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Stratfor, the Crack Geopolitical Soothsayer, Predicts the Demise of Cash. I predict a Payment Facilitator Boom!

Stratfor, the Crack Geopolitical Soothsayer, Predicts the Demise of Cash. I predict a Payment Facilitator Boom!

Europe is axing the 500 Euro Note. Crosshairs are on the Ben Franklin, and cash looks to be on a long slow death. This spells opportunity for electronic payment, but to get there someone has to enable the hundreds of millions of small merchants globally. This will — in fact it MUST — happen through Payment Facilitators. Click on this article in PaymentFacilitator.com to see why.

Not Your Father’s ISO: How Tech Is Forcing Acquirers To Make a Crucial Choice

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

What’s next for Square after Jack Dorsey’s move?

SAN FRANCISCO >> As Jack Dorsey heads to Twitter to steer that company through a rocky patch, his other company, Square, is staring down a future that just got a whole lot murkier.

Square, financial services, merchant services aggregator and mobile payments firm, finds itself without a full-time leader at a critical juncture — it is losing money and competition is steep. With Dorsey, Square’s cofounder and CEO, taking over the chief executive post at Twitter on an interim basis, speculation — which Dorsey did not deny when asked Thursday — abounds that he wants the Twitter gig permanently.

If that happens, Square will likely find itself looking for a new leader and perhaps a bigger company to buy it, say analysts who study the company and payments industry.

“It’s been the case for at least two or two and a half years now that Square has tried to position itself to get sold,” said Sam Hamadeh, founder and CEO of PrivCo, a financial data provider on major privately-held companies. “Everyone in M&A knows that they are shopping the company around. They are really hoping someone like Google steps up and buys them, they are praying for that, because the financials are horrific.”

Santa Cruz Sentinel Business, June 12, 2015

Report: Android Pay won’t earn Google a share of mobile payments transactions

Google will have to explore other avenues to earn money from its recently announced mobile payments service, Android Pay. Unlike rival Apple Pay, Android Pay will not earn Google a percentage of each transaction processed via the payments service.

According to a report from The Wall Street Journal, this is “because Visa Inc. and MasterCard Inc., which operate the dominant payment networks, recently standardized their ‘tokenization’ card-security service and made it free, preventing payments services from charging fees to issuers.”

Tokenization, when applied to data security, says Wikipedia, is the process of substituting a sensitive data element with a non-sensitive equivalent, referred to as a token, which has no extrinsic or exploitable meaning or value.

In the case of mobile payments, tokenization replaces sensitive credit card details with a unique code – a token – that can only be used once. In this manner, credit card details are never transmitted or shared with merchants, adding an extra layer of security.

SiliconAngle, June 8, 2015

Google’s Android Pay Will Not Collect Transaction Fees From Participating Credit Card Companies

Google has officially dropped transaction fees for credit card establishments engaged with Android Pay, the company’s highly anticipated mobile payments service.

The announcement could force other businesses offering similar services to reconsider their terms with participating credit card issuers. Banks that are unhappy with sharing fees could use Google’s move as an example to gain the upper hand in future deals.

As a basis for comparison, financial companies on board with Apple Pay allow Apple a 0.15 percent share of the total value per credit card transaction. The tech giant collects a half-cent for each purchase made using a bank debit card.

“This is a bold move on behalf of the banks,” said Rick Oglesby, head of research at Double Diamond Payments Research. “They’re now taking a stand against similar deals. It could easily turn into a standoff.”

Payment Week, June 8, 2015

Google reportedly won’t take a cut from Android Pay transactions

Android Pay is a near identical clone of Apple Pay, but it won’t be anywhere near as lucrative, according to a new report. Unlike Apple, Google isn’t taking a cut from Android Pay transactions, so the service will literally be offered for free.

The Wall Street Journal reports that the reason for this is “because Visa Inc. and MasterCard Inc., which operate the dominant payment networks, recently standardized their “tokenization” card-security service and made it free, preventing payments services from charging fees to issuers.”

