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Purchase Volume Worldwide 2015 Vs. 2025

Purchase Volume Worldwide 2015 Vs. 2025

FOR 46 YEARS, THE LEADING PUBLICATION COVERING PAYMENT SYSTEMS WORLDWIDE JANUARY 2017 / ISSUE 1102

Acquisitions/Investments in Mobile Payments 2016 There were 34 acquisitions and 57 angel, seed, venture, and strategic investment transactions in and mobile Purchase Volume money transfer companies in 26 countries last year. These Worldwide 2015 vs. 2025 Tl. > see p. 10 Results Consumer and commercial and prepaid cards issued in the by American Express and third parties generated $695.44 billion in purchase volume at merchants in 2016, down > see p. 9 Payment Processing for Merchant Bots There are at least 7.22 billion consumer messaging app accounts worldwide on the 10 largest platforms, led by Facebook Messenger (1.10 bil.), WhatsApp (1.10 bil.), WeChat (1.10 bil.), QQ 4.8 / 9.7 0.4 / 0.7 0.6 / 1.3 3.0 / 7.0 0.3 / 1.1 11.4 / 35.1 103% up 84% up 111% up 137% up 264% up 208% > see p. 8

Discover Financial Results U.S. CANADA LATIN MIDDLE ASIA- AMERICA EAST/ PACIFIC Credit and prepaid cards carrying the Discover brand generated AFRICA $121.47 billion in purchase volume at merchants in 2016, up 2.5% © 2017 The Nilson Report over the prior year. Cash advances (including balance transfers) of > see p. 8 Neustar Mobile Fraud Fighting Platform Purchase Volume by Global Brand Cards Sales projections indicate that online shopping from mobile — Projected to 2025 devices will be on a par with desktop devices in five years. With General purpose payment cards with global brands — that gain will come a concurrent rise in mobile payment fraud. American Express, Diners Club/Discover, JCB, Mastercard, > see p. 5 UnionPay, and Visa — collectively generated purchase Deloitte Cards & Payments Consulting volume of $20.422 trillion in 2015. They are projected to generate $54.891 trillion by 2025. These card-present and More than a thousand consultants contribute to Deloitte’s global card-not-present payments for goods and services are Cards & Payments practice, which saw revenues increase more than generated by credit, debit, and prepaid cards. 10% last year. Airlines, utilities, car companies, mobile network There are more than 60 domestic-market-only general > see p. 12 purpose card brands. They include , RuPay, Star, Pulse, , Shetab, , Carte Bancaire, BC Card, Accel, Software-based TEE for Mobile Cards Hipercard, Banricompras, , Redcompra, KB Kookmin, Mobile payment wallet providers including handset manufacturers, , Samsung Card, Post Finance, Pagobancontact, and financial institutions, and mobile network operators use outside Multibanco. Those figures are not included here. technology companies to provision tokenized card credentials > see p. 6 > see p. 7

INSIDE 2 – 4 Fast Facts CHARTS 7 Market Shares of Purchase 10, 11 Acquisitions & Investments: 5 Innowi Mobile POS Device Volume Worldwide Mobile Payments and Mobile 8 U.S. 2016 Money Transfers — 2016 9 American Express U.S. 2016

© 2017 HSN Consultants, Inc. THE NILSON REPORT VISIT US ONLINE AT WWW.NILSONREPORT.COM SAGE PAYMENT SOLUTIONS, the U.S. division of U.K. SYNCHRONY FINANCIAL, the largest private label credit software company Sage Group, might be available for card issuer in the U.S., has received a multiyear renewal of acquisition. Sage Group has hired investment bankers to its consumer financing program with department store Belk. consider options. SPS is the 25th largest U.S. merchant Tom Quindlen is CEO at Synchrony Financial, acquirer. Paul Bridgewater is CEO, (571) 612-6127, (203) 585-6244, [email protected], [email protected], www.sage.com. www.synchronyfinancial.com.

GROOVV POS FLEX is an alternative to countertop POS INTEGRATED SOLUTIONS GROUP is a terminals. It features a Samsung Galaxy Tab E 9.6-inch newly formed business segment of the largest U.S. tablet with an EMV-compliant and NFC-enabled card- merchant card acquirer. It is focused on providing software FAST reader device from Total Merchant Services. Groovv POS tools that independent software vendors, value-added Flex comes pre-programmed with software for inventory resellers, software developers, system integrators, and other

FACTS management, reporting, and integrated marketing. The market participants can use to integrate with First Data’s system connects wirelessly to a cash drawer, receipt printer, platforms including Clover. EJ Jackson is SVP, Integrated JANUARY 2017 barcode scanner, and kitchen printer. John Gibson is Senior Solutions at First Data, (650) 864-1077, edward.jackson@ ISSUE 1102 Manager at Samsung Electronics America, (201) 298-6987, firstdata.com, www.firstdata.com. [email protected], www.samsung.com/us. GALITT U.S. is accredited to provide Discover D-PAS Joe Kaplan is CEO at Total Merchant Services, Consulting Services. Assistance is available for EMV issuing, No paid (916) 742-8421, [email protected], EMV acquiring, and transit. Loic Berton is SVP-Emerging advertising. www.totalmerchantservices.com. Payments at Galitt U.S., (312) 730 5662, l.berton@ NYCA, a venture capital firm focused on innovation in galitt.com, www.galitt.com. No sponsored , has closed its latest capital fund with BMO HARRIS BANK has launched a lineup content of more than $125 million in total commitments. Hans Morris with Masterpass, Android Pay, and . All can any kind. Ever. is Managing Partner, (212) 893-1177, hmorris@ hold BMO Harris Bank credit and debit cards for purchases nycapartners.com, www.nycapartners.com. in-store, in-app, and online. Patrick Strieck is Managing It is never is offering an application called Verifone Points Director U.S. Retail and Small Business Payments at Redemption to the FIS Premium Payback Network, which BMO Harris Bank, (312) 461-3997, [email protected], permissible for supports loyalty points redemption at U.S. gas stations for www.bmo.com. subscribers to 8.5 million consumers from 3,100 banks. When a shopper BBVA COMPASS has renewed its processing agree- forward or print presents a loyalty card at a Verifone device, it will prompt ment with TSYS, which will continue to provide account this issue. Doing so them automatically if enough points are available to pay for management, card and statement production, fraud and risk violates copyright their purchase. Verifone Points Redemption is aimed at management, web and mobile service support, and other laws. retailers, restaurants, and other places where value-added services for the bank’s consumer, commercial, consumers use their payment cards. Glen Robson is EVP and and small business portfolios. Pam Joseph is Head of Verifone Solutions, (408) 334-4534, glen.robson@ President at TSYS, (706) 644-8750, [email protected], verifone.com, www.verifone.com. Bruce Lowthers is EVP at www.tsys.com. Jon Groch is EVP, Global Payment System FIS Global Retail Payments, (904) 438-6549, Director at BBVA Compass, (312) 279-2038, jon.groch@ [email protected], www.fisglobal.com. bbva.com, www.bbva.com. Conferences & Seminars

