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Custom Underwriting and Risk Management Policies and Procedures – Payment Facilitation Focused Research
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Payment Facilitation Program, Custom Underwriting Policies and Procedures, Fraud and Compliance Management
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When the Internet, and then mobile and cloud-based technology, began to radically change the acquiring business, some independent sales organizations thought they could adapt by becoming software companies without changing the way they do business.
They were wrong, and that mistake is costing them dearly, argues Rick Oglesby, senior research analyst at Double Diamond Payments Research, Centennial, Colo. “Your average ISO is a distribution specialist selling a universal solution.” he tells Digital Transactions News. “The software industry isn’t like that. It’s very different from traditional payment-industry approaches to selling.”
The result of this mismatch is inevitable. “These guys haven’t figured out how to make money” on mobile solutions, Oglesby says.
So should ISOs become ISVs? Independent software vendors have shot to prominence as mobile and cloud point-of-sale technology has brought sophisticated business-management and marketing functions, once affordable only at big chains, within reach of small merchants, the ISOs’ bread-and-butter clients. Oglesby’s answer, laid out in 35 pages of closely reasoned text in a report released Thursday, is a carefully qualified “maybe.”
Digital Transactions, July 9, 2015
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The merchant acquiring industry faces continuing pressure from shrinking margins and disruptive competitors, but it has used the past five challenging years to seek out a position of strength.
Facing thinner transaction revenue and the torrid advancement of technology, many acquirers have stuck to the basics while also embracing digital products and security services to maintain their status in the payments food chain.
Merchants are becoming less receptive to re-pricing tactics, so acquirers can’t rely on interchange-plus pricing, bundled rates or flat-rate pricing to turn that tide, Annapolis said.
Yet, chief financial officers of acquiring companies say they are optimistic about the future for their industry and that margin compression is not a life-threatening issue, according to a separate report from payments research firm Double Diamond Group.
“Margin is really revenue and cost combined … revenue continues to go up, though a little less with each incremental transaction, but costs stay largely the same,” said the report’s co-author, Richard Oglesby, senior analyst at Double Diamond Payments Research.
The acquiring industry has dealt with a wave of new entrants and new technology the past few years. The landscape was again reshaped in recent months with the launch of Apple Pay and the consolidation of Google Wallet and Softcard.
In addition, Samsung acquired LoopPay before unveiling Samsung Pay on its newest Android phones, while PayPal is stepping up its acquisitions by purchasing Paydiant and CyActive ahead of the company’s separation from eBay.
“The threat was overblown a bit,” Oglesby said. “The acquirers have to distribute these services and there’s nobody out there that can distribute the way acquirers can.”
But even if these new threats were not instantly lethal, it would be foolish to ignore them for too long, Oglesby said.
“Acquirers don’t have to adapt to the speed of technology; they have to adapt to the speed of their competitors,” Oglesby added. “The reality is, acquirers and payments in general don’t change that quickly.”
ISO & Agent, March 12, 2015
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Sectors have a lifecycle that runs in stages from introduction to growth, maturity, decline and eventually death. The adverse publicity recently piled on the merchant acquiring sector evokes an image of vultures circling over the major firms, awaiting a roadside feast from their soon-to-be rotting carcasses. In this case, however, those vultures will probably drop dead from starvation long before their meal is ready.
Double Diamond Payments Research’s latest report concludes that merchant acquiring is healthy and vibrant, and will continue its path of steady, long-term growth. In fact, this sector will benefit from a technological revolution that offers even greater potential.
The report, Acquiring Acquirers: Why Industry Insiders are Bullish on the Acquiring Sector,takes insight from CFOs around the sector to provide a deep analysis of the market. It identifies key factors such as increased transaction volume fueled by the continued displacement of cash and checks, plus the expansion of value-added products that will drive revenue and margin expansion as well as increase free cash flow. Due to these factors, we expect that sector earnings before interest, taxes, and depreciation (EBITDA) will grow an average of 6.5% each year with EBITDA expanding from US$4.9 billion to US$7.2 billion between now and 2020.
There should be vultures circling your acquiring business, but they should be a different kind of vulture than the scavengers you might expect. They should be the ones that circle your business seeking an opportunity to invest. These vultures don’t seek rotting meat, but rather tasty morsels that can produce prime returns.
If that’s not happening for your business, then let us know, our report can help you make a better case to your potential investors, adjust your business strategy to maximize valuation, find the best investment or acquisition targets, or build a business case for future initiatives.
For more information about the report email Rick Oglesby at firstname.lastname@example.org.
