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DIGGING DEEPER WITH
CASHSTAR:
The Digital Gifting Phenom
APRIL 21 - 25, 2014 Visit PaymentWeek.com
The World of Payments
P...
2
F E A T U R E D A R T I C L E S
Felix Shipkevich
FOUNDER
Jason Mongiello
DIRECTOR OF MARKETING
GRAPHIC DESIGNER
Kevin Xu...
T E C H
3
Mobile
Confidence in Mobile Payments Takes a Blow with Heartbleed
By: Michael Foster
W
hile Heartbleed highlight...
4
T E C H
4
Security
FDIC Lists Gov Sites for Cyber Threat Updates
By: Gregory Sweet
T
he FDIC recommends
financial instit...
T E C H
5
out the National Council of ISAC’s to find out more.
• In addition to the list provided by the FDIC,
the FCC’s S...
6
E M E R G I N G P A Y M E N T S
6
Bitcoin
Bitcoin to Enter Final Frontier
By: Kevin Xu
S
ome view bitcoin and
digital cu...
E M E R G I N G P A Y M E N T S
7
7
I
n a second quarter earnings call, Apple’s CEO
took questions regarding the state of ...
8
E M E R G I N G P A Y M E N T S
8
Card Solutions
The World of Payments Powered by BLE
By: Sridhar Chityala
T
he words Pa...
E M E R G I N G P A Y M E N T S
9
9
payments transaction?
Bluetooth Low Energy is a communication frequency
that runs on a...
10
E M E R G I N G P A Y M E N T S
10
providers, processors, issuers and even networks.
Payment networks may look at this ...
E M E R G I N G P A Y M E N T S
11
11
Card Solutions
Frequent Flyer Miles: Perils of Unregulated Currencies
By: Jane Genov...
12
E M E R G I N G P A Y M E N T S
12
shift could leave the Everyman flyer grounded.
Businesspeople and jet-setting hipste...
13
M A R K E T P L A C E
13
Industry Leaders
Wal-Mart Expands With Money Transfer Services
By: Kyle Dowling
I
t looks as i...
I N D U S T R Y V O I C E S
14
Andrew Barnes’ series, “Digging Deeper” is based
in Silicon Valley and focuses on startups ...
I N D U S T R Y V O I C E S
15
product and payment type.
What we are talking about is a very different end-
to-end experie...
I N D U S T R Y V O I C E S
16
On top of that very strong business, we’re now
defining and building the market opportunity...
I N D U S T R Y V O I C E S
17
between the retailer and these really interesting
B2B gift card distribution channels.
Many...
I N D U S T R Y V O I C E S
18
Would you like to be next week’s Industry Voice?
Email Kevin Xu - kxu@lamilmedia.com
Andrew...
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Payment Week - Andrew Barnes, Managing Director___Cashstar

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Payment Week - Andrew Barnes, Managing Director___Cashstar

  1. 1. DIGGING DEEPER WITH CASHSTAR: The Digital Gifting Phenom APRIL 21 - 25, 2014 Visit PaymentWeek.com The World of Payments Powered by BLE Confidence in Mobile Payments Takes a Blow with Heartbleed Wal-Mart Expands With Money Transfer Services
  2. 2. 2 F E A T U R E D A R T I C L E S Felix Shipkevich FOUNDER Jason Mongiello DIRECTOR OF MARKETING GRAPHIC DESIGNER Kevin Xu EDITOR CONTENT STRATEGIST Andrew Barnes MANAGING EDITOR, EMERGING PAYMENTS Kyle Dowling CONTRIBUTING WRITER Jane Genova CONTRIBUTING WRITER Michael Foster CONTRIBUTING WRITER Corporate Office 65 Broadway Suite 508 New York, NY 10006 For Advertising Rates: ads@paymentweek.com 2014 Lamil Media Inc. All rights reserved. The content of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Requests to reuse materials published in Payment Week should be directed towards our editor. M A R K E T P L A C E T E C H E M E R G I N G P A Y M E N T S Digging Deeper with CashStar: The Digital Gifting Phenom Payment Week sat down with Ben Kaplan, president and CEO, to discuss branded currencies for retailers, the business models they are disrupting, and the market inefficiencies on which they are growing their business. S P O T L I G H T A R T I C L E 4 - FDIC Lists Gov Sites for Cyber Threat Updates 3 - Confidence in Mobile Payments Takes a Blow with Heartbleed I N D U S T R Y V O I C E S 6 - Bitcoin to Enter Final Frontier 7 - Apple’s iTunes Has Almost 800 Million Credit Card Linked Users A P R I L 2 1 - 2 5 , 2 0 1 4 8 - The World of Payments Powered by BLE 14 - Digging Deeper with CashStar: The Digital Gifting Phenom 11 - Frequent Flyer Miles: Perils of Unregulated Currencies 13 - Wal-Mart Expands With Money Transfer Services
