and Innovation or dissemination of any portion of this document in any manner is a copyright violation subject to substantial fines. for Transaction Banking at MUFG Union Bank, (646) 452-4782, in [email protected], www.unionbank.com/commercialcards. Asia/Pacific, United States, Europe, Latin America, Management Changes Middle East/Africa, and Canada Steve Aliferis has been appointed President, Asia Pacific at Verifone, 65 (63) 903-218, [email protected], www.verifone.com. Patricia Watson has been appointed CIO at Order Today TSYS, (706) 644-3033, [email protected]. Philip Julian, www.nilsonreport.com/specialreport formerly at Visa, has been appointed Head of Sales, Australia and New Zealand at i2c, 61 (2) 9004-7087, [email protected]. Greg Mallin, formerly at MasterCard, has been appointed Director e-NABLER has certified three of Partner Tech’s PC-based, open architecture of New Business Development at BillingTree, (602) 443-5900, POS tablets for use with its eMobilePOS software. All three are Android- [email protected]. Elizabeth Buse has resigned as CEO based and can be paired with chip & PIN readers to process EMV-compliant at Monitise. Lee Cameron has been appointed CEO at Monitise, payments. Matthew Inan is Director of Business Development and Sales at 44 (207) 947-4300, [email protected]. Manav Gupta has e-Nabler, (954) 258-9773, [email protected], www.e-nablercorp. been appointed Vice President, Issuer Products at Verifi, Inc., com. Keith Schroer is VP of Sales at Partner Tech, (513) 367-6935, (323) 655-5789, [email protected]. Bill Lodes has been [email protected], www.partnertechcorp.com. appointed Senior VP, Business Development and Strategy at CTRIP, one of the top travel agencies in China, is using Digital River World First American Payment Systems, (817) 317-9145, Payments to process Visa, MasterCard, and UnionPay payment cards at its [email protected]. John Wordley has been appointed Singapore site. It also intends to use Digital River in Korea. Hayden Reed is Head of Sales at AccessPay, 44 (203) 282-7152, john.wordley@ SVP & General Manager at Digital River, (952) 225-3438, hreed@digitalriver. accesspay.com. Ron Fetzer has been appointed Vice President of com, www.digitalriver.com. Finance at Ubiquity Global Services, (917) 576-9686, ron.fetzer@ ubiquitygs.com. Raymond D’Aponte has been appointed U.S. DISTRICT COURT Judge Paul Magnuson for the District of Minnesota Chief Financial Officer at Planet Payment, (516) 941-1885, granted class action status on September 15, 2015, to litigation brought by [email protected]. David Laferla has been appointed U.S. community banks and credit unions against Target related to the 2013 Chief Financial Officer at The Strawhecker Group, (402) 964-2617, data breach that resulted in the theft of more than 40 million payment card [email protected]. Pawan Chawla, formerly at Visa, account numbers. Umpqua Bank, Mutual Bank, Village Bank, CSE Federal CU, has been appointed Vice President Merchant Solutions & Strategy and First Federal Savings of Lorain have been appointed to represent all at Emergent Payments, (650) 320-9300, pchawla@ entities in the U.S. and its territories that issued payment cards. emergentpayments.net.

© 2015 HSN Consultants, Inc. THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON REPORT © HSN Consultants, Inc. 2015 THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON 3 2 REPORT ARUBA BANK has implemented Euronet Software Solutions’ EMV chip card DINERS CLUB SA, the Diners Club franchise in South Africa, which is acquiring platform for ATMs and POS terminals. Marc Kwaad is Executive owned and operated by Standard Bank of South Africa, will migrate to EMV Director at Aruba Bank, (297) 527-7610, [email protected], compliance using technology from Proxama for issuing, transaction process- www.arubabank.com. Cindy Ashcraft is Managing Director at Euronet ing, and PIN management. Ebrahim Matthews is Managing Director at Diners Software Solutions, (501) 218-7000, esw-cindyashcraft@ Club South Africa, 27 (11) 358-8500, ebrahim.matthews@ euronetworldwide.com, www.euronetsoftware.com. dinersclub.co.za, www.dinersclub.co.za. Patrick Regester is EVP for Strategic Accounts and Partnerships, Digital Payments Division at Proxama, PREMIER BANK in Bangladesh, a card account processing client of TSYS 44 (203) 668-2888, [email protected], www.proxama.com. since 2003, will upgrade management of its portfolio to PRIME 4, the latest version of TSYS’s PRIME platform. Jaffar Agha-Jaffar is Mng. Dir., PRIME CONTIS GROUP provides end-to-end banking and payment programs for Licensing & Group Exec. at TSYS Int’l, (971) 4391-2823, jagha-jaffar@ private label and co-branded contactless prepaid and debit cards. It owns tsys.com, www.tsys.com. Omar Faruque Bhuiyan is Sr. EVP & Head, Cards an e-money license in the EU, is a Principal Member of Visa Europe, and is a Division at Premier Bank, 880 (2) 982-08448 x226, faruque.bhuiyan@ certified processor. Peter Cox is Executive Chairman at Contis Group, premierbankltd.com, www.premierbankltd.com. 44 (7970) 131-888, [email protected]. www.contisgroup.com.