Tokenization is the system that swaps credit card data like account numbers, expiry dates, and security codes with a unique string of numbers (token) that can only be used once. It’s much safer than traditional transactions, because it means credit card details are never shared with merchants.

TechnoBuffalo, June 7, 2015

Google Misses Out on Apple’s Slice of Mobile Transactions

Google Inc. won’t earn any transaction fees from credit-card issuers for its coming mobile-phone payments service, unlike Apple Inc., because of evolving ground rules for the services.

Credit-card issuers hope the changes pressure Apple to trim or eliminate its fees, say industry executives, highlighting the speed at which the economics are changing in the evolving mobile-payments business.

Google disclosed its payments service, Android Pay, in late May, with wireless providers, payment networks, retailers and banks, stepping up competition with Apple Pay, which launched late last year.

Hundreds of financial institutions scrambled to work with Apple Pay, afraid of being left at a competitive disadvantage. As a result, big banks and other card issuers agreed to give Apple 0.15% of the value of each credit-card transaction. For bank debit cards, Apple collects a half-cent per purchase, according to people familiar with the service.

“This is a bold move on behalf of the banks,” said Rick Oglesby, head of research at Double Diamond Payments Research. After agreeing to Apple’s terms for Apple Pay, “they’re now taking a stand against similar deals. It could easily turn into a standoff.”

Many of Apple’s contracts are for three years, and have roughly two years to go, according to people familiar with the situation.

Wall Street Journal, June 5, 2015

With New Digital Program, Visa Drops Token Fees, Offers Issuers Single Connection to All Services

With its Visa Digital Enablement Program, announced last week on the same day Google Inc. unveiled Android Pay, Visa Inc. has introduced application programming interfaces for card-issuing institutions to link to potentially thousands of digital-payments services with a single integration and without separate business agreements for each.

Visa also hopes to make those arrangements virtually cost-free for issuers. Services that connect to VDEP agree not to levy fees. And with VDEP Visa itself has decided to permanently waive the tokenization fees it devised last year and put on a temporary hold. The fees reportedly included a 7-cent charge for each token and 2 cents for each decline.

That’s where Visa says VDEP will make things easier. Instead of confronting commercial contracts and integrations individually with each service, issuers will be able to turn on a service with a single connection to Visa. “An issuer will have the ability to throw a switch,” notes Rick Oglesby, a senior analyst at Double Diamond Group, a Centennial, Colo.-based consultancy who follow mobile payments.

Digital Transactions, June 2, 2015

Google’s Android Pay Debuts as an Apple Pay Fighter While Wallet Takes a Back Seat

Google Inc. is betting its latest mobile payments incarnation—Android Pay—will work better than Google Wallet did. Announced Thursday at Google I/O, its developer conference, Android Pay is poised to compete directly against Apple Inc.’s Apple Pay, PayPal Inc., and the upcoming Samsung Pay for a piece of the burgeoning mobile-payments market.

Android Pay, which Google says will be available in coming months, will work with smart phones using KitKat and Lollipop versions of the Android operating system. Nearly all of these phones also have near-field communication (NFC) technology. Together, those two OS versions account for 49.5% of Android phones. That’s about 26% of all U.S. smart-phone subscribers, according to Digital Transactions News estimates. By contrast, the iPhone 6 and 6 plus, which work with Apple Pay for in-store transactions, account for about 8% of U.S. subscribers, DT estimates.

Google’s strategy, which is a close replica of that of Apple with Apple Pay, makes the most sense from a business and technology standpoint, says Rick Oglesby, head of research at Double Diamond Group, a Centennial, Colo.-based advisory form.

“If the major wallet players approach banks and merchants with compatible offerings, they strengthen the business cases for participation and acceptance,” Oglesby tells Digital Transactions News in an email. “Apple put the model in place to gain issuer and network participation, so Google is following that model as well. Then, Apple and Google will actually be teaming up to gain merchant participation.”

