Special Money20/20 Edition...Opportunity: Integration Making payments just one of many features at...

FALL 2015

payments industry insights journal

Strategies to:

1 3> Use the Internet of Things in your business plan

How merchants and acquirers have an opportunity to capitalize

19> Understand what millennials really want

Creating an effective engagement strategy

49> Take ownership of your customers’ financial health

Collaboration and concern are key in product development

plus

09> Understanding Europe’s fintech renaissance

23> A rivalry continues: chip and PIN vs. chip and signature

27> Who’s getting funded in the crypto-currency horse race?

37> The next big opportunity at the point of sale: integration

cover story

The Future of Loyalty

Marketing for Retailers

and Brands

Four trends that encourage

repeat customers for

tomorrow’s commerce

Special Money20/20 EditionFollow us on Twitter @ngenuityjournal for live updates from the show.

35Going Beyond the Status Quo to Secure Financial TransactionsAnd why every payment should begin with user authentication

cover story

3The Future of Loyalty Marketing for Consumers and BusinessesFour key trends that will shape the loyalty marketing industry

features

45 Payments Profiles 60 Seconds With Anil Aggarwal A founder of Money20/20 and career entrepreneur shares some personal and professional thoughts

47 Policymakers at Work A View From Washington Payments regulations and legislative news from Capitol Hill

49 Perspective in Payments Why it’s Time to Take Ownership of Your Customers’ Financial Well-Being Collaboration and concern are key for product development in fintech

7Not So Fast — How Mobile Wallets Can Overcome Major Obstacles to AdoptionWhile leaving your wallet at home sounds neat, there’s quite a way to go

17The Complexities of Overdrafts and Fees in an Income-Challenged EconomyEvolving overdraft fees in an era where more consumers have irregular incomes

19Millennials and Financial Services: What They Want, What They Don’t, and WhyUnderstanding a generation to create an effective engagement and retention strategy

37The Next Great Payments Opportunity: IntegrationMaking payments just one of many features at the point of sale

41Rising from the Ashes, How the Credit Industry Transformed Post-CrashA revolution in lending and credit analysis

13How the ‘Internet of Things’ Will Spawn New Business ModelsWhy merchant acquirers have opportunity to capitalize

9Understanding Europe’s Fintech RenaissanceWhy cross-border collaboration will define the future of financial services in Europe

313D Printing and its Implications for RetailersIt’s more than cool technology — it’s a game-changer

27The Leaders in the Crypto-Currency HorseraceWho is getting funded in crypto as VCs pony up?

23Chip and PIN vs. Chip and Signature: A Rivalry Nears Historic ProportionsIs a signature equal to a PIN when it comes to chip cards?

1 n>genuity Fall 2015 www.tsys.com 2

n>genuityFall 2015

Volume 8, Number 2

n>genuity® journal features industry

articles on global payments topics and

is published by TSYS.®

editorial

Editor In Chief: Virginia Ann Holman

Managing Editor: Erin M. Sarris

Editorial Coordinator: Stan Merritt

editorial board

Charles Marc Abbey

Anil Aggarwal

Sean Banks

Deborah Baxley

Carol Coye Benson

Virginia Ann Holman

Kenneth Howes

Steve Mott

Joanne Robinson

Patricia Sahm

Matt Simester

Scott Talbott

Karen Webster

contributing editors

Cyle Mims

Rebecca Stephan

Robin Keegan

production

Design and Creative Direction: Laura ChampionPaula Sutton

Printing: Columbus Productions, Inc.SM

subscribers

To request additional copies, make

comments or request electronic

delivery, contact Stan Merritt

at +1.706.641.6586 or

[email protected].

TSYS Marketing

One TSYS Way

Post Office Box 2567

Columbus, GA 31902-2567

For more information, visit our website

at www.ngenuityjournal.com.

© 2015 Total System Services, Inc.® All rights reserved worldwide. Total System Services, Inc. and TSYS ® are federally registered service marks of Total System Services, Inc., in the United States. n>genuity in action: n>gen

SM is a service mark of Total System Services, Inc., in the United States

and in other countries. Total System Services, Inc., and its affiliates own a number of service marks that are registered in the United States and in other countries. All other products and company names are trademarks of their respective companies.

The information in this document is confidential and proprietary. Reproduction, in part or whole, is strictly prohibited without written permission from TSYS.

contributors

Andrew Morris: Andrew Morris is senior vice president, head of content for Money20/20. He leads content development, including speaker selection/recruitment and all agenda planning for Money20/20’s flagship event in the U.S. and is a contributor to content for Money20/20 Europe.

Charles Keenan: Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997. His work at the American Banker included writing about credit and debit cards, merchant processing, and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health care, and is based in Los Angeles.

Pat Patel: Pat Patel is the content director, Money20/20 Europe. With more than 15 years financial services experience, Pat started from an actuarial and risk background at Chubb Corporation and Cardif Pinnacle, a BNP Paribas Group company. He then spent eight years at VocaLink, one of the largest clearing houses in Europe, in a variety of roles including market intelligence, corporate strategy and product management. He brings deep knowledge and insight of real-time payment systems, mobile payments, e-Commerce, the European financial services, payments and emerging fintech landscape.

Steve Mott: Steve Mott is a 25-year veteran of the electronic payments industry, specializing in transaction economics, innovative uses of debit networks, authentication and security technologies, and emerging alternative payments types and venues such as stored value, online and mobile commerce and transacting over social networks. As principal of BetterBuyDesign, a payments consultancy, Steve conducts strategy, product, technology and market assessments for banks, processors, networks, technology providers and merchants, and advises a number of investment firms on industry trends and developments.

Stan Merritt: Stan Merritt is the editorial coordinator for n>genuity journal and a member of the Global Brand & Corporate Communications team at TSYS. In addition to writing industry articles, he focuses on studying payments industry trends, product innovations, regulatory issues and game-changing technology. Prior to joining TSYS, Merritt was engaged in the private practice of law for more than 15 years.

Roger Alexander: Roger Alexander is a non-executive director of Accourt Ltd., a UK-based consultancy specialising in the payments industry. He had an extensive career in payments, primarily with Barclays, but prior to his retirement in 2008 he was CEO and President of Elavon Merchant Services in Europe. In addition to Accourt, Roger has a portfolio of other non-executive roles across Europe.

Rob Wells: Rob Wells is marketing director and resident bitcoin enthusiast at Money20/20. Rob brings a background in marketing and hospitality, along with an MBA, to his third straight year at Money20/20.

Mark Beresford: Mark Beresford is a director located in the London office of Edgar, Dunn & Company (EDC). Before joining EDC, Mark was a program director and client engagement manager with significant experience in strategic business planning, product development, business process improvement and service delivery gained on several long and short-term assignments in a variety of blue chip organizations.

Chris Souther: A near-Atlanta native, Chris Souther spent the early 90s in the U.S. Air Force, then as a civilian network engineer before returning to school and launching his marketing communications career. Since then, Chris has worked with industry pioneers such as Internet Security Systems, IBM and Verifone. Chris is now the content director for Money20/20 U.S.

Rick Oglesby: Rick Oglesby heads up the payments research division at the Double Diamond Group. He is a respected industry veteran and research professional with more than 20 years of industry knowledge and solid research methodology experience, and he specializes in merchant acquiring, new product development, product management, and emerging payments strategies.

Sanjib Kalita: Sanjib Kalita is chief marketing officer of Money20/20, the largest global event focused on payments and financial services innovation. A fintech leader for almost 15 years, he has worked for large organizations like Google, Intel and Citi. He splits his time between Northern Virginia and New York City.

Anil D. Aggarwal: Anil D. Aggarwal is the chairman & CEO of Money20/20. He previously started two emerging payments processors — TxVia, acquired by Google in 2012, and Clarity Payment Solutions, acquired by TSYS in 2004. He has raised over $75 million in venture capital from investors that include Oak Investment Partners and Bain Capital Ventures. Throughout his career, Anil has been committed to industry development initiatives, including founding the Network Branded Prepaid Card Association (NBPCA), a leading nonprofit trade group.

Scott Talbott: Scott Talbott, J.D., C.P.A., is senior vice president of government affairs at the Electronic Transactions Association. He is an experienced policy advocate and communicator with two decades of experience in Washington. Talbott has represented the largest financial services firms in the country before Congress and federal regulators, most notably during the fiscal crisis. He is also an expert on communication, appearing regularly on national and international media. He has been called the voice of the financial services industry and one of the most recognizable faces in the industry.

Kimberly Gartner: Kimberly Gartner is a senior vice president at the Center for Financial Services Innovation (CFSI). CFSI is the authority on consumer financial health, leading a network of committed financial services innovators to build better consumer products and practices. Kimberly brings her deep knowledge of consumers, understanding of the financial services marketplace, and vision for financial health to spur people and companies to action.

“Our greatest hopes could become reality

in the future. With the technology at our

disposal, the possibilities are unbounded.”

The words of inspirational geniuses echo wide and far across many industries, and this comment by legendary scientist Stephen Hawking is a prime example. The digitization of payments and financial services is evolving on a daily basis and at an amazing speed — and as we continue to strive for progress, the potential for innovation is indeed limitless. We think this issue of n>genuity journal captures Dr. Hawking’s sentiments and how they apply in the world of commerce.

The annual Money20/20 event is a leading-edge forum for discussion of the present and future of payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology. With this convocation of industry leaders and innovators always comes the kind of insightful discourse that drives progress. The gathering will be held this year at The Venetian in Las Vegas from October 25-28, and it is our honor to serve again as the event’s official publication and to present this year’s Money20/20 edition.

As we know, the consumer is the key in our industry. Our cover story looks at the future of consumer loyalty and strategies for innovation by brands and retailers in the area.

The Millennial generation has assumed its place as an incredible force in commerce. We feature an article in this issue discussing strategies to engage and retain them as customers — through understanding their wants and needs.

As the online world becomes increasingly important in our physical world, the phenomenon known as the Internet of Things cannot be ignored. An author in this issue explores how leveraging this merger of the virtual and physical worlds can lead to tremendous business efficiencies.

Another author discusses the value of a holistic approach to consumer financial health and how it should drive product development. We also feature an interview with a payments industry expert — Money20/20’s own Anil Aggarwal — with a track record that proves that expertise.

These are just some highlights from this edition, and we hope that all of our articles reflect just how exciting things are right now in the world of commerce — and that the sky is the limit in the future. We invite you to subscribe to our journal online at www.ngenuityjournal.com and to follow us on Twitter (@ngenuityjournal) so you can take advantage of the offerings you’ve come to expect from us.

We truly welcome your feedback and thoughts. Feel free to email us at [email protected].

Enjoy the read!

