Unlocking Mobile's Power

May/June 2017 www.isoandagent.com

Unlocking mobile’s power Once viewed as a threat to the ISO business model, mobile POS technology is now embraced as a key element of any sales strategy

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001_ISO05062017 1 4/13/2017 4:26:25 PM Inside 05/06.2017 Cover Story

Adapting to the Mobile Threat 18 Mobile was once seen as a threat to the traditional business model of ISOs and Agents. But the acquiring industry was quick to address the pain points that newcomers missed.

ISOs Loyalty Security 06 | Keeping with Merchant 16 | Harland Clarke Gives 44 | The (in)Security of Con- Demand RetailMeNot a New Role nected Tech As merchants warm up to the idea of The latest combination of a legacy As more companies express interest implementing new technology, it's up payment company and a digital new- in conducting business over connect- to ISOs and agents to be ready for the comer sees Harland Clarke making ed devices, more opportunities arise opportunity. a bid to take over RetailMeNot, the to provide security for the Internet of internet's coupon hub. Things. Security 08 | Cybercrime Comes to Regulation Security the Terminal 26 | Did the Durbin Rule Help 46 | Merchants Remain Di- Credit Cards? vided on 3D-Secure Fraudsters are always looking for a new way to compromise payment The banks that often complain about 3D-Secure is ready for its second data. The point of sale terminal is the the Durbin Amendment's effect on fee wind, and many merchants are willing latest link in the payment chain to at- income may be profiting nicely on the to give it a new chance. But some still tract hackers' attention. increased use of credit cards. want to see more from the revised online security system. ISOs Loyalty 12 | Can Technology Be the 40 | Plenti Gets Its First Gro- Mobile Savior of ISOs? cery Store 50 | Amazon Cash's Secret Tech startups once sought to disrupt The addition of Southeastern Grocers Weapon Is Apple's Wallet ISOs and other traditional companies LLC to the multi-merchant loyalty Amazon Cash won't be the first in the payments ecosystem. But these program signals a new phase for the example of a cash-based e-commerce same disruptions are now seen as venture, and perhaps for the concept payment system. But it is looking vital to ISOs' future. as a whole. to be one of the most streamlined, thanks in part to its integration with Apple's Wallet app.

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003_ISO05062017 3 4/13/2017 4:26:31 PM Daniel Wolfe Editor’s Letter Editor

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EDITOR Daniel Wolfe 212-803-8397 [email protected] CONTRIBUTING EDITOR David Heun ART DIRECTOR Monica Pizzi GROUP EDITORIAL DIRECTOR, BANKING Richard Melville The Mobile Movement [email protected] VP, RESEARCH MOBILE COMMERCE IS ENTERING A NEW PHASE. IT'S NO LONGER Dana Jackson surprising when a restaurant allows people to browse a menu or place or- NATIONAL SALES MANAGER, ADVERTISING Hope Lerman ders before they arrive, and this innovation is spreading to other merchant 312-475-0649 categories. [email protected] VP, CONTENT OPERATIONS AND CREATIVE SERVICES Not long ago, mobile technology was seen as a threat to the traditional Paul Vogel business models of ISOs and DIRECTOR OF CREATIVE OPERATIONS Michael Chu agents, cutting them out of the process of bringing payment acceptance DIRECTOR OF CONTENT OPERATIONS to merchants. But merchants’ needs are getting more complex, creating Theresa Hambel MARKETING MANAGER opportunities to experiment with new systems that place more emphasis on Deborah Vanderlinder loyalty and omnichannel commerce. ISOs and agents can guide merchants FULFILLMENT MANAGER through this growing array of options, deepening their involvement with Christopher Onyekaba CUSTOMER SERVICE clients. 212-803-8500 This movement also emphasises the importance of experience and relation- [email protected] ships, creating unlikely combinations of legacy companies and newcomers. The recently announced acquisition of digital deals provider RetailMeNot by Harland Clarke — a brand still known to many consumers as a supplier of paper checks — demonstrates how a company with deep roots can benefit by working with a younger entity that brings in a perspective from outside the payments market. CHIEF EXECUTIVE OFFICER Douglas J. Manoni CHIEF FINANCIAL OFFICER Michael P. Caruso

CHIEF REVENUE OFFICER Marianne Collins

EVP & CHIEF CONTENT OFFICER David Longobardi

CHIEF PRODUCT & AUDIENCE Minna Rhee OFFICER

CHIEF MARKETING OFFICER Matthew Yorke

SVP, CONFERENCES & EVENTS John DelMauro

SVP, HUMAN RESOURCES Ying Wong

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

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004_ISO050617 4 4/17/2017 5:43:33 PM 005_ISO05062017 5 4/13/2017 5:54:48 PM ISOS RETAIL

a space within a mall setting, but also have a small station in the communal areas of that mall, she added. One hand feeds the other in payments and retail settings these days, making Keeping with Merchant Demand it important for merchants to be able Merchants are warming up to the idea of overhauling their technology to better integrate to offer customers the ability to order marketing and sales. It's up to acquirers to tap into this demand. BY DAVID HEUN products at any location. “Having this level of service greatly improves customer loyalty, a factor that is very important in today’s retail ecosystem,” said Jeff Scott, CEO of Infinite Peripherals, a mobile solutions provider. t’s difficult for acquirers to have With those services in place, retailers the proper payments technology also can use their locations as shipping available when merchant interest points, giving customers the option for peaks. This is even more difficult same-day delivery or in-store pickup, as efforts such as Smart Cities and Scott said. IInternet of Things initiatives overwhelm As such, the current trend in om- retailers with options. nichannel and mobile commerce essen- Retailers seeking ways to engage tially puts to rest the notion that retailers with consumers are revamping their need to align themselves with a single stores and and further linking the sales mobile wallet or other emerging pay- experience with online, mobile and ment type. Rather, acquirers are taking loyalty offerings. It’s all a greenfield the view that merchants simply need to for acquirers — if they are prepared be able to accept all forms of payments, to serve it. from EMV to NFC and beyond. “Time to market is crucial, we are “Accepting all payment methods is right at the cusp of where that turn an integral component to the omnichan- is happening,” said Zavida Mangaru, nel experience,” Scott added. “But the head of products at Total Merchant mobile wallet could make this more Services. “Merchants are seeing that convenient and secure for both the they can replicate their messages in customer and retail stores.” many places through omnichannel, For now, ISOs and acquirers need rather than having one big footprint to concentrate on the online channel in one place.” in terms of being able to accept various Merchants are increasingly aware payment types, said Richard Oglesby, of, and interested in, technology that president of AZ Payments Group and provides various touchpoints with con- a senior analyst at Double Diamond sumers, Mangaru said. Payments Research. “That’s what will drive consumer “There still isn’t a lot demand from adoption,” Mangaru added. “The more consumers to pay in-store with a wallet places I, as a consumer, can use the ªMerchants are seeing that they can replicate their messages in many places through omnichannel, solution,” he added. “When merchants advanced technology, the more likely rather than having one big footprint,º said Zavida Mangaru, head of products at Total Merchant Services don’t accept in-store wallets, there aren’t I am to adopt it.” nichannel environment for merchants merchant to operate in a stable environ- any major drawbacks.” Woodland Hills, Calif.-based Total through application programming in- ment, like a store, but also use more A mobile wallet becomes a bigger fac- Merchant Services wants to grab a terfaces and software development kits. mobile options within the stores or res- tor in e-commerce because consumers piece of that pie, expanding its Groovv “We recognize the shift that is hap- taurants, or on the road,” Mangaru said. can easily switch from one merchant to integrated payments POS platform this pening in retail and the desire for a Offering the proper omnichannel another when shopping online, Oglesby week for developers to include an om- mixed-use environment that allows a technology allows a merchant to have said. “The merchant that provides the

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006_ISO050617 6 4/17/2017 5:32:55 PM a space within a mall setting, but also most seamless experience from end-to- Ingenico ePayments is preparing to have a small station in the communal end is the one that will earn the sale.” make the system available at the chain’s areas of that mall, she added. But an acquirer’s timing for all of this restaurants throughout Europe in the One hand feeds the other in payments isn’t just dumb luck. They have to be coming months. and retail settings these days, making keenly aware of their merchants’ taste in The system accepts multiple cur- Keeping with Merchant Demand it important for merchants to be able technology and willingness to change. rencies and payment types, as well as Merchants are warming up to the idea of overhauling their technology to better integrate to offer customers the ability to order “It’s also a matter of being able to language options. In addition, Five Guys marketing and sales. It's up to acquirers to tap into this demand. BY DAVID HEUN products at any location. expand on existing merchant relation- has been able to use the ePayments “Having this level of service greatly ships,” Oglesby said. gateway with its chosen local acquirers. improves customer loyalty, a factor that If an ISO or acquirer has a portfolio Ingenico ePayments has spent much is very important in today’s retail eco- of small restaurants, and they begin of the past year building up its merchant system,” said Jeff Scott, CEO of Infinite adding order-ahead capabilities, the acquirer network to help expand its Peripherals, a mobile solutions provider. provider “better have an API avail- omnichannel vision for merchants. With those services in place, retailers able so that their developers can route While technology such as mobile also can use their locations as shipping the order-ahead transactions to you,” ordering is on a fast track, merchants points, giving customers the option for Oglesby added. may still show some reluctance to spend same-day delivery or in-store pickup, Otherwise, the failure to do so gives on upgrades. Scott said. another acquirer a foot in the door. “So “With many retailers so invested in As such, the current trend in om- it’s not always a matter of winning the legacy systems, it becomes an immense nichannel and mobile commerce essen- developer, it could just be a matter of challenge to reverse engineer them,” tially puts to rest the notion that retailers keeping the merchant,” he said. Infinite Peripheral’s Scott said. “Rather need to align themselves with a single There is definitely an appetite for than starting out fresh and throwing mobile wallet or other emerging pay- new systems such as mobile ordering. everything out, retailers should focus ment type. Rather, acquirers are taking For example, after launching a mobile on adapting their legacy systems with the view that merchants simply need to pre-order and pre-pay app at Five Guys mPOS technology and make sure both be able to accept all forms of payments, burger locationsslp_ad_2nd-edition.ai in Paris 4/23/2013 and Madrid, 6:23:18 PM systems are integrated properly.” from EMV to NFC and beyond. “Accepting all payment methods is an integral component to the omnichannel experience,” Scott added. “But the mobile wallet could make this more Managing a Consumer convenient and secure for both the Lending Business 2ND EDITION customer and retail stores.” For now, ISOs and acquirers need C WHAT THEY ARE SAYING to concentrate on the online channel in terms of being able to accept variousM “A comprehensive tool kit and payment types, said Richard Oglesby,Y management guide for making

president of AZ Payments Group andCM consumer loans.” a senior analyst at Double Diamond MY “Entry level and seasoned Payments Research. veterans will ﬁnd this book well “There still isn’t a lot demand fromCY worth reading.” consumers to pay in-store with a walletCMY ªMerchants are seeing that they can replicate their messages in many places through omnichannel, solution,” he added. “When merchantsK “The book translates technical rather than having one big footprint,º said Zavida Mangaru, head of products at Total Merchant Services don’t accept in-store wallets, there aren’t material into readable language.” merchant to operate in a stable environ- any major drawbacks.” ment, like a store, but also use more A mobile wallet becomes a bigger fac- mobile options within the stores or res- tor in e-commerce because consumers $75.00 taurants, or on the road,” Mangaru said. can easily switch from one merchant to For information or to order: Offering the proper omnichannel another when shopping online, Oglesby Visit our website, www.solomon-lawrence.com, or call 212.866.2395 technology allows a merchant to have said. “The merchant that provides the

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007_ISO050617 7 4/17/2017 5:32:56 PM SECURITY POINT OF SALE

Cybercrime at the Terminal Fraudsters are always looking for the weakest link, wherever it happens to reside in the payments ecosystem. BY DAVID HEUN

alicious hackers tend to Heartland Payment Systems, Global network signals another shift in fraud- swarm around indus- Payments, RBS WorldPay and more ster behavior. tries they perceive as disclosed breaches dating back to 2009 “The hackers are not going after vulnerable, and termi- — and then attention shifted to retail- retailers as much, but they are going nal makers are the lat- ers with Target’s widely publicized after the POS vendors,” said Stephen Mest to find themselves in the crosshairs. incident in 2013. Boyer, chief technology officer, for Years ago, payment processors A recent report that Verifone began BitSight Technologies, which measures seemed to be a favorite target — investigating a breach of its internal acyber security performance.

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1 The Strawhecker Group Mini Report; includes merchants with between $500-$500K in annual volume.

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Most recent research from Cam- But the incidents continue. portunity,” said Julie Conroy, research bridge, Mass.-based BitSight indicates Last week, the upscale Cleveland- director and fraud expert with Boston- that one in four data breaches involv- based Select Restaurants Inc. chain had based Aite Group. “When they find an ing payment card data have the POS its customers’ payment data exposed open window, they intensively attack it, terminal or network as the source of through what was believed to stem knowing they have a limited time before the compromise. It’s an indication that from an attack on the POS provider that avenue of compromise is sealed.” criminals have switched their past focus 24X7 Hospitality Technology. Again, The payments industry is all too on payment processors and retailers and the culprit was a remote access com- familiar with the way fraudsters focus are finding the companies that provide promise, according to data security on a particular vertical whenever they equipment to be easier targets. expert Brian Krebs. believe they have found a weakness. In addition to payment card data, It’s worth noting that the Verifone “The hotel and restaurant POS sys- hackers inside a POS provider’s network incident, which Krebs covered, affected tems that were compromised in multiple can find human resources and employee its internal network and did not affect events in 2015 and 2016 are a good information, e-mail lists, website creden- its payments service network. The example, often taking advantage of the tials, and details about other services Verifone incident also illustrates what fact that the user never reset the default the company may provide, Boyer said. may become more common for POS password,” Conroy added. “This is really important for the in- vendors in quickly explaining to clients Possibly even more alarming, and dustry to understand because the hacker and media what happened. further down the supply chain, Conroy is thinking all he has to do is go after Information security teams at Veri- said instances were confirmed last year a POS vendor and then get into their fone “identified evidence of this very in which mobile devices being shipped hundreds of thousands of endpoints,” limited cyber intrusion into our cor- out of China had malware pre-loaded. Boyer said. “Get the passwords for porate network in January of 2017,” The bigger technology players are remote management and you get into a Verifone said. While saying it was in not immune. network to exploit not just one retailer, immediate contact with the card brands Late in 2016, Oracle’s Micros POS but maybe hundreds and thousands that and its clients to explain the breach, unit suffered a data breach, and the red the company services.” Verifone also sought to minimize fears flags began going up in terms of POS It’s also why the retailer may get the in saying there had been “no adverse vendors reinforcing business strategies immediate headlines when a breach effects or misuse of any data” resulting with an emphasis on security. occurs, but the source of the breach is from this incident. “The retailers do as much as they increasingly becoming the POS provider, There are other incidents, such as can to lock down their own systems, but not an oversight on the retailer’s part. three years ago when more than 200 the people who do the service to these Verizon’s 2016 data breach investiga- Jimmy John’s restaurants were breached endpoints are getting compromised,” tion report warned that the new trend of through remotely planted malware. The BitSight’s Boyer said. “And then the attacks against POS vendors was picking restaurant discovered the problem when retailer is compromised as a result. It’s up steam, citing 97% of POS breaches POS manufacturer Signature Systems a really hard problem.” featuring stolen credentials came about Inc. informed its clients that the hackers No one had a magic formula in hand to when a hacker used legitimate “partner” used compromised terminal passwords predict and warn the payments industry access to enter a network. to plant the malware. a few years ago that the POS vendors “This year continued the trend of With that sort of success, hackers would be the next in line of a hackers’ the criminal sprees in our data being have quickly placed attacks on payments pecking order that started with pro- associated with attacks against POS supply chains, with the goal of obtain- cessors like Heartland and continued vendors, followed by using their access ing remote management passwords with major retailers like Target and into the customer database,” Verizon and codes, at the top of their target list. Home Depot. said in its report. To combat that, Verizon Indeed, hackers have been licking “The attackers move quickly from encouraged merchants to make sure their chops over the prospect of getting one weak spot to the next weak spot,” their POS vendor had a second access into terminal vendors’ inner sanctums Boyer said. factor beyond a password; something for many years. “To be thinking years ago that you like a hardware token or mobile app, as “In general, fraudsters will push were probably the next target, that’s a well as a system for monitoring login and probe at the financial services lot more foresight than a lot of these activity. value chain, looking for windows of op- companies have.”

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011_ISO05062017 11 4/13/2017 4:26:48 PM ISOS DISRUPTION

Can Technology Save ISOs? The technology that once threatened the ISO business model is turning out to be its savior. BY DAVID HEUN

s digital and mobile capabilities have taken hold on payments and data security, acquirers and independent sales orga- nizationsA have needed to quickly ramp up their tech knowledge. At first blush, some seven years ago, the acquiring and ISO community may have looked more like a deer in the headlights than an eager and willing participant in technology that would essentially change their successful and relatively comfortable business models. “We certainly talked about current events in the market, and for a couple of years there was a pretty grave concern growing around our futures,” said Marc Castrechini, vice president of product management at Boston-based Cayan, formerly Merchant Warehouse. “Some of it was that some of the industry was ripe for consolidation, but mostly it was about keeping up with the pace of evolution and change.” ªFor a couple of years there was a pretty grave concern growing around our futures,º said Marc Fast forward to 2017 and many of Castrechini, vice president of product management at Cayan. the organizations wondering about lies in the fact that technology has cured Real-time payments and even a same- whether they had a place in the new headaches that ISOs battled for years. day Automated Clearing House option payments landscape have instead found The merchant underwriting and were only dreams in the past. Technol- that technology has been a savior on boarding process sometimes took ogy makes that all possible now. many fronts — from better payments weeks. Now, there’s technology to do Poor communication tools, to the experiences, to enhanced customer that in real-time. The ability to pro- point where a merchant might never service and faster merchant registration. vide all payment method options for a find the salesperson or customer service “Ultimately, we were saying it doesn’t merchant could mean time-consuming rep to immediately solve an issue, did seem as bad as we thought it would be,” complexities. Now, there’s technology nothing to help retention. Technology Castrechini said. in place to provide all of that, in some now provides 24/7 customer service help The reasons for the sudden optimism cases from the same provider. and online chat rooms to solve issues.

