Dorado Trend Watch Q2 2012

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Quarterly review of happenings in the electronic payments industry.

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Dorado Trend Watch Q2 2012

  1. 1. TrendWatch 2.0 Q2 2012 Payments System Industry SynopsisNotice: Materials contained in this document are drawn from several media sources and Dorado Industries is not responsible for their accuracy. Opinions expressedherein are presented without warranty. Brand names are the trademarks of their respective service offerors.
  2. 2. Random Thoughts Settlement? What Settlement? Then again, if you fly a lot, watch out. Most of the airlines in Anyone else find it curious that the cornerstones of electronic OZ-land charge from AU$8 to AU$25 per ticket when paying payments – issuers and acquirers (or bankers and merchants if with a credit card. When it happens in the U.S., think of it as you prefer) – would squander seven years of acrimony not to just another baggage fee or meal-for-purchase tariff. mention millions in resources wasted on lawyers merely for So, while the standard-bearers for U.S. electronic payments the sheer pleasure of announcing a settlement that everyone engage in courtroom fisticuffs and legislative legerdemain, hates? others like PayPal, Apple, Intuit, and Google are nonchalantly Then again, what’s to like? Seven million merchants get to taking big bites out of the payments space and generously share $7.25 billion, almost as meaningless to them as it isn’t rewarding their shareholders. painful to Visa, MasterCard and the FI plaintiffs. A ten basis Clearly, a rousing chorus of kumbaya isn’t going to get the job point reduction in interchange for eight months might be done but perhaps some co-dependent thinking by some of the equivalent to free Starbucks coffee for a week, if that. And best and brightest from each side of the payments tug-of-war merchants win the right to negotiate collectively on might help avoid losing the payments flag to others interchange. Anyone with experience in the retailer world altogether? Just a thought. knows that merchants pretty much hate and fear each other just as much as they diss bankers so this settlement bone probably isn’t going anywhere soon. Then there’s the icing on the cake: merchants will be able to surcharge credit card transactions. Well sort of. Consumers in California, New York, Texas, Florida and six other states – generally places where people want to live won’t be impacted because surcharges are illegal under state law. Other state residents probably needn’t worry too much anyway. For instance, in Australia, a case study in over-regulation consequences, retailers have been permitted to surcharge since 2003. As of 2010, fewer than 20 percent of small merchants You can keep your stinkin’ $7 billion! and 40 percent of large players have done so.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 2Rolling Hills Estates, CA 90274 www.doradoindustries.com
  3. 3. Table of Contents 2012 Predictions 4 TrendWatch Scorecard/Summary 5 2012 Payments Industry Yields 6 Interesting Quarterly News That Got No Respect 7 Q1 M&A/Investor Activity 11 Useful Links for More Information 18 Back in the Day 19Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 3Rolling Hills Estates, CA 90274 www.doradoindustries.com
  4. 4. 2012 Predictions • Four new payments schemes designed to maximize mobile phone functionality while eliminating the need for retailer check out lanes will proliferate – two will be launched by merchants, two from third parties. Mar: More entrants in the QSR, fine dining and tavern sector. Waiting on the big box guys. Late add: Intuit acquires AisleBuyer, one of the check out lane disrupters paying between $80 and $100 million. Jun: JC Penney announces plans to eliminate its fixed site POS installations in favor of tablet and smartphone equipped roving checkout personnel. • CFPB or DOJ will put the buy-here, pay-here segment for automobiles and accessories out of business. Mar: Looks like CFPB is using the shotgun approach - 10,000 notices to companies have been issued in the first six months of its existence! Annual report was issued March 31, 2012. Worth a quick read at: http://files.consumerfinance.gov/f/201204_cfpb_ConsumerResponseAnnualReport.pdf Jun: Perhaps payday lending is getting all the attention since there are more of these lenders than the others. Then again, maybe CFPB’s cup runneth over with credit card complaints posted by consumers. • At least one of the top ten FIs will be merged out. Mar: Nothing yet but it’s still early. Jun: Might want to fire up the popcorn popper, this one could take a while. • Congress will turn its back on efforts to repeal Durbin and/or materially alter Dodd-Frank. Mar: Looks like Congress won’t have to do anything despite certain GOP candidates claiming they intend to repeal Durbin. Jun: Two words: “election year.” Might not happen until 