Dorado Industries TrendWatch 2.0 Q3 2013 Industry Review

TrendWatch 2.0
Q3 2013
Payments System Industry
Synopsis
Notice: Materials contained in this document are drawn from several media sources, and Dorado Industries is not responsible for their accuracy. Opinions expressed
herein are presented without warranty. Brand names are the trademarks of their respective service offerors.

Random Thoughts
2013: Back to the Future Past
Whether listening to very snazzy presentations or meandering
through the exhibit hall at this year’s Money2020, a nagging
sense of déjà vu kept cropping up. And for good reason. In
fact, any circa-’60s or ’70s banker would likely experience the
same cold, clammy feeling of impending misfortune. Not
long ago, fifty years or so, consumers bought big-ticket items
using store credit because bankers couldn’t spell “consumer.”
Credit cards pretty much didn’t exist then so POS was actually
“check.”
Thieves being thieves, merchants began to refuse customer
checks without “courtesy” or “check guarantee” cards. CGC
cards became just about the only way an east or west coast
consumer could cash a check or buy a bag of groceries. If you
were a person of moderate means, you had multiple check
guarantee cards – one for each bank – as well as “charge
cards” from the likes of JC Penney’s, Sears, Macy’s and the
like because there weren’t any common brands.
The rise of portable credit and POS debit allowed consumers
to abandon their stack of plastic (metal in some cases) so
necessary in earlier years in favor of one of the national card
brands. Life was much simpler for most (merchants might
quibble.)
Fast forward to the present (and a bit beyond). Suppose the
same consumer went shopping for a cup of coffee, a greasy
doughnut, a cheeseburger, some gasoline, and an airline ticket.
Five purchases, each transacted with a high-tech telephone,
and five mobile applications. Sure, each app produces value
for the consumer in the form of loyalty rewards, discounts, or
rebates.

Dorado Industries
655 Deep Valley Drive, Suite 125-P
Rolling Hills Estates, CA 90274

But five apps for five purchases? And Lord help the consumer
who is out bar-hopping with friends only to learn that she can
settle up with the saloon on this side of the street using
Tabbedout but needs Chase’s QuickPay across the street.
Technology makes life easier? We think not, when electronic
payments are concerned. No, this isn’t a plea to return to the
“one card fits all” days – it’s not likely the DoJ would approve
anyway. But we’re concerned that all the late nights spent by
serial entrepreneurs, the bundles of cash being offered by VCs,
and the head-long dash to get away from those simpler days
will have one casualty – the consumer. And, aren’t her needs
the thing we’re all trying so desperately to meet? At this rate,
all she is going to get is a smartphone littered with apps she’ll
use once or twice, SMS merchant messages wondering where
she’s been, and a wrinkled brow as she tries to recall which
personal identifier each merchant wants her to use. Don’t be
surprised if someday our consumer and her friends decide that
her iPhone isn’t all that bad for making calls and turns the data
function off. Then what do we do?
We’re nowhere near the edge of the abyss yet, but it’s coming.
Two-fer! This quarter’s issue brings with it an op-ed piece
written by Jack Benton, one of the original thinkers behind our
industry. We hope you enjoy his perspective on the future of
payments. Back to Baja.
Until next time.
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jmacallister@doradoindustries.com
www.doradoindustries.com

Table of Contents

2013 Predictions
TrendWatch Scorecard/Summary
2013 Payments Industry Yields
Interesting Quarterly News That Got No Respect
Q1 M&A/Investor Activity
Useful Links for More Information
Back in the Day

Dorado Industries

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6
7
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2013 Predictions
•