SEAA 2017: March 20-22, 2017. Cardware 2017 — Payment Insights: TRANSACT 17 — Powered By ETA: May 10- The Le Meridien, Charlotte, North Carolina. May 1-3, 2017. The Hilton Niagara Falls/ 12, 2017. The Mandalay Bay Convention Center, Estimated attendance: 750-800. Cost for the Fallsview Hotel & Suites, Niagara Falls, Ontario, Las Vegas, Nevada. Estimated attendance: 4,000. three-day conference is $99 in advance, $150 Canada. Estimated attendance: 350. Cost for the Cost for the three-day conference is $1,345 for at the door. Contact John McCormick at three-day conference is $1,108 ($1,450 CAD). nonmembers. Subscribers to The Nilson General Credit Forms, (314) 216-8600, Contact Ellen Bansil at ACT Canada, Report will receive a $250 discount. (Use [email protected]. Register at (905) 426-6360 x 122, [email protected]. code NIL250.) Contact Del Baker Robertson at www.southeastacquirers.com. Register at www.cardware.ca. ETA, (202) 828-2635 x204, [email protected]. Register at www.etatransact.com.

2 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive 1 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive THE CARDLINX ASSOCIATION is offering an open source card-linking CORRECTION: BANESCO BANCO UNIVERSAL was ranked as the fifth software suite from . Companies can build on the code, which largest credit card issuer in Venezuela in issue #1098 measured by outstand- provides API to payment networks. Microsoft is a member of CardLinx. ings at year-end 2015. We made an error in our foreign exchange conversion. Download at www.cardlinx.org. The bank should have ranked as Venezuela’s second largest credit card issuer.

ALTERNATIVE PAYMENTS, provider of local payment options to global ACCEO TENDER RETAIL, a payment processing and device management brand credit and debit cards, has been integrated with Lime Light CRM, service used by retailers in Canada and the U.S., now links to Mastercard provider of campaign management services that help marketers streamline Payment Gateway Services. The combination provides PCI-validated pay- the creation and management of direct marketing campaigns. Alternative ments through tokenization, point-to-point encryption, EMV support, hosted Payments can provide direct debit services to 520 million consumers in the payment pages, SecureCode, and Masterpass. Joey Vaccaro is VP Business European Union. Wolf Kring is President at Alternative Payments, Development and Strategic Alliances at ACCEO, (514) 868-0333 x4420, (626) 585-1814, [email protected], [email protected], www.acceo.com. Tim Fletcher is General Manager www.alternativepayments.com. Mastercard Payment Gateway Services Americas, (914) 249-2655, tim.fletcher@.com, www.mastercard.com. WEX, a provider of payment products to corporations and small businesses, will offer its small business customers access to OnDeck’s suite of loans (up EQUINOX PAYMENTS has integrated its entire of POS terminals with to $500,000) and lines of credit (up to $100,000). Brian Fournier is VP, Fleet Android Pay. Its client Walgreens is the first retailer to integrate a loyalty Channel Partner at Wex, (207) 523-7792, [email protected], program with Android Pay. One tap of a phone at the terminal conveys loyalty, www.wexinc.com. Jerome Hershey is VP at OnDeck, (646) 412-5470, coupon, or prepaid card information so consumers can earn points or have [email protected], www.ondeck.com. discounts applied. Rob Hayhow is VP at Equinox, (416) 621-7410 x504, [email protected], www.equinoxpayments.com. CDS SOFTWARE and PAYMENT SAVVY have formed a partnership. Payment Savvy is a fully integrated payment processing company that SECURIONPAY, a gateway for online and mobile card payments accepted specializes in medium- to high-risk companies. CDS Software has offered by merchants in Europe, now also offers “Cross-Sales,” software those mer- collection software since 1970. Chad Deatherage is CEO at Payment Savvy, chants can use to boost sales by contacting buyers with offers for products (214) 431-3173, [email protected], www.paymentsavvy.com. and services related to their initial purchases. Lucas Jankowiak is CEO, Brett Menzie is Director of Sales at CDS Software, (805) 527-9977, bmenzie@ 34 (6) 7901-5699, [email protected], www.securionpay.com. collectone.com, www.collectone.com. CIRCULO DE CREDITO, which claims a 45% market share among credit PLANET PAYMENT offers airline members of UATP more than 300 local bureaus in Mexico, says it has been using the FICO Extended Score to score and alternative forms of payment to global brand credit and debit cards. people with little or no credit history, and has increased the percentage of Ralph Kaiser is CEO at UATP, (202) 774-5065, [email protected], people who can be scored from 45% to 85%. FICO and Circulo de Credito www.uatp.com. Paul Levine is SVP at Planet Payment, (561) 859-0901, developed a customized score based on the high correlation of an individual’s [email protected], www.planetpayment.com. risk with the risk level of people who live at the same house The partners aim to calculate a risk score on some 10 million Mexicans who lack credit history. RS2’S BankWORKS payment processing software for global acquiring and Jim Wehmann is EVP for Scores at FICO, (612) 758-5617, jimwehmann@ issuing was recently given a benchmark test on hardware from Hewlett fico.com, www.fico.com. Juan Manuel Ruiz Palmieri is Director at Packard Enterprise (HPE). It processed up to 62 million transactions per Circulo de Credito, 52 (55) 1720-9977, [email protected], hour, which is 8,600 authorizations per second. The average response time www.circulodecredito.com.mx. was 0.096 seconds for the web-based user interface, 0.05 seconds for web services, and 0.025 seconds for the merchant portal. Radi Abd El Haj is CEO at RS2, (356) 2134-5857, [email protected], www.rs2.com. Management Changes

