They're Laying out Big Cash for Companies in Businesses Ranging
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THETHE NETWORKS’NETWORKS’ SHOPPINGSHOPPING SPREESPREE They’re laying out big cash for companies in businesses ranging from cross-border transfers to real-time payments to fraud management. What’s behind the buying binge? Volume Sixteen, Number Nine • DigitalTransactions.net • September 2019 ALSO IN THIS ISSUE: New Life for Card on File The Next Era for Rewards Real Time’s New Reality Supplanting Passwords pax-2019-smart-retail-solutions(digitrans).indd 1 2/19/19 12:08 PM SEPTEMBER 2019 • VOLUME 16, NUMBER 9 The Networks’ Shopping Spree 24 With ntechs nipping at their heels, the payment card networks are buying up companies big and small in a range of industries. How far will the networks venture beyond their core business—and at what price? THE GIMLET EYE The Networks’ M&A Mania 4 TRENDS & TACTICS 6 Venmo Leverages After a Decade Uber Cuts the Fare Visa and Kroger: More Digital Instant Transfers As And a Merger, the It Pays For Card A Settlement Payments, More It Digs for Revenue BofA-First Data Acceptance in Routing, But Fraud Threats First, it was instant JV Closes Out The ride-share Skirmishing One thing merchants, transfer to card. Now, The storied BAMS kingpin has managed Continues banks, and ntechs instant transfer to to do what nearly agree on: Fraud is set merchant-acquiring The grocery giant is bank account. How deal will end next every major merchant to rise. PayPal’s popular P2P is looking to do—but still refusing to take year now that First Visa cards in select app is using faster Data is part of Fiserv. will this campaign payments. run out of gas? stores. Plus, Security Notes shows how identity management is critical to foiling hackers. ACQUIRING 16 MARKETING 20 SECURITY 35 Finessing Card-on-File How Tech Is Remaking Rewards A Sell-By Date for Passwords Ever more numerous digital payments From back o ces to the point of Technical advances in identi cation and and better management tools are sale, and from digital wallets to the authentication are nally establishing helping transform the venerable blockchain, ntechs are fomenting a an alternative to the alarmingly stored-credential transaction. revolution in loyalty and rewards. insecure username-password combo. NETWORKS 31 ENDPOINT 38 The New Reality in Rethinking Consumer Real-Time Payments Engagement Now that the Fed’s so-called public More and more, retailers are learning option is no longer a matter of that the key to powerful loyalty speculation, the race is on to programs lies in payments, says dominate a crucial payments market. Christopher Kronenthal. Cover Illustration: Jason Smith, Shutterstock Digital Transactions (USPS 024-247) is published monthly by Boland Hill Media LLC, 800 Roosevelt Road, Building B, Suite 212, Glen Ellyn, IL, 60137. Periodicals Postage Paid at Glen Ellyn, IL, and at additional mailing o ces. POSTMASTER: Send address changes to Digital Transactions, P.O. Box 493, Northbrook, IL 60065-3553. 2 DIGITAL TRANSACTIONS | SEPTEMBER 2019 CONTENTS SEPTEMBER 2019 • VOL. 16, NO. 9 PUBLISHER Robert A. Jenisch EDITORINCHIEF John Stewart ARE THE BIG CARD NETWORKS no longer content to be card networks? You SENIOR EDITOR Jim Daly might be excused for thinking so if you looked at the buying binge Mastercard SENIOR EDITOR, DIGITAL Inc. and Visa Inc. have embarked over the past year or so—with some participa- Kevin Woodward tion from American Express Co., as well. Much of this spending—now adding up CORRESPONDENT to billions of dollars—has focused on payments plays that have little or nothing Peter Lucas to do with payment cards (see senior editor Jim Daly’s story, “The Networks’ ART DIRECTOR/PRODUCTION EDITOR Shopping Spree,” on page 24). Jason Smith And that’s really the point. Digital payments are moving well beyond the EDITORIAL ADVISORY BOARD familiar card-based processing for in-store and online transactions that has Eula L. Adams characterized the industry for the past couple of decades. Now, we are seeing John Elliott opportunities like cross-border payments, bill payments, business-to-business Alex W. “Pete” Hart payments, and fraud and chargeback management attracting the big networks’ Former Chief Executive O cer, Mastercard International attention—and they’re writing some big checks to buy leading players. William F. Keenan There are some nuances to this shopping spree. Mastercard is intent on President, De Novo Corp. building up its ability to satisfy the burgeoning demand for real-time payments Dr. Gideon Samid (for more on this opportunity, see “The New Reality in Real-Time Payments,” Chief Technology O cer, page 31). Just this summer, Mastercard announced the biggest acquisition in its AGS Encryptions Ltd. history, laying out almost $3.2 billion for the account-to-account businesses of DIRECTOR OF ADVERTISING Denmark’s Nets Group. Robert A. Jenisch, 877-658-0418 [email