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JUNE 8 - 13, 2014 visit paymentweek.com
POWERING PAYMENTS FOR THE CROWD
PayPal Launches PassPort the
Cross-Border Seller E...
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...
4
T E C H
4
Mobile
Exploring Better Practices for Mobile Commerce with Worldwide
Business Research
By: Kevin Xu
W
e chat w...
T E C H
5
the mobile platform specifically
makes it advantageous?
Quite simply, not all screens
are created equal. Analyti...
6
T E C H
6
consumers use, versus what will they absolutely
hate?
One of our conference speakers recently mentioned
that w...
T E C H
7
Mobile
HouseTab Is Socializing the Bar Scene through Mobile Payments
By: Melli Pini
O
n Tuesday evening, HouseTa...
8
T E C H
8
drink, as a token of apology.
While this app is at the moment currently only
available for iOS devices, HouseT...
T E C H
9
Security
P.F. Chang’s China Bistro Confirms Data Breach
By: Kevin Xu
A
nother day, another data breach.
Arizona-...
10
E M E R G I N G P A Y M E N T S
10
Credit, Debit, & Prepaid
A Trillion Dollars in Credit Card Debt Could Be Good for US...
E M E R G I N G P A Y M E N T S
11
11
“invested” in holding onto their
house until they find a job, putting
a down payment...
12
E M E R G I N G P A Y M E N T S
12
Credit, Debit, & Prepaid
AmEx Partners with Sharing Economy Superstar Uber
By: Kevin...
13
M A R K E T P L A C E
13
Industry Leaders
Facebook Poaches PayPal CEO, Could Be Your Future Bank
By: Michael Foster
I
t...
14
M A R K E T P L A C E
14
C
learXchange, the distribution network that
allows users to make payments to email
addresses,...
15
M A R K E T P L A C E
15
Global & Local
EU’s Negative Interest Rates – Coming to the US?
By: Jane Genova
W
ill the US F...
16
M A R K E T P L A C E
16
also noted that “inflation is
undesirably low.”
After the speech, she explicitly
said to the m...
17
M A R K E T P L A C E
17
D
espite PayPal’s efforts to
get into offline-retail, it’s
important to remember
that PayPal s...
18
M A R K E T P L A C E
18
take advantage of the opportunity
of cross-border selling.”
As an example, China’s “Singles
Da...
19
M A R K E T P L A C E
19
Corporate Payments
Avangate Launches Ecommerce Solution for the New Services
Economy
By: Kevin...
20
M A R K E T P L A C E
20
Building upon this experience, Avangate is now
releasing what it calls “the first digital comm...
I N D U S T R Y V O I C E S
21
Digging Deeper With
WePay: Powering Payments for the Crowd
By: Andrew Barnes
A
ndrew Barnes...
I N D U S T R Y V O I C E S
22
platforms didn’t exist back then. You now find
yourself supporting a whole industry. Is bei...
I N D U S T R Y V O I C E S
23
we believe, are the most dynamic segments of
ecommerce. Building the right tools for this s...
I N D U S T R Y V O I C E S
24
Our vision is that a marketplace or crowdfunding
site can come build on us and then immedia...
I N D U S T R Y V O I C E S
25
to go and partner with card associations, with an
acquiring bank, a settlement bank. There ...
I N D U S T R Y V O I C E S
26
favorite restaurant is a place down the hill called
Evvia, which is a Greek restaurant. It’...
Payment Week - Andrew Barnes, Managing Director___WePay
Payment Week - Andrew Barnes, Managing Director___WePay
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Payment Week - Andrew Barnes, Managing Director___WePay

  1. 1. JUNE 8 - 13, 2014 visit paymentweek.com POWERING PAYMENTS FOR THE CROWD PayPal Launches PassPort the Cross-Border Seller Education Tool HouseTab Is Socializing the Bar Scene through Mobile Payments Facebook Poaches PayPal CEO, Could Be Your Future Bank FEATURED INSIDE:
  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 Jenn Roberts Ma CONTRIBUTING WRITER Gregory Sweet CONTRIBUTING WRITER Kyle Dowling CONTRIBUTING WRITER Jane Genova CONTRIBUTING WRITER Michael Foster CONTRIBUTING WRITER Helen Wallis CONTRIBUTING WRITER David Cross CONTRIBUTING WRITER Monique Zami CONTRIBUTING WRITER Corporate Office 65 Broadway Suite 508 New York, NY 10006 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 WePay: Powering Payments for the Crowd Bill Clerico, CEO and Co-founder of WePay, talks crowdfunding, beating the likes of Stripe, Balanced and PayPal, and lessons he’s learning as a payments startup. S P O T L I G H T A R T I C L E 7 - HouseTab Is Socializing the Bar Scene through Mobile Payments 4 - Exploring Better Practices for Mobile Commerce with Worldwide Business Research I N D U S T R Y V O I C E S 9 -- P.F. Chang’s China Bistro Confirms Data Breach J U N E 8 - 1 3 , 2 0 1 4 10 - A Trillion Dollars in Credit Card Debt Could Be Good for US 12 - AmEx Partners with Sharing Economy Superstar Uber 13 - Facebook Poaches PayPal CEO, Could Be Your Future Bank 14 - Bank of America Upgrades ClearXchange’s Payment Role 19 - Avangate Launches Ecommerce Solution for the New Services Economy 17 - PayPal Launches PassPort the Cross-Border Seller Education Tool 21 - Digging Deeper with WePay: Powering Payments for the Crowd
  3. 3. 4 T E C H 4 Mobile Exploring Better Practices for Mobile Commerce with Worldwide Business Research By: Kevin Xu W e chat with Greg Ashton, Director of Worldwide Business Research’s Mobile Shopping Conference, which explores bettering mobile commerce, taking place in October. We delve into some of the ways retailers can leverage their mobile offerings to drive sales, increase engagement, and improve their customers’ user experiences. WB Research’s Mobile Shopping Event highlights the trends in carrying out effective mobile consumer engagement. Your next event is in October. What are some of the general trends and changes you’ve seen during the last few months between your annual events? Greg Ashton: I think we’re in the middle of a retail revolution. As we move from traditional point and click to touch and swipe, wearables and beyond, we need to keep a firm focus on providing the most relevant device experience to our customers. Last year we saw a lot of conversation around mobile feature experimentation – at this year’s show in October, we’re delving much deeper into the three challenges on everyone’s radar - attribution, location and personalization. Each day of the show is built around each theme. We’re hearing some poignant early results from teams who have established omnichannel analytics to track mobile revenue and maximize conversion rates across all their digital assets. Our speakers also have some great pilot program feedback to share around digitizing the in-store experience, and understanding the intention of the mobile shopper at each stage of their purchase path. The retail revolution is gaining momentum and our audience is beginning to see the fruits of their labors. Why are analytics so important to merchants, and what about Image credit: Worldwide Business Research