2013, if then. • American Express will prevail in its suit with DOJ. Mar: The longer the suit continues, the better this prediction looks. Jun: Then again, the July 13, 2012 settlement with Visa/MasterCard could put things in a cocked hat. • By yearend, China UnionPay’s base of cardholders will be 120 percent of Visa’s. Mar: Could happen. After all, who would have thought AMEX volume would have topped MasterCard’s in 2011? Jun: WTO finds China out of compliance with reciprocity agreements, excluding other acquirers from operating there. Might change things. • Nokia’s partnership with Microsoft will save it from extinction. Mar: Nokia’s still in the game and swinging for the fences. Microsoft is trying mightily to make the deal work. Jun: Maybe not if Windows 8 flops. We should know soon after its release date in October. Yet, if the iPhone 5 comes out inDorado Industries September, all bets are off for Nokia. (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 4Rolling Hills Estates, CA 90274 www.doradoindustries.com
  5. 5. TrendWatch Scorecard/Summary – Q2 2012 Industry Players To Watch V/MA: UBS downgrades both to “sell” because of global economic woes; something’s bound to happen. Interlink volume down 54 percent in Q2. Isis: Bad reaction to issuer pricing, AMEX tucked in for now, and pilots getting ready to roll out in SLC and Austin; plus $100 million in new Positive capital. CFPB: Looks like the favorite club in the bag is a Big Berth driver and not Mixed a putter– ask Capital One. Negative Groupon: Twelve M&A transactions in a year; several moving toward e- commerce.High 1. New Payment Forms clearXchange, the new P2P Payments Leader: Even though consumers need to be customers of Wells, Chase and BofA (good luck with that),Low 2. ATM Restructuring there’s enough mass here to alter the marketplace for all of us. Apple: iOS6 and Passbook could put a crimp in some folk’s initialMed 3. POS Volume Trend thoughts about mobile and digital wallets.High 4. Legal/Regulatory Issues Market & Industry Situation 1 – Payments with your Twitter handle? Check out Chirpify.High 5. New Venture Growth 2 – Co-branding still moving ahead despite the spate of signage litigation. Meanwhile BofA has reduced its ATM fleet by 9 percent citingMed 6. Earnings Announcements profitability issues with off-site deployments. 3 – Mixed messages involving Interlink, other PIN debit networks.High 7. Industry Investments 4 – CFPB tees off on Capital One for advertising practices. Good news: House passes ATM signage reform law. Waiting on the Senate. 5 – Lots of new P2P players and social media houses moving into payments. Some good, others not so much. 6 – Still barely chugging along. No big surprises (other than MSFT’s $6.0 billion write-off and V/MA settlement hits). 7 – 77 transactions totaling $3.4 billion invested in e-commerce startups and other players during Q2.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 5Rolling Hills Estates, CA 90274 www.doradoindustries.com
  6. 6. 2012 Payments Industry YTD Yields While the DJI and S&P kicked in lackluster YTD returns of 5.4 and 8.4 percent respectively, our basket of payments industry equities posted an average YTD yield of 16.6 percent. Not bad for industry that no one knew or cared about a decade ago. Industry Player 12/31/2011 6/29/2012 Price  Cap Value  YTD 2012 Yield Alliance Data Systems $ 103.84 $ 135.00 $ 31.16 $ 1,854.0 30.0% Cardtronics $ 27.06 $ 30.21 $ 3.15 $ 128.2 11.6% Discover Financial Services $ 24.00 $ 34.58 $ 10.58 $ 5,087.9 44.1% Euronet Worldwide $ 18.48 $ 17.07 $ (1.41) $ (71.1) -7.6% Fidelity National Information Services $ 26.59 $ 34.08 $ 7.49 $ 1,429.1 28.2% First Data (Future Use) Fiserv Inc. $ 58.74 $ 72.22 $ 13.48 $ 2,101.5 22.9% Global Cash Access Holdings $ 4.45 $ 7.21 $ 2.76 $ 212.8 62.0% Green Dot $ 31.22 $ 22.12 $ (9.10) $ (370.8) -29.1% Heartland Payment Systems $ 24.36 $ 30.08 $ 5.72 $ 213.9 23.5% Jack Henry & Associates $ 33.61 $ 35.52 $ 1.91 $ 160.2 5.7% MasterCard Worldwide $ 372.82 $ 430.11 $ 57.29 $ 7,413.3 15.4% NetSpend $ 8.11 $ 9.19 $ 1.08 $ 94.8 13.3% Online Resources $ 2.42 $ 2.43 $ 0.01 $ 0.3 0.4% TNS $ 17.72 $ 17.94 $ 0.22 $ 5.5 1.2% Total System Services $ 19.56 $ 23.93 $ 4.37 $ 862.6 22.3% Visa $ 101.53 $ 123.63 $ 22.10 $ 18,694.4 21.8% Sources: Company releases, Morningstar.com, Bloomberg.com 2012 YTD yield excludes dividends; based on 12/30/11 and 6/29/12 closing pricesDorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 6Rolling Hills Estates, CA 90274 www.doradoindustries.com
