Dorado Industries TrendWatch 2.0 Q2 Payments Industry Review

TrendWatch 2.0
Q2 2014
Payments System Industry
Synopsis
Notice: Materials contained in this document are drawn from several media sources, and Dorado Industries is not responsible for their accuracy. Opinions expressed
herein are presented without warranty. Brand names are the trademarks of their respective service offerors.

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Random Thoughts
Fire(works) and Ice(bergs)
We often expect version 2.0 of the payments ecosphere to
deliver 4th of July shock and awe results and are
disappointed when we realize that our sector’s evolution
more closely resembles ice freezing (or freezing ice for the
northern brethren). Sure, there have been some industry
sparklers recently – Square’s democratization of the
merchant services gambit and adoption of the smartphone
for remote deposit capture are two “safe and sane”
examples. Truth is, the number of Roman candle
eruptions witnessed over the past two decades (okay, one,
if you’re that young) hardly moves the proverbial needle
when compared to other advances in access, convenience,
and overwhelming customer experience found in high tech
and retailing.
Yet, there some ice crystals starting to form, suggesting
that we’re on the cusp of some serious change. Sam’s
Club is rolling out EMV terminals. MCX is rumored to be
in alpha mode joint with a fistful of Walmart stores. Isis
(despite becoming an unfortunate externality because of its
name) is actually gaining transaction volume with retailers
that offer real merchandise rather than public
transportation. Retailers (Macy’s, American Airlines, and
Walgreens being the first) are showing their support for
BLE technology by rolling out beacons at a rapid clip
(whether consumers will turn off their Bluetooth devices
upon store entry is another question.) Target is cleaning
up its REDcard act by adding a brand, a chip, and the
EMV spec.
2
Meanwhile, VC investment in Bitcoin startups reflects a 2014
run rate of $250 million. And, the bulk of these funds are
going toward making digital currencies easier to use and safer.
Fortunately, there’s always room for more in the payments
pool. Three social media icons have launched what they
expect to be payments cherry bombs: Facebook has added a
“Buy” button for products advertised on the site; Twitter has
acquired CardSpring so that merchants can offer and fulfill
discounts through tweets; and Snapchat has filed trademarks to
protect its intent to enable users to send funds between one
another or purchase goods through its app, like Venmo.
Whether fireworks or icebergs, examples of three new crystals
forming in our block-of-ice payments ecosystem.
The reference to ice freezing is designed to remind us all that,
just like a Minnesota lake, the new payments system may
appear soupy most of the time, but can become rock-hard in
the blink of an eye. At that point, Payments 3.0 begins.
Sorry for being tardy again
this quarter; some things are
just more important than
payments (but not many.)
Until next time.

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Table of Contents
2014 Predictions 4
TrendWatch Scorecard/Summary 6
2013 Payments Industry Yields 7
Interesting Quarterly News That Got No Respect 8
Q4 M&A/Investor Activity 14
Useful Links for More Information 22
Back in the Day 23

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2014 Predictions
• Beacons of all variety and stripe will gain considerable traction and ink. Department, mid-to-high end clothing
stores, and the hardware trade will lead the way.
Mar: Lots of new and old players joining the fray; so far, no privacy complaints.
Jun: Still no privacy issue complaints from customers at American Airlines; bag fee bitches, yes.
• HCE will be anointed as an equal amongst the other mobile payments options – NFC, 2D barcodes, etc.
Mar: V/MA have fallen into line. Waiting to see what the real NFC bigots have to say. Isis? Not sure yet.
Jun: Popular press has picked up HCE, a good sign for the industry.
• The Target and Neiman Marcus hacks will light a fire under the U.S. EMV rollout (albeit for all the wrong reasons)
and one of the combatants will blink.
• Mar: Was it the breaches or the unified front put up by DNA? Anyway, things are moving haltingly ahead.
Jun: Target REDcard to get chips and PINs plus a MasterCard logo. Sam’s Club rolling out EMV terminals.
• MCX will announce a roll-out plan and schedule that will leave more than a few pundits confused.
Mar: [Sound of crickets] Come on, guys.
Jun: MCX selects Walmart and a few stores to alpha test? A start, perhaps.
• Regulation II will remain virtually unchanged.
Mar: Nothing wrong with a favorable Appellate Court ruling every now and then. Merchants were probably hosed
but time will tell on the routing rule front.
Jun: Retailers have until August 21 to appeal to the Supreme Court. Curious what the Sups will do with this hot
potato.
4

