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Dorado trend watch q2 2013
 

Dorado trend watch q2 2013

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Edgy quarterly review of the electronic payments industry.

Edgy quarterly review of the electronic payments industry.

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    Dorado trend watch q2 2013 Dorado trend watch q2 2013 Presentation Transcript

    • TrendWatch 2.0 Q2 2013 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. Hey! We were here first!
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com Random Thoughts Bitcoin: Ignore at Your Own Peril. Thirty years ago, a California gasoline retailer revolutionized the payments industry by introducing a plan to allow fuel purchases with ATM cards. Bankers hated it; consumers loved it, and today PIN debit is an integral thread in the payments fabric. Fifteen years ago, cybercurrencies such as CyberCash, Beenz, and Flooz sprouted, wilted, and died, victims of (a) the dot-com bubble burst, and (b) fatal hubris. All is quiet until 2009 when a cloak-and-dagger developer using the handle “Satoshi Nakamoto” writes the core algorithms for Bitcoin, kicks off the first Bitcoin server, and open-sources the code. Unlike the early attempts to circumvent traditional currency, Bitcoin adherents don’t appear to be in the game to reap huge rewards and, despite the few successful efforts by VCs to wedge themselves into the play, raising capital isn’t a top priority either. No, Bitcoin (and apparently its “we’re better than you” challenger BitMint) is bootstrapping itself into the payments lexicon. And quite a set of references it has. In the UK, we have TheBitcoinCard, a MasterCard branded prepaid card that holds Euros and is funded with Bitcoins. Mt. Gox is (was) a Bitcoin exchange shut down by regulators (FinCEN) because of non-compliance with money transfer service laws. There have been two value crashes since Bitcoin’s launch and the little-engine-that-could has survived them both. There’s even a Bitcoin ATM in the works. 2 For its faults, Bitcoin has a lot going for it. First, its value is determined entirely by the “market.” Who doesn’t like a good roll of the dice every once in a while? Second, most folks think it’s anonymous – which of course it isn’t, but Ruth’s Chris does well selling sizzle instead of beef, so what the heck? Third, it’s cheap and virtually instantaneous for merchants, and there’s the kicker. Retailers were the key to success for PIN debit, and we’re betting that, at least for a segment of the purchasing population that want to use cybercurrencies, Bitcoin’s fortunes will rise and fall with retailer acceptance. For now, the biggest Bitcoin merchants are web-based and include Wordpress, The Pirate Bay, and Reddit; the list of others is growing daily and attracting brick- and-mortar sites. We’re certainly not going to see Bitcoins taking over for greenbacks or Euros anytime soon, but it’s not likely they’re going away either. Younger consumers (the target for most issuer-side payments gurus) are driving the demand (and value) side while the aforementioned merchants will do just about anything to avoid paying excessive acceptance fees (witness MCX and the new spate of litigation). There’s no need to make Bitcoin a focal point of just about anyone’s payments strategy, but those choosing to ignore it entirely may get caught short one day. Until next time.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 3 Table of Contents 2013 Predictions 4 TrendWatch Scorecard/Summary 5 2013 Payments Industry Yields 6 Interesting Quarterly News That Got No Respect 7 Q1 M&A/Investor Activity 13 Useful Links for More Information 21 Back in the Day 22
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 2013 Predictions 4 • One cloud-centric mobile payments player other than PayPal will have a break-out year; the payments industry will declare NFC DOA and move on. Mar: Since Google is re-gearing mobile yet again, it’s not likely to be the one. Jun: Indeed, it looks like the wheels have come off the Google Wallet juggernaut. • One or more of the non-traditional dongle-centric merchant services providers will be acquired by a mainstream POS terminal industry leader. Mar: Verifone’s Sail is gone, so it’s off the table. Someone else will cave. Jun: Perhaps “acquire” is premature. “Strategic partnering” comes closer, i.e., NCR’s new relationships. • Despite the fact that there are already laws preventing abusive use of electronic benefits transfer cards, the CFPB or Congress will intervene to provide more protection. Mar: Still waiting to see if CFPB wants to double down on casinos, strip clubs, and liquor stores. Jun: Tick, tick, tick. • One of the remaining EFT networks will change ownership. Mar: The search for a common AID for mobile (more accurately, reaction by V/MA) will likely propel things. Jun: New common AID, new Durbin compliance requirements, mounting merchant pressure; someone’s going to throw in the towel. • American Express will prevail in its Department of Justice litigation. Mar: Time remains an ally for American Express. DOJ litigation didn’t impair its efforts to gain FDIC access for its prepaid product – Bluebird. Jun: Supreme Court sides with AMEX and against merchants in AMEX v. Italian Colors Restaurant. Not directly related but tangential at least. • The US Postal Service will declare its pilot in gift card sales a failure and shut the program down. Mar: After all, who buys gift cards on Saturday when USPS is delivering mail. Oh, right. Jun: Oops. Back to Saturday delivery, so maybe dumping gift cards is the next money saver? • Emboldened by the success of PayNet (FIS) and clearXchange (BofA, Chase, Wells), two new real-time payments networks will emerge. Mar: Nothing yet, but the Italian banks are pushing their own version in-country and pan-Europe. Time will tell. Jun: Could MCX be thinking that a shift to real-time is a good way to avoid V/MC rails and fees?