  4. 4. T E C H 5 the mobile platform specifically makes it advantageous? Quite simply, not all screens are created equal. Analytics are giving merchants confidence to send the right message to the right person at the right time, based on device relevancy and analysis of past purchase history. Now that platforms are working hand-in-hand to drive customers to the point of sale, analytics are pinpointing the origin of that sale and, crucially, ensuring its conversion. At this year’s show, we’re opening the floor to hear how the biggest and best retailers are sizing the mobile market and the impact it is having on their overall e-commerce business. I’m a firm believer that “you can’t manage what you can’t measure” and there is so much new technology out there that is allowing us to go granular in quantifying mobile’s indirect impact and contribution to store and desktop purchases. Overall, I think the appeal of mobile is clear- it’s with your customer pretty much 24/7. Make sure that your brand is buying up that real estate. Smartphones enable GPS and location tracking. How can retailers leverage this data and what are the technologies taking advantage of this? More importantly, how can you incentivize it to get consumers on board with being tracked? The fuse has been burning on iBeacon and location-based services for quite some time (e.g. through Apple Passbook), but only recently have we seen the explosion. The opportunity until now has lay in simply finding your customers, but now the technology is intelligently reaching them to provide immediate gratification. Most of our solution provider partners are working on some incredible things to provide targeted in store offers – and that’s just the tip of the iceberg, you’ll have to attend the meeting to see some of the really high-tech stuff! Its mind blowing. In terms of customer incentivization, I think were at a crossroads here too. There is always a disconnect between technology advancement and technology user acceptance. The ‘winning formula’ will be to let the merchant decide what works best for them, let the consumer decide what works best for them, and meet in the middle over time; incidentally this flexibility will be the only way for mobile payments to prevail as well! Why is responsive, mobile-first, a good design philosophy? What are some tricks to improve usability and user experience? It’s certainly becoming increasingly difficult to serve up an optimized experience across all the screens we have now. With the largest retailers already taking the plunge with responsive, that leaves other brands thinking “Do I need to get onboard with this immediately?” I think that the answer is yes, take the jump now. Customers don’t care who or which part of your business they are talking to, as long as the message and voice of your brand is the same, every time. Although responsive will require a complete website rewrite, with the mobile site as the driving force, this is good business from a long term perspective as more of your sales will come though the mobile channel, guaranteed. Mobile Shopping 2014 will share early pain points encountered from true responsive trailblazers, and what they did to overcome them. Overall, back-end coordination and communication between digital teams is key to creating a seamless front-end experience. What are some of the trends you see among consumers in terms of engagement, and actual usage in mobile shopping? Certain industries are pushing out their own mobile apps. What will
  5. 5. 6 T E C H 6 consumers use, versus what will they absolutely hate? One of our conference speakers recently mentioned that with mobile, engagement does not always equal time spent. The most effective mobile campaigns engage the user in less than 10 seconds. With this in mind, I think the biggest trend to follow right now is in video. Video is being used to create some amazing branded content, it resonates with any audience and is a welcome change from the ‘flat’ content that we’re all used to. Consumers already love video – resources should increasingly be directed here to build scale. In terms of app usage, at Mobile Shopping we’re going to talk about some interesting initiatives around app partnerships. Some brands are already forming natural partnerships to build a broader customer base and share resource level of their investments. It’s definitely something to keep our eye on, as I think the real benefit is the convenience and seamless front-end experience that it can provide to consumers. Final thought, what will be the next buzzword in mobile? “Mobile-Born.” The next generation (born around 2005) have grown up with mobile devices. We need to anticipate this Mobile-Born audience by focusing our next innovations on them. Let’s get them onboard with our brands early! Greg Ashton, Conference Director, Worldwide Business Research Greg is Director of the Mobile Shopping Conference. Since 2007, Mobile Shop- ping has been the must-attend forum for digital executives looking to refine mobile strategy, world class networking opportunities, and in-depth research support retail industry & brand growth.