  3. 3. T E C H 3 Mobile Confidence in Mobile Payments Takes a Blow with Heartbleed By: Michael Foster W hile Heartbleed highlighted the security risks that still exist online, banking and payments services remained largely unaffected. Most banks’ websites and apps weren’t affected by the Heartbleed bug that exposed vulnerabilities across the web, according to the American Banking Association. However, the bug has a lot of users worried, because it impacted a number of popular sites, like Twitter, Gmail, OkCupid, and Flickr. In these cases, mobile apps were just as vulnerable, since they connect to servers to process data requests encrypted through OpenSSL, meaning that a user who sticks just to mobile was equally at risk. Google apps were widely affected, including Google’s in-app payment system, which has left a lot of users worried that online transactions, particularly mobile payments, are substantially less secure than they really are. Smaller apps that process mobile payments were also affected, according to Trendmicro.com, which found 39 online payment-related, 10 shopping- related, and 15 bank-related apps that were vulnerable to Heartbleed. TrendLabs recommended that people “lay off the in-app purchases or any financial transactions for a while (including banking activities)” until developers fix the problem. While this may seem excessive to mobile payment professionals who know that the vast majority of mobile payment apps and web services were not affected by the bug, the problem is a serious headwind for the mobile payment movement. In a move to prevent a Heartbleed Part II from ever happening, more than a dozen leading tech companies including Google, Microsoft, and Facebook are bank rolling the Core Infrastructure Initiative, a non-profit dedicated to bettering the web at large. The Core Infrastructure Initiative will first focus on OpenSSL, in hopes of improving a critical part of online security. Image credit: snoopsmaus
  4. 4. 4 T E C H 4 Security FDIC Lists Gov Sites for Cyber Threat Updates By: Gregory Sweet T he FDIC recommends financial institutions subscribe to government alerts to monitor for data breaches. The announcement comes after news the Heartbleed bug may have infiltrated up to 66% of OpenSSL encrypted websites. The FDIC is encouraging banks and payment services to utilize a variety of services in order to stay current with today’s online security concerns. Director of the FDIC’s Division of Risk Management Supervision Dorren Eberly explains the importance of monitoring for cyber threats, “We believe that financial institutions and their technology service providers have been managing system updates to mitigate potential vulnerabilities in an effective manner…financial institutions may benefit from greater awareness of the resources available to identify cyber- related risks as quickly as possible.” FDIC Approved Sites • United States Computer Emergency Readiness Teams (US- CERT). Run by the Department of Homeland Security, US-CERT helps coordinate information sharing around cyber threats and vulnerabilities through its Cyber Awareness System (NCAS). • U.S. Secret Service Electronic Crimes Task Force (ECTF). ECTFg coordinates local, state and federal law enforcement with the private sector to help fight cyber threats. • FBI InfraGard. A forum for sharing information between the FBI and the private sector, InfraGard has more than 60 chapters that host local meetings in their geography. • Regional Financial Services Coalitions. Regional industry coalitions can help coordinate between the private sector and local law enforcement. Check here for groups in your region. • Information Sharing and Analysis Centers (ISAC’s). ISAC’s can help provide incident alerts, response and mitigation and coordinate information sharing between different parties. Check
  5. 5. T E C H 5 out the National Council of ISAC’s to find out more. • In addition to the list provided by the FDIC, the FCC’s Small Biz Cyber Planner is a service for creating a customized cyber-security plan. Heartbleed Advice for Merchants While most banking sites and payment apps are reportedly not affected by the bug, servers connected to such services may have compromised confidential passwords and session keys. Mobile apps offering in-app purchases are also susceptible to the software vulnerability in OpenSSL. A patch for Heartbleed was released soon after the vulnerability was announced, but retailers should review the following steps to ensure they are secure: • Test web infrastructure for flaws—but make sure to use vetted testing tools from reputable vendors. • Contact web security vendors, who are likely to already have software patches ready to solve the problem. • If a company does its own software maintenance, it should recompile its OpenSSL library. • Revoke and reissue SSL certificates, a step that will likely require technical assistance from security vendors. • Monitor for an increase in chargebacks, unusual account activity and other signs that might point to fraud. Analysis of the Heartbleed bug means that supposedly secure information could now be in the hands of criminals. To move forward, the best financial institutions can do is install proper OpenSSL patches, be on the watch for suspicious account activity and monitor for future data breaches.