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 5 TrendWatch Scorecard/Summary – Q2 2013 Market & Industry Situation 1 – Lots of new uses of QR, and sonic applications are coming around again. 2 – Do we really need a Bitcoin ATM? Or a mobile accessed kiosk? Perhaps. 3 – Big volume growth helping post-Durbin somewhat. Square et al. providing new e-payments venues. 4 – CFPB behaving as expected. Prepaid in the cross-hairs. 5 – Some big money is starting to enter the game; $1 billion for Intuit Financial Services is a good kickstart. 6 – Record bank profits. Enough said. 7 – Big Data is getting the lion’s share, but payments isn’t far behind. Analytics on a par with payments. (Both covered in TW Q3.) Industry Players To Watch Judge Gleeson: Certify the V/MA settlement or not? GoBank/Green Dot: GoBank now available to the mass market. Will it change the way we bank? WalMart: Says no to PayPal in-store acceptance. Got something better? Prepaid Processors: If Aite is right and there’s too much supply, which one(s) will be the first to find a partner? Australia: Visa and MasterCard are duking it out for mobile wallet supremacy. Early results may be telling in the US. MCX: Processor in place, wallet platform in place, whatcha got next? 5. New Venture Growth 4. Legal/Regulatory Issues 1. New Payment Forms 2. ATM Restructuring 3. POS Volume Trend High Med Med Med High Med High Positive Mixed Negative 6. Earnings Announcements 7. Industry Investments
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 6 2013 Payments Industry YTD Yields Sources: Company releases, Morningstar.com, Bloomberg.com 2013 YTD yield excludes dividends; based on 12/31/12 and 6/28/13 closing prices We lost NetSpend through acquisition by Total Systems. No matter, the payments basket of equities averaged 23.3 percent in capital appreciation through the first half of the year, while the Dow and S&P posted gains of 13.8 and 15.0 percent, respectively. Blackhawk IPO performing like Facebook. Industry Player 12/31/2012 6/28/2013 Price  Cap Value  YTD 2013 Yield Alliance Data Systems 144.76$ 181.03$ 36.27$ 2,158.1$ 25.1% Blackhawk Network Holdings 25.10$ 23.20$ (1.90)$ (99.4)$ -7.6% Cardtronics 23.74$ 27.60$ 3.86$ 157.1$ 16.3% Discover Financial Services 38.55$ 47.64$ 9.09$ 4,371.4$ 23.6% Euronet Worldwide 23.60$ 33.80$ 10.20$ 514.1$ 43.2% Fidelity National Information Services 34.81$ 42.84$ 8.03$ 1,532.1$ 23.1% First Data (Future Use) Fiserv Inc. 79.03$ 87.41$ 8.38$ 1,306.4$ 10.6% Global Cash Access Holdings 7.84$ 6.26$ (1.58)$ (121.8)$ -20.2% Green Dot (M&A-ed Out) 12.20$ 19.95$ 7.75$ 315.8$ 63.5% Heartland Payment Systems 30.23$ 37.25$ 7.02$ 262.5$ 23.2% Jack Henry & Associates 39.26$ 48.43$ 9.17$ 769.4$ 23.4% MasterCard Worldwide 491.28$ 574.50$ 83.22$ 10,768.7$ 16.9% MoneyGram International 13.29$ 22.65$ 9.36$ 541.6$ 70.4% NetSpend (M&A-ed Out) Total System Services 21.42$ 24.48$ 3.06$ 604.0$ 14.3% Western Union 13.61$ 17.11$ 3.50$ 1,990.7$ 25.7% Visa 151.58$ 182.75$ 31.17$ 26,366.7$ 20.6%
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 7 Interesting News This Quarter Subject Source/Date Substance UK Payments Roadmap UK Payments Council Now here’s a clever thought. Get all the parties associated with payments together for a three- year effort to build a payments roadmap covering the full range of tender options, their underlying technologies, varying token types, security disciplines, and consumer experience needs in the hope that putting everyone on the same path might avoid redundant expenditures, absurd pricing, and customer confusion. The initial report is out and describes the journey undertaken by the Payments Council (we don’t have one of those), the players involved (not likely we could fit everyone’s egos in the same room), and the timeframes planned (altogether too long in our view, but plausible). If it works, the benefits could be significant; if not, well, they tried. Recall that the same council was going to toss checks over the side by 2018. Isn’t going to happen. This just in: a roadmap might not matter to British citizens, it seems. Eleven percent of 1,600 Brits interviewed recently didn’t know what an ATM was, and 32 percent couldn’t explain the difference between a credit and debit card. Wonder what a similar U.S. survey might reveal? Starbucks PYMNTS.com June Coffee giant Starbucks announces that 30 percent of its in-store purchases occur through either its proprietary stored value card or mobile. Ten percent of all transactions now occur on mobile phones using 2D bar code technology. Moreover, 25 percent of SBUX transactions involve the company’s loyalty program launched three years ago. Wonder why a loyalty program is needed when caffeine