THE U.K. COMMERCIAL COURT has found in favor of Mastercard and Janet Johnston has been appointed Head of Payment Services at rejected claims by a group of U.K. retailers including Asda, Morrison, New Raphaels Bank, 44 (203) 751-1600, [email protected]. Look, and Next that Mastercard’s interchange fees restricted competition and Edward Garcia has been appointed Chief Operating Officer at infringed on U.K. and European Union laws. Mastercard continues to fight Pivotal Payments, (514) 313-1190, [email protected]. litigation brought by U.K. merchants in more than 10 other lawsuits. Devora Henderson has been appointed Vice President, Retail, Americas at Diebold Nixdorf, (330) 490-4000, devora. YELLOWPEPPER has announced new partnerships with Banco Davivienda [email protected]. Russell Scudder has been and Bancoomeva to provide mobile payment services in Colombia. Previously, appointed President and Chief Operating Officer at ZipLine, YellowPepper announced agreements with Banco Colpatria and Banco (954) 449-9540, [email protected]. Tracy Cray has been Corpbanca. YellowPepper has bank customers in Mexico and Ecuador. appointed Director of Compliance at Serge Elkiner is CEO at YellowPepper, (786) 924-3814, selkiner@ Chargebacks911, 44 (203) 750-5197, [email protected]. yellowpepper.com, www.yellowpepper.com.

© 2017 HSN Consultants, Inc. THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 3 © HSN Consultants, Inc. 2015 THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 2 AFS, a provider of credit and processing, ATM and POS MASTERCARD has created 2KUZE, a mobile payment platform that driving, and related payment services to banks and other organizations in the connects small farmers, agents, buyers, and banks in Kenya, Uganda, and Middle East and North Africa, has launched Bahrain’s first NFC-based mobile Tanzania. Farmers can buy, sell, and receive payments for agricultural goods payment service in partnership with Ithmaar Bank and Batelco. Shiraz Ali is via their feature phone. Eighty percent of farmers in East Africa are Director – Frictionless Payments at AFS, (973) 3222-0505, shiraz.ali@ classified as smallholder because they have less than two acres of farmland. afs.com.bh, www.afs.com.bh. Michael Elliott is VP, Innovation Management and Head of Mastercard Lab for Financial Inclusion, 254 (71) 909-4000, [email protected], APRIVA, provider of end-to-end wireless transaction processing support, has www.mastercard.com. completed EMV integration and certification with Metric Parking, a provider of payment services to over 60,000 parking terminals worldwide. The AF PAYMENTS in the Philippines will offer unbanked commuters in Manila certification includes Visa, Mastercard, American Express, and Discover. multipurpose smart cards they can use for transit and purchases of goods at Peter Aylward is Managing Director at Metric Parking, 44 (179) 339-3250, stores. OT (Oberthur Technologies) will supply the cards. Peter Maher is CEO [email protected], www.metricgroup.co.uk. David Riddiford is at AF Payments, 63 (2) 810-0398, [email protected], President at Apriva, (480) 421-1210, [email protected], www.apriva.com. www.beeptopay.com. Mark Garvie is Asia Financial Services Institutions Managing Director at OT, (852) 2838-8507, [email protected], ETHOCA and FICO have formed a partnership. Card issuers using the FICO www.oberthur.com. Falcon Fraud Manager will be able to connect to Ethoca’s Global Collabora- tion Network to improve the recovery of card-not-present fraud losses and WELCOME REAL TIME’S At Store mPOS real-time reward application is minimize costs tied to the process. Robert Duque-Ribeiro is VP available to banks and merchant acquirers for their small merchant customers at FICO, 55 (11) 98111-2019, [email protected], www.fico.com. on AEVI’s Global Marketplace, which is a white-label, business-to-business Trevor Clarke is EVP, Business Development at Ethoca, (416) 849-6094, app store and cloud platform. Pierre Boces is Head of Product Marketing and [email protected], www.ethoca.com. Consulting for Welcome Real Time, 33 (4) 4297-5887, p.boces@ welcome-rt.com, www.welcome-rt.com. Mike Camerling is Chief Product CARD SOLUTIONS is offering to its boon prepaid Officer at AEVI, 44 (134) 438-4800, [email protected], Mastercard customers in France. Boon is based on an automatic app-to-wal- www.aevi.com. let integration. Georg von Waldenfels is EVP Consumer Solutions at Wirecard, 49 (89) 442-4331, [email protected], www.wirecard.com. DIGITAL RIVER WORLD PAYMENTS, a , has integrated into its online platform the ACI Pay.On Payment Gateway. ACI CO-OPERATIVE BANK (CB Bank) in Myanmar has started to issue JCB Pay.On brings Digital River bank connections, payment features, and brand platinum, gold, and standard debit cards. CB Bank is the second JCB alternative payment types, particularly in Latin America and Europe. Hayden card issuer in Myanmar. Yuji Matsushita is Country Manager at JCB Interna- Reed is SVP and General Manager at Digital River, (952) 253-1234, hreed@ tional (Thailand) Yangon Branch, 95 (1) 860-3397, [email protected], digitalriver.com, www.digitalriver.com. Markus Rinderer is SVP at www.global.jcb/en/. U Zayar Aung is General Manager at CB Bank, ACI Worldwide, 49 (89) 452-300, [email protected], 95 (1) 378-905, [email protected], www.cbbank.com.mm/. www.aciworldwide.com. U.K. COMPETITION APPEAL TRIBUNAL has denied an appeal by AMP CREDIT TECHNOLOGIES’ version 4.0 of its proprietary automated Mastercard to reconsider its previous award of $86.4 million (£68 mil.) to lending platform for banks and other institutional lenders includes new grocery store chain Sainsbury related to fees charged on credit card functionalities such as omnichannel document ingestion and analysis, transactions. Mastercard will appeal this decision to the Court of Appeal for document management, and risk management. Thomas DeLuca is CEO, England and Wales based in London. (852) 2541-3180, [email protected], SMART2PAY, which offers online merchants local payment methods in 80 www.amp-creditech.com. countries, has added China’s WeChat Payment to its platform. APPLE PAY is being offered in Spain by Mastercard, which is working Jamie Flinterman is CEO at Smart2Pay, 31 (35) 533-5370, james@ with several issuers including Banco Santander and prepaid company Ticket smart2pay.com, www.smart2pay.com. Restaurant. Issuers receive tokens for their primary account numbers from BARCLAYCARD is embedding its bPay technology in the Mastercard Digital Enablement Service. Ovidio Egido is General Manager personalized smartphone cases available through Case Station. Cardholders for Spain at Mastercard, 34 (91) 566-2500, [email protected], can design their own cases for iPhone, Samsung, and LG handsets online www.mastercard.com. using images, texts, and designs by Case Station. BPay chips to digital MONERIS SOLUTIONS, Canada’s largest acquirer of debit and credit card wallets that can be used by anyone holding a U.K.-registered Visa or payments, has received a five-year contract extension from ATB Financial to Mastercard debit or credit card. They can be offered in a variety of wearable provide merchant services. Jeff Guthrie is Chief Sales Officer at Moneris, payment devices. Tami Hargreaves is Commercial Director, Digital Consumer (416) 734-1281, [email protected], www.moneris.com. Payments at Barclaycard, 44 (777) 619-0360, tami.hargreaves@ Teresa Clouston is EVP, Business and Agriculture at ATB, (403) 245-8110, barclaycard.co.uk, www.barclaycard.com. [email protected], www.atb.com.