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2014 Predictions
• Regulators will take a serious look at Visa Authorized PIN Debit.
Mar: This one’s a stretch but someone ought to take a look-see at its effects on PIN debit networks.
Jun: Lots of EFT traffic redirected by VAPD, but no uproar yet.
• FRB will announce plans for a pan-industry working group to sort out the “US Payments System Improvement”
initiative. Won’t happen until late in the year.
Mar: May not happen at all based on the highly PC-packed responses filed by 200 respondents – “yes, but have
you thought about . . . .”
Jun: Done. Three years or so will tell the tale (government work, after all.)
• Apple will enter the payments industry in a big way.
Mar: January patent for NFC-compliant WiFi/Bluetooth in-store payments suggests a move is underway.
Jun: AAPL payments launch in Japan doesn’t count. Perhaps waiting for iPhone 6 and iOS 8. Late third quarter
seems to be the launch timeframe.
2013 Holdovers:
• One of the remaining EFT networks will change ownership.
• One or more of the non-traditional dongle-centric merchant services providers will be acquired by a mainstream
POS terminal industry leader.
5

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TrendWatch Scorecard/Summary – Q2 2014
Market & Industry Situation
1 – Watches and wearables.
2 – Cardless access and Bitcoin devices – down the rabbit hole again.
3 – Looks like debit users believe the recovery is in full tilt.
4 – CFPB snooping around mobile but nothing serious yet.
5 – Still slow except in specialty sectors – restaurants gaining attention.
6 – Payments sector doing better than the Dow but not very strong.
7 – Watches and wearables.
8 – Nothing major but still troublesome.
Industry Players To Watch
Apple: Japanese launch is 2D, a hint about later this year?
Hospitality Sector: Getting cluttered with the addition of Cover to the mix.
NACS et. al: August 21 is the Supreme Court submission deadline.
Enough horses to get it done?
VC: VC gamblers made $13 billion in wagers this quarter but precise little
found its way into payments save for Bitcoin startups.
Ripple: Tough to lose 65 percent of value and remain viable.
Loop Pay: A viable alternative to EMV for consumers and merchants. No
new POS hardware needed and safe for consumers to carry and use.
5. New Venture Growth
4. Legal/Regulatory Issues
1. New Payment Forms
2. ATM Restructuring
3. POS Volume Trend
Med
Med
Med
Low
Low
Med
Med
Positive
Mixed
Negative
6. Earnings Announcements
7. Industry Investments
8. Payments Industry SecurityMed

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2014 Payments Industry YTD Yields
Sources: Company releases, Morningstar.com, Bloomberg.com, Coinbase.
2014 YTD yield excludes dividends; based on 12/31/13 and 6/30/14 closing prices.
Have to love a mild Q2 market recovery despite warnings coming from the wire houses that a 10-15
percent adjustment is likely to hit in August. Not sure why the big cap payments players aren’t
getting much respect in 2014 – off election year maybe. Meanwhile the Dow and S&P continue to
limp along at 1.5 and 6.0 percent, respectively. Not great, but better than passbook savings rates
(where’s Reg. Q when we need it?)
Industry Player 12/31/2013 6/30/2014 Price r Cap Value r YTD 2014 Yield
Alliance Data Systems 262.93$ 281.25$ 18.32$ 1,090.0$ 7.0%
American Express 90.73$ 94.87$ 4.14$ 4,471.2$ 4.6%
Blackhawk Network Holdings 25.26$ 28.22$ 2.96$ 154.8$ 11.7%
Cardtronics 43.45$ 34.08$ (9.37)$ (381.4)$ -21.6%
Discover Financial Services 55.12$ 61.98$ 6.86$ 3,299.0$ 12.4%
Euronet Worldwide 47.85$ 48.24$ 0.39$ 19.7$ 0.8%
Fidelity National Information Services 53.68$ 54.74$ 1.06$ 202.2$ 2.0%
First Data (Future Use)
Fiserv Inc. 59.05$ 60.32$ 1.27$ 323.2$ 2.2%
Global Cash Access Holdings 9.99$ 8.90$ (1.09)$ (84.0)$ -10.9%
Heartland Payment Systems 49.84$ 41.21$ (8.63)$ (322.8)$ -17.3%
Jack Henry & Associates 59.21$ 59.43$ 0.22$ 18.5$ 0.4%
MasterCard Worldwide 84.36$ 73.47$ (10.89)$ (17,532.9)$ -12.9%
MoneyGram International 20.78$ 14.73$ (6.05)$ (350.1)$ -29.1%
Total System Services 33.28$ 31.41$ (1.87)$ (369.1)$ -5.6%
Western Union 17.25$ 17.34$ 0.09$ 51.2$ 0.5%
Vantiv 27.94$ 33.62$ 5.68$ 1,408.5$ 20.3%
Visa 222.68$ 210.71$ (11.97)$ (10,125.4)$ -5.4%
Bitcoin Closing Price 747.6$ 638.0$ (109.56)$ -14.7%