Transaction Trends, March 2, 2015
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Rick Oglesby, senior analyst at Double Diamond Payments Research, says Apple has killed the mobile wallet. No offense to Mr. Oglesby, but I think just the opposite is true. In fact, I believe Apple has done itself and its customers a gross injustice by walling off access to its wallet contents, which currently include payment data as tokens.
Apple is the only company that owns and controls the hardware, firmware and operating system of the device used. And it has big enough political chops to push the product through traditional channels, all while signaling the death knell for the mobile wallet supported by the same channel that couldn’t say “no” to Apple the way they did to Google.
Apple killed the mobile wallet? No, not in the least. Has it influenced the way competitive wallets grow? Absolutely. But I wouldn’t run out to buy shares in chip manufacturers because of it. Software-only solutions that use proven token generation, storage and transmission methods are not dead. They will just take a new route to fruitition.
Mobile Payments Today, January 26, 2015
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Google Wallet is reportedly in talks to buy NFC-based mobile wallet rival Softcard, causing speculation about how the combination might stack up against Apple Pay and other emerging wallet concepts. The rumors surfaced following news that Softcard was shedding 60 employees and consolidating its operations. Softcard’s sale to Google Wallet could fetch between $50 million and $100 million, according to reports in TechCrunch and the Wall Street Journal.
What are the competitive advantages of Google Wallet combined with Softcard, versus Apple Pay, which is a hit with its iPhone 6 user base? Observers note that Android has about 60 percent of the smartphone market, with latent opportunity to expand now that Apple Pay—and the emergence of HCE technology—has rekindled interest in NFC payments at the POS.
The combination makes a lot of sense, according to Rick Oglesby, a senior analyst and consultant with Double Diamond Group. “Operating system owners like Google and Apple are in the best position to make mobile wallets work,” he says, because each company’s operating system is integrated with available mobile apps and smartphone browsers, enabling maximum functionality for mobile wallets. At the same time, Softcard owns mobile wallet carrier relationships, which offer value, Oglesby believes. “Google is in the best position to make an Android mobile wallet work, but Google would benefit greatly from carrier support that could be achieved from buying Softcard.” Executives at Google Wallet and Softcard were not available for comment.
PayBefore, January 20, 2015
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After years of watching quietly while Bling Nation, Google, Isis/Softcard, PayPal and others tried and failed to popularize the digital wallet, Apple finally launched its product in October. What’s the impact? The concept of the digital wallet is now dead, and it’s been replaced by the physical-digital wallet.
The traditional leather wallet is a storage mechanism for consumers’ cash, credit, debit and loyalty cards and coupons. The first generation digital wallet, starting in the late 1990s with PayPal and eBay, was a software solution that provided convenient way to store cards for repeat online purchases.
Once the iPhone came about and mobile commerce began to take hold, Apple extended this model to iTunes, and Google followed with Google Play, both providing a software solution for repeat online purchase via the mobile device. Braintree and Stripe extended this even further, capturing the in-app and mobile transactions that took place outside of iTunes and Google Play.
Mobile network operators (MNOs) sought to take the digital wallet concept offline by storing payment credentials within the only part of the mobile device that the MNOs could control — the SIM card, and transmitting the credential to payment terminals via a near field communications (NFC) radio. This introduction of hardware componentry into the payments game created a tug-of-war between the haves (those that had influence over hardware components) versus the have-nots (those who did not have influence over mobile hardware).
So, we are left with the death of the digital wallet concept and only the physical wallet survives, but in a mobile form. What does this mean? It means that banks can pretty much give up on their plans to launch their own wallets, they will need to partner with the operating system owners, or go home.
Mobile Payments Today, January 2, 2015
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Apple Pay was the talk of the Money20/20 trade show last month, but should it have been? Before Apple Pay can become a dominant payment vehicle, merchants need the ability to accept it (only about 2% of merchant locations can do so today), so it’s far more important to complete that prerequisite.
Why is this transformational? Innovators of any type (payment networks, payment facilitators, digital-wallet providers, loyalty providers, solutions for the automated clearing house, etc.) could obtain instant acceptance at a wide variety of POS locations. It also removes massive barriers to entry, which will create competition across the board.
Under this model, app-store providers can monetize their technology solutions and merchant footprint through a much broader set of software solutions that they would not be able to create on their own. The same is true of software developers. They can monetize their ideas and code in ways that were never before possible.
Last but not least, acquirers and independent sales organizations can monetize their distribution channels across an entirely new set of services (not just payment and POS), without needing to become experts in how merchants run their businesses. And, by creating a wide set of new, marketable services, app stores also reduce the dependency these providers have on the payment networks. The payment networks could soon be just another app within a store that includes thousands of apps. For example, banks or groups of banks could offer payment services directly to merchants via the app stores, cutting out the payment networks altogether.