EVERTEC will pay $5.4 million to buy 65% of the shares of payment BANK OF IRELAND will convert all Visa credit cards in its portfolio to processor Processa in Colombia. Evertec is the 8th largest acquirer in the MasterCard over the next 9 months. Its debit cards will remain Visa branded. Caribbean and Central America, and handles 2.1 billion transactions annually. Bank of Ireland owns the 35th largest credit card portfolio in Europe. Austin Alan Cohen is EVP at Evertec, (787) 773-5331, [email protected], Cleary is Head of Consumer Cards at Bank of Ireland, 353 (07) 662-43927, www.evertecinc.com. [email protected], www.boi.com.

CARREFOUR BELGIUM will install POS terminals from Worldline in 747 RUSSIAN STANDARD BANK processed 258.6 million payment card locations. The terminals will be equipped with the Visa PayWave NFC transactions in 2014, making it the 38th largest merchant acquirer in Europe. technology to process contactless payment cards. Jean-Marie de Crayencour Ivan Glazachev is Head of Acquiring & e-Commerce at RSB, 7 (903) 960-8031, is Country Manager BeLux at Visa Europe, 32 (2) 274-4767, decrayej@visa. [email protected], www.rsb.ru. com, www.visaeurope.com. Willy Walraeve is CEO at Worldline Benelux, PAY.ON has integrated into the payment platform it white labels to PSPs 32 (2) 727-7028, [email protected], www.atosworldline.com. GFKL Group’s PayProtect risk management service, which offers online INFORM and GLOBAL RISK TECHNOLOGIES are partners on an end- merchants 100% protection against payment default for direct debit and open to-end, card-not-present chargeback prevention service for merchants and invoice payments. PayProtect is particularly valuable in Germany, Austria, and acquirers in Europe and the U.S. Stanley Harmsen van der Vliet is RiskShield Switzerland. Markus Rinderer is CEO at PAY.ON, 49 (89) 452-300, Marketing Manager at Inform, 49 (2408) 9456-5000, s.harmsenvandervliet@ [email protected], www.payon.com. Marc Schillinger is Member inform-software.com, www.riskshield.com. Gary Cardone is CEO at of the Management Board at GFKL Financial Services, 49 (201) 102-1195, Global Risk Technologies, (213) 400-9189, [email protected], [email protected], www.gfkl.com. wwwglobalrisktechnologies.com. Featured Conference MBNA, the 5th largest credit card issuer in the U.K. and the 19th largest in Europe, has launched the MBNA Everyday Plus American Express Credit Card. NEW PAYMENTS LANDSCAPE 2015 Features include a 7.4% finance charge rate and no annual fee as well as no fees for: money transfers, balance transfers, ATM usage anywhere in the Two-Day Conference world, credit card handling, and foreign exchange transactions. Ian O’Doherty October 8-9, 2015 is CEO at MBNA, 44 (1244) 672-251, [email protected], The Sofitel London St. James, London, U.K. www.mbna.co.uk. Andy Besant is VP and Head of Global Network Partnerships, Europe at American Express, 44 (1273) 215-657, Topics include: the potential of the block chain, opportunities in Iran, the present and future role of cards, regulation, securing [email protected], www.americanexpress.com. web payments and innovation and disruptors. Speakers represent: ALPHA PAYMENTS CLOUD, provider of an omnichannel platform that links BBVA, Equity Bank, Fidor, iZettle, MasterCard, Reliance Payment risk and commerce vendors with merchants and financial institutions, has Services, Visa, and more. Cost is $1,400 industry rate and $2,495 added Paysera payments. Paysera is a Lithuanian-based payment system with standard rate. (Use code Nilson2015. Excludes any early bird more than 200,000 users. Ronan Gallagher is Chief Product Officer at Alpha rates.) Contact Caroline Hastings at Lafferty Group, Payments Cloud, 353 (1) 960-9024 x503, [email protected], 44 (203) 008-8415, [email protected]. www.alphapaymentscloud.com. Daumantas Barauskas is Head of Register at www.laffertyevents.com. Development Projects at EVP International, Developers of Paysera, 370 (618) 662-03, [email protected], www.paysera.com. 20%