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Interesting News This Quarter
Subject Source/Date Substance
The Members Group Finextra
July
Credit union card processor, The Members Group, has launched a payments app for Google Glass.
Dubbed “See2Pay,” the app tells wearers when they are near retail locations that accept Dwolla for
payment (TMG is a Dwolla investor.) Based on the Google Mirror API, See2Pay completes a
purchase transaction with a mere swipe on the Glass stem. Great wow factor; practicality will come
along later maybe.
Bank of America Various
June
Bank of America’s consumer mobility report reveals some interesting trends. The top three
functions used by the 1,000 consumers polled include: check balances/statement (81%), transfer
funds between accounts (49%), and pay bills (48%). Oddly, sending money to friends and others
rates a minor 11%. So what’s all the fuss over P2P and mobile payments again?
Greenhouse Payment
Solutions
Presser
May
A key challenge faced by vendors of legal recreational and medicinal marijuanais that of finding a
processor to handle the purchase transactions and a bank to keep the money warm (“baked,” if you
will.) A new JV between Advanced Content Services, SinglePoint and Greenhouse Payment
Solutions is designed to remedy this problem through its venture branded GreenStar Payment
Solutions. Naturally, the venture is headquartered in Colorado.
Ripple Finextra
May
Ripple, one of the many digital currencies in flight, suffers a significant valuation loss as one of its
founders announce plans to liquidate his nine billion XRP holdings. Twenty-four hours after the
announcement, the XRP price dropped by 65 percent. Some may scoff at the need for regulatory
agencies like the Fed, OCC, and SEC but few would argue that a 65 percent dilution in value in one
day is tough to swallow. The cryptocurrency industry is maturing rapidly but absent some form of
regulation, its not likely to replace the greenback anytime soon, we opine.
Russian Payment System Various
April
Russian President Vladimir Putin has it out for Visa and MasterCard. Not only has he mandated
that the card brands put up $3.30+ billion, or two days worth of purchase postings, to “promote
consumer safety” but the lower house of the Federal Assembly has tasked the Central Bank of
Russia with building a new national payments card to compete with Visa and MasterCard. All this,
in retaliation for US sanctions against four Russian banks over the Ukraine annexation. Ah, the
world of geopolitics and payments. Used to be such a simple business.

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Interesting News This Quarter – Continued
Quippi PayBefore
May
Never under estimate man’s ability to find an arbitrage play. Quippi, a San Diego-based startup,
seeks to remove “punitive” levels of fees from the money transfer sector by substituting gift cards for
currency. Users purchase gift cards equipped with PINs either online or through physical locations
for use by friends and relatives in Mexico. Cards can be purchased in the U.S. from 7-Eleven, ACE
Cash Express, and Family Dollar Stores and can be redeemed at more than 3,400 merchants in Mexico
including Office Depot, Farmacias Benavides, Farma Todo, and Opticas Devlyn. Based on Pew
Research data, Quippi users can dodge money transfer fees which run as high as 7.0 percent. Buena
suerte, Quippi!
JPMorgan Chase PYMNTS.com
May
JPMorgan Chase is shutteringits nine-year old Blink contactless program as part of its re-branding
of certain card portfolios from MasterCard to Visa. That, and the fact that few merchants actually
took Blink and even fewer consumers used it. Casual observers may recall that the current head of
Visa is former Chase executive Charlie Scharf. There, the dots are connected.
PayPal Business Insider
April
Payments aggregator, PayPal, is taking another zig in its plan for payments domination with a test
program involving a “wearable wallet.” The approach is dependent upon beacons arrayed throughout
merchantstores and (currently) Samsung mobile devices to avoid traditionalcheckout processes.
PayPal is still promoting its “pay with face” gizmo so the user’s image appeals on the checkout POS
device courtesy of the smartphone or Gear Fit wrist band. Beats paying at Home Depot with a
telephone number and a PIN, we suppose.
Heritage Bank (AU) PaymentEye
April
Speaking of wearables, Australian FI Heritage Bank has jumped on the relatively small bandwagon
initiated by local tailor MJ Bale and ad agency WhybinTBWA and now offer a “payweave” suit that
enables small tender size transactions through the flick of the coat sleeve. The machine washable
wool (naturally) material is embedded with a payments chip and an antenna. Twelve units have been
ordered and made so far and one of them is for sale on eBay. Okay, parade over, next topic.

