Payment Week - Andrew Barnes, Managing Director___First Data
Payment Week - Andrew Barnes, Managing Director___WePay
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
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
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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.
4. 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
5. 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
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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.
7. 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
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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
9. 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
10. 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
11. 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.
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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.
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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
14. 14
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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
15. 15
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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
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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.
17. 17
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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
18. 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.”
19. 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.
20. 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.”
21. 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
22. 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
23. 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.
24. 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
25. 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
26. 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.