4 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive 3 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Chase Freedom Mobile App from page 1... merchant categories. They redeem redemption option — the Chase already have access to a mobile their rewards via credits on Freedom mobile app, which lets app that lets them pay their credit them use cash back points to pay card bill, check account status, for purchases at 30 participating and view recent transactions and merchants. Qualitative and rewards balances. quantitative research showed Chase Freedom Mobile is an Chase that cardholders wanted app dedicated to payments. It to act spontaneously with has a second feature —­ person- their rewards. to-person (P2P) money transfers. While in the merchant’s store, The P2P transactions are an cardholders open the app to check extension of Chase’s existing Chase their cash back balance, select QuickPay service. the merchant, and then trigger Senders need only the the app to generate a barcode or recipient’s email address or phone QR code, which clerks scan in the number to initiate a transfer. checkout lane. Recipients do not need to be a If the available cash back Chase Freedom cardholder or a amount is insufficient to cover Chase deposit account customer. the entire purchase amount, the Chase is planning on additional merchant’s POS system creates a features for the Freedom split tender, and accepts payment Mobile app. monthly statements or as money by cash, check, deposited in their bank accounts. or card to cover In 2009 Chase Freedom the balance. ...lets cardholders use cash back cardholders gained access to Merchants points to make in-store purchases. Chase Ultimate Rewards, a loyalty participating program open to all Chase credit in the Chase and debit cardholders. Their cash Freedom Mobile app do not Adele Chandler is Freedom back points could be redeemed for need to be customers of Chase Marketing Director at Chase hotel, air, car rental reservations, Commerce Solutions, the 4th Card Services in Wilmington, and private label prepaid cards. largest U.S. acquirer. Delaware, (302) 282-3667, This month Chase Freedom Chase Freedom and all other [email protected], cardholders were given another credit card customers of Chase www.chase.com.

PerformLine Marketing Compliance Platform

Digital communications including search and display ads as well as speech communication by customer service agents and sales staff are potential problems for card issuers and other financial services companies if they don’t fully comply PerformLine is a seven-year-old company that with regulatory requirements including the Truth in offers a compliance platform on a software-as-a- service (SaaS) basis to help companies with all or some of their communications. The aim is to provide ...helps prevent fines and financial proper compliance monitoring while supporting settlements with regulators. aggressive marketing of profitable products. Large fines have been paid over the last four years by most top card issuers, and they have become reluctant Lending Act, the Card Act, and Unfair, Deceptive, or Abusive Acts or Practices. > see p. 6

© 2015 HSN Consultants, Inc. THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON REPORT 5 PerformLine Marketing Compliance Platform from page 5... to market some products to their credit and debit immediately. The process is more efficient and card customers. more scalable than the legacy practice of manually PerformLine helps prevent fines and financial reviewing communications, which typically covers settlements with regulators including the Consumer less than 10% of all activity. Financial Protection Bureau. It also protects against PerformLine use a monthly subscription revenue reimbursements to cardholders. model. It has clients in the U.S., Canada, and the U.K. Clients including Barclaycard US receive a Alex Baydin is CEO at PerformLine in Morristown, dashboard they can use to monitor the actions of their New Jersey, (973) 590-2305, [email protected], outside agents and their own marketing efforts. When www.performline.com. messages are not in compliance, they can be corrected

