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Tuesday, July 25, 2017

Paysafe, MCPS consolidate assets, expand reach

L ondon, U.K.-based Paysafe Group plc disclosed July 21, 2017, it will pay $470 million to acquire Delta Card Services Inc., the primary holding company for Merchants’ Choice Payment Solutions (“MCPS”), a Shenandoah, Tex.-based payment processor. A select group of syndicators will fund the transaction, including BMO Capital Markets and Deutsche Bank, representatives stated.

MCPS generates an estimated $14 billion in annual processing volume, mostly from small and midsize merchants. The company’s 2016 pre-tax earnings were $446 million, with gross assets valued at $90.4 million, according to recent reports.

Payments analysts called the merger an easy fit due to the long-standing partnership of Paysafe subsidiary Meritus and MCPS, their mutual ties to Woodforest National Bank and complementary areas of expertise.

“Paysafe excels in online gambling and other high-risk verticals, which are its bread-and-butter,” said a source familiar with the companies. “They needed a low-risk partner with expertise in mobile and POS technologies to round out and diversify their portfolio. MCPS, which specializes in A-paper retail and hospitality merchants, would gain financial clout as well as expertise in high-risk categories.”

Expanded technology suite

In addition to expanding its North American footprint, Paysafe will gain the MCPS technology suite, specific areas of expertise and 60,000-merchant portfolio to strengthen its capabilities and global reach. Gaining advanced data analytics will enable Paysafe to refine the underpinning integrated technology platform used in its POS, digital wallets and online cash solutions. This will facilitate real-time reporting for online and brick-and-mortar retailers and distribution partners, Paysafe representatives stated.

Paysafe will also add the MCPS Merchant Foundry platform to its suite of solutions. Designed to help small and midsize merchants manage all aspects of their businesses, the cloud-based solution provides a single-access view of transaction data, front- and back-office reporting and other merchant activity. Foundry POS is an Android, tablet-based POS solution that includes business management tools.

Retain leaders, consolidate portfolios

MCPS Chief Executive Officer Todd Linden and Chief Financial Officer Giovanni Diano, both of whom joined the company in 2010, will serve in Paysafe’s North America Processing operations. MCPS is also in the process of buying back some of its smaller ISO portfolios to lower acquisition cost before the merger, representatives noted.

Paysafe employs more than 2,200 people in 12 countries and has a processing volume of approximately $48 billion per year. The company has reportedly attracted solicitations and cash buyout offers, including inquiries from Blackstone and CVC Partners, but it has yet to comment to shareholders or analysts.


Visa's war on cash encounters backlash
Friday, July 21, 2017

V isa Inc. launched a new initiative to unseat cash from its perch atop the payments apparatus. And that has some folks crying foul. Despite the proliferation of card-based electronic alternatives, cash remains the number one choice for consumer payments in the United States, particularly for items priced at $50 or less.

Data published by the Federal Reserve Bank of San Francisco revealed cash was used for nearly one-third (32 percent) of retail transactions in 2015; credit cards represented 21 percent and debit card transactions were 27 percent of the total. Cards fared better in terms of total value of retail payments: 16 percent of dollars spent were transacted with credit cards and 18 percent with debit cards. Cash accounted for 9 percent of the total value of retail payments in 2015, according to the The State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice.

Rewards for going cashless

On July 12, 2017, Visa heralded an initiative to get businesses off cash, particularly fast food truck vendors. It is promising awards totaling $500,000 to eligible small food establishments that commit to going 100 percent cashless.

In support of going cashless, Visa cited a study it just completed that found if businesses in just 100 cities shunned cash in favor of cards (such as those loaded on mobile wallets) the net benefits to those cities would total $312 billion a year. In New York City alone, businesses could generate $6.8 billion in additional revenues and save over 186 million hours of labor by switching to digital payments, according to Visa.

Visa said it will be showcasing the new initiative as sponsor formula race car events in and around New York, where concession sales will be cashless. "With 70 percent of the world, or more than 5 billion people connected via mobile devices by 2020, we have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless," said Jack Forestell, Head of Global Merchant Solutions at Visa. "To Visa cashless culture means convenience, security and ease of use. That translates to freedom for consumers and merchants alike."

Cashless rationale assailed

But not everyone is convinced. The ATM Industry Association immediately blasted the initiative, and Visa's promise of monetary rewards for businesses that can successfully wean customers off cash. Among other arguments, the association called into question the economics of card payments if Visa needs to offer monetary rewards to incent change.