•

•

•

•

One cloud-centric mobile payments player other than PayPal will have a break-out year; the payments industry will declare NFC DOA and
move on.
Mar: Since Google is re-gearing mobile yet again, it’s not likely to be the one.
Jun: Indeed, it looks like the wheels have come off the Google Wallet juggernaut.
Sep: Check out what Loop, Paydiant, clearXchange have been cooking up.
One or more of the non-traditional dongle-centric merchant services providers will be acquired by a mainstream POS terminal industry
leader.
Mar: Verifone’s Sail is gone, so it’s off the table. Someone else will cave.
Jun: Perhaps “acquire” is premature. “Strategic partnering” comes closer, i.e., NCR’s new relationships.
Sep: Heartland invests $20 million in Leaf, the tablet-centric startup. Not a dongle, but close enough.
Despite the fact that there are already laws preventing abusive use of electronic benefits transfer cards, the CFPB or Congress will
intervene to provide more protection.
Mar: Still waiting to see if CFPB wants to double down on casinos, strip clubs, and liquor stores.
Jun: Tick, tick, tick.
Sep: Now that the Federal shut-down has ended, we’re likely to see the release of some pent up demand on CFPB’s part.
One of the remaining EFT networks will change ownership.
Mar: The search for a common AID for mobile (more accurately, reaction by V/MA) will likely propel things.
Jun: New common AID, new Durbin compliance requirements, mounting merchant pressure; someone’s going to throw in the towel.
Sep: Judge Leon’s ruling may help this prediction along; the Fed’s appeal may force a carry-over to 2014.
American Express will prevail in its Department of Justice litigation.
Mar: Time remains an ally for American Express. DOJ litigation didn’t impair its efforts to gain FDIC access for its prepaid product –
Bluebird.
Jun: Supreme Court sides with AMEX and against merchants in AMEX v. Italian Colors Restaurant. Not directly related but tangential at
least.
Sep: Nothing new this quarter; hang tight, AMEX.

Dorado Industries

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2013 Predictions

•

•

The US Postal Service will declare its pilot in gift card sales a failure and shut the program down.
Mar: After all, who buys gift cards on Saturday when USPS is delivering mail. Oh, right.
Jun: Oops. Back to Saturday delivery, so maybe dumping gift cards is the next money saver?
Sep: Holiday season is upon us – time will tell.
Emboldened by the success of PayNet (FIS) and clearXchange (BofA, Chase, Wells), two new real-time payments
networks will emerge.
Mar: Nothing yet, but the Italian banks are pushing their own version in-country and pan-Europe. Time will tell.
Jun: Could MCX be thinking that a shift to real-time is a good way to avoid V/MC rails and fees?
Sep: Take a gander at what Zipmark is doing for B2B transactions. And clearXchange just got its first non-founder
bank. “There’s something happening here,” to quote Buffalo Springfield.

Dorado Industries

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TrendWatch Scorecard/Summary – Q3 2013

Industry Players To Watch
Positive
Mixed
Negative

High

1. New Payment Forms

Med

2. ATM Restructuring

Med

3. POS Volume Trend

Med

4. Legal/Regulatory Issues

High

5. New Venture Growth

Med

6. Earnings Announcements

High

7. Industry Investments

Dorado Industries

Google and Apple: Could Beacon and iBeacon change the way customer
relationships work? We believe so.
P2P Space: Everyone’s heading that way and there must be a good reason.
After all, how many bar tabs need to be settled every day?
EMVCo: Now that the big six are all players, what happens?
VC and PE: They were stacked like cord wood at Money2020 and a couple
of other shows. Looks like “bootstrapping” is a thing of the past.
Heartland: Making some interesting investments in emerging sectors and
novel payment approaches. Might there be more?
MCX: Okay, QR technology. When does the pilot start and where?

Market & Industry Situation
1 – There are some serious attempts being made to avoid using V and MA
rails. Which will succeed is anybody’s guess. Fun to watch though.
2 – Cardless ATM access is gaining traction. Cardtronics on a roll.
3 – Good thing Judge Leon stayed his own ruling. More time for volume
growth to offset the Fed’s next mis-direction play.
4 – Prepaid just can’t cut a break.
5 – $800 million for Braintree? Only $109 million for Official Payments?
Oy!
6 – Card issuers still making the big bucks. V & MA too.
7 – Lots of money going into payments integration with existing phone and
tablet apps.