  7. 7. Interesting News This Quarter Subject Source/Date Substance Dwolla TechCrunch • Iowa native Dwolla launches FiSync, its real time money transfer system that circumvents the June ACH system. Veridian Credit Union based in Waterloo, Iowa (naturally) is the first FI to enroll in FiSync. Dwolla is also destined to become imbedded in a transportation app for smartphones. NYC startup GetTaxi uses a smartphone app to enable commuters to seek out and hire taxis across their wireless network. If it works out for Dwolla, the payment is likely to arrive before the ride ends. Late update: Dwolla leaks to the American Banker that twelve FIs have enrolled in FiSync. Not yet an avalanche but worth watching. Facebook Finextra • Facebook sure seemed certain to be the first successful and sustainable creator of a digital June currency for the mass market (sorry Bitcoin). Facebook Credits are available in prepaid card form at Wal-Mart and other retailers and for digital purchases and game-playing on the social media network, Credits were the only game in town. Now it appears that Facebook will reverse its course and will allow developers and digital goods sellers to accept payments in local currencies rather than maintain a market for Credits against those same currencies. Consumers will now be able to convert their local funds into game currencies without having to execute a double conversion. Of course, Facebook will continue to take 30 percent off the top of all sales. mPowa American Banker • UK based entrepreneur Dan Wagner launches mPowa, a mobile phone app for payment June acceptance in multiple currencies. mPowa claims to differentiate itself from Square by catering to the chip and PIN crowd. No matter, Square has already put a Cease and Desist letter over mPowa’s bow with respect to a promotional photograph claimed to be right off of Square’s website. Pricing is ultra low-end at 25 b.p. for each debit and credit card payment. Seems a bit light given today’s interchange and acquirer fees. National Payment Card PaymentsSource • By all accounts, National Payment Card should have gone the way of the dodo and all the other Association June decoupled debit offerors and become payments system road kill. Yet, at 15¢ per transaction, the company’s decoupled debit solution does come in under the Durbin 24¢ cap and remains appealing to those issuers willing to accept the risk attached to delayed ACH settlement. And now the company offers open-loop cards that authorize across the Pulse EFT network. Transaction volumes remain small at 800,000 per month; following the other mobile payments lemmings, the company is moving forward with plans to become integrated with several digital wallets and applications.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 7Rolling Hills Estates, CA 90274 www.doradoindustries.com
  8. 8. Interesting News This Quarter – Continued Subject Source/Date SubstanceFlint Mobile Finextra • Flint enters the mobile-device-as-POS-terminal fray and garners $3.0 million in VC funding from May Storm Ventures and True Ventures. The Flint approach relies on use of the merchant phone’s on-board camera to record a picture of the payment card’s 16 digit PAN. The image is augmented with user- supplied PIN and ZIP for authorization and settlement purposes. Receipts are emailed and each purchase can be posted on the merchant’s Facebook Fan page. Merchant services fees are modest at 1.95 percent plus $0.20 for debit and 2.95 percent plus $0.20 for credit.LevelUp Mobile Payments • Invigorated with a fresh load of capital (next section), LevelUp draws a line in the acceptance pricing Today sand and eliminates all transaction fees charged to merchants who accept its payment method. The July “Interchange Zero” model only assess fees to merchants for customer acquisition and loyalty campaigns. As to the latter, LevelUp charges 35¢ for every incremental dollar brought in by the campaign. Looks like the risk-sharing ratio is about right; now if LevelUp could just scale up, we’d really have something to talk about.Kmart/Green Dot PaymentsSource • Kmart and Green Dot have inked a deal for distribution of the new Halogen Reloadable MasterCard throughout the retailer’s 1,200 stores. The card is competitively priced versus Wal-Mart and offers free withdrawals at MoneyPass ATM locations across the country. As with most GPR cards, fees can be waived in exchange for monthly reloads and use of other services. Green Dot benefits through this relationship by lessening its dependency on Wal-Mart, a matter of some concern with the stock analysts. Curious side note: GDOT traded much higher when it was announced that Wal-Mart was dropping its American Express “Bluebird” prepaid program than it did when the Kmart deal was announced. Go figure.Wipit PaymentsNews • Wipit delivers a pay-with-cash-everywhere option for those without deposit accounts but with a mobile May phone. Consumers fund a virtual, regulated, account by depositing funds with participating merchants. A mobile phone app keeps track of balances and spend. As an alternative, the Wipit virtual account could be funded with a credit card. The virtual account can be used in person or on the web for purchases and cash withdrawals. Ria Financial powers a bill payment function tied to the Wipit account as well. The Wipit management team looks extremely strong with good industry experience. This could be the one to watch in the short-run. Western Union has a pretty big head start however.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 8Rolling Hills Estates, CA 90274 www.doradoindustries.com