Apple has proven the app-store model via its consumer app store and devices. Android/Google/Amazon have continued that model and have shown that it is truly scalable. Now merchant app stores are next, and if this takes off everything we know about the payments business could change.
Enablement of NFC payments to accept network-sanctioned solutions such as Apple Pay may cost a merchant from a few hundred to a few million dollars. For the same price, however, merchants could eliminate the need for networks altogether, and that could be priceless.
Digital Transaction, December 8, 2014
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Mobile payments is such a new concept that many in the media continue to inaccurately report what happened this week between Apple Pay and CVS. Here’s what really happened, and why, no matter what, Apple wins, some experts say.
There have been some reports that cite sources close to MCX who describe a mobile payments checkout process that requires several steps and two bar code scans. But MCX has not released a final product and has been hush-hush, so only time will tell. Apple Pay requires only one touch of an iPhone’s home button.
“MCX could streamline its payment system by leveraging the Apple Passbook mobile wallet and the development tools that are available through Passbook,” says Rick Oglesby, senior analyst at Double Diamond Group, a payments consulting firm whose specialties include mobile payments. Passbook is Apple’s mobile wallet app, which retailers and other organizations can integrate with to store loyalty cards, event tickets and other “passes.” Passbook is also the hub of Apple Pay, storing credit and debit cards.
Apple Pay and NFC represent just one component part of Passbook. Those that wish to compete with Apple Pay will have to do so through Passbook; stand-alone apps won’t be good enough, Oglesby says. So Apple wins either way because it brings consumers and capabilities that can’t be accessed anywhere else.
“This isn’t about retailers versus Apple, it’s about retailers versus payment networks fighting over how they will access Apple’s customers. If you think about it that way, it’s pretty clear that Apple is in the best position. These retailers consider the payment networks to be unnecessary and expensive middlemen.”
Internet Retailer, October 28, 2014
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With Apple Pay now confirmed to launch on Monday, we are closer to seeing the impact it will have on mobile-payments acceptance, technologies, and standards.
In the meantime, much of the debate concerning Apple Inc.’s payments venture has missed a crucial point. While the discussion has centered on whether Apple Pay will energize mobile payments and the ecosystem for near-field communication (NFC), it is far more important to consider that Apple Pay is merely a component of Apple’s Passbook app, and then to evaluate what the Apple Pay/Passbook combination could mean for the future of payments.
At first glance, it appears that Apple has positioned itself in alignment with the rest of the payments ecosystem to reinvigorate mobile payments. However, in the greater Passbook context you can see that, by positioning itself alongside the payments ecosystem, Apple has greatly bolstered its potential as a payments disruptor.
The key is Passbook. Through Apple Pay, Apple has incorporated the major payment brands and the largest issuers into Passbook, thereby legitimizing Passbook as a wallet. Apple and its payments-network and financial-institution partners have already begun to aggressively promote Apple Pay in an effort to make Passbook a central payments decision point for consumers.
Digital Transactions, October 16, 2014
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With the launch of Apple Pay, Apple and its partners took the single largest step toward mobile payments enablement that the payments industry has seen, but it’s still probably not enough to move the needle for offline mobile payments.
This is, without a doubt, the single biggest move towards the creation of a broad-based mobile payments infrastructure since mobile payments were first conceptualized. However, we also must look at what was not accomplished.
So those of us that were watching the Apple event and expecting payments disruption were left with a case of disruptus interruptus. For now, Apple has chosen to play within the payments system to launch a starter product for offline payments. But this starter product is not enough. Payments companies know it, consumers know it, merchants know it, and Apple knows it. There is much more to come.
Mobile Payments Today, September 15, 2014
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A mobile wallet from Apple could make all the difference in the world to the mobile payments market, says Rick Oglesby, a long-time mobile payments and mobile wallets industry observer and senior analyst at Double Diamond Group, a payments consulting firm.
“With every new iPhone, Apple sells millions of units within just days of launch, and those users want to test drive all of the new features pretty fast,” Oglesby says. “If Apple is truly making a big bet on payments and has the major card companies involved, there is no other provider that can make a bigger difference. And as for NFC, merchants may not need much in the way of new hardware if Apple does this right. Apple has a long history of reinventing things, and when you are talking about computer-to-computer communication, like an iPhone to a POS system, a terminal really shouldn’t be necessary. NFC is likely a part of Apple’s solution, but it could well be a solution that does not use an NFC terminal.”
Internet Retailer, September 3, 2014
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