  6. 6. 6 E M E R G I N G P A Y M E N T S 6 Bitcoin Bitcoin to Enter Final Frontier By: Kevin Xu S ome view bitcoin and digital currencies as the next frontier in payments. It seems only fitting that bitcoin is going to the final frontier. In a preliminary design partnership between Dunvegan Space Systems and Deep Space Industries, tiny satellites will be launched into low earth orbit and will serve as a broadcast relay for the latest bitcoin blocks. Called BitSat, the non-profit project aims to provide resiliency and accuracy to the bitcoin blockchain. The blockchain serves as a record of every transaction made with bitcoin. Computers work to solve complex algorithms, and those who solve them are awarded a set amount of bitcoin. The bitcoin network itself is peer-to-peer, so computers need to work in unison to both update and accept the blockchain. BitSat will ensure the prevention of “spoofing” or the fraudulent awarding of bitcoin along with network attacks by becoming a third-party marker of accuracy. Dunvegan Space Systems, the space-flight company behind BitSat will take donations for the project via bitcoin processor BitPay. Deep Space Industries is dedicated to operations and resources for ventures in space, and aim for cost-effective measures to carry them through. BitSat will be a test for both companies to provide further ventures in space, including creating a space-based network, and open-source, cost efficient space travel. “Private spaceflight is breaking big, driving down costs so that great ideas like BitSats are within reach of even volunteer nonprofits. We want to keep bitcoin healthy and free by finding alternative ways to distribute block chain data” says Dunvegan Space Systems founder Jeff Garzik. Image credit: Wendy Harman
  7. 7. E M E R G I N G P A Y M E N T S 7 7 I n a second quarter earnings call, Apple’s CEO took questions regarding the state of the company, but more importantly, hinted at the staggering numbers that would make the rumored Apple mobile payment system viable. It’s no secret that iTunes is one of Apple’s main revenue drivers, “thanks to an incredible ecosystem and our very large, loyal and engaged customer base,” says Cook. He goes on to say, “We now have an almost 800 million iTunes accounts, most of these with credit cards.” These accounts come from the massive ubiquity and consumer adoption rates of Apple devices. Internationally, Apple retail stores have popped up in Brazil and Turkey and now reach 15 different countries. In China, Apple has reached $10 billion in revenue thanks to iTunes and retail device sales in one quarter alone. It’s an interesting dynamic in that, while Apple is known mainly as a technology company that releases upscale gizmos, we should think of these devices as an endpoint for content delivery thanks to unmatched loyalty on both the hardware and software sides. A number of businesses have sprung up with their own digital marketplaces, including Microsoft, Google, and Amazon, which has plans to enter the physical retail world with its Kindle checkout system. However, Apple seems unmatched when it comes to marrying the popularity of its devices and their usage to spur payments. It’s likely that the potential Apple mobile payment system is more a question of “if” rather than “when.” Credit, Debit, & Prepaid Apple’s iTunes Has Almost 800 Million Credit Card Linked Users By: Kevin Xu Image credit: Mike Deerkoski
  8. 8. 8 E M E R G I N G P A Y M E N T S 8 Card Solutions The World of Payments Powered by BLE By: Sridhar Chityala T he words Payments, Disruption, and Interest seem synonymous. Very few business domains have attracted as much interest as the world of payments. Google, Amazon, Apple, Facebook and even Starbucks to some extent have all entered the payments game and yet their core business is anything but payments. What is spurring this momentum? The prolific growth in mobile payments is a clear driver in conjunction with the broad reach of smart phones and message capable conventional mobile phones. The mobile payments market is expected to grow from about $14 billion in 2013 to $280 billion by 2018. Also look at the announcements of PayPal, Starbucks, Amazon and Square on volumes of mobile payments processed by them in 2013 and the first quarter of 2014 and the numbers are very compelling. The dollar value of payments processed is in the billions. Transaction volume is driven by a number of technologies that are at play here. These include mobile apps, card readers in mobile devices called dongles that can process card based payments (Square,Amazon etc), mobile wallets with the much touted NFC capability, mobile wallets with HCE (Host Card Emulation) capability (being pushed by Google), and the emerging Bluetooth Low Energy (BLE). Apple (iBeacon) and PayPal (Beacon) are behind the BLE push and they’re rapidly gaining interest in the marketplace. There are over 300 million iPhones that can connect to Apple’s iBeacon platform excluding millions of Android phones. What is BLE technology and how does it drive a Image credit: Estimote Beacons