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013_ISO05062017 13 4/13/2017 4:26:50 PM ISOS DISRUPTION

There are others changes, depending “Anything that streamlines the paper- on the merchant and vertical, but the work or improves the boarding process message is the same: The technology and results in less rework or chasing that had the potential to destroy the paper, that’s more time to spend on livelihood of an ISO has very likely the next sale,” said McNulty, who also saved the industry. As such, far more serves on the linked2pay board. ISOs are creating opportunities for all Another piece of the technology types of sales and customer retention puzzle is retention. value-adds that help merchants do more “If a merchant gets the info they need than just plug in off-the-shelf terminals. in the easiest way possible, the ISO is “The ISO doesn’t want to go away and going to retain that merchant and it the small community bank doesn’t want will result in more sales and keeping to go away,” said Richard McShirley, the sales you make,” McNulty said. “It chief marketing officer for Oxnard, grows your organization and that’s true Calif.-based linked2pay, which has whether it is an ISO or a bank; basically been scoring good marks with ISOs whoever is out touching the customer.” needing a one-stop shop for all of these New technology can not only help technological advances. “It’s about ISOs resolve issues with equipment automation for the banks and the ISOs ISOs can be providers of automation services, problems easier, it also provides an op- said Richard McShirley, CMO of linked2pay. to provide these services and cut the tion that cuts down on the maintenance cost of delivery.” another day to do it or get a signature,” needs of POS hardware through the said Jim Malcolm, president of sales at Veritas Payment Advisors in Oklahoma City. “That’s important to me because I have customers all over the U.S., and now I can get things done remotely and train them right there.” In the ISO game, wasted time is wasted money. “You are losing money if you are waiting a week to start processing payments,” Malcolm said. “If I can get them approved that day, I can start making money that day.” It explains why ISOs were so con- cerned when disruptors or third-party providers sought to streamline the sales process by removing ISOs from it. But many of those innovations could Technology improves both sales and retention, be applied to the ISOs’ own business ªI can get a merchant instantly approved now,º said Chris McNulty, president of Wimsett&Co. practices. said Jim Malcolm, president of sales at Veritas. “ISOs are sales organizations, so Acquirers and ISOs that have fully from their mentality, any time you can use of cloud-based virtual terminals. embraced new technology know it has free up a sales person time to sell more, “Virtual terminals are really big,” resulted in an increase in their most the more successful the organization Malcolm said. “If someone has a ques- valuable commodity: time. will be,” said Chris McNulty, president tion about this terminal, you can just “A big benefit for me is when I go for Louisville, Ky.-based Wimsett & resolve it through the chat button.” to a town two hours away, I can get a Company, an acquiring and payments Technology has also narrowed the merchant instantly approved now while consultant for business owners, banks gap between companies like Cayan and I am there, and won’t have to go back and ISOs. the smaller linked2pay.

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leading network will be the perfect complement to our omni-channel suite of services,” Serot said in an email. “The massive digital audience provided by RetailMeNot will serve to create RetailMeNot Gets a New Role the premier savings destination for As part of Harland Clarke Holdings, internet coupon hub RetailMeNot will play a key role in consumers.” providing a link between marketing and sales. BY JOHN ADAMS Harland Clarke can benefit from the deal in a couple of ways. First, it can respond to the pressure that’s on all legacy payment companies, ranging from card networks to processors to terminal manufacturers, to diversify arland Clarke’s acquisi- in merchant services. Harland Clarke tion of RetailMeNot may Holdings’ corporate roster already signal a flood of similar includes Valassis, a marketing data deals, as merchant ser- company; and RetailMeNot provides vice providers scramble real-time deals that can link promotions Hto improve location-based marketing beyond its current state. The impetus for such moves is competition from e-commerce, where heavy hitters like Amazon have streamlined Looking for a competitive advantage the purchase process to the point where to oﬀer your POS ISVs and merchants? the payment is nearly invisible — and a sharp contrast to the brick-and-mortar world where the EMV migration has drawn out the payment process in the Give them EMV Quick Chip! Quick Chip reduces transaction time from 15 seconds to 2 seconds or less. Payworks enables ISOs & eyes of many shoppers. VARs to have access to next generation payment gateway technology with the added bonus of EMV Quick Chip already integrated. But merchants have also been burned in the past by digital payment and loy- FASTER INTEGRATION TECHNOLOGY alty platforms that over-promised their benefits or even clashed with retailers’ WHY CHOOSE PAYWORKS? Payworks has taken the preferred payment and loyalty platforms. SHORTER TIME TO ROI RetailMeNot, a product of the digital complication out of card acceptance. Our world, can address this pain point. industry leading gateway technology can be used with any LATEST CARD ACCEPTANCE TECHNOLOGY “Harland Clarke is trying to transfer and a sale through a digital trail can which offers a mobile app that uses Point of Sale system and is the perfect choice for ISOs & form from a transaction company to a command a cut of the purchase that’s geolocation and notifications to tell data company, which is especially im- larger than interchange, he said. “It’s shoppers they are near a location with VARs needing a dynamic white-label solution. TSYS & EMV ACCEPTANCE FROM START WITH NO ADDED SETUP

portant when you consider its roots are about attribution.” a discount offer. First Data ISOs & VARs, get in touch to find out more about in paper checks,” said Richard Crone, a Crone predicts other traditional pay- By adding RetailMeNot, Harland WHITE-LABEL SOLUTION AVAILABLE payments consultant. “This gives Har- ment companies will buy technology Clarke Holdings will substantially in- becoming a Payworks partner. land Clarke a rich offer inventory, but companies to provide marketing and crease its digital presence and gain a INTEGRATE ONCE, SELECT FROM MULTIPLE that inventory only generates revenue sales analysis. While it’s important direct-to-consumer relationship with the PROCESSORS GLOBALLY if you can prove a new sale … The real for retailers to increase foot traffic in RetailMeNot brand, as well as adding attraction for Harland Clarke and the their stores, it is more important that access to new channels and products for electronic offers industry in general is the people that come into the stores its clients, said Debbie Serot, senior vice the purchase verification.” actually buy something, he said. president of corporate communications Contact us today to learn more about Payworks! A company that can demonstrate the Harland Clarke will spend an equity for Harland Clarke Holdings. Michael Doron | [email protected] | (212) 457-1776 | www.payworks.com link between a coupon, ad or special of- value of $630 million for RetailMeNot, “RetailMeNot’s innovative market

16 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 17

016_ISO050617 16 4/17/2017 5:46:45 PM leading network will be the perfect to sales at the merchant. And given the decline of traditional complement to our omni-channel suite It also enables Harland Clarke to fight retail, stores may be looking for any of services,” Serot said in an email. against the encroachment of competitors advantage they can get. “The massive digital audience provided that match omnichannel retail market- “It is proven that certain merchant by RetailMeNot will serve to create ing to sales, such as InstreamGlobal types can increase shops and average RetailMeNot Gets a New Role the premier savings destination for and Catalina. Other companies are ticket using incentives,” said Tim Sloane, As part of Harland Clarke Holdings, internet coupon hub RetailMeNot will play a key role in consumers.” pursuing the market from the mobile vice president of payments innovation at providing a link between marketing and sales. BY JOHN ADAMS Harland Clarke can benefit from the shopping side, such as Shopkick and Mercator, adding CVS and Starbucks are deal in a couple of ways. First, it can Foursquare. among the retailers that have benefited respond to the pressure that’s on all These companies are luring mer- from this process. legacy payment companies, ranging chants at a time when consumers are “A critical factor for success is ease from card networks to processors to warming up to mobile-delivered loyalty of use and high value for the consumer, terminal manufacturers, to diversify and marketing programs. Last month, which includes offers that are relevant,” in merchant services. Harland Clarke mobile consultant Vibes reported nearly Slone said. Holdings’ corporate roster already three quarters of consumers have a more “This is not easy for any provider to includes Valassis, a marketing data positive perception of a brand because implement and the more parties that company; and RetailMeNot provides it delivered a loyalty program through are in the value chain, the harder it is real-time deals that can link promotions a mobile app. to succeed.”

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16 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 17

017_ISO050617 17 4/17/2017 5:46:46 PM How acquirers are adapting to the mobile threat

AS TRENDS IN PAYMENTS TECHNOLOGY take hold or taper off, it’s safe to say that one is firmly entrenched: The shift to mobile and integrated point of sale devices. Square kicked off the mobile POS trend about seven years ago by targeting micro merchants with a card- swiping dongle attached to a smartphone, a model that by today’s standards seems much more bare-bones. But Square’s real influence wasn’t its technology; it was its sales model, which cut out independent sales organizations and agents in favor of selling payment technology through convenience stores. Other companies iterated on this model. Groupon, for example, chose to use its internal sales force to sell its Breadcrumb POS devices rather than partner with ISOs. The implication was obvious: As more merchants favored mobile devices, fewer would see a need to work with an ISO. Traditional acquirers and terminal makers responded to this threat by looking ahead, envisioning a market where off-the-shelf card readers would no longer satisfy small-business owners. That vision is becoming a reality.

Image from Gettyimages.com

18 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 19

018_ISO050617 18 4/17/17 4:00 PM How acquirers are adapting to the mobile threat

AS TRENDS IN PAYMENTS TECHNOLOGY take hold or taper off, it’s safe to say that one is firmly Traditional acquirers and entrenched: The shift to mobile and integrated point of sale devices. terminal makers saw mobile Square kicked off the mobile POS trend about seven payments as a threat to years ago by targeting micro merchants with a card- swiping dongle attached to a smartphone, a model that their business model. They by today’s standards seems much more bare-bones. responded to this threat by But Square’s real influence wasn’t its technology; it was its sales model, which cut out independent sales looking ahead, hoping to organizations and agents in favor of selling payment address the pain points that technology through convenience stores. Other companies iterated on this model. Groupon, the newcomers overlooked. for example, chose to use its internal sales force to sell its Breadcrumb POS devices rather than partner with ISOs. The implication was obvious: As more BY DAVID HEUN merchants favored mobile devices, fewer would see a need to work with an ISO. Traditional acquirers and terminal makers responded to this threat by looking ahead, envisioning a market where off-the-shelf card readers would no longer satisfy small-business owners. That vision is becoming a reality.

Image from Gettyimages.com

18 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 19

019_ISO050617 19 4/17/17 4:00 PM MOBILE DISRUPTION

In 2017, merchants are demanding NCR cash registers or standard tabletop and 40% for the larger terminals and more robust technology, providing an- legacy terminals from IBM, Verifone, retailers. other opening for terminal makers and Ingenico or Hypercom [Verifone ac- The trend has really taken hold in ISOs to defend and reclaim their turf. quired Hypercom in 2011 and sold its the last couple of years, with more Paul Galant, CEO of terminal manufac- U.S. assets to Ingenico]. mobile POS providers entering the turer Verifone, put it this way during The turnover in terminals was ac- field, Holt said. the company’s first-quarter earnings celerated with the EMV liability shift “From our perspective, in 2015, we call: “Next generation devices are the in the U.S. in 2015. were shipping 1.3 million terminals in company’s future, and those devices “It’s a reflection of how payments traditional form factors,” he added. “The will have significant need in the North have evolved from being a sales driven customers still wanted reliability and American market.” industry to a technology driven indus- security, which is always top of mind.” While acknowledging that First try,” Stuttard added. But as iPad-based POS systems Data with its Clover series of mobile attracted more merchants, the lines terminals and Square with its readers Shift in sales between the small and large clients’ and tablet-based POS stations “have Even with enticing developments in needs became more blurred and the done a phenomenal job of creating a new technology, old habits are hard to break. number of mobile devices sold has category,” Galant echoes the thoughts of “Acquirers are still selling the stan- risen, Holt said. the traditional POS providers in making dard tabletop models because they It was becoming increasingly clear it clear they never had any intention of know that equipment works, and many that a terminal able to add software for letting this particular trend fly by them. of them are selling the same equipment services above and beyond payment “This is a category with global impli- they have for years,” said Paul Martaus, acceptance was finding a good number cations,” Galant said. “And Verifone’s a merchant acquirer consultant and of willing buyers. position in this space is that we are a industry researcher. NCR introduced its NCR Silver mo- scale player and we will be using that Sometimes technology stubs its own bile- and cloud-based POS during this scale to really accelerate the third-party toe and slows down a process. Many transition, falling into a marketplace development community interaction with our platform and devices.” “A pretty big segment of acquirers is going to the A technology driven industry iPad-based devices.” The common definition of a “mobile -Paul Martaus, consultant and industry researcher POS” device has two major components. One is the dongle attached to a smartphone; the other is a smaller tablet-based processors aren’t up to speed on EMV that was primed for innovation. or handheld terminal that employees chip technology, let alone integrated “Just like locusts, the average in- can move around a business showroom, payments, which slows down acquirers novation and replacement cycle for a warehouse, outdoor displays, markets, looking to equip merchants with “future- POS is seven years,” said Chris Poelma, kiosks or at drive-through lines of quick- proof” terminals capable of EMV and president and general manager of NCR service restaurants. mobile payments, Martaus said. Silver. “When you look at all of the new “Tablet POS solutions started as “A pretty big segment of acquirers is technology being developed, plus that higher-end system candidates, but going to the iPad-based devices because seven-year cycle on POS replacement they are now gravitating toward more merchants want to take advantage of that and the EMV liability shift in 2015, sophisticated, integrated POS envi- mobility, but in those I talk to, that would those three things created a perfect ronments,” said Ian Stuttard, head of still be a minority,” Martaus added. storm for change.” product and innovation at Elavon, the However, terminal makers are seeing And how did the landscape look after payments unit of U.S. Bank. “These a broader shift. the storm cleared? terminals handle business, inventory Scott Holt, vice president of market- “Merchants are absolutely embracing and employee time management, data ing and product at Ingenico, says his it and they are running to it,” Poelma analytics and marketing solutions.” company has seen sales shift to 60% of said of the smaller, mobile POS units. Prior to Square introducing its mobile device sales attributed to next-genera- “The reason is that mobile devices are POS system, merchants were using tion devices used by small merchants, everywhere, and in some countries you

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are more likely to see people who have traditional payments ecosystem could a mobile phone than they are to have a COSTCO’S POWER sputter and leave the door open for permanent residence.” As American Express and Citigroup third-party providers. It’s a pretty straightforward process clashed over which issuer would get the For the most part, the same acquir- coveted Costco Warehouse credit card for a small business owner to begin us- business, one area remained undisputed ers and ISOs hearing those warnings ing a mobile POS system that is likely and out of their hands: Payment are still around. They’ve adjusted quite to be similar to the mobile devices he processing for Costco’s small business nicely. clients. personally uses, Poelma added. “It That role is held firmly by Elavon, a unit “ISOs in many cases are embracing lowers the complexity and the cost is of U.S. Bank, which marked its 20th year in it faster than some of the long tail of the palatable because it is part of an ongo- April as the provider for small businesses primary payment processors that are that seek payment processing as part of ing revenue model.” their Costco memberships. First Data has not,” said NCR’s Poelma. “The big 10 a similar role with Sam’s Club, providing processors in this country are all over What comes next the payment processing for more than it, but after that, some are not as quick a decade for members of the Walmart- The effort to lure and service small owned warehouse retailer. to embrace the new technology.” merchants may never be more apparent The merchant warehouses “are not ISOs are essentially sales-driven than with Verifone’s new e285 mobile in the payment processing business, and customer-focused organizations, but they know it is a necessary evil,” POS designed to connect with phone said merchant acquirer consultant Paul so they had much at stake if they let data, WiFi or Bluetooth. Martaus. “Costco is incredibly loyal to payments technology pass them by. “This product is an example of how Elavon because they know the payment Essentially, they took a look at inte- processing service they provide works, we’re innovating to support the cash- and if it isn’t broke, don’t fix it.” grated payments and liked what they less evolution in many regions of the Haggling over a couple of basis points saw. world and provide another option for on processing services makes no sense “ISOs have been very adaptable when you are more interested in the merchants … that can do it all-in-one customer service being provided, Martaus and had much success in this environ- without dongles, smart device pairings said. “I’m fairly certain it is a pot of gold for ment,” Elavon’s Stuttard said. “They or cards,” said Glen Robson, executive Elavon, and all they have to do is perform.” understood that it was going to be a Elavon has service centers at Costco vice president and global head of solu- stores and helps set up merchants for very technology-driven marketplace tions at Verifone. card-present or card-not-present payment and customers were going to be more It represents another shift in the card acceptance. It offers the Poynt demanding. And they have reacted mobile POS system or the Talech with Elo mPOS market, one in which the terminal terminal common in restaurant settings. accordingly.” maker’s device simply looks, feels and “When a business has a membership Ingenico doesn’t service small mer- acts like another smartphone in the with Costco for supplies, water and chants directly, instead using the ISO equipment for their offices, one of user’s hands. the most popular services is buying and acquirer channels to offer services Merchants in advanced markets discounted credit card processing through and products through Ingenico Mobile. are seeking deeper customer experi- Costco,” said Ian Drysdale, executive vice “All of the acquirers and largest and president of business development for ences while replacing their traditional Elavon. “That’s what we provide.” midsize ISOs have focused on the need terminals with something designed to First Data has been doing much of to become true technology providers look and operate more like consumer the same type of work with Sam’s Club and not just the people who start mer- members, pushing EMV acceptance and products, Robson said. mobile POS terminals from is Clover chant accounts and roll out a terminal,” family of products. Ingenico’s Holt said. A role for ISOs “Sam’s Club is an important partner, as Ultimately, all of the latest mobile we are both laser focused on meeting the It wasn’t that long ago that indepen- needs of small businesses,” said Debbie technology trends have resulted in dent sales organizations and resellers Guerra, senior vice president and head of terminal providers, software develop- were being warned that their business SMB Direct at First Data. ers, ISOs and acquirers moving in the Working with a retailer warehouse is model would become obsolete as mPOS not an overwhelming task, Guerra said. same direction. makers like Square and Groupon sold “The U.S. small business opportunity is “As dynamics change, our partners their products through retailers or their large and our direct sales force and ISOs are telling us they want technology all have a degree of specialization, so we own in-house sales staff. don’t view this as adding pressure,” Guerra added on the front end and technology The message had an underlying said. “From a technology standpoint, the added to the POS,” Holt said. “It’s more meaning: If the ISOs and acquirers pressure to be ahead of the curve is really about being a technology provider now being generated by market demands.” didn’t understand the technology, the than ever before.”