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2013 Payments Industry YTD Yields
American Express has been added to provide a full view of America’s four networks while Vantiv’s
addition rounds out the payments processer perspective. Once again our basket of payments
industry equities drubbed the Dow Jones Industrial and S&P. Although both indicators did well by
posting 15.7 and 17.9 percent gains, respectively, our portfolio averaged 34 percent returns on a
year-to-date basis. Not bad at all.

Industry Player
Alliance Data Systems
American Express
Blackhawk Network Holdings
Cardtronics
Discover Financial Services
Euronet Worldwide
Fidelity National Information Services
First Data (Future Use)
Fiserv Inc.
Global Cash Access Holdings
Heartland Payment Systems
Jack Henry & Associates
MasterCard Worldwide
MoneyGram International
Total System Services
Western Union
Vantiv
Visa

12/31/2012

Price 

9/30/2013

Cap Value 

YTD 2013 Yield

$
$
$
$
$
$
$

144.76
57.48
25.10
23.74
38.55
23.60
34.81

$
$
$
$
$
$
$

213.62
75.52
24.03
37.11
50.54
39.88
46.44

$
$
$
$
$
$
$

68.86
18.04
(1.07)
13.37
11.99
16.28
11.63

$
$
$
$
$
$
$

4,097.2
19,483.2
(56.0)
544.2
5,766.0
820.5
2,219.0

47.6%
31.4%
-4.3%
56.3%
31.1%
69.0%
33.4%

$
$
$
$
$
$
$
$
$
$

79.03
7.84
30.23
39.26
491.28
13.29
21.42
13.61
20.42
151.58

$
$
$
$
$
$
$
$
$
$

101.96
7.81
39.72
51.66
672.78
19.57
29.42
18.67
27.94
191.10

$
$
$
$
$
$
$
$
$
$

22.93
(0.03)
9.49
12.40
181.50
6.28
8.00
5.06
7.52
39.52

$
$
$
$
$
$
$
$
$
$

3,574.8
(2.3)
354.9
1,040.4
23,486.1
363.4
1,579.2
2,875.1
1,864.8
33,430.0

29.0%
-0.4%
31.4%
31.6%
36.9%
47.3%
37.3%
37.1%
36.8%
26.1%

Sources: Company releases, Morningstar.com, Bloomberg.com
2013 YTD yield excludes dividends; based on 12/31/12 and 9/30/13 closing prices
Dorado Industries

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Interesting News This Quarter
Subject
Visa/MasterCard

Source/Date
Finextra
September

Substance
We start off with some cheery news from the inventors of the Maginot Line. Long embroiled in a
brouhaha with French regulators, Visa and MasterCard blink and concede to a near-half
reduction in interchange rates. And, for good measure, the card brands kicked in a 55¢ cap on
ATM withdrawals. Nothing like a dose of government price fixing to get things going. Oh, wait.
Didn’t mean to overlook you, Judge Leon.

Shopify

TechCrunch
August

Amazon

PaymentsNews
October

The news from Amazon has nothing (or everything) to do with hard goods or books. The
retailing giant is now offering its “Login and Pay with Amazon” service to retailers wishing to
make the 215 million Amazon customer theirs. Not likely to resonant well with the big-box
merchants but certainly appealing to the SMB crowd. Amazon investors are likely to see a
goodly jump in value soon. AMZN up $10 since the announcement.

Isis

Paybefore.com
September

Two issuers in; one out. American Express and its Serve payments platform join Chase in
announcing participation in the Isis national rollout. Capital One says no dice after being part of
the telecom consortium’s pilots in Austin and Salt Lake City. No clear reasons for its withdrawal
were offered by Capital One but in this era of emerging mobile payments networks perhaps a
better deal has been put on the table? You can bet it’s not likely the big time issuer has decided
that mobile is not in its wheelhouse. Maybe its that Isis NFC bias that’s at the center of the
decision?