works so well? Wendy’s International PaymentsSource June Cheeseburger merchant Wendy’s launched a mobile app last summer allowing customers to tailor their meals based on calorie count. The application has gradually morphed into something much richer and now has payments and value reload features built in. So long as you live in New Mexico, Portland, or Austin. The app creates a unique and time-sensitive purchasingnumber which is given to a cashier at checkout. Seems a bit klugey for now, but you’ve got to applaud Wendy’s for moving ahead with mobile while the MCX mobile wallet system is being hammered out. McDonald’s Paybefore.com June Keeping the hospitality/fast food thread alive, McDonald’s has added Kuwait to its growing list of test markets for mobile payments. Kuwait International Bank, a local kingpin in prepaid card issuance, will partner with McD and Seamless, the Stockholm-based software outfit, to get the job done. The pilot will utilize quick response (QR) technology rather than NFC in a fashion similar to the 220 store roll-out test launched by McDonald’s in Sweden last quarter.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 8 Interesting News This Quarter – Continued Subject Source/Date Substance iZettle TechCrunch June Launched in Europe in February, iZettle is expanding to the UK and Mexico following a $6.6 million investment in the mobile payments startup by Spain’s Banco Santander. The UK expansion involves sales of small business readers to local merchants at very low prices. The effort in Mexico includes dongles for iOS and Android phones and tablets. Porous as the US-Mexico border stands today, it’s likely that we’ll see iZettle terminalsin local stores soon. Check Presser June Check used to be known as PageOnce (good re-branding move) and started life as a PFM application that tracked when bills were due. Since its launch, Check has added payment processing using stored bank account and credit card information. This month Check added an expedited payment function for bills that may have slipped through the cracks or arisen suddenly. Pricing is about 1/3 cheaper than other offerings at $14.99 flat per transaction. Square and Google Pressers May Interestingthat Square and Google would launch email cash transfer options one week apart. Square Cash works with most email clients and requires a “To:” designation, a “CC:” reference to pay@square.com, and a dollar amount in the subject field. Pricing is probably high at $0.50 per transaction, but market pressures will likely shrinkit some. The Google solution is either more or less elegant depending on your point of view and requires that funds be “attached” using the application’s icon. Transfers made from linked deposit accounts using the ACH are free to the sender and receiver, while card based transactions involve ad valorem pricing of 2.9 percent with a $0.30 minimum. While launched at virtually the same time, these apps represent different strategies. For Square, the Cash product represents yet another effort to broaden the utility of the mainstream application. For Google it appears to be a desperate attempt to salvage Google Wallet. Safeway Bizjournal May Safeway’s CEO touts the company’s “new” Fast Forward payment program during a shareholders meeting. This decoupled debit program currently is being tested in Sacramento, California, and won’t be available to all shoppers for several months. Wizened payments veterans might be wondering “why all the fuss” because Safeway’s subsidiary, Von’s Grocery, has offered SmartCheck as part of its Club Card loyalty program since the late 1980s. We’re not sure if this is a re-branding ploy or something new. If it’s the former, why bother testing something that has worked for nearly thirtyyears? If it’s the latter, how much different can it be? Something to ponder for next quarter. Truly aged readers will recall that SmartCheck emerged out of the quagmire known as the check guarantee card. Younger readers should Google it.