4 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive 3 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Innowi Mobile POS Device

Former Motorola engineers from scanner technology and miniaturized it for the the design team for Razor and ChecOut M. The result is 1D and 2D high resolution Droid smartphones are behind the barcode scans that are design of the ChecOut M mobile completely effective for device pictured here, which is environments where expected to receive PCI DSS 4.1 consumers can check certification in the second quarter out and pay anywhere. of 2017. Start-up Innowi created The high-speed CheckOut M, which allows for scanner can also be ordering and paying from anywhere used for inventory SKU in a store while simultaneously management and price updating inventory, employee, lookup, as well as enabling CRM, and SCM management tickets to be scanned in information systems. transit applications. The device incorporates Intel’s The ChecOut M Atom 2.24 GHz processor running measures 7.14 inches either the Android Marshmallow by 3.59 inches by 0.49 or Windows 10 operating system. inches. There are front Offering a of operating systems (2 MP) and rear (8 MP) gives third-party developers more flexibility when cameras that can be used creating software for the ChecOut M. Connectivity for customer and back- options include Wi-Fi ac 2.4/5 GHz, , and office communications. Its front screen features a Its rear screen, which is used for 6.4-inch (diagonal) FHD display with a 440 NITS brightness level. Its rear screen, which is used PIN on glass, measures 2.4 inches. for PIN on glass, measures 2.4 inches diagonally. The screens are manufactured with scratch- and 4G LTE. An optional biometric fingerprint reader is drop-resistant surfaces. available for employee sign-in. Battery options offer Innowi’s chief financial backer is Whizz Systems, either 8 or 10 hours of continuous use. The ChecOut which also manufactured the ChecOut M prototypes. M is EMV Level 1 and Level 2 contact and contactless Production models will be available in the third chip certified. quarter of 2017. Most mobile POS terminals support barcode Jeffrey Brooks is Chief Marketing Officer at Innowi in scanners using the device’s built-in camera. Innowi Santa Clara, California, (408) 476-3123, jeffrey.brooks@ licensed high-end integrated peripheral barcode innowi.com, www.innowi.com.

Neustar Mobile Fraud Fighting Platform from page 1 Protecting against that fraud while “fingerprints” of mobile devices to the U.S. and Canada that permit maximizing the number of sales personally identifiable information verification of a mobile phone and (PII) of the prospective buyer, is its user, as well as a check on the currently in use by 2 of the top device’s history. Neustar can tell 10 U.S. financial institutions to if a phone number has just been assist with fraud protection in issued or has been held by the new the opening of new credit cards account applicant or prospective approved without triggering any and bank accounts. The company online buyer for up to a decade. By action by a seller’s fraud fighting is now offering its technology matching online identity data (IP team is the goal of Neustar to merchants. addresses and device identity data) Fraud Detection Solutions. The Neustar has connections to with offline identity data (name, company’s platform, which ties all mobile network operators in > see p. 6

© 2017 HSN Consultants, Inc. THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 5 Neustar Mobile Fraud Fighting Platform from page 5... address, and phone number), Neustar ties the device know through theft or from data purchased from to its valid user, creating a historical profile that other criminals. combines desktop and mobile banking transactions Customers link to Neustar’s platform through the with desktop and mobile payments. It can also extend company’s application programming interface (API). buyer profiles to include family members using The platform can be operated on a customer’s site or other devices. hosted by Neustar, which earns revenue on a per- transaction basis. ... ties the device to its valid user Neustar says its platform, in operation for 18 and creates a historical profile. months at its bank clients, approves more than 95% of all new account applications. Its success at reducing “false positives,” those transactions that suggest fraud Device fingerprinting alone does not protect might be occurring but which are actually valid, lenders or sellers from criminals who have successfully have already saved those banks millions of dollars “spoofed” a handset, which allows them to use it for in extra risk management action, such as contacting fraud. Neustar’s PII combats spoofing and can be applicants for additional information or using two- particularly helpful to call centers, where criminals factor authentication. try to obtain additional personal information about Ken Jochims is Director, Fraud and Risk Solutions at a cardholder to supplement what they already Neustar in San Francisco, California, (415) 659-1472, [email protected], www.neustar.biz.