The Paypers
July

Discover takes another step toward full utilization of its cards by joining the Allpoint Network for
cash access. Allpoint continues to grow and now has nearly 45,000 devices available to issuers
for use by their cardholders.

Discover

Dorado Industries

Canada-based ecommerce store site provider, Shopify, takes another step toward full integration
by launching Shopify Payments. The service supports in-app payments processing at rates
ranging from 2.5 to 2.9 percent plus 30¢ per transaction with no premium pricing for American
Express or international (read, UnionPay) card acceptance. Shopify processes for 35,000 US
stores and becomes one of many vendors chasing the integrated payments app grail.

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Interesting News This Quarter – Continued
Subject
PayPal

American Express

CardlinX Association

Discover Network

Dorado Industries

Source/Date

Substance

PYMNTS.com
September

Looking for a game-changer to impress your friends? Check out what PayPal is doing with its Beacon
device. Based on Bluetooth Low Energy (BLE), these cheaper-by-the-dozen (and the size of a thumb
drive) units can detect a Bluetooth enabled phone in their presence and can begin pushing coupons and
discounts out to the consumer based on where they are shopping in the store. Looking at Beacon from
other than the whiz-bang perspective, PayPal may have given merchants what they’ve been clamoring
for – an intimate consumer relationship from the time they enter the store. And, perhaps, a way to put a
dent in showrooming? Keep your eye on this one. Oops, forgot to mention that the Beacon app
naturally works with the PayPal wallet.

Presser
October

Not much as been said by American Express since launching Serve two years ago but that’s likely to
change. Serve is designed to meet the needs of the nation’s underbanked as part of the AMEX push
toward inclusiveness. Serve customers will soon be able to use direct deposit, bill pay, RDC, and a
savings tool branded “Reserve.” Consumers preferring cash may begin using CVS and 7-Eleven stores
to fund their Serve accounts starting in November. Just one slight glitch: starting in December, Serve
customers will be assessed a $1.00 per month fee unless they are using direct deposit or load $500 each
cycle. Good business but bad form?

PaymentsNews
October

Older readers may recall frequent rants over the lack of a pan-industry network for payments industry
problem-solving. Well, we now have one, sort of. CardlinX Association has been formed by
Microsoft, BofA, Discover, Deem (check them out in the M&A section), Facebook, First Data,
Linkable, LivingSocial, MasterCard, Affinity Solutions, CardSpring, and Cardlytics. Alas, the new
group doesn’t quite get to the crux of the problem. Note this pithy quote: “ . . . . to define a set of
standards ands services that will make it easier for consumers to shop and for merchants to sell their
goods and service.” Emphasis added. A shame that the focus isn’t on enabling consumers to pay for
goods and services without the friction imposed by bankers and merchants who don’t particularly care
for one another. A good step forward, nevertheless.

ATM Marketplace
September

Discover Network has joined EMVCo and becomes an equal partner with the others – American
Express, JCB, MasterCard, UnionPay and Visa. This looks like good news for those backing the EFT
network play for a common AID (Discover’s DPAS was selected by the networks earlier this year).
EMVCo is the standards body overseeing international deployment of the chip card technology.

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Subject
clearXchange

Dwolla

Source/Date
PYMNTS.com
October

Finextra
October

Substance
clearXchange founding members Bank of America, Chase, and Wells Fargo welcome their first nonfounding FI, FirstBank, to the P2P network. Customers of the Colorado-based bank will be able to send
payments from their FirstBank accounts using the recipient’s mobile number or email address. Some pundits
have projected that new member enrollment is the first step toward making clearXchange a serious player in
the P2P space with aspirations to morph into a full-blown mobile payments player. We’re waiting to see if
any merchants sign up to nudge the P2P product into becoming a serious role player in payments.
Itself somewhat of a maverick in electronic payments, Dwolla has pulled the plug on currency conversion
services once offered to Bitcoin holders. Dwolla has been caught up in the scrutiny and mayhem involving
US regulators (Homeland Security, no less) and the MT. Gox and TradeHill Bitcoin exchange flare-ups.
Dwolla is giving exchanges and holders until the end of October to find another resting place.