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 9 Interesting News This Quarter – Continued Subject Source/Date Substance VocaLink Finextra June UK payments network VocaLink has launched Zapp, a consumer-to-business payments company and mobile application. Consumers link their deposit accounts to the Zapp app (clever alliteration) for use while making mobile handset purchases at participating merchants. Retailers receive instant settlement and reduced acceptance cost because Zapp circumvents the card brands at the point of sale. VocaLink has invested £1.6 million but needs a bit more; efforts are underway to raise £100 million from – wait for it – retailers and telcos. Remember the old adage, “new payments take twice as long and cost twice as much as planned.” Smartphone Shopping Mobilecommerce Daily June Meanwhile, a new study by Skava (a solutions vendor) indicates that 88 percent of the survey sample (unspecified) have had negative experiences while shopping via their smartphones. One third of the sample said they would defect to another merchant as a result of their experience. Even if the numbers are off by half, the message to networks and system designers trying to make a go of it in mobile payments is clear: blow the customer experience side of the equation and risk losing a large chunk of your market. Slyce PaymentsSource May Canada-based Slyce takes showrooming a step farther by enabling consumers to snap a photo of real life merchandise or print/TVads to source a Slyce merchant or other retailer to complete the purchase. The startup recently closed a $3.75 million round of funding to finish off the one-click application and is now is testing with a group of bloggers and small merchants. Ambitions are small, with a 1,000 user beta planned soon and hopes of 10,000 using the app by yearend. Mega retailer Amazon has had the skills to perform the same service since 2009 when it acquired ShopTell, but has not aggressively promoted it to consumers. Wells Fargo Bank Presser June Wells Fargo continues its string of innovation in remote access banking by launchinga new service for ATMs, online, and mobile banking. The bank has hoisted the “green” flag once more and now provides its customers with the option of receiving receipts via text message to their mobile phones. Sounds very environmental until you consider the cost transfer involved. In lieu of incurringthe cost of paper, ink, and machine duty cycles to print receipts, Wells Fargo now allows us to opt into a service where the proviso of “Your mobile carrier’s text messaging and web access charges may apply” should be taken quite seriously. The catchphrase “two for me, one for you” comes to mind.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com Interesting News This Quarter – Continued 10 Subject Source/Date Substance Punchey Payments Journal June Square, GoPayment, and PayPal have a new competitor for merchant services. Boston-based startup Punchey joins the ranks of the pay-as-you-go processors focused on small and middle sized retailers. Pricing with Punchey is a bit different in that the firm charges 75 bp over the interchange rate to accommodate Durbin-regulated cards. There’s a dime tossed on top of the ad valorem fee as well. Unlike others, though, Punchey charges $19.95 for its reader (the terminal is generally free elsewhere). According to the source, the Punchey option works out best for merchants with debit transactions over $18.00 and credit sales over $67.00. We’ll see how this plays out. GoBank Bank Innovation June Green Dot’s mobile bank, GoBank, breaks out of limited audience mode and heads for the mass market – so long as you own an iPhone; the Android version arrives shortly. New retail account opening partners include Barnes & Noble and Rite Aid. Initial observers are a bit miffed over GoBank’s ten-day hold on checks deposited via its mobile access service, but we’re confident that market pressure will quickly knock over this obstacle. Washington Nationals PaymentsSource June Season ticket holders for MLB’s Washington Nationals (woo hoo, baby, second place in the NL East) will soon be able to leave their wallets at home (assuming they’re taking public transportation to the games). The team will issue the “Ultimate Ballpark Access” card that will serve as both a season pass and a payments token. The card will use RFID technology to provide contactless access through unattended turnstiles and for concession stand purchases. It is anticipated that single game attendees will be given the same opportunity. Looks like decoupled debit has made it to the big leagues. Rumors that cellar-dwellers in Miami, Milwaukee, and San Diego are pursuing the same strategy are unfounded. Barclays Finextra June UK customers of banking giant Barclays are this close to having their anonymized data sold to other companies unless local regulators derail the effort. Other UK players, including Vodafone, EE, and O2 have already announced similar intentions. The new Barclay customer terms enable the bank to hold, anonymize, and sell not only directly observed accountholder transaction data but mobile location information and social media contact details, including Facebook and Twitter. Similar announcements in the Netherlands resulted in sufficient backlash to scuttle the effort within 24 hours of the announcement. Perhaps the Brits are more sanguine about privacy?