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Target PaymentsNews
May
Target announces plans to convert its entire REDcard and co-branded credit card portfolios to MasterCard
chip-and-PIN. Moreover, the company has accelerated its deployment schedule for EMV readers in all 1,800
stores by September, 2014, six months ahead of schedule. Logically, the REDcard chip-and-PIN rollout will
be undertaken early 2015. Its not likely that Target will the only retailer making the move to EMV.
Mobile Wallets in
general
Various Mobile Wallets are being launched by retailers at a torrid pace. That’s good for the payments industry(we
think) but bad for those writing about it. For the most part, the new offerings look pretty much the same with
subtle differences added based on the sort of retailer involved. So, rather than deluge TrendWatch 2.0 readers
with a series of re-hashed pabulum about pre-orders, line-jumping, and digital receipts, here are some of the
newcomers: SeaWorld, Tim Horton, Hesburger (Finland, but excellent food), McDonald’s and Burger King.
Of course, when exceptional offerings arise, a deeper review will be conducted.
MasterCard PYMNTS.com
May
We’ll get email over this rant. At long last, at least one payments leader has come forth and done the right
thing. MasterCard plans to extend its zero-liability policy to PIN debit transactions effective in October
2014. It has always seemed illogical that a “safer” transaction type would come with a penalty to users when
they become victims of shoulder surfing, data breaches, or video surveillance episodes. Clearly, the old
“well, the user knows his PIN” dodge to avoid liability doesn’t work anymore. Nice move, MasterCard. Now
about this “chip-and-signature” gambit floating about the EMV world . . . . .
Prepaid Bitcoin PaymentEye
May
So, when is a reward not a reward? When the reward comes with fluctuating value and there’s almost no
place to redeem it? Sounds about right. Prepaid Bitcoin is a program that enables employers or others to
load from $1 to $500 worth of Bitcoins on a prepaid card for use as rewards or incentive fulfillments. Cards
can be personalized with company logos and (get this) expiration dates. The scheme is being promoted as an
effective tool for event giveaways, loyalty rewards, corporate gifts, and rebates. Sounds like a stretch to us.

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Expedia Money Beat
June
Big online travel site, Expedia, joins others in the travel industry – CheapAir.com being notable – in
accepting Bitcoins for hotel bookings with an eye to expanding digital currency usage as volume warrants. It
is unlikely that Expedia will want to take the currency exchange risk so there’s likely to be an intermediary
like Coinbase involved in the transaction flow somewhere (read: added costs.)
Isis Mobile
Commerce Daily
June
At long last, Isis, has something to talk about relative to transaction volume. Toys R Us announces that it has
experienced 23,000 Isis wallet transactions within the first 90 days of becoming an Isis merchant. Potentially
adding to its volume are the Isis activation numbers (20,000 per day) and broader adoption of Host Card
Emulation, a “softer” approach to Near Field Communications technology. While still a long way from
ubiquity and winning the mobile wallet war, Isis (and its $200 million plus in funding) remains a force to be
reckoned with.
MCX Payments Journal
June
Meanwhile, Isis competitor MCX, the consortium of many of the nation’s top merchants, is reported by a
Jeffries analyst to be in a limited pilot engagement with a few Walmart stores. If true, and successful, the
payments industry may be about to witness an interestingbattle between FI issuers and retailers over any
number of issues: the cost of payment acceptance, the role of card company operating rules and pricing,
disparate technologies, and ownership of the resulting transaction and customer data. Assuming there’s
nothing worthy of binge-viewing on Netflix in 2015, this colossal event should be worth the price of
admission.
Bancorp Bank Digital
Transactions
June
Prepaid card enabler, Bancorp Bank, has signed a consent order issued by the FDIC. Most of the restrictions
involve the Bank Secrecy Act and limit the bank’s ability to enroll new sales ISOs and merchants. It has been
speculated that Magic Johnson’s Magic Card and Suze Orman’s Approved card – both now being orderly
liquidated – may have been victims of the consent agreement. It is unclear at this point if the agreement is the
result of findings generated under the Federal government’s Operation Choke Point, an attempt to cut off
questionable third parties from using the banking system to gain access to depositor records and card
accounts. Stay tuned; this cannot be good for the prepaid card industry.
CO-OP Financial
Services
CU Times
May
CO-OP announces an agreement with FIS that enables the credit union EFT network to link its SPRIG P2P
services with the third party processor’s PayNet real time network. The new relationshipadds “pay anyone”
to the SPRIG features and puts CO-OP members on equal footing with consumers in other countries where
real time payments are prevalent. An unanswered question is whether or not SPRIG might morph into an
alternative payments POS option along the lines of MCX or Dwolla. Interesting possibility.