Rewards/Loyalty Platform for Europe’s SMBs from page 1 Merchant customers of Credit have earned. Cardholders can view itself from companies competing Agricole in the Provence area of their accounts online and generate mainly on the lowest price for card France have beta tested Izicap’s a voucher for in-store use. processing. Valitor’s data center Merchants are in Iceland processed 74.8 million given a portal to see all card transactions last year. It of their transactions. ranks 67th among merchant card Consulting services acquirers in Europe. from Izicap help Markadis has applied for a merchants set license from the U.K.’s Financial platform over the last six months. up loyalty programs and Conduct Authority to become a Izicap says that the test has develop marketing campaigns. payment institution. Once the demonstrated proof of concept Izicap’s platform analyzes card license is granted, Markadis and that acquirers and their transaction data during nightly will be able to handle small and merchants have valid benchmarks batch processing. midtier merchant card receivables for returns on their investments. Izicap expects to deliver its in the U.K. and Ireland. It sees Markadis, currently an ISO in platform to acquirers in Portugal revenue opportunities associated the U.K. and Ireland, has licensed and other European markets in with providing marketing Izicap’s platform and will begin 2016, as well as to a partner in programs to local merchants. marketing it on a white-label basis Brazil. The to its merchants in October as a start-up has Cardholders view accounts online and service called Mii-Promo. Credit raised $1.0 generate vouchers for in-store use. Agricole merchants continue million in to use it under Izicap’s Twiing equity and service mark. debt financing since 2013. It promises to help them grow Merchant rewards including Miguel Mateus is CEO at Izicap their businesses in the 3% range cash back and loyalty programs in Nice, France, 55 (11) 9713- annually while offering card can be tied to a payment card 05967, [email protected], processing with no hidden fees. and delivered through QR codes www.izicap.com. Markadis also offers merchants an on smartphones, through paper Markadis, a joint venture opportunity to avoid certain PCI vouchers, or directly on POS between Valitor, an Iceland- DSS compliance costs. terminals. Cardholder spending based acquirer, and Witstock, a Adrian Cannon is Managing triggers merchant communication consulting service specializing Director at Markadis Ltd. in through automated email or SMS in cards and payments, opened Heathrow, U.K., 44 (208) 705-0763, text messages. The Izicap platform for business in 2014. It leverages [email protected], handles all account management Valitor’s processing platform for www.markadis.com. for cardholders such as the acquiring services and sees Mii- amount of cash back rewards they Promo as a way to differentiate

6 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Cards in the Middle East and Africa from page 1... from these global general purpose Diners Club’s share fell 14 basis million, up 9.5%. MasterCard and card brands increased 16.8% to points to 1.08%. Visa cards accounted for 99.19%. $286.71 billion. Cash volume of Purchase transactions Visa added 4.4 million cards $499.60 billion accounted for generated by these cards but its market share fell to 58.12% from 61.43%. MasterCard Purchase Transactions on Cards added 14.5 million cards and its Issued in Middle East/Africa 2014 vs. 2019 market share grew to 41.08% Market from 37.72%. Share > Brand 2014 (Bil.) 2019 (Bil.) Increase 1> Visa cards issued in the Middle Visa 2.05 3.91 91% East and Africa region accounted

2018 2019 for 4.48% of all Visa cards in 1> MasterCard 1.50 3.20 113% circulation worldwide at the 44 41 2013 2014 57 54 Amex 0.05 0.07 40% end of 2014, down from 4.59% in 2013. The region accounted Diners 0.02 0.03 21% for 2.38% of Visa’s worldwide 3.62 7.21 99% purchase volume in 2014, up ©2015 The Nilson Report from 2.22% in 2013, and 1.81% 61 of its purchase transactions, up 63.54% of total volume in 2014, reached 3.62 billion, 132%up 18.3%. from 1.73%. down from 63.71%61% in 2013. MasterCard and Visa cards MasterCard cards issued Both MasterCard and Visa had generated 3.55 billion purchase in the Middle East and Africa double-digit growth in purchase transactions in 2014, equal to region accounted for 6.24% of all volume in 2014. Visa’s purchase 97.95% of the total volume grew by $25.25 billion in the Middle East Both MasterCard and Visa had or 18.5% over the prior year. and Africa region double-digit growth in 2014. MasterCard’s purchase volume for global cards, up grew by $15.48 billion or 15.9%. from 97.71%. American Express’s purchase Visa’s market share of purchase MasterCard cards in circulation volume grew by $0.45 billion or transactions fell to 56.52% from worldwide at the end of 2014, 5.6%, while Diners Club’s increase 58.09%. MasterCard’s share grew up from 5.95% in 2013. The was $0.10 billion or 3.4%. to 41.43% from 39.62%. Amex’s region accounted for 3.44% of Visa’s share of purchase share declined to 1.39% from MasterCard’s worldwide purchase volume grew 78 basis points to 1.55%. Diners Club’s share of volume, up from 3.33%, and 56.55%. MasterCard’s market 0.65% was down from 0.74%. 2.91% of its purchase transactions, share declined 32 basis points to Global brand credit, debit, up from 2.67%. 39.37%. American Express’s share and prepaid cards in circulation dropped 32 basis points to 3.00%. at year-end 2014 totaled 218.4 Middle East/Africa General Purpose Cards 2014 vs. 2013

