The Payments Landscape in 2015
CTO Forum
Outline
- Look back at 2014
- Apple Pay
- EMV and plastic cards
- Digital wallets
- Peer-to-peer finance
- Data is king
- Security is queen
- Questions
"Just had a sesh with someone important. Bitcoin is all the rage. Why aren't we accepting bitcoin?"
--Boss
"How do you make our app accept Apple Pay? I want that in the next release!"
--Boss
Where payments happen
- Physical retail
- Online
- App stores and in-app purchases
- P2P payments
More commerce is happening on the web...
...and more people are walking around with computers in their pockets.
More transactions are going digital.
☹ Checks have declined from 46% to 15%!
♡ Debit card usage has doubled.
♔ Visa and Mastercard dominate digital payments.
* Source: 2013 Federal Reserve Payments StudyOnline Payments
✓ Stripe
✓ WePay
✓ Amazon
✓ Authorize.net
Offline Payments
✓ Square
✓ Intuit
✓ Paypal
... many more
Ease of integration vs. Costs
2.9% + $0.30 per transaction
Braintree can handle Paypal
Stripe is testing Bitcoin support
Loss of convenience ==> lower costs
Accepting cryptocurrencies
| Pros | Cons |
|---|---|
| ✓ More acceptance channels | ☒ High cost of integration |
| ✓ Potential PR boon | ☒ Brand risk |
| ☒ Low adoption |
$50M of Bitcoin transactions processed per day
The Problem
Cost
Fraud
Security
Complexity
Convenience
User Experience
Fees are foisted on merchants to reward consumers.
Fees are declining.
Consumers only use it because they are paid to.
Might an alternative emerge?
Merchant networks are expensive
Visa
MasterCard
Amex
Discover
Square
Dwolla
LevelUp
Incumbents are resisting change.
Consumers or Merchants are the prize to be won.
Innovation in Payments
Where will it come from?
... and why?
✓ Apple
✓ Government
Snuffed Innovation
- Merchants
- The Network
- Issuing Banks
- Consumer
Incumbents
Traditional Competition
Apple Pay
Pay at retail with a mobile phone over NFC
Supported by 11 banks so far
Disabled by two large retail chains
In cooperation with Visa and Mastercard
Apple has 1 billion card accounts on file
Tokenization
Abstraction for payment card data
Advantages
The goal is to reduce the scope of PCI … but card issuers don’t like this.Top of Wallet
Issuers lose power
Erodes the value of the network “middlemen”
Tokenization Dilemma
If tokenization services stay at the “network” layer, then processors risk being marginalized. Concerns about being locked into a tokenization provider
Further reading
EMV is Coming!
Europay-MasterCard-Visa
Alternative to magnetic stripe technology
Dynamic content rather than static magnetic stripes
There is a shift in the fraud liability
Mandate to comply by October 2015
Apple Pay and EMV
Since merchants must adopt EMV, many assume that NFC and contact-less terminations will become pervasive as merchants replace their systems to comply with 2015 mandate.
...but do customers care?
Digital Wallets
- LevelUp
- Square
- Paypal
- Venmo
... but do customers care?
Small change
Customers prefer cash for small transactions.
Data Prize
Verizon is tracking unencrypted browser behavior
Acxiom is the world's largest processor of consumer data
Check out AboutTheData.com
Gigya
Epsilon
DataLogix
AppNexus, Invite Media and MediaMath
Fintech
- Final
- Acorns
- LevelUp
- Coin
- Venmo
- Moven
Good to Know
"How Dwolla Works", Fast Company.
"Study on Payments in 2013", Federal Reserve.
"The Digital Payments Transformation", Accenture.