Sincerely,

M. Troy WoodsPresident & Chief Operating Officer TSYS


cover story

The Future of Loyalty Marketing for Consumers and Businesses Four key trends that will shape the loyalty marketing industry

There is nothing more basic to business success

than loyal customers. Fred Reicheld, author of

The Loyalty Effect and founder of Bain & Company’s

loyalty consulting practice, reports that building

loyalty with five percent more customers leads

to an increased average profit per customer of

between 25 and 100 percent.

by> andrew b. morris

www.tsys.com 4


A staggeringly large industry now exists

to support programs designed to drive

repeat purchases by existing customers.

Colloquy estimates that there are

nearly three billion loyalty program

memberships in the U.S. and that more

than $12 billion is paid in retail loyalty

incentives each year. And if you include

payment card, hospitality and travel

reward programs, that number jumps

to $50 billion.

In this increasingly competitive market-

place, retailers and brands require

strong returns on their remarkable

level of investment in loyalty programs.

Here we explore four key trends that

will drive the future of the loyalty

marketing industry.

#1 “Small Business,

Big Loyalty”A 2014 BIA/Kelsey and Manta study

of 1,000 small businesses in the U.S.

revealed that while more than 60

percent of small to mid-sized business

(SMB) owners generate a majority

of their annual revenue from repeat

customers, more than two-thirds do

not have a loyalty program in place.

“Until recently, effective loyalty

programs have been largely out of

reach for small merchants,” explains

Rick Ducey, managing director, BIA/

Kelsey. “The programs have been too

cumbersome for SMBs to manage, and

SMBs often lacked the technology to

implement them.”

As a result, an increasing number of

loyalty solutions are emerging that

bring the type of loyalty capabilities

that were previously only available to

national chains to this underserved

SMB marketplace. Solutions are

typically cloud-based and leverage

smartphones and tablets to engage

mobile-first consumers as well as to

be more cost-effective.

#2 “Getting to Know You”Emotion is an important

component in creating authentic

customer engagement — and personal-

ized service helps drive this emotional

connection. Imagine walking into an

old-fashioned general store. Given

his relatively small group of regular

customers, the general store proprietor

could keep all of his customer data

in his head, but to implement this

same experience at scale requires

automation.

The most valuable type of data is

purchase data. Card-linked marketing

uses purchase data to deliver relevant

ads through mobile and online banking

applications. A leader and pioneer of

card-linking is Cardlytics, with nearly

400 banking relationships in the U.S.

and U.K.

Card-linking is simple for the

consumer — no extra steps, coupons

or paperwork. The consumer captures

the reward by paying with a card, and

the reward is deposited into their bank

account. Card-linking is also simple

for the retailers who advertise on

the platform.

Whether it is card linking or another

data-driven approach to marketing, the

ability to gather and analyze customer

data in real time to deliver personalized

customer experiences is an important

trend driving the future of loyalty.

#3 “Location, Location,

Location”One of the most important factors in

delivering personalized and relevant

experiences for consumers is the

context in which they are receiving

communications. The location

technologies found in every smart-

phone today are precise enough for

marketers to understand when

the customer is at or near the store

and to use that contextual information

to increase the relevance of marketing

communications. A technology

called “beacons” is the most

common approach.

Adoption of beacons — Bluetooth-

enabled sensors that connect with

nearby mobile phones and tablets

— is spreading. Nearly one-third of the

top-100 retailers in the U.S. will have

deployed beacons by the end of this

year, according to Business Insider,

and 85 percent will have beacons by

the end of 2016.

“Beacon technology has been met with

huge enthusiasm among retailers,” said

ShopKick co-founder and CEO Cyriac

Roeding in a release. ShopKick is one of

the pioneers in using beacons. It uses

points called “kicks,” which are awarded

when users walk into participating

stores. Kicks are also awarded for

scanning product barcodes or QR

codes using a device’s camera, and

for making purchases.

Business Insider says that beacons

will influence more than $4 billion in

U.S. retail sales this year — a scant

0.1 percent — but that this number

will increase tenfold in 2016. Based on

in-store campaign performance and

shopper surveys conducted during the

2014 holiday season, 60 percent of

shoppers engaged beacon-triggered

content, the company says, and 30

percent took advantage of a beacon-

triggered offer. The data also revealed

that 73 percent of shoppers indicate

that beacon-triggered content and

offers increased the likelihood of

purchase during a store visit, and

61 percent said they would visit

stores with beacons more often.

#4 “So Happy Together”Abeer Bhatia, CEO of U.S.

Loyalty at American Express, knows

his company is placing a big bet on

Plenti, its new coalition loyalty program

launched in March 2015. In a company

press release, Mr. Bhatia explained that

Plenti is “the first U.S.-based coalition

loyalty program where consumers will

have the flexibility and choice across

seven well-known brands to earn and

use points for purchasing a wide range

of products.”

Many have tried coalition loyalty but

few have succeeded, with the two

most successful programs in the

U.K. (Nectar) and Canada (Air Miles).

Many reasons have been cited for the

lack of coalition loyalty success in the

U.S. market, including daunting POS

technology requirements, the lack

of unified membership and card-

tracking infrastructure, the competitive

business environment, and the lack of

a national retail anchor for repeated

consumer spending.

But there are significant advantages

in coalition programs like Plenti.

For program sponsors, the coalition

provides wallet space and customer

engagement, cost benefits, and a more

complete and useful customer database

— and there’s more cumulative value

for consumers.

An eye to the futureThe good news is that many exciting

solutions are coming into the

marketplace. And innovation in loyalty

marketing is happening across the

entire retail and payments value chain.

The call to action for brands and loyalty

solution providers is to create programs

that more efficiently bring value to both

consumers and businesses.

About the Author

Andrew Morris is senior vice president, head of content for Money20/20. He leads content development,

including speaker selection/recruitment and all agenda planning for Money20/20’s flagship event in the

U.S. and is a contributor to content for Money20/20 Europe.

In this increasingly competitive marketplace,

retailers and brands require strong returns on their remarkable

level of investment in loyalty programs.


Not So Fast — How Mobile Wallets Can Overcome Major Obstacles to Adoption While leaving your wallet at home sounds neat, there’s quite a way to go

by> charles keenan

Last year, Apple Pay was the first wallet to involve the banks in any big way, and its integration of a fingerprint scanner and NFC chip in the iPhone 6 took away friction at the point of sale. Samsung’s purchase of LoopPay and recent announcement of a wallet that taps into existing magnetic stripe technology already in terminals at the point of sale also promises to reduce that friction.

But while the thought of leaving the credit and debit cards at home might sound neat, mobile wallets still have a way to go.

“In concept they seem really cool,” say Brian Riley, a senior research director, CEB TowerGroup, a Boston-based consulting firm. “But I think it will be a long time before I’m ever willing to leave my house without a credit card and be counting on my phone.”

Grasping the consumer perspectiveAt first glance, the growth of mobile payments looks encouraging. Total volume of proximity mobile payments at the point of sale totaled $3.5 billion in 2014, according to eMarketer, a research firm. That figure will skyrocket to $118 billion in 2018, but mobile payments will still be far from dominating the point of sale.

To put the numbers in perspective, U.S. consumer spending in goods and services totaled $48 trillion in 2014, according to the Bureau of Economic Analysis — meaning that mobile payments accounted for just 0.0073 percent of consumer spending last year.

Compared with plastic, mobile wallets have challenges getting traction. Less than one in 10 consumers say they prefer to use their mobile payments over credit cards or cash, according to a recent survey by Comrade, a mobile and Web design firm based in Oakland, Calif.

While there are early adopters of Apple Pay, observers say these are the easy consumers to get — tech-savvy and willing to experiment with payment methods like contactless. “They are already comfortable with that method of payment, and it is a very easy behavioral replacement,” says Greg Weed, director of card research at Phoenix Marketing International, a consulting firm based in Rhine, N.Y.

About the Author

Charles Keenan has written about payments since joining the American Banker as a staff reporter

in 1997. His work at the American Banker included writing about credit and debit cards, merchant

processing, and bank stocks. He later freelanced for the Banker and industry publications such as

Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing,

insurance and health care, and is based in Los Angeles.

Compared with plastic, mobile wallets have

challenges getting traction.

Mobile wallets have been one of the hottest topics in payments for

years now, but they still have yet to gain traction in any big way.

Plenty of obstacles remain — though there has been progress.

Pain points and solutionsMobile wallets need to overcome the following problems to replace plastic cards:

1. Friction at the POS: Apple Pay is a start, but for wallets to succeed they must replace the speed and effectiveness of magnetic stripe cards, especially for small-dollar transactions where a signature is not needed. About 75 percent of consumers who don’t use mobile payments said that it’s easier to pay with cash or a credit or debit card, according to a 2015 Federal Reserve study of 2,900 consumers. Despite the popularity of QR codes, they often don’t scan on the first pass, making them slower on average than a card swipe.

2. Lack of trust: Perception of security has kept consumers cautious when it comes to using a mobile wallet. About 65 percent of consumers said a hacker getting personal information from a smartphone would be a “major problem” in their willingness to use a mobile payment app, according to Phoenix. About 57 percent said the prospect of a lost or stolen phone and giving merchants access to personal information would be major problems. To encourage adoption, trust is key, says Young Pham, chief strategy officer at Comrade, a Web and mobile design agency based in Oakland, Calif. “It goes beyond the simplicity of what that is from a mobile experience,” Pham says. “Does the experience include things that address security?”

3. No compelling value proposition: Part of the success of the LevelUp and Starbucks apps boils down to the rewards they offer. But most wallets don’t have a compelling enough deal to get consumers to use them regularly. “It gets back to why do I need this and why do I need to go out beyond my bank,” Riley says. “Everything I can do with a mobile wallet I can do with my bank account.” “There’s an area of the mobile wallet that has yet to be developed that would transform it beyond the payment card,” Weed adds. “Ultimately it has to be something that a payment card can’t do, to give the wallet a life of its own.” It could be as simple as giving immediate notification at the point of sale of a balance after the transaction, or a message from the issuer that making the purchase would give the buyer rewards points. “Since the phone is an online device, and a payment card is not, it creates the area in which the mobile wallet can be highly differentiated,” Weed says.

But hope is far from lostOn the bright side, mobile wallets will almost certainly have some kind of future — after all, it took a while for the credit card to take hold, Pham notes. “If the barriers to the customer experience are addressed, that is when you’ll see mass adoption.”


Understanding Europe’s Fintech RenaissanceWhy cross-border collaboration will define the future of financial services in Europe

The European financial services industry is

rapidly changing as product development

accelerates. As the barriers to entry fall,

opportunities increase.

Combining this with the fallout from the

financial crisis, it’s clear to see that the

financial services market is in a state of

flux. This certainly goes some way to

explain the confidence investors have

placed in the industry, as investments in

the fintech sector throughout Europe grew

215 percent to $148 billion in 2014, with

growth likely to continue throughout 2015.

by> pat patel


Commerzbank. This is a model that is gaining traction across Europe.