Princeton One Card

CentralJersery
July

Princeton, New Jersey becomes another of a handful of cities that offer a local merchant purchasing card or
mobile phone app. The Princeton initiative runs on Heartland Payment Systems rails and operates like a
decoupled debit card. Consumers may opt for the plastic card or app. A chip card option is available for use
with city parking meters. There is a nonprofit component as well since participating merchants are required
to donate one percent of each transaction to a cause of the cardholder’s choice. The offset for merchants is
that they pay a mere 5¢ per transaction rather than traditional ad valorem interchange. Unlike the
municipality-backed card scheme launched in Oakland, California, the Princeton One Card is the brainchild
of the local merchants’ association consisting of eighty local retailers.

American Express
Wells Fargo Bank

PaymentsNews
September

Wells Fargo and American Express announce a partnership wherein Wells will issue new cards accepted on
the American Express network. There is to be a pilot conducted this year with a full scale launch planned for
mid-2014. Talk about back-to-the-past experiences. In the early ‘70s, American Express launched its Gold
Card which at that time generated credit receivables that AMEX couldn’t carry (no banking charter). So, how
was the card branded? Joint with United California Bank which became First Interstate Bank which was
acquired by Wells Fargo in 1996. What goes around, comes around.

Finextra
August

PayPal and MoneyGram have formed an alliance that enables the underbanked population to fund and
redeem cash from their PayPal accounts through MoneyGram outlets in Dallas, New York and San Francisco
in an early phase of the program. Global expansion is planned for a later time. Yet another example of good
marriages between cyber payments schemes and brick-and-mortar distribution systems.

PayPal

Dorado Industries

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Subject
Akimbo

Source/Date

Substance

PaymentsSource
August

The number and type of “sub networks,” those taking a page from the recently announced Chase Merchant
Services playbook, continue to grow. Akimbo, the direct-to-consumer prepaid card scheme with a social
networking twist, plans to offer the service to small and mid-tier banks for use with their depositors. Akimbo
management is suggesting that banks can use the card program and its Facebook tie-in to promote travel card
sales and better budgeting. Outsiders wonder if Akimbo might be taking a mis-step. When they work,
they’re great but sub networks are tough cookies to manage. Good luck, Akimbo.

VeriFone

Presser
August

Terminal giant VeriFone is putting its Zoosh acquisition through its first trial run. Way2Ride is an
Android/iOS app for payment of taxi fares using sound-based communication technology. The app is
designed to give passengers the ability to pay for rides via their cell phones at anytime during the trip. The
app stores both payment method and tip preferences and produces digital receipts. New York City is the
initial marketplace with a national rollout planned for the future. Way2Ride is positioned to re-disrupt the
market tossed sideways by e-hailing interlopers Hailo, Taxi Magic and Uber. Sonic communications is
getting some love from users and investors; check out what Clinkle is up to in our M&A section.

Visa, American
Express, MasterCard

Presser
October

The “big 3” step up to the tokenization standards plate by agreeing on a framework for a new global standard
– note the “framework” reference – for use in e- and m-commerce transactions. Issuers and merchants have
been clamoring for a safer approach to transaction processing for decades and the growth of e-commerce
transactions coupled with the expected explosion in m-commerce exchanges have pushed the issue to the front
burner. Now, a framework and a standard aren’t quite the same thing so there’s a ton of work to be done and
dozens of other constituents to be corralled (e.g., EMVCo, The Clearing House, etc.), but at least we’re
making some headway. Wonder why Discover hasn’t joined the party.