  6. 6. T E C H 7 Mobile HouseTab Is Socializing the Bar Scene through Mobile Payments By: Melli Pini O n Tuesday evening, HouseTab officially celebrated its launch at the Windsor Gansevoort Park with a warm reception of crispy hors d’oeuvres and drinks, putting an emphasis on the niche that their new mobile payment app is aiming to capture. HouseTab CEO,AndrewTauber proudlyannounced its debut and a business model that is “revolutionizing” how we dine, imbibe, and socialize. Tauber said, “HouseTab is more than just mobile payments; we’re looking to drive usage, adoption and create a social community.” HouseTab is a mobile app targeting the nightlife trendsetters “with a specific focus on the post- collegiate 23-30 age group,” hoping to bridge the gap between mobile payments and social etiquette. Facilitating our social experiences, HouseTab envisions the elimination of waiting on friends and bar tabs, awkward divvying, and clumsy calculating (post-residual banter, food coma, and imbibing). From the merchant’s perspective, HouseTab allows restaurants and bars to engage in customer hospitality, repeat business (such as texting “a drink on the house”), as well as to ensure all payments and tips have been easily tracked and completed through the app. So what are its capabilities? They include social texting, sending and receiving food and drink or other goodies, paying for tabs through the app (no more lost credit cards (!)), and keeping up on the real-time pulse of specials and promotions. If you’re running late for a night out, you can send your punctual friends at the HouseTab-using bar a
  7. 7. 8 T E C H 8 drink, as a token of apology. While this app is at the moment currently only available for iOS devices, HouseTab plans on making the push to Android in the near future. HouseTab is also expanding their current roster of 15 established bars dotted along West Side New York to any and all restaurant and bar establishments. When asked if HouseTab had plans to partner with other complimentary social apps, such as Tinder for example, Tauber responded that they “would be open to partnering with other platforms down the line.” Closing the night with insightful conversations with investors, media, the HouseTab team, and the staff at Windsor Gansevoort Park, one is left with the impression that mobile payments has just hit the pavement running – that the adoption of mobile payments on both merchant and consumer sides will happen if those solutions can solve a real problem, which HouseTab hopes to do. HouseTab launch party in NYC on 6/10/14
  8. 8. T E C H 9 Security P.F. Chang’s China Bistro Confirms Data Breach By: Kevin Xu A nother day, another data breach. Arizona-based restaurant chain, P.F. Chang’s China Bistro has confirmed that its customers have had their payment card details stolen. P.F. Chang’s CEO, Rick Federico issued a statement that they’re currently working with the United States Secret Service and forensics experts to determine the scope of the breach. IT security expert, Brian Krebs, first reported that thousands of cards were being sold on rescator.so, an online black-market that sells stolen financial credentials. These credentials are payment details embedded in a credit or debit card’s mag-stripe, which can then be copied over to a blank card for purchasing goods. One thing these cards had in common was that they had all been used at P.F. Chang’s locations between March and May 19 this year. According to Seth Ruden, Senior Fraud Consultant at ACI Worldwide, “Until we take the necessary efforts to get control around the management of payment card data in the merchant channel through technologies like EMV and tokenization, we will continue to be impacted.” Though the details of this breach remain murky, previous attacks such as the ones at Target and Neiman Marcus were the result of malware being installed in POS machines which collected information on every card swipe. P.F. Chang’s locations will now switch to manual card imprinting devices, suggesting that a similar method involving compromised POS machines was used in this attack. What can retailers do to limit their risk in falling victim? Ruden says, “The best defense against these attacks is through the development of our own networks and communities: information sharing and internal discussion of threats and actors to develop coordinated strategies.” Image credit: gsloan
  9. 9. 10 E M E R G I N G P A Y M E N T S 10 Credit, Debit, & Prepaid A Trillion Dollars in Credit Card Debt Could Be Good for US By: Jane Genova A n indicator of a strengthening US economy could be consumer credit card debt, and signs point to it skyrocketing to a trillion dollars. According to the US Federal Reserve, credit card debt currently stands at $854.2 billion. The average consumer has $15,191 in debt. Compared to the average student loan debt of $33,607, that is relatively low. But, as the recovery gains traction, that 15 thousand and change in debt could increase significantly. And that could be great for the U.S. economy.There are two major reasons why. One is associated with the consumer and the other relates to the small business owner. THE CONSUMER America’s economy is consumer- driven. About 70 percent of it, says the Federal Reserve, is tied to consumer spending. The encouraging news on that front is that, according to the Conference Board, in May the Consumer Confidence Index bounced up to 83.0. That’s the highest it has been since December 2007. A boost in credit card debt does not necessarily mean that the card holders are taking it on the chin in double-digit interest rates. The savvy among credit card users are adept at playing the zero or very low interest game. They continue to transfer balances to cards which charge no or very low interest for a certain period of time. When the time is up, for a relatively modest fee such as two to five percent of the balance, they do another transfer. In a sense they have access to free money. The funds that they gain by not using to pay off the card can be Image credit: Wonderlane
  10. 10. E M E R G I N G P A Y M E N T S 11 11 “invested” in holding onto their house until they find a job, putting a down payment on a house or rental property, improving their property, buying into a hedge fund, enrolling in a program to learn coding, or be used to pay off high-interest student loans. All these initiatives could augment economic growth. However, there’s a negative to revolving debt. Zero and low interest balance transfers are usually provided in good times as a promotional tactic to attract new customers or encourage current customers to boost their balances. Hard times could return and credit card issuers may put the brakes on such offers. That leaves households on the hook for big balances which eventually incur high interest rates. SMALL BUSINESS OWNERS Increased credit card debt could indicate that more small businesses are expanding. There are more startups and distressed companies dodging the bankruptcy bullet. All this is good news for the economy. According to the US Small Business Administration (SBA), small businesses create about 64 percent of new jobs and maintain over half of existing private sector jobs. Currently, traditional financial institutions remain tight about lending to small businesses, even those which are solidly in the black. They have always been wary of startups. Often, bridge loans are difficult to acquire. These are all factors why small businesses have found credit cards, including personal ones, ideal for expansion or buying time in hopes of a turnaround. The SBA Office of Advocacy found that about 14.5 percent of small businesses turned to credit cards, personal and business, for expansion financing. Three- fifths of them reported that they were satisfied with the credit cards terms and conditions. Most of them applied to large credit card issuers. Most startups are funded by credit cards. It’s cool to boast about getting venture capital, having angel investors or generating tons of money through crowdfunding. But the reality is that the lion’s share of entrepreneurs have to provide the seed money themselves. Those self-funders include Larry Page of Google. For small businesses in trouble, the problem is often time- related. They, for example, have to wait until spring to sell the hot new fashions. Meanwhile, the owners have to pay fixed costs. Temporary financing from alternative lenders can incur triple-digit interest rates. Much less expensive is simply to leverage personal and business credit cards to keep afloat. A successful selling season could wipe out all that debt. In the next several years, a trillion-dollar credit card debt figure be something economists will crow about. It may be one of the most solid symbols of higher GDP growth.