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com Interesting News This Quarter – Continued 11 Subject Source/Date Substance Square Finextra June Square founder Jack Dorsey takes on eBay and Etsy by launchingSquare Market, a no-fee marketplace where smaller retailers may set up e-tailing operations for free. System attributes enable merchants to display their wares, manage inventory, publish prices and photos, and, naturally, accept payments. Pricing is set at 2.75 percent of sales made through the store (pretty typical). Jack’s move seems like a logical extension of his plan to keep a slice of each piece of the smaller retailer value chain. Did we mention that there’s a direct link between Square Market and Twitter to enable its retailers to post “suggested” Tweets? Not a fan of the Twitter clutter, but the idea’s good. City of Oakland, CA Bank Innovation June Oakland, CA, made infamous by Gertrude Stein’s “there’s no there there” reference, is the first U.S. city to issue a municipal identification card for non-drivers using city services that doubles as a prepaid debit card. MasterCard branded and Arroweye Solutions crafted, the card enables the city to issue funds to its citizens and to avoid check cashing costs. Despite the well-earned snub, the Oakland idea may gain transaction in the underserved segment as municipalities add oomph to the fledgling (and often floundering) private sector efforts to provide access to the financial services industry. Convenience Payments Source July Startup Convenience simultaneously puts a shot across the bows of coin-hording player Coinstar (now called Outerwall) and coin saving plans from Bank of America (Keep the Change) and Wells Fargo (Way2Save). This upstart’s program consists of either a prepaid card or a mobile app that enables cashiers to deposit coins involved in a purchase transaction into either a Dwolla or PayPal account. Details on pricing are still soft around the edges but Convenience will probably skim a small fee on each transaction; well below Outerwall’s hefty cut today, we hope. Question: what are those of us with grandkids going to do when they sidle up to us with their palms up looking for pennies, nickels, and dimes? LevelUp Payments Source July Had to happen. LevelUp CEO Seth Priebatsch is all lathered up about an app the company is testing internallythat supports payments with Google Glass eyewear. Really, folks. Has it come this?
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com Interesting News This Quarter – Continued 12 Subject Source/Date Substance Prepaid card industry Various July What a difference a couple of hours makes. Earlier in the day PULSE issues a presser covering its 2013 Debit Issuer Study. Speaking about general purpose reloadable prepaid cards, it says “the percentage of GPR issuers almost doubl[ed] between 2011 and 2012 from 19 to 36 percent.” Apparently growth doubling in GPR isn’t enough to keep the industryon an even keel. A few hours later Aite Group announced the conclusion it has drawn from a recent study of the GPR industry. Aite concludes that the industry “must undergo a significant consolidation in the future because more prepaid card processors exist than are needed.” Never one to author timid reports, Aite suggests that FIS should acquire TransCard,Green Dot ought to buy i2c, First Data and Blackhawk make a fine pair, and Fiserv could pull off an M&A trifecta by gobbling up Ceridian and Galileo. We’ll keep track of these combatants and see what happens. Pass the popcorn, please. MCX Various MCX is carefully revealing itself through a number of timely press releases and placed commentary. New adherents include Phillips 66, Circle K, and Kohl’s. Technology partners now include Gemalto and FIS. So, scale seems to be in place and the technology probably won’t defy the laws of physics. Now, where the heck are those issuers? PayPal Various PayPal wins one and loses one. German Apple users can now use PayPal to make purchases through their Apple.com store. Meanwhile, WalMart says “nein” to accepting the payments giant’s application within its brick-and-mortarstores, citing the higher costs involved. Odd that both Apple (Airdrop) and WalMart (MCX) would take different positions, given that both are licking their chops while waiting for the right moment to entry the payments industry. Or is it?