22 ISO&AGENT May/June 2017

022_ISO050617 22 4/17/17 3:25 PM 023_ISO05062017 23 4/13/2017 4:27:10 PM CREDIT SUBPRIME

New Options for Subprime Credit Consumers who are categorized as subprime are getting more options for shopping online. BY KATE FITZGERALD

n the shift to online and mobile shopping, one group often left out is the 65 million Americans with poor or no credit. But as more retail categories like furniture Imove online, a growing number of e- commerce merchants is adding instant finance options for the subprime crowd. The shift is giving merchants the opportunity to test the placement of checkout buttons to see which of their expanding options get the best results. Ghostbed, which sells memory-foam mattresses online, recently added two new alternative financing buttons to its website to accommodate the growing number of consumers starved for credit. “Our whole concept is based on immediate purchase and delivery of a bed, and about half of our audience has no that cost about $500 to $1,000, Werner Zibby’s senior vice president of sales credit, so we needed a channel for those said. and marketing. customers alongside the traditional Consumers opting to pay with Zibby “We triangulate data from a variety payment choices,” said Marc Werner, enter their mobile phone number and of sources and process it with machine CEO of Plantation, Fla.-based mattress provide details including their address, learning to get an instant credit deci- manufacturer Nature’s Sleep, Ghostbed’s Social Security number and estimated sion,” Prince explained, noting that most parent company. income. new customers are approved within 30 One solution emerged from Zibby, a Most are immediately approved to seconds. Zibby, owned by Cognizant, New York-based lease-to-own company borrow up to Zibby’s limit of $3,500 per received $150 million in financing in specializing in loaning money to consum- individual per month, according to the February from Victory Park Capital. ers with low or no credit for furniture, New York-based lender, which shoulders Around the same time Ghostbed electronics and appliance purchases. a short-term loan consumers can pay added Zibby to its checkout menu, the Ghostbed promotes Zibby in a promi- off in installments or sooner. company identified another segment of nent corner of its main landing page, Zibby skips FICO scores, running consumers seeking alternative finance touting the option to buy with no credit a quick scan of prospects’ identities options, and in February Ghostbed required, and after piloting the service and location using data-verification added Klarna, which targets consum- last fall it’s become a permanent option tools from LexisNexis, IDology and ers with solid credit who nevertheless that’s driving “strong results” for beds FactorTrust instead, said Zac Prince, want to pay in installments.

24 ISO&AGENT May/June 2017

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025_ISO05062017 25 4/13/2017 4:27:11 PM REGULATION CARDS

Did Durbin Help Credit Cards? Banks have often complained that the Durbin amendment put them at a disadvantage. But did the changes actually help their bottom line? BY KEVIN WACK

or half a decade, big banks and retailers have been quar- reling about the effects of government-imposed price caps on U.S. debit card fees. FThe banks contend that merchants have pocketed a $42 billion-plus wind- fall in the years since the Federal Reserve capped the fees that big banks charge retailers whenever a customer pays with a debit card. Retailers say that claim is nonsense: Merchants operate in a competitive environment, and the money they save on swipe fees eventually winds up in the pockets of consumers. What is lost in this high-stakes tit-for-tat, which is being fought with renewed vigor in the early days of the Trump administration, is any consid- The price cap is surely not the legislation that was sponsored by Sen. eration of how the price ceiling is af- only factor in the shift, but experts Richard Durbin, D-Ill. fecting consumer spending patterns. say that it had a significant impact. Since the Durbin amendment took Yet there is mounting evidence that “It’s an important part of the picture,” effect, banks that are subject to it have as a result of the five-year-old debit said Nick Clements, a former credit been collecting around 23 cents in card rules — or more precisely, as a card industry executive. interchange fees for each debit card result of how the banking industry Many Americans who lean heavily transaction, down from 51 cents before responded to the rules — Americans on reward-laden credit cards are likely the rule’s enactment. are spending more money on their benefiting in today’s landscape. But Meanwhile, the fees that banks get credit cards. the shift toward plastic carries risks paid for credit card purchases were Between 2012 and 2015, the number for other consumers, who may incur unaffected by the Durbin amendment. of U.S. credit card transactions grew finance charges. The trend may also Today those charges are often at least slightly faster than the number of be having a negative influence on some twice as high as the fees banks collect debit card transactions, according to consumers’ saving habits. from similar debit card transactions. Federal Reserve data. Those numbers Even before Congress passed the represent a huge turnaround from the Rewards growth fuels spending Durbin amendment, banks had a finan- previous decade, when debit card use The Fed’s debit card fee ceiling cial incentive to encourage the use of was growing by leaps and bounds. was implemented in response to 2010 credit cards, because of the interest

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income and penalty fees they collect volumes,” the analysts wrote. billion, compared with a $460 billion from consumers. But the math became increase in debit card spending, the more compelling once the debit card Mixed outcomes for consumers Fed found. price ceiling took effect. The most comprehensive report This turnaround from the previous “If someone has a choice between on Americans’ payment habits is pub- decade’s spending trends happened push steak and beef stew, they make lished by the Fed once every three despite the fact that many consumers, more money on steak, so they’ll push years. It is based on data reported by chastened by the financial crisis, had the steak,” said Mallory Duncan, a sample of depository institutions. grown warier of debt. senior vice president at the National During the 2000s, before the arrival To be sure, the share of cardholders Retail Federation. of the debit card fee cap, consumers’ who use credit cards in low-risk ways Referring to the banking industry, use of debit cards grew rapidly, ac- has been growing. he said, “If they can make monopolistic cording to the Fed data. Between 2003 In the third quarter of 2016, 29.2% of fees on credit cards, they’re going to and 2006, U.S. debit card transactions U.S. credit-card holders paid off their push credit cards.” increased by 74.4%. Between 2006 and entire balance each month, according The U.S. credit card industry is 2009, those payments grew by 52.6%. to the American Bankers Association. heavily concentrated — JPMorgan Meanwhile, U.S. credit card transac- That figure was just 19.5% in the third Chase, Bank of America, Citigroup, tions grew by just 14.2% between 2003 quarter of 2008. American Express, Capital One Finan- and 2006, and they actually declined For savvy shoppers, leaning heavily cial and Discover Financial Services by 3.2% during the next three-year on a credit card that offers generous have roughly 70% of the total market period. rewards can yield substantial savings. share. Over the last five years, the A number of factors are at play here. “If you really use it to your advantage, big six issuers have sought to attract The U.S. debit card market was still there’s a lot of money that you can credit card spending by continually fairly small in the early 2000s, which squeeze out of it,” said Brian Riley, sweetening the cash and travel-based made it easier to achieve impressive director of the credit advisory service rewards they offer to their customers. growth rates. And during the Great at Mercator Advisory Group. In 2013, Capital One launched the Recession, many consumers had their But for credit-card holders who Quicksilver card, which offered 1.5% credit lines cut, which undoubtedly pay interest charges each month, the cash back on every purchase. The fol- had a significant impact on credit recent shift in spending patterns is lowing year, Citi rolled out its Double card spending in 2009. more worrisome. Consumers had $995 Cash card, which further upped the Still, the spending patterns from billion in revolving debt outstanding ante. In 2016, Chase announced Sap- the 2000s were a reflection of the in December, which was approaching phire Reserve, which offered new banking industry’s substantial efforts the record of $1.004 trillion set in cardholders points worth $1,500 if to market debit cards at that time. December 2008, according to the Fed. they spent $4,000 in the first three Part of the industry’s motivation was In the fourth quarter of 2016, Ameri- months. to reduce consumers’ use of checks, cans had access to $2.57 trillion in “There’s been an arms race between which are costly to process. Hefty available credit on their cards, an issuers,” said Greg McBride, chief interchange fees on debit cards were increase of more than $470 billion financial analyst at Bankrate.com. another factor. from four years earlier, according to In 2011, the big six issuers sent The Durbin amendment took effect data from the Federal Reserve Bank of $12.2 billion to consumers in the form in October 2011. Between 2012 and New York. Late-payment rates on credit of credit card rewards, according to 2015, credit card transactions grew by cards remain low by historical stan- a recent research note by analysts at 26.1%, slightly outpacing debit card dards, but they are widely expected Nomura Instinet. By last year, that transactions, which rose by 23.0%, to rise as a result of increased use. figure had risen to $22.6 billion. according to the Fed data. Even for consumers who pay off “Attractive credit card rewards During the same three-year period, their entire bill each month, an in- … have fueled credit card spending spending on credit cards rose by $610 creased reliance on credit cards may have negative repercussions. Some “There’s been an arms race between issuers.” observers contend that consumers spend more money when they pay ‑Greg McBride, chief financial analyst, Bankrate.com with credit cards, because it hurts

28 ISO&AGENT May/June 2017

028_ISO050617 28 4/17/2017 5:41:23 PM 029_ISO05062017 29 4/13/2017 4:27:15 PM REGULATION CARDS

more psychologically to part with cash. In any event, the U.S. personal savings rate is currently 5.4%, which is higher than it was during the credit bubble of the mid-2000s, but well below its levels in the 1960s, ‘70s and ‘80s.

Spending absent from the debate In Washington, the Durbin amendment has long been viewed as a zero- sum game between banks and retailers: Congress can either satisfy merchants by keeping the price ceiling in place, or it can fulfill the wishes of banks by repealing the five-year-old regulation. Lobbyists on both sides of the debate have not shown much interest in studying how the price ceiling has impacted consumers’ spending habits. eration acknowledged that some of He also took issue with the notion After all, banks and retailers both the recent growth in the use of credit that credit cards cause consumers to make a lot of money from credit cards, cards may be attributable to the Durbin spend more. He noted that consumers and they do not have a lot to gain by amendment, but he also pointed to typically use credit cards to buy bigger casting their increased use in a nega- other factors, and said that credit card items but added, “That doesn’t mean tive light. use was already on the rise prior to that the credit card causes the higher Duncan at the National Retail Fed- October 2011. purchase.”

COMDATA'S PAYMENTS APP TACKLES FEDERAL TRUCK DRIVING RULE Payments increasingly are the anchor connecting diverse transaction data with where and how far they drove, business functions, including in the commercial trucking improving processes,º he said in an interview. industry, where tools built into fleet card apps are helping to The majority of the trucking industry is comprised of cut costs and paperwork for fuel taxes, workplace safety and smaller firms and most of these have not yet adopted ELD other functions. technology, McCrossan said. The latest example is Comdata Inc., which announced a MyFleet Program, which launched in November 2016, partnership this month with KeepTruckin, a San Francisco- supports fleet card pricing, controls and record-keeping for based startup that that provides electronic logging device fuel purchases, along with discounted lodging through a (ELD) services for trucking companies to track the hours partnership with CLC Lodging and access to capital through drivers spend behind the wheel. Crestmark Bank. This technology can help comply with new federal safety The Federal Motor Carrier Safety Administration in late mandates. 2015 announced its final electronic logging device rule Through the connection to KeepTruckin, users of requiring commercial truck and bus drivers to track the Comdata's MyFleet Program fleet card app may directly number of hours spent driving during each shift beginning in buy and manage ELD services from KeepTruckin to December 2017. automatically track drivers' duty records, backed up by GPS The possibility still exists that a fresh legal challenge to data, said Terrence McCrossan, a senior vice president with the rule could crop up before the end of the year, when most Brentwood, Tenn.-based Comdata. trucks are required to comply. The GPS element from KeepTruckin also improves An association of independent drivers challenged the rule Comdata's fuel tax-management service within MyFleet last year, but a U.S. Court of Appeals for the Seventh Circuit Program, according to McCrossan. upheld it in an October 2016 ruling. The independent owners ªLinking with KeepTruckin ties together several things still have an option to appeal that decision to the Supreme we already offered, so now we can marry drivers' fuel Court.

30 ISO&AGENT May/June 2017

030_ISO050617 30 4/17/2017 5:41:24 PM 031_ISO05062017 31 4/13/2017 4:27:16 PM RETAIL CREDIT

How Blispay Lives Between Financing and Cards BY KATE FITZGERALD Blispay customers also earn 2% on all purchases, which is provided as a s mobile e-commerce credit applied back to their account, grows, more online mer- Lisiewski said. chants are adding instant Utah-based First Electronic Bank credit options like PayPal issues Blispay’s Visa cards and funds Credit and Klarna, giv- the initial purchase; Blispay immediately ingA consumers more ways to finance buys the loan from the bank and sends large purchases separately from using monthly bills to customers. a credit card. “Blispay works just like a store loan, Blispay, a Baltimore, Maryland-based except we’re the lender and the vehicle consumer finance startup, wants to push for managing the funds is a Visa card, this concept further but stops short of so consumers can use the credit line offering a full-fledged store-branded all over town instead of opening up a credit card. separate credit line at several stores,” For more than a year, Blispay has Lisiewski said. been quietly expanding its smartphone- Merchants that have adopted Blispay

based instant-credit app, enabling shop- ªBlispay solves two sides of the credit problem,º include sporting equipment website pers to borrow significantly more money says founder Greg Lisiewski. retailer Evo, the online luxury handbag than the amount of a sought-after item, resale site Trendlee and Laura’s Home and providing the extra funds in the mote Blispay at the point of sale or on & Patio, a home goods store in East form of a Visa account. their website with signs or a button Northport, N.Y. The program behaves almost like directing buyers to apply via Blispay’s Blispay opted for Visa, because of its a store-branded card, but without the mobile website. ubiquity, and Lisiewski doesn’t expect physical plastic. Applicants are prompted to provide to add other network options in the It is designed in a way that would basic information, including their name, foreseeable future. appeal to the many small or midsize email, address, birthdate and Social Since its launch, Blispay borrowers stores that don’t want to run their own Security number. have used its credit at 50,000 online credit programs. The service, targeting customers and brick-and-mortar locations to fund Since the funds come not from the with healthy credit scores, also asks purchases of items ranging from airline store but from Blispay, it gives merchants applicants to create a password before tickets to household goods, according a way to provide credit to drive sales at they can be approved. to Lisiewski. no risk, said Greg Lisiewski, Blispay’s Approval takes three to five minutes, “Our product is an option for people founder. producing a 16-digit virtual Visa credit who are making an unusual purchase Lisiewski previously worked at Bill card number that appears on the con- that they want to finance apart from Me Later before it was acquired by sumer’s smartphone within the Blispay everyday expenses, like buying a good PayPal in 2008, and this experience app, which can be used immediately to bicycle or a wedding dress or a trip,” helped him spot untapped opportunities complete a purchase. Lisiewski said. in consumer credit. Blispay typically approves loans “The Visa card gives them flexibility “Blispay solves two sides of the credit of $199 to $10,000, depending on the for making purchases at places that problem, by providing credit to stores customer’s credit score. wouldn’t otherwise offer financing,” that don’t have the in-house financing Those who qualify may use the Visa he said. options of a big-box store and by giving virtual account number anywhere, up to The 25-person company, which re- consumers a versatile line of credit for the credit limit and Blispay subsequently ceived $12.75 million in seed funding last purchases they don’t necessarily want mails the borrower a physical Visa credit year from FirstMark Capital and others, to put on their everyday credit or debit card for greater convenience. will soon expand to a major regional card,” Lisiewski said. Blispay charges no interest for the retail chain and also is negotiating for Merchants supporting Blispay make first six months; the interest rate on additional equity and to expand its debt no technical changes; they simply pro- loans repaid after six months is 19.99%. function, Lisiewski said.

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032_ISO050617 32 4/17/2017 5:41:25 PM 033_ISO05062017 33 4/13/2017 4:27:20 PM CREDIT SUBPRIME

PayPal’s Retreat from Subprime PayPal's credit business generated a lot of money while it was an eBay subsidiary. But as an independent company, PayPal is looking to change course. BY KEVIN WACK

t the height of the panic in late 2008, PayPal Holdings made a counterintuitive move: It entered the subprime lending business. AndA disproving the naysayers, the payments giant built loans of last resort to online shoppers into a lucrative business. Since 2013, the San Jose, Calif.-based PayPal has generated an estimated $575 million in earnings from its consumer lending business, PayPal Credit. Shop- pers who max out their credit cards frequently use the product to finance big-ticket online purchases. But now PayPal, which was spun off from eBay in 2015, is looking to reduce its footprint in consumer lending. While the firm will continue offering PayPal Credit to consumers, it has to sell off $1.6 billion in subprime card exposure gets crushed in that kind of hinted that is exploring options to re- balances. environment,” the report warned. duce its exposure to souring loans. PayPal relies much more heavily Back in October 2008, PayPal agreed Close observers of the company have on borrowers with damaged credit to pay roughly $945 million in cash and floated different possibilities, including histories than large card issuers such as stock options for a firm called Bill Me a sale of all or part of the PayPal Credit JPMorgan Chase and Bank of America, Later, Inc., which offered financing for portfolio, as well as a deal in which a and even Synchrony Financial, which e-commerce purchases, and had deals partner agrees to fund all future loan has a substantial subprime business, with Amazon, Overstock and Zappos, originations. analysts at Instinet noted in a recent among many other online retailers. The shift, which comes at a time when report. At the end of last year, borrow- In 2014, the Bill Me Later service was fewer PayPal Credit borrowers are pay- ers with credit scores below 680 owed rebranded as PayPal Credit. ing on time, may be motivated in part 49% of PayPal Credit’s loan receivables. PayPal offers the product with specif- by the prospect of rising losses. It could The Instinet report urged PayPal to ic retailers as part of the online check-out be a harbinger of tougher times for the shed or significantly reduce its credit process. Once borrowers get approved, subprime credit-card industry, which risk, in order to avoid big losses in a they have access to a revolving credit has boomed in recent years. Earlier this scenario where unemployment rises line of at least $250. month, a credit-card unit of the British and credit conditions deteriorate. “The The product, which is available both bank Barclays PLC reportedly agreed valuation of any business with credit in the U.S. and internationally, can

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034_ISO050617 34 4/17/2017 5:54:52 PM 035_ISO05062017 35 4/13/2017 4:27:22 PM CREDIT SUBPRIME

benefit savvy shoppers. But it can also growing concern. PayPal’s consumer Bank said in a March 10 research note. turn into an expensive form of credit. lending business reported a net charge- Worries about credit quality are PayPal offers interest-free financing off rate of 6.4% at the end of 2016, up not the only reason that PayPal might on certain purchases when borrowers from 5.9% one year earlier. Loans and want to scale back its presence in the repay the full amount within six months. interest receivable that was more than consumer lending business. But when consumers fail to pay off the 90 days past due rose from 3.9% to 4.1%. The product has generated regula- loan in time, PayPal charges an annual When it comes to borrowers’ likeli- tory problems for PayPal. In 2015, the percentage rate of 19.99% that gets ap- hood to repay, PayPal faces a structural company agreed to pay a $10 million plied retroactively, back to shortly after disadvantage versus issuers of cards fine and $15 million to consumers after the purchase was made, a practice that with Visa and Mastercard logos. Since being accused of enrolling customers has come under fire from consumer such general-purpose credit cards can be in PayPal Credit without their consent advocates. used for far more purchases, borrowers and deceptively advertising promotional In recent years, PayPal Credit has have an incentive to pay those bills first. benefits. helped to power the company’s strong “Cash-strapped consumers facing There is also the fact that investors earnings growth. Today, roughly 6% to difficulty meeting their financial ob- typically assign lower valuations to 7% of the firm’s revenue comes from Pay- ligations would likely view the limited lending businesses than they do to Pal Credit, and it accounts for a similar utility of PayPal Credit as an excuse for payment networks or tech companies. percentage of total profits, said Lisa placing it at the bottom of their repay- Nonetheless, this year is looking like Ellis, an analyst at Bernstein Research. ment priority list,” Instinet wrote. an auspicious time to scale back in the PayPal Credit’s value to the com- PayPal executives have indicated that subprime consumer credit business, pany’s shareholders goes beyond the they are exploring ways to reduce the said Nick Clements, a former credit-card income it generates, since the product company’s credit exposure. industry executive and the co-founder generates more spending on the PayPal “We are in the early process of look- of MagnifyMoney.com. network. ing through this right now,” CEO Dan He noted that subprime credit pro- Many shoppers who use PayPal Schulman said during a Jan. 27 con- viders made big profits in the wake of Credit do not have other payment op- ference call. “It is a very competitive the financial crisis, when mainstream tions. PayPal has stated that merchants process out there as people look to card issuers were seeking shelter from who adopt the product see a 20% to 30% potentially partner with us. We will look the storm. But since then, competition lift in total payment volume. to make a decision as we digest and sort has picked up substantially. “The lending business is a strategic through all the different proposals that Last year, subprime accounts made business for PayPal,” said Gil Luria, an we are seeing.” up 21% of the U.S. credit-card industry, analyst at D.A. Davidson & Co. PayPal is expected to announce its up from 18% in 2014, according to the At the same time, credit quality is a plans this year, analysts at Deutsche rating agency DBRS.