  9. 9. E M E R G I N G P A Y M E N T S 9 9 payments transaction? Bluetooth Low Energy is a communication frequency that runs on a smartphone and has a range of 40 to 50 meters (as compared to a NFC phones which are narrow band). The BLE enabled phones are immediately recognizable when a customer walks into a store or venue that has an antenna or antennas installed there. As an example I walk into Wal-Mart or a CVS Pharmacy that is BLE equipped and at both these venues, Apple’s Passbook app or PayPal Mobile app is able to immediately recognize the signal of the iBeacons or Beacon. This capability opens a new vista into the world of payments. Think of the Apple’s App store on your mobile device. You buy a book, software or subscribe to a sports channel or buy a ticket. At checkout, you enter your credentials and your payment is initiated and processed. You get an email confirmation of the purchase. There is no physical interaction, and the payment between the merchant and Apple happens in the back end. Extend this into the world of retail. Imagine Wal-Mart and Apple or PayPal and Wal- Mart have a partnership to accept payments through BLE. When a customer walks up to checkout for goods and says that he wants to pay with his iTunes account or PayPal account, all he does is enter his details on the mobile app and the confirmation of the payment goes to the merchant register. A receipt is sent to the customer and the customer collects the receipt for his goods at the store and walks away. There are no scanners, no physical usage of the payment card, no swiping, no transport of data between the POS device to the processor, etc. The technology sounds very intriguing and given that between Apple, PayPal and Amazon, there are hundreds of millions of customers registered with a payment method combined with the enormous trust that has been built with these brands makes this model extremely attractive. The data that is collected can now be mined and in partnership with the participating stores, a range of marketing and loyalty offers can be presented to the client. Payments, marketing offers, discount coupons, special promotions, and location based services – we are probably at the precipice of a new ecosystem. Let’s also examine the economics and operational aspects of this model. From a customer vantage point – there’s no extra cost. Smartphones are equipped with BLE technology, they’re already a registered PayPal or iTunes account holder and they have the mobile app. From a merchant vantage point he has to install the BLE antennas and they are very modestly priced. They fully integrate with Apple, or PayPal or Amazon, and these companies are testing this platform today. For illustrative purposes I have used Apple and PayPal but there is nothing limiting financial institutions and tech companies who desire to play in this new BLE beacon ecosystem. The technology offers great potential and is one that may find resonance with all players in the ecosystem – merchants, customers, service
  10. 10. 10 E M E R G I N G P A Y M E N T S 10 providers, processors, issuers and even networks. Payment networks may look at this with some skepticism, namely whether this could open up a new world with a different payment scheme that bypasses their model – this remains to be seen. The operational model of accepting and supporting payments from many players including Apple, PayPal, Amazon, Facebook or any other provider is perhaps being addressed. The adoption models for any new payment scheme is driven by simplicity, convenience, ubiquity, trust, security, reliability and the experience reflecting an integral part of their daily lives. Finally the cost to the customer and merchant to deploy the model seems low enough to be very promising. Both Apple and PayPal enjoy a loyal customer base that supports this model. They have the intrinsic ability to market and execute. The next wave of retail revolution and payment enablement may begin with BLE. ABOUT SRIDHAR CHITYALA Sridhar Chityala is an advisor and consultant to various firms