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 13 M&A/Alliance Activity Buyer/Investor Target Payments Emphasis Possible Strategy Andreessen Horowitz, CollaboFund, Others Balanced Merchant services Balanced is a new behind-the-scenes payments processing platform for web start-ups and entrepreneurs. Its differentiation point is that Balanced sits in the middle of the payments stream enabling C2B purchases of end-user product and B2B remittances to suppliers. An escrow account straddles the two segments to insure good funds. Investors anted up an additional $2.0 million to keep this 2012 enterprise in cash and to hire additional engineers to promote product enhancements. OpenCoin Simple Honey Shopping application Heard about OpenCoin yet? This as-yet unlaunched startup is headed by Chris Larsen, co-founder of E-Loan and Prosper, the peer-to-peer lending network. OpenCoin is developing Ripple, a global payments system rumored to be based on mathematics and capable of dealing in multiple currencies – virtual or otherwise (Bitcoin on steroids, perhaps?) April and May were good months for the company. First, it acquired Simple Honey, a consumer wish list shopping system launched in May 2012, and in May, Google Ventures and IDG Capital Partners (China) dropped a slug of cash into the venture. Andreessen Horowitz has also got capital in at an undisclosed amount at risk. This could be worth the wait. WalMart Inkiru Predictive intelligence “Every Day Low Prices” maven, WalMart, acquires predictive intelligence startup Inkiru through its WalMartLabs subsidiary. Inkiru has developed an active learning system to determine customer interactions, improve personalization and enhance customer segmentation/targeting. Odd, we thought low prices were all WalMart needed. Could there be something else in the works? Couponing, or payments, perhaps?
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 14 M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Green Dot Bank GE Capital Retail Bank Prepaid card issuance Green Dot takes action to reduce the cost of issuing bank support for the WalMart MoneyCard prepaid scheme which GDOT has operated since program inception. GE Capital once was the issuing bank behind the three-party scheme which now becomes bi-lateral. The 8-K report discusses unconditional and absolute guarantees, assignments, and conditions precedent, but no pricing. Giving the program’s success, “boat load,” might be the appropriate measure. Redpoint Ventures, Index Ventures, 500 Startups Erply Mobile POS Erply increases its funding to $4.2 million through a Series B round of $2.15 million even though up to $10 million had been offered. Erply is in the mobile POS and inventory management space and operates in the black. iPads and PayPal POS play major roles in the New York-based company’s offerings. DCM, Flybridge, First Round, IA Ventures, Others SavingStar Online/Mobile coupons SavingStar raises $9.0 million in Series C funding to expand its grocery store couponing system beyond the 25,000 merchant locations already enrolled. Consumers select the product coupons preferred, use their store loyalty cards at checkout time, and have the product savings credited to their SavingStar savings account. Distributions can be made to a consumer’s bank, PayPal, or Amazon account. The presence, or absence, of FDIC coverage and the name of the depository are not disclosed. First Round, Greylock, Index Ventures Swipely Merchant services/loyalty First reviewed in TW Q2 2010, merchant services provider Swipely has transformed itself into a combined merchant services, analytics, marketing, and loyalty company focused on local businesses. Returning investors added $12.0 million in Series B money, raising total funding to over $20.0 million. Hospitality purveyors (i.e., upscale bars and restaurants) are particularly enthralled with the business analytics and on-board loyalty program.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 15 M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy Founders Fund BitPay Bitcoin payments processor BitPay receives an offer it can’t refuse from Founders for $2.0 million in growth capital. BitPay is a payments processor for e-tailers willing to gamble on Bitcoin settlements for purchases. A relationship with Amazon enables online product vendors access to the mega retailer for backend fulfillment. BitPay prices beat current traditional card brand rates by a ton – but shouldn’t they, since Bitcoin transactions trade at par? Union Square, Others Coinbase Bitcoin wallet Bitcoin wallet startup (redundant term), Coinbase, raises $5.0 million in Series A funding to get its Bitcoin based wallet off the ground. Since its $600K seed round eleven months ago, the company claims to have enticed $15 million in conversions from greenbacks to cybercurrency. For background material on Bitcoin and Coinbase (most of it accurate), check out www.weusecoins.com. OCA, Origin, Firestarter i2A Fund Pangea Payments Money transfer service Startup Pangea Payments benefits from an oversubscribed $1.0 million offering to fund market/platform expansion. Like others, Pangea uses prepaid card rails to offer global money transfer services. Unlike most, Pangea pricing is flat-fee based. Online web and mobile channels are supported with retail purchasing services to be offered in the future. Peter Thiel (Valar Ventures) TransferWise Money transfer service The PayPal co-founder injects $6.0 million into TransferWise, a London-based MTS dealing in multi-currency settlement. Here, too, flat fee pricing is practiced, and rates are set to beat out store front operators. Editorial note: Pangea and TransferWise are two of the newer entrants to the MTS marketplace that appears to be getting a bit overcrowded. Watch for some consolidation (or an ugly security breach) soon.