These initiatives are largely in the early stages of generating tangible value. One challenge is the level of global competition for the best startups. Of equal importance will be the ability to form real partner-ships with the corporates involved. So far, early indications reveal that on average from an intake of 10 startups in a program, most will not survive beyond six months — and only two or three will be in opera-tion beyond a year with some degree of success (investment, customers). This will gradually improve over time and with maturity of the program.

Vive la (r)evolutionCollaboration between fintech companies will be a key feature defining the future of financial services in Europe. According to Mariano Belinky, managing principal of Santander InnoVentures, “Funds alone are not enough. To move to the next phase of evolution in financial services, banks need to invite fintechs to work within our industry, even inside our own businesses. That means investing in fund-ing but also giving access to our expertise, as well as utilizing our client base and our own innovation initiatives.”

With a wide variety of cultures, languages, behaviors and regulatory environments, growing businesses to scale in Europe is a challenge. This is slowly easing as a result of a number of regulatory and collaborative measures to reduce inefficiencies, support commerce and create opportunities. These include:

¬ SEPA, the Single Euro Payment Area, a payment-integration initiative for the simplification of bank transfers

¬ Payment Services Directive II, aimed to protect consumers and create a level playing field for both banks and non-banks

¬ The Single Digital Market to reduce regulations and combine 28 national markets and enable better access to digital goods and services by promot-ing open standards, collaboration and interoperability.

In the past, Europe struggled to support its tech community. This is slowly chang-ing at national and international levels, and it is one of the drivers for the Single Digital Market initiative.

The start of a homegrown movementThe allure of Silicon Valley for a European tech startup is very compelling. The U.K. still leads the way in Europe, with 60 percent of all European fintech startups based in the U.K. and British companies attracting half the total investments in fintech businesses across Europe. The fintech industry is worth an estimated £20 billion in revenue to the U.K. economy.

Level39 in London is one of the most successful initiatives in Europe, attracting more than 170 startups and continuing to deliver innovative approaches in develop-ing the community, from hackathons to educational and networking events. The recent success in London has been a catalyst for other major cities to respond to the challenge. In Denmark, the Copenhagen Fintech Innovation Research association (CFIR) has been initiating a number of projects to create an ecosystem to support established and emerging companies within financial services — which includes building relationships with universities. CFIR has aspirations to collaborate with associations and the wider industry across the Nordics and the Baltics.

Holland Fintech is similar to CFIR, but it is a commercial company seeking to create an internationally connected ecosystem that enables maximum acceleration and adoption of fintech. Within a year, it cre-ated a network of 68 companies, as well as partnerships with several other coun-tries. One initiative being explored is how administrative barriers can be reduced to allow entrepreneurs to set up a business within a short timeframe, rather than months or years, by using digital tools to accelerate requirements from a legal, financial and administration standpoint.

One of the most recently formed associations, Fintech France, is seeking to capitalize on its renowned specialists within finance- and mathematics-based engineering. Within a few months, membership has risen to 50 fintech companies across a whole spectrum

of sub-verticals. Government support has been forthcoming, with ministers backing the initiative and seeking to help shape the environment to reduce the barriers to development and growth.

Each association hopes to leverage its historical, cultural and geographical envi-ronment in order to gain an advantage. Remember that it took Silicon Valley many years to reach its current position as a global phenomenon. Collaboration across the hubs in Europe is essential to allowing Europe to compete, as is government support to provide a regulatory environment that reduces barriers to entry.

Partnering with startupsIn 2015 alone there have been a number of new accelerator programs or incubator units launched from either established companies within banking, retail and payments enablers (e.g., METRO Group, Temenos, Visa Europe, Deutsche Bank) and independent companies/associations (e.g., Emerging Payments Association). This is in addition to the established programs such as those initiated by Barclays and Accenture. In most cases hosting an accelerator program is viewed as a way to outsource and hasten innova-tion, as the goal is to partner with the most innovative startups to generate value and develop new products.

One of the early initiatives, “main incuba-tor” (based in Frankfurt and founded by Commerzbank), seeks to provide invest-ment, access to bank customers, insight, and IT and infrastructure support. It also seeks to build companies to address opportunities and challenges within

About the Author

Pat Patel is the content director, Money20/20 Europe. With more than 15 years financial services

experience, Pat started from an actuarial and risk background at Chubb Corporation and Cardif Pinnacle,

a BNP Paribas Group company. He then spent eight years at VocaLink, one of the largest clearing houses

in Europe, in a variety of roles including market intelligence, corporate strategy and product management.

He brings deep knowledge and insight of real-time payment systems, mobile payments, e-Commerce, the

European financial services, payments and emerging fintech landscape.

Remember that it took Silicon Valley many years

to reach its current position as a

global phenomenon.


Hershberger, an entrepreneur who

cofounded Flat 12 Bierwerks craft brew-

ery with some partners six years ago,

observed that the business of selling

beer was much less precise than he was

accustomed to from his background in

software and analytics. Beer distributors

typically give guidance on what they’ll

buy from brewers three to six months in

advance, but that guidance was typically

off by 30-150 percent of the volume of

beer made. “It was guesswork at best,”

Hershberger says.

So three years ago, Hershberger set

out to bring the power of analytics to

beer. As chief executive of Indianapolis-

based SteadyServ Technologies, he had

designed a specialized weight sensor

for kegs.

The sensor monitors how much beer

remains in the keg and communicates

wirelessly with a router nearby. An RFID

tag on the keg helps track the type of

beer. All of the data is then sent to iKeg,

a secure, mobile, cloud-based inventory

and order management system view-

able on an iOS or Android app.

Now brewers using the system know

where their product is, how old it is

and how many days it has been on

tap. Analytics can be used to forecast

next season’s demand, so bars and

restaurants can determine the

optimum mix of beers.

While Hershberger says the beer

industry is like any other in terms of

being resistant to change, sales of his

product are starting to flow. Since its

debut of iKeg last August, SteadyServ

is approaching 300 accounts in six

states and Brazil, with The Netherlands

on deck.

“If something can be measured and

that measurement can deliver economic

or lifestyle value — securely and in a

How the ‘Internet of Things’ Will Spawn New Business ModelsWhy merchant acquirers have opportunity to capitalize

Steve Hershberger was tired of not having

enough beer — or too much of it.

by> charles keenan

“If something can be measured and that measurement can deliver

economic or lifestyle value

— securely and in a cost-effective fashion —

then you should do it,” Hershberger says.


cost-effective fashion — then you should

do it,” Hershberger says.

Physical + virtual = actionable dataSteadyServ’s iKeg represents how

business is seizing on opportunities now

offered by the Internet of Things (IoT),

a network of physical devices integrated

with electronics, software and sensors

to extract actionable data for its users.

Thanks in part to falling prices for

hardware and cloud computing, IoT is

changing the way companies conduct

business, giving rise to entirely new

business models and offering big

opportunities in merchant acquiring.

In a sense, IoT has been affecting

digital commerce for some time. Google

uses smartphone GPS data to provide

real-time traffic maps. RFID tags improve

supply chain management. Smart

meters send electricity usage directly

and wirelessly from homes to utilities.

Hospitals are starting to install sensors

at hand-washing stations to increase

staff compliance.

But it’s just the beginning.

There are now an estimated 15 billion

“smart” devices — ranging from small

chips to large machines — connected to

the Internet, according to research by

Santa Clara, Calif.-based Intel. That is

expected to grow to 200 billion by 2020.

“We certainly see a great deal of the

infrastructure in place and the right

sort of pricing around the potential for

these services,” says Jonathan Collins,

principal analyst at ABI. “More and more

businesses are being set up to help build

on those foundations.”

Disruption, disruption, disruptionSteadyServ is showing that one

application can profoundly change how

companies do business. Carl Bruggemeier,

chief executive of Indianapolis-based CZH

Hospitality Group, uses iKeg and hasn’t

looked back. Bruggemeier estimates that

the percentage volume per keg wasted at

the restaurants he advises was in the high

teens — as much as 1.7 gallons of beer

per keg.

Now, using analytics, he can see which

beers sell well — in real time. Beers

running low can be replenished faster

and automatically ordered. At the

Lighthouse Restaurant, an upscale

steak and seafood establishment in

northeastern Indiana, the new system

helped drop the percentage of wasted

beer per keg down to single digits, trans-

lating to a projected $40,000 boost in

annual revenue and $30,000 additional

profit for a restaurant with just 10 taps,

according to Bruggemeier.

For a merchant such as Bruggemeier,

using analytics has become key to his

business since most everyone carries a

smartphone now. While SteadyServ helps

with the flow of beer, the Lighthouse

Restaurant also uses RestaurantConnect

to monitor table inventory, manage

private and group dining, and explore

dining preferences of guests.

“We’re very interested in everything that

a customer consumes,” Bruggemeier

says. “We’re interested in their demo-

graphics, how far away they travel to

come to us, and how long different

party sizes are at the table.”

Payments won’t be left behindWith mobile devices playing such a role

in the IoT, payments are naturally being

folded in. Tablets, for example, are used

to order and pay for meals in quick serve

restaurants such as Chili’s. “Payments

are going to be something that many

computer devices will need to perform

as a workload,” says Michelle Tinsley,

director of mobility and payment security

at Intel. In retail, this can also translate to

ordering a custom combination of frozen

yogurt at a kiosk, or reducing lines at

movie theaters, she notes.

And the payments industry sees the

potential. In April, Intel announced a

deal with Ingenico, a Paris-based

merchant terminal and payments

company, to develop a payment solution

for the IoT to debut next year. The goal is

to be able to offer value-added services

to devices such as “intelligent” vending

machines and kiosks.

For merchant acquirers, IoT innovation

means new opportunities. “As an acquirer

and ISO in the network, think about

your business model,” Tinsley says.

“Instead of keeping the status quo of

selling 50 basis points below the next

guy, [think] ‘What kind of future services

should I be offering?’”

About the Author

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997.

His work at the American Banker included writing about credit and debit cards, merchant processing,

and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies,

Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health

care, and is based in Los Angeles.

With mobile devices playing such a role in the

Internet of Things, payments are naturally being folded in.


Few subjects in retail banking raise as much scrutiny and ire as

account overdrafts — and the disparity of practices and fees

employed by regulated financial institutions when they happen

to consumers. Today, the industry is holding its collective breath

as the Consumer Financial Protection Board (CFPB) prepares to

weigh in further on this issue in the next year.

The Complexities of Overdrafts and Fees in an Income-Challenged Economy Evolving overdraft fees in an era where more consumers have irregular incomes

About the Author

Steve Mott is a 25-year veteran of the electronic payments industry, specializing in transaction economics,

innovative uses of debit networks, authentication and security technologies, and emerging alternative payments

types and venues such as stored value, online and mobile commerce and transacting over social networks. As

principal of BetterBuyDesign, a payments consultancy, Steve conducts strategy, product, technology and market

assessments for banks, processors, networks, technology providers and merchants, and advises a number of

investment firms on industry trends and developments.