protected] Visa, on the other hand, is focusing on cross-border payments and dispute- resolution services. This includes the $320.4 million acquisition earlier this year ADVERTISING SALES REPRESENTATIVES Robert Mitchell, 877-658-0418, x7 of Earthport. Not that Mastercard is ignoring this market: It was outbid by Visa [email protected] for Earthport and then bought another firm in the space, Transfast. Rob Akert, 877-658-0418, x6 So what’s going on? If you’re AmEx, Mastercard, or Visa, non-card payments [email protected] are an enticing field for expansion at a time when merchants and regulators Digital Transactions, Digital Transactions News, are increasingly putting pressure on card-based fees. This is especially true for and DigitalTransactions.net are publications of Boland Hill Media LLC, 800 Roosevelt Road, cross-border payments, an enormous market little penetrated by cards. Suite B212, Glen Ellyn, IL 60137 And, as fraud losses continue to mount, technologies that combat charge- John Stewart, Managing Director backs and various forms of fraud can be lucrative—and can be developed and Robert A. Jenisch, Managing Director For advertising information, call deployed more nimbly if you own them. It’s no coincidence that Visa bought 877-658-0418. To subscribe or Verifi shortly after Mastercard snapped up Ethoca. give us a change of address, go to www.digitaltransactions.net and click on But perhaps the biggest opportunity for expansion-by-acquisition lies in “Subscriber Care” or call 847-559-7599. faster payments. Companies are coming at this market from multiple direc- The views expressed in this publication are tions, including cryptocurrency (see Facebook: Libra). Mastercard got an early not necessarily those of the editors or of the members of the Editorial Advisory Board. jump with its acquisition of Vocalink, developer of the technology undergird- The publisher makes reasonable e orts to ensure the timeliness and accuracy of its ing the United Kingdom’s real-time system and a key component of The Clear- content, but is not engaged in any way in ing House’s Real Time Payments network. The Fed’s decision to jump into this o ering professional services related to nancial, legal, accounting, tax, or other market only intensifies the urgency to claim share now. matters. Readers should seek professional Where will this shopping spree lead the payments industry? Those who distrust counsel regarding such matters. All content herein is copyright © 2019 Boland Hill Media the big networks are wary. Others see opportunity. We’d bet on the latter camp. LLC. No part may be reproduced without the express written permission of the publisher. John Stewart, Editor | [email protected] Subscription prices: $59/year for subscribers in the United States; $69/year for Canadian subscribers. All other subscribers, $119/year, payable in 4 DIGITAL TRANSACTIONS | SEPTEMBER 2019 U.S. currency. EVERYTHING YOU NEED FROM ONE FAMILY OF COMPANIES THE COMPANIES OF GENERAL CREDIT FORMS ARE READY TO MEET ALL YOUR POINT-OF-SALE NEEDS Forms, Rolls & Labels • Custom Printing POS Deployment, Depot & Configuration Revenue Generating Supply Resale Programs Custom Kitting, Distribution & Shipping Purchasing & Inventory Management www.gcfinc.com • 888.GCF.NEWS GCF_digitaltransactions_2019_v1.indd 1 5/10/19 2:46 PM trends & tactics VENMO LEVERAGES INSTANT TRANSFERS AS IT DIGS FOR REVENUE With real-time payments in the House Payments Co., a processing Such revenue-raising services headlines these days, it’s not sur- platform owned by 25 of the nation’s are important for Venmo, which prising payments companies are largest banks, including Chase. is generally free to users for peer- jumping on the faster-payments TCH launched RTP in November to-peer transfers. Venmo’s rapid bandwagon (more on this on page 2017 and has brought 15 institutions growth has forced PayPal to seek 31). But some, like PayPal Holdings live so far. Earlier in the month, the out sources of revenue for usage, Inc., are finding ways to use speedier Federal Reserve said it will launch including acceptance fees to mer- funds to bolster revenue. PayPal last a real-time payments service called chants and now levies for instant month announced its latest instant- FedNow by 2024. transfers. For example, PayPal transfer service, this one allowing The new service for Venmo fol- introduced instant transfers last Venmo users to move funds in min- lows PayPal’s move in March to make year for Venmo users who want to utes to their bank accounts. instant transfers to bank accounts move money to a linked debit card, The new service relies on PayPal’s available for PayPal users. That ser- with the same 1% charge. connections through JPMorgan Chase vice, too, relies on the link to TCH. Just how many Venmo users & Co. to the Real Time Payment (RTP) And pricing for both services is the there are was a closely guarded network offered by The Clearing same: a 1% fee, with a $10 cap.