Business Wire
August

Did we really need another payments trade association? Ten processors have formed the Third Party Payment
Processors Association (TPPPA). The aim of the group is to protect the processing industry from fall-out
associated with regulator snooping into payments practices used by issuers and acquirers. Since its formation,
the executive director has fired a salvo or two through op-ed pieces in Forbes and the American Banker while
defending TPPPA members involved in processing transactions in the dreaded payday lending sector. Each
member has agreed to abide by a strict code of conduct which we hope involves doing everything possible to
prevent data breaches, adherence to industry encryption standards, and full support of tokenization. Time will
tell.

TPPPA

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Subject

Source/Date

Substance

Target

Payments Journal
August

For those considering decoupled debit as a mere artifact of the last decade, the numbers being posted by the
Target REDcard are noteworthy. Penetration of total transactions is between 17 and 20 percent and climbing
for the rewards-loaded REDcard while the split between credit and debit card funding for the closed-loop
program now tilts in the favor of debit. As noted in this issue’s Random Thoughts, “back to the past” may be
the catch phrase for the future.

Digital River

Card Not Present
Report
August

Digital River may be the oldest surviving player in the e-commerce sector, and it’s still thriving. DR is
branching out once again. Beanstream Mobile is the company’s play in the m-commerce acquiring game.
Like all the other dongle guys, Beanstream comes with an encrypting card reader and downloaded app which,
unlike most of the others, can process transactions in multiple currencies. Pricing meets the current bar set by
Square and others – 2.75 percent, flat. For CNP transactions, Beanstream seems like a bargain at 2.9 percent
plus 30¢ where others charge 3.5 percent and 15¢. This time we did the math: Beanstream CNP pricing beats
the others for transactions over $25.00.

Apple

Mobile Payments
Today
September

Looks like most of us got caught napping during the Apple World Wide Developers Conference earlier this
year. That’s the event Apple used to kick off its iOS 7 operating system release. Seems one of the slides
referenced “iBeacon support.” The recent release of the iPhone 5s brought come clarity, sort of. iBeacon is
similar to PayPal’s Beacon system in that it uses Bluetooth Low Energy to detect and communicate with
Bluetooth enabled smartphones. Unlike Beacon, which is AC powered, iBeacons operate on batteries with a
reported two-year life (so, how long between charges on your iPhone?) iBeacon’s geo-sensing capabilities
insure that you’re being bombarded with promotions for jeans when you’re in a clothing section of a store and
not housewares. As good a game changer as Beacon? Not until Apple declares itself in mobile payments, we
suggest. The NFC versus BLE debate took shape not 24 hours after the Apple iBeacon announcement. Far
too much time on some folks’ hands.

LevelUp

Payments Source
July

Had to happen. LevelUp CEO Seth Priebatsch is all lathered up about an app the company is testing
internally that supports payments with Google Glass eyewear. Really, folks. Has it come this?

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Subject
Western Union/US
Bank

Source/Date
Business Wire
September

Substance
Not long ago, industry watchers were wondering how Western Union was going to catch up with the
electronic age. Indeed, many thought WU would continue to wilt under First Data ownership and its laborintensive solution for money movement. Then along came the FDC spin-out and a flurry of e-payments
acquisitions which has drawn the attention of several interested parties. US Bank is so enamored with the
world wide physical network of agents and company-owned WU stores that it has launched a new mobile
money transfer application with WU’s network capabilities wired in. Good for USB for not seeking ways
around Western Union (like so many others have tried) but sensing the opportunity WU provides and
grabbing for it. If the gambles works, the payoff could be huge; the money transfer business involves $600
billion in value exchange every year.

UK Treasury

Finextra
October

“We’re from the government; we’re here to help.” The UK Treasury has pulled the plug on self-regulation
once living under the guise of the Payments Council. Readers may recall that this body had set out plans in
2011 to do away with paper checks by 2018. The PC is the same group that had launched the UK Payments
Roadmap earlier this year, a venture likely destined for the dustbin. The new regulator will have the power to
tweak existing UK payments systems such as BACs (ACH equivalent only better) and Faster Payments in
ways that would enable smaller and innovative players to participate. No doubt there are some very honked
off UK high street bankers these days.