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PNC Payments Source
June
Although a bit late to the micro-merchant sector led by Square and others, PNC has launched Pogo, a new
tool for payment acceptance by merchants, particularlythose in the lower sales size tiers. Like the others,
Pogo attaches to mobile devices and utilizes an application to handle payments. Pogo is being promoted for
its faster payment schedule (next-day access) for those retailers having a PNC account. Other matters of
micro-merchant hygiene, digital receipts and 24/7 customer support are also present.
Ransomware Finextra
June
The ubiquity of mobile phones and the lax attitude most consumers have about their use and security has led
to the inevitable – financial malware and ransomware that attacks banking apps. The most virulent form, an
app named Spyeng, is Russian by birth and searches a user’s phone for banking applications. It then locks the
screen with the familiar FBI warning and demands $200 in the form of a Green Dot MoneyPak payment.
Spyeng and others are tough little buggers to get rid of particularlyif the phone hasn’t been rooted. The FBI
has been able to dislodge the Cryptolocker and Gameover Zeus Trojans that befuddled PC users over the past
18 months. It may take just as long to kill this new form of device infection. A word to the wise.
LevelUp Finextra
June
Apple’s iBeacon devices will be made available to all LevelUp merchants shortly. This wholesale approach
to promotion of merchant-customer communication has the potential of fostering more iBeacon installations
than the direct approach undertaken by Macy’s and Walgreens. Early results have been stunning.
Participatingmerchants have experienced a 22 percent increase in customer spend. Activity among formerly
inactive LevelUp consumers has increased by 63 percent. Again, a word to the wise, or those on the fence.
iBeacon and Beacon will inextricably change the retailingindustry and has the potential to shift the balance of
loyalty among consumers.
Visa Finextra
July
Two years following its launch, Visa has replaced Visa.me with Visa Checkout. Online shoppers at sites
operated by Neiman Marcus, Pizza Hut, Staples, United Airlines, and others will see an extra button at
checkout for use of the new service. So far, 180 financial institutionshave opted in. Visa and its gaggle of
proponents are promoting the security aspects of the new program while some industry pundits are suggesting
that the game of transaction steering and top-of-wallet has been stepped up a bit.

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Stripe Bank Innovation
May
Payment processor Stripe enters the money transfer business at low cost. Stripe charges 25¢ per transaction
and processes money transfers to customer debit cards is one-to-two days. This service works in parallel with
the processor’s R/T and account number transfer service which has proven to be problematic in some
markets. While Stripe continues to promote is global currency support, including digital and fiat, the new
debit card remittance service works only with U.S. Visa and MasterCard branded cards.
Uber PYMNTS.com
June
All the hand-wringingover digital currencies like Bitcoin has led to many overlooking the shadow currencies
accumulated by airlines and card companies. American Express has begun flexing its muscle in the
alternative payments realm by enabling cardholders to use their Membership Rewards for trips made in Uber
vehicles. Not interested in using the points and prefer to pay with your Amex card? That’s good for 2x in
point accumulation. Winner, winner, either way.
Bitcoin Various Tired of Bitcoin? Us too. So here’s a group shot of three new ripples in the Bitcoin pond (pardon the pun.)
QuickCoin has offered a beta application that enables users to send cryptocurrency to their Facebook friends.
Next, we have Xapo with its Bitcoin debit card. Xapo relies on Bitstamp to exchange user Bitcoin values for
real money. Finally, Circle has exited stealth mode to bring Bitcoin use to the common man. Circle focuses
on Bitcoin as a transaction medium rather than a store of value. Hence, it offers free storage and remittance
services through its newly established exchange. Circle is a registered Money Transmitter under U.S. law and
maintainsthe reserves required in that certification. Deposits are also insured at no cost to the owner. Sounds
a bit like a bank, doesn’t it?
NACS, et. al. PayBefore
July
The National Association of Convenience Stores and others have received another extension of time for filing
its appeal of the U.S. Appeals Court ruling in favor of the Fed regarding debit card interchange limits.
Originallyextended until July 21, the plaintiffs now have until August 21, 2014 to file with the Sups.
Ondot Finextra
April
Ondot, a California startup company, has broken its silence and has launched its CardControl app.
CardControl is marketed to FIs rather than consumers and enables mobile phone users to control usage of
their debit and credit cards. Cards can be turned off or on based on a set of preferences including location,
merchanttype, transaction type, and spending caps. Other bells and whistles include push alerts for balances,
fraudulent events, and periodic spending. Worth a look-see for card issuers seeking to add value to their card
portfolios.