  9. 9. Interesting News This Quarter – Continued Subject Source/Date Substance ZipZap Press Release • ZipZap competes against Wipit without being wedded to the mobile form factor. 700,000 sites in the U.S. May can be used to replenish the CashCade aka Cash Payments account. ZipZap is another example of a early stage player with good management, strong funding (Bloomberg and TriplePoint), and a reasonable approach to payments. That said, there certainly are a lot of entrants in this underbanked sector. Wonder when the weeding out process begins? Bump Technologies Bank Technology • Strange how the world works, right? Three years ago, PayPal announced integration of Bump for its first News foray into mobile payments. Empowered by the marquee endorsement, the Bump app has attracted 80 million April users. Oops. PayPal launches PayPal Here and removes Bump leaving but one option for the technology company – it is moving toward spinning out a separate entity to promote Bump Pay, a standalone app for P2P payments. Bump Pay will still require that both parties have the app and linked PayPal accounts but there’s no dongle or wedge to attach to the phone and, of course, no merchant services fees. A niche market in the extreme but with 80 million adherents, there could be a good outcome for Bump. BillMyParents Bank Technology • And then sometimes the air just comes out of the balloon altogether. BillMyParents started life as a digital News online parent-billing scheme but the company experienced strong headwinds from retailers unwilling to April modify their POS systems to accommodate yet another payment option. So BillMyParents has resurfaced as SpendSmart, a MasterCard-branded prepaid card that parents can use to fund teen spending via real-time notices and the ability to veto purchases. By taking this well-worn path BillMyParents is likely to experience more headwinds; this time from well established competitors with years of experience in the teen card realm. Despite our positive comments in Q1 for the simplicity of the BillMyParents model, we foresee tough sledding ahead. PowerPay LLC PaymentsSource • PowerPay puts a shot over Square’s bow by introducing a smartphone and tablet app (AppCharge) that June transforms a merchant’s mobile device into a card acceptance terminal. The unique twist here is that AppCharge will be distributed only through ISOs (Square doesn’t like them) and only to their existing or future merchants. All of which means the merchants using AppCharge will have merchant accounts with a sales agency which will be setting the discount rates and ancillary fees. In the beginning AppCharge will not accommodate PIN debit transactions, contactless, or QR code transactions. Clearly, an attempt to protect ISO merchants from Square, Intuit, and VeriFone’s new Sail offerings. Not yet a battle royal, but not a powder puff derby either.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 9Rolling Hills Estates, CA 90274 www.doradoindustries.com
  10. 10. Interesting News This Quarter – Continued Subject Source/Date Substance Universal Business PaymentsSource • Older TrendWatch readers will recognize the name Bipin Shah. Bipin was one of the founders of the MAC Payment Solutions July network and went on to become CEO of GenPass. Along the way, Mr. Shah left his fingerprints on several Acquisitions Corp. industry milestones including surcharge-free ATMs and prepaid cards. He withdrew from the industry several years ago as the result of a family conflict. Universal Business Payment Solutions Acquisitions Corp. (now there’s a mouthful) is the brainchild of Mr. Shah and Peter Davidson, another payments industry veteran. UBPSAC has raised $75 million in capital and bought three companies – Electronic Merchant Systems, an ISO; JetPay LLC, a processor; and AD Computer Corp, a payroll processor and tax filing outfit. Bipin’s latest tactic focuses on the full scope of business needs for small merchants and his PacMan strategy is heading in that direction. Nice to have one of the veterans back at it. Bank of America American Banker • Bank of America once again vouches for the veracity of the old adage “it’s harder to manage technology July than manage technology vendors” as it reverses its 2006 decision to insource processing for its consumer credit card portfolio. The bank will return its processing requirements to TSYS for at least six years after which it could do another about-face and exercise a new option to license TS2 software. A spokesperson cited “aging technology” and “regulatory enhancements” as the primary causes for the reversal. About right. Chirpify American Banker • Chirpify is another startup that blurs the distinction between