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com M&A/Alliance Activity - Continued 16 Buyer/Investor Target Payments Emphasis Possible Strategy Andreessen Horowitz, Others Dwolla Online payments system Dwolla, the third most famous Iowa export behind Bret Favre(college ball), and corn cobs, has raised another $16.5 million in capital to expand its product suite, build its marketing and business development teams, and expand its employee bases in San Francisco and New York. Appears that Dwolla doesn’t intend to cater to only heartland denizens; lessons learned from its recent snafu with Bitcoin exchange Mt. Gox, notwithstanding. Allegro, Swan & Legend, Western Tech, Innovation Endeavors Tango Card Digital gift cards Tango Card (TW Q4 2010, Q2 2012) intends to leverage its relationships with Amazon, Target, and iTunes plus another $4.1 million from returning and new investors to expand into the international gift card marketplace. Since our last Tango Card update, the company has moved into mobile applications and the aggregator has lassoed FedEx and Plink as clients, among other notables. Xseed Capital, Others ZooZ Checkout payments platform Now over three years old, ZooZ delivers a consumer checkout platform to handle merchant services needs. One-time entry of consumer data enables ZooZ to “learn” how each consumer wishes to pay, and in what locations. Like others of its ilk, ZooZ emphasizes merchant analytics and fraud prevention attributes to justify its merchant services fees. Global reach exists and multiple currencies are supported. Square Digital Gift Card Stored value card Not all that glitters is gold at Square, it seems. The uber-acquirer for micro and small businesses is shuttering its six-month old digital gift card program that once enabled users to send gift cards to anyone with an email address. Operational challenges and the specter of fraud potential are what the pundits are speculating the causes might be. Cardholders may cash out through transfers to Apple’s Passbook, or via QR code at merchants.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com M&A/Alliance Activity - Continued 17 Buyer/Investor Target Payments Emphasis Possible Strategy Payvia Mogreet Mobile messaging system VC-backed Payvia delivers direct-carrier billing services for the purchase of digital goods. It has acquired Mogreet, a provider of cloud-based mobile messaging services, to take a baby step into physical goods purchasing. Payvia intends to use the messaging company’s talents to deliver targeted advertising and fulfillment messages to customers of its merchant base. The combined company is likely to experience the usual digital-to-physical headwinds associated with direct-carrier billing, buy, if the telecommunications giants agree to go along for the ride, we may see the first break-out opportunity. Accenture Acquity Group eCommerce and digital marketing Accenture pays $316 million to gain back a bunch of its alumni and ex- marchFIRST (Google it) founders/executives. Acquity provides brand enhancement services through its consulting, technical, and digital marketing strengths. The move is designed to enhance similar service offerings provided today by Accenture. Accenture gains 600 Acquity employees and access to the $141 million in revenues posted by the marketing firm in 2012. Greylock, Granite Ventures Marqeta Gift card management system Marqeta delivers the multi-account plastic gift card management services behind Facebook’s growing gift card suite of services. Returning investors fund $14.0 million in new capital for market growth and new technology systems. Online and physical retailers contribute to the Marqeta scheme by reloading the card with each transaction or applying appropriate user discounts.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com M&A/Alliance Activity - Continued 18 Buyer/Investor Target Payments Emphasis Possible Strategy Cardtronics Aptus Financial ATM fleet The big get bigger, again. Cardtronics pays an undisclosed amount for the Aptus Financial fleet of 3,300 ATMs, most of which are owned by merchants. This acquisition involves two old ATM hands Dave Grano and Rick Holt, founders of Card Capture Services, once part of E-Trade (seems like only yesterday but it was in 2000 when that mis-step occurred). Cardtronics purchased CCS in 2004 for $106 million. Welcome back, Dave and Rick. Business line shut- down IP Commerce Credit card processing Oops. VC-backed IP Commerce announces its plans to shut down its key business line of credit card acceptance. Those most likely to be impacted are Jack Dorsey’s Square and Groupon (which can hardly afford any more bad news). Wind-down time is expected to be short – June 30, 2013, is the target date. IP Commerce will concentrate on software development for retailers, sales management, and software development. Vantiv operates behind the IP Commerce scenes, and will take over daily operations shortly. Epic Ventures, Others MokiMobility Mobile POS devices Utah-based MokiMobility provides a cloud-based platform to manage, monitor, and secure tablets and smartphones used to provide POS acceptance services. The investors laid out $2.0 million for platform enhancements and market expansion. Better known MokiMobility apps include PayPal Here, Square Register, and Revel Systems. Thomas Bravo Intuit Financial Services Internet banking platform Intuit digs itself out of a channel conflict hole by selling its financial services subsidiary including the old Digital Insight holding, mobile banking, and purchase rewards systems for $1 billion (it paid more for DI). There’s likely to be a valuation release (which Thomas Bravo plans to reap when it sells in a couple years), as the subsidiary will have more cache as a separate company. Good move.