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M&A/Alliance Activity
Buyer/Investor Target Payments Emphasis Possible Strategy
CheckAlt Diebold ERAS Check 21 processing In a hat tip to the inevitable demise of checks, Diebold elects to
sell its Check 21 processing unit to CheckAlt, a company that
believes it has a better endgame strategy than others in the
dwindling field of check electronification for community banks
and credit unions. Terms were undisclosed but were probably
on the light side.
Chicago Growth
Partners, Trident
Capital
2Checkout eCommerce processor Fifteen year old 2Checkout raises $60 million in new funding to
expand upon its base of 22,000 merchants worldwide.
2Checkout operates in 126 countries, settles in 26 currencies,
communicates in 15 languages. Quasi-unique aspects of the
2Checkout offering include free merchant services accounts and
fixed rate pricing.
Dead pool TSYS Japan Card processing After nearly fifteen years of trying, TSYS has dumped its 54
percent interest in GP Net and is exiting the Japanese market
despite having made inroads with Toyota Finance, Sony
Finance, and others. Just not enough volume, it seems. A new
company will take over the existing processing contracts while
Visa is acquiring all the equity of GP Net. Tough market,
Japan.
Vantiv Mercury
Payments
Systems
Merchant services Funny what a little money and new management can do for you.
When Midwest Payments System (now Vantiv) was a wholly
owned subsidiary of 5th 3rd Bank, it was a so-so processor and a
sleepy ATM driver. Post its PE investment by Bain and Advent
and a subsequent IPO, Vantiv has become a world-beater.
Vantiv paid $1.65 billion for Mercury. Mercury majority
owner Silver Lake made a goodly 2.8x return on its 2010
investment. Money, the root of all good things.

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M&A/Alliance Activity - Continued
Index Ventures Bitpay Bitcoin exchange Bitpay, one of the newer Bitcoin exchanges, raises $30 million in new
funds, lending itself to a valuation of $160 million. The company claims
to have settled $100 million in transactions in 2013 (you do the valuation
math). Bitpay pricing is somewhat unique; it charges $30 or $300 per
month for transactions totaling $30,000 and $100,000, respectively. An
enterprise level is also available for heavy hitters willing to spend 1.0
percent on transactions. Bitpay had raised $2.7 million in an earlier round
making it the most highly funded exchange to date. More evidence that,
at least the investment community is convinced Bitcoin has legs.
Gemalto Shoreline,
Source One
Direct
Payment card
personalization
Fully believing that EMV is finally coming to the United States,
Amsterdam-based Gemalto acquires two U.S. -based card personalization
companies for an undisclosed amount. The company believes that the
investments will aid it in capturing market share as banks and credit
unions transition their card portfolios to the new (assertedly safer)
technology. Payments system historians will recall that Gemalto was
formed through merger of Gemplus and Axalto, itself a spin-out from
Schlumberger. Younger readers won’t care.
Dead pool Square Wallet Digital wallet After three years of trying in a market populated with no less than 200
wallets, Square pulls the plug on Square Wallet and zigs to the left toward
the order-ahead segment. Square Order enables users to order from
Square merchants – primarily coffee shops and cafes – and pick up their
goods upon arrival. Square continues to do well on the acquiring side but
struggles to keep consumer interest high.

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Technology
Crossover Ventures
Swagbucks Loyalty scheme Swagbucks, perhaps the ultimate in merchant funded rewards, scores $60
million in new funding. The company has been offering free gift cards
from Amazon, Walmart, Starbucks, Target, PayPal and others since 2008.
Its 100 million members earn these premiums ($66 million so far) for web
searching, shopping, online entertainment, surveys and gaming activities
leading to enhanced vendor relationships with motivated consumers.
Spark Capital,
Max Levchin,
Union Square
Ventures, First Round
Capital
Sift Fraud detection system Well it’s about (real) time. Sift eschews the traditional rules-based fraud
detection approach in favor of “sifting” through data streams across a
whole network of merchant input. (Nothing new here – SCAN and Card
Alert Services started multi-merchant or issuer fraud reviews in the 1990s.)
Sift claims that its systems maintain a false positive performance of 5 to 7
percent compared to rules systems that run 50 percent or higher. And, Sift
runs in real-time. Spark and others invest $18 million on top of earlier
funding of $5.0 million.
Intuit Check
(formerly Page
One)
Bill payment app Intuit expands its efforts in consumer payments management by acquiring
bill payment app, Check ,for $360 million. Acquiring the app fills a hole
in Mint, the personal financial management system acquired by Intuit tin
2009. This, and other transactions expected shortly, are designed to shore
up the collapse that occurred when Intuit sold its Digital Insight asset one
year ago.
To be determined Nordstrom Private label credit card
portfolio
If it happens, the poorly kept secret that Nordstrom is looking for a buyer
for its $2.0 billion private credit card portfolio would become the third
such transaction in two years. Capital One bought the HSBC store-
branded asset in 2012 and Toronto Dominion now owns the $5.9 billion
portfolio created by Target. We’ve seen this pendulum swing before; it’ll
swing again when these sellers re-initiate their programs in a few years.