It turns out that the overdraft fee problem has many dimensions

and complexities that have been incompletely captured by the

available research. For example, there is a wide disparity about

how often FIs actually pay the item in question (typically a bounced

check or debit card purchase decline). When the FI pays the item,

and assesses a fee (now about $35 per item), the banking industry

views that activity as beneficial to consumers, and it ostensibly helps

them avoid more expensive credit options such as payday lending.

Perhaps.

But when the FI declines to pay the item and imposes the $35 fee

anyway (the system cost for which is typically no more than a few

cents if it occurs with a debit/ATM card), the value to the consumer

becomes very questionable. And in many cases, the consumer then

runs up a series of overdrafts during the same day — often due to

the FI posting and processing high-amount items first, which results

in many smaller items moving into overdraft status and incurring

multiple fees.

The 80/20 rule

Moreover, there isn’t good data on how often banks actually

experience overdraft conditions, but when good customers

complain, they incur high consumer-touch costs in writing some

of them off. In other words, the actual incidence of events that

trigger overdrafts is still known only by the individual bank.

While 20 percent of consumers generate 80 percent of overdrafts,

some surveys suggest half or more of consumers experience

overdraft situations at least once a year. That makes determining

appropriate and fair national policy difficult — and it thwarts

possible accommodations that big banks might make to minimize

the unproductive costs of overdrafts.

Overdrafts, therefore, have become a source of perhaps billions

in fees and high-margin income for billers — who outsource

most of their payment processing operations but encounter very

little regulatory scrutiny (other than Regulation E requirements)

for providing consumers with accurate, helpful information and

alternatives for managing auto-debit systems.

Alternative ways for consumers to keep their accounts active and

services flowing, like phone payments, either come with a fee or

get processed as normal ACH items, which can take 2-3 days.

In fact, there are myriad other problems that are vestiges of

the legacy electronic bill payment (EBP) business that confound

consumer intentions and capabilities to pay far beyond declined

debit card purchases. These include irregular deposit holds

(particularly after an overdraft event), inability to pay online

after an overdraft except by bankcards, and unavailability of

timing of debits and payment postings.

Pre-crisis engineering

The problem here is that the EBP business was crafted prior to the

banking crisis, which has seen the majority of consumers revert

to paycheck-to-paycheck households, with high levels of income

instability and unpredictability. These systems are fundamentally

premised on and set up for regular access to funds where overdrafts

would largely only occur when consumers were irresponsible —

rather than trapped by a cycle of irregular income.

No wonder, then, that many consumers have unhooked from

online bill payment when and where they can. For many, returning

to cash and alternative credit sources comes too late for bank

account closings and bad credit score impacts. There are solutions

to these problems, but they must be holistically derived, data-driven

and posited with respect to financial responsibility on the part of

all parties.

Clearly the government needs to define, size and track all of this

problem’s components, and enable responsible FIs to recoup their

costs (and make a fair margin) while limiting chronic and serial

abusers. And this should all occur at levels that reflect responsible

financial management and outcomes for income-strapped

consumers, rather than punishment that makes their financial

lives undeservedly worse.

Smaller banks and credit unions, which are more dependent

on overdraft (and Non-Sufficient Fund) fees, are particularly

concerned about further steps the Feds might take in

restraining banks from imposing arduous fees on the public.

In 2010, FDIC surveys prompted the Federal Reserve to impose

some restrictions — namely requiring banks to get consumer

“opt-ins” for overdrafts — as well as a number of initial CFPB

actions. But updated surveys by the CFPB in 2012 identified

a number of continuing problems, which were described in

a 2013 report, updated in July of 2014, and supplemented

by new data from 626 large financial institutions (FIs) made

available for the first time this year.

No small potatoes

The new data indicated that the overdraft fee income of banks

surveyed was about $10 billion, suggesting an industry total

of perhaps $15 billion, when smaller institution fees might

be counted. This number is a far cry from the well-publicized

$30 billion or so the Moebs group asserts, but concern over a

number of practices — including consumer misunderstanding

of the opt-in process — still may generate further CFPB

actions. The big questions are: What actions, where and how?

by> steve mott


Millennials and Financial Services: What They Want, What They Don’t, and WhyUnderstanding a generation to create an effective engagement and retention strategy

Businesses of all kinds across

the world are clamoring to

attract the Millennial genera-

tion — conventionally defined

as those born after 1980, with a

rough cut-off birth year of 2001.

The unique attitudes, traits and

experiences of the generation,

also referred to as Generation Y,

present several new challenges

for financial services players

looking to bring Millennials into

their fold.

by> stan merritt

And a couple of things are clear when it comes to this generation: Carrying on business as usual and looking for organic growth in Millennial business is a fool’s formula; proactively tailor-ing services to meet unique Millennial needs — and wants — is an absolute necessity. But it all begins with understanding core financial values, expectations and behaviors.

A different kind of wallet-watcher and penny-pincherAndrea Hershatter is a professor and associate dean at the Goizueta Business School at Emory University, and deals with Millennials on a daily basis. She is quick to note that Millennial attitudes on spending and saving are both in stark contrast to those of past generations.

“What other generations might consider luxuries are actually needs to Millennials,” she says. “I’m talking travel, eating out, going to clubs, gen-eral recreation…these experiences are more important to them than ‘stuff.’”

But Hershatter also points out that Millennials should by all means be described as fiscally conservative. “They track every penny,” she says. “They know where their money is, where it goes, and they are vigilant in making sure it doesn’t go someplace it should not.”

These attitudes have interesting impli-cations in savings and budgeting.

Hershatter says that Millennials absolutely know that they should be saving, yet they are “more likely to create a budget so that they can spend guilt-free money on what’s important to them. It’s less about saving for a rainy day and more about budgeting for their daily expenses.”

Millennials and debt = oil and waterFinancial Institutions (FIs) should understand that Millennials hate debt — including debt they may already have.

“Student debt is a major issue for Millennials who attended university,” says Sam Maule, emerging payments practice lead at Carlisle & Gallagher Consulting Group. “The impact of this debt, combined with the experience the Millennials have had with their parents and grandparents losing savings through the 2008 crash, has had a significant impact on their response to debt.”

In addition to an aversion to big purchases and loans, Millennials also dislike credit cards, notes Maule. He cites recent statistics indicating that 63 percent of Millennials don’t have a credit card.


“They’d rather use traditional debit or even a prepaid product,” says Hershatter, “than go in arrears and pay interest.”

Dislike vs. disinterest: good news and bad newsGenerational attitudes notwithstanding, Millennials actually don’t harbor ill-will toward their grandfather’s bank.

“Any cultural bias against traditional banks that’s cropped up in the last ten years has not been due to Millennial involvement — they’re too young,” says Hershatter. “Millennials want what they want, and they don’t care whether it comes from an established global bank or a new financial services disruptor.”

The biggest challenge for traditional FIs in dealing with the Millennial mentality is not disdain or dislike, says Hershatter — it’s disinterest.

“Millennials have typically postponed several traditional banking relationship events, such as car and home pur-chases, and even marriage and having children,” says Maule. “The traditional entry point of ‘checking’ doesn’t have the appeal it once held.”

And that trend is continuing.

Millennial must-haves and deal-breakers“Millennials want their financial institution to be a lot more proactive…not reactive,” says Maule.

Once they do decide to make milestone purchases, Millennials want FIs to educate and assist them throughout the process. “Personalized recommen-dations will go a long way. For example, working with referrals for car and home purchases, and education on the loan types and best fit for their individual needs will go far in building loyalty,” he continues.

Noting that tech-obsessed Millennials are avid early-adopters, Maule also rec-ommends that FIs focus on integrating with existing financial tools currently used by Millennials. Some good candi-dates for FI integration or collaboration are Digit and SmartyPig as savings tools, Mint and Level for financial awareness, RobinHood and Acorn in investment decisioning, and Moven and Simple for pure-mobile banking, says Maule.

Then there are some things that Millennials just won’t tolerate, such as dishonesty, bureaucracy and disorganization. “Millennials demand transparency,” says Hershatter. “And they are huge fans of disintermedia-tion. They don’t like smoke and mirrors or middlemen.”

So what about outsourcing customer service?

“Millennials want real-time solutions from people with real decision-making ability,” says Hershatter. She notes that it is not uncommon for a Millennial to terminate a business relationship if they realize or even suspect that they have been “passed on” to a remote call center.

“It’s unfathomable to the average Millennial that a customer could hold multiple accounts with the same FI yet have to deal with different entities with regard to each account,” Hershatter says. In the same vein, being required to repeatedly fill out forms or provide information that they have previously provided to an FI evokes frustration.

And there aren’t many second chances. “With Millennials, you have one opportunity to make a

first impression,” says Victor Corro, vice president of member services with the World Council of Credit Unions (WOCCU). “They’ll move on fast when crossed.”

Making moves toward MillennialsWhile individual financial institutions struggle to make the vaunted Millennial connection, the industry at large is not idle on this front.

MasterCard recently announced the launch of its in reachTM program, which features access to a personal financial mentor, budgeting and credit-building tips, and advice on building a professional and polished social media profile. This is good news for traditional issuers of credit, debit and prepaid cards looking for a turnkey solution to integrate and reach out to the generation.

In the credit union space, WOCCU has launched a content-rich website, wecu2.org, to foster relationships with Millennials.

“The credit union model aligns philosophically with the generational mentality of Millennials…way more so than banks. So many in the generation just don’t know it,” says Sarah Timmins, corporate social media manager for WOCCU. “At the same time, credit unions don’t realize what a great fit they are for Millennials. There’s a true generational gap between Millennials and the credit union establishment, and we want to help bridge it for everyone’s benefit.”

The biggest challenge for

traditional FIs in dealing with the Millennial

mentality is not disdain or dislike, says Hershatter

— it’s disinterest.

About the Author

Stan Merritt is the editorial coordinator for n>genuity journal and a

member of the Global Brand & Corporate Communications team at TSYS.

In addition to writing industry articles, he focuses on studying payments

industry trends, product innovations, regulatory issues and game-changing

technology. Prior to joining TSYS, Merritt was engaged in the private

practice of law for more than 15 years.

These attitudes have

interesting implications

in savings and budgeting.


Chip and PIN vs. Chip and Signature: A Rivalry Nears Historic ProportionsIs a signature equal to a PIN when it comes to chip cards?

If you ask Mike Cook, Walmart’s assistant treasurer

and a senior vice president, EMV rules in the U.S.

are a joke. At a recent industry conference, he

expressed his dismay with chip and signature

being treated equally to chip and PIN, calling

signature a “worthless form of authentication.”