that focus on product innovation, and to private equity and venture capital firms making strategic investments on emerging technologies. Sridhar is presentlyChairman & Fonder of CKL Partners LLC, and Senior Advisor to SVX Group. Sridhar was executive vice president and chief eCommerce officer at Wachovia, where he was responsible for all internet, intranet and mobile strategic direction, execution, customer experience integration and online brand articulation. Prior to that he was the Executive VP and Head of Telecom sector at Citi Corp in the Credit Card group. From 1999 to 2005 he was Executive vice president and eBusiness executive in Chase Financial Services and was responsible for the e-commerce, online marketing, payments and e-business initiatives of Chase’s diverse Consumer and Middle Market business streams. Prior to joining Chase he was Chief Operating Officer and Vice Chairman of the Financial Industry Foundation/Lafferty Councils, responsible for strategic consulting and advisory services to major banks and financial institutions in the United States, Europe and Asia regarding marketing, distribution, retail services, e-commerce, cards, and payments issues. Sridhar spent three years managing the National Australia Bank Group’s strategy, policy, operations, procedures and strategic projects for Global Payments, Cards, Marketing, Distribution and e-commerce. He is a Co-founder of the Global Payments Council, World e-money council, a board member of various payment bodies and associations and is recognized as an industry expert on retail distribution, payments and e-commerce through published articles and appearances at industry conferences. Sridhar holds a Graduate Management Qualification from the Australian Graduate School of Management at the University of New South Wales, Sydney, Advanced Management Program from Stanford Business School and a MS in Computer Science from the Indian Institute of Technology, Bombay. He has also attended management programs at MIT and the Senior Executive Leadership Management Class at JP Morgan Chase.
  11. 11. E M E R G I N G P A Y M E N T S 11 11 Card Solutions Frequent Flyer Miles: Perils of Unregulated Currencies By: Jane Genova “B anana Republics.” That’s what some users of Frequent Flyer Miles (FFM) have been calling a number of the airlines which issue those currencies. And, yes, they are currencies. Not just one aggregate currency system. Each airline establishes the terms and conditions for its own FFM program. Each is operated as independently as is the currency of the U.S. versus the currency of China or that of Germany. Like each of those national currencies, the airline currencies have actual transactional value. For more than three decades they have been exchanged for airline trips, then for lodging. More recently, some of issuers allow their currencies to be used to purchase merchandise such as consumer electronics. In addition, more of the currencies have the same liquidity of cash. That’s happening via third-party payment systems such as Paypal and gift cards through Amazon. The cash can be spent at a retailer, transferred to someone else or deposited in a bank account. As payment technologies continue to evolve, there will be more options. In some circles, the mood is turning ugly regarding FFMs because of the myriad changes a number of major airlines have made in the terms and conditions. They include United and Delta. Those airlines didn’t need government approval for this. Their currencies aren’t regulated. There is no equivalent of the Federal Reserve. During the end of the 1980s and the beginnings of the 1990s,there had been a number of lawsuits which generated some constraints on what airlines could or could not do with their programs. Essentially, though, each remains relatively autonomous in how each airlines configures the point system and the ways in which the currency is allowed to be “spent.” Among the recent changes, beginning on February 1, 2014, United boosted the number of FFMs needed for a first-class ticket to the Middle East from the U.S.That applied to both its own planes and to those of its partners. For its own, the increase was around 30,000 miles. For partners’ it has been around 85,000 miles. In addition, it specified new spending levels in order to qualify to even participate in the program. Next year, Delta is introducing another form of game-changer. FFMs will be calculated on the amount of money spent, not miles traveled. This Image credit: Andrei Dimofte