By effectively paying food service vendors "to reduce their customers' payment choices, Visa Inc. has elevated its commercial interests above the public interest in America," stated Mike Lee, ATMIA's Chief Executive Officer. "Cash is still the most universal, popular and convenient form of payment in the world today and to deny the right to use it is an insult to millions of Americans who use cash, as well as a deal-breaker for those who only use cash. This is digital discrimination and bad industry practice."

Concerns about digital discrimination, particularly as it pertains to payments, are not limited to ATMIA. Several media outlets – from national to local newspapers – have published articles raising concerns going cashless will seriously disadvantage Americans without bank accounts. The Federal Deposit Insurance Corp. reported that 7 percent of U.S. households (9 million in all) are unbanked.

In June, Washington City Paper, a weekly publication in Washington, D.C., where more than 11 percent of households are unbanked, ran this front page headline: Casual Restaurants are Going Cashless – And Cutting Off their Unbanked Customers.


PayPal advances globally
Thursday, July 20, 2017

P ayPal Holdings Inc. advanced its global payment position through a series of actions completed the week of July 17, 2017. First, it finalized the acquisition of TIO Networks Corp., a cloud-based multichannel bill payment processor. SamSung Electronics Co. Ltd. agreed to add PayPal as a payment option within Samsung Pay for in-app, online and in-store purchases; and PayPal extended its partnership with Visa to European businesses. Earlier this year, PayPal entered a definitive agreement to acquire Canadian-based TIO for $2.56 per share in cash or an approximate value of $233 million. After receiving TIO shareholder approval in April, the Supreme Court of British Columbia granted approval for PayPal to indirectly acquire all issued and outstanding shares of TIO, a portfolio company of Core Innovation Capital and the Center for Financial Services Innovation.

"By acquiring TIO and integrating bill payment into our global payments platform, PayPal adds another key service in our efforts to become a part of a consumer's everyday financial life," said Dan Schulman, PayPal President and CEO. "Worldwide, more than 2 billion people do not have affordable access to basic financial services, making it difficult and expensive for consumers to carry out basic financial tasks, including bill payment."

Seventy-nine percent of TIO's customers are low-to-moderate income. CFSI and Core initially invested in TIO to reduce bill-pay costs to consumers. According to Core, when it invested in TIO in 2013, customers that year saved approximately $192 in annual walk-in bill pay charges, relative to common alternatives, an aggregate savings of $290 million overall.

In 2016, TIO acquired Softgate Systems Inc., a retail payment exchange platform that connects retailers and billers with cash-preferred consumers. Last year, TIO processed over $7 billion in payments for 14 million customers in North America. Today it has over 10,000 supported billers who process telecom, wireless, cable and utility bill payments at over 900 bill-pay kiosks, 65,000 retail walk-in locations, and through mobile and web.

"PayPal's acquisition of TIO represents one of CFSI's greatest impacts to date," said Jennifer Tescher, founder and CEO of CFSI. "In TIO, we made an early investment that helped a strong innovator become a financial health champion, and the company has built an incredible business around a real consumer pain point, shaped it, and demonstrated that it can be done profitably. Under the larger umbrella of PayPal, TIO should scale even further to benefit more Americans."

Samsung, Visa market extensions

Expanding its strategic partnership with Samsung, PayPal customers in the United States will be able to use Samsung Pay to access and use their PayPal wallets. Conversely, through Braintree, a PayPal service, merchants will be able to accept Samsung Pay as a method of payment in-app and online through Braintree Direct. Both parties plan to extend availability of the joint offering to other countries in the future.

Injong Rhee Chief Technology Officer and Head of R&D, Software and Services of the Mobile Communications Business at Samsung said, "At Samsung, we pride ourselves on our open model of partnership and collaboration, which helps us deliver the best experiences to our customers. We are excited to be partnering with PayPal, one of the largest payment platforms in the world, to offer our global consumers a richer mobile wallet experience."

With the extension of its partnership with Visa, which already includes collaboration on in-app, online and in-store payments in the U.S. and Asia Pacific regions, through PayPal's banking license in Europe, it now joins Visa's network of client financial institutions to offer Visa accounts in Europe that enable customers and businesses to use PayPal funds to make purchases wherever Visa is accepted.

"Visa and PayPal have a shared goal of giving consumers a safe, convenient way to pay using their preferred device," said Bill Sheedy, CEO, Europe Region,Visa. "Expanding our partnership into Europe provides greater consumer choice and benefits merchants. By having the option to issue Visa accounts in Europe, PayPal will now have the ability to offer customers new and innovative ways to manage and move their money regardless of platform or device."