social media and payments. The web payment July gateway enables Twitter users to link their social media handles to their PayPal accounts and make P2P payments, donate to charity, purchase or sell digital and tangible goods, and contribute to political campaigns (perish the thought). Chirpify raised $1.3 million in Series A financing led by Voyager Capital earlier this year and claims to have tens of thousands of users already signed up for the service. Discussions with several banks are under way in an effort to enable Tweeting amongst users with debit and credit cards. Groupon VentureBeat • Apparently Groupon isn’t satisfied with being merely an online couponing service and has quietly entered May the payments industry through acquisition of Breadcrumb for an undisclosed amount. Breadcrumb operates a mobile merchant POS system with iOS (iPhone/iPad) applications. Not solely a payments system, Breadcrumb also manages shift schedules, payroll, and employee time clocking. Groupon continues to be acquisitive as it shapes its ultimate space in the daily deals frontier; other tuck-in purchases include a travel site, a place and deal data aggregator, and Adku, an e-commerce data firm.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 10Rolling Hills Estates, CA 90274 www.doradoindustries.com
  11. 11. M&A/Alliance Activity Buyer/Investor Target Payments Emphasis Possible Strategy Intuit AisleBuyer Mobile commerce enabler Intuit pays “between $80 and $100 million” to straddle the gap between consumers and retailers in mobile shopping and payments. AisleBuyer’s mShop and mDine apps provide consumers with online shopping and purchasing tools while mClerk allows retailers to use mobile devices for payment acceptance. Both app suites eliminate the need for checkout lanes (not unlike what JC Penney is trying to do.) Whether the price is on the high or low end of the range doesn’t matter. AisleBuyer’s earlier funding amounts to less that $8.0 million; a nice payday for Old Willow Partners and the founders. Ignition Partners WePay Online merchant services Calling itself the “anti-PayPal” option for online Highland Capital merchants must have attracted some attention. The new Partners and returning investors injected another $10 million for August Capital expansion purposes – twice previous levels. The WePay approach for merchant services avoids the need for retailers to have a separate services account in much the same way Square and PayPal operate. Capital One BankOns Mobile couponing Capital One pays an undisclosed amount for BankOns (think “bank + coupons”) , a one-year old startup. BankOns bills itself as the “anti-Groupon,” by asserting that it enables banks to deliver geo-centric and spending- history enhanced deals to consumers leading to a greater level of coupon up-take. Looks like Capital One continues to be enthralled with mobile commerce.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 11Rolling Hills Estates, CA 90274 www.doradoindustries.com
  12. 12. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Mercury Payments Sundrop Mobile Mobile payments and loyalty There may be no less-sticky a relationship than that between a Systems retailer and its merchant services provider – relationships come and go in nanoseconds. So it’s not surprising that Mercury Payments Systems would purchase Sundrop to improve its point-of-sale offerings for small and mid-tier retailers and to retain existing and future merchants. We’re likely to see more of these value-add tuck-in acquisitions as Durbin and the new credit card settlement inch merchant acquirers closer to the commodity closet. Terms of the deal were not disclosed. Wright Express CorporatePay Private label/cobranded prepaid Wright has been forcing itself to diversify its U.S. based cards transportation-centric payment offerings for a half-decade. This relatively small ($27.5 million) transaction puts Wright in the European payroll card business. CorporatePay cards took on $400 million in loads in 2011. Citi Ventures Jumio Mobile commerce Citi Ventures takes a lead position in Series B funding for Jumio, the inventive folks that use smartphone on-board cameras to validate that a payment card is legitimate (“Netverify” )and accept the card for mobile payments (“Netswipe”). To date, Jumio has raised $35 million from some pretty heavy hitters – Facebook cofounder Eduardo Saverin and VC firm Andreessen Horowitz, for example. Visa SecureKey Authentication solutions The four payments schemes and others plunk down another $30 MasterCard million in expansion capital to keep SecureKey, the de facto American Express winner of the m- and e-commerce authentication race, in full Discover expansion mode. Not content with dealing exclusively in Others payments, SecureKey is now going after government information access portals; recently winning the race for Canada.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 12Rolling Hills Estates, CA 90274 www.doradoindustries.com