Digital Transactions, May 28, 2015

EMV for Small Merchants Is a Hard Sell, But It’s Easier With The Right Approach

Selling payments services to small merchants is never easy. Now, throw in EMV and its attendant complications, add in merchant ignorance of the technology, and the sales pitch gets more complex.

With the impending liability shift set for Oct. 1, independent sales organizations, acquirers, processors, and banks are scrambling to get merchants on board with EMV. The chip card technology should put a dent in point-of-sale fraud, but it can’t do that if consumers can’t use their cards at their favorite merchants.

Small merchants, in particular, are poised to be least ready come October. Getting them to listen to the EMV sales pitch might be tough, but there are ways to make it a little more appealing, as outlined in “10 Ways To Sell Small Merchants on EMV,” a recent Digital Transactions webinar.

One tip is to explain how security-conscious consumers might balk at using magnetic-stripe cards instead of their chip cards. Issuers will be touting the security benefits of chip cards, and while consumers may not understand EMV, they’ll have seen the publicity about data breaches and will want to use it.

Another tip is to bundle EMV with tokenization and encryption services, which is especially useful for merchants that sell online. Using these technologies can do a better job of protecting sensitive card data.

Sales agents can bundle EMV with other services, too, says Rick Oglesby senior analyst at Double Diamond Group, a Centennial, Colo.-based payments advisory firm. Use POS systems, with business-management features, to lead the sales pitch, he suggests.

Digital Transactions, May 15, 2015

How Apple Forced MCX Down a New Path

Best Buy’s move to accept Apple Pay in its stores is the clearest public sign yet that the Merchant Customer Exchange has radically altered its vision of and ambitions regarding a retailer mobile wallet.

MCX’s CurrentC wallet was designed to lower interchange for merchants through the use of a cloud-based mobile wallet, while keeping merchants in control of consumer data. When Apple Pay launched last year with a structure that allied with the banking industry’s interchange pricing structure — and offered a bump in security —  it shifted the very nature of the market that MCX was developing for.

The MCX of today is radically different from the MCX that formed in 2012, said payments consultant Todd Ablowitz, who attended some of the group’s earliest meetings.

“At the time they started this, their hope was to run the table in mobile payments. They wanted to lock up big retailers,” said Ablowitz, who today is president of The Double Diamond Group. “But the nature of a consortium makes it move slowly. By any measure, MCX has moved slowly. Now, with the benefit of seeing Apple in the market and the quality of its offering, it seems almost silly to expect a retailer to be exclusive to MCX.”

Steve Mott, principal with payments consultancy BetterBuyDesign, said the idea of exclusivity made a lot more sense in the beginning, when MCX’s contracts were written and signed.

“The exclusivity idea was a logical way to help get off the ground with a new product in the heady period of the first generation of mobile wallets. It would be no different with a shared loyalty program–why support competing offers? That makes no business sense,” Mott said. “But now, knowing that the consumer adoption of mobile wallets and payments is a long, uphill climb for everyone—including Apple—there is less need to incubate or protect a nascent system. That plus Apple, which gets a free ride on its behavior from many people, clearly is putting pressure on merchants that naturally want more allocations of Apple products to sell in their stores.”

MCX’s goal must be to coexist with other wallets, rather than push them out of the market, Ablowitz said.

“The mobile operating system manufacturers—Apple and Google—they will win. This isn’t in question. They will win,” Ablowitz said.

PaymentsSource, April 28, 2015

Square introduces $Cashtags, clickable payments for businesses

Square, the startup that helped heat up the tech world’s interest in mobile payments, seems determined not to lose ground to giant rivals like Facebook and Google, which are posing direct threats.Square-logo-black.jpeg

In a move that could help improve its profitability, Square, the six-year-old payments startup,announced Monday that it is expanding its money transfer service, called Square Cash, from consumers to include businesses throughout the U.S.

The company said Monday that it is now processing more than $1 billion in peer-to-peer payments annually.

Square is effectively doubling down on payments, which was a largely ignored sector populated mainly by financial firms until a few years ago. Now. is attracting the biggest names in tech, eager to capitalize on their vast networks of users. Facebook confirmed last week that it will add a payments option to its Messenger application, giving users a way to quickly send and receive cash from friends and family. Others like Google, Amazon and Venmo, currently owned by eBay, previously launched similar efforts with some mixed results.