Volume (bil.) Transactions (mil.) Cards Brand Total Chg. Purchases Chg. Cash Chg. Total Chg. Purchases Chg. (mil.) Chg. Visa $515.62 14.6% $162.12 18.5% $353.50 12.9% 4,241.3 12.9% 2,047.5 15.1% 126.9 3.6% MasterCard $258.75 20.4% $112.89 15.9% $145.86 24.0% 2,198.1 21.7% 1,500.8 23.7% 89.7 19.2% Amer. Express $8.78 5.3% $8.59 5.6% $0.18 –7.3% 52.1 6.3% 50.4 6.4% 1.3 4.8% Diners Club $3.16 3.4% $3.10 3.4% $0.06 3.5% 24.0 4.3% 23.7 4.5% 0.4 0.6% Totals $786.32 16.3% $286.71 16.8% $499.60 16.0% 6,515.5 15.7% 3,622.3 18.3% 218.4 9.5% Includes all general purpose consumer and commercial credit, debit, and prepaid cards. Currency fi gures are in U.S. dollars. Change fi gures are based on local currency. Some prior year fi gures have been restated. Includes Israel. Visa includes Electron. MasterCard excludes Maestro & Cirrus. © 2015 The Nilson Report

© 2015 HSN Consultants, Inc. THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON REPORT 7 Mobile Payments in Austria from page 1... Six Payment Services. PSA has developed a SIM- between the banks and mobile network operators A1, based NFC mobile payment application called T-Mobile Austria, and Drei Austria. Bankomatkarte Mobile in partnership with Vienna- Bankomatkarte Mobile can be used in any country where PayPass contactless payments are accepted. There are more than 250,000 PayPass outlets worldwide, including an estimated 35,000 in Austria. Consumers will be able to use based technology Bankomatkarte Mobile for online purchases if they company Research sign up for MasterCard SecureCode. Industrial Systems Next year Bankomatkarte Mobile will be open to Engineering (Rise). Bankomatkarte Mobile will be Visa credit and debit cards when VPay is rolled out in available to all banks and mobile network operators Austria. MasterCard credit cards will also be able to in Austria in the fourth quarter of this year. be loaded into the wallet. The Bankomatkarte Rainer Schamberger is Mobile app is available Chief Executive Officer at only for Android Virtual Maestro PayPass cards linked Payment Services Austria in handsets running to bank accounts fund transactions. Vienna, Austria, 43 (1) 7171- version 4.1 (Jelly Bean) 8100, rainer.schamberger@ or higher. Over 75% psa.at, www.psa.at. of the Austrian mobile handset market is Android- Rise provides PSA with a payment and banking based. A virtual Maestro PayPass debit card is linked transaction platform and payment transaction to a bank account to fund transactions initiated by processing software. The platform can handle the app. Maestro is a service mark of MasterCard. more than 2,000 transactions per second. Rise also Consumers will be able to order a virtual debit provides transaction processing software for national card through their bank’s website. That virtual transport ticketing in Austria. card is generated by the bank’s payment card Thomas Grechenig is Chief Executive Officer at account processor. The card account number will Research Industrial Systems Engineering in Vienna, be provisioned to the SIM over the air by PSA. It Austria, 43 (664) 6084-441080, thomas.grechenig@ uses the Rise banking service manager technology rise-world.com, www.rise-world.com. platform, and PSA is the trusted service manager

Zazoo Mobile Virtual Cards

Approximately four million (UEPS) platform. Transactions Europe and the U.S. It is looking unbanked and underbanked for banking, loans, insurance, for customers outside of social people in South Africa use cash withdrawals, payroll, and welfare payments. remittances are secured by Because there is no need fingerprint and voice biometrics. to connect to a host, one-time Grindrod Bank is the MasterCard card numbers can be instantly card issuer. created for both online and Net1 is South Africa’s largest contactless payments. It can transaction processor of social offer prepaid card managers welfare payments. Recently voice authentication to verify the it added support for similar identity of a caller and create a mobile phone-based payments products in Nigeria. Zazoo mobile card using that authentication and MasterCard branded virtual technology is offline. Virtual cards method. Because its platform payment cards from Zazoo, which are created on a phone, not at a also offers a split payment app, a manages mobile products on its remote data center. Net1 created group of friends can contribute parent company’s Net1 Universal Zazoo to take virtual prepaid to a restaurant charge or online Electronic Payment System MasterCard card technology to purchase while the merchant

8 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive receives only one consolidated payment. Zazoo also The Bancorp Bank was the issuer. Fiserv handled the sees opportunities for remittances. Receivers of account processing. money transfers could immediately make a local bill In Korea, Net1 owns KSNET, a POS terminal network linking 200,000 merchants. EasyPay in One-time-only MasterCard numbers South Africa operates on Net1’s switch. It is linked to can be used to make bill payments. more than 60,000 merchants. Recent acquisitions by Net1 include Transact24, an acquirer in Hong Kong, and OneCredit, a personal payment using a one-time-only MasterCard number loan provider in Nigeria. using the Zazoo app. Philip Belamont is Managing Director at Zazoo in In the U.S., Zazoo tested its mobile virtual London, U.K., 44 (7788) 715-999, [email protected], payment card service under the name “Pay in Private.” www.zazooltd.com.