  13. 13. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Innovation Endeavors Tango Card Prepaid/Mobile payments Seattle-based Tango Card, the engine behind Bing Western Technology Rewards, FedEx, Extole, and Shutterfly, lands another $1.8 Investment million from new investors in its already fat $40 million Series A round of funding. The company’s emphasis includes incorporating digital goods into corporate client rewards and gifting programs. Continental Investors SCVNGR Mobile game and payments SCVNGR’s mobile payments app, LevelUp, receives a $12 Transmedia Capital operator million injection of new capital from returning and new Highland Capital Partners investors. LevelUp is now available for use at 3,000 Google Ventures merchant partner sites including Johnny Rockets and Ben Balderton Capital & Jerry’s. The app entails credit and debit card linkages plus the standard fare of loyalty-promoting services. Funds will be used to financing further U.S. roll-outs. Maveron Lemon Mobile wallet provider App provider Lemon receives $8.0 million in Series A Lightspeed Venture funding from a host of investors and launches its “smarter Partners CampVentures wallet” approach. The app relies on the user’s smartphone Others camera to record an image of each credit, debit, and loyalty card which is saved in the wallet. A four-digit PIN is used to access the payment cards in either physical or online shopping experiences. Chexar Networks Clear Payments Check conversion technology Chexar Networks focuses on check cashing, bill payment, money transfer and related services delivered to the U.S. underbanked population. Clear Payments owns proprietary technology the enables conversion of checks to a good- funds model in addition to offering payment processing services in the e-commerce space. Terms were not disclosed.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 13Rolling Hills Estates, CA 90274 www.doradoindustries.com
  14. 14. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Verizon Isis Mobile payments Now we’re talking some real money! Verizon and T-Mobile T-Mobile consortium raise their collective investment positions in Isis, the mobile payments consortium , by $100 million. No one said that launching a new payments platform was going to be cheap but we wonder if Google, Visa, and the other mobile wallet peddlers are going to stay in the game with these stakes? Terry Semel Openbucks Gift card network Openbucks enables online shopping without a major debit or Greycroft Partners credit card by allowing consumers holding Subway, CVS, BV Capital Burger King, Shell Oil, and Circle-K closed loop gift cards to Clearstone Ventures use them to purchase digital and durable goods. Seems like a Others good way to get rid of nuisance balances on old gift cards or to make purchases anonymously. Investors shelled out $4.8 million in Series A funding to grow the network of card issuers and acceptors. PayPal Card.io Mobile technology provider PayPal swoops in to capture another innovator in the smartphone technology field and adds yet another feature to its burgeoning play in mobile payments. It isn’t clear how the card.io app (which is also used by the Lemon and SCVNGR LevelUp offerings) will differentiate PayPal but it’s a safe bet that the human capital netted in the deal will help build a better mousetrap. These card.io guys are really sharp! Carmel Ventures Tapingo Mobile commerce platform Tapingo, with offices in San Francisco and a data center in Tel Aviv, targets university students with a mobile application that supports goods and services purchases at merchants in physical locations adjacent to college campuses. Carmel Ventures is making a $3.5 million bet that Tapingo will remain on students’ devices once they matriculate.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 14Rolling Hills Estates, CA 90274 www.doradoindustries.com
  15. 15. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Intel Capital CashStar Digital prepaid system CashStar, based in Portland Maine, raises its fourth tranche of Passport Ventures funding, this one totaling $5.0 million. The company delivers FTV Capital customized gift and loyalty programs to Home Depot, The Others Gap, Pottery Barn and dozens of other well known retailers. Funds are targeted to help buffer CashStar from the headwinds likely to be blowing as mobile wallet providers start carving out new merchant relationships and their own loyalty schemes. Sequoia Stripe Merchant service provider Three of PayPal’s five co-founders have made investments in Peter Thiel Stripe, a direct competitor on the acquiring side. This $20 Elad Gil million round comes on top of a similar funding tranche one year ago. Stripe offers the opportunity to take nationally branded payment types without having a merchant account or gateway. Pricing is 2.9 percent plus $0.30 per transaction, similar to both PayPal and Square. Stripe hasn’t gone mainstream yet but the number of online merchants is growing exponentially. Stripe’s secret sauce is its ability to be integrated with virtually any online storefront in minutes. Degicel M-Via Mobile SMS remittances M-Via was getting to be a bit long in the tooth so it changed RRE Venture its name to Boom and reeled in new and returning investors Matt.org for another $17 million. Boom claims presence in 31 markets including the Caribbean, Central America , and South America with “thousands of merchants” and 100,000 Boom ATMs. Boom provides SMS-based remittance services for the unbanked and immigrant population in the U.S.