  12. 12. 12 E M E R G I N G P A Y M E N T S 12 shift could leave the Everyman flyer grounded. Businesspeople and jet-setting hipsters are the ones who have the resources to pay top dollar for the flight they want when they want it. Therefore, they will receive the FFMs, not Everyman who plays every angle to save a few bucks on flying. Another rant among those using these currencies is that a standard perk is vanishing. That’s the upgrade from coach to business class Delta had given to frequent flyers when the better seats were empty. Last March that was no longer available on a number of its domestic flights. As a competitive advantage, some airlines are retaining this feature – for now. But frequent flyers are wary that overall the currencies are being devalued, on several fronts. Obviously, with all the modifications, the value of the mile traveled or the amount of money spent is unstable. That makes this asset as volatile as those in banana republics. At one time couples stored their miles, planning for plenty of no-cost travel during their retirement. Now no one can treat any part of these currencies as “bankable.” Perhaps the new attitude will have to be: Use it or lose it. The airlines claim the modifications are needed because of their own growing operating expenses and investments in improvements such as seats which turn into beds. Clearly, users of FFM are vulnerable. But, from a business point of view, so are the issuers of the currencies. The institution was begun as a loyalty initiative back in 1981 by American. Ironically, as some airlines play fast and loose with the rules of the game, their particular FFM programs could provide strong disincentives for both individuals and organizations to switch to other carriers. That movement could be accelerated if their competitors create totally different kinds of rewards programs. FMM could go the way of giving out drinking glasses at gas stations for a fill-up. In addition, lawsuits could be filed and there could be an outcry for increased regulation.
  13. 13. 13 M A R K E T P L A C E 13 Industry Leaders Wal-Mart Expands With Money Transfer Services By: Kyle Dowling I t looks as if it’s time for the legendary powerhouse money transfer services of Western Union and MoneyGram to either move over or step up their game. Another industry tycoon is gearing up to come in and take them both on, offering lower fees and a branded name to back it up. You guessed it… Wal-Mart. As recently reported by the Chicago Tribune, Wal-Mart is launching their own money transfer service—“Walmart-2-Walmart”—which will permit shoppers to send and receive cash from both family and friends at the more than 4,000 stores across the United States and in Puerto Rico. Offered at a lower rate than competitors, Wal-Mart claims the new service will “cut fees by up to 50% compared with similar services elsewhere,” according to USA Today. As it sits, the Walmart-2-Walmart service— which will not be offered online or throughout international stores—will allow customers to “transfer up to $50 for a fee of $4.50, compared with between $4.75 and $5 at rival services,” states the Tribune. Customers will be limited to $900 a day unless more is required, in which case additional information must also be provided by the customer. So, why the initiation of Walmart-2-Walmart? Daniel Eckert, Senior Vice President of Services for Wal- Mart, admits that company officials had received an earful of complaints from customers about high fees elsewhere in related services. Therefore, the decision was made to take another stab at the financial services market from within. With that, while the supposed goal is to offer shoppers more choices in their financial options, another added bonus that cannot be overlooked is the fact that bringing in such services will drive more people to Wal-Mart… perhaps tempting them to spend some of that money in the actual store. Maybe another reason the service is not offered online? When approached about the news, Western Union stated confidently that its place in the industry is “well-positioned.” However, as true as that is, following the announcement of Walmart-2- Walmart, shares of Western Union went down 4%, while MoneyGram plunged 15.6%. So we can’t say people aren’t eager to see what Wal-Mart has “in store”. This isn’t the first attempt the tycoon has made to get into the financial services game. Back in 2007, Wal-Mart applied for a bank charter but retracted after some disapproval from both banks and labor unions. Yet with this new service, it appears the corporation is ready to take a full swing at cornering yet another market.