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com M&A/Alliance Activity - Continued 19 Buyer/Investor Target Payments Emphasis Possible Strategy Investors like us RetailMeNot Digital coupon platform WhaleShark Media acquired Australian company RetailMeNot in 2010 and adopted its name. The RMN platform supports coupons from over 60,000 retailers/others and ginned up $113.4 million in 2012 revenues. Its mobile coupon app has been downloaded 3.0 million times (reminder: downloads and users are only loosely correlated). Q1 revenues were on pace to exceed $150 million for 2013. RetailMeNot has filed for an IPO valued at $230 million and has taken “SALE” as its trading name. Now based in Austin, the company has been on an acquisition tear since 2011, primarily in Europe. Worth a look-see for treasure seekers. Accel, SV Angel Endorse Digital coupon platform Oops. Founded in 2010 by several very savvy eCommerce players, Endorse announces plans to dissolve on June 30, 2013. Endorse operated a digital couponing scheme similar to others creating a cash savings account for consumer users. Current Endorse users have been asked to transfer their cash balances directly or through PayPal. So it goes. OpenTable JustChalo Mobile payments It was just a matter of time. OpenTable, the dining reservations category killer, has acquired mobile payments startup JustChalo for $11 million. Seems that 36 percent of the 34 million diners seated in Q1 2013 initiated their transactions via a mobile telephone. Braintree, the current payments processor for OpenTable, might be a bit cheesed at having its client decide that backend integration will result in higher yields, but savvy readers saw this coming all along. Right? JustChalo is based in Saratoga, CA and has operating systems in Mumbai. Discover Diners Italy Card brand Discover pays an undisclosed amount to purchase the Diners Italy franchise after the Slovenia central bank ordered the current owner to cease operations because merchants were not being paid. Discover acted to preserve the card scheme’s value for the 140,000 cardholders in Italy. Discover now has its first card issuing business located outside the U.S. Probably not the last.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com M&A/Alliance Activity - Continued 20 Buyer/Investor Target Payments Emphasis Possible Strategy QED Investors, FIDES, KIBO Ventures peerTransfer International tuition payments New and existing investors raise another $6.4 million on top of $15 million raised in 2009 to enable peerTransfer to expand its program of tuition remittance beyond its current markets of North America, Australia, and Europe. Tuition payments are large by nature and involve considerable fees (circa 3-6 percent) when wires and MTS players get involved. peerTransfer works with more than 350 education institutions across existing markets. Beyond tuition remittance, the company has plans to facilitate other school related payments – no, homemade beer bongs from Home Depot are not covered. Golub Capital Smashburger Better burger operation Denver-based Smashburger raises another $35 million in expansion capital to fulfill its 250 franchisee pipeline and more than double its 200 site network. Sorry, anything having to do with custom made cheeseburgers always catches our eye. Accel, Andreessen Horowitz, Peter Thiel, Intuit Clinkle Mobile POS system 2011 startup Clinkle scores big with $25 million in development capital. Not bad for a company that, heretofore, had not made public its technology, business strategy, or distribution plans. Now we know that Clinkle operates at merchant points of interaction using smartphones/tablets and terminals that can “hear” high- frequency sounds rather than “see” 2D images or “sense” NFC radio wave lengths. We’ve seen and written about this concept before (two years ago, in fact) and can’t help but wonder if Clinkle is another company wearing different clothes. Otherwise, there’s a patent troll out there somewhere getting ready to pounce on a big pot of cash.
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 21 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 iZettle P2P payments system www.izettle.com Check PFM and payments processor www.check.me Slyce Showrooming systems www.slycecommerce.com Punchey Mobile merchant services www.punchey.com Balanced eCommerce enabling systems www.balancedpayments.com OpenCoin Cybercurrency www.opencoin.org Erply Mobile POS systems www.erply.com BitPay Bitcoin processor www.bitpay.com Clinkle Sound based authorization systems www.clinkle.com
    • Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274 (310) 544-1316 jmacallister@doradoindustries.com www.doradoindustries.com 22 Back in the day! Okay, back to the payments trivia contest. Who is the network commando circled here and why all there coffee cups and not highball glasses present? Must have been a WCTU auxiliary meeting! Seriously, we’re trying to identify the event, date and venue that triggered this round of socializing among competitors. If can you fill us in, the usual door prize awaits. Drop a line to the email address and you’ll be handsomely rewarded. Suspected source: DoJ files