  11. 11. 12 E M E R G I N G P A Y M E N T S 12 Credit, Debit, & Prepaid AmEx Partners with Sharing Economy Superstar Uber By: Kevin Xu T hrough its partnership with global car (and sometimes helicopter) service Uber, American Express continues to expand its premium branding by hopping onto the new sharing economy cool. On June 9th, AmEx announced that its card holders could use their rewards program with Uber in two ways. One is cashing in points to pay for Uber rides: 2000 points for a $20 ride. That means the points become currency in real time and can be used exactly where and when card holders need them. The other option is to earn double points. To participate, AmEx card holders have to download the Uber iOS app. Currently, the AmEx promotion is only available on the iPhone and in the U.S. This integration of a rewards program and app technology represents a nod of approval for the hot startup. It is also the first time Uber is permitting the use of credit card reward points for rides. However, this is not the first time AmEx has allowed card holders to exchange points for taxi rides, and in New York City, it has enabled this option through VeriFone. The added value from the Uber deal comes from being associated with such a successful player in the sharing economy. Recently Uber had raised $1.2 billion and its valuation is about $18.4 billion. Like another sharing economy player Airbnb, Uber is controversial. However, companies such as AmEx, skilled at managing issues, can harness and leverage the momentum. There is a saying among public relations pros: “All publicity is good publicity. Just spell our client’s name right.” In addition, criticisms that are being thrown on disruptive players in the sharing economy niche can create intense loyalty among customers. Those users can also derive a sense of being smarter consumers than traditionalists who stick with status-quo forms of transportation and lodging. Earlier this year, AmEx took a more mundane step into diversifying its branding. It launched the EveryDay card geared towards middle-income moms. Right now AmEx’s rewards programs are associated with more than 500 brands. The payment industry will now be on special watch for the next out-of- the-box brand the company partners with.
  12. 12. 13 M A R K E T P L A C E 13 Industry Leaders Facebook Poaches PayPal CEO, Could Be Your Future Bank By: Michael Foster I t all started when Facebook bought WhatsApp for $19 billion in cash and stock, making it one of the most expensive acquisitions in human history. Now that Facebook has poached PayPal’s former CEO, David Marcus to head up Facebook Messenger, the social site’s plans are obvious: the company wants to become your bank. The infrastructure is there, and the know-how is coming. With the staff and service in place, implementation will be easy. All Facebook will need to do is start offering a service where you can connect your bank and/or credit card to your WhatsApp and Facebook accounts, and then you can send money straight to them through a secure transaction. Because Facebook monetizes itself through advertisements and because it already has billions of users, it should be able to offer payment transfers at less cost than PayPal. While it may not reach Dwolla’s level of low prices, it can certainly undercut its biggest competitors like Google Wallet, Square, and, of course, PayPal. The value for Facebook goes much beyond being a transaction processor. By helping you pay for things, Facebook is keeping you in their system. It’s collecting data about who you pay, when, and why. This is all valuable stuff, and it can help Facebook grow bigger and bigger, even after nearly a quarter of the world’s population is already on the site. The idea isn’t far fetched. In China, WeChat has offered payments through its messaging service for a while, although Chinese consumers only use it for small payments. WhatsApp/Facebook Payments could succeed in America where WeChat struggles if they offer instant payments at a fraction of the cost of PayPal. While low-cost startups have struggled from scale, the big players like Square and PayPal have been able to charge big fees. With scale and low cost, money transfers on Facebook would be the disruptor that the mobile payments world needs. Image credit: LeWeb
  13. 13. 14 M A R K E T P L A C E 14 C learXchange, the distribution network that allows users to make payments to email addresses, is the brainchild of Bank of America, Wells Fargo, and JP Morgan Chase with additional support from Capital One and FirstBank. The financial conglomerates make up more than 50 percent of the online banking market and lead the way in digital transactions. The peer-to-peer network established by Bank of America is now being expanded to permit other transactions like insurance payouts to be made via clearXchange with a test roll-out to determine its effectiveness. Corporate distributions will be made easier through the streamlined network. Other Bank of America markets in Canada and the U.K. will similarly expand its base beyond P2P payments. According to a recent Fed survey, 85 percent of consumers and 81 percent of merchants desired a digital payment system that operated without using account numbers. In the US alone, Bank of America clears 25 percent of all transactions, making them well positioned among their competitors. The P2P market is relatively small market, sitting at about $1.2 billion, but may open the door to other payment services. The nature of P2P means that it’s well suited to corporate transactions because payments are being sent without requiring the recipient’s details like account information and other personal data. Banks using the clearXchange network are able to compete with alternative payment systems like PayPal and Dwolla. The market for emerging payments seems to appeal mostly to non-banking companies, but more and more banks are jumping on the bandwagon in order to stay competitive while offering consumers more services. Industry Leaders Bank of America Upgrades ClearXchange’s Payment Role By: Daniel Cross Image credit: Mike Mozart