VISA, AMAZON TEAM UP TO DELIVER COMMERCIAL CARD DATA Visa has formed a new partnership with Amazon Benefits include tools to track multiple shipments and to provide Visa commercial card customers with a purchases on a single account and the ability to customize comprehensive view of transaction data from Amazon accounts by allowing multiple users and establishing Business purchases. spending limits, with free two-day shipping on orders of at Visa’s U.S. commercial card customers at supporting least $49. banks may now search, compare and buy products from “Tracking and reconciling online purchases made with various suppliers on Amazon Business, with the ability to commercial cards can be a time-consuming task, and at track and analyze purchases using full line-item details, Visa Visa we are constantly looking for innovative ways to simplify said in an April press release. the process,” said Vicky Bindra, global head of products and Bank of America Merrill Lynch, Citi and PNC Bank are the solutions at Visa, in the release. first three banks to offer the new service to customers who The new service supports straight-through processing, use Visa commercial cards to buy supplies from Amazon which is becoming a requirement for many businesses, said Business, with the goal of enhancing end users’ ability to J. Christopher Ward, executive vice president and head of manage expenses. product management for PNC Bank treasury management.

36 ISO&AGENT May/June 2017

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037_ISO05062017 37 4/13/2017 4:27:26 PM MOBILE GIG ECONOMY

Grab’s Digital Business Model Makes Room for Cash BY DAVID HEUN

ingapore-based ride-sharing company Grab is looking to expand its reach in Indone- sia through its acquisition of Kudo, an e-commerce platform Sfor unbanked consumers that could complement Grab’s own digital payment platform and provide even more cash options. Consumers in Southeast Asia seeking rides from a taxi or private driver are likely to do so through Grab, the region’s answer to Uber or Lyft. But the irony of the ride-sharing boom is that, in providing a long-overdue modernization of the way drivers accept payments, it seeks to digitize payments even though flexible and tailored cashless payments leverage it through Kudo. a cash option remains in the process. solutions,” said Ming Maa, president “Our goal is to make it as easy as Kudo, which is based in Jakarta, of Grab. possible for users to adopt and integrate brings a cash option to the forefront About 175 million Indonesians are GrabPay into their lives,” Maa said. for those shopping online. Consumers classified as middle class, yet the ma- “Whether that’s working with major without bank accounts or cards can use jority of people are unbanked or un- local banks or integrating with existing Kudo to purchase goods or services derbanked, particularly in non-urban local services.” online, then make cash payments to a areas, Maa said. “Kudo has created a Grab recently announced that Jason local Kudo agent. truly unique solution to the challenge Thompson, a former executive with Kudo’s network of 4,000 agents covers of serving this massive, underserved Euronet, will head Grab’s payments 500 towns and regions across Indone- market.” strategy team to increase mobile pay- sia and has more than 5 million active Currently, Grab users have various ments services across the region. customers. mobile options to choose from including The company’s master plan calls for It’s a similar model to the recently GrabTaxi or GrabCar, or simply having an initial focus on serving smaller cities announced Amazon Cash, as well as GrabPay on their phones with a linked and communities not yet involved in a older offerings such as Walmart’s Pay card or account to make payments at digital economy, Maa said. with Cash, PayPal’s MyCash Card or participating retailers. Top-up options Meanwhile, other taxi payment pro- PayNearMe. such as GrabPay Credits and a loyalty viders are shifting their strategies. Grab claims its GrabPay mobile pay- program called GrabRewards in which Verifone, for example, is combining ment service is growing and Grab has points are earned for each Grab ride its two U.S. taxi payment apps, Way2ride 95% market share in Singapore’s ride- also exist. and Curb. hailing industry. In obtaining Kudo as “GrabPay represents a huge market The addition of Curb, an e-hailing part of its overall $700 million “Grab opportunity for us, and it’s something app maker Verifone bought in late 2015, for Indonesia” 2020 master plan, the we think we are uniquely positioned to will immediately add advance booking company seeks to bring financial inclu- bring to the table,” Maa said. “Across to Way2ride’s taxis. sion to the forefront through its various the region, there remains large poten- Verifone is also upgrading the screens mobile payment offerings. tial for cashless payments solutions to that appear in the back seats of cabs in “Indonesia is one of the most prom- increase from their small scale today.” New York, where it has the contract to ising and fastest growing ecommerce Because GrabPay is the largest high- provide payments for about half of the and cashless payments markets in frequency mobile app in Southeast Asia, city’s cabs, and 65 other U.S. cities to Asia, but there is a clear need for more the company is in a good position to accommodate third-party apps.

38 ISO&AGENT May/June 2017

038_ISO050617 38 4/17/2017 5:54:53 PM 039_ISO05062017 39 4/13/2017 4:27:31 PM LOYALTY MULTI-MERCHANT

Any loyalty program would benefit from having supermarkets on board because “there’s significant spend there, north of $4,000 per household annually,” Riley said. Plenti Gets Its First Grocery Store Plenti members include American The Plenti multi-merchant loyalty program has finally added a grocery store, opening up a Express, AT&T, Exxon Mobil, Macy’s, new avenue for the platform's growth. BY DAVID HEUN Nationwide, Rite Aid, Direct Energy, Enterprise Rent-A-Car, Hulu, Expedia and Chili’s Grill & Bar. In addition to managing the program, American Express two years ago created a cobrand Plenti credit card as a payment he Plenti loyalty program option for consumers participating in unfolded two years ago with the program. a new twist on plastic card- As with many new programs, con- based rewards—a multi- sumers offered mixed reviews for Plenti merchant coalition in which when it first came on the scene in 2015. Tparticipants were given exclusivity within their market and consumers could earn points at one retailer and redeem them at another. Plenti has grown under the watch of American Express management to the tune of 36 million shoppers making use of the program in the past year, but it had its share of early confusion among consumers who questioned its deliberate lack of merchant participants. In securing Southeastern Grocers LLC as its first grocery participant, Plenti now has a mix of basic life es- sentials to offer consumers through its gasoline, grocery, clothing and phar- macy retailers, among others. and Fresco y Mas grocery chains op- are consistently evaluating loyalty and Though Plenti still promises mer- erate under the Southeastern Grocers we believe our coalition model is espe- chants exclusivity within their category umbrella and will upgrade their own cially appealing.” and region, the addition of Southeast- loyalty programs through Plenti, a Because loyalty and rewards are so ern Grocers will add 700 more store process that began on April 5. integral to grocery shopping, it is impor- locations and potentially millions of The presence of Southeast Grocers tant for Plenti to not let the exclusivity consumers to the program, said Josh opens the door for the program to seek rules get in the way of bringing on other Berwitz, president of U.S. loyalty for other major chains in other parts of the chains in other parts of the country, said American Express. country, a move that would fall in line Brian Riley, director of card services “We expect Southeastern Grocers with Plenti’s policy on exclusivity. for Mercator Advisory Group. will add significant scale and Plenti “The grocery category in the U.S. “Certainly within the grocery busi- membership around the southeast,” is highly regionalized, and Plenti ex- ness you have companies that dominate Berwitz said. “They have a strong and pects to expand the coalition with new certain regions and would not compete loyal customer base actively engaged grocery partners over time in other against each other,” Riley said. “In that in their loyalty programs.” regions across the country,” Berwitz case, there is no reason to limit the The Winn-Dixie, Harveys, BI-LO said. “We know many regional grocers participants in the program.”

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040_ISO050617 40 4/17/2017 5:57:05 PM Any loyalty program would benefit Many were confused about how to Plenti has also made some adjust- from having supermarkets on board earn and redeem points, saying some ments in creating the Plenti Online because “there’s significant spend there, merchants had caveats about use of the Marketplace, where members can shop north of $4,000 per household annually,” rewards at their stores. online and redeem offers and earn extra Riley said. Some also complained about the points, while participating merchants Plenti Gets Its First Grocery Store Plenti members include American registration process in which another have established special deals within The Plenti multi-merchant loyalty program has finally added a grocery store, opening up a Express, AT&T, Exxon Mobil, Macy’s, card had to be linked to the shopper’s their stores to provide more Plenti points new avenue for the platform's growth. BY DAVID HEUN Nationwide, Rite Aid, Direct Energy, Plenti card. at any given time on certain available Enterprise Rent-A-Car, Hulu, Expedia “It’s a great idea and it has American products. and Chili’s Grill & Bar. Express behind it, but they missed In addition, Plenti does not rely solely In addition to managing the program, some practical applications early on it on the presentation of a plastic mem- American Express two years ago created to make it easier for users,” Mercator’s bership card. a cobrand Plenti credit card as a payment Riley said. The Plenti app allows users to store option for consumers participating in Still, members have so far earned their virtual Plenti card in iOS and the program. more than 40 billion points, translating Android wallets. As with many new programs, con- into at least $400 million in value, and Users can also provide a phone num- sumers offered mixed reviews for Plenti have redeemed more than 90 million ber instead of the app or membership when it first came on the scene in 2015. offers, Berwitz said. card as a Plenti ID.

are consistently evaluating loyalty and we believe our coalition model is especially appealing.” Because loyalty and rewards are so integral to grocery shopping, it is important for Plenti to not let the exclusivity rules get in the way of bringing on other chains in other parts of the country, said Brian Riley, director of card services for Mercator Advisory Group. “Certainly within the grocery business you have companies that dominate certain regions and would not compete against each other,” Riley said. “In that case, there is no reason to limit the participants in the program.”

40 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 41

041_ISO050617 41 4/18/2017 4:42:46 PM TECHNOLOGY MOBILE ORDERING

McD’s Tricky Mobile Strategy A lot of restaurants have an appetite for mobile ordering, but it's a tricky service to get right. BY KATE FITZGERALD

he plan McDonald’s Corp.’s revealed this week to add mobile order and payments to its app and roll the service out to 20,000 of stores Tis overdue, but fraught with risk, analysts say. Customers will be able to place orders via McDonald’s mobile app for pickup at the drive-through, curbside or inside the store, where a kiosk will recognize their profile with stored payment methods and order preferences, McDonald’s CEO Steve Easterbrook announced at the company’s Investor Day meeting. The moves aren’t unexpected—Mc- Donald’s signaled a new commitment to mobile last year as part of a broad turnaround plan—but specifics of the mobile order and payment strategy resulted that hurt its same-store sales. over-75 crowd that won’t order ahead,” underscore challenges the company “McDonald’s pioneered the shift from Crone said. is likely to face. drive-in burger stands to drive-through Much of this is uncharted terri- Mobile order and payment already fast food, and that heritage could be tory for McDonald’s compared with is transforming the retail landscape, leveraged for order-ahead, but it could Starbucks, whose mature mobile app with dramatic effects for quick-service also be their boat anchor dragging them relies on sophisticated algorithms and restaurants companies like Starbucks, down,” said Richard Crone, a principal machine learning to constantly refine Dunkin Donuts and Panera Bread Co. with Crone Consulting LLC. and adapt its systems to streamline store reporting strong demand as soon as Shifting to a mobile-first focus is processes and customer experience, the feature launched. inevitable, Crone said, but McDonald’s Crone points out. But the logistics can be tricky. Star- has some unique hurdles to overcome. McDonald’s has already fumbled bucks has a long head start over Mc- “McDonald’s will have to make major with mobile payments, being slow to Donald’s with years of success with its changes in its infrastructure and re- embrace the trend and making iffy mobile payments app, and in January engineer its processes, procedures and forays into new technology. Last year the coffee giant disclosed that it wasn’t retrain people, and the company will McDonald’s tested Google’s Hands Free completely prepared for the popularity probably need to rethink how it handles payment app at 47 U.S. restaurants; that of its mobile order and pay service that its drive-through lanes for customers test has been discontinued, accordign rolled out last year, and bottlenecks who want to pick up and go, versus the to sources.

42 ISO&AGENT May/June 2017

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PAX-2016Ad-ISO&Agent.indd043_ISO05062017 43 1 4/13/20171/5/16 4:27:34 8:42 AMPM SECURITY INTERNET OF THINGS

sensitive data to handsets or other devices with secure keys protected by the TEE that could prevent a movie from being pirated or keep healthcare data safe from exposure, opening up The Security of Connected Tech rich commercial opportunities for de- As more interest grows in the Internet of Things, more opportunities arise to tame this new vice makers and digital applications, frontier of emerging technology. BY KATE FITZGERALD Ramsden said. Trustonic has its work cut out, Rams- den concedes, as its business model largely depends on anticipating needs that haven’t fully materialized and foot- ing the cost of adding security to third- o one knows exactly what party equipment. the Internet of Things will Provisioning applications when de- look like in five years, but vices are already out in the market also forecasters predict more introduces some complexity; typically a than 20 billion devices Trusted Application Manager (TAM) is Nwill be connected, and Trustonic is sure required to access the TEE, but it’s much fraudsters will come along for the ride. simpler than the third-party systems U.K.-based Trustonic is planning to needed to provision devices with an counter that fraud trend by creating a embedded secure element, according hardware security approach for IoT to Ramsden. devices based on a “trusted execution “We see a big future in providing the environment” (TEE) that works like a security for services offered by banks, fortress to protect sensitive data from government [and] enterprises across the the mass of ever-evolving threats to IoT and for anyone else selling content software from intrusions and malware. like music or video, including studios The concept builds on the idea that and mobile network operators on devices payment credentials and other sensi- after they’re deployed,” Ramsden said. tive and confidential information must Analysts agree that some form of be protected within devices at their embedded, future-proof security will core—much in the way the secure ele- likely become essential for the IoT, ment shields payment details inside an especially in devices like major appli- iPhone. But unlike the secure element dational to every device it supports, “We’ve laid a strong foundation with ances, vehicles and equipment. model, Trustonic’s TEE approach is with TEE built into each device at the smartphones, and now we’re moving to Amazon is already working with designed to enable third-party access at factory level. the IoT, connected cars and machine- appliance makers to put its Dash pur- any moment, while keeping data secure. To ramp up, Trustonic for the last to-machine arenas,” Ramsden said. chasing system into dishwashers and Targeting an expanding market of four years has been working with device Trustonic is hoping its investment will laundry machines, for example. device manufacturers, service provid- manufacturers including Sony, Samsung pay off as device makers find reasons to “One of the challenges of the IoT is ers and app developers, Trustonic aims and LG to embed its TEE technology add secure payments to existing objects. the lifecycle of the connected devices to monetize its services by supporting within tens of millions of smartphones, While it’s a speculative move, Trustonic could be much longer than traditional everything from simple, highly se- recently hitting a milestone of a billion says it has an edge because it’s the only technologies like smartphones,” said cure authentication methods including devices. TEE permitting third-party apps to be Thad Peterson, a senior analyst with biometrics to managing tokens for In addition to handsets, Trustonic provisioned after devices have been Aite Group. high-value transactions, according to is already embedding its technology deployed, which will become a critical “A connected device could be func- Andy Ramsden, Trustonic’s product in smartwatches with Samsung Gear, advantage for IoT devices that may tioning for a decade or more if it’s in marketing director. televisions via the Amazon Fire and have long lifespans and multiple users. a major appliance or embedded in an The main challenge—and it’s a big certain auto manufacturers the company Banks, retailers and other organiza- industrial setting. There’s no way to one—is that Trustonic has to be foun- declines to disclose. tions using Trustonic’s TEE may beam know how fraud will evolve, but it’s

44 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 45

044_ISO050617 44 4/17/2017 5:48:30 PM sensitive data to handsets or other certain to be present and a powerful, mobile payments, by combining its devices with secure keys protected future-proof security capability will be hardware approach with software. by the TEE that could prevent a movie core for devices connected to the IoT,” “TEE security makes solutions like from being pirated or keep healthcare Peterson said. HCE much more resilient than software data safe from exposure, opening up Trustonic’s business model isn’t a solutions alone could ever be, and it The Security of Connected Tech rich commercial opportunities for de- simple one. Manufacturers contribute meets all the requirements needed for As more interest grows in the Internet of Things, more opportunities arise to tame this new vice makers and digital applications, to the cost of adding Trustonic’s TEE a tokenized payment solution such as frontier of emerging technology. BY KATE FITZGERALD Ramsden said. to handsets—Samsung uses it for the HCE,” Ramsden said. Trustonic has its work cut out, Rams- Knox security built into all of its Galaxy Trustonic may be operating in a den concedes, as its business model handsets—but Trustonic foots most market that hasn’t fully evolved yet, but largely depends on anticipating needs of the bill, anticipating future revenue Ramsden predicts it will soon be com- that haven’t fully materialized and foot- from licensing its services to a broad monplace for smart devices to rely on ing the cost of adding security to third- range of device makers, application hybrid hardware and software solutions. party equipment. developers and other organizations “The battle against fraud is ongoing, Provisioning applications when de- marketing content and data. and when you consider the future need vices are already out in the market also A current business for Trustonic is for constant software refreshes to stay introduces some complexity; typically a marketing its TEE services for banks ahead of the latest threats, the TEE ap- Trusted Application Manager (TAM) is and others looking to enhance security proach may be simpler than many other required to access the TEE, but it’s much for Host Card Emulation (HCE)-based routes,” Ramsden said. simpler than the third-party systems needed to provision devices with an embedded secure element, according to Ramsden. “We see a big future in providing the security for services offered by banks, government [and] enterprises across the IoT and for anyone else selling content like music or video, including studios and mobile network operators on devices after they’re deployed,” Ramsden said. Analysts agree that some form of embedded, future-proof security will likely become essential for the IoT, especially in devices like major appli- “We’ve laid a strong foundation with ances, vehicles and equipment. smartphones, and now we’re moving to Amazon is already working with the IoT, connected cars and machine- appliance makers to put its Dash pur- to-machine arenas,” Ramsden said. chasing system into dishwashers and Trustonic is hoping its investment will laundry machines, for example. pay off as device makers find reasons to “One of the challenges of the IoT is add secure payments to existing objects. the lifecycle of the connected devices While it’s a speculative move, Trustonic could be much longer than traditional says it has an edge because it’s the only technologies like smartphones,” said TEE permitting third-party apps to be Thad Peterson, a senior analyst with provisioned after devices have been Aite Group. deployed, which will become a critical “A connected device could be func- advantage for IoT devices that may tioning for a decade or more if it’s in have long lifespans and multiple users. a major appliance or embedded in an Banks, retailers and other organiza- industrial setting. There’s no way to tions using Trustonic’s TEE may beam know how fraud will evolve, but it’s