The fee to businesses for the new payments feature is lower than Square’s fee for its credit card processing system, which demands 2.75% per transaction. Stripe, a rival mobile payment processor, charges 2.9% for each transfer plus $0.30 per successful charge.

“Peer to peer payments are typically a loss leader,” Rick Oglesby, a senior analyst for Double Diamond Payments Research, has said. “Consumers are just not accustomed to paying a fee in order to send money to someone, but there is a cost so most companies do it for free as a loss-leader for something else.”

Mashable, March, 23, 2015

Reports of Acquirers’ Death Overblown, But a Threat Remains

Concept conceptual 3D male businessman on stair or steps over suThe 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

Is Acquiring Dead Meat or a Tasty Morsel?

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 rick@doublediamondgroup.com.

Transaction Trends, March 2, 2015

While Many Decry Margin Compression, Report Paints Sunnier Picture of Acquirer Profit

Many merchant-services executives have complained for years about so-called margin compression, a relentless loss of profitability driven by competition on price per transaction. But now two researchers argue acquirer profitability, far from collapsing, is actually much better than widely thought.

“There has been a lot of talk about margin compression, but the reality is margins have been expanding,” Rick Oglesby, senior researcher at Centennial, Colo.-based Double Diamond Payments Research, tells Digital Transactions News.

Oglesby and Marc Cochrane, a researcher and consultant at Double Diamond, last week released a report called “Acquiring Acquirers: Why Insiders Are Bullish on the Acquiring Sector” that looks at acquirer profitability as one factor among many that make acquirers attractive acquisition candidates.

The authors acknowledge that independent sales organizations and merchant processors do indeed confront significant pressure on merchant pricing. In recent years, much of this has been brought on by the nearly 5-year-old Durbin Amendment, which not only capped debit card rates but also led to merchant demand for greater pricing transparency in the form of so-called interchange-plus pricing.

Digital Transactions, February 23, 2015


Why Billing Revolution Is Betting on Credit Cards for Mobile Payments

Billing Revolution is among a crop of startups that are trying to build mobile-payments businesses that don’t rely on new technologies like near-field communication (NFC), a sophisticated interactive technology that has become bogged down in disputes between banks and mobile carriers. That could be an advantage for the startups, say some. “I continually hear from payments-industry players, ‘How do I make money now on mobile payments,” says Todd Ablowitz, president of Centennial, Colo.-based consultancy Double Diamond Group, in an e-mail message. “Anything that can generate revenue?without waiting for macro changes in the landscape (like NFC phones)?is highly attractive.” Ablowitz says he is advising Billing Revolution.

Digital Transactions News, September 24, 2009

Apple Killed the Mobile Wallet? No, Not in the Least

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

Google Wallet Eyeing Softcard Combo?

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

Small Businesses Have Even More Credit-Card Reader Options

Small business owners looking to ditch traditional credit card readers have more options than ever.

Online retailers Amazon and Etsy are just two of the latest companies to offer mobile credit card readers to small companies, joining the likes of Square, PayPal and Intuit. Mobile credit card readers are small devices that stick into a smartphone or tablet and allow credit cards to be swiped and accepted from anywhere. Small business owners say mobile readers can be cheaper than traditional in-store credit card readers, which often charge higher fees.

Businesses need to do the math to see if using a mobile credit card reader is cheaper than a traditional one, says Todd Ablowitz, president of payments consulting company Double Diamond Group. Bigger businesses that accept a lot of credit card payments may find traditional credit card terminals cheaper in the long run. They charge monthly fees, but they generally take a smaller percentage of each transaction, sometimes below 2 percent, says Ablowitz.

Not all card issuers will be offering chip-based cards right away, Ablowitz says, so small businesses will have to decide if they want to make the switch based on how many chip-based cards their customers start to use.

The New York Times, January 7, 2015

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