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Friday, February 23, 2018

ETA update: Transact 2018, Transact Tech NYC, activism

T he Electronic Transactions Association opened 2018 with a packed agenda. Following are highlights of particular interest to payment professionals. Of immediate importance to those planning to attend the ETA's annual Transact tradeshow, taking place April 17 to 19, 2018, in Las Vegas, the deadline for a discounted rate on early registration is Fri., Feb. 23. For registration details, visit .

New to the Transact exhibit area will be the Contactless Zone, presented by FreedomPay Inc., which will showcase the innovation and collaboration advancing growth in contactless payments. "As consumer expectations for payments evolve, companies must look to contactless to find a way forward," said Jason Oxman, CEO of the ETA. "Contactless payments offer better security, convenience and opportunities for innovation."

ETA Transact will also present a fireside chat with Lou Anne Alexander, Group President at Early Warning Services LLC. Alexander will discuss how person-to-person (P2P) and mobile applications are changing the payments industry. As a company, Early Warning offers real-time multiple use cases through its Zelle Network, including P2P payments, business and government disbursements, check deposit and bill payments.

Over the years, ETA Transact has gained recognition as an exemplary gathering place for individuals engaged in all aspects of the payments ecosystem. ISOs, value-added resellers, independent software vendors, large financial institutions and technology companies are invited to network and participate in educational sessions scheduled throughout the event. More than 200 companies are expected to exhibit this year.

Transact Tech NYC, federal spotlight

On March 13, 2018, the ETA will host the first event in its 2018 Transact Tech series. Transact Tech New York City will take place at the American Express Tower, in partnership with the International Biometrics+Identity Association. The event will focus on next-generation authentication methods such as advanced biometrics and artificial intelligence, as well as data security and the changing POS experience. To view the full agenda, visit .

Additionally, as a global trade association representing over 500 payments and technology companies, the ETA plays an active role in Washington, D.C. In February, Oxman testified before the House Financial Services Subcommittee on Financial Institutions of Consumer Credit on how ETA members and the payments industry are expanding the use of financial technology to combat fraud.

"ETA and its member companies share a commitment to protecting consumers from harm and will continue to push for sensible policies and encourage policymakers to take a collaborative approach with our industry," Oxman told congressional lawmakers.

During his testimony, Oxman unveiled the 2018 update to the ETA's Guidelines on Merchant and ISO Underwriting and Risk Monitoring. He also reinforced the ETA's support for measures like the Office of the Comptroller of the Currency's proposed fintech charter, national security requirements and uniform data breach notification standards, which have been developed with a collaborative approach to solving pressing issues.

At the end of his testimony, Oxman commended the subcommittee and reconfirmed the association's commitment to working cooperatively with Congress, federal regulators, and the industry toward the common goal of preventing fraud and expanding financial inclusion. For a copy of Oxman's complete testimony, visit .

DOJ steps up cybersecurity vigilance
Thursday, February 22, 2018

T o bolster efforts to eliminate national cyber threats through detection, deterrence and disruption, Attorney General Jeff Sessions, on Feb. 20, 2018, ordered the U.S. Department of Justice to create a new Cyber-Digital Task Force. The new entity's assignment is to canvass global cyber threats and identify how federal law enforcement can more effectively thwart malicious attacks.

"The Internet has given us amazing new tools that help us work, communicate and participate in our economy, but these tools can also be exploited by criminals, terrorists, and enemy governments," Sessions said. "At the Department of Justice, we take these threats seriously. That is why today I am ordering the creation of a Cyber-Digital Task Force to advise me on the most effective ways that this Department can confront these threats and keep the American people safe."

Threats identified by Sessions run the gamut from disabling critical infrastructure to information theft and device exploitation, which impact both public and private sectors.

"Given recent events, I think everybody is worried about potential Russian hacking, or hacking in general, but I think regardless of the political aspects of it, it really outlines that people can do just about anything they want, if we don't protect ourselves, and that's true," said Darrel Anderson, President of Conformance Technologies LLC, an automated Payment Card Industry Data Security Standard-compliance and data protection provider serving over 500,000 small and midsize businesses globally.

"The federal government has been ratcheting this up for four or five years now, and really putting heat on the card brands, merchant associations, the banking associations, to step it up," Anderson said, noting that in monitoring larger client merchant portfolios in the private sector, there is not an hour that goes by that his firm doesn't flag suspicious activity, whether that be at the merchant end or someone attempting to exploit a merchant.

Broad sweeping government effort

On Jan. 5, 2018, in a separate but related development, the U.S. Department of Commerce and U.S. Department of Homeland Security released a draft report to President Trump in response to a May 2017 Executive Order issued to strengthen the cybersecurity of federal networks and critical infrastructure. The report contains supportive measures to be taken by the government and private sector to reduce automated cyber-attack threats.