Software-based TEE for Mobile Cards from page 1... to smartphones and wearable for Apple Pay. Software includes Cube” that protects data storage devices. Those companies, which “white box” encryption, available and sensitive logic and conducts include Sequent Software, Bell from companies including Arxan, cryptographic operations. ID, Oberthur, , and Inside Secure, and WhiteCryption. MagicCube clients also Other companies including receive a secure appliance called V-Key combine a miniCloud, which includes a encryption hardware security module and with threat trust authority. The appliance analytics to works with the Cube through a G&D, must work with multiple create what they call a virtual proprietary security connection, types of hardware and software secure element. which includes multiple technologies in mobile devices MagicCube is a start-up that technology layers, protocols, that protect credentials linked has created what to applications for payment it claims to be (including transit), government, an industry first Device agnostic software is offered healthcare, identification, loyalty, — a full, entirely to mobile wallet and IoT providers. and access control. software- Hardware that stores data based trusted and sensitive logic and executes execution environment (sTEE) encryption, and obfuscations to cryptography can come in the platform. Its patented, device handle listeners, loggers, man- form of secure elements, SIM agnostic software is offered to in-the-middle attacks, network cards, and trusted platform mobile wallet and IoT (Internet threats, and impersonation. modules. NXP and ARM are of Things) providers to be linked Unlike other software that top hardware manufacturers for to their payment application stores tokenized card credentials, secure elements in mobile devices. in the cardholder’s device. The MagicCube can facilitate offline Other manufacturers include MagicCube SDK creates an payments when a mobile phone Qualcomm, which makes chips intelligent software secure element can’t get a network signal, such as that include the secure element the company refers to as “the when underground for a transit

6 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive application. MagicCube is compliant with EMVCo the first card credential provisioning company to form token service provider specifications. a partnership with MagicCube. Sequent works with every type of hardware and software on the market that safely contains tokenized card credentials for smartphones and wearables. Sam Shawki is CEO at MagicCube in Sunnyvale, The company earns revenue from yearly license California, (650) 863-9723, [email protected], fees for the miniCloud. Each license comes with a www.magiccube.co. select number of Cubes. MagicCube has received Hans Reisgies is CTO at Sequent in Santa Clara, funding from Visa, Epic Ventures, and BVP. California, (408) 888-9080, [email protected], Sequent Software, which digitizes payment, transit, www.sequent.com. loyalty, and identification cards for wallet providers, is

Purchase Volume by Global Brand Cards — Projected to 2025 from page 1 Global brand credit, debit, expected to reach $1.260 trillion in at $0.659 trillion, up from $0.358 and prepaid cards issued in the 2025, up from $0.597 trillion. trillion in 2015. Asia-Pacific region are expected Cards with global brands from Global brand purchase volume Canada had a market share for cards issued in Spending worldwide is project- 1.75% share of the the Middle East/Africa region ed to reach $54.891 tril. by 2025. worldwide market was 1.50% in 2015. It is expected in 2015. By 2025, to reach 2.04% of the worldwide cards from Canada total by 2025. Purchase volume is to generate 63.99% of worldwide are expected to hold a 1.20% share, projected to be $1.117 trillion, up spending at merchants in 2025, with purchase volume projected from $0.307 trillion in 2015. up from a 55.87% share of global purchase volume in 2015. Asia- Pacific cards are projected to Market Shares of generate $35.126 trillion in purchase volume by 2025, up from Purchase Volume Worldwide $11.409 trillion in 2015. Cards issued in the United 2025 States held a 23.44% share of (outside) <2.0% global brand purchase volume in 12.8% 64.0% 2015. That share will fall to 17.69% by 2025, even as card spending 14.5% <2.3% <1.5% reaches $9.711 trillion, up from > 1.2% <2.9% 55.9% $4.786 trillion in 2015. 1.8%> Credit, debit, and prepaid cards 2015 in Europe with global brands 17.7% 23.4% (inside) accounted for 14.51% of worldwide purchase volume in 2015. Europe’s market share will decline to 12.79% by 2025 when purchase Change in Basis Points Asia- Pacific volume is expected to reach $7.018 Middle East/ up trillion, up from $2.964 trillion. 812 Latin America held a 2.92% Africa Latin up share in 2015. By 2025, market U.S. Canada America Europe 53 share of the region is projected to down down down slip to 2.29%. Purchase volume is 575 down 55 63 173 © 2017 The Nilson Report

© 2017 HSN Consultants, Inc. THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 7 Ingenico Payment Processing for Merchant Bots from page 1... (0.91 bil.), Viber (0.81 bil.), Instagram (0.60 bil.), customer service as well as for links to Masterpass. Tumblr (0.55 bil.), Line (0.40 bil.), Kik (0.33 bil.), and Bank of America will soon have a bot for cardholders Twitter (0.32 bil.). Businesses can engage in customer on Facebook Messenger. Technology for bots is available from companies including IBM, Kasisto, and Personetics. Merchants have also deployed bots for customer service, and they are moving quickly into bots for targeted commerce. One problem with commerce is that payments are likely to occur at another website or in an app, undercutting one of the values of using a service and commerce bot in the first place. on these and other social networks with messaging Ingenico ePayments, a payment service provider apps including Sina Weibo, Telegram, Snapchat, that handled $60 billion in card and noncard online Pinterest, Skype, and Slack using a form of artificial intelligence called a chatbot, which engages with The platform finalizes the payment consumers who type in messages. in the messaging app. American Express was the first card issuer to deploy a chatbot. That happened in September 2016 on Facebook Messenger. Amex uses its bot to advise payments last year, can embed its payment and cardholders about recent purchases as well as to make multicurrency processing service inside a merchant’s restaurant recommendations and to send messages bot, removing the need to leave the messaging app about Membership Rewards. Cardholders can also to complete a purchase. Merchants can customize a add their account details and billing information to bot user experience once and deploy it in multiple facilitate payment on Facebook for games and for messaging networks. Ingenico’s platform integrates purchases from the social network’s Shop section. with the merchant’s existing systems and finalizes the PayPal and financial institutions have rolled out payment in the messaging app. customer service bots. PayPal uses a bot for its Gertjan Dewaele is Product Intelligence & Innovation person-to-person money transfer service. It also Manager at Ingenico ePayments in Brussels, Belgium, interacts with bots deployed by merchants including 32 (2) 613-0424, [email protected], . Mastercard is building a bot for card issuer www.ingenico.com.