  14. 14. I N D U S T R Y V O I C E S 14 Andrew Barnes’ series, “Digging Deeper” is based in Silicon Valley and focuses on startups and key innovators and how they are disrupting digital payments and commerce. CashStar is a successful startup whose vision of branded currencies for retailers is disrupting the $120 billion traditional gift card market. CashStar generated more than $500 million in gross merchant sales, growing by 92 percent year-over- year in 2013. It was recently named to both the Forbes 100 most Promising Private Companies list and the Inc. 500 Fastest Growing Companies list. It’s fair to say these folks are doing something right. Andrew sat down with Ben Kaplan, president and CEO, to discuss branded currencies for retailers, the business models they are disrupting, and the market inefficiencies on which they are growing their business. As a payment and commerce professional, why should I pay attention to what CashStar is doing? Why are digital gift solutions relevant to me? That’s a really good question. Let’s look at what digital gifting and digital gift cards actually are and what they mean. When talking about digital gifting, what you are really talking about is mobile prepaid payments that are branded currencies for use at that particular retailer or merchant. Users may refer to them as eGift cards, but that is simply the application of a well-understood Startup Corner Digging Deeper with CashStar: The Digital Gifting Phenom By: Andrew Barnes
  15. 15. I N D U S T R Y V O I C E S 15 product and payment type. What we are talking about is a very different end- to-end experience for the merchant, the giver, and the recipient. All are executed in digital form, and are redeemed via a smart phone in-store over 50% of the time. As a payment and commerce professional, the application and the use of mobile payments in a $120 billion market for traditional gift cards is pretty important. Can you further explain the concept of a branded currency for a retailer? Sure. If you take a look at the rise of retailer and merchant mobile applications for payments, these apps usually use a prepaid or stored value model. It’s a form of prepaid, and you also think about digital gift cards, which are another model of prepaid stored value, right? In both of those cases, you’re talking about a closed loop currency that can only be used at that merchant. It isn’t that you couldn’t call traditional plastic gift cards a branded currency because they technically are. The difference is with digital gift cards and mobile prepaid solutions. Users have portability, accessibility and immediacy, as well as the ability for offers and these currencies to be promoted and used within digital marketing campaigns. When these can be redeemed easily with a 2D barcode scanner on your smartphone, the power of digital gift cards as a branded currency is unleashed. And that branded currency can be used by retailers and by merchants, like Starbucks and The Home Depot, in a really interesting range of applications and use cases. Almost any single consumer marketing initiative can be enhanced by or supported by a marketing campaign that leverages and utilizes a promotion featuring digital gift cards or branded currency. For instance, marketing campaigns that drive new customer acquisition, re-engagement, new location openings, new product launches, in-season sales, off-season sales, or in-store sales versus online sales. How does the distribution work, and what are your retailer and merchant clients telling you that they want? In this case, obviously, we’re not talking about Andrew sending his nephew a digital gift card to Best Buy. What we’re really talking about is perhaps Best Buy or Staples or Starbucks sending out digital gift cards to incentivize consumer behavior. Those types of promotions that leverage this concept of a branded promotional currency is a really, really interesting set of applications for CashStar and one which our retailers and merchants are pulling us into. The company wasn’t founded with this vision in mind. The company was founded with the vision of resolving the incredible inefficiencies and costs in the plastic gift card supply chain. We said we were going to automate and streamline them into a digital, mobile form factor.
  16. 16. I N D U S T R Y V O I C E S 16 On top of that very strong business, we’re now defining and building the market opportunity for using digital gifting as a branded promotional currency, a currency that retailers and merchants can use in a range of consumer markets and applications. So whose business model are you disrupting, if any? I think that there are a few and I think they’re at a couple of different levels. In the near term, we’re disrupting the plastic gift card models currently dominated by players like Blackhawk Network and InComm. I think more broadly, and more strategically, we are part of the mobile payments and mobile marketing disruption that is occurring in both payments and omni-channel retail. You’ve mentioned mobile a couple of times, can you talk about what mobile means to your business and how you are innovating with it? Everything. Yes, the short answer is that it means everything. The longer answer is that the future of many different day-to-day consumer experiences will at a minimum be instantiated and supported by mobile or will be completely encapsulated in mobile. Our own mindset from a development and strategy perspective has changed from mobile first to mobile always. Everything we do as a company, in some form or fashion accounts