U.S. Commercial Cards — Part 3 from page 1 Commercial card products used by last year versus American Express, 2014 and its market share of those employees of small, medium, and MasterCard, and Discover. Visa’s card products was 10.32%, down large private companies, federal, market share of commercial card from 10.47%. state, and local government spending was up from 39.41% Purchase volume of $264.73 agencies, and nonprofit in 2013. Visa’s consumer card billion from MasterCard organizations generated $988.84 purchase volume grew by 9.1% commercial card products was billion or 22.27% of the total, up in 2014, and its from 21.75% in 2013. market share of Commercial cards grew 11.5% Purchase volume on those card products vs. 8.2% for consumer cards. commercial cards grew by 11.5% was 60.59%, up last year compared to spending for from 60.08%. goods and services by cards issued Commercial card purchase up 12.2%. Its market share of to consumers, which was up 8.2%. volume of $328.05 billion for 26.77% was up from 26.60% in Visa remained the top brand American Express was up 9.6%. 2013. Consumer card purchase for commercial cards in 2014, Its commercial card market share volume grew 7.9% in 2014, and its with purchase volume growth of dropped to 33.18% from 33.74% market share of those products at 12.7% to $393.86 billion. Visa in 2013. Consumer card purchase 25.46% was down from 25.54% cards held a 39.83% market share volume at Amex was up 6.7% in the prior year. Discover commercial card purchase volume of $2.20 billion Purchase Volume increased by 1.14%. Its share on U.S. Cards* in 2014 (Bil.) dropped to 0.22% from 0.24%. * Credit, Debit Consumer card purchase volume and Prepaid at Discover grew by 0.1% in 2014, and its market share of those 81.9%

81.1% 78 80.4% 78.9% 78.2% $3,452 77.7% 34 products was 3.62%, down from $989 3.92% the prior year. 39 As a percentage of each Commercial Consumer ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 brand’s combined consumer and Visa $394 $2,091 commercial purchase volume, commercial cards generated: MasterCard $265 $879 Consumer Cards’ Declining Share 47.93% at American Express, Amex $328 $356 of Purchase Volume 23.15% at MasterCard, 15.85% at Discover $2 $125 Visa, and 1.73% at Discover.

©2015 The Nilson Report Prior issues: 1049, 1026, 1002, 979

© 2015 HSN Consultants, Inc. THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON REPORT 9 Featurespace Machine Learning Fraud Fighting from page 1... and gambling sites benefit from legacy systems only catch fraud Featurespace models create a a reduction of up to 70% in that they have already been statistical profile of every entity — false positive transactions trained to identify because they cardholder, merchant, as well as anything specified by a client such as ATMs or bank identification numbers. This permits behavioral analysis based on context within (valid business misidentified have been introduced to factors the total population of the as fraud) versus legacy, rules- previously used by fraudsters. customer database. Fraud attacks based fraud fighting systems. Issuers often become aware of can be monitored at the individual Featurespace can host its platform a new fraud scheme only after and network level. or install it onsite. It receives a cardholder an annual licensing fee. Top reports a U.K. issuers added the platform as card issuers in the U.K. have problem. a supplement to existing systems. added Featurespace’s platform Featurespace as a supplement to their existing scores every systems that fight fraud at the transaction and spots red flags Prospective clients can install a point of sale as well as in the immediately, reporting them to Featurespace model on a proof- online and mobile channels. fraud managers. of-concept basis to quantify its In addition to booking more Featurespace is privately held. benefits before deploying the sales because they reduce false It has received $8.5 million (£5.5 entire system. positive transactions, issuers million) in three rounds of venture Martina King is CEO at Featurespace benefit from protection in real funding. The company has 21 in Cambridge, U.K., 44 (122) 334- time against new kinds of fraud. customers in the U.K. including 5925, martina.king@featurespace. Featurespace can identify fraud card issuers, online and offline co.uk, www.featurespace.co.uk. from factors criminals deploy for gambling sites, and Vocalink’s the first time. By comparison, Zapp mobile service.