Discover Financial Results from page 1... $10.91 billion increased by 16.1% delinquent Discover Card U.S. 206 versus 2015. Purchase volume and for more than 30 days past the cash volume combined reached payment due date increased 2016 2015 Chg. $132.37 billion, up 3.5%. Cash by 32 basis points to 2.04%. Cards (mil.) 51.4 52.7 –2.5% volume accounted for 8.24% of Delinquencies greater than 90 Accounts (mil.) 44.3 44.8 –1.0% total volume in 2016 compared to days past the payment due date Active Accounts (mil.) 20.0 20.1 –0.5% 7.35% in 2015. at 0.97%, were up 12 basis points Transactions (bil.) 2.18 2.07 4.8% Outstanding credit card from 0.85% in 2015. Purchases (bil.) 2.13 2.03 4.5% receivables grew from $57.94 Discover brand credit cards Cash (bil.) 0.05 0.04 18.2% billion to $61.56 billion, an were also issued in 2016 by DFS Volume (bil.) $132.37 $127.88 3.5% increase of 6.3%. network partners First National Purchases (bil.) $121.47 $118.49 2.5% Net principal credit card Bank of Nebraska and Alliance Cash (bil.) $10.91 $9.39 16.1% charge-offs of $1.34 billion were up Data. However, purchase volume Outstandings (bil.) $61.56 $57.94 6.3% 10.1%. The net principal charge-off on those cards amounted to less All categories include third-party issuers, although they rate was 2.34%, up 12 basis points than 0.04% of total Discover card account for less than of Discover’s business. from 2015. purchase volume in 2016. As a © 2017 The Nilson Report percentage of total outstandings

8 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive on all Discover brand credit cards, network partners accounted for 0.06% compared to 0.07% in 2015. The number of Discover credit cards in circulation issued by DFS and its network partners combined totaled 51.4 million, down 2.5%. partners, Diners Club International, and business- DFS had net income of $2.39 billion for 2016, up to-business transactions handled for AribaPay, 4.2%. This included card, mortgage, student loan, and contributed $107 million in pretax income, up 7.0% versus 2015. Diners Club purchase volume in Diners Club purchase volume in 2016 increased 2016 increased 7.7% to $28.60 bil. 7.7% to $28.60 billion. Total volume on Pulse cards in 2016 (including purchases, cash back at the , and ATM personal loan businesses. Its Direct Banking segment cash withdrawals) dropped 8.1% to $138.00 billion. generated pretax income of $3.66 billion, up 1.2%. The number of transactions processed on the Pulse Total loans reached $77.25 billion, up 6.7%. Network totaled 3.46 billion, a decline of 11.2% from Discover’s Payment Services, a segment that 2015. includes the PIN-based Pulse Network, network

American Express Results from page 1... 3.0% versus 2015. Credit card Union, USAA, U.S. Bancorp, and down 1% on cards issued directly outstandings declined 6.3% versus . by American Express, while the prior year to Total volume cards issued by the hundreds of $101.11 billion. Cards (purchase volume partners linked to the Amex Global in circulation in the cash advances) Network Services business grew by U.S. totaled 47.5 on all American 10%. million, down 17.5%. Express cards issued In its Japan/Asia/Pacific/ Amex-branded in the U.S. was Australia region, total American cards were issued $700.40 billion in Express card volume was up 14% by Bank of America, 2016, down 3.0% on a local currency basis. For Latin Bank of Hawaii, versus 2015. Both America and Canada it was up 6%. Barclays, BBVA Compass, travel and entertainment (T&E) For Europe, the Middle East, and Citigroup, First National of volume and non-T&E volume Africa it was up 8%. Nebraska, Pentagon Federal Credit declined by 3% versus 2015. In Proprietary consumer card the fourth quarter of 2016, T&E volume on cards issued outside the volume accounted for 23% of total U.S. was up 8% on a local currency American Express U.S. 206 volume, while non-T&E volume basis, while proprietary small

2016 2015 Chg. accounted for the remaining 77%. business and corporate services Proprietary consumer volume volume on cards issued outside the Cards (mil.) 47.5 57.6 –17.5% was down 7%, while proprietary U.S. was up 7%. Accounts (mil.) 37.4 44.8 –16.5% small business and Active Accounts (mil.) 24.6 29.4 –16.3% corporate services Transactions (bil.) 4.92 5.11 –3.7% Total volume in the U.S. was volume was up 2%. Purchases (bil.) 4.88 5.08 –3.9% Worldwide total $700.40 bil., down 3.0%. Cash (bil.) 0.04 0.03 33.3% volume generated by Volume (bil.) $700.40 $721.80 –3.0% American Express cards, including Cards issued in the U.S. Purchases (bil.) $695.44 $717.29 –3.0% spending tied to cards issued generated 67.51% of total Amex Cash (bil.) $4.96 $3.71 33.7% by all third-party partners, was volume worldwide in 2016, down Outstandings (bil.) $101.11 $107.85 –6.3% $1.038 trillion in 2016, up 1% on from 70.20% on a local currency All categories include third-party issuers. a local currency basis. Also on a basis in 2015. © 2017 The Nilson Report local currency basis, volume was