Prep sluggish for GDPR deadline, study finds
Wednesday, July 19, 2017

A new study finds most companies may not be ready for the European Union General Data Protection Regulation (EU GDPR), which becomes law May 25, 2018. The 2017 EU GDPR Readiness Report by Crowd Research Partners and STEALTHbits Technologies Inc. amassed data from 500 cybersecurity professionals who are members of LinkedIn's Information Security Community. Nearly 90 percent of organizations surveyed were familiar with the EU GDPR, but only 32 percent considered themselves compliant or nearly compliant, researchers noted.

"This survey reveals that while over 90 percent of the respondents indicated familiarity with the EU GDPR, less than a third believe they are compliant or well on their way to compliance," said Holger Schulze, Chief Executive Officer at Crowd Research Partners, and founder of the Information Security Community on LinkedIn. "What is striking in this study is the marked contrast in level of preparedness and awareness between companies headquartered in the US and the European Union.

Security overhaul needed

As companies scramble to meet the fast-approaching deadline, 30 percent of survey respondents indicated that they would be making substantial changes to their security practices and technologies to conform to GDPR guidelines. Their top challenges were finding ways to address budgetary deficits (32 percent), hiring experts (28 percent) and ensuring that all staff fully understands the regulatory requirements (29 percent), according to the report. Approximately 65 percent of participants have a Data Protection Officer on staff or plan to hire one.

Adam Laub, Senior Vice President of Product Marketing at STEALTHbits Technologies, said the upcoming regulation is prompting numerous organizations to prioritize privacy best practices. "We would encourage organizations to review this report carefully to understand the perspectives of their peers and gain insight into some of the challenges involved in GDPR conformance," he stated.

Implementation begins

Researchers noted the GDPR's anticipated regulatory impact will vary by industry, depending on the amount of personally identifiable customer information that businesses collect. They found that participants have identified multiple avenues within their corporate networks that will need to become compliant. Many are taking an inventory of user data and mapping it to protected EU GDPR categories in the following ways:

Bracing for global impact

Tony Fulda, Managing Director of Strategic Advisory Services for San Jose, Calif.-based AppSec Consulting Inc., said companies that work with European firms or have employees, partners or customers in the European Union, will face termination and noncompliance penalties if they fail to implement EU GDPR guidelines for collecting and managing Personally identifiable information on or before the May 2018 deadline.

"Our consulting team has been advising clients on how to best meet or exceed GDPR's new requirements and build out a sustainable and appropriate privacy program," he stated. "An expanding number of organizations are getting in front of these new requirements as a good business practice, as well as to mitigate the risk of leaking private personal information by human error or cyber-attack."


Mastercard to acquire Brighterion, beef up AI capability
Tuesday, July 18, 2017

B efore 2011, the term "artificial intelligence" rarely cropped up in The Green Sheet. Since then, mention of artificial intelligence (AI) has gradually increased to the point where, like "fintech" and "payfac," it appears routinely in news, views and feature articles throughout the magazine. Indeed, AI is on the rise in the payments sphere. This is evidenced by today's news that Mastercard intends to purchase Brighterion Inc., a software company specializing in AI.

Describing Brighterion in a press release about the acquisition, Mastercard wrote, "Brighterion offers the world’s deepest and broadest portfolio of artificial intelligence and machine learning technologies, providing real-time intelligence from all data sources regardless of type, complexity and volume. Our technologies are successfully applied in cyber and homeland security, anti-money laundering (AML), real-time cross-channel fraud prevention, onboarding and risk monitoring, behavioral device ID, data breach detection, marketing, trading, healthcare and biotech."

Mastercard noted that its suite of security products already uses AI, and Brighterion’s Smart Agent technology will be added to the suite. "The resulting insights and capabilities from the combined team will deliver even greater accuracy and a new element in managing risk and protecting the consumer," the company stated.

Ajay Bhalla, President of Enterprise Risk and Security for Mastercard, added, "To fully realize the promise of our increasingly digital lives, we need to design our payment systems with the future in mind and that’s what we’re doing. Our unprecedented use of artificial intelligence on our network is already proving successful. With the acquisition of Brighterion, we will further extend our capabilities to support the consumer experience."

Brighterion founder and Chief Executive Officer Akli Adjaoute said it all comes down to intelligent decisioning at the time of the transaction. "We’ve worked with Mastercard over the years to identify patterns and trends to power their most advanced customers’ authorization and decisioning activities," he said. "We look forward to building on that foundation and providing an industry-leading, holistic and seamless security experience."

The companies declined to disclose their agreement's terms but indicated closing of the transaction is subject customary conditions, including the expiration or early termination of the applicable waiting periods under the Hart-Scott-Rodino Act.


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