Merchant Litigations Update

Lawyers representing plaintiffs and defendants filed about the email exchange of documents between an arguments in U.S. District Court for the Eastern attorney representing MasterCard (Keila Ravelo) District of New York on Tuesday, September 1, 2015, and an attorney representing the merchants (Gary in favor of overturning or retaining a $7.25 billion Friedman). Ravelo was retained by MasterCard settlement of class action litigation that pitted Visa, but was not the lead counsel for MasterCard. That MasterCard, and 12 credit card issuers against U.S. firm is Paul, Weiss, Rifkind, Wharton & Garrison. merchants. The settlement was finalized more than Mr. Friedman was the lead attorney representing a year ago after a decade of legal proceedings that merchants in litigation against American Express originated with large concerning surcharging. merchants filing individual Plaintiffs and defendants disagree Plaintiffs and defendants price-fixing lawsuits on the size of his role in the case. disagree on the size of regarding interchange fees his role in the Visa/ they paid to acquirers of MasterCard case. Visa and MasterCard card payments. The cases were The documents sent by Friedman to Ravelo ultimately consolidated into a class action. concerned the Amex surcharge case and were A number of large merchants opposed the protected by court order. They should not have settlement agreement reached in 2013 because been disclosed to a MasterCard attorney. The Amex they contend it precludes any future litigation on surcharging case had received preliminary, but similar grounds. Beyond that, they now say it was not final, approval by the court. In August, Judge compromised and seek to overturn it after learning > see p. 12

10 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Global General Purpose Cards — Midyear 2015 from page 1... and services worldwide from debit cards accounted for 54.84% credit and debit card purchase January 1 to June 30, 2015, up of combined credit and debit card transactions worldwide for 19.4% over the first six months of 2014. These global brand general Purchase Transactions on Global purpose cards generated 106.56 billion purchase transactions in General Purpose Cards Midyear 2015 this period, up 15.5% over the first 44.7% Visa 65.7% half of 2014. Credit card purchase volume 29.4% MasterCard 23.9% Credit Debit in the first six months of 2015 14.3% UnionPay 10.4% 48.13 Bil. 58.43 Bil. increased 18.3% over the same 7.4% Amex period in 2014. Purchase volume 2.2% Discover/Diners on debit cards (including prepaid) 1.9% JCB grew 20.5%. When measuring combined ©2015 The Nilson Report credit and debit/prepaid purchase volume, debit cards generated payments for goods and services, the first six months of 2015. 50.39% of spending, up from up from 54.33%. Nonetheless, its share fell 49.94% for the same period in Visa remained the global to 56.20% from 58.64%. 2014. Purchase transactions on leader when measuring combined MasterCard’s share slipped to 26.39% from 26.52%. UnionPay’s share grew Global General Purpose Cards MY 2015 vs. MY 2014 to 12.18% from 9.20%. American Express declined Dollar Volume Purch. Trans. to 3.34% from 3.64%. Brand Total (bil.) Chg. Purch. (bil.) Chg. Cash (bil.) Chg. (bil.) Chg. JCB grew to 0.87% from Visa Credit $1,821.84 10.9% $1,693.00 11.9% $128.84 –0.7% 21.50 10.2% 0.83%, and Diners Club/ UnionPay Credit $1,463.67 42.3% $1,439.37 42.9% $24.30 13.5% 6.91 50.7% Discover fell to 1.01% MasterCard Credit $1,192.02 9.8% $1,098.51 10.6% $93.51 0.5% 14.15 10.4% from 1.17%. UnionPay was the global American Express Credit $507.60 6.4% $501.51 6.4% $6.09 1.3% 3.56 6.2% leader in combined credit JCB Credit $102.63 21.5% $99.82 22.2% $2.81 0.9% 0.93 21.4% and debit card purchase Discover/Diners Credit $74.30 –9.3% $69.02 –9.6% $5.28 –4.1% 1.08 –0.6% volume worldwide. Its CREDIT CARD TOTALS $5,162.06 17.3% $4,901.23 18.3% $260.83 0.9% 48.13 14.2% market share increased to UnionPay Debit $3,226.16 30.2% $2,781.66 29.9% $444.50 31.8% 6.08 55.6% 42.73% from 38.04%. Visa’s share declined Visa Debit & Prepaid $3,071.17 7.4% $1,671.63 8.8% $1,399.54 5.7% 38.39 11.0% to 34.06% from 36.85%. MasterCard Debit & Prepaid $1,011.33 15.8% $524.75 15.1% $486.58 16.6% 13.97 20.0% MasterCard’s share DEBIT CARD TOTALS $7,308.66 17.7% $4,978.04 20.5% $2,330.62 12.1% 58.43 16.6% dropped to 16.43% CREDIT & DEBIT TOTALS $12,470.71 17.5% $9,879.26 19.4% $2,591.45 10.9% 106.56 15.5% from 17.51%. American Express’s Visa Total $4,893.01 8.7% $3,364.63 10.3% $1,528.38 5.1% 59.89 10.7% share fell to 5.08% from MasterCard Total $2,203.35 12.5% $1,623.26 12.0% $580.09 13.7% 28.13 15.0% 5.69%. JCB’s share VISA & MC TOTALS $7,096.36 9.8% $4,987.89 10.9% $2,108.47 7.3% 88.02 12.0% increased to 1.01% from UnionPay Total $4,689.83 33.7% $4,221.03 34.1% $468.80 30.7% 12.98 52.9% 0.99%, and Diners Club/ Discover’s share dropped Figures are for January 1, 2015 through June 30, 2015. They include all consumer and commercial credit, debit, and prepaid cards. Currency fi gures are in U.S. dollars. Change fi gures for dollar volume refl ect a year-over-year comparison in to 0.70% from 0.92%. local currency. Visa includes the sum of Visa Europe and Visa Inc. and includes Visa, Visa Electron, and Interlink brands. MasterCard excludes Maestro and Cirrus fi gures. American Express includes fi gures for third-party issuers. JCB fi gures Prior issues: 1060, 1049, are for October 1, 2014 to March 31, 2015 and include third-party issuers. Purchase volume, cash volume, and purchase 1037, 1026 transactions are estimates. © 2015 The Nilson Report