PayPal

Finextra
August

Sometimes technology can run amuck. Richmond, London shopkeepers are dabbling with PayPal’s “pay with
face” application. No, you needn’t scrunch your face (or other bits) on a scanning glass like we used to do
with photocopiers, but you do perform some extra key strokes. Customers of stores using the system must
first identify the store within the mobile app, and slide a pin down in the app. Doing so causes a photo of the
user along with her name to appear on the store’s payment system (warning: this will not work with Zon Jr.
terminals). Once the customer has finished shopping, the retail clerk selects the facial image and the deal is
done. Of course, the customer’s cell phone is pinged as a reminder of the amount paid and a PayPal email
receipt follows. The objective is to alleviate the need for wallets, cards, and PINs. We suggest that a walletless high street is a couple of decades away.

Payments Journal
October

You thought the Kardashian card was bad? Try this one from the founders of the Occupy Money
Cooperative. These folks plan on issuing a Visa prepaid card to raise a targeted $900,000 to fund the
cooperative. The thinking is that like-minded protesters would use the cards and get a warm fuzzy feeling
each time they are swiped under the notion of “A Protest with Every Purchase.” Guys, there’s got to be more
thinking done here. The reload fees alone will cause another protest.

Occupy Wall Street

Dorado Industries

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Subject

Source/Date

Paydiant

PaymentsSource
August
Presser
October

Paydiant

ATM
Marketplace
July

PayPal

PayBefore
October

Substance
In a classic tale of two cities, Paydiant, one of the poster children for cloud-based mobile commerce, has
struck deals with two vastly different organizations. The Pulse debit network has crafted an agreement with
Paydiant to create bank-branded wallets that will operate within the network’s broad base of merchants. The
wallet app gives the banks the ability to determine which payment cards will be supported and how customers
will be able to use Pulse ATMs for cash withdrawals. Paydiant software has the ability to support bank,
retailer, and processor sponsored wallets so it’s not a surprise that the same vendor is behind the mobile wallet
effort being pursued by CU Wallet. CU Wallet is a consortium of fifteen credit unions that own a majority
interest in the new CUSO. The Pulse and CU Wallet objectives are the same; keep their FIs relevant and in
control of the expected expansion of mobile payments. Of course, Pulse brings vast numbers of retailers to
the party while the CU Wallet offering will be starting from square one on the acceptance front.
Last add on Paydiant. Those of us scrambling to experiment with a Paydiant-enabled mobile wallet will be
pleased to learn that a partnership with Diebold brings along new wallet functionality – the ability to use the
wallet to withdraw cash from Diebold devices rather than have our cards exposed to ATM skimming.
Wouldn’t EMV solve the same problem?
PayPal (referred to elsewhere as being “a bit long in the tooth”) re-jiggers its in-store strategy once again by
launching “payment code,” another term for quick response codes. So here’s how it works (paraphrased from
another source):
1. Select the stuff you’re going to buy.
2. Open the PayPal app (might want to open your phone beforehand).
3. Check in with the app.
4. The app prompts you with a QR code, or a four-digit short code.
5. In bar-coding merchant locations, the merchant scans your code.
6. If the merchant is not scan-enabled, use the four-digit code with the PIN pad to check out.
Really slick unless your purchases include a six-pack of beer, a bag of ice, and a gallon of ice cream.

Dorado Industries

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Subject
OpenTable

Square
Simple

Dorado Industries

Source/Date

Substance

PaymentsSource
August

Dining reservations powerhouse OpenTable claims to be seating 12 million customers per month in 28,000
restaurant customers worldwide. Like others in the space, and indicative of a growing trend of payments
integration with other applications, OpenTable is testing an in-app payments solution provided by mobile
payment startup JustChalo, a company it acquired in June. Customers in 20 San Francisco restaurants will be
included in the test round. In an interesting twist, the restaurant owners will continue to be stuck with the
payment interchange. Wonder how that works.