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045_ISO050617 45 4/17/2017 5:48:31 PM SECURITY E-COMMERCE

about many false positives and aborted transactions, negating 3-D Secure’s benefits of blocking fraud and shifting liability for chargebacks. The developers at EMVCo went back Merchants Divided on 3D-Secure to the drawing board and finalized new As EMVCo works to improve the 3D-Secure system for protecting e-commerce, merchants specifications for 3-D Secure 2.0 last are starting to warm up to the changes. But there are still those that need convincing. year to eliminate much of that friction BY KATE FITZGERALD by making the consumer verification process more streamlined, with more merchant control over declines. Card issuers are working now to implement the new version for merchants during the second half of this year. To gauge industry interest in 3-D Secure 2.0, payment authentication provider CardinalCommerce asked hundreds of payments industry professionals about their expectations for the updated tool. Nearly half, or 46% of respondents, said the most important feature needed in the 3-D Secure is an intuitive consumer interface that won’t interrupt the consumer shopping experience unnecessarily. About one in five merchants surveyed said they want 3-D Secure to provide more data points to make nuanced deci- sions about suspicious transactions, and 18% said they want the new version to support in-app, mobile and non-browser purchases, reflecting the rise in mobile e-commerce. What’s least important to merchants considering 3-D Secure 2.0 is support for specialized types of transactions, including proprietary extensions for different country and regulatory requirements. t’s well accepted that the earliest the designers of 3-D Secure 2.0 fixed a new 3-D Secure that will make it more More than a third, or 37%, of survey re- version of 3-D Secure was off- lot of these problems, but it remains to user-friendly, which suggests there’s a spondents ranked those considerations putting to merchants and consum- be seen how many will adopt it. More lot of interest,” said Tara Lavelle, Car- as least vital for 3-D Secure. ers who didn’t like how it added than half, or 52% of respondents said dinalCommerce’s senior vice president CardinalCommerce conducted its friction to the checkout process they would be likely to CardinalCom- of marketing. survey in October and November of Iin the interest of online security. The merce’s own Consumer Authentication The original version of 3-D Secure, 2016 among hundreds of participants new version of 3-D Secure wants to service next year when includes 3-D introduced 15 years ago to fight e- including merchants, fraud and e-com- avoid the same pitfall, and merchants Secure 2.0, while 48% said they would commerce fraud, typically required merce vendors, card issuers and card are cautiously optimistic. be unlikely to use it, or had no opinion. consumers to provide an additional associations. New survey data from CardinalCom- “Merchants indicated very specific password to use their payment card CardinalCommerce currently sup- merce finds merchants are hopeful that preferences for features built into the during checkout. Merchants complained ports 3-D Secure’s earlier version as part

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046_ISO050617 46 4/18/2017 2:30:04 PM about many false positives and aborted of its Cardinal Consumer Authentication with 50% in Eastern Europe and the transactions, negating 3-D Secure’s e-commerce fraud prevention service, Middle East; 49% in Europe; 48% in benefits of blocking fraud and shifting and the company plans to upgrade South America and 39% in both North liability for chargebacks. participating clients to 3-D Secure 2.0 it America and the Asia Pacific region. The developers at EMVCo went back becomes widely available, Lavelle said. Verified by Visa and Mastercard Merchants Divided on 3D-Secure to the drawing board and finalized new Globally, 41% of merchants and 54% SecureCode, which are both based As EMVCo works to improve the 3D-Secure system for protecting e-commerce, merchants specifications for 3-D Secure 2.0 last of organizations overall use or support on 3-D Secure, are far and away the are starting to warm up to the changes. But there are still those that need convincing. year to eliminate much of that friction consumer authentication programs, up most popular consumer authentication BY KATE FITZGERALD by making the consumer verification from 49% of all organizations who said methods merchants are using today, at process more streamlined, with more they supported it last year, according 84% and 78%, respectively, according merchant control over declines. Card to the survey data. to the survey. issuers are working now to implement Cardinal’s own payment verification Other methods include device veri- the new version for merchants during service, Consumer Authentication, fication directly from the merchant and the second half of this year. which leverages existing 3-D Secure Facebook logins, at 25% each, followed To gauge industry interest in 3-D protocols, continues to be most popular by email verification (22%), with declin- Secure 2.0, payment authentication outside the U.S. ing numbers of other methods down to provider CardinalCommerce asked More than 57% of merchants par- online PIN debit and American Express hundreds of payments industry profes- ticipating in the survey in Africa use SafeKey at 3% each, according to the sionals about their expectations for the Cosnumer Authentication, compared survey. updated tool. Nearly half, or 46% of respondents, said the most important feature needed in the 3-D Secure is an intuitive consumer interface that won’t interrupt the consumer shopping experience unnecessarily. About one in five merchants surveyed said they want 3-D Secure to provide more data points to make nuanced deci- sions about suspicious transactions, and 18% said they want the new version to support in-app, mobile and non-browser purchases, reflecting the rise in mobile e-commerce. What’s least important to merchants considering 3-D Secure 2.0 is support for specialized types of transactions, including proprietary extensions for different country and regulatory requirements. new 3-D Secure that will make it more More than a third, or 37%, of survey re- user-friendly, which suggests there’s a spondents ranked those considerations lot of interest,” said Tara Lavelle, Car- as least vital for 3-D Secure. dinalCommerce’s senior vice president CardinalCommerce conducted its of marketing. survey in October and November of The original version of 3-D Secure, 2016 among hundreds of participants introduced 15 years ago to fight e- including merchants, fraud and e-com- commerce fraud, typically required merce vendors, card issuers and card consumers to provide an additional associations. password to use their payment card CardinalCommerce currently sup- during checkout. Merchants complained ports 3-D Secure’s earlier version as part

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dents said they noticed mobile ads on their phones on a weekly or daily basis, and of those, 32% said they tap on the mobile ad with a “purpose” in mind, to either learn more or potentially make How Mobile Is Winning Users a purchase. Only 10% said they never Mobile wallets have sometimes struggled to find an audience among consumers. Finally, noticed these types of ads. shoppers are warming to the concept of smartphone payments. BY DAVID HEUN Of note to merchants and wallet providers is that 33% said they were “extremely likely” to make a purchase from their smartphone after clicking a mobile ad, with only 17% saying they would never do so. In the prior year’s Vibes report, 32% of respondents were already taking advantage of the non-payment portion of a mobile wallet by storing coupons and offers.

PAYMENTS TODAY AND INTO THE

TERMINAL SOLUTIONS

MOBILE SHOP SOLUTIONS VENDING FUTUREFUTURE EAT SOLUTIONS Apriva POS solutions give companies the ﬂexibility to choose the devices INTEGRATED SELF-SERVICE KIOSK SOLUTIONS and processors that work best for their markets. By connecting to all major wireless carriers, more than 30 T INTEGRATED payment processors, over 40 hardware R TICKETING SOLUTIONS PARK providers, plus robust API/mobile A N integration, EMV certiﬁcations, and S INTEGRATED PARKING SOLUTIONS self-service solutions, Apriva P O empowers merchants to sell anything, R onsumers are increasingly as a payments vehicle, after all ‘Pay’ is in In a survey of more than 2,000 U.S. anywhere, now and into the future. T positive about loyalty pro- the name of most of them,” said Sophie consumers from November 2016 to Janu- grams, mobile ads, chatbots Vu, chief marketing officer for Chicago- ary 2017, 91% of respondents said they Learn more at Apriva.com/ISOAgent WASH INTEGRATED VEHICLE and making a purchase based Vibes, a mobile engagement regularly participate in loyalty programs 877-277-0728 WASH SOLUTIONS from a smartphone, despite consultant and researcher. But Vibes they have joined, and 70% indicated Can early resistance to changing their research reveals that consumers find they had a more positive perception of payment habits when mobile wallets convenience “in just having a mobile a brand because it delivered digitized debuted years ago. wallet to carry cards and coupons” while loyalty cards they could use through “The mobile wallet is interesting in eliminating the need to carry plastic or mobile devices. that people think of it first and foremost cash, Vu said. Seventy-three percent of respon-

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048_ISO050617 48 4/17/2017 5:53:08 PM dents said they noticed mobile ads on That number increased to 38% in billboards. You just have to go up to the their phones on a weekly or daily basis, this year’s report. POS counter, where you maybe find out and of those, 32% said they tap on the As for payments, PayPal ranked high- if they accept a mobile wallet or not.” mobile ad with a “purpose” in mind, to est in popularity amongst respondents Consumers are not inclined to take either learn more or potentially make at 71%, Apple Pay had 33%, Android Pay too many steps to be able to use their How Mobile Is Winning Users a purchase. Only 10% said they never 30%, Samsung Pay 16%, and Google smartphone for in-store payments, Mobile wallets have sometimes struggled to find an audience among consumers. Finally, noticed these types of ads. Wallet 7%. Vu said. shoppers are warming to the concept of smartphone payments. BY DAVID HEUN Of note to merchants and wallet While the Vibes didn’t ask respon- “You have to think of the whole providers is that 33% said they were dents how many mobile payments they ecosystem for it, with the POS being “extremely likely” to make a purchase made, the rest of the research about enabled for it, and the mobile device from their smartphone after clicking loyalty and the desire to make a purchase communicating with that POS,” Vu said. a mobile ad, with only 17% saying they from a mobile ad doesn’t necessarily “There are just a lot of moving parts.” would never do so. translate to more in-store payments Mobile wallets can also become In the prior year’s Vibes report, 32% with smartphones. superfluous on a phone, Vu added. of respondents were already taking “There is still a lot of education that “Just like having hundreds of apps on advantage of the non-payment portion has to happen to increase mobile pay- the phone, if I have 30 different mobile of a mobile wallet by storing coupons ments,” Vu said. “You don’t really see it wallets on my phone it becomes overload and offers. anywhere anymore on commercials or and defeats the purpose of it.”

PAYMENTS TODAY AND INTO THE

TERMINAL SOLUTIONS

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are no consumer fees, and there is no physical card. “It’s a bit of a defeat for PayPal, which is increasingly catering to the needs of the unbanked and would had loved to Amazon Cash Meets Apple Wallet do a deal with Amazon to enable the Amazon won't be the first company to let the unbanked shop online by accepting cash at unbanked to purchase there,” said Rick partners' stores. But it is still a pioneer in how it packages the service. BY JOHN ADAMS Oglesby, president of AZ Payments Group. Amazon Cash also shares traits with PayNearMe, which works with a similar network of retailers but markets its service more for bill payment than e-commerce. Amazon’s service could also be an alternative to prepaid card companies such as Netspend and Green Dot, whose products can give unbanked consumers access to e-commerce. The Payments Industry is Fierce

mazon is lending its con- com stored-value account. the U.S., and the initial retailers in- siderable brand and heft to Systems like this are not new, and clude CVS, Speedway, Sheetz, Kum & a cash payment model that earlier models relied on consumers Go, D&W Fresh Market, Family Fare borrows a vital piece of setting up a cash load online and then Supermarkets and VG’s Grocery. real estate from Apple Pay. presenting a printed receipt, as was Besides bearing similarities to ACalled Amazon Cash, the feature the case when Walmart introduced a Walmart’s Pay with Cash service, allows cash-carrying consumers to add similar service in 2012. Amazon’s twist Amazon Cash also resembles PayPal’s funds to their Amazon.com balance by is keeping the experience decidedly MyCash card, which charges a nominal presenting a bar code to a cashier at digital, allowing consumers to store fee upfront for digital in-store prepaid a network of partner retailers. Users a reusable Amazon Cash bar code in loads to PayPal’s account, and is a major tell the clerk how much cash to add, Apple’s wallet app or on the home screen part of PayPal’s efforts to build a market between $15 and $500 at once, and the of Android devices. among underbanked consumers. The funds arrive instantly in an Amazon. Amazon Cash debuted in April in key differences for Amazon: There

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050_ISO050617 50 4/17/2017 5:26:50 PM are no consumer fees, and there is no “Amazon’s service is open to anyone is also opening a chain of bookstores, physical card. who has a mobile phone,” said Richard and is expanding its distribution and “It’s a bit of a defeat for PayPal, which Crone, a payments consultant. The fulfillment network in the U.S. is increasingly catering to the needs of system adds authentication through Amazon did not reveal terms of its the unbanked and would had loved to the phone credentials, the Amazon deals with retailers, and did not return Amazon Cash Meets Apple Wallet do a deal with Amazon to enable the login and the consumer showing his a request for comment by deadline. Amazon won't be the first company to let the unbanked shop online by accepting cash at unbanked to purchase there,” said Rick or her phone at the retailer, he noted. The launch of Amazon Cash comes partners' stores. But it is still a pioneer in how it packages the service. BY JOHN ADAMS Oglesby, president of AZ Payments “It pushes the entire prepaid market to at an unwelcome time for the traditional Group. up its game.” brick-and-mortar industry, as Amazon Amazon Cash also shares traits with Amazon can also pair the program becomes larger than most big-box chains PayNearMe, which works with a similar with its strategy to build a brick and combined, and many big-box chains face network of retailers but markets its mortar footprint by tying some ele- traffic slumps and closures. service more for bill payment than ments of traditional retail with its e- “Consumers can access to Amazon e-commerce. Amazon’s service could commerce brand. Amazon is building for whatever you want to buy. And if also be an alternative to prepaid card Go, an experimental store that doesn’t Amazon takes this to its move to open companies such as Netspend and Green require a checkout, instead using in- stores, they can squeeze out even more,” Dot, whose products can give unbanked store sensors to charge a user’s Amazon Crone said. “It would be like Trader consumers access to e-commerce. account for in-store shopping. Amazon Joe’s for Amazon.” The Payments Industry is Fierce

the U.S., and the initial retailers include CVS, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets and VG’s Grocery. Besides bearing similarities to Walmart’s Pay with Cash service, Amazon Cash also resembles PayPal’s MyCash card, which charges a nominal fee upfront for digital in-store prepaid loads to PayPal’s account, and is a major part of PayPal’s efforts to build a market among underbanked consumers. The key differences for Amazon: There

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gift cards more deeply into marketing and loyalty operations—it’s a natural evolution,” McCarthy said. Bottom-line considerations also drove the deal, as aggregating First Data’s First Data’s Role in Digital Gifting various gift card properties together The market for gift cards is still deeply dependent on plastic. First Data's agreement to form a with those of SVS also could cut opera- joint venture with Fleetcor aims to shift the balance to digital. BY KATE FITZGERALD tions costs significantly by centralizing processing, distribution and fraud management, McCarthy said. First Data has invested heavily in machine learning and over time the company plans to leverage those resources oday, less than 10% of all into the overall fraud management for gift cards sold in the U.S. all operations within the joint venture. are digital. That could start “Initially it will be business as usual, to change, as the industry’s but as we consolidate more of the ele- heavy hitters break down ments of the joint venture, we’ll have Tthe walls between their plastic and digital gift card operations to spur global growth. First Data, a major force in U.S. closed-loop gift cards, recently made a decisive move to accelerate digital gift card growth by forming a joint venture with Fleetcor, combining the two companies’ respective physical and digital gift card assets into a single unit. The deal had market advantages FROM POSSIBILITY TO PERFECTION for both sides, analysts say. First Data is already a major gift card provider in Make business bloom with cross-border the U.S., plus it has significant digital eCommerce payments that are simple, gift card assets in Gyft and Transaction Wireless, two companies it purchased global and secure. within the last few years. Fleetcor, a major player in fuel cards Deliver the ultimate in simplicity, global connectivity and payroll cards, two years ago picked ªWe think the gift card market is getting ready to move to the next generation, where digital technology will play a bigger role,º said Barry McCarthy, First Data EVP and head of network and security solutions. and security to merchants with ACI’s white label UP up Stored Value Solutions (SVS), a key player in business-to-business digital gift the acquisitions of Gyft and Transac- the joint venture has no name, but the eCommerce Payments solution. With a single cards and international markets, when tion Wireless, by using the original agenda for the venture is beginning to integration, you’ll enable connectivity to more than it purchased fuel-card giant Comdata model of the two companies as third- take shape, said Barry McCarthy, First 350 market-relevant alternative payment methods for $3.45 billion. While SVS may not party providers,” said Ben Jackson, a Data’s executive vice president and and card acquirers, while ensuring PCI compliance. mesh perfectly with Fleetcor’s other director of prepaid cards at Mercator head of network and security solutions. holdings, it dovetails nicely with First Advisory Group. “The rationale for this deal is we think Data, which has robust credit and mer- “And for Fleetcor, the deal gives them the gift card market is getting ready chant processing operations outside a way to make sure their gift card clients to move to the next generation, where LEARN MORE at aciworldwide.com/ecommerce the U.S. but lacks an international gift stay happy and have all the services digital technology will play a bigger card footprint. they need without making other major role with the growing base of younger “This joint venture is a way for First investments,” Jackson said. consumers who are focusing on mobile Data to make additional revenue from It’s still early in the process and e-commerce and corporations integrate

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052_ISO050617 52 4/17/2017 5:45:00 PM gift cards more deeply into marketing a larger pool of data to leverage with Carthy. “That’s a huge expense for a and loyalty operations—it’s a natural machine learning to get a better handle retailer to take on, and one we think is evolution,” McCarthy said. on gift card fraud,” McCarthy said. ripe for improvement.” Bottom-line considerations also drove Funneling digital gift card brands Digital gift cards also provide op- the deal, as aggregating First Data’s through a single processing hub also portunities for new types of promotions First Data’s Role in Digital Gifting various gift card properties together will open up new promotion and mar- that more companies are embracing. The market for gift cards is still deeply dependent on plastic. First Data's agreement to form a with those of SVS also could cut opera- keting channels for the joint venture’s One example is First Data’s evolution joint venture with Fleetcor aims to shift the balance to digital. BY KATE FITZGERALD tions costs significantly by centralizing corporate clients, McCarthy said. of the popular “Never Ending Pasta processing, distribution and fraud man- Digital gift cards offer vast distribu- Bowl” promotion for Olive Garden, agement, McCarthy said. tion efficiencies for brand marketers from plastic to digital gift cards. Ini- First Data has invested heavily in versus the cost of manufacturing and tially promoted only with plastic gift machine learning and over time the com- handling plastic gift cards, McCarthy cards at restaurants, First Data within pany plans to leverage those resources said. the last year enabled Olive Garden to into the overall fraud management for When a $100 gift card is sold inside launch the promotion via an online all operations within the joint venture. a gift card mall like those at supermar- “flash sale” using digital cards. Olive “Initially it will be business as usual, kets, the brand on the card’s face ends Garden’s inventory of 50,000 cards for but as we consolidate more of the ele- up paying about $4.50 altogether for the unlimited pasta deal sold out within ments of the joint venture, we’ll have distribution costs, according to Mc- seconds of going live during the latest

FROM POSSIBILITY TO PERFECTION Make business bloom with cross-border eCommerce payments that are simple, global and secure.