Not so, says Stephanie Ericksen, vice president of risk

products at Visa, Inc. “We don’t see a need for it, [as chip

and PIN] will have a shorter shelf life,” she said, noting that

the company is moving to new technologies and innovation

that look beyond EMV.

In short, it’s a case of two high-ranking executives from two

major organizations in the U.S. voicing two very different

perspectives about the October 2015 fraud liability shift

rules. Which begs the question of who is correct — either,

neither or both?

Is a signature equal to a PIN when it comes to chip cards?

Revisiting European roots, context and lessons

EMV in its chip-and-PIN incarnation was designed for

effective use in a predominantly offline card ecosystem

(e.g., the U.K. at that time), enabling issuers to delegate

authorisation authority to the chip without requiring

an online authorisation from the issuer’s host system.

In 2002, following years of growth in various fraud types,

the U.K. card industry formally began its migration to

the EMV chip coupled with PIN — seen then as the most

effective approach.

The U.K. chip and PIN programme was ultimately regarded

as an industry success, and it certainly achieved one of its

objectives: reducing counterfeit and lost-and-stolen fraud

numbers significantly. However, the U.K. migration was not

without harsh lessons learned at the time and since:

¬ A credible industry business case was extremely difficult

to develop due to varying approaches to risk appetite and

management across the industry. Ultimately, the view was

that there was enough of a case to move forward instead

of doing nothing.

¬ Consideration of the downside of a protocol shift is a

necessity. Mitigating certain fraud types (e.g., skimming/

counterfeit) might incent criminals to focus on other

fraud types (e.g., card not present or “CNP”). The solution

might lead to a greater problem.

¬ A card scheme liability-shift mechanism (like the one

beginning in October 2015 in the U.S.) is critical to drive

appropriate and timely actions across the industry.

¬ ATMs — primary card-skimming enablers — should have

been (or should be) one of the first channels to convert.

¬ Up-front agreement to prevent fallback to magnetic

stripes is critical to drive desired behaviours, even though

this is an extremely difficult proposition for merchants

and consumers.

Approaching the POS precipice in the U.S.

Given these and other learnings from Europe, is chip and

PIN a must in the U.S.? There are many factors to consider,

not least of which is cost — financial, operational, customer,

social and cultural.

by> roger alexander


Let’s deal with cost first. It is widely established (e.g., in

Europe and Australia) that implementing EMV chip is one of

the most effective methods of reducing skimming/counterfeit

fraud. The addition of the PIN element generally mitigates

losses from lost/stolen card fraud.

The chart above provides perspective on the 2014 card

fraud loss landscape in the U.S.

Counterfeit and CNP fraud predominate, though lost/stolen

fraud is not insignificant. Bearing in mind that the U.S. is

almost entirely an online authorisation ecosystem and

chip and PIN was designed for a predominantly offline

ecosystem, does it make sense to invest significantly to

support offline PIN?

From a purely financial cost perspective, it makes sense to

focus limited resources on the areas of greatest exposure

and impact. So based on current experience and predictable

outcomes, it appears that chip and signature would be

the most balanced, cost-effective, immediate solution in

skimming and counterfeit fraud.

This would also be a significant step toward rendering card

data obtained from data breaches useless in geographies

where EMV chip is the only acceptable form of face-to-face

card payment. The caveat however, is that as long as a

magstripe exists on today’s payment cards, there is still a

risk that this data can be used to commit fraud in online

environments (though it must be noted that EMV in and

of itself does not reduce CNP fraud risk).

“Too little, too late” for chip and PIN?

Another inquiry is whether the payments ecosystem has

changed such that chip and PIN is no longer viable. Clearly,

technology has changed dramatically since the early days of

EMV. There are numerous fraud solutions that did not exist

at the time that PIN-versus-signature decisions were being

made outside the U.S., and their existence today significantly

influences considerations that underpin such decisions.

An oft-cited justification for ignoring PIN is the argument

that a large portion of the American population is unlikely to

remember and use PINs. Experience does not support that

argument — Americans have been successfully using PIN-

based debit products for years.

Perhaps a less obvious but potentially important consider-

ation is how chip and signature cards will be treated outside

the U.S. — after all, chip-and-signature cards presented

where chip-and-PIN cards are expected will cause friction.

So, is there a clear winner in this debate?

The position of Walmart’s Mike Cook that was referenced

in the introduction of this article is both valid and

unsurprising. A check-out staffer carrying the burden

of signature authentication, for example, is unrealistic, and

PIN helps to address this issue. And the company has already

made the investment in a PIN-based strategy — something a

number of competitors are not keen to do.

Bolstering the contrary position of Visa and other association

stakeholders, there are other innovations being driven

into the market in this space. While it will take considerable

time for these to gain ubiquity, it makes sense to balance

limited resources (i.e., industry investment) across these

innovations with investment in today’s tools for fraud and

risk management — like EMV.

So perhaps both positions are somewhat correct and neither

is completely correct.

Signature has long been a very poor form of authentication.

But given the state of the U.S. market, implementing PIN

where there are more advanced and effective methods of

authentication makes less sense today than historically.

U.S. Card Fraud Losses (2012-2014)

Counterfeit

Lost/Stolen

CNP

(U.S. $ Billions)

2012 2013 2014

$3.0$2.4$2.1

$2.6 $2.8 $2.9

$0.9 $0.8 $0.8

About the Author

Roger Alexander is a non-executive director of Accourt Ltd., a UK-based consultancy specialising in the payments

industry. He had an extensive career in payments, primarily with Barclays, but prior to his retirement in 2008 he

was CEO and President of Elavon Merchant Services in Europe. In addition to Accourt, Roger has a portfolio of

other non-executive roles across Europe.

Bearing in mind that the U.S. is almost entirely

an online authorisation ecosystem and chip and PIN was designed for a

predominantly offline ecosystem,

does it make sense to invest significantly to support offline PIN?


The digital currency and blockchain ecosystem is

quickly approaching the billion-dollar milestone for

venture capital. With daily Bitcoin transaction volumes

recently reaching a record of 215,000 and the market

cap creeping back more than $4 billion for the first

time since last spring, the second half of 2015 looks

promising for Bitcoin and the entire crypto-community.

The Leaders in the Crypto-Currency Horserace Who is getting funded in crypto as VCs pony up?

by> rob wells


institutional-grade platform to buy and sell bitcoin. In early May of this year, they raised $25 million in series-A capital from Blockchain Capital, James Pallotta, Raptor Capital Management, Jay W. Jordan II, Liberty City Ventures, Solon Mack Capital, and RRE Ventures.

In announcing the funding round, itBit simultaneously announced that they were the first bitcoin exchange to be granted a trust charter by the New York Department of Financial Services (NYFDS). That means customers from all 50 states can trade on the itBit platform. Additionally, they’ve part-nered with a U.S. FDIC-insured banking institution to be able to offer insurance on fiat balances of U.S. clients, and have added three new board members:

former Sen. Bill Bradley, former FDIC Chairman Sheila C. Bair and former FASB Chairman Robert H. Herz.

Ripple Labs: challenging BitcoinIn May 2015, Ripple, a decentralized and open-source global payment net-work — and alternative to Bitcoin and the blockchain — raised $28 million in series-A capital. The Ripple protocol enables free and instant payments to merchants, consumers and developers with no chargebacks and in any cur-rency — including dollars, yen, euros, and even bitcoin. The round included U.S. Futures, CME Group, Seagate Technology, AME Cloud Ventures, IDG Capital, ChinaRock Capital Management, China Growth Capital, Wicklow Capital, Bitcoin Opportunity

Corp., Core Innovation Capital, Route 66 Ventures, RRE Ventures, Vast Ventures and Venture 51. This round brought the San Francisco-based crypto-company’s total funding to $34.4 million, according to Crunchbase.

The race is onThe VCs have spoken, and they believe in Bitcoin, the blockchain, and the other technology that powers it all. Chips are on the table as we approach $1 billion in funding. That money is in the pockets of five U.S.-based companies that have been charged to go out into the world, and bring the crypto-economy to life.

Since last year’s Money20/20 confer-ence, we’ve seen approximately 140 investors put $442.5 million into 47 companies from 14 different countries. More than 90 percent of that comes from five funding rounds by 36 inves-tors into five companies, all located in the United States. In that list of 36 investors we see not only the usual Bitcoin enthusiasts like Andreessen and Union Square, but also the likes of Goldman Sachs, the New York Stock Exchange (NYSE), BBVA and USAA.

Below we’ve chronologically outlined the five largest funding rounds since last year’s Money20/20, and what those companies are doing to create the crypto-economy of the future.

Coinbase: exploring compliance framework Coinbase is a bitcoin wallet and plat-form for merchants and consumers. The San Francisco-based company raised $75 million in Series C funding in January 2015, which at the time was the largest funding round ever. The company’s total funding to date is $106 million, with investors including NYSE, USAA, BBVA, Union Square Ventures, Andreessen Horowitz and Reinventure.

Led by Fred Erhsam and Brian Armstrong, Coinbase has distinguished itself as one of the most trusted brands in the global Bitcoin ecosystem. Currently, they integrate with bank accounts in 26 countries and have 2.4 million users, 3.1 million wallet downloads and 40,000 merchants

on board. They’ve also integrated with more than 7,000 developer apps, making them the most popular Bitcoin platform on the market.

21 Inc.: embedded miningOn March 10, 2015, Bitcoin and tech giants came together for what is cur-rently the largest funding round in the history of the crypto-currency space. Peter Thiel, Qualcomm Ventures, Cisco Systems, Data Collective, Khosla Ventures, Yuan Capital, Pantera Capital, RRE Ventures and Andreessen Horowitz invested $116 million in San Francisco-based 21 Inc., according to CoinDesk. Led by CEO Balaji Srinivasan, a former partner at Andreessen Horowitz, 21 Inc. and team have developed a Bitcoin mining chip called “BitShare” and an accompanying technology stack. According to a blog post by Srinivasan, “The 21 BitShare can be embedded into an Internet-connected device as a standalone chip or integrated into an existing chipset as a block of IP to generate a continuous stream of digital currency for use in a wide variety of applications.” The team sees embedded mining as a gateway to mass adoption through mobile micropayments, decen-tralized device authentication, devices that can pay for associated services and Bitcoin-subsidized devices for developing countries.

While we have limited information on 21 Inc., it’s the most anticipated crypto-currency startup around, considering its partnerships with Qualcomm and

Cisco. And with $116 million in the bank, its roadmap seems viable.

Circle: simplifying consumer experiencesIn their own words, Boston-based Circle Internet Financial is a consumer finance company focused on transforming the world economy with secure, simple and less costly technology for stor-ing and using money. Founded in 2013 by legendary Internet entrepreneurs Jeremy Allaire and Sean Neville, Circle raised $50 million in series-C funding in April 2015. Investors included Goldman Sachs, Breyer Capital, General Catalyst Partners, Accel Partners and China-based IDG Capital.

While having Goldman get into the game was exciting, having IDG Capital will give Circle a strategic partner for entering what is arguably the most complex yet lucrative bitcoin market.

In addition to starting what will certain-ly be a drawn-out process of entering the Chinese market, Circle will use their capital to focus on building a superior mobile app. Since the funding round, Allaire and team have turned on the unique “Dollar Feature,” which allows users to hold money in dollars or bit-coin, making the currencies seamlessly interchangeable.

itBit: new standards for complianceBased in New York City, itBit was found-ed in 2012 by CEO Charles Cascarilla and is a global exchange offering investors (institutional and retail) an

The VCs have spoken, and they believe in bitcoin,

the blockchain, and the other technology that

powers it all.

About the Author

Rob Wells is marketing director and resident bitcoin enthusiast at Money20/20. Rob brings a background in

marketing and hospitality, along with an MBA, to his third straight year at Money20/20.


Mention three-dimensional (3D) printing to any of your colleagues and most

will know exactly what you are talking about. Dig a little deeper and you’ll find

some futurologists predicting that 3D printing will herald a seismic shift in

manufacturing, supply chain logistics and consumerism.

3D printing has been around for more than 30 years, and the majority of its existence has been hidden away

in the depths of specialised workshops and research laboratories.

by> mark beresford

3D Printing and its Implications for RetailersIt’s more than cool technology — it’s a game-changer

Over the last few months Edgar, Dunn

& Company (EDC) has been talking

with retailers to understand their per-

spective and the business implications

of technological advancements in 3D

printing. We’ve determined that 3D

printing will lead to changes in

consumer power, personalisation, the

protection of intellectual property,

supply chains, payment processing

and the traditional infrastructures

associated with manufacturing.

A hidden history and bright future3D printing has been around for more

than 30 years, and the majority of its

existence has been hidden away in the

depths of specialised workshops and

research laboratories. Its application

has mainly focused on specialised

component manufacturing or rapid

prototyping — ranging from the

manufacturing of aircraft to Formula

1 racing cars. In the next few years

almost every consumer in the

developed countries will be directly

or indirectly impacted by the 3D

printing revolution.

A retailer’s supply chain has tradition-

ally been built around warehousing and

transporting products from the point

of manufacture. 3D printing allows

retailers to hugely reduce the carbon

footprint associated with production

and distribution.

3D scanning, 3D modeling and 3D print-

ing are all accessible technologies that

will be used to improve the consumer

experience, and omni-channel retailing

will be coupled with a plethora of smart

Internet-enabled devices. The “click-

and-deliver” retailing model commonly

seen today will evolve into something

more like “click-personalise-and-

deliver,” allowing consumers to

purchase products as they appear in

television shows or on Internet-enabled

advertising billboards.

Major consumer empowermentThe ability to print — or more correctly,

to “manufacture” — close to where

the design was created is one step

toward “distributed manufacturing,”

which allows decentralized and geo-

graphically independent distributed

production of products and compo-

nents. In the future, everyone with

access to the Internet will have

the ability to create, design and

manufacture almost anything: jewelry,

crockery, a pair of shoes, furniture or

even spare components for your car.

Today, it is possible to print a fully

functioning penknife using high-


resolution 3D printers. Victorinox, the

makers of Swiss Army knives, must see

3D printing as a threat. On the other

hand, Lego, one of the oldest and most

famous toy brands, has embraced

3D printing as an opportunity to

reach a wider audience that wishes to

personalise their Lego building blocks.

The opposite of globalisationGlobalisation has been seen as the

economic unification or joining

together of the world’s economies. 3D

printing is the opposite to globalisation.

This is an idea of localisation involving

local producers selling to consumers

who live in the same area.

You could be looking for a spare part

for your dishwasher — for example, it

could be manufactured at your local

hardware store. This would be a

dramatic difference from the same

component being manufactured and

transported around the world to be

stored in a distribution centre until the

time came when it would be sent to

each of the branch stores.

In such a model, inventory is main-

tained according to the demand and

supply, which in turn make up a vast

network of supply chain logistics. 3D

printing will provide the opportunity

to reverse globalisation and nurture

a greater degree of customisation,

individualism and creativity.

Intellectual property issuesThe proliferation of 3D printing also

creates complex questions about

intellectual property rights (IPR).

Common types of IPR include copy-

right, patents, industrial design rights

and the rights that protect trademarks.

The potential infringement of IPR

could be a significant stumbling block

to growth of the fledgling 3D printing

industry. Why, for example, couldn’t

consumers obtain the blueprint for the

desk lamp designed by Zaha Hadid, the

acclaimed Iraqi-British architect, and

have it printed at a fraction of its price

tag? The designer will most certainly

not receive any royalties, and unauthor-

ised commercial production of patented

products by 3D printing may constitute

an act of patent infringement.

More ways to shop and payWe have already seen the importance

to retailers of shoppers embracing

multiple channels, and we believe that

retailers are currently standing at the

crossroads of a substantial change in

how consumers pay. The genesis of

this change has been spurred by the

use of the Internet, cloud computing,

e-commerce and the rapid consumer

adoption of smart devices.

Payment is at the heart of the retailer’s

DNA, but retailers must take steps to

better understand customers’ high

expectations for 3D printing. Getting

the payment process wrong or even

making it slightly clumsy could turn

customers off in droves.

With the new 3D printing paradigm,

it is likely that there will be multiple,

yet smaller, payment transactions

that must take place to allow the

consumer to purchase a single product.

In the future, the retailer will have the

opportunity to take centre stage and

manage these smaller payments on

behalf of the consumer and the

different stakeholders in the new

“Additive Manufacturing” value chain.

With the advent of 3D printing,

consumers have options — they could

buy a design online and print at home

or at a 3D print shop, or they could

design at home and print at a 3D

print shop. The retailer will likely

act as the broker and offer multiple

pricing options for the same product

depending on the sourcing and

printing options.

Payment processing must be flexible

to take into account the retailer’s

evolving point of interaction, which will

be channel-agnostic. Equally, retailers

must strive to better understand the

customer journey, from pre-payment

to post-payment, with and without 3D

printing as part of that journey.

allowing consumers to purchase products as they appear in

television shows or on Internet-enabled advertising billboards.

The “click-and-deliver” retailing model commonly

seen today will evolve into something more like “click-personalise-and-deliver,”

About the Author

Mark Beresford is a director located in the London office of Edgar, Dunn & Company (EDC). Before joining EDC,

Mark was a program director and client engagement manager with significant experience in strategic business

planning, product development, business process improvement and service delivery gained on several long and

short-term assignments in a variety of blue chip organizations.


No matter how you slice it, encryption is a requirement for true transaction security — and a very good one at that. It has become such an ingrained part of payment security that, as early as 2012, Mercator Advisory Group research suggested that some acquirers were already calling for point-to-point encryption (P2PE) as a “standard” feature of new POS solutions.

Today, P2PE solutions typically come in two flavors: PCI certified, or not. Non PCI-certified encryption algorithms aren’t necessarily less secure, but they haven’t gone through the additional rigorous checks for vulnerabilities that PCI-certified algorithms have. Some POS vendors, like CreditCall, develop their own encryption algorithms and submit them for PCI certification, while other vendors like First Data and TSYS offer a number of both in-house and third-party-developed encryption solutions.

But encryption is an old technology, albeit a good one, which likely explains why there has been very little true innovation in transmission-level security in the past decade. Tokenization is the most notable exception — and that has evolved beyond security. Companies like MasterCard, Synchrony and Citi Retail are doing some very interesting things with tokens that integrate with Apple Pay and provide merchants with additional value from a CRM and loyalty standpoint.

While transmission and storage-level security appear to be enduring — if not exactly profitable — solutions, they aren’t innovative and don’t quite capture the headlines that some new device-level solutions do. Whether that innovation is truly original — or simply a variation on a theme — is still to be seen.

Tokenization and encryption are two solutions that can considerably reduce data theft risk during transit or in storage, but neither of those solutions addresses fraud or provides a secure method of authenticating the originator of the transaction.

The sheer scale of the digital financial footprint hinders standard security efforts, especially with regard to mobile applications. An IOActive Labs’ review of the top 40 mobile banking apps in January of 2014 showed that while 60 percent supported transmission-level security using SSL, as many as 70 percent did not require dual-factor authentication prior to initiating a financial transaction.

Despite the current state of authentication, every financial transaction should begin with user authentication. Is the person initiating and completing the financial transaction who he or she says he is? And is that person authorized to make the transaction?

The watermark for validating a person’s identity has long been the idea of three-factor authentication: something you know; something you have; and something you are. For financial transactions, the industry has loosely standardized two-factor screening as being adequate to authenticate identity.

But as more of our banking activities and financial transactions move online, the problem isn’t a lack of technology necessary to authenticate a user at the point of transaction. The problem is, instead, in the user experience and creating a nearly seamless authentication process that can be used across applications, experiences and devices — without having to remember a library of passwords or maintenance of duplicate versions of physical and digital payment methods.

Securing financial transactionsThe process of securely completing a financial transaction, whether online or offline, is a complex one requiring a number of solutions:

1. Device-level security — or security on the computer/mobile device where the transaction originates

2. Transmission security, which secures the data as it travels from the point of origin to its final storage

3. Secure storage of financial and personal data

Of the three, transmission and storage security are the simplest to solve and have, therefore, benefited the most from recent advances in encryption and tokenization.

Going Beyond the Status Quo to Secure Financial Transactions And why every payment should begin with user authentication

The financial services industry is flush with investments in companies looking

for easier ways to move money domestically and internationally. This “open

borders” concept brings with it concerns around security — not just for issuers

or data-storing merchants, but for every user submitting personal information

as part of a financial transaction, whether via a mobile device, a fixed unit

such as desktop computer or even a point-of-sale tablet.

by> chris souther

About the Author

A near-Atlanta native, Chris Souther spent the early 90s in the U.S. Air Force, then as a civilian network

engineer before returning to school and launching his marketing communications career. Since then,

Chris has worked with industry pioneers such as Internet Security Systems, IBM and Verifone. Chris

is now the content director for Money20/20 U.S.


The Next Great Payments Opportunity: IntegrationMaking payments just one of many features at the point of sale

Investopedia defines a “commodity” as: “A basic good used in

commerce that is interchangeable with other commodities of the

same type. The quality of a given commodity may differ slightly,

but it is essentially uniform across producers.”

by> rick oglesby

Some would argue electronic payment processing has been a commodity since its inception, but it hasn’t always been used as a raw material in the production of other products. Now, however, the fastest growing processors are the ones that facilitate the use of payments as an input, completing the commoditiza-tion cycle and creating the next great payments opportunities.

Roots: the standardization of paymentsTwo associations of banks created Visa and MasterCard in order to enable financial institutions to offer payment instruments that could be accepted at any merchant, anywhere

in the world. To do so, they created:

¬ standardized authorization;

¬ clearing, and settlement frame-works that they could use to offer payment acceptance to merchants in a way that provided global coverage; and

¬ interoperability to bankcard issuers.

This intentional commoditization of payments created a huge opportunity — it enabled banks to sell a standard-ized payment acceptance solution to tens of millions of merchants around the world. The opportunity was so large that the banks and payment brands couldn’t realize it on their own, so they aligned with payment acceptance technology firms


(processors) and distribution firms (ISOs) to create global networks of technology and distribution partnerships that could tap the worldwide opportunity. All experienced explosive growth and participated in the many trillions of dollars in transaction volume that followed.

The quest for payment reinvention? All good things must come to an end, however, as has the age of explosive growth in the payments industry. The market has become saturated, leading to a queue of payment sales-people waiting at the door of every merchant, all with offers of lower and lower prices. ISOs and acquirers are almost universally seeking to re-invent themselves, complaining of excessive competition, the inability to differentiate themselves and constant pricing compression.

There is a group of providers, however, that has already reinvented payments.

Integrated software vendors (ISVs) have been using payments as an input into the payment systems for decades, focusing primarily on the largest of merchants. They offer

payment processing as just one of many features within a software package that is designed to meet a wide variety of the payment and non-payment needs of specifically targeted merchant categories.

Over time, cloud computing has reduced the cost of software delivery, making integrated payment solutions more accessible to smaller merchants, and smaller merchants are buying. Thousands of new ISVs are now flooding the market seeking to offer specialized solutions to at least 1,300 merchant verticals. The few payment companies that specialize in helping ISVs include payments in their applications, such as Accelerated Payment Technologies, Element Payment Services, PayPros, and Mercury Payment Systems, were growing at a rate that outpaced the rest of the acquiring industry by a multiple of three until they were swallowed up by Vantiv and Global Payments.

Other integrated payment firms such as Stripe and Braintree continue to be some of the fastest-growing firms in payments, and the growth rate of these firms far outpaces the growth of payments overall, meaning a significant volume shift

from non-integrated to integrated solutions is underway. Integrated software vendors and the payments companies that enable them clearly represent the future of merchant services.

Necessary narrowing of focus on merchantsThis trend represents the next great opportunity for ISOs, ISVs, value-added-resellers (VARs), acquirers, processors and payments technology suppliers. Merchants are thirsty for specialized solutions that solve the problems of their specific businesses. The cloud, the Internet, the mobile device and the app-store provide platforms for the delivery of special-ized solutions in a cost-effective way, and the worldwide explosion of ISVs means that companies are lining up to tap the opportunity.

Most seek partners to help them distribute and monetize their prod-ucts. The payments companies that have been serving those needs are already growing explosively, yet the market is still largely untapped.

SMBs on the horizonThe stars are aligning to create the next great opportunity in merchant services: integrated payments for

the small to medium-sized merchant. Tapping into this opportunity requires an approach that is entirely distinct from legacy acquiring, processing, distribution and technology business models.

The approach for each firm depends on its ability to specialize in a specific merchant segment, its distribution model, its distribution scale and its software development capabilities. By assessing its capabilities across these dimensions, each firm can select an approach to unlock participation in the next wave of explosive growth.

And those that don’t adapt will be left behind.

About the Author

Rick Oglesby heads up the payments research division at the Double Diamond Group. He is a respected industry

veteran and research professional with more than 20 years of industry knowledge and solid research methodology

experience, and he specializes in merchant acquiring, new product development, product management, and

emerging payments strategies. Rick is a recognized thought leader in the acquiring and mobile payments spaces.

He is respected as an industry expert that has presented at numerous events, including Money20/20, ETA, Mobile

Contactless Innovations, EPCOR and TAG Fintech.

The market has become saturated,

leading to a queue of payment salespeople waiting

at the door of every merchant, all with offers of

lower and lower prices.

Now, however, the fastest growing processors

are the ones that facilitate the use of payments as an input,

completing the commoditization cycle and creating the next

great payments opportunities.


As the market presented new opportunities, professionals

who had been at traditional lenders left to start or join new

companies. Additionally, financial services companies that

hadn’t provided credit saw the opportunity and began

offering credit services. Market changes also presented

opportunities to use new data and analytical methods.

From bankers to entrepreneurs

One strong example of this movement is MPOWER Financing,

an alternative lender that provides loans to students left

out of traditional banking options. MPOWER’s CEO and

co-founder, Emmanuel Smadja, began his career at

Capital One. Several years later, he saw an opportunity to

extend credit to an untapped segment of the population:

International students at top U.S. institutions.

“Traditional lending is heavily anchored on FICO. FICO is a

good metric if you’re looking at someone who’s middle-aged

and financially active, because you have years of data to rely

on for all the accounts this person holds. Yet, FICO leaves out

younger people and falls short when assessing people going

through a major life change — like obtaining an advanced

degree. At MPOWER, we go beyond the FICO score and

look at dozens of academic and professional variables to

underwrite undergraduate and graduate students.”

Kevin Brown, vice president of marketing and product

for Credibly, spent more than eight years at Citi. Brown

described Credibly as “an emerging fintech platform

leveraging data science and technology to serve small

and medium businesses to deliver the most affordable

and right-sized capital.”

While both Brown and Smadja served credit markets as

parts of large banks, leaving these institutions changed their

perspectives. According to Smadja, “The biggest change in

my perspective of credit since my banking days is that I no

longer view credit-worthiness as a historical metric; I look

at it as a trajectory. Someone’s credit-worthiness should not

only encompass historical data, but also future data.”

From alt payment to alt lending

The growth of alternative lenders attracted the attention

of other financial providers.

Rising from the Ashes, How the Credit Industry Transformed Post-CrashA revolution in lending and credit analysis

The financial crisis of 2008 shattered institutions that were the bedrock

of finance. Amongst the chaos and uncertainty, banks, the traditional

providers of credit and lending, pulled back. Concurrently, the market

need for credit increased.

by> sanjib kalita

The increase in types of lenders

and borrowing situations has altered

perspectives on data and infrastructure

that have remained relatively

static for decades.


According to Sebastiao, “Most of the world’s data has been

created in the last two years, and within this new era of the

Internet of Things, the mobile-enabled consumer demands

an instant service delivery that is one-click simple. Yet,

existing fraud systems were built using technology and

science from the 1990s. So we built a risk platform — using

artificially intelligent machine learning — that captures big

data streams from non-traditional sources.”

While many other new entrants in the alternative lending

space have chosen to compete with the established industry,

Feedzai has chosen to partner with it in order to improve

credit prediction capabilities for the existing market. This

strategy can be challenging, especially in a conservative

industry such as financial services.

When asked about receptivity by the industry, Sebastiao

responded, “It’s been very positive. Last year we saw a

300-percent year-over-year growth, and our customers

include the world’s largest processor, a top-five bank, a

top-three acquirer and a top-three telecommunications

company, amongst others.”

Future transformations

Disruptions in the credit markets have led to transformations

at personal, business and infrastructure levels, and these

changes will accelerate.

According to Sebastiao, “We will see the machine-learning

science used by Google, Amazon and Netflix become more

widely adopted within the financial industry to make the

application, underwriting and servicing process easier

and safer. Startups like Upstart and Driverup are creating

lending marketplaces that rely on non-traditional credit-

history data.”

New entrants into the lending space will also be able to use

existing data and infrastructure in new ways. Smadja cited

an example. “One of the companies we admire, LendStreet,

uses data from collections agencies to single out the most

responsible consumers (those who’ve been making timely

payments for several months) and provide them with a fresh

financial start and the opportunity to build their credit.”

Perhaps that is a key transformation and an opportunity

to build or rebuild credit through collaboration. The

invention of credit has empowered both businesses and

consumers to lead better lives and maintain stability

through the waves of life.

One of the early disruptors, and now an industry leader in

online payments, PayPal, decided to enter the small and

medium businesses (SMBs) lending market in 2013. Darrell

Esch, vice president of SMB lending for PayPal, commented:

“Since the program launched in September of 2013, PayPal

Working Capital has provided more than $500 million in

capital to more than 40,000 SMBs.”

PayPal’s relationship to SMB customers is a critical

piece of the lending business. According to Esch, “PayPal

Working Capital is offered exclusively to PayPal business

customers with strong PayPal sales histories. Eligibility is

based on PayPal sales history, not a business or personal

credit score.”

Another payments disruptor in the SMB financing space

is Square. Square’s introduction of mobile point-of-sale

(POS) systems expanded the types of merchants accepting

credit cards by dramatically simplifying the process. Square

appears to be having a similar impact with Square Capital.

According to Faryl Ury, product communications head at

Square, “With Square Capital there is no application process,

and businesses get their money as soon as the next

business day. For example: Square might reach out to a

business and offer them $10,000, which they’d get as soon

as the next business day. In return, Square would get

$11,300 of their future card sales.”

It is interesting to note that both PayPal and Square use a

deeper understanding of their customers to provide SMB

financing with easier processes, faster access to capital

and more flexible payment terms.

From rocket science to data science

The increase in types of lenders and borrowing situations

has altered perspectives on data and infrastructure that have

remained relatively static for decades. The plethora of data

and precise calculations needed have pushed credit analytics

toward the frontiers of data science, drawing new entrants to

the credit space as well.

Nuno Sebastiao, founder & CEO, Feedzai, previously

led the development of the European Space Agency

Satellite Simulation Infrastructure. This outsider’s

perspective helped Sebastiao create something beyond

the industry status quo.

About the Author

Sanjib Kalita is chief marketing officer for Money20/20, the largest global event focused on payments and financial

services innovation. A fintech leader for almost 15 years, he has worked for large organizations like Google,

Intel and Citi. He splits his time between Northern Virginia and New York City.

The invention of credit has empowered both

businesses and consumers to lead better lives

and maintain stability through the waves of life.


You’ve grown Money20/20 from a startup to a four-day sell-out conference with more than 10,000 attendees, bringing together almost all of the influential names in the industry. What’s been the formula for success?

We’re living in a period of widespread and disruptive innovation with fundamental shifts in consumer behav-ior. Money20/20 was the first platform to articulate that payments and financial services going forward will be defined more by these types of changes than the more traditional migration of paper-intensive payments to efficient electronic systems.

Once we did that, we spent three years executing the heck out of that thesis to become more than just an event — we became a key part of the fabric of the ecosystem. And that meant primarily a grassroots effort to build an industry-wide network effect. The need for Money20/20 seems obvious today, but it was groundbreaking when Jonathan Weiner and I first brought it to market in mid-2011.

You talk a lot about payments receding into the background as part of a larger trend — commerce. Can you share how this has happened and why it has changed?