A memo addressed to the heads of department components expected to join the new task force stated that malicious use of technology poses an unprecedented threat to the nation. "While computers, smart devices, and other chip-enabled machines ‒ as well as the networks that connect them ‒ have enriched our lives and have driven the economy, the malign use of these technologies harms our government, victimizes consumers and businesses, and endangers public safety and national security," Sessions wrote.

The Cyber-Digital Task Force will be chaired by a senior DOJ official appointed by the Deputy Attorney General and will initially consist of representatives from the department's Criminal Division, National Security Division, U.S. Attorney's Office, Office of Legal Policy, Office of Privacy and Civil Liberties, Office of the Chief Information Officer, the ATF, FBI, DEA, and U.S. Marshals Service.

The attorney general requested an initial report from the Task Force detailing the DOJ's current cyber-related activities and initial recommendations be presented no later than June 30, 2018.

Google Pay replacing Android Pay, Google Wallet
Wednesday, February 21, 2018

A lphabet Inc., d.b.a. Google LLC, disclosed Feb. 20, 2018, that the Google Pay mobile app is nearing completion. The newly branded Google Pay mobile platform will absorb the Android Pay and Google Wallet brands, broadening and consolidating their capabilities, according to company representatives. The legacy mobile apps were part of the company’s iterative journey dating back to 2011, when Google partnered with Sprint to launch Google Wallet on near field communication (NFC)-enabled Nexus S 4G phones and Google's subsequent carrier-agnostic launch of Android Pay in 2015.

Google representatives said the new Google Pay app will replace Android Pay on Android phones. Consumers may notice subtle differences in the user interface, which is designed to display credit, debit and loyalty cards in a scrolling menu below the default payment card. An optional geolocation feature displays nearby stores that accept NFC payments.

Built to scale

Google Pay is accepted at numerous retail locations, including McDonalds, Dunkin Donuts, Whole Foods, Trader Joe’s, American Eagle Outfitters, Best Buy and the Disney Store, according to Google’s website. The mobile app is also widely supported by leading financial institutions such as Chase, Capital One, Citi and Bank of America.

Google noted the Google Pay platform is designed for a global merchant and consumer base, and that enhanced security and a simplified checkout experience can improve conversions and reduce shopping cart abandonment by enabling customers to pay in-store, online and within the app with four taps, compared with an average of 120 taps on traditional POS systems. “Your customers already use our products,” the website states. “Now they can use them to pay you.”

A growing number of payment processors and acquirers have certified the Google Pay app and support the Google Pay application programming interface. Current processing partners include Adyen, Braintree, EBANX, Paysafe, Stripe, Vantiv and Worldpay. Google revealed additional partnerships with ACI Worldwide, Cybersource, First Data Corp., Payture and Square are currently in development.

Google reported its global installed base comprises approximately 1 billion Google Chrome users and 2 billion Android device users. These users represent a captive audience for Google Pay, which the company describes as free to use and easy to set up, using only 10 lines of code. The app enables customers to access stored credit or debit cards, stay in control, and securely maintain their preferred payment methods, the company stated.

Top four faster-payments contenders emerge, Mercator says
Tuesday, February 20, 2018

I n July 2017, a Federal Reserve-commissioned task force issued a call to action with the ambitious goal of making faster payments available to every consumer and business in America by 2020. While "faster payments" is a relative term and many issues are as yet unresolved, recent research by Mercator Advisory Group indicates progress is being made, especially among four faster-payments solutions with "compelling use cases." Mercator is an independent research and advisory services firm exclusively focused on the payments and banking industries.

"[P]ayment platforms and products that offer the ability to send and receive transactions within seconds (or at least minutes) are beginning to be launched in the United States," Mercator stated. "Not since ACH and wire transfer became available has a truly new way to move money been introduced."

In Faster Payments: U.S. Forecast, 2017–2021 Mercator identifies the top four faster payments solutions as Zelle, Mastercard Send and Visa Direct push payments, The Clearing House RTP product, and same day ACH. It discusses these competing options and offers projections through 2021 of person-to-person, business-to-business and business-to-consumer transactions, while also noting that "adoption will depend on the value that faster payments provides the counterparties, the comparative price of a faster payment option, and the number of competing options available in the market."

Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report, stated that without a regulatory mandate requiring uniform adoption of a single faster-payments platform, the U.S. market is developing several solutions to move payments quickly. "At this early stage of faster payments development, we have seen creative development for specific markets and use cases," she said. "This approach is fostering a competitive market with multiple options, but for financial institutions, processors, and other participants, it will be difficult to know when, how, and with which services to jump into the faster payments fray.”