  14. 14. 15 M A R K E T P L A C E 15 Global & Local EU’s Negative Interest Rates – Coming to the US? By: Jane Genova W ill the US Federal Reserve System follow the European Central Bank (ECB) in introducing negative interest rates? On June 5th, the ECB put in place negative interest rates, or what’s called a “tax on money,” in the 18 nations whose currency is the euro. Essentially, negative interest rates mean that the ECB imposes a fee on commercial banks to maintain their funds at the ECB. This economic strategy has two key goals. One, the policy was made to motivate banks to stop “hoarding money.” Instead financial institutions, the thinking goes, will begin lending more of their money to businesses and individuals. And, two, it is intended to discourage foreign investors from “parking” their funds in the Eurozone. That is expected to trigger a drop in the value of the euro. From that, EU exporters gain a competitive advantage. Clearly, negative interest rates put pressure on financial institutions to create, directly and indirectly, a kind of economic stimulus. The assumption is that tight money has constrained enterprise. It has deterred consumers from boosting their spending. Also, the flood of global investors had upped the euro’s value, hurting exports. Some frame negative interest rates as a desperate measure, needed for desperate times. During Q1 2014, GDP growth in the Eurozone was 0.2 percent. In May, inflation was 0.5 percent, a 0.2 percent decline from April and well below the ECB’s wish list of a bit below two percent. Deflation is a real fear. Unemployment stands at about 12 percent. The question is: Will this policy work? Most recently, in 2012, Denmark introduced a -0.2 interest rate on bank deposits. Among the Danish economic concerns was the rising value of the krone currency. For that, it was effective. However, lending did not significantly increase, and for businesses, it decreased. As for consumer lending, borrowing became more expensive. That’s because, as the Danish Banking Association reports, the banks passed on their losses on deposits to potential borrowers. Consequently there was no uptick in the number of individuals taking out loans. In 2009, during a financial crisis in Sweden, central banks cut the interest rate to -0.25 percent. The economic consensus is that the policy had no positive effect. Those who follow the economic thinking of Janet Yellen speculate that negative interest rates are a possibility in the US. Back in February 2010, before she became Chairman of the Board of Governors of the Federal Reserve System, she delivered a seminal address to the University of San Diego Business School. First she predicted that the economy “will be operating well below its potential for several years.” She made that assessment even though she contended that the recession was over. She
  15. 15. 16 M A R K E T P L A C E 16 also noted that “inflation is undesirably low.” After the speech, she explicitly said to the media, “If it were positive to take interest rates into negative territory I would be voting for that.” Whether negative interest rates become a government or macro policy remains unclear. However, on the micro level, a number of financial institutions have already instituted their own version of negative interest rates. The most common form is the fee structure for savings accounts. Typical of those kinds of charges is the monthly maintenance fee, especially in brick and mortar banks and credit unions. For that reason, Internet or online financial institutions promote that their savings accounts carry no fees. However, personal finance experts warn consumers to read the fine print on the contracts provided by Internet financial institutions. The absence of fees may only be for an introductory period. They are also frequently bundled with requirements. Those range from keeping a certain monthly balance balance, to the limit on the number of monthly transactions. Despite the current reality of negative interest rates on some savings accounts, consumers and businesses rely on them for money management. For example, they are often linked to checking accounts to provide funds for overdrafts. Also, they can enhance one’s financial profile. Should negative interest rates be introduced officially by the Federal Reserve, all transactions with financial institutions are likely to become more complex. More funds for lending could become available. But, as in Denmark, that could come at additional cost to borrowers. But a positive could be that savings accounts would be saddled with more fees. That could motivate both businesses and consumers to switch those funds into investments which stimulate the economy.