ªWe think the gift card market is getting ready to move to the next generation, where digital technology Deliver the ultimate in simplicity, global connectivity will play a bigger role,º said Barry McCarthy, First Data EVP and head of network and security solutions. and security to merchants with ACI’s white label UP the joint venture has no name, but the eCommerce Payments solution. With a single agenda for the venture is beginning to integration, you’ll enable connectivity to more than take shape, said Barry McCarthy, First 350 market-relevant alternative payment methods Data’s executive vice president and and card acquirers, while ensuring PCI compliance. head of network and security solutions. “The rationale for this deal is we think the gift card market is getting ready to move to the next generation, where LEARN MORE at aciworldwide.com/ecommerce digital technology will play a bigger role with the growing base of younger consumers who are focusing on mobile e-commerce and corporations integrate

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round, McCarthy said. Inc. which supports direct integration operations, Llach said. Thus, it’s likely First Data isn’t the only gift card of traditional and electronic gift cards, to be a long journey to the point where company working to aggregate digital loyalty and rewards programs into Apple digital platforms dominate the gift card gift card brands for better efficiency. Pay, said Teri Llach, chief marketing industry. Blackhawk Network in December 2016 officer for Blackhawk Network. “Some people will always stick with launched Hawk Commerce, a compre- “Due to the breadth of our product a physical gift card, while others may hensive solution enabling marketers to offerings and distribution channels, we adopt digital gift cards where they might plan, distribute and manage traditional face a number of competitors across not have purchased one before because and B-to-B gift cards and electronic gift different business sectors domestically the new channel makes it easier to use,” cards through a single channel. and internationally,” Llach said. said Mercator’s Jackson. Blackhawk also sees big opportuni- Plastic gift cards will continue to “It’s not always a zero-sum game ties from its partnership with Apple be a strong piece of the company’s with plastic.”

HOW ACCULYNK WON FIRST DATA’S ATTENTION BY BEING DIFFERENT When most of the payments industry was working to find offering across our acquiring solutions,” Foskett said. a way to accommodate the Durbin amendment’s routing Currently, Acculynk can accept Visa and Mastercard rules for EMV debit cards, First Data acquisition target transactions in the U.S. and route them over the PIN rails on Acculynk had its attention focused elsewhere. a PINless basis, saving the likes of Square and Uber a lot of The company already had an e-commerce method in money on switching fees. place for dual authorization transactions at that time, and But with First Data’s global presence, Acculynk would Acculynk CEO Ashish Bahl, who initially got involved in the be able to additionally connect to foreign debit networks in various alliances and conflicts governing debit routing and markets such as Australia and India. real-time payments, figured out fairly quickly that the best “In many of these foreign markets, like Latin America or strategy was to simply play a different game. Asia-Pacific, credit card acceptance rates are very low,” Bahl “I made the executive decision that this was not a good said. “But the government mandates have put debit cards in use of our time, as we were trying to get so much done in the hands of all of the bankable consumers, so that is part of a short period of time,” Bahl said. “We had a consultant our broader strategy and seems to be working well.” monitor it for us and if anything noteworthy came up, It’s a strategy that has shifted since Acculynk first entered we would be in a position to participate. We had a patent the payments technology arena in 2008 with its dual-factor portfolio to bring to the table that would be more than the authentication of presenting a “floating” PIN pad online average participant.” during the transaction process. That technology, called That sort of focus, from about 2011 through 2014, allowed PaySecure, especially looked like a slam dunk for Acculynk Acculynk to set up several clients — from independent debit when talk of the EMV shift began to unfold. networks to financial institutions, merchants and airlines — As the Durbin amendment’s fee caps and routing with the PaySecure online PIN debit service. mandates took a lot of steam and economics away from And First Data took notice, recently announcing a deal PIN debit transactions, Acculynk continued to stress the to acquire Acculynk and its key technologies of PaySecure advantages of PIN-less online transactions. routing, Payzur P-to-P payments and electronic payments “We went to the same debit networks and convinced them for municipalities. to do single message PIN-less and dual message PIN-less First Data has been active with Acculynk for several years, acceptance and push payments,” Bahl said. including having executive Mark Herrington join the Acculynk Acculynk had worked on PIN-less online transaction board in 2012. technology for years, so it was a strategy that paid off, giving To be sure, First Data and Acculynk have had much more the company what it felt was a wise option to complement in common the past decade than both being based in the what was becoming a crowded e-commerce security arena payments hub of Atlanta. with products like 3-D Secure, one-time passwords or PINs, “The biggest pain point with our merchants has been the and the floating PIN pad. cost of payment acceptance, and now we have a unique and With PIN-less online transactions, the consumer secure way to provide low-cost routing for them,” said Chris essentially enters a PIN and, through a provider’s Foskett, executive vice president and head of corporate and technology, the keyboard converts that PIN to different business development at First Data. numbers. While authorizing the user, it creates a sequence of Initially, First Data will integrate Acculynk products numbers that are worthless if a fraudster were to steal data into the services for enterprise clients, targeting the large as it moved along a network or was in storage. corporations, banking and government clients. “Having Acculynk positions us to be ahead of the “Maybe down the road, Acculynk technology could competition to offer technology around debit routing,” become a feature within Clover Online or Clover [point of Foskett said. “No one has a similar offering in the market sale] products, but for now it will become the integrated today.”

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Investing in Connected Retail Even if every consumer doesn't want to wear a smartwatch or high-tech glasses, there will be enough connected devices and wearables to make a difference. BY JOHN ADAMS

earable payment devices are cutting edge, fast and diverse. But they are not a steady, predict- ableW or popular consumer trend. Even so, investors see a rich opportunity to get involved in the market for wearables. “There are going to be [50 billion] connected devices, and if you have an internet connection you can turn those devices into credit cards,” said Matt Mc- Cooe, CEO of Connecticut Innovations, a Stamford–based venture capital firm that recently participated in a $10 million financing round in Dream Payments, a Toronto-based financial technology company that uses the cloud to support a SaaS approach to the Internet of Things. What’s interesting about Dream, ªThere's work to be done to make this type of technology work and there are a lot of companies that said McCooe, is its model assumes want to make it work quickly,º said MattMcCooe, CEO of Connecticut Innovations. a proliferation of IoT deployments as variety of IoT payment ideas. Disney’s can have hiccups. Amazon’s connected companies figure out what types of MagicBand has been one of the most “Go” store, which is designed to allow devices, accessories or clothing connect successful deployments, enabling pay- consumers to shop without a cashier, with consumers. While everything — ments, theme park entry and hotel room reportedly had trouble dealing with in theory — can be a credit card, not access. The wristbands reached 50% crowds. For McCooe, Amazon Go is an everything will be used as a credit card. use in 2014 and underwent an upgrade example of both the possibility and tough “One of the problems is you have the in 2016. But a similar band didn’t work evolution tied to connected commerce. technology, but you don’t have the use at HersheyPark, demonstrating that “It’s kind of like an EZ Pass,” Mc- cases,” said McCooe. even in the same category, the strategy Cooe said. McCooe has previously invested in doesn’t have consistent success. “You go through a toll booth at 55 IoT and cloud technology, but this is Elsewhere, banks such as Barclays miles per hour and don’t stop to pay. In his firm’s first investment in a startup and RBC are engaging in a variety of this case, you’re leaving the store without that tries to ease deployments of IoT IoT tests, mostly to see what will stick taking your mobile device or card out. payments in with consumers. There’s work to be done to make this The market is already filled with a But even efforts with big backers type of technology work and there are

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a lot of companies that want to make it Dream plans to work with merchant nity to expand its efforts into the U.S. work quickly,” he said. acquirers, which now have to face the market and it has the funding to do so,” Dream Payments, whose investors rapid approach of IoT. said Thad Peterson, a senior analyst at also include Toronto technology VCs “There may be 15 million payment Aite Group, who adds the challenge is Real Ventures and FairVentures, will terminals in the U.S., but there may finding the right spots in the payment use the new funding to expand outside be billions of connected devices,” said system to leverage its value. “There of Canada to the U.S. Brent Ho-Young, CEO of Dream Pay- is a lot of smoke around Internet of Its tech enables businesses to ac- ments. “Acquirers are looking to see Things payments right now, coming cess cloud-based mobile point of sale where they fit in.” from nearly every category of service technology that works on a wide range But even if Dream has the resources provider and while there’s very little fire of connected devices and operating and the ambition to expand, will be yet it will be a challenge for Dream to systems. Dream also has partnerships challenged to find a receptive audience deliver a differentiable and actionable with TD Merchant Solutions, Intuit in its new market. message to the payments community QuickBooks and TruShield Insurance. “Dream appears to see an opportu- in the U.S.”

TO PROTECT DIGITAL PAYMENTS, UBS ADOPTS E-SIGNATURES Switzerland’s UBS is adopting an advanced type of digital Naveen Jakhar, a government official in India who helps signature technology, with a range of uses that include the oversee the country’s telecom industry, also argues that capability to secure high-risk digital payments. e-commerce can benefit from e-signatures, which provide a UBS is embedding digital signature technology developed private key for the signer and a verification algorithm on the by Cryptomathic and SwissSign into its e-banking system to receiving end. augment its existing authentication system. Jakhar’s presentation notes e-signatures are UBS is starting with wealth management and e-banking, transportable, cannot be imitated and are time-stamped. which usually require customers to sign about a half For e-commerce, a digital signature can verify the payment’s dozen documents per year, but the bank expects the same sender because the digital signature key is bound to a technology can improve payment security by serving as an specific user, according to Jakhar. authentication factor. In this way, e-signatures can complement the use of EMV “We want to remove steps and simplify processes for cards at the point of sale. EMV is an anti-counterfeiting a number of our activities,” said Philipp Kuhn, a project measure, designed to assure that the person making the manager at UBS who is helping lead the e-signature transaction is the only one who can use that payment initiative. instrument at that time. The underlying technology can be used to support With e-signatures, “the idea is to emulate what happens payments use cases by adding an advanced form of digital on a chip card,” Landrock said. signatures called XAdES signatures to an XML file that is ISO In an oped for PaymentsSource, Guillaume Forget, 20022 compliant, according to Cryptomathic and SwissSign. director of product management for Cryptomathic, There are also use cases for treasury management, wrote the regulatory environment for digital signatures is invoicing and other processes related to the handling of improving, as new rules allow consumers and businesses to payments. add e-signatures to document images, giving these the same ”There are a lot of areas where we would need a signature legal status as paper-based documents. equivalent, such as for fulfillment, where this would help us,” “Electronic signatures, when properly implemented, can Kuhn said. be very helpful in combating online payments fraud,” said “An e-signature can be good at establishing non- Avivah Litan, a vice president at Gartner, and a security repudiation,” said Matt Landrock, an executive vice president specialist, who notes there is some friction to the strategy. at Cryptomathic. “We can say for certain that the user First, the technology itself is complex. “There’s a need to intended to make this transaction.” assign keys to senders and receivers, and both senders and Writing for PaymentsSource, James Gagliardi, a vice receivers need to participate in the application for it to work president at Digital River, argues digital signatures may be properly,” Litan said. necessary to protect ‘Internet of Things’ transactions such Also, the process of enrollment can be complicated, as using remote buy buttons such as Amazon Dash that according to Litan. order household items such as toilet paper or soap; or to “This is always the weakest link in any online security help secure payments for ride-sharing apps, where there system,” Litan said. is no exchange of a physical card or overt use of a mobile “Fraudsters can impersonate others or use stolen wallet. identities, at which point it doesn’t matter if the payment Gagliardi argues a digital signature can add an extra layer transaction is carried out securely because at that point a with an extra step, though it’s a small one for the consumer. fraudster is receiving the ‘secure payment,’” she said.

56 ISO&AGENT May/June 2017

056_ISO050617 56 4/17/2017 5:51:24 PM VARs VISIONARIES Q&A A renewed focus on technology and specialization

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003_ISO0417 3 4/12/17 12:21 PM VARs Visionaries and Q&A Focus on Technology Adapting to Change: and Specialization How VARs and Agents Can Value-Added Resellers & Independent Capitalize On It Software Vendors continue to up their game for ISO partnerships

By Lisa Joyce

How is the relationship between VARs, agents and their merchant customers changing? As technology evolves, merchants expect more from their VARs and agents—they want a valuable resource who will guide them into the future by recommending point of sale (POS) and payment solutions that work seamlessly together. For VARs and agents, it takes a lot to keep up with technology changes and determine which solutions work together and stand out from the crowd. But those that demonstrate expertise and provide a single source solution will differentiate themselves in a merchant’s eyes.

Do merchant acquirers and payment processors need to readjust their models to account for VARs’ and ISVs’ increasing influence in merchant acquiring? Traditional merchant acquirers and pay- The U.S. payments ecosystem is multifaceted, ment processors absolutely need to make and a an increasing number of providers are competing for adjustments, because they typically only market share. For example, the value-added resellers (VAR) and offer payments. In today’s environment, independent software vendors (ISV) marketplace is highly that isn’t enough. More organizations are fragmented, with more than 10,000 active developers, according offering bundled solutions that include to First Annapolis. POS and payment processing, driving tough competition for VARs and agents. VARs and ISVs serve an important role in helping merchant To remain competitive, VARs and agents acquirers and independent sales organizations (ISOs) make sense of a complex web of payments processing moving parts. IF YOU’D LIKE TO KNOW MORE, PLEASE CONTACT US: But for those acquirers and ISOs that serve small and mid-sized merchants, VARs and ISVs are particularly critical. call: (888) 291-7571 email: [email protected] visit: cayan.com While large merchants typically have internal IT departments to Continued on page A6

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004_ISO0506 4 4/19/17 10:55 AM VARs Visionaries and Q&A Adapting to Change: How VARs and Agents Can Capitalize On It

Cayan® provides agents and VARs with a real competitive advantage. With our unique combination of payment processing, payment technology and a variety of leading point of sale systems, Cayan enables VARs and agents the flexibility and control to easily design, install, maintain and support bundled solutions that meet the specific requirements of each merchant customer. John Buchanan, Director of Third Party Sales, Cayan

How is the relationship between VARs, should bundle payments and tablet-based agents are facing tough competition. Plus, agents and their merchant customers POS together to provide merchants with payment solutions are among the most changing? the solutions they need. complex technologies out there, and it’s As technology evolves, merchants expect difficult to be an expert in every aspect more from their VARs and agents—they As a payment technology compa- of the field. want a valuable resource who will guide ny, Cayan provides secure, affordable them into the future by recommending payments and a range of leading POS Cayan’s approach of offering merchant point of sale (POS) and payment solutions systems that can be easily bundled. acquiring, payment technology and a that work seamlessly together. For VARs variety of POS systems empowers VARs and agents, it takes a lot to keep up with What’s the key to being successful as a and agents to customize a bundled solution technology changes and determine which VAR and agent? that is easily installed and supported. solutions work together and stand out VARs and agents are most successful from the crowd. But those that demon- when they offer all-in-one solutions with What’s the best way for VARs and agents strate expertise and provide a single a tablet-based POS, payment processing to achieve a simpler life? source solution will differentiate them- and value-added services. With Cayan, Better partners. VARs and agents in selves in a merchant’s eyes. they can sell a variety of innovative POS today’s environment can only thrive if solutions, in addition to traditional pay- they offer flexibility. Many all-in-one Do merchant acquirers and payment ment processing, providing the all-in-one companies can’t offer flexibility in their processors need to readjust their models solution that meets merchants’ specific bundled solutions, and as we all know, to account for VARs’ and ISVs’ increasing needs. each merchant has unique requirements. influence in merchant acquiring? At Cayan, we enable VARs and agents to Traditional merchant acquirers and pay- This is beneficial for all parties—the VAR easily customize bundled solutions spe- The U.S. payments ecosystem is multifaceted, ment processors absolutely need to make or agent can add tremendous value for cific to their merchants’ needs. We also and a an increasing number of providers are competing for adjustments, because they typically only the merchant, thus creating stickiness and realize that dedicated support is essential market share. For example, the value-added resellers (VAR) and offer payments. In today’s environment, increasing revenue. to everyone’s success, as great support independent software vendors (ISV) marketplace is highly that isn’t enough. More organizations are ensures simple implementation and ongo- fragmented, with more than 10,000 active developers, according offering bundled solutions that include What are the biggest challenges VARs ing maintenance. We make it easy for our to First Annapolis. POS and payment processing, driving and agents are facing? VARs and agents to get their merchants tough competition for VARs and agents. With many companies offering all-in-one up and running quickly and without any VARs and ISVs serve an important role in helping merchant To remain competitive, VARs and agents payment and POS solutions, VARs and hassles. acquirers and independent sales organizations (ISOs) make sense of a complex web of payments processing moving parts. IF YOU’D LIKE TO KNOW MORE, PLEASE CONTACT US: But for those acquirers and ISOs that serve small and mid-sized merchants, VARs and ISVs are particularly critical. call: (888) 291-7571 email: [email protected] visit: cayan.com While large merchants typically have internal IT departments to Continued on page 6

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005_ISO0417_001 5 4/12/17 2:40 PM VARs Visionaries and Q&A