© 2015 HSN Consultants, Inc. THE NILSON REPORT SEPTEMBER 2015 / ISSUE 1072 / THE NILSON REPORT 11 © 2015 HSN Consultants, Inc. THE NILSON REPORT All Rights Reserved. Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for any purpose is strictly prohibited and may violate the intellectual property rights of HSN Consultants, Inc. dba The Nilson Report.

Merchant Litigations Update from page 10... Nicholas Garaufis denied final approval when a decision or whether the parties need to make oral informed about the document exchange. That case arguments. A decision is likely in October. now remains open to be resettled or taken to trial. Not impacted by the Friedman/Ravelo document Objectors wanting to overturn the settlement in exchange is the Department of Justice (DOJ) lawsuit the Visa/MasterCard case filed a motion citing the versus American Express concerning steering — Friedman/Ravelo document exchange in addition Amex rules that prevent merchants from asking to their complaint about giving up the right to sue. consumers to use another card brand. The DOJ Lawyers for MasterCard, Visa, and the 12 banks prevailed in that case and American Express is responded, saying the settlement was not influenced appealing the decision. Both parties have filed by the document exchange. Objectors filed a rebuttal motions in the appellate court. to the defendants’ motion. A judge or magistrate will now decide if there is enough information to make Prior issues: 1069, 1031, 1018, 998

CashStar Private Label Prepaid from page 1... company provides digital and manufacturer Valid. CashStar software development, and it plastic prepaid card and related doesn’t provide card account plans to use some of the proceeds services to retailer and restaurant processing, it integrates with the from its Series D round to expand processors used by its clients. its software development staff. CashStar delivers digital CashStar also focuses on prepaid cards to a computer fraud prevention and risk or a smartphone. For in-store management, critical factors in purchases, customers use private label prepaid, which is a barcode that they either the riskiest transaction among print at home or use on their all card-not-present purchases. customers that own 300 brands smartphone. They can also Prepaid products are effectively in the U.S., Canada, the U.K., and use their card number at the purchases of cash. CashStar uses Australia. Its platform processes 8 merchant’s checkout page for mostly proprietary predictive currencies and handles purchases online purchases. models based on known good and from 157 countries. CashStar’s top competition fraudulent purchases of private CashStar offers its technology comes mostly platform on a software-as-a- from in-house ...processes 8 currencies and han- service (SaaS) basis. Clients use digital systems it to operate their own digital designed by dles purchases from 157 countries. and plastic card programs as retailers for well as other prepaid promotions use on card account processing label prepaid cards, supplemented and incentives. By comparison, platforms supplied by third by some third party technology companies including Blackhawk parties. The company says these and data sources. and InComm sell private label in-house systems don’t usually Ben Kaplan is CEO at CashStar prepaid cards on behalf of stay current with the latest trends in Portland, Maine, (207) 549-2222, their customers. in features and functionality. [email protected], While approximately 95% of CashStar’s core competency is www.cashstar.com. the private label prepaid card market remains tied to plastic David Robertson, Publisher cards, at CashStar 75% of all September 30, 2015 sales are digital. When customers use CashStar for plastic cards, fulfillment is handled by card

12 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive