Nov. 6, 2014
Volume 10, No. 41
weekly
Tips, Tactics and Strategy For POS And ATM Sales Success
SECURTY
Artificial Identities
Can Sidestep EMV
By David Heun
Fraudsters around the world are quickly
developing a way to sidestep EMV-chip
security ahead of the U.S. card networks’
October 2015 deadline for adopting the
technology.
Instead of printing cloned cards,
which EMV technology is designed
to thwart, fraudsters are beginning to
create artificial identities to open credit
cards with banks, then use that account
to its maximum limit.
The method, known as synthetic
identity fraud, is a looming danger for
banks, mobile network operators and
the acquiring industr y because it tends
to increase dramatically once chip-based
FRAUD Continued on page 21
News Briefs
Market Trends
Vendor Briefs
p 11
p 13
p 15
People
p 19
Appointment Book
p 25
Ad Index
p 25
SUBSCRIBE
Opportunity Knocks In Vending
By Jeffrey Green
Acquirers are encouraging vending-machine
operators to add card and mobile electronicpayment acceptance, which could represent
a whole new category of transactions.
ISOs, processors and gateway providers could reap financial rewards if they’re
patient enough to handle the relationshipbuilding process, willing to invest in the
education necessary to understand the
vending market and ready to devise the
right tactics, insiders say.
Challenges can arise, however because
vending-machine operators are not like other
retailers. Unlike retail POS terminals, for
example, vending machines tend to move
around a lot—up to 10 times each during
their operational existence—thus requiring constant attention. Wireless and other
connectivity issues and getting to know an
assortment of new market players also pose
potential complications, observers say.
Indeed, ISOs venturing into vending
face considerable upfront and continuous work building and retaining relationships, said Stacey Finley Tappin, senior
vice president of North America sales and
marketing communications at Scottsdale,
Ariz.-based Apriva, whose tokenized Apriva
VENDING Continued on page 23
MOBILE WALLETS
Together, Apple And Alibaba Would Be Global
By John Adams
Inside
isoandagent.com |
NEW FRONTIER
follow us
needs to establish itself in China, where
The “marriage” that Apple’s CEO and
Alibaba’s Alipay affiliate has a strong
Alibaba’s founder are hinting at could crefooting.
ate a mobile wallet with a global reach that
Meanwhile, Alipay needs a way to
well exceeds that of most banks, telcos
reach consumers in the
and other mobile-wallet
U.S., where one million
developers active in
Biometrics Security
people have already
either company’s home
Goes Beyond EMV
signed up for Apple Pay.
market.
But fingerrpint authentication
“Alibaba is the most
The two technology
still lacks adoption. Page 3
prominent tech comgiants can address each
pany in China and has a
other’s needs almost
lot of weight and a lock on the Chinese
perfectly, obser vers told ISO&Agent
e-commerce consumer, and Apple is the
Weekly.
most popular technology brand in the
Apple has launched a mobile wallet
in the United States. but the company
TOGETHER Continued on page 19
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ISO&AGENT
NOVEMBER 6, 2014
TECHNOLOGY
Biometrics Offers Security EMV Can’t Provide
Even after working with MasterCard,
Zwipe has a long journey ahead before its
contactless cards with fingerprint authentication see mass adoption. But the hightech cards have the potential to suppress
fraud and deter security breaches beyond
what EMV-chip cards can do.
EMV cards deter counterfeiting, but they
leave loopholes for fraudsters to exploit.
Notably, EMV cards don’t add security for
card-not-present payments, but they are also
vulnerable to other attacks. In many cases,
EMV cards are also used with a PIN to
prevent the misuse of stolen cards.
After the U.K. switched to EMV chipand-PIN, lost or stolen fraud decreased, but
between 2011 and 2013 those rates rose as
fraudsters found ways to skim and capture
PIN numbers, said Julie Conroy, an analyst
with the Aite Group.
“Other countries as they’ve gone to
EMV, if they use chip-and-PIN, it initially
addressed lost/stolen fraud but then those
numbers went right back up,” she said.
The addition of a biometric sensor could
reduce that type of skimming fraud, Conroy
said. “It’s a bit more effective than a PIN that
is a static four-digit data element.”
MasterCard Set To Work With Zwipe
MasterCard plans to launch a card with
Zwipe in the U.K. in early 2015. Consumers won’t have to input their PIN at the
point of sale when using a card that has a
fingerprint sensor authentication.
“The merchant will have quicker transactions so smaller queues and higher turnover,” said Kim Humbortad, CEO of Zwipe.
The biometric card benefits the whole value
chain because “it combines a security level
that’s higher than traditional PIN codes with
a simpler process than PIN codes.”
And because Zwipe isn’t disrupting the
value chain, it might have an easier time
working with established players.
Zwipe has run successful tests with two
banks, SparebankenDIN in Norway and
Getin Bank in Poland. SparebankenDIN will
use Zwipe’s technology for its credit cards
and Getin Bank will use it for its debit cards.
“Zwipe has worked with financial institutions in pilots; a lot of people are working on
[biometrics] tech but getting the consumer
feedback for us is critical,” said Bob Reany,
head of authentication services at MasterCard. “Around security you can create a lot
of cool stuff that no one will use.”
Both MasterCard and Zwipe gave a nod
to Apple for being the wedge in the biometrics market. Apple’s mobile payment system,
Apple Pay, uses Apple’s TouchID fingerprint
scanner for authentication.
Five years ago, consumers associated fingerprint scanning with criminal
activity and thought the process a bit
Or wellian, said Reany.
The biometric cards could also provide
enough security to eliminate the limits
placed on contactless payments, Hombortad
said. “That’s the goal for MasterCard to use
contactless for all amounts,” he said.
The security of the cards also rides on
the fact that consumer biometric data and information are stored on the chip in the card.
Data breaches have captured the pay-
ments industry’s attention for the past year.
Most of the breaches occurred when fraudsters broke into big central databases to steal
lots of credentials. “Putting the information
on individual cards and phones, you destroy
that model for fraudsters,” Reany said.
Cost Impedes Biometrics Progress
The main hurdle biometric cards face
is cost. High-tech cards are much more
expensive than traditional cards.
Zwipe, which has offices in Norway
and Colorado, would not disclose the
price of the cards. MasterCard would not
disclose a range of card prices. MasterCard works with a number of biometric
technology providers, including voice and
facial recognition providers.
Previously MasterCard had worked with
NagraID to develop a card with a digital
one-time code generator for card-not-present
transactions. NagraID was acquired by
Oberthur Technologies in August.
“I haven’t seen that solution get much
traction other than with high net worth individuals…where there’s more risk,” and
so the users don’t mind spending more
money on the card, Conroy said. ■
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ISO&AGENT
NOVEMBER 6 2014
ISO&AGENT
NOVEMBER 6, 2014
TECHNOLOGY
Corporate Employee Payments May Go Mobile
Advances in consumer mobile payments
are setting the stage for similar changes
to corporate employee payments, such
as travel purchases and other expenses.
“It’s a natural extension of the change
in human behavior,” said Dominic Venturo,
chief innovation officer at U.S. Bank, which
is releasing a number of mobile features for
corporate travel and purchasing.
The general familiarity employees
have with mobile in their personal lives
makes for less of an adjustment when
using the technology for work expenses,
Venturo said. This trend also benefits
developers and issuers, he said.
“Some of the work that we have done
on the retail side will bleed into the
corporate side,” including the bank’s approach to risk, Venturo said.
Banks are largely overlooking the opportunity to generate more fee income by
adding technology and mobility for corporate, travel and entertainment, said Stessa
Cohen, a research director at Gartner. “I
haven’t heard too much about [mobile pay
for employees] happening. It’s the less
sexy side of banking, but here is where
you can start to really generate revenue
from digital banking,” she said.
Mobile payments can remove friction
for corporate travel and procurement,
improving the user experience and aiding
on the management side, Cohen said.
“Businesses can get an easier view into
cash flow and how travel and entertainment impacts the budget.”
U.S. Bank Adds Data And Reporting
U.S. Bank is gradually bringing features
of its Access Online data management and
reporting tool to a mobile app called Access Online Mobile. Business employees
can use the app to view account summary
information and payment due dates.
Fraud, transaction and security alerts will
be added shortly, as well as electronic
receipt attachment and mobile payments
for single-use corporate accounts.
Different types of corporate payment
data and functions can be available in the
same location, saving navigation for people
who normally use different travel cards,
Venturo said. Many companies choose to
distribute separate cards as part of how
they organize procurement and travel &
entertainment risk, he said.
U.S. Bank is also developing a provisioning function for corporate employee cards,
Venturo said. “We can leverage the technology in the consumer app where we could
push a new card out in real time for an employee that didn’t have one,” Venturo said.
The move to mobile follows a number of
other initiatives at U.S. Bank to add technology to business payments. Late last year,
U.S. Bank launched TravelVirtualPay, which
provides a one-time-use virtual account
number for each purchase. That payment
method is designed to replace the central-
5
ized lodge cards that businesses use to
manage travel payment. Single-use accounts
can give corporate clients a way to manage
waste in corporate spending by viewing a
larger set of payments information that can
be retrieved and organized quickly.
Making Changes The On B2B Side
The bank has also made moves on the business-to-business side, including deployment
of a payment application that enables clients
to integrate enterprise resource planning
software from SAP with the bank’s payment
origination service. SAP’s Consolidated
Payables Link for U.S. Bank is designed
to process business payments faster and
in more consistent manner for companies
using different payment types.
More recently, U.S. Bank on Oct. 28 updated the Access Online platform to simplify
the number of fields required for businessto-business payment instructions. ■
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ATMS
Cardtronics Testing Location-Based Offers
Cardtronics Inc. is testing a system that
takes location-based offers, which are typically linked to a card account or a mobile
app, and makes them available to consumers who may prefer to pay with cash.
The technology, which Cardtronics
calls its ALLTM Network, offers product
discounts available at the store in which the
ATM is based. This approach exploits both
the growing sophistication of ATMs and the
steady spread of location-based offers.
Cardtronics’ ALLTM Network made its
pilot test debut recently at 17 Fresh & Easy
neighborhood market stores in Phoenix.
Cardtronics plans a wider rollout of the
technology in 2015.
Consumers use the ALLTM app on their
smartphones to scan a QR code on their
ATM receipt after withdrawing cash in order
to receive the digital rewards or incentives
offered from a second digital screen display
at the top of the ALLTM unit.
Javelin Strategy & Research has found
that nearly 40% of consumers would be willing to scan QR codes as part of a payment
or discounting process, according to Mary
Monahan, head of mobile for Javelin.
“ATMs are going to get more sophisticated, and this [ALLTM] is an interesting step,”
Monahan said. “ATMs will become much
more creative, because we are not even close
to using them to their full potential now.”
Technology providers have been encouraging updates of ATM fleets. Over the next
three to four years, ATMs will offer customers many more services, Monahan said.
The new ALLTM units are part of
Cardtronics’ Allpoint surcharge-free network, so customers of the 1,200 financial
institutions in Allpoint would not pay fees to
withdraw cash and redeem the product discounts, said Nick Pappathopoulos, director
of public relations and corporate communications at Houston-based Cardtronics.
7
After scanning the QR code from the
ALLTM receipt, consumers can check off
the product deals they want to redeem
before clicking a “check out” button on the
phone. The app produces a new QR code
for each discount. The merchant scans the
codes at the point of sale.
“You can use the app at any time to view
deals at the location, but scanning the receipt
… changes the offers from something you
are looking at to something you can use,”
Pappathopoulos said.
Cardtronics will expand use of the ATMs
through the Fresh & Easy franchise in California and Nevada, as well as through other
stores, Pappathopoulos said.
Even though the Phoenix units are part
of the Allpoint network, not every ALLTM
unit will automatically be part of Allpoint,
which serves 43,000 locations in the U.S..
Cardtronics’ move into digital rewards
and other tech comes as ATM owners are
also upgrading to accept EMV. Meanwhile,
crooks are skimming magnetic-stripe transaction data or capture cardholder PINs. ■
8
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ISO&AGENT
NOVEMBER 6, 2014
ASSOCIATIONS
NEAA Moves Show To Attract Larger Crowds
The Northeast Acquirers Association
winter conference is moving to Boston
next year after a 14-year run at Mount
Snow, Vt.
The regional trade group’s board
changed the site to provide a more central, more accessible location in the hope
of attracting more attendees and exhibitors, said Alan Forgione, an Ingenico
executive who ser ves as president of the
all-volunteer NEAA board.
“It made sense to look at other venues because we wanted the numbers to
grow,” Forgione said.
Shows at Mount Snow have been attracting 300 to 450 participants, and the
board hopes to see that number increase
to as many as 600 in Boston, he told
ISO&Agent Weekly in a phone inter view.
Where the association’s future winter
shows will convene remains undecided,
Forgione said, noting that Mount Snow
could ser ve as the venue for alternating years and that New York City and
Philadephia could also play host to
future gatherings.
A new attraction at this year’s winter
conference bears the name “Catpult
2015.” The event, which parallels the
Shark Attack at the Midwest Acquirers
Association conferences, was inspired
by the Shark Tank television show that’s
based on the Dragon’s Den program in
the U.K. In all of those events, entrepreneurs present their business plans to a
panel of judges.
The idea for Catapult 15 came from
Donna Embr y, a Payment Alliance International executive who’s the outgoing
MWAA president and has become the
newest member of the NEAA board.
At the NEAA show, the Catapult 2015
winners will receive cash prizes and
exposure in the acquiring industr y.
9
The first place Catapult 2015 contestant will also receive free booth space at
Transact 15, the annual conference of the
Electronic Transactions Association.
Awarding Transact 15 booth space
to the winner is an example of the
cooperation emerging between the ETA
and each of the four regional acquiring
conferences, Forgione said.\
ETA CEO Jason Oxman is scheduled
to speak at the NEAA show in another
example of cooperation.
Meanwhile, the fate of the NEAA’s
summer show seems a bit uncertain,
Forgione said. The board may decide to
skip the show in 2015 and reconvene the
following year.
Summer shows have been attracting
200 to 300 participants, but many just
drop in for a brief visit during lunch or
after work, he noted.
Other NEAA board members include
Nancy Austin, Jim Fink, Ruth Gorski,
Chris Butts, Jeff Akeson and Henr y
Helgeson. ■
10
ISO&AGENT
NOVEMBER 6 2014
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ISO&AGENT
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11
News Briefs
MCX Catching Flak
For Anti-Apple Moves
The Merchant Customer Exchange is
facing harsh scrutiny after some of its merchants shut off all Near Field Communication capabilities to show allegiance with the
merchant mobile wallet over Apple Pay.
The MCX wallet, CurrentC, was
designed to use QR codes instead of NFC,
but it may change its model following complaints from users of NFC wallets such as
Apple Pay, Google Wallet and Softcard.
The retailers in question also shut off their
ability to accept bank-issued contactless
cards. But now MCX is exploring the use
of NFC, Bluetooth Low Energy and other
wireless technology.
“This isn’t about the technology, it’s
about customer engagement … if we need
to, we can pivot to NFC at the appropriate
point of time,” MCX CEO Dekkers Davidson said at a recent press conference.
MCX also countered claims that it is
threatening merchants with fines if they
break their exclusivity to MCX. “There are
no fines to MCX merchants. It’s simply not
true,” Davidson said.
Davidson did not address other details
related to non-compete arrangements
between merchants and MCX. “Merchants
are free to make whatever choice they
wish,” he said. He also did not disclose
investments merchants make in MCX or
other details of participation.
MCX’s CurrentC wallet is being tested
with a small group of merchants, with a
public rollout expected for early 2015.
Davidson did say what merchants should
tell consumers who want to make mobile
payments for holiday purchases. ■
company-wide security awareness.
The Wakefield, Mass., group published
a series of best practices for teaching staff
how to protect payment information.
Recommendations include assembling
a security awareness team and developing a checklist for employee trainings.
“This guidance can help businesses
focus on the people part of the equation
and build a greater culture of security
awareness and vigilance across their
organizations,” said Troy Leach, the
PCI’s chief technology officer, in an Oct.
30 press release.
The council, which maintains the PCI
data security standards, last month released guidance for merchants on ways
to protect against card skimming. The
group is also expected to release a new
set of standards next year to give retailers better protection against hackers. ■
We Are
Apple Pay scooped up one million payment
cards in its first 72 hours, 60% of which
were Visa cards, but MasterCard’s chief
executive still expressed optimism for the
payment network’s chances in the rapidly
shifting mobile landscape.
Whatever Apple Pay’s effect, it is not a
competitor, Ajay Banga, MasterCard president and CEO, said during the Purchase,
N.Y., company’s recent earnings call.
Though some payment companies
are casting Apple as a rival, MasterCard
is actively promoting the new mobile wallet through efforts such as offering its
MasterCard Nearby app as an unofficial
Apple Pay merchant locator. ■
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13
Market Trends
Consortium Of Big Banks
Seek Real-Time Payments
The movement to develop a faster U.S. payment system has a new, influential convert.
The Clearing House, a payments
company and trade group representing 24
of the nation’s largest commercial banks,
has announced plans to build a real-time
payment system for all of the country’s financial institutions. The effort will require
a “multi-year endeavor,” according to the
group’s press release.
“The only way a system like this will be
successful is if it’s ubiquitous and not just
a small set of banks,” Clearing House president and chief executive Jim Aramanda
said. “So it’s going to take a while—there
are a lot of constituents involved.”
The announcement comes in the midst
of a broader push to improve the nation’s
payment system. The Federal Reserve is
expected to lay out a multi-year road map
for achieving a near real-time system in a
paper scheduled for publication before the
end of the year. And Nacha, an industry
trade group that sets the rules for the
automated clearing house network, is
working on an initiative that would allow
ACH transactions to clear on the same day
they’re initiated, rather than a day later.
The Clearing House’s plan signals the
turning of a new page for the organization, which along with the Federal
Reser ve operates the ACH network and
processes wire-transfer and check-imaging payments. ■
Bitcoin Firms Maneuvering
To Circumvent Regulation
As regulators heighten their scrutiny
of Bitcoin businesses, several digital
currency supporters are looking for
business models that do not subject
them to the cumbersome requirements
they would face as money ser vices businesses or money transmitters.
Brawker, a Bitcoin company based in
Hong Kong, is taking lessons from the
sharing economy, which has grown rapidly
over the past couple years with standouts
like Airbnb, Uber, Getaround and TaskRabbit.
Brawker matches Bitcoin users with
credit card users to make purchase at
merchants that don’t accept Bitcoin. The
credit card user buys the product, then
gives it to the Bitcoin user in exchange for
the equivalent amount of digital currency.
“Usually exchanges rely on banking
services in order to function…we piggyback on the e-commerce infrastructure,”
said Cyril Houri, CEO of Brawker.
Brawker has nearly 15,000 registered
users (both buy side and sell side) and
handles about 15 transactions per day,
mostly for Amazon gift cards, Houri said.
He’s also seen people use the service to
pay an electricity bill, a parking ticket or an
installment of a student loan.
“We’re making it possible now for
someone who’s going to receive bitcoin to
be confident that they’ll be able to spend it
on anything they want,” said Houri. ■
Google Adding Features
To Keep Wallet Relevant
Google Wallet, which faces pressure to
stay relevant after the launch of Apple Pay,
has added recurring bank transfers and
alerts to rekindle consumer demand for
mobile payments on non-Apple devices.
An update enables Google Wallet users
to activate automatic bank transfers, picking the amount to add to the wallet and
the time frame. The update also provides
alerts to tell the user when the Google
Wallet account is almost out of funds.
The move is similar to BBVA’s strategy
to stay fresh in its consumers’ minds as
Apple Pay creates a surge of fresh competition on users’ handsets. BBVA’s Android
app, which it is porting to iPhones, relies
on alerts and account-management features to keep users engaged.
By adding features like these to
Google Wallet, Google can encourage
more of its customers to use its wallet
app on a recurring basis. ■
14
ISO&AGENT
NOVEMBER 6 2014
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ISO&AGENT
NOVEMBER 6, 2014
15
Vendor Briefs
Besides Aiding Merchants,
Womply’s Data Helps ISOs
Womply, a vendor that uses data to help
merchants understand their customers and
competitors, also uses data to help ISOs.
When the San Francisco-based company’s operatives work with merchants on
intelligence gathering and analysis, they
watch for signs that the merchant might
consider leaving its acquirer, said Cory
Capoccia, Womply’s president.
“Womply’s white glove onboarding and
support team is trained to identify these
issues, monitor merchant satisfaction, and
collect the data that Womply’s partners need
to save merchants, increase satisfaction, and
make better decisions,” Capoccia said.
Womply sends ISOs regular alerts and
reports on “at risk” merchants so they
can stop churn before it happens, he said,
noting that the service comes standard as
part of Womply’s Insights platform.
To sign up new merchants, or to retain
established clients, the company’s data
crunching enables ISOs to deliver immediate value without new hardware, software
installations or changes in daily operations,
Capoccia said. Merchants have access to the
information on computer dashboards. ■
Recombo Offers ISOs Data
On Earlier Client Contacts
An automated onboarding and underwriting tool for ISOs can capture the details of
any interaction with merchants and make
those details conveniently available for
subsequent conversations.
The product, called Agreement Express,
comes from Recombo, a Vancouver, British Columbia-based company that’s been
around for about 10 years and has been
selling its wares in the U.S. for six years.
Besides bringing new merchants onboard quickly—which gives them less time
to change their minds—Agreement Express
documents every point of contact with a
merchant, whether it’s online, via mobile devices, through a call center or with partners,
said Mike Gardner, CEO of Recombo.
ISOs can then use the data from previous conversations to improve their future
conversations, he noted.
Competing systems don’t bring together data from as many sources or make
it as easily available, Gardner maintained.
Recombo offers Agreement Express
in fairly simple form for smaller ISOs and
can increase the number of features an
the depth of the analysis for larger ISOs.
Smaller ISOs might pay as little as $150
per agent per month for the services, while
larger users with more complexity might
pay $5,000 to $10,000 annually, he said. ■
Ingram Micro Signs Deal
To Offer PowaPOS T-Series
Ingram Micro Inc. has signed a deal
with Powa Technologies to distribute the
PowaPOS T-series point of sale system in
North America.
“Market demand for a scalable, flexible
tablet-based payment solution continues to
grow, and with Ingram’s global reach, thousands of its channel partners can now call on
the company to meet this market need,” Jeff
Dumbrell, CEO of PowaPOS, a division of
Powa Technologies, said in a press release.
As part of the Ingram Micro Specialty
Solutions Division, the Data Capture/
POS business unit helps companies tap
into high-margin sales and service opportunities in vertical markets by offering
products, business support resources, geographical reach, professional services and
inventory management, the release said.
Earlier this year, Powa Technologies
unveiled the PowaPOS T-Series, a tabletbased approach that integrates components into one simplified and space-saving POS stand. Features include a tilting
and swiveling tablet mount, high-speed
printer, 2D barcode scanner, encr ypting
magnetic stripe reader, EMV-compliant
smartcard reader, secure PIN-entr y
keypad and cash drawer. ■
MITEC Joins With Cardinal
To Give Consumers Choice
CardinalCommerce and MITEC (Mercadotecnia Ideas y Tecnologia) have
joined forces to offer Cardinal’s Universal
Merchant Platform, Centinel, to MITEC’s
merchant-customers throughout Mexico.
Through the partnership with Cardinal, MITEC will integrate the proprietar y Cardinal Centinel platform and
offer Cardinal’s rules-based consumer
authentication, as well as other 3-D
Secure protocols such as Verified by Visa
and MasterCard SecureCode to MITEC’s
Merchant-Customers.
The Centinel platform also gives
MITEC’s Customers access to alternative payment brands and digital wallets,
providing Mexican Consumers a choice
of which payment methods to use while
shopping online. ■
ControlScan Creates Site
To Teach Data Security
ControlScan, a security provider, has
launched a website for small-business owners seeking information and best practices
to secure sensitive customer data.
SMB Security Guide joins an earlier online tool, PCI Compliance Guide, to create an
“arsenal” of ControlScan web properties that
teach business owners about unified security
and compliance for data breach prevention,
the company said in a press release. PCI
Compliance Guide, which averages nearly
2,000 daily visits, offers information and
action steps for complying with the Payment
Card Industry Data Security Standard.
“The payments industry has a lot at
stake when it comes to SMB security—and
it’s not all related to PCI,” said Joan Herbig,
CEO of ControlScan. “SMB Security Guide
picks up where PCI Compliance Guide
leaves off, so that SMBs see the big picture
of how secure technologies and processes
contribute to their business success.” ■
16
ISO&AGENT
NOVEMBER 6 2014
ISO&AGENT
NOVEMBER 6, 2014
Merchant Blends Apple Pay With NCR’s Tech
The Peterbrooke Chocolatier has a new
recipe for mobile payments: it’s blending
Apple Pay with NCR’s order-ahead and
mobile point of sale technology to engage
its customers in a new way.
The appeal of Apple Pay is that it is available to any merchant that wants to accept it,
no matter how small, said Jeff Smith, chief
operating officer of Peterbrooke, a Jacksonville, Fla.-based company that has about two
dozen locations. “A lot of times these new
payment and merchant platforms are rolled
out to just the big guys,” he said.
Merchant preference is expected to play
a role in how Apple Pay and other mobile
payment options co-exist. Some large retailers have shut off Apple Pay in favor of the
merchant-backed CurentC wallet.
But Apple Pay pairs well with tabletbased point of sale devices, which small
merchants favor, Smith said. Peterbrooke
is using the NCR Silver mobile point of sale
system and the Silver Sidewalk app, which
has an order-ahead feature that supports
Apple Pay as a payment option on the iPhone
6 and iPhone 6 Plus. The service, which
includes oyalty programs, is free until Jan. 1.
The chocolate shop hopes the orderahead function can reduce wait times and
handle digital payments faster, given Apple’s
use of TouchID fingerprint recognition to authenticate transactions, Smith said. “We have
a lot of special orders and a couple of our
locations have curbside loading,” he noted.
Consumers order on the Peterbrooke
app and set a time for pickup. Apple Pay appears on the mobile device’s screen as a payment option. The store can access its loyalty
program through the iPad mobile POS app.
Adjustments will come as consumers and
staff get used to Apple Pay, though Smith
said that based on early feedback, he’s not
concerned about a major usability problem.
“All indications are positive that both
Apple Pay and order ahead will work seamlessly once our guests and staffs are oriented
TSYS Awaits Word On Rules For Prepaid Cards
Total System Services is close to beginning tests of new products and merchant
services, and it is already seeing a benefit
from last week’s launch of Apple Pay. But
in prepaid, a significant business for the
processor, TSYS is still awaiting new rules
from the government.
During the Columbus, Ga.-based company’s third-quarter earnings call, CEO M.
Troy Woods addressed long-pending rules
and guidance from the Consumer Financial
Protection Bureau on prepaid products. He
expects the rules to emerge over the next
few months, covering Regulation E protections on unauthorized transactions, deposit
insurance, disclosures and overdraft polities.
TSYS has made a number of moves in
the past few months to expand its NetSpend
prepaid card unit. Walmart will place
NetSpend’s reloading prepaid product in all
4,300 of its U.S. stores over the next month,
and Netspend also recently launched a co-
branded prepaid card with Western Union.
“That will provide a way to move money in
minutes and pay anywhere MasterCard is
accepted, and manage money and pay bills
without a checking account,” Woods said.
Walmart also recently began offering
Green Dot’s GoBank account. Walmart owns
a 4% stake in Green Dot, a rival of NetSpend.
As Woods has traveled the country since
becoming CEO of TSYS earlier this spring,
he said one of the questions he’s most often
asked by investors is the impact that the
CFPB’s pending rules will have on prepaid.
“Today, NetSpend follows the rules and
regulations in respect to Reg E and all of
our products are FDIC insured,” Woods
said, adding TSYS helped create a standard
for disclosure and its overdraft policy is
designed to help consumers to avoid fees.
“We will work with and meet with the
CFPB in all of these areas,” Woods said.
TSYS also benefited from its early
17
to how it works,” Smith said. Peterbrooke
did not give figures for early deployments.
NCR Silver enables merchants to accept
cards on touchscreen POS terminals and
those of Apple Inc.’s iPads, iPods or iPhones.
Besides Apple Pay integration, NCR
has recently updated Silver to support
links to accounting software, loyalty programs and centralized business management for multiple locations. Apple Pay
does not offer a loyalty program.
NCR sees “pickup” businesses, such
as coffee shops, food trucks and pizzerias as the sweet spot for the order ahead/
Apple Pay combo.
“These risk losing customers because the
line is too long…Peterbrooke has a grab-andgo business,” said Justin Hotard, president of
NCR Small Business.
The merchants will also drive a large
number of in-app payments from patrons
who order and pay ahead of time, said Zil
Bareisis, a senior analyst at Celent, in an
earlier inter view. In-app payments should
make up most of Apple Pay’s early business, he said. ■
support of Apple Pay, Woods said. TSYS
will set testing centers across the U.S.
for Apple Pay-related apps. Apple Pay has
generated hundreds of leads so far, said
Paul Todd, TSYS’ CFO.
Total revenue for the quarter was $616.9
million, an increase of 8.2% over the $570
million for the same period in 2013. Total accounts on file passed 600 million for the first
time, the company said. The performance
was helped by growth in the company’s
NetSpend prepaid card subsidiary and the
processor’s North American business.
TSYS is also finishing a large technology
project called Surround, which is a suite of
technology and products that’s designed
to deliver services added to payments—an
important strategy as payment processors
move beyond payments.
Surround improves how clients can
manage payments services, Woods said.
TSYS expects early tests of the system
will be complete this month, and it will
then move into beta testing with a Canadian client with a target launch in 2015. ■
18
ISO&AGENT
NOVEMBER 6 2014
ISO&AGENT
NOVEMBER 6, 2014
TOGETHER
Continued from page 1
West,” said Gil Luria, an analyst at Wedbush Securities.
Apple CEO Tim Cook and Alibaba
founder Jack Ma hinted recently that
they were in talks, but the companies
have not announced any formal partnership.
“It could be that Apple wants access
to China to sell more iPhones or to open
an Apple store [in China],” Luria said.
“It could be that Apple
wants access to China to
sell more iPhones or to
open an Apple store (in
China).”
Gil Luria,
Wedbush Securities
Cook told investors last week that
the ultimate goal for Apple Pay is to sell
more iPhones; its latest iPhone models
were launched in China on Oct. 16.
“Ever ybody is tr ying to gain access
to the Chinese economy with its potential for enormous growth,” said Richard
Crone, a payments consultant. “Binding
the two with a common payment platform could go a long way to opening up
both markets.”
Another need Alipay can address for
Apple is the small range of payment options currently available in the Apple Pay
offering.
Apple has enrolled more than 500
banks to support its mobile wallet, but
these issuers are getting started gradually with Apple Pay.
What’s more, Apple Pay does not support payments from Discover cards and
PayPal accounts.
Rival mobile wallets typically offer some form of prepaid account for
consumers who don’t have a card from
a participating bank. The U.S. wireless carriers’ Softcard wallet is linked
to Amex’s Ser ve prepaid platform and
Google Wallet launched with a virtual
prepaid Google card, but Apple doesn’t
have anything comparable.
Alipay, which is similar to PayPal,
could become a default payment option
for Apple Pay consumers whose bank or
credit union doesn’t participate.
“Apple’s all about making it easier
for the consumer. If the consumer can
add other payment types besides credit
cards, such as Alipay, it will open more
markets for Apple,” said Ralph Dangelmaier, CEO of BlueSnap, which provides
consulting and payments related services for merchants.
If Apple can provide cross-border
access for Alipay, it would put pressure
on PayPal, which has also had trouble
bringing its payments business to China.
PayPal did not provide comment by
deadline, and Apple and Alibaba did not
return requests for comment.
“Alibaba with Alipay and eBay with
PayPal are ‘twins’ from different countries that are now competing internationally,” said Mar y Monahan, an executive
vice president and research director of
mobile for Javelin Strategy & Research.
PayPal has had a turbulent relationship with Apple. The eBay unit supports
payments for Apple’s iTunes store, but
is absent from Apple Pay and has made
several moves to cast Apple Pay as a
competitor.
But PayPal is in the process of
separating from eBay, which should
open opportunities for partnerships that
19
have been unavailable to it as part of an
e-commerce company.
“Alibaba definitely threatens PayPal/
eBay,” Monahan said. “When PayPal
spins off from eBay, it will be a different
animal, less of a threat to the Alibabas of
the world and a more likely partner.”
Any collaboration between Apple
and Alipay would not be a slam dunk,
however, since the companies could face
pushback from regulators due to their
sizes, Crone said.
Even so, the companies have a huge
opportunity to work together and rattle
Alibaba may not be
well-known now, but if it
puts its brand together
with Apple, there are a
lot of synergies.”
Richard Crone,
consultant
the payment providers that are entrenched in each market.
“When two gorillas get together they
can wreak some havoc…the payments
acceptance market may be globalized,
but the issuance is regionalized,” Crone
said. “The world just got a lot smaller.
Alibaba (which is affiliated with Alipay)
may not be well known now, but if it puts
its brand together with Apple, there are a
lot of synergies.” ■
People & Promotions
Peter Bell, a partner at Highland Capital Partners, will join Bitnet’s board of
directors.
Former Google and PayPal executive Osama Bedier is heading a startup called
Poynt Co.
Profiles in Diversity Journal has named Elavon’s Marianne Johnson as one of its
Women Worth Watching. Elavon’s Elizabeth Holmes was chosen as a finalist for
Women in Technology’s 2014 Women of the Year in Technology Awards.
20
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NOVEMBER 6 2014
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ISO&AGENT
NOVEMBER 6, 2014
FRAUD
Continued from page 1
cards go mainstream, said Stephen
Coggeshall, chief analytics and science
officer for ID Analytics, a unit of Tempe,
Ariz.-based LifeLock.
About 2% of all applications, either
for credit cards, loans, cell phones or
financial ser vices, are synthetic fraud,
according to recent research from ID
Analytics.
“We were surprised to see this
number, as it was a little more than we
expected,” Coggeshall said.
With billions of applications being
filled out annually around the globe, it
“Two percent of
applications for cards,
loans, phones or
financial services are
synthetic fraud.”
Stephen Coggeshall,
ID Analytics
means that “tens of millions of synthetic
attempts occur each year,” he maintained.
Unlike attempts in which fraudsters
target someone to steal an identity and
open new accounts, or manipulate their
own accounts with different names or
numbers to avoid bill payments, those
deploying synthetic fraud invent completely new identities.
The risk to banks associated with
these types of accounts is about four
times higher than the average risk
of other accounts, Coggeshall told
ISO&Agent Weekly.
“It’s easier for the fraudsters to abuse
the account and never have it traced
back to them,” Coggeshall said.
Sometimes the criminals open fake
accounts and then let the accounts sit
dormant or pay small bills regularly to
lull banks into a false sense that the accountholder is a good customer, Cogge-
shall said.
At some point, the criminal performs
a “bust out” with the account, quickly
using it to its limit with no intention of
paying it back, Coggeshall said.
“We call that the long con because we
have examples of thousands of accounts
being nurtured in this way,” he maintained.
U.S. banks are likely to feel the sting
if the synthetic fraud trend in other EMV
countries is any indication, said Julie
Conroy, senior analyst and fraud expert
with Boston-based Aite Group.
“It’s an issue in the U.S. now, but we
will see it increase in size and severity as
we migrate to EMV,” Conroy predicted.
Recent Aite research found that application fraud in Australia spiked to $3.5
million in 2012, from $1.1 million in 2011,
she noted.
In Canada, application fraud rose
to $11.8 million in 2013, up from $8.5
million in 2012; the countr y has seen
increases in application fraud losses
beginning in 2011, about the time EMV
was taking hold.
“It’s the ultimate game of whack-amole,” Conroy said, referring to the arcade game where players hit moles with
a mallet when the merchanical animals
stick their heads out of the “ground.”
“It’s a big problem and we see once
again that organized crime rings are
ver y active in it,” she said.
Financial institutions generally tr y
to protect themselves from synthetic
fraud attacks by limiting exposure to an
account by denying credit line increases
or the withholding the ability for the
cardholder to obtain other loans for 90 to
180 days, Conroy said.
“But these crime rings are lying in
wait for three or more years with these
accounts, building up connections and
their credit,” she continued. “Then they
bust out the accounts at the same time,
often in collusion with fake businesses.”
Still, the most common use case is
that of a John Doe applying for a credit
card and proceeding to use a synthetic
identity, racking up a ton of charges, and
then disappearing, Conroy said.
“The bank absorbs this fraud and is
21
left holding the bag,” she noted.
But there’s hope for merchants and
financial institutions that are dedicted to
fighting this type of fraud, according to
obser vers on the scene.
ID Analytics, for example, uses its
network of personal credentials accumulated over the past decade to help financial institutions and businesses screen
for potential synthetic fraud, Coggeshall
said.
A bank or wireless network operator
generally sees only its own customer
data, but ID Analytics sees data across
many industries.
“When our tools cannot figure out
who a person is, that’s the first warning
sign to the banks,” Coggeshall said.
“Synthetic fraud is
already an issue now, but
we will see an increase as
we migrate to EMV in
the U.S.”
Julie Conroy,
Aite Group
ID Analytics also recently boosted its
protection for online merchants to guard
against an anticipated rise in e-commerce
after EMV technology drives fraud away
from the point of sale.
When a synthetic fraud account
operates for a number of years, appearing to be a good bank customer making
payments on time, it generally means
some other crimes are in the works,
Coggeshall said.
“These accounts and these expensive
cell phones obtained through fake identities are the tools for money laundering
or selling drugs,” he noted.
Financial institutions should be especially concerned about synthetic fraud
as it relates to the Know Your Customer
compliance policies, sources inter viewed
for this article emphasized. The USA
Patriot Act of 2001 requires all financial
ser vice providers to establish anti-money
laundering programs. ■
22
ISO&AGENT
NOVEMBER 6 2014
ISO&AGENT
NOVEMBER 6, 2014
VENDING
Continued from page 1
Vend product provides ePayments gateway
services for vending operators. “It takes a lot
of investment up front if an ISO wants to get
into this,” she says. “It’s not an easy market;
it’s complicated.”
Just as ISOs should build a knowledge
of vending, vending operators should learn
more about the payments industry. ISOs
thus can serve not just as ePayment service
providers, but also as advisors, much as they
were when many traditional merchants still
were accepting primarily cash and checks
and knew little about card acceptance, not to
mention interchange and discount rates.
The vending market essentially
represents a new frontier for ePayments,
as the vast majority of machines accept
only cash, thus providing considerable opportunity for ISOs. In 2013, revenue from
vending totaled $19.69 billion, according
to the National Automated Merchandising
Association (NAMA), citing annual research data from Automatic Merchandiser
magazine. However, only 10% of the 4.85
million vending machines last year had
cashless readers. That’s not many statistically but still a significant increase from
the 4% that did only two years earlier.
To one observer, such growth in
cashless-payment acceptance, including
cards and contactless mobile transactions,
represents progress. “The main thing is we
really have moved that thing forward quite
a bit,” Mike Kasavana, NAMA endowed
professor at Michigan State University, told
ISO&Agent. “But on the opportunity side,
there’s still lots of machines that are not accepting electronic payments that should be.”
ISOs could find willing customers, as
ePayment acceptance can generate potential
growth in vending machine sales volume,
according to NAMA, citing 2013-14 data
from USA Technologies Inc.’s Cashless
Knowledge Base. During a recent 12-month
period after installing cashless vending, the
company found total monthly vending transactions increased by 22.8%, with no decline
in cash-sales volume.
“It’s not cannibalizing cash but actually
represents new business because so many
people don’t carry cash today,” Kasavana
says. “It’s a lot easier to make sales with ePayments than with limited currency or coin.”
USA Technologies, whose chief
competitors include San Francisco-based
Cantaloupe Systems and Crane Payment
Innovations of Malvern, Pa., represents
an ISO that has succeeded in targeting
the vending market. Though it considers
itself a “payment services provider,” the
company, which also is based in Malvern, primarily sells payment-processing
services for Atlanta-based Elavon, Mike
Lawlor, USA Technologies’ senior vice
president for sales and business development, said in an ISO&Agent interview.
Conversely, various ISOs are out selling
USA Technologies’ products to vending
machine, laundry and kiosk operators,
“It takes a lot of
investment up front if
an ISO wants to get into
(vending). It’s not an
easy market.”
Stacey Finley Tappin,
Apriva
including wireless services and card-acceptance hardware that connects back to
the company for processing and reconciliation into the operators’ accounts.
“There is money to be made for them,”
Lawlor said in reference to ISOs. “We’re
just at the tip of the iceberg with these new
market opportunities.”
As of June 30, USA Technologies’ ePort
service connected to 266,000 machines,
handling some 170 million transactions totaling $300 million during the fiscal year. Some
86% of the company’s connections come
from traditional vending customers, Dave
DeMedio, USA Technologies chief financial
officer, noted during a recent fiscal fourth
quarter earnings call with analysts.
Pricing plays an important role when
targeting the vending market. Because many
vending operators are not familiar with ePayment acceptance, they want pricing to be
simple, industry insiders agreed.
23
USA Technologies, for example,
charges a flat percentage rate, which
equates to about 5.5% to 6% on an average
$1.50 transaction. The rate varies by market, and it goes down as the debit or credit
card transaction amount rises, Lawlor
says, noting USA Technologies provides
an aggregated processing service across
customers’ multiple payment-acceptance
locations, similar to the concept San
Francisco-based Square Inc. has adopted.
The company expects its license and
transaction-fee revenue to grow to $44
million to $47 million in the current fiscal
year, which would represent 24% to 31%
year-over-year growth, DeMedio said on
the earnings call.
For its part, Apriva has negotiated a 2.2%
plus 2 cents interchange rate with Visa,
though what vending machine operators
pay ISOs as their fee is somewhat higher,
Tappin says. Her colleague, Rinaldo Spinella,
Apriva executive vice president of strategic
accounts, estimated the typical discount fee
on an average $1.50 transaction is 9.6 cents.
ISOs will require considerable volume to
make vending a viable target market, Tappin
said, noting the low end in the range of machines such organizations are willing to take
on initially can vary. “Some channels have 50
to 100 machines, and they’re happy because
they’re making a little money there and
learning the market,” she says. “Some say
they don’t won’t want to touch the market
with less than 1,000 machines.”
ISOs may choose to sell processing
services only, or they also can sell hardware for ePayment-acceptance providers,
many of which differ from retail POS
terminal manufacturers. They also may
support add-on services, such as loyalty
and rewards programs.
USA Technologies, for example, supports
payment acceptance and a rewards program
through Softcard, the Near Field Communication-based mobile wallet backed by
T-Mobile, Verizon and AT&T and formerly
known as Isis. The company says its NFC
footprint of 150,000 locations represents 70%
of its installed vending-machine base. ■
An expanded version of this article is is scheduled to appear in the November-Decemeber
print issue of ISO&Agent.
24
ISO&AGENT
NOVEMBER 6 2014
Published seven times a year, ISO&Agent is the merchant acquiring industry’s
leading publication, combining timely news and articles on ways to boost revenue
with insightful and relevant analysis of long-term trends shaping the industry.
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ISO&AGENT
NOVEMBER 6, 2014
25
Advertiser Index
WorldPay.....................................................2
Go To Billing.................................................3
Womply........................................................4
IntegraPay Pty Ltd...................................... 5
LoanMe, Inc.................................................6
Harbortouch................................................ 7
@Pay ...........................................................8
USA ePay.....................................................9
Electronic Transactions Association....... 10
eProcessing Network, LLC........................11
Clearent, LLC............................................. 12
PCI Compliance........................................ 13
Priority Payment Systems....................... 14
PAX............................................................. 16
Electronic Merchant Systems.................. 18
Central Payment.......................................20
United Merchant Services........................22
ISO&Agent................................................24
ISOandAgent.com....................................26
Editor: Ed McKinley
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Jan. 20-22, 2015
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First Data Introduces Clover Mobile POS
First Data has unveiled Clover Mobile, a
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With Clover Mobile, merchants can
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can lead to stronger, enduring customer
relationships---all with a portable, tabletsized device, a press release said.
That means restaurants can accept
payment at the table, retailers can use it
for line-busting, brick and mortar stores
can use it as a payment and business
tool, and on-the-go merchants can use
the device for mobility. ■
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ISO&AGENT EDITORIAL ADVISORY BOARD
Xavier Ayala,
oneSOURCE
Tom Della Badia,
Cynergy Data
Paul Coppinger, Consultant
Matt Clyne, Direct
Connect
Stacey Finley Tappin,
Apriva
Mark Dunn,
Field Guide Enterprises
Steve Eazell,
Secure Payment Systems
Donna Embry, Payment
Alliance International
Glenn Goldman,
Capital Access Network
Dennis Hamilton,
TransFirst
Charles Hogan,
Tranzlogic
Rod Hometh, Ingenico
Matt Johanson,
Discover Network
Kevin Jones,
Anovia Payments
Rod Katzfey,
Credorax
Abe Maghaguian,
Atlantic-Pacific Processing
Mike McCormack,
Palma Advisors LLC
Tim McWeeney, VeriFone
Tim Munto, TSYS
Joe Natoli, NPC
Linda Perry,
Consultant
Jon Perry,
DFW Card Services
James Taylor, Trustwave
John Priore,
Priority Payment Systems
Paul Rianda, Rianda Law
Linda Rossetti,
Bluestone Payments
Mike Fox,
Group ISO
Lisa Shipley,
First Data Corp.
Don Singer,
EZCheck
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ISO&AGENT
NOVEMBER 6 2014