Continued from page A4 manage the hardware, software, and services inte- As VARs and ISVs seek to provide full solution gration that merchants need to process payments, sets, Rupert expects mergers and acquisitions to merchants with fewer IT resources are reliant on increase. “We’ll see more M&As and partnerships What is a Value Added someone else to manage the integration, explains of VARs and ISVs over the next few years as firms Jared Drieling, Director of Business Intelligence for try to buy a full suite,” he predicts. The Strawhecker Group. Acquirers and ISOs are Reseller-VAR? turning to VARs and ISVs for help in meeting these Growth Prospects merchant needs. “Acquirers and ISOs that have tried to use VAR and ISV offerings have tended to use a shotgun “Merchant acquirers and ISOs need to evolve to approach,” says Rupert. However, in order for new market demands and are looking to VARs merchant acquirers and ISOs to compete in a and ISVs to provide a bundled package of hard- Jared Drieling complex market, Rupert recommends that they ware and software that works together for their Director of Business take a step back and define their strategy. merchant customers,” says Drieling. Intelligence Strawhecker Group Instead, acquirers and ISOs need to understand Technology and Niche Markets their merchant base and its needs. Once an ac- “If you ask a payment provider what business they quirer and ISO focuses on the merchant, they can are in, many will say that they are in the technolo- then align with the right VARs and ISVs. A Value Added Reseller is a company that gy business,” says Drieling. To that end, VARs and identifies existing products and solutions ISVs are focusing on technologies such as data In addition to finding the right partners, acquirers in the marketplace, bundles them together analytics. “Data analytics is a huge value added and ISOs also need to be ready to invest in the into customized offerings to provide service,” he says. VAR/ISV relationship, including investing in train- complete turnkey solutions that best ing and product support, says Rupert. meets the needs of their clients. Jason Rupert, Senior Vice President and General Manager of the ISO Business Unit, Vantiv, agrees But the rewards may be worth the investment, Why are POS resellers useful and with Drieling that technology makes VARs and especially since acquirers and ISOs typically have often necessary? ISVs more critical to the payments ecosystem a good relationship with merchants. “By partner- POS resellers are useful and often than in the past. “VARs and ISVs provide a level of Jason Rupert ing with a VAR/ISV, the acquirer or ISO is able necessary because they can identify their technology innovation that is higher than ever,” Senior Vice President and to develop an even deeper relationship with the client’s pain points and customize the says Rupert. General Manager merchant that will result in more loyalty,” says appropriate solution based on their ISO Business Unit Rupert. “Acquirers and ISOs do a really good job specific client’s needs. That way their He adds that many are also specializing in vertical taking care of merchants since they tend to have client isn’t overbuying or under buying industries such as healthcare, retail, or legal. “VARs such a high-touch approach. When you lay an their point of sale solution. They also and ISVs are becoming experts in a variety of vertical industries, offering from a VAR or ISV on top of that relationship, it becomes provide more personal customer service, which is positive for merchant acquirers and ISOs,” says Rupert. a homerun for the acquirer/ISO.” often times even face to face. “The most successful VARs and ISVs are providing an end-to-end vertical solutions.” Drieling concurs that a partnership with a VAR or ISV can make Do VARs and ISVs play an good business sense for acquirers and ISOs. “We are seeing a important role in the acquisition Rupert believes that the trend toward specialization will continue. rush for acquirers and ISOs to partner with providers in specialized of new merchants in U.S. “Investment by VARs and ISVs is at an all time high. We’re seeing markets,” says Drieling. merchant acquiring? VARs and ISVs able to provide a full suite of products for a true Absolutely, VARS and ISVs play an important vertical line solution,” he notes. For example, Rupert says that Partnerships are also a way for acquirers and ISOs to differentiate role in the acquisition of new merchants in some VARs and ISVs provide a full healthcare software suite to themselves in an increasingly crowded market. “Acquirers and U.S. merchant acquiring because merchant physician offices—from point of sale to scheduling to billing. ISOs typically compete on price, but if you are a merchant, you acquirers now have a channel to bring will find value in having an integrated platform and other added new clients on due to their acquisition “Generic solutions are becoming less common,” says Rupert. benefits, such as data analytics, smart terminals, and even “Most VARs and ISVs are verticalizing their solutions as a way to loyalty and rewards programs, that a VAR or ISV can offer. These appeal to merchants.” benefits make the merchant more sticky and less likely to jump ship,” says Drieling. IF YOU’D LIKE TO KNOW MORE, PLEASE CONTACT US: SilverEdge | 4065 St. Cloud Drive, Loveland, CO 80538 call: 855-GO2-EDGE email: [email protected] visit: www.GOSILVEREDGE.com

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006_ISO0417 6 4/12/17 2:53 PM VARs Visionaries and Q&A

As VARs and ISVs seek to provide full solution sets, Rupert expects mergers and acquisitions to increase. “We’ll see more M&As and partnerships What is a Value Added of VARs and ISVs over the next few years as firms try to buy a full suite,” he predicts. Reseller-VAR? Growth Prospects “Acquirers and ISOs that have tried to use VAR SilverEdge is passionate about helping small to medium-sized businesses succeed by providing and ISV offerings have tended to use a shotgun customized turnkey business solutions. SilverEdge has a wide suite of solutions to increase their client’s approach,” says Rupert. However, in order for profits and deliver an enhanced customer experience. Whether a business is looking for tablet-based merchant acquirers and ISOs to compete in a point of sales, integrated loyalty programs, customer analytic tools, or cash advances, SilverEdge has a complex market, Rupert recommends that they best in class solution. take a step back and define their strategy. Ken Salazar, President and CEO of SilverEdge

Instead, acquirers and ISOs need to understand their merchant base and its needs. Once an acquirer and ISO focuses on the merchant, they can then align with the right VARs and ISVs. A Value Added Reseller is a company that and adoption of new technology solutions identifies existing products and solutions versus coming onboard strictly for lower In addition to finding the right partners, acquirers in the marketplace, bundles them together rates or a commodity product. and ISOs also need to be ready to invest in the into customized offerings to provide VAR/ISV relationship, including investing in train- complete turnkey solutions that best Can a POS Reseller be an ing and product support, says Rupert. meets the needs of their clients. individual, a large company or anything in between? But the rewards may be worth the investment, Why are POS resellers useful and Yes, a company of any size can be a POS especially since acquirers and ISOs typically have often necessary? Reseller assuming they put in the right a good relationship with merchants. “By partner- POS resellers are useful and often infrastructure and obtain the ability to ing with a VAR/ISV, the acquirer or ISO is able necessary because they can identify their support a large client base. An individual to develop an even deeper relationship with the client’s pain points and customize the can also be a POS Reseller if they partner merchant that will result in more loyalty,” says appropriate solution based on their with the right company that can fully Rupert. “Acquirers and ISOs do a really good job specific client’s needs. That way their support their client’s needs. taking care of merchants since they tend to have client isn’t overbuying or under buying such a high-touch approach. When you lay an their point of sale solution. They also Do Merchant Acquirers need to offering from a VAR or ISV on top of that relationship, it becomes provide more personal customer service, readjust their models to account a homerun for the acquirer/ISO.” often times even face to face. for VARs’ and ISVs’ increasing influence in merchant acquiring? Drieling concurs that a partnership with a VAR or ISV can make Do VARs and ISVs play an Yes, it is extremely important that good business sense for acquirers and ISOs. “We are seeing a important role in the acquisition merchant acquirers make it easy for rush for acquirers and ISOs to partner with providers in specialized of new merchants in U.S. VARs’ and ISVs’ to do business with them. markets,” says Drieling. merchant acquiring? That is everything from making it easy Absolutely, VARS and ISVs play an important to integrate new technology to providing Partnerships are also a way for acquirers and ISOs to differentiate role in the acquisition of new merchants in the appropriate amount of sales support themselves in an increasingly crowded market. “Acquirers and U.S. merchant acquiring because merchant to take care of the acquisition of new ISOs typically compete on price, but if you are a merchant, you acquirers now have a channel to bring merchants. will find value in having an integrated platform and other added new clients on due to their acquisition benefits, such as data analytics, smart terminals, and even loyalty and rewards programs, that a VAR or ISV can offer. These benefits make the merchant more sticky and less likely to jump ship,” says Drieling. IF YOU’D LIKE TO KNOW MORE, PLEASE CONTACT US: SilverEdge | 4065 St. Cloud Drive, Loveland, CO 80538 call: 855-GO2-EDGE email: [email protected] visit: www.GOSILVEREDGE.com

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007_ISO0417 7 4/12/17 12:22 PM MARKETING SOLUTIONS GROUP

RESEARCH 008_ISO0417 8 4/12/17 12:22 PM Innovation Takes the Stage at MWAA 2017

Kick Your Company’s Creativity into High Gear! Today it’s not enough to simply think out of the box – you’ve got to get rid of the box. The Midwest Acquirers Association Annual Conference has always kept Payments professionals ahead of the curve in one of the fastest-moving industries on the planet. So it only follows that the 15th anniversary conference would focus on new ways of thinking, new tools and technology, and new ways to boost your bottom line. Join us in Chicago, July 18-19, for two days of transformative takeaways: • The true Power of Change • How to create a culture of innovation in your company • Cross-selling strategies to increase revenue and retention • The advantages Payment Facilitators bring to your table • ACH game-changing future…how can you beneﬁ t? • And more … Discounted room rates are available while they last. See the full agenda, register and pay at www.midwestacquirers.com.

MWAA 2017 2 TUESDAY JULY 18 – WEDNESDAY JULY 19, 2017 2 CHICAGO MARRIOTT DOWNTOWN MAGNIFICENT MILE

065_ISO05062017 65 4/13/2017 4:27:37 PM TECHNOLOGY MOBILE

popular products as well as purchasing patterns and customize their offerings accordingly. Smart machines also allow operators to identify malfunctioning machines quickly—sometimes even Vending Machines Get Smart before problems affect customers. As more vending machines and kiosks connect to the internet, more opportunities open up The ability to offer digital coupons for marketing, payments and loyalty. BY CHERYL WINOKUR MUNK and special promotions to customers who opt in presents another potential revenue-generating opportunity. Some smart vending machines also have the ability to make product suggestions based on biometric data. For the new generation of Inter- past few years, for instance, U.K.-based net-connected vending Costa Coffee has been using cameras machines could make dig- to discern things like gender, estimated ging for spare change and age and mood and make recommenda- fiddling with uncoopera- tions accordingly, says David McCarthy, tiveA dollar bills a thing of the past. At a director of products at Bsquare Corp., growing number of locations, customers a Bellevue, Washington, IoT software can now pay by credit card and mobile solutions firm that works with Costa. wallet. Smart vending machines are also The market for so-called smart vend- showing promise for the cannabis space, ing machines that accept credit cards which now relies heavily on cash trans- and other payment types is growing actions. quickly, presenting a revenue oppor- Dickson of Solutions Vending says tunity for payments companies. Today, her company hopes to someday use its only about 10 percent of the world’s 17 technology to help cannabis dispensa- million vending machines are Internet- connected—a figure that is expected to reach 20.3 percent by the end of 2020, according to the business intelligence TARGETING THE FRICTION BETWEEN ADS AND `BUY BUTTONS' firm Berg Insight. Byte Foods, a smart vending machine according to Phani Pandrangi, chief Given the pressures of cart abandonment and “The vending machine market is supplier in San Rafael, California, doesn’t product officer at Kii, a Toyko-based showrooming brought about by digital marketplaces, growing aggressively, and right now even accept cash in its refrigerator-like IoT company that creates software traditional retailers are trying lots of ways to fight back with digital techniques of their own. many of those payments are generated machines, according to Lee Mokri, co- solutions for industries such as vend- One possible inflection point is enabling people to buy and in cash, so it’s a big opportunity,” says founder and head of sales and marketing. ing. Customers can also use the app to item directly from an advertisement, rather than redirecting Dawn Dickson, founder of Solutions Instead, customers pay for restaurant- determine what items local machines to a checkout page from an ad. It seems intuitive, but there are many obstacles in the way of bringing such a concept to Vending in Columbus, Ohio. quality fresh food with their credit, stock, whether they are currently work- market. The company started in 2012 as a debit or prepaid card. Payments using ing and which payment options they OmnyWay, the company that helps power Kohl's Pay, smart vending solutions manufacturer mobile wallets and bitcoin are in the support. “Smart vending is going to be among other retail clients, aims to solve this issue with the launch of ZapBuy, which it introduced to enable consumers and now makes smart vending machine works for later this year, Mokri says. a pretty integral part of lots of venues to ªzapº an ad to purchase the item. software to retrofit traditional machines. “People aren’t carrying as much cash going forward,” he says. Placing a buy button in an ad is more challenging than a The software allows machines to accept today. We’re using the payments tools For vending operators, smart vend- purchase trigger on a website because the user has already signed on in the latter case, according to Tim Sloane, a variety of payment types, including that people already have.” ing machines are invaluable because vice president of payments innovation and director of the Apple Pay, Android Pay, credit, debit To be sure, the allure of smart vend- of their inventory management tools. emerging technologies advisory service at Mercator. and prepaid cards. Bitcoin will be sup- ing machines goes beyond payments. They keep track of sales in real time ªThere have been several attempts at advertising buy buttons via bar codes, but none have been successful,º ported later in 2017, and within the few For instance, with an app on their to help vendors more efficiently keep Sloane said. years customers will also be able to pay phone, customers can locate certain them stocked. Analytical tools also OmnyWay, which this week changed its name from using facial recognition, Dickson says. Internet-connected vending machines, help vendors identify popular and un-

66 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 67

066_ISO050617 66 4/17/2017 6:01:33 PM popular products as well as purchasing patterns and customize their offerings accordingly. Smart machines also allow operators to identify malfunctioning machines quickly—sometimes even Vending Machines Get Smart before problems affect customers. As more vending machines and kiosks connect to the internet, more opportunities open up The ability to offer digital coupons for marketing, payments and loyalty. BY CHERYL WINOKUR MUNK and special promotions to customers who opt in presents another potential revenue-generating opportunity. Some smart vending machines also have the ability to make product suggestions based on biometric data. For the past few years, for instance, U.K.-based Costa Coffee has been using cameras to discern things like gender, estimated age and mood and make recommendations accordingly, says David McCarthy, director of technology to help cannabis dispensa- to niche payment types. Pandrangi of products at Bsquare Corp., a Bellevue, ries accept other forms of payment. Kii predicts many more opportunities Washington, IoT software solutions The machines would use biometrics to come, such as vending machine in firm that works with Costa. to verify the identity of customers and college dorms that accept student ID Smart vending machines are also ensure they have the proper credentials cards as payment. showing promise for the cannabis space, to purchase cannabis products. Once “This is a new frontier,” says Mc- which now relies heavily on cash trans- verified, customers could pay for the Carthy of Bsquare. “People have been actions. products using credit card, debit, pre- using smart vending technology for a Dickson of Solutions Vending says paid, mobile wallet, or bitcoin. few years in different ways, but it’s still her company hopes to someday use its Smart vending may also open doors in the early days.”

TARGETING THE FRICTION BETWEEN ADS AND `BUY BUTTONS' according to Phani Pandrangi, chief Given the pressures of cart abandonment and OmnyPay to reflect the growing move by payments product officer at Kii, a Toyko-based showrooming brought about by digital marketplaces, technology vendors to reposition themselves as providers of IoT company that creates software traditional retailers are trying lots of ways to fight back with broader merchant services, uses a mix of mobile technology digital techniques of their own. and links to ad networks to move consumers directly from an solutions for industries such as vend- One possible inflection point is enabling people to buy and ad to checkout. ing. Customers can also use the app to item directly from an advertisement, rather than redirecting ªThis one strikes me as different because it isn't a solution determine what items local machines to a checkout page from an ad. It seems intuitive, but there claiming to be out of the box for all ads, instead it is retailer are many obstacles in the way of bringing such a concept to specific,º Sloane said. ªThis retailer focus is key to enabling a stock, whether they are currently work- market. lower friction implementation.º ing and which payment options they OmnyWay, the company that helps power Kohl's Pay, Otherwise, ZapBuy sticks to the basics. It uses QR codes support. “Smart vending is going to be among other retail clients, aims to solve this issue with the and other technology to allow smartphones to capture launch of ZapBuy, which it introduced to enable consumers information about a product through a scan. This scan works a pretty integral part of lots of venues to ªzapº an ad to purchase the item. for print, display, social media, email, television and other going forward,” he says. Placing a buy button in an ad is more challenging than a media. For vending operators, smart vend- purchase trigger on a website because the user has already QR codes are an old technology, but is a go-to choice for signed on in the latter case, according to Tim Sloane, many mobile wallet providers because it does not require ing machines are invaluable because vice president of payments innovation and director of the any advanced technology on the part of the consumer. of their inventory management tools. emerging technologies advisory service at Mercator. Starbucks, Kohl's and Chase Pay all use QR codes or bar They keep track of sales in real time ªThere have been several attempts at advertising buy codes with their mobile wallets. buttons via bar codes, but none have been successful,º In the case of ZapBuy, once the consumer scans an ad for to help vendors more efficiently keep Sloane said. a branded product, he or she will find out where that product them stocked. Analytical tools also OmnyWay, which this week changed its name from can be purchased and offer an instant payment. help vendors identify popular and un-

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067_ISO050617 67 4/18/2017 4:22:21 PM PROCESSING INTERNATIONAL

“We don’t want the merchants to have to worry about that.” CLSA did not make an executive available for an interview, nor did it disclose the size of the investment. China’s Payment Opportunities Despite deregulatory signals from the While many payment companies are focused on supporting Chinese travelers as they journey Chinese government, even the largest abroad, there is another opportunity to address sales into the country. BY JOHN ADAMS U.S. payment brands, including Visa and Mastercard, have found it challenging to establish a local presence, partly due to local processing regulations designed to protect UnionPay’s near monopoly over card payments. Also, fewer European and U.S. merchants have relationships with Chinese e-commerce company Ali- baba and its digital transfer subsidiary Alipay than with more recognizable Western brands such as PayPal.

here’s been a lot of funding based e-commerce companies that But recognizing the size is all that’s flowing into technology manages payments and other functions easy. China’s local payment ecosystem that targets the spending on behalf of foreign retailers wishing makes it hard for external companies to of Chinese travelers as they to sell into China. enter the market on a variety of levels, visit other countries. But There is a clear opportunity, if not a according to Azoya. Tthis narrow use case isn’t the only op- necessity, for merchants to sell inside “There are numerous challenges, portunity for investment and innovation. China. It’s a huge market that consis- including technical, regulatory and CLSA Capital Partners has made an tently sets e-commerce records and an marketing,” said Franklin Chu, a New investment in Azoya, a Shenzhen, China- appetite for mobile technology. York-based managing director at Azoya.