As consumer experiences move from analog to digital, payments will inevitably move more into the back-ground as a seamless part of those experiences. It might not seem like a big deal to pull out a plastic card to pay — and that’s the prevailing industry sentiment — but just use Way2Ride in a New York City cab once and you’ll immediately realize how antiquated and inconvenient physical cards really are. It’s now one of my favorite apps, and the only way I pay when I’m in a cab. In-app buying, paying for dinner without having to wait for the check, and other use cases really illustrate how payments can be far less frictional when integrated into the background.

How long before we really start to see measurable change in payments based on technologies like mobile?

It’s going to be a while. We’re not talking about the emergence of a few new specialty payment products that exist in the long tail of the demand curve, but a monumental shift as payments go from being based on a hard-wired world to a wireless one. That’s going to take a substantial amount of innovation, trial and error, development with the marketplace and significant industry realignment. It’s also going to be dependent on the ongoing shifts in consumer behavior and uptake.

60 Seconds with Anil Aggarwal A founder of Money20/20 and career entrepreneur shares some personal and professional thoughts

It continues to be an exciting period of time, but there’s a long road ahead.

You’ve grown the Money 20/20 conference exponentially year over year and you’ve now expanded overseas. As a career entrepreneur and innovator — what’s next for you personally?

I’m working on three things. First is my ongoing support of Money20/20, and I’m especially thrilled about Money20/20 Europe. It’s coming together unbelievably well.

Second, I’m enjoying spending time as a Venture Partner at Oak HC/FT, a $500 million venture capital fund, looking at interesting fintech deals.

And, finally, I’m launching a new event called Shoptalk, which will take place on May 16-18, 2016 at the Aria in Las Vegas. Shoptalk is designed to be the leading event for next-generation commerce — Shoptalk is to commerce what Money20/20 is to payments and financial services. We’ve built an amazing team for Shoptalk and raised $2 million last month to build a platform that we think will be invaluable to the industry.

payments profiles

About the Author

Anil D. Aggarwal is the chairman & CEO of Money20/20. He previously started two emerging payments

processors — TxVia, acquired by Google in 2012, and Clarity Payment Solutions, acquired by TSYS in 2004.

He has raised over $75 million in venture capital from investors that include Oak Investment Partners and Bain

Capital Ventures. Throughout his career, Anil has been committed to industry development initiatives, including

founding the Network Branded Prepaid Card Association (NBPCA), a leading nonprofit trade group.


As Congress returns to D.C. for the last big legislative push of the year, there are only a handful of weeks left to advance or complete work on legisla-tion before year-end. Additionally, with the holiday season rapidly approaching, the migration to chip cards is on every-one’s mind. It is a good time to take a break and examine what to expect from Washington this fall.

CybersecurityIn legislation, no issue is more important than protecting consumers from cyber-crimes. Government affairs departments in the payments industry are working to get Congress to pass two pieces of leg-islation — data breach notification and information sharing on cyber-threats.

If a data breach occurs now, companies must follow a convoluted series of 47 different state laws to notify their cus-tomers. The payments industry — along with retailers and other stakeholders — continues to press Congress to create one national standard for breach notifi-cation. Five bills have been introduced to create this national standard.

In terms of sharing information about cyber-threats, the payments industry is on the front line of the war on cyber-crimes. We often see individual data points that form a pattern of a cyber-crime. Currently, a company with such information is prohibited from sharing it.

Allowing companies and the government to voluntarily share information about cyber-threats will strengthen our ability to monitor, detect, contain and prevent cyber-crimes. The payments industry strongly supports removing restrictions and thereby allowing companies and the government to share information about cyber-threats. The House has passed two bills in this area and the Senate bill is awaiting floor time.

The shift to chip cardsOctober 1 was the first day of the chip card liability shift, and all the players in the payments industry had been working hard to prepare for this day. Chip cards are being sent to customers, merchants are upgrading their point-of-sale termi-nals, and processors have adapted their systems.

The payments industry has committed a large amount of resources to make the shift, and Congress is getting into the act as well. The payments industry is providing regular briefings to Congress and federal regulators on what chip cards are — and what they are not. These briefings focus on:

¬ The type of fraud chip cards prevent — lost or stolen card fraud;

¬ How the chip works — creating a special one-time use code for each transaction;

¬ What it means to consumers — no liability for fraud; and

¬ How chip cards fit in with other technology like tokenization and encryption.

As the business side of the industry is preparing for the shift, lobbyists are hard at work in Washington briefing policymakers on what the shift means to them and their constituents. And as Congress grapples with legislation, the federal regulators are hard at work thinking about how the new world of payments fits into the existing regulatory framework — and if any new regulations are needed.

Prepaid cards The Consumer Financial Protection Bureau (CFPB) released an 870-page proposal to regulate general reloadable prepaid cards. The proposal would create heavy regulatory burdens on mission-critical features of prepaid

cards — including overdraft — and create confusion for consumers due to disclosure requirements. The proposal also attempts to regulate peer-to-peer lending, mobile transactions and Bitcoin.

The payments industry extolls the many virtues of prepaid cards — like ease of use, low fees, and convenience in distributing payroll, student funds and government benefits. The industry continues to express strong concerns regarding the restrictions proposed by the CFPB.

Big dataPopular topics among regulators are big data and its use by the business community to slice and dice informa-tion. Big data, of course, refers to the use of information about one person or a group of people to enable the collector to mine the data for specific business purposes.

The business community uses big data to target specific product offerings, to learn more about what consumers want, and to reduce fraud. But regula-tors worry that big data could be used for more nefarious purposes. Given the newness of the concept, the payments industry urges regulators to go slow and not rush to regulate.

As the last months of the year are upon us, Congress and regulators are focusing on myriad issues facing the payments industry. It is important for industry executives to have their voice heard to ensure that premature or overreaching regulations do not interfere with the industry’s efforts to innovate and deliver better products and services to consumers.

policymakers at work

A View From Washington Payments regulations and legislative news from Capitol Hill

by> scott talbott

About the Author

Scott Talbott, J.D., C.P.A., is senior vice president of government affairs at the Electronic Transactions Association.

He is an experienced policy advocate and communicator with two decades of experience in Washington. Talbott

has represented the largest financial services firms in the country before Congress and federal regulators, most

notably during the fiscal crisis. He is also an expert on communication, appearing regularly on national and

international media. He has been called the voice of the financial services industry and one of the most

recognizable faces in the industry.


Why it’s Time to Take Ownership of Your Customers’ Financial Well-BeingCollaboration and concern are key for product development in fintech

We all know happy customers make for good

business. But what makes for a happy customer?

by> kimberly gartner

A happy customer has access to high-quality financial products that empower her to achieve her financial goals. She trusts her provider and recognizes the role that institutions play in assisting her to achieve strong financial health, meaning her day-to-day financial system functions well — and increases the likelihood of financial resilience and opportunity.

In the same way food manufacturers influence an individual’s physical health, so too do financial service providers impact consumers’ financial well-being. Providers can assist consumers to achieve strong financial health by offering high-quality products and services that can help consumers make better financial decisions, retain greater control over their money, and plan for the future.

An American challengeAcross the country, consumers lack robust financial health. Fifty-seven percent of American adults — approximately 138 million — are struggling financially, according to a new national study on consumer financial health from my colleagues at the Center for Financial Services Innovation. Companies can build engagement and loyalty by ensuring that products help consumers adopt positive financial behaviors.

Our research indicates that the financial challenges facing so many millions of Americans are not exclusively tied to income but also to habits. Consequently, well-designed products that support and encourage beneficial financial behaviors can go a long way toward improving an individual’s economic stability and mobility.

Holding income and other demographic and behavioral variables constant, our research reveals consumers who plan ahead for large, irregular expenses are ten times as likely to be in a financially healthy segment as those who do not, and those who have a planned savings habit are four times as likely to be in a financially healthy segment as those who do not.

Despite its significance, most financial service providers do not gather data on customers’ financial health. Now is the time to change that.

perspectives in payments

All about informationFor most providers, gathering data on customers’ financial health should be relatively easy, as many providers already have systems in place to survey customers, regardless of whether those clients are consumers or other businesses. It’s simply a matter of leveraging that existing infrastructure to gather a few critical pieces of new data to understand and measure consumers’ financial health.

Armed with an understanding of customers’ overall financial position, providers will then be much better positioned to help clients understand the value of their services. Additionally, providers will have the data to demonstrate, in real time, how products and services are benefitting customers.

For providers who work directly with consumers, the easiest way to start is by utilizing the different customer touch points to survey clients. While there are numerous useful questions, a good starting point is to ask at least these three:

1. Does your household plan ahead to make sure you have the money to pay for large, irregular expenses (for example, bills that are not due each month, such as insurance, property taxes and car registration)?

2. Which one of the following statements comes closest to describing your savings habits? (a) Don’t save, spend more than income (b) Don’t save, spend as much as income (c) Save whatever is leftover at the end of the month

(no savings plan) (d) Save one family member’s income, spend the other’s (e) Spend regular income, save other income (f) Save regularly by putting money aside each month

3. When you think about saving for the future, which of these time frames is most important to you?

(a) Next few weeks (b) Next few months (c) Next year (d) Next few years (e) Next 5-10 years (f) Longer than 10 years

It’s not difficultFor technology providers and other business-to-business operations, consider creating a “customer satisfaction toolkit” that enables clients to ask their customers the same questions.

Consumers want to be financially healthy, and soon they will begin demanding that financial service providers partner with them to achieve that goal. The writing is on the wall — just look at the rapid transformation currently underway around physical health.

Consumers are embracing wearable technologies that provide real-time data to assist them in making positive decisions. They are purchasing millions of mobile apps to track calories, exercise, sleep, water intake, and anything else that affects physical well-being, again with an eye to modifying habits to improve outcomes. They are petitioning food manufacturers to provide healthier options. Clearly, they want to be empowered to make good choices.

Painting the picture for consumer financial healthProviders of prepaid products have been leading the financial services industry in giving consumers the information they need to build financial health, including real-time balances and spending alerts. Inevitably, more types of financial service providers will soon be faced with equivalent consumer expectations.

Companies can help themselves to anticipate those demands by surveying customers to better understand both their overall financial health and also exploring product features and functions that can most effectively help them to save and plan.

By doing so, providers can best position themselves to capitalize on the many business opportunities such demands will inevitably create.

About the Author

Kimberly Gartner is a senior vice president at

the Center for Financial Services Innovation

(CFSI). CFSI is the authority on consumer

financial health, leading a network of committed

financial services innovators to build better

consumer products and practices. Kimberly

brings her deep knowledge of consumers,

understanding of the financial services

marketplace, and vision for financial health

to spur people and companies to action.

Our research indicates that the financial challenges facing

so many millions of Americans are not exclusively tied to

income but also to habits.

Special Money20/20 Edition...Opportunity: Integration Making payments just one of many features at...

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