© 2017 HSN Consultants, Inc. THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 9 Acquisitions/Investments in Mobile Payments 2016 from page 1... transactions are in addition to the 53 acquisitions and automakers BMW and Volkswagen. Their actions 59 investments in merchant acquiring and related preceded the announcement this month that processing companies identified in 28 countries last Germany-based Mercedes Benz, would buy mobile year, which we published in issue #1101. payment company PayCash of Luxembourg. Combined, the value of the 91 acquisition and Other companies making acquisitions were investment transactions in mobile payments and financial institutions Standard Bank and Societe mobile money transfers exceeded $927.4 million. The Generale, bill-to-mobile phone specialist Bango, and exact amount is higher payment card acquiring but isn’t known because The value of the 91 acquisitions and processors Net Element 32 transactions were and Net1 UEPS. investments exceeded $927.4 mil. disclosed without any There were 11 monetary value being acquisition transactions revealed. In particular, the value of the acquisitions in the U.S., 10 in Europe led by 4 in the U.K., 7 in Asia isn’t known because terms were not announced on 26 including 2 each in India and Vietnam, 3 in Canada, of the 34 transactions. and 3 in Africa. What is known is that acquisitions in mobile Investments in mobile payments and mobile payments and mobile money transfers occurred in money transfers occurred in 19 countries and totaled 16 countries. The 8 deals with announced values at least $413.1 million. The exact amount of the 57 amounted to $514.3 million. investment transactions is not known because only The largest acquisition with a known value was the 51 transactions were announced with financial terms $386-million purchase of Union Mobile Pay in China disclosed. No amounts are available for the other by Qingdao Haili Metal One. The second largest 6 transactions. was the $50-million acquisition in Nigeria of Vanso The largest investments based on known amounts by Interswitch. were the $60-million Series B round for in Of note were the mobile payment company India, the $50-million Series C round for MobiKwik acquisitions made in the U.S. by Germany-based in India, two $38-million rounds for U.S.-based

Acquisitions Mobile Payments and Mobile Money Transfers — 2016

Amount Amount Company Buyer (mil.) Country Company Buyer (mil.) Country Union Mobile Pay Qingdao Haili $386.0 China Onebip Dimoco * Italy Vanso Interswitch $50.0 Nigeria ParkMobile BMW * U.S. VNPT Epay UTC $33.8 Vietnam ParkX * U.S. PayPoint Volkswagen Financial $32.5 U.S. Pay2Global TerraPay * U.K. MeaWallet Seamless $4.9 Norway Paymill KliknPay * Germany BilltoMobile Bango $3.5 U.S. PayStar Net Element * U.S. CardsMobile Lanit $2.5 Russia PhonePe Flipkart * India TagPay Societe Generale 1 $1.1 France PowaPOS SuperCom * U.K. Axiologix/SLA Mobile joint venture * U.S. PowaTag undisclosed * U.K. D1 Mobile Ackroo * Canada PowaWeb Greenlight Digital * U.K. Dash Reserve * U.S. Prabhu Telenor * Malaysia Firepay Standard Bank 2 * South Africa Qarth Technologies Ola * India Glidera Kraken * U.S. Rabbit Line Pay BSS Holdings 4 * Thailand Global CashSpot Trailblazer Resources * U.S. Securus Payments Chyp * U.S. Masterpayment Net1 UEPS 3 * South Africa Transfert Credit Ding * France MiniCheckout omNovos * Canada Vietnam MPOS Tech. SoftPay Mobile * Vietnam Nexcharge Net Element * U.S. Zomaron management buyout * Canada

*Terms not disclosed. 1Purchased undisclosed equity stake. 2Purchased maority stake. 3Purchased 60. 4Purchased 0. © 2017 The Nilson Report

10 VISIT US ONLINE AT WWW.NILSONREPORT.COM Order Back Issues / Preview Upcoming Conferences / View Newsletter Archive Remitly, and a $23-million Series B round for South which also completed a $16-million series D venture Korea-based Viva Republica. funding round. There were 22 investments in Europe led by 9 in Deals in merchant acquiring and processing in the U.K., 19 investments in the U.S., 12 investments 2017 have included Advent International and Bain in Asia led by 5 in India, and 1 each in Africa, Canada, Capital purchasing ConCardis, EVO buying Sterling Latin America, and the Middle East. Payment Technologies, and Clarus Merchant Services Acquisitions and investments in mobile payments buying North American Merchant Services and and mobile money transfers continued in the first BC Technologies. month of 2017 including the $48 million in debt financing received by Sweden-based processor iZettle, Prior issues: 1100, 1098, 1096, 1094, 1092, 1090, 1088