  16. 16. 17 M A R K E T P L A C E 17 D espite PayPal’s efforts to get into offline-retail, it’s important to remember that PayPal started as an online company. Though PayPal is now one of, if not the biggest and most successful payments companies to exist, its roots are with online merchants and sellers. Expanding on their relationship and value to sellers, PayPal is launching PassPort, a website designed to aid sellers in their effort to go global with their products and services. Anuj Nayar, PayPal’s Senior Director of Global Initiatives, said that this was a natural expansion of PayPal’s Modern Spice Routes report that received a warm reception last year, which detailed cross-border selling opportunities. Customs & TaboosThe tools and knowledge database in PassPort include shipping channels, international customs, holidays, taboos, along with buying and selling patterns. PassPort will link back to eBay’s Marketplace to provide sellers with quick access to selling immediately. PayPal’s online business is critically important for eBay since it allows sellers to reach customers and receive payments on an international scale along with providing peace of mind with global buyer and seller protection. Nayar adds it’s the “first time launching a global online resource to help small business to Global & Local PayPal Launches PassPort the Cross-Border Seller Education Tool By: Kevin Xu
  17. 17. 18 M A R K E T P L A C E 18 take advantage of the opportunity of cross-border selling.” As an example, China’s “Singles Day,” which takes place on November 11, provided a feast for retailers and brought in $8.2 billion dollars in sales over 24 hours. There’s an obvious opportunity here for international retailers to get in on the action. Nayar also spoke to a story regarding one merchant who bought used ski equipment offseason, and resold them to international markets during their ski seasons. When trying to target the Asian markets, the merchant’s efforts failed, since there is a cultural taboo regarding second-hand clothing, with shoes and boots in particular. PassPort may be able to help educate sellers and to find these moneymaking opportunities that exist internationally. At the New York PayPal office, they’ve built several realistic storefronts (and a bar!) showcasing offline technology that highlights PayPal’s efforts to cater to SMBs, namely PayPal Here, Beacon, and other real world solutions to drive and accept business. Though these technologies are exciting and garner much of the attention, PayPal’s goal in both online and offline is not just facilitating payments, but increasing sales. As Nayar puts it, “At the end of the day, PayPal doesn’t make money unless merchants make money.” IT’S THE “FIRST TIME LAUNCHING A GLOBAL ONLINE RESOURCE TO HELP SMALL BUSINESS TO TAKE ADVANTAGE OF THE OPPORTUNITY OF CROSS-BORDER SELLING.”
  18. 18. 19 M A R K E T P L A C E 19 Corporate Payments Avangate Launches Ecommerce Solution for the New Services Economy By: Kevin Xu I n the Internet age, payments are becoming more than just about moving money from point A to point B. For enterprises and service providers, there are new economies where payments must not only scale to size, but there must be ways to facilitate customer engagement. Avangate, a leading digital commerce provider, is expanding its services to provide an all- in-one solution for enterprises offering online services – and it’s not just payments. According to Carl Theobald, CEO at Avangate, online services are “the next trillion dollar market being accelerated by the explosion of cloud computing and mobility.” This is what Avangate calls, “The New Services Economy.” In Avangate’s New Services Economy survey of Internet consumers, 63 percent of US adults use at least one online service, with 50 percent paying for them. The most important findings conclude that consumers would be more likely to pay for these services if they had access to free trials, better customer support, and the ability to customize their subscription settings. Mike Ni, CMO at Avangate, says that building out commerce platforms targeting customers of online services often produces “commerce hairballs.” For example, Avangate found HP spending thousands of man hours building out both the front and back ends of their B2B software platforms. Theobald shared a story regarding their relationship with HP Software. HP had their own payment gateway, so bringing the platform live, creating support for subscription and recurring billing, and enabling payments was not an issue. The “commerce hairball,” was the issue of bringing that software platform to scale. As a global company, HP had an imperative to bring those same services to as many markets as possible. Avangate took the reins and pitched that they could bring HP’s next service to “over a hundred countries, in under 30 days,” and succeeded.
  19. 19. 20 M A R K E T P L A C E 20 Building upon this experience, Avangate is now releasing what it calls “the first digital commerce solution for the New Services Economy.” By providing the infrastructure and logic necessary for service providers large and small, Avangate aims to solve the three critical issues of scale, speed, and customer engagement. This includes a suite of tools that tackles cart abandonment, secure filing of customer payment details, fraud management and global payment processing capabilities by utilizing the safety and security of the cloud. Avangate’s platform also supports a call center module, along with subscription management, and analytics. Avangate will be more than just a payment service provider, but a platform that provides commerce and monetization, with resources for businesses to engage existing and new customers around the world, in a very short time frame. These new offerings underscore the payments industry at large and the need for payment providers to do more than their namesake, to provide not only payments for businesses, but valuable tools to grow and to retain business. ACCORDING TO CARL THEOBALD, CEO AT AVANGATE, ONLINE SERVICES ARE “THE NEXT TRILLION DOLLAR MARKET BEING ACCELERATED BY THE EXPLOSION OF CLOUD COMPUTING AND MOBILITY.”