Report highlights

Mercator also identified four highlights from the 16-page report, as follows:

  1. Projected volumes for the U.S. faster payments market by segment through 2021
  2. Comparison of available solutions including data formats, relative market pricing levels, transaction limits, and other characteristics
  3. Definition of the material differences between faster payments and real-time payments
  4. Analysis of the potential for the Federal Reserve to play a more active role in support of this new payment type

So, is it realistic to expect a major shift in the way the nation's payment system operates in less than three years? According to Patti Murphy, Senior Editor and long-time columnist for The Green Sheet, the answer is no.

"It took seven years to implement the United Kingdom's Faster Payment Service – a system the Fed has pointed to as something to emulate, and by most accounts, it only handles a fraction of that nation's payments," she wrote in "Road to faster payments is still a work in progress," The Green Sheet, Aug. 14, 2017, issue 17:08:01. "Seven years is fast compared to the pace of change in the United States. The ACH, for example, was created in the 1970s as a faster, better alternative to checks. But ACH transaction volumes only surpassed check volume a few years ago; the biggest shift has been among consumers shunning checks for debit cards. Nearly half of all business-to-business payments in the United States are still made by check, according to the Fed."

She also mentioned the difficulties encountered with the U.S. transition to EMV (Europay, Mastercard and Visa) technology. "Despite several years' prep time and the threat of ruinous financial liability if EMV devices are not deployed and customer card data becomes hacked, millions of U.S. merchants still authorize cards using mag stripe readers," she wrote.

Still, the Fed, not known for embracing rapid innovation, has provided vision, and according to Mercator, some of the industry's most powerful players have stepped up to heed the call for change.

Proposed REFER Act extends marijuana protections
Friday, February 16, 2018

T he U.S. Department of Justice's tough stance against marijuana may have unintentionally sparked a backlash among legislators and cannabis industry lobbyists. Reaction was swift when Attorney General Jeff Sessions rescinded the Obama-era Cole memo, which recommended not prosecuting marijuana-related activities in states where the practices were legal. Days after Sessions' Jan. 4, 2018, memo that reinstated the Controlled Substances Act of 1970, a movement was underway to protect medical and recreational marijuana usage across the United States.

On Jan. 11, the House of Representatives introduced the Restraining Excessive Federal Enforcement and Regulations of Cannabis Act (REFER). Currently under review by the Subcommittee on Crime, Terrorism, Homeland Security and Investigations, the act would protect individuals and companies from federal prosecution for marijuana crimes in states that have decriminalized these activities.

"Unfortunately for Sessions, both Democratic and Republican members of Congress have spoken out against his rescinding actions and threatened to restrict funding and hold up future nominations made by the Department of Justice," stated Brett Husak, Managing Partner at Deft Payment Systems. "The DOJ's actions have taken the cannabis industry off the backburner and back in the spotlight, empowering U.S. District Attorneys to continue to rule by state law and do what they are doing."

Rohrabacher-Farr protections extended

The Rohrabacher-Farr Amendment was originally voted into law December 2014, as part of an omnibus spending plan. The amendment, which expires annually, protects medical marijuana dispensaries by preventing the DOJ from using federal funds to prosecute cannabis activities in jurisdictions where state-specific medical marijuana laws are in force. The House of Representatives renewed the amendment Jan. 20, 2018, renaming it Rohrabacher-Blumenauer following Rep. Samuel Farr's retirement.

In addition to the proven health benefits of medical marijuana, dispensaries contribute millions in state taxes, Husak noted. Erik Altieri, Executive Director at NORML, a cannabis advocacy group, agreed, stating the cannabis industry has created more than 150,000 jobs and countless millions in state tax revenue. "[Rescinding the Cole memo] will only push consumer dollars away from these state sanctioned businesses and back into the hands of criminal elements," he said. "With over 60 percent of Americans, including a majority of Republicans, supporting marijuana legalization, this is not just bad policy, but awful politics, and the Trump Administration should brace itself for the public backlash it will no doubt generate."

Medical marijuana is legal in 29 states, eight of which have sanctioned recreational use, Husak noted. "Cannabis grew into a $7.9 billion industry in 2017 [and is] poised to deliver billions more in future state tax revenues," he added. "We need consistent federal guidelines, beyond the Cole memo's informal suggestions or recent DOJ declarations that are out of step with popular opinion."

Until such guidelines are in place, the cannabis value chain will continue to struggle with payment acceptance, because most financial institutions will not accept deposits from marijuana-based businesses. Only about 400 U.S. banks and credit unions in the United States will work with the cannabis industry, which forces many cannabis merchants to operate cash-only businesses. Fortunately, the REFER Act would prevent the federal government from penalizing financial institutions that service cannabis-related businesses operating within state laws, he said.

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