Investments Mobile Payments and Mobile Money Transfers — 2016

Amount Amount Company Investor (mil.) Country Company Investor (mil.) Country Paytm Series B 1 $60.0 India Muume Series A 28 $2.2 Switzerland MobiKwik Series C 2 $50.0 India Shopbox undisclosed round 25 $2.2 Denmark Remitly Series C 3 $38.5 U.S. ModoPayments angel funding 25 $2.0 U.S. Remitly Series D4 $38.5 U.S. Tide seed funding 29 $2.0 U.K. Viva Republica Series B5 $23.0 So. Korea MovoCash seed funding 30 $1.8 U.S. Ping++ Series B 6 $20.0 China Covercy Tech. Trading seed funding 31 $1.5 U.K. Azimo undisclosed round 7 $15.0 U.K. Dream Payments undisclosed round 32 $1.5 U.S. Paidy Series B 8 $15.0 Japan SwissPay seed funding 33 $1.5 Switzerland Zoona Series B 9 $15.0 Zambia Toast pre-Series A 34 $1.5 Singapore GoCardless Series C 10 $13.0 U.K. Roam seed funding 25 $1.2 U.S. Afrimarket Series B 11 $11.2 France CoinTent seed funding 35 $1.1 U.S. Kyash Series A 12 $8.5 Japan Minkasu seed funding 25 $1.0 U.S. Passport Series B 13 $8.0 U.S. Cringle crowdfunding $0.9 Germany Lydia undisclosed round 14 $7.8 France Series A 36 $0.7 U.K. TransferWise undisclosed round 15 $7.5 U.S. MovoCash seed funding 37 $0.7 U.S. Seamless private placement 16 $6.0 Sweden SpeedETab seed funding 38 $0.7 U.S. Juspay Series A 17 $5.8 India Tricount seed funding 39 $0.7 Belgium Wyre Series A 18 $5.8 U.S. Droplet crowdfunding $0.6 U.K. Instarem Series A 19 $5.0 India CodiPark seed funding 25 $0.5 U.S. Mobile Credit Payment undisclosed round 20 $5.0 Singapore CashCodes seed funding 25 $0.3 Ireland PayIt Series A 21 $4.5 U.S. PaySur seed funding 40 $0.3 Brazil MobiKwik undisclosed round 22 $4.0 India soCash angel funding 25 $0.3 Singapore PayQR undisclosed round 23 $3.9 Russia My-Send seed funding 25 * U.S. TransferGo Series A 24 $3.4 U.K. PennyPass angel funding 25 * U.S. Giftagram undisclosed round 25 $3.2 Canada Reserve Diageo 41 * U.S. Flexion undisclosed round 25 $3.0 U.K. Seamless Tikvah Management 42 * Sweden PinPay undisclosed round 26 $2.5 Lebanon TransferGalaxy undisclosed round 25 * Sweden Revolut seed funding 27 $2.5 U.K. Waltz undisclosed round 43 * U.S. YouTransactor undisclosed round 16 $2.3 France Terms not disclosed. 1Led by Mountain Capital. 2 Led by GMO Payment Gateway. 3 Led by Stripes Group. 4 Combination of debt and equity. 5 Led by Goodwater Capital. 6 Led by China Broadband Capital. 7 From Fintech Fund. 8 Led by Eight Roads. 9 Including IFC and Accion. 10 Led by Passion Capital. 11 Led by Global Innovation Fund. 12Led by Jafco. 13Led by MK Capital. 14 From NewAlpha AM and Oddo Cie. 15 From Baillie Gifford. 16 From existing investors. 17 Led by Accel Partners. 18Led by Amphora Capital. 19Led by Vertex Ventures. 20Led by 2W Group. 21 Led by Advantage Capital Partners. 22 Led by Net UEPS. 23 From Sergey Kozlovsky. 24From Vostok Emerging Finance. 25Investors not disclosed. 26From Fransabank. 27 Including Index Ventures. 28 From eliad Equity Partners. 29 Including Passion Capital. 30Led by Tech Coast Angels. 31Led by SGVC. 32From Connecticut Innovations. 33 Including Edipresse Groupe. 34 Led by Aetius Capital. 35 Led by Combinator. 36Led by Gate Ventures. 37Led by Cox Orange. 38From AVenture Capital. 39From Belcube. 40 Individual investor. 41 Strategic investment. 42Increased ownership to .8 of voting shares. 43From Outfront Media. © 2017 The Nilson Report

© 2017 HSN Consultants, Inc. THE NILSON REPORT JANUARY 2017 / ISSUE 1102 / THE NILSON REPORT 11 © 2017 HSN Consultants, Inc. THE NILSON REPORT All Rights Reserved. Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for any purpose is strictly prohibited and may violate the intellectual property rights of HSN Consultants, Inc. dba The Nilson Report.

Deloitte Cards & Payments Consulting from page 1... operators, theme parks, and other Deloitte expertise includes up new vertical markets for merchants now account for more services tied to whether or not specialty processors. than half of Deloitte’s Cards & these mobile wallet operators want Other Deloitte clients in 2016 Payments clients. Merchants to be the merchant of record for included healthcare processors, have changed their thinking on all transactions including those business-to-business (B2B) and upstream and downstream. Those business-to-consumer payment services include all regulatory, processors, and processors of accounting, and tax issues insurance payments. Deloitte related to payments. can help clients with technology Deloitte creates a they implement to immediately mock-up of the mobile clear and settle micropayments wallet to give merchants for insurance on travel, scuba payments, moving beyond seeing a better understanding of both diving, skydiving, and other them as a cost center and instead the capabilities and potential products not previously available viewing them as a strategic liabilities. It also provides for monetization. asset. They are spending money consulting on on consulting and professional selecting a wallet Merchants now account for more services to control their own technology than half of the practice’s clients. mobile wallets, giving consumers provider, and the ability to load multiple then integrates, payment instruments into those tests, and deploys the wallet. For B2B processors, Deloitte wallets while influencing the Payment card issuers continue offers predictive analytics that choice of the default payment to use Deloitte to manage accelerate efficiencies in real- option, which could be a improvements in operational time ordering and receipt of proprietary card, a co-branded performance and in meeting raw materials. card, or a noncard account. growth strategies. Issuers are also Deloitte provided consulting to Merchants want their wallets looking for assistance in digitally China-based payment companies to be tied to the calendar of a adding new accounts, inclusive of that want to do business in the customer’s mobile device to all needed fraud protection. U.S., where credit card interchange influence spending decisions Deloitte served more than 100 rates remain attractive. Other “upstream” and “downstream” clients in 2016. Most were U.S.- consulting includes the use of the from what will occur on their based. Consulting was provided blockchain for loyalty points in premises. For example, a hotel for mergers & acquisitions in addition to payments. could promote a restaurant outside merchant acquiring and specialist Brian Shniderman is Principal at its own property once a guest processors as well as operational Deloitte Consulting in Phoenix, declines a promotion for an on- readiness for real-time payments Arizona, (602) 738-7600, premises eatery. That guest might in the U.S. and PSD2 in the [email protected], also want information about local European Union. That consulting www.deloitte.com. tourist experiences while staying at included how to implement the hotel and need a car rental and treasury functions that help Prior issues: 1101, 1099, 1063, 1055, other travel arrangements before replace lost “float” income. Deloitte 1046, 1034, 1029, 1006, 980, 971, they get to the property. While this sees real-time payments and 968, 959, 951, 923, 915, 908 concept has been around for some PSD2, which require expanded time, it is catching on now. transaction messages, opening

David Robertson, Publisher January 31, 2017

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