  20. 20. I N D U S T R Y V O I C E S 21 Digging Deeper With WePay: Powering Payments for the Crowd By: Andrew Barnes A ndrew Barnes’ series, “Digging Deeper” is based in Silicon Valley and focuses on key startups and innovators, and how they are disrupting digital payments and commerce. WePay just raised an additional $15MM C Round to bring its total to $34MM. The pressure must be on, but from talking with Bill Clerico, their Co- founder and CEO, you would never know it. Pivots are beautiful. Fundraising is enlightening. And their target market is experiencing off-the-charts growth. Does it get any better than that? WePay is going all-in on providing payment APIs to platform businesses, specifically crowdfunding, marketplaces, and small business platforms. Let’s look at some numbers: WePay currently powers eight out of the top 15 crowdfunding platforms and has over 400 active partners. The company is on track to triple its revenue in 2014. WePay reports a recorded 51% quarter over quarter growth from Q4 2013 to Q1 2014, and is averaging 35% monthly growth in crowdfunding- specific processing alone. Not too shabby…. Their marquee clients include some big names in platforms: Care.com, CustomMade, GoFundMe, Crowdrise, Fundly, Meetup, and InvoiceASAP. So what’s the deal? Why should we care about these guys? Andrew jumps into it with Bill Clerico, CEO and Co-founder to talk about crowdfunding, beating the likes of Stripe, Balanced and PayPal, and lessons he’s learning as a payments startup. If I look at your trajectory as a company, this wasn’t necessarily where you started. Crowdfunding
  21. 21. I N D U S T R Y V O I C E S 22 platforms didn’t exist back then. You now find yourself supporting a whole industry. Is being in this position a matter of good fortune as things have grown up around you? Bill Clerico: The way I look at it, it’s a little bit of luck and a little bit of skill. The company’s six years old and for six years we’ve been investing in this payment platform. From the beginning, we started in group payments, so we had to build a payment platform. Probably 90 percent of the work went into the platform, 10 percent went into the UI around like sending and receiving money among friends. That market wasn’t the right fit for our products, and we should have gone through a couple iterations to find the right market for us, but we were constantly investing in that platform. As a result, we have a platform that we’ve been developing for six years. It’s really robust, really full-featured; it’s geared towards the needs of sending and receiving money among little sellers and small buyers. We found that the crowdfunding use cases plugged right in. We realized, “Hey, let’s not build all the UI and try to figure out all the different use cases and nuances.” Let’s strip all that off. Let’s build an API and let’s allow partners to come build all that on top of us. Instead of trying to figure out all the nuances, let’s let our partners figure that out and we’ll be the platform underneath. We had this tremendous asset that we had built over the course of time and it matched up with the right market at the right time. WePay’s message talks to three buckets of clients, small business, marketplaces, and crowdfunding. Can you compare and contrast between those from a payments platform perspective? I think the common thread through these platform businesses is that they are technology platforms that enable small merchants to accept payments. An example is an SMB (small-medium business) on Constant Contact accepting payments through their software. Or it can be a babysitter on Care. com accepting payments through their software, or it can be a fund-raiser on GoFundMe accepting payments through their software. At the end of the day, it’s the smaller merchants that need to accept credit card payments. Solving that problem is actually really hard because underwriting the chargeback and fraud risk of smaller sellers is really difficult. They need to be pricing competitively and without monthly fees. They need an easy user experience for sign up, and need to get paid very quickly. All sounds like basic stuff, but they are really hard problems to solve in payments. We see different usage patterns across the platforms. In crowdfunding we see short spikes of fundraising that lasts a couple of weeks and then the account goes dormant. In SMBs we see a slow and steady trickle of income over time. And with marketplaces we can see really fast growth of their platform because there can be strong network effects. You also haven’t been shy about drawing distinctions with your competition. Can you name a couple of dragons that you’re looking to slay? Sure, we have a lot of respect for all the innovators in payments right now. There’s so much going on. The amazing thing is that the market is so large and growing so fast. There’s a ton of opportunity everywhere. Because of that, it becomes important to focus, and we’ve chosen platforms, which
  22. 22. I N D U S T R Y V O I C E S 23 we believe, are the most dynamic segments of ecommerce. Building the right tools for this segment as opposed to trying to do a lot of different things is very important for us. PayPal is in a huge number of businesses. They’re going international with a whole bunch of other tools. They’re really focused on mobile. Stripe is building a huge, universal developer platform that does many different things. In contrast, we believe that by focusing, we can deliver a lot of value. In addition to the features and the support that we provide to the market, the primary differentiator for us is risk. We will basically shield crowdfunding sites, marketplaces, and small business platforms from any kind of fraud risk. We take that on ourselves. Platforms can install our solution and we’ll protect them from fraud. And we can still enable all the payments that they want. That’s a big differentiator from our competition, like Balanced and Stripe. PayPal will do similar things in the area of fraud protection, but they don’t have the user experience or some of our features. And our API is easier to implement than the other guys. So let me ask you, which came first: the clarity or the funding? Raising money helps clarify your strategy. Yes, it’s really helpful to get external voices into the mix. There are some smart investors in your lineup. Can you say more about what transpired? We had a vision to work with platforms dating back a couple years. We’ve been working with GoFundMe and some of our other customers since they were really small companies and they helped us see the market. We worked with them at a very early stage. We saw the success they were having and we said, “Wow, there’s a huge opportunity here that’s much broader.” That helped us clarify things. When you go out and raise money, no one wants to hear a pitch of, “Hey, we’re trying to boil the ocean.” They want to hear about a very specific opportunity and how you’re going to align all your resources to go after it. In thinking through what it was going to take to raise capital, we had to really clarify our strategy and that was when we started to make some of these decisions on where to focus. We went out recently and got a really nice round done. We had the former CEO of Morgan Stanley who is also the former co-founder and CEO of Discover lead the round and all our existing investors participated as well. We have a nice slab of capital to go take on this opportunity. Where are you planning to spend your funds? Is international a top priority? Absolutely, when you think about platforms and all these sellers, marketplaces, and crowdfunding sites, and even small business software, they want to be global right away. They want sellers in the US. They want sellers in the UK. They want sellers in China. There’s no reason why they need to be isolated by geography. They want the capability to be able to onboard sellers from all over the world. They want to be able pay someone and to be able to underwrite the risks of sellers all over the world. They’re going to have challenges, but that’s why we’re investing in our infrastructure.