for, prioritizes, or enhances our mobile strategy. It’s because the user experience that we will rely on and that we support will primarily be a mobile one. It doesn’t mean that we’re not supporting additional modalities, we are. We’ve very, very flexible. Keep in mind that the market still has a long way to go from an adoption perspective. However, our business and our future are linked to the growth and adoption of interesting and exciting mobile use cases. Let’s go back to distribution channels. How are you disrupting B2B distribution and partnerships pertaining to the digital gifting platform for retailers and merchants, and which is more important? They’re both important, and they’re pretty different. I’ll tackle each independently. CashStar originally started its business focusing on the merchant to consumer experience. For instance, how consumers could buy gift cards for friends, for each other, for themselves, and how those use cases can be instantiated in a digital and mobile experience. The second wave was when CashStar began to invest and build out solutions for helping merchants distribute gift cards directly to other businesses, to other channel partners, to loyalty programs, to airlines, and to gift card distribution houses. That market, the traditional B2B gift card market, is very dynamic and it’s one that CashStar has made a great amount of progress in this past year. So let’s tease this out. There are a lot of players between the retailer and the end employee in an incentive program or a member of a loyalty program. You might have the credit card company and then the loyalty platform and then several gift card distributors. You’ve got lots of different players
  17. 17. I N D U S T R Y V O I C E S 17 between the retailer and these really interesting B2B gift card distribution channels. Many things that we’re trying to do in gift card distribution are to rationalize,integrate and simplify all of these different channels and relationships for the retailer. That goal is a big one, and we’re making tremendous progress on it. There’s just so many different, discreet players, companies, resellers, distributors, between the retailer and the end consumer in this B-to-B-to-B- to-B-to-B-to-B-to-C distribution model. CashStar’s goal is to try to simplify that, and by doing so adding a lot of value to the merchant. As you look at 2014, what big deliverables are you committing to? I think that there are three things, three big areas. First is a continued rollout of innovative solutions for digital gifting and branded currencies that advance retailer and consumer goals in really compelling ways. The second piece is that I expect us to have incredible growth this year. Just like 2013, I know we’re going to blow the doors off from a revenue perspective, an adoption perspective, and a new client perspective. The third piece involves scaling the company. Scaling companies is hard and we’re at the stage where we’ve got to bring in different processes and additional people. We’ve got to be able to hire and on-board new employees, new executives, and get efficient people. We’ve got to make sure that we’re able to do that and execute on our business in a really repeatable way even as we are innovating the entire time. CashStar is the leading provider of omni-channel digital gifting solutions for the world’s top brands. The CashStar platform enables retailers and restaurants to maximize sales, eliminate fraud risk, increase customer engagement, and drive adoption of mobile payments. More than 300 leading companies rely on CashStar to power the most innovative and advanced prepaid and digital gifting programs, including Best Buy, Brookstone, Coach, Crate & Barrel, Dell, Dunkin’ Donuts, Gap, lululemon athletica, Office Depot, Petco, Pottery Barn, QVC, Sephora, Staples, Starbucks, The Cheesecake Factory, The Home Depot, and Williams-Sonoma.
  18. 18. I N D U S T R Y V O I C E S 18 Would you like to be next week’s Industry Voice? Email Kevin Xu - kxu@lamilmedia.com Andrew Barnes, Managing Director, Emerging Payments Barnes is a self-confessed payments and commerce “geek” working in Silicon Valley and San Francisco. He utilizes c-level relationships in tech, startups, retail, and financial institutions to identify emerging market opportunities and analyze challenging business models. Barnes recently launched “Digging Deeper,” a published series focusing on startups and key innovators that are solving digital payments and mobile commerce problems worldwide. He has held executive business development positions in Asia with Sprint, Global One, and 2Roam Mobile, and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from Waseda in Tokyo and a BA from Penn State. He can be reached on Twitter @ AndrewinSV and Linked-in Ben Kaplan, president and CEO Ben brings twenty years of experience to CashStar in senior operations, marketing, and product roles at software, e-commerce, loyalty marketing and payments companies. Most recently, he was Chief Operating Officer at Cartera Commerce, a leading provider of card-linked marketing solutions for merchants, banks, and loyalty programs. Prior to Cartera, Ben was Vice President of Marketing for KNOVA Software and Vice President of Marketing for North Systems, directing marketing and product management at both companies. Earlier in his career, he held product marketing and product management positions at Broadbase and Commerce One. Ben is a graduate of Harvard College. The Man Behind The Voice The Writer

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