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Dead pool Approved and
Magic Cards
Prepaid card schemes Suze Orman and Magic Johnson announced that their prepaid card
programs – Approved and Magic Card – will be shut down soon and
remaining balances will be sent to users by check (ironic, no?) Some
industry observers contend that both cards are victims of the recent
announcement by Bancorp Bank that it has entered into a agreement
with regulators over capitalization requirements. Interestingly, Ms.
Orman had invested $1.0 million of her own money in the Approved
card. Both offerings included social benefit as attributes. Approved
worked with credit bureaus to help establish a credit history while the
Magic Card was tied to the Mojo saving account plan to help accumulate
wealth for the underserved market.
KKR,
Others
First Data Data processing First Data executives have struggled since the company’s LBO in 2007.
The company’s balance sheet reflects $22.5 billion in debt which carries
a junk rating. KKR and others have raised $3.5 billion in equity to ease
the burden somewhat – about $375 million in interest carry has been
eliminated. Hopefully, First Data will be able to invest these extra funds
in increased competitiveness and product development. The industry
needs FDC to be a strong competitor for balance and options.
SBT Venture
Capital
Moven Financial services Mobile-only financial services provider, Moven, raises $8.0 million to
go with the $4.0 million initially raised when founded in 2011.
Launched by anti-branch maven, Brett King, the enterprise relies on
CBW Bank, a Kansas banking powerhouse to keep app users’ money
warm and safe. The app allows users to link the Moven account with
external accounts to provide a full view of their financial goings-on. No
figures yet on the number of Moven users but readers might recall that
Simple, a similar cabal of banking services, was snatched up for $117
million awhile back. Don’t be surprised if, well, don’t be surprised.

Dorado Industries
(310) 544-1316
18
Andreessen
Horowitz
Instacart Grocery delivery Seems like a decade ago (actually, it was) that the grocery delivery segment
crashed leaving only Peapod, an Ahold subsidiary, in it wake. Really late-
comers include Amazon Fresh, FreshDirect, and Google. Instacart is a San
Francisco based grocery delivery firm that operates without an inventory.
Instead ,drivers visit Whole Foods, Costco, Safeway, and other local grocers
immediately after orders are placed and deliver the marked-up goodies in
exchange for either a delivery fee or an annual subscription. A-H has
invested $44 million to keep the pursuit of instant gratification alive for
foodies everywhere. Wonder how well Instacart will do in Colorado and
Washington state?
Thayer Street
Partners
Shopkeep Merchant terminals Shopkeep, the iPad, iPhone, and iPod Touch-based merchant terminal
systems company, raises $25 million in its third round of funding with the
funds earmarked for foreign expansion. Shopkeep emphasizes the back
office plumbing necessary to keep track of inventory, time and attendance,
and customer value-added services like coupons and rebates. Transaction
processing is left to other third parties who, like Shopkeep, emphasize the
under $1.0 million in sales segment. Shopkeep, like competitors Leaf and
Square, continue to bedevil the entrenched players like NCR and Micros (so
why did Oracle pay $5.3 billion for Micros again?)
MasterCard ElectraCard
Services
Transaction processing MasterCard moves its share in ElectraCard from 12.5 percent to 100 percent
in a transaction announced with no terms discussed. The card brand
continues to expand its global positioning strategy and picks up
ElectraCard’s payment processing business with banks, retailers and telcos
in 25 countries. Similar strategy as that used by UnionPay except
MasterCard is using hard currency rather than partnerships.

Dorado Industries
(310) 544-1316
19
Pritzker Group
Venture Capital,
others
Swipely Merchant analytics and
loyalty
Startup Swipely raises $20 million from new and returning investors
to up its capitalization to over $40 million. The company uses its
analytics to build customer loyalty independent of payment types
and POS equipment. Addition tools promote CRM, measure staff
performance, mix and match menu selections based on each
customer type and monitor social media reviews. Sounds like a
good addition to bank teller systems.
Ping An Group
(China)
Payoneer Global funds movement Payoneer, a long-time favorite of TrendWatch 2.0, receives an
undisclosed amount of investment from Ping An, a Chinese
insurance company with banking and investment arms. Payoneer
works with employers to disburse funds to far-flung contract and
permanent workers around the world (200 countries and virtually all
currencies.)
Oracle Micros POS systems Oracle pays $5.3 billion for Micros, the hotel, restaurant, and retail
segment leader in POS equipment and software. Seems Oracle is
interested in these verticals and hopes to use Micros for pull-through
business development opportunities. Time will tell if Oracle will
resist the temptation to fiddle with the Micros success formula (says
a veteran of the AT&T acquisition of NCR and its near ruination.)