  23. 23. I N D U S T R Y V O I C E S 24 Our vision is that a marketplace or crowdfunding site can come build on us and then immediately sign up someone anywhere in the world without any exposure to risk. I think that’s a really powerful vision. It’s going to take a lot of work to realize that, but that’s our goal. Will your market development be direct, or will that be through partners? We work with acquirers in all these other geographies. Our vision is to put a global API in front of that so that partners do one integration with us and never have to sign up for anything else. We handle everything else on the back end, which is pretty unique. If you think of some of the other companies that have gone global, maybe you integrate with one gateway, but then there are different acquirers that you need to sign contracts with in all the geographies. That’s not our vision. Our vision is that you integrate with us once. We come to one agreement and we can take you global immediately, across the world because I think for platforms it’s an important competitive advantage — for them and for us. Let’s talk about Veda, could there be a WePay without Veda? No, I don’t think so. It comes back to our value position, which is onboarding these small sellers and allowing them to accept payments easily. Anyone can accept payments for a small seller; the acceptance part is not hard. The challenge is underwriting the risk of that seller so you don’t incur fraud in the process. To these ends, Veda does a couple things. First we use social media to help understand who the seller is. Second is the risk API which we announced at FinovateSpring. The platform can pass us data about the buyers, the sellers, and transactions, which in turn helps us to underwrite the risk. If you think about a buyer and seller on a marketplace, there are all kinds of great data that the marketplace has about them. For example, their reputation, their history, and how many times they’ve logged in. There’s all this great information that they can share with us that helps us make better fraud management decisions. Think of it as big data applied to small merchant underwriting. Without your small merchant underwriting, you couldn’t perform risk assumption.Without assuming risk, you wouldn’t have folks jumping on board. Exactly, we’d just be another payment processor. If I were an entrepreneur in payments what would you tell me? What have been the keys to your success? We sat down at the company a couple months ago just to reflect on the journey, and the unique things that we have done that have allowed us to make it this far. I believe that almost 99% of startups ultimately fail and in payments it’s probably higher. We used that to define a set of values for ourselves. There were two in particular that really applied well to us. First, we invested in relationships. I think that payments is a relationship business. You can’t start a payment company without backing. You’ve got
  24. 24. I N D U S T R Y V O I C E S 25 to go and partner with card associations, with an acquiring bank, a settlement bank. There are all these different parties doing the back end. There are fraud and risk questions, there are gray area questions, and there are compliance questions. Having really strong relationships with your partners in the back end and being really transparent with each other is a critical part of success. It allows you to take your platform through the many iterations and manage the bad things that happen, and the bad things that you wouldn’t want to have happen. You need to have partners that you stand behind, and they stand behind you. This applies to both your vendor side, the guys working on the back end, and also your customers. One of our larger customers is GoFundMe. We started working with those guys when they were tiny. That’s the relationship that we really invested in, fostered over time, and now they’re a great success story and a great customer for us as well. And the second core value? The other big bucket is having the courage to change. That’s our other core value. In payments, you have to invest a lot to get something up and running and it can be really hard to put that down. We had a whole direct business where we went direct to customers and we had an invoicing tool and we had a mobile app. We’re talking about tens, maybe hundreds of man years that went into building this software. Knowing when to pull the plug on that so that you can focus on what is working is critical. That is, unless you’re Steve Jobs and you know exactly what the market wants and you can go build it. As a startup there’s a process to learning that. So calling yourself out when something is not working, and then trying to fix it, is a critical piece. It’s interesting that payments business is a transaction based business and yet underlying it is so much relationship-building. One of my favorite things about the payments business is that your incentives can align almost exactly with your customers. For example, if GoFundMe grows, then WePay grows. It’s worth it for them to give us great feedback and help us improve our product. We want to help them grow and be successful as well. It’s not like I’m selling you software and I’m trying to extract as much flesh as I can out of you because you signed a contract. It’s really like a game that plays out over years. How can we both be really successful over time? That’s one of my favorite pieces of the business. Okay, cuisine question – Palo Alto, you’re heading out, where are you going? I’d probably head to San Francisco. That is heresy. There’s some good restaurants and some good places to be, but… You’re heading up to the city…. I usually head to the city. When we’re in Palo Alto my
  25. 25. I N D U S T R Y V O I C E S 26 favorite restaurant is a place down the hill called Evvia, which is a Greek restaurant. It’s really good, that’s my spot. We also have a local dive bar called the Nut House, which is right around the corner. That’s a WePay favorite as well. Thanks Bill. This has been great. Very exciting time in payments. Great talking with you too Andrew. It’s been a pleasure. About WePay WePay’s payments API is built specifically for platform businesses like marketplaces,crowdfunding sites and small business software. These platforms are empowering millions of users worldwide to unlock all kinds of creative commerce. Through its proprietary VedaTM risk engine, WePay gives platforms a flexible payments API that provides a great user experience while still being able to take on all their fraud risk and compliance burdens. Who’s providing the money? Investors include: Y Combinator, August Capital, SV Angel, Ignition Partners, Highland Capital Partners, Webb Investment Network About Bill Clerico Bill is CEO and co-founder of WePay, where he drives the company’s vision, strategy and growth. Bill and his co-founder Rich Aberman founded WePay in 2008. But the real roots go back to 2005 when Bill and Rich were roommates at Boston College. Back then they started a taxi advertising company in Hong Kong. The business ultimately failed but the entrepreneurial fire was lit. Andrew Barnes, Managing Director, Emerging Payments Barnes is a self-confessed payments “geek” and recognized entrepreneur working in Silicon Valley. He leverages his track record in business development and his network in startups, retail, and FI’s to analyze opportunities and solve market challenges in payments and mobile commerce. Barnes has held executive positions internationally with Sprint, Global One, and 2Roam Mobile. He founded the National NNN Investment Group, 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 at @AndrewinSV and Linkedin.

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