68 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 69

068_ISO050617 68 4/17/2017 5:30:46 PM “We don’t want the merchants to have “The Chinese payments market has also have a complex transaction process- to worry about that.” been rather closed for many years and ing chain that can pose challenges for CLSA did not make an executive has been notoriously difficult to enter for outside merchants. available for an interview, nor did it Western companies,” said Zil Bareisis, “We maintain and manage every of disclose the size of the investment. a senior analyst at Celent. “While it’s their business in China, starting from China’s Payment Opportunities Despite deregulatory signals from the opened up a bit in recent years, it remains creating a Chinese e-commerce site, While many payment companies are focused on supporting Chinese travelers as they journey Chinese government, even the largest a complex market with dominant local processing the payments, customer abroad, there is another opportunity to address sales into the country. BY JOHN ADAMS U.S. payment brands, including Visa and players and its own set of regulations, service, tax and duties, etc.,” Chu said. Mastercard, have found it challenging to so local partnerships can be crucial to Azoya also shares some of the risk. establish a local presence, partly due to success.” It collects payments in local currency, local processing regulations designed to Azoya attempts to circumvent that by then converts the currency at the end of protect UnionPay’s near monopoly over being the merchant of record for local the month to pay the foreign merchant. card payments. Also, fewer European transactions, then relying on its existing Azoya’s fees are based on the volume and U.S. merchants have relationships relationships with UnionPay and Alipay of successful transactions. with Chinese e-commerce company Ali- to smooth issues such as compliance The company is hoping to benefit baba and its digital transfer subsidiary and the original merchant’s need for a from the popularity of U.S. brands with Alipay than with more recognizable relationship with a Chinese card issuer, Chinese consumers, an affinity borne Western brands such as PayPal. UnionPay or Alipay. Chinese payments of increasing international travel.

But recognizing the size is all that’s easy. China’s local payment ecosystem makes it hard for external companies to enter the market on a variety of levels, according to Azoya. “There are numerous challenges, including technical, regulatory and marketing,” said Franklin Chu, a New York-based managing director at Azoya.

68 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 69

069_ISO050617 69 4/17/2017 5:30:47 PM TECHNOLOGY DEVELOPMENT

nology providers chasing merchant marketplaces, has led Dwolla to remove some of the barriers to using its application programming interface. It’s also taking its faster ACH payments Dwolla Builds a Simpler Sandbox product out of pilot. Open software development tools have empowered many merchants, but this technology Dwolla’s app Transfer is designed to may still seem out of reach to those without programming expertise. BY JOHN ADAMS require less technology knowledge at the onset. A tool for small to medium sized businesses, Transfer does not necessitate coding skills to set up payments rails, and works with existing small-business commerce software such as JotForm, Shopify and Due. The move also follows a strategic evolution away from consumer-facing products toward business services at Dwolla. Part of the strategy is targeting the digital marketplaces that are increasingly popular because the model allows fulfillment and cross-border transaction issues to be digitized, enabling a very small business to sell across the country, or outside of the country. It’s an industry that’s also attracted WePay, which uses its API tools to enable these marketplaces to power payments for sellers. BlueSnap in January introduced Payments for Marketplaces, which is designed to execute payments quickly, manage sales reporting and onboarding for new sellers. BlueSnap’s platform also manages commissions for sellers. “We see digital marketplaces using this, but operations without a developer on staff that don’t immediately have the payments volume to require a larger system,” Lampe said. “But they do need he app economy has grown Today, the audience consists of many businesses with new payment needs. We a way to pay out funds quickly in a way big enough now that many businesses that have broader needs and spotted a company that authenticates that’s compatible with their current of the early rules no longer less expertise. luxury handbags, for example. They tech stack.” apply. “It’s not just ‘emergency’ payroll buy the handbags, authenticate them Dwolla’s Transfer costs 0.5% per The audience itself is services,” said Lampe, who’s a spokes- and then sell them on the other side. transaction, with a $5 maximum fee. Tchanging, said Dwolla’s Jordan Lampe. person for the Des Moines, Iowa-based They have to get payouts to sellers Once the merchants’ volume reaches In the early days, real-time payment Dwolla, which offers digital payments very quickly.” a critical mass, it can upgrade to a $250 capabilities appealed most to companies and merchant developer tools. “One of The proliferation of real-time pay- monthly package without transaction paying freelancers and contractors. the things you find is there are a lot of ment needs, and the growth of tech- fees.

70 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 71

070_ISO050617 70 4/17/2017 5:42:54 PM nology providers chasing merchant The vendor has taken its Same Day value-added messaging to the real-time marketplaces, has led Dwolla to remove ACH product out of pilot and making payment, Coven added. some of the barriers to using its ap- it available to all approved Access API To fuel its efforts, Dwolla in Janu- plication programming interface. It’s users. ary raised $6.85 million in a funding also taking its faster ACH payments During testing, Dwolla found same round led by Union Square Ventures Dwolla Builds a Simpler Sandbox product out of pilot. day ACH credits aid cash management and Founding Group, along with Next Open software development tools have empowered many merchants, but this technology Dwolla’s app Transfer is designed to internally and allow businesses to sell Level Ventures, Ludlow Ventures, High may still seem out of reach to those without programming expertise. BY JOHN ADAMS require less technology knowledge at expedited payments to their own clients, Alpha, Firebrand Ventures and Detroit the onset. A tool for small to medium Lampe said. Ventures. sized businesses, Transfer does not “The expectation is that ultimately Dwolla says the funds it rasied in this necessitate coding skills to set up pay- there will be opportunities for a broader round will be used to hire and expand ments rails, and works with existing set of alternative digital providers of sales operations at its headquarters in small-business commerce software such faster real-time payments, particularly Des Moines, Iowa. as JotForm, Shopify and Due. on the consumer side,” said Linda Coven, “The Midwest has a wealth of re- The move also follows a strategic a senior analyst at Aite Group. sources, but its biggest strength is its evolution away from consumer-facing The banks will continue to dominate people and that’s a competitive advan- products toward business services at on the wholesale side though there tage we plan on continuing to invest Dwolla. will be opportunities for financial sup- in,” Ben Milne, CEO, said in a press Part of the strategy is targeting the ply chain providers that can provide release. digital marketplaces that are increasingly popular because the model allows fulfillment and cross-border transaction issues to be digitized, enabling a very Let Be Your EMV Expert! small business to sell across the country, Your EMV Eco-System Made Affordable! or outside of the country. eProcessing Network has the secure, payment solutions to help you stay current with the It’s an industry that’s also attracted technologies that keep your merchants connected. And with real-time EMV capabilities, retailers WePay, which uses its API tools to enable can not only process contact and contactless payments, Apple Pay and Android Pay, they’re able to these marketplaces to power payments manage their inventory as well as balance their books via QuickBooks Online. for sellers. BlueSnap in January introduced Payments for Marketplaces, which is designed to execute payments quickly, manage sales reporting and onboarding is EMV-Certified for new sellers. BlueSnap’s platform also manages commissions for sellers. “We see digital marketplaces using this, but operations without a developer on staff that don’t immediately have the payments volume to require a larger system,” Lampe said. “But they do need businesses with new payment needs. We a way to pay out funds quickly in a way spotted a company that authenticates that’s compatible with their current luxury handbags, for example. They tech stack.” buy the handbags, authenticate them Dwolla’s Transfer costs 0.5% per and then sell them on the other side. transaction, with a $5 maximum fee. They have to get payouts to sellers Once the merchants’ volume reaches very quickly.” a critical mass, it can upgrade to a $250 eProcessingNetwork.com © eProcessing Network, LLC. All Rights Reserved. The proliferation of real-time pay- monthly package without transaction All trademarks are the property of their respective holders. ment needs, and the growth of tech- fees.

70 ISO&AGENT May/June 2017 isoandagent.com May/June 2017 ISO&AGENT 71

071_ISO050617 71 4/17/2017 5:42:55 PM LOYALTY RESTAURANTS

Dining with Mobile and Loyalty If it seems EMV is slow to take hold at restaurants, it may be because other emerging technologies are taking priority. BY KATE FITZGERALD

.S. restaurants’ EMV EMV’s anti-counterfeiting proper- a unit of TD Bank, said they don’t cur- migration has lagged be- ties address one narrow concern, but rently offer mobile payments. And 75% hind other retail catego- mobile and digital payments open up said they don’t currently offer a loyalty ries for several reasons, entirely new business opportunities, or rewards program. including the hassles of as evidenced by the recent deluge of “Restaurants are dealing with a lot Ureplacing centralized payment systems order-ahead apps. And even this trend of pain points with respect to payments, with pay-at-the-table routines that chip leaves a lot of room for innovation. mobile and loyalty and most of them are cards often require. But another reason: About 68% of restaurant executives still in the very early stages of finding Restaurateurs have other priorities. surveyed by TD Merchant Solutions, solutions,” said Doug Mearkle, head

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of U.S. cards and merchant services for TD Bank Merchant Solutions. TD Bank commissioned the study among top restaurant decision-makers at the International Restaurant and Foodser- vice Show in New York March 6 and 7, 2017, working with Prosek Partners to gather and collate the data. About a third of survey respondents said their existing point of sale systems aren’t configured to support mobile payments, while the remainder said they don’t offer mobile payments because they see no need or customer demand for it. Restaurants are taking many ap- proaches to handle mobile payments, pay-at-the-table and loyalty, including building entirely new systems and introducing new apps. About 80% of CPK’s customers con- and experimenting,” said Robbins of Los Angeles-based California Pizza nect with CPK via their mobile devices Paytronix. “But restaurant operators Kitchen (CPK) in February unveiled a and many already were members of the actually are willing to take risks and new system in its 200 U.S. stores that Pizza Dough Rewards program, which they tend to be entrepreneurial at their married its existing restaurant man- provided an easy ramp to migrate cus- very bone marrow, but they want to be agement and payment system from tomers to use the app for ordering and sure before they commit to solutions.” NCR with a new, app-based payments checkout in the restaurant. In addition, Another company that began in the approach from Newton, Mass.-based CPK continues to support the option of restaurant loyalty-program business Paytronix Systems Inc. a traditional checkout minus a mobile that’s now moving into payments is “The omnichannel capabilities of device, Ceraolo said. Punchh, a Mountain View, Calif.-based the new CPK app, in concert with our Paytronix began as a specialist in firm launched in 2010. mobile-optimized digital and social restaurant loyalty and gift card pro- “For most restaurant chains, loyalty marketing strategy, allow us to reach grams that’s steadily developing broad is fundamentally broken, because the guests on their preferred technology integrations to link restaurant chains’ CRM element is all hindsight-driven platform in a relevant and seamless existing payment systems with broad with people signing up later or not at way,” said Ashley Ceraolo, CPK’s senior loyalty programs. all,” said Shyam Rao, Punchh’s CEO. vice president of marketing, in a recent Other Paytronix clients include “More restaurant chains in the U.S. blog post. Panera Bread and Bloomin’ Brands, now accept payments through mobile CPK’s in-app mobile payment system which operates the Outback, Carrabba’s channels, but the majority don’t ac- integrates with the CPK Pizza Dough and Bonefish restaurant chains. knowledge that they know who you are Rewards program that enables diners to While restaurants have been rela- or how often you visit.” earn, track and redeem purchases and tively slower to adopt EMV because Punchh got its start providing loy- rewards. It also allows them to opt in to food services have a lower proportion alty services to chains including Cici’s, receive real-time marketing messages of counterfeit card fraud, as an industry Moe’s Southwest Grill, Noodles & Co. for in-restaurant, online ordering and restaurants are not afraid to embrace and Quizno’s and now it’s adding pay- takeout experiences. new technology. ments through direct integrations and Diners pay by linking a payment “There’s a lot of chaos and innovation partnerships with several clients. card within the app, speeding up the going on right now with technology San Francisco-based payments pro- checkout process by about 12 minutes, around mobile payments and loyalty, vider Revel Systems worked with Punchh which drives more efficiency during and many restaurants are watching ex- last year to service large restaurant peak hours, Paytronix said. amples like Starbucks and others closely chains.

74 ISO&AGENT May/June 2017

074_ISO050617 74 4/17/2017 5:56:04 PM Delivering the news that matters the most to the merchant acquiring industry

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075_ISO05062017 75 4/13/2017 4:27:43 PM d33449_ISO&Agent_house ad final.indd 1 1/10/17 3:23 PM SECURITY BIOMETRICS

One-Size-Fits-All Authentication Now that consumers are more comfortable with certain forms of biometrics, is there a chance to use a single device to provide security across all their accounts? BY JOHN ADAMS

n an increasingly digital world, retailers are working to bring transactions closer to the shopper and further away from traditional hardware. IBiowatch brings that trend about as close to the shopper as possible, with a product that can be used once to provide authentication for multiple services. “The ‘things’ connected to the Inter- net do not have a way to authenticate the human being interacting with them,” said Matthias Vanoni, cofounder and CEO of Biowatch, a Lausanne, Switzer- land startup that uses vein recognition technology to authenticate people for a variety of purposes. “But the ‘things’ can recognize a device like a wearable. words in favor of more advanced meth- the [consumer] can use the wearable Biowatch’s recognition of the wearable ods, security providers will be pressured to authenticate third party services means recognizing the human being to find ways to make biometric options using their protocol with no need for behind that.” more reliable and attractive to users. biometric or any further authentica- Biowatch has been gradually at- In the past, biometric authentication tion,” Vanoni said. tracting attention since its founding methods have had a tough time taking Biowatch will use Visa’s API to create two years ago. It recently drew a $1.2 hold in the retail world, with one of the a Visa Ready payment product that can million seed round and a cash stipend most prominent flare-outs being the integrate into banks’ mobile apps, expos- of about $35,000 for winning a Visa Pay By Touch system. ing Biowatch to an addressable market developer contest at the recent Mobile Biowatch’s play is to authenticate a of millions of consumers. Biowatch can World Congress, a prize that comes single time for multiple services. It uses work with other parties through its own with a significant boost to the startup’s a wrist vein reader to scan a person’s application programming interface. visibility and reputation. veins and runs that image against a pre- Body recognition sounds futuristic, “Visa will be useful to increase our registered template. Feedback tells the but it’s not a brand new concept. RBC credibility towards partners and thus user the authentication is successful, has deployed a payment wristband in accelerate product development,” Vanoni then tells the user to close the clasp on partnership with Mastercard and Bi- said. “That will allow us to integrate the wearable. When the clasp is closed, onym that uses heart rhythms to verify more easily into bank applications the company’s technology monitors the users. And facial recognition is behind worldwide.” clasp to ensure it remains closed. the increasing number of “selfie pay” As companies attempt to retire pass- “As long as [our] system is active initiatives.

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076_ISO050617 76 4/17/2017 5:28:29 PM Delivering the news that matters the most to the merchant acquiring industry

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077_ISO05062017 77 4/13/2017 4:27:45 PM d33449_ISO&Agent_house ad final.indd 1 1/10/17 3:23 PM TECHNOLOGY POINT OF SALE

How Tech Is Propping Up Cash Digital payment technologies often have the goal of `competing' with cash, moving more payments to card network rails. But technology can also keep cash flowing at stores that prefer it. BY KATE FITZGERALD

s many tech companies push to counter the use of cash in favor of cards and mobile wallets, some merchants are pushing backA by urging the use of cash. Certain sectors already offer a cash discount—the practice is common with gasoline sales—but on a one-off basis many merchants are unsure how to handle the practice. Despite cash being seen as a counter to the costs and complications of digital alternatives, cash use can also benefit from a bit of targeted technology. That’s the case for The House, a sports bar and grill in Arlington, Texas, which recently adopted SignaPay’s PayLo software to automate cash discounts and saw its payment costs fall by nearly $1,000 a month, said owner Brewer said. The House also benefits offer a cash discount, but they don’t Mike Brewer. from improved cash flow since adopting know how to execute the whole thing,” “We were paying about $1,100 a PayLo, according to Brewer. said Joe Martillo, CEO of SignaPay’s an month in credit and debit card fees Customers had mixed reactions Irving, Texas-based supplier of payment each month and after introducing cash when Brewer introduced PayLo a few terminals and software. discounts, that number dropped to about months ago. PayLo applies a “customer service $140,” Brewer said. “Some people didn’t like it, but we fee” to each sale made with the com- The House’s average transaction is have a lot of regulars and once they pany’s payment terminal. The customer about $20, and when a server rings it understood the system, they haven’t can skip paying the fee by opting to up, PayLo calculates the interchange, had a problem with it,” Brewer said. pay with cash or a gift card, which the card association and network fees to be SignaPay developed its software for merchant must explain, in accordance about 79 cents, according to Brewer. The merchants who said they wanted to with card network policies. software then offers a discount of that push cash over cards struggled with The PayLo software calculates a amount for customers who pay in cash. the complexity of determining an ap- fee based on the interchange, card “A fee as little as 79 cents may not propriate cash discount and explaining association and network fees for each sound like much, but for a small busi- how it works. transaction, which may vary based on ness it adds up throughout the year,” “Most merchants know they can the card, according to Martillo.

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078_ISO050617 78 4/17/2017 5:29:14 PM Advertising Index

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isoandagent.com May/June 2017 ISO&AGENT 79

079_ISO050617 79 4/18/2017 3:38:39 PM B-TO-B PARTNERSHIP

PayPal, Oro Partner on B-to-B PayPal has evolved a lot over the years, but it still has a strong reputation as a P-to-P brand. Its technology could also help emerging players in the B-to-B market. BY KATE FITZGERALD

ro Inc., a rising force in the emerging $7 trillion business-to-business e-commerce market, is teaming with PayPal to Ostreamline transactions as more global suppliers move their sales online. PayPal has created a fully integrated payments solution for Oro’s open-source website, OroCommerce, to handle the process for buyers to pay for, track and receive goods and services. Oro’s CEO is Yoav Kutner, who was a co-founder and chief technology officer at Magento, an open-source e-commerce platform launched in 2008 that eBay Inc. acquired in 2011 for $180 million. In 2010 Magento inked a similar deal to Oro’s with PayPal, Kutner said. Magento’s platform was built to support online stores for consumers, involved in a single transaction. “One of transactional history facilitates customer whereas OroCommerce enables B-to-B the complexities of B-to-B e-commerce service and cross-selling, among other sellers to display vast, complex catalogs is there is no single buyer—there’s often things, Leggett added. designed to sell products and services to someone in research, a buyer, a manager One of the new frontiers in B-to-B other businesses, according to Kutner. and a sales rep—and they’re all parties e-commerce is expanding general sales Oro, founded in Los Angeles in 2012, to one purchase,” Kutner said. and marketing opportunities via mobile has quickly expanded to 190 employees The OroCommerce website also devices, according to Kutner. with offices in Ukraine, Poland and enables buyers to associate details of “At expos and tradeshows, a seller Germany, and its deal with PayPal will products they buy from Oro with their can show a prospective customer the likely accelerate growth, Kutner said. own CRM systems. catalog via Oro on a mobile device, “Once a buyer’s payment creden- A B-to-B e-commerce platform with and generate a price quote on the spot tials are stored via PayPal with Oro, it built-in CRM integration is a rare combi- instead of waiting until they get back to opens up more advanced use cases,” nation, said Kate Leggett, a CRM expert the office to create a transaction through Kutner said. who is a vice president and principal paper and phone calls,” Kutner said. Examples include scenarios where a analyst with Forrester. Having a 360-de- Oro recently raised $12 million in company buying supplies from a B-to-B gree view of prior communications and financing from Highland Capital Eu- e-commerce site has a team of employees interactions along with customers’ rope.

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