Dorado Industries
(310) 544-1316
20
Redpoint Ventures,
Bitcoin Opportunity
Corporation, A-
Grade Investments.
BitGo Bitcoin security Ashton Kutcher and others believe Bitcoin theft or loss could
impede acceptance of the digital currency as a mainstay currency
and have invested $12.0 million in BitGo, a British security
platform. Operating somewhat like VeriSign and it certificate
authority that helped spawn safe e-commerce, BitGo provides
assurance that the Bitcoin presenter is actually the owner. The
added protection comes through use of a layered approach to key
management similar to the dual key process found in safe deposit
boxes. Now, if folks would just forget the Mt. Gox fiasco and the
recent Fed auction of Bitcoins taken from a drug cartel, digital
currency might have a chance of surviving.
QuickPay Nautical
Technologies
Parking lot payments Privacy freaks won’t like this one. QuickPay seeks to become the
“Uber of parking.” The already successful parking lot management
and payments company acquires Nautical Technologies, a firm that
offers vehicle license plate recognition systems. When fully
integrated and installed, customers drive up to the lot and their plate
is scanned. When leaving, the reverse occurs and the customers
credit or debit card is charged for the appropriate parking toll. No
ticket to lose, no card-in-the-damn-slot-that-is-too-low/high-to-
reach, and no attendants. Then again, your plate, entry and exit
times, and location have been recorded for all time.
Battery Ventures Vaurum Digital currency trading BV puts up $4.0 million to help launch yet another digital currency
trading exchange. Vaurum claims to be easier to use and appealing
to both the casual digital currency user as well as institutional
investors. Plans call for a white-label version of the system for use
by others wishing to jump on the cryptocurrency band wagon.

Dorado Industries
(310) 544-1316
21
Spark Capital Cover Restaurant payments app The restaurant payments field dominated by TabbedOut and
LevelUp just got a bit more crowded with the success of Cover, a
New York and now San Francisco-centric enterprise. Spark Capital
antes up $5.5 million to fund market growth beyond the 90 NYC
and 25 SF restaurants currently on the system. Patrons can use the
app to pre-order, check-in, and settle-up. An earlier seed money
round put $1.5 million in the Cover coffers. Bon appetite!
Octopus
Investments
Elliptic Bitcoin vault Hedge funds, law firms, and investment funds aren’t likely to keep
their digital currencies under the mattress. Elliptic, a UK startup
saw a niche and is attempting to fill it by offering to store owners’
cryptographic keys in a safe place, that is, offline servers in a safe
location. Just another indicator to the point made two years ago; to
be successful, digital currencies require high-level, high-volume
players and these guys take security very seriously. Octopus feels
the same way and has ponied up $2.0 million to make sure that the
safe storage place stays that way.
Khosla Ventures Plastiq Alternative payments
scheme
Currently playing only in Canada, Plastiq enables users to make
payments to virtually anyone via a credit card regardless of merchant
acceptance. Tuition, income taxes, and utilities are likely uses of the
application. Khosla – key investors in Square, Stripe, and Boku –
leads a Series B round for $10 million; funds are targeted for
expansion in Canada and entry into the United States.

Dorado Industries
(310) 544-1316
22
Useful Links for More Information
We threw a lot of new names out again this quarter. Here’s a list of links for you to
learn more.
Company Role Link
The Members Group Debit/credit card processor www.themembersgroup.com
Ripple Cybercurrency system www.ripple.com
Ondot Card protection system www.ondotsystems.com
2Checkout eCommerce processor www.2checkout.com
Swagbucks Loyalty scheme www.swagbucks.com
Sift Online card/transaction security www.securitysift.com
Moven Financial services provider www.moven.com
Instacart Grocery goods delivery www.instacart.com
Swipely Merchant analytics and loyalty www.swipely.com

Dorado Industries
(310) 544-1316
Back in the day!
23
Discerning readers may have spotted a reference to “Reg. Q” a few pages back. One of the
challenges associated with rapidly becoming fossilized is that the audience gets younger and
sometimes misses the history behind clever quips. So, this quarter’s contest comes in the form of a
multiple choice question: “What is, or was, Regulation Q?”
A. A Federal Reserve Board regulation enacted in 1933 and revoked in 2011.
B. A regulation that banned the payment of interest on demand deposit accounts and capped the rate
of interest payable on savings, CDs, and NOW accounts.
C. A causal factor in the use of branch expansion, account opening freebies (toasters), and bundled
loan rates for competitive purposes.
D. A causal factor in the creation of non-bank money market funds.
E. All the above.
Too easy, so here’s a couple more:
1. What is a NOW account and in what year did Congress make them legal in all 50 states?
2. What Congressional Act repealed the last remaining elements of Regulation Q?
Not sure what this quarter’s prize goody might be, but the first correct email takes home the bacon.

Dorado Industries TrendWatch 2.0 Q2 Payments Industry Review

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