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 15Rolling Hills Estates, CA 90274 www.doradoindustries.com
  16. 16. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Trellis Investors TabbedOut Restaurant/bar payments app Long a TrendWatch darling (for the innovation shone), New Enterprise TabbedOut raises another $3.5 million + in addition to the Associates $6.5 million raised earlier. TabbedOut concentrates on restaurants and bars as clients and its application eliminates the need for servers to be involved in settling up the dinner or drink tab. Patrons can close out their tab at anytime and if they forget, TabbedOut settles after the fact. North Bridge Ventures Paydiant Mobile payments platform If you’ve been following the evolution of mobile payments at Partners all, you’ve likely run into Paydiant, considered one of the General Catalyst front-runners in white labeled mobile payments applications. Returning investors have shelled out another $12 million to finance expansion in both the bank and merchant verticals. Competition in the space is going to be fierce with the likes of MFoundry, Square, Isis, Google and PayPal all vying for a chunk. Cielo SA Merchant e- Merchant acquiring services Cielo SA is a Brazilian payments services provider Solutions purchasing Redwood City, California –based Merchant e- Solutions for $670 million. MeS was founded twelve years ago by a couple of ex-BAMS senior executives and processes about $14 billion in transaction s each year. Nice little liquidity event for a couple of old payments war horses. Good to see that happen from time to time. Brightwell Payments Directo Payment card operator This acquisition links two old-line players. Brightwell’s claim to fame is its OceanPay maritime paycard while Directo has been serving the Hispanic market from its Atlanta headquarters since 1998. Terms were not disclosed.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 16Rolling Hills Estates, CA 90274 www.doradoindustries.com
  17. 17. M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Private Investor Kuapay Mobile payments platform There’s another mobile wallet in town. Kuapay expands beyond its roots in Chile and Spain to the U.S. with new offices in Santa Monica. A private investor is footing the bill with $4.0 million in new funding while southern California KFC franchisees have stepped up to pilot the service in 100 locations. Kuapay’s wallet model is QR code based and integrates with merchant POS systems or a Kuapay-provided iPod Touch. Earlybird Traxpay B2B online payments Traxpay, currently Euro-centric but heading for the U.S., offers real time B2B payments with its service which has been developed in partnership with Accenture, SAP, and NTT Docomo. Funds circumvent standard payments rails required in other e-invoicing services. Earlybird is a dominant VC player in Europe and has dropped $4.0 million into Traxpay to kick start its entry into the United States.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 17Rolling Hills Estates, CA 90274 www.doradoindustries.com
  18. 18. 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 Chirpify Twitter enabled payments www.chirpify.com Traxpay B2B invoicing www.traxpay.com BankOns Daily deal couponing for FIs www.bankons.com Jumio Smartphone payments acceptance www.jumio.com Tango Card High flying loyalty payments www.tangocard.com Openbucks Closed-to-open loop card payments www.openbucks.com Tapingo College-based mobile payments www.tapingo.com Stripe Mobile merchant services www.stripe.comDorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 18Rolling Hills Estates, CA 90274 www.doradoindustries.com
  19. 19. Back in the day! Most of us owe our careers in EFT to the 389-page document depicted here. Published in October, 1977, the Final Report of the National Commission on Electronic Fund Transfers set the stage for the EFT Act and put electronic payments on the map in the United States. Sure, it never made it to the top of the New York Times Best Sellers list but it has quite a plot, one which continues to entertain and evolve today.Dorado Industries (310) 544-1316655 Deep Valley Drive, Suite 125-P jmacallister@doradoindustries.com 19Rolling Hills Estates, CA 90274 www.doradoindustries.com
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