Netbanker
October

Non-fans (us included) of P2P payments ought to take notice of the fact that Square and Simple launched
their own P2P solutions within the same week. Square Cash uses email and debit cards from anyone to
anyone with no login, third-party account or any of the other burdensome stuff. Just send an email to Sally
with a cc: to Square and you’re done. Simple has gone in another direction with its MoneyDrop service that
uses Bluetooth for close-proximity P2P. Presently an iOS service for now, expansion plans are in the works.

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M&A/Alliance Activity
Buyer/Investor

Target

Payments Emphasis

Possible Strategy

Heartland Payments,
Morgan Creek Capital,
NEA

TabbedOut

Mobile Payments

TabbedOut, the darling of the bar, restaurant ,and hospitality
niche for customer ordering and payments, raises another $7.75
million in expansion funds to move into more geographies. The
TabbedOut approach helps rid its users of several hurdles in
hospitality payments including that of schlepping the customer’s
payment card to and from the POS terminal.

Safeguard Scientifics,
Ben Franklin
Technology Partners

Clutch

Gift Card Wallet

Clutch enables users to store and track their gift cards
(Christmas is coming, after all) in a phone wallet while earning
additional benefits through card usage. Two investors pony up
Series B monies totaling $5.3 million to aid company expansion
into offline uses and merchant white label options. Meanwhile,
Clutch is acquiring ProfitPoint as a way to bring 3,000 merchant
clients to the game. A global payment widget to cover up-spend
when the gift card balance is exceeded is likely in the works we
think.

Cardtronics

Cardpoint

ATM fleet

Titanic US ATM deployer Cardtronics continues its roll-up
strategy across Europe by announcing its plan to combine
Cardpoint with Cashzone and Bank Machine estates to form
Cardtronics Europe. The Cardpoint acquisition brings 7,100
UK devices and another 800 German sites under the new
banner. All this for a mere £100 million in cash. Decent
purchase price – Cardpoint ginned up $101 million in the twelve
months ended June 2013. You do the math.

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M&A/Alliance Activity - Continued
Buyer/Investor

Target

Payments Emphasis

Possible Strategy

Dead Pool

PerkStreet
Financial

Debit Card Scheme

Started five years ago, PerkStreet, attracted deposits and card usage by
offering rebates for activity. Acting as agent for Provident Bank and using
Bancorp Bank, the company paid out over $4.0 million in rebates
throughout its short tenure but ran short on money due to low interest
margins and the residual effects of the Durbin Amendment. More road kill
along the payments highway.

IFC

SafetyPay

Web-based Payments

IFC is an investor offshoot of the World Bank and has made a $7.0 million
investment in SafetyPay. The Florida-based company came to life in Peru
six years ago and serves the needs of consumers in Mexico , Costa Rica,
Colombia, and Brazil through linkages between 84 LATAM banks and
major retailers. The underlying system facilitates web purchases via the
consumer’s banking account. IFC has also taken a similar position in
Earthport, the UK processor that provides similar account-to-account
transactions.

TIO Networks

Global Express

International Payments

Vancouver BC-based TIO is acquiring Global Express and its money order
business to expand its market footprint. It is hoped that TIO will be able to
leverage the acquisition to cross-sell its mobile payment, kiosk and
financial wallet service lines to the Global Express user base. TIO is being
helped in the deal by Core Innovation Capital which is injecting $3.0
million in new equity (and, at $0.35 each, that’s a boat-load of shares.)

Davis + Henderson

Harland
Financial
Solutions

Financial Service
Processing

Harland Clarke Holdings spins off HFS to Davis + Henderson for $1.2
billion in cash. HFS represented 15 percent of the parent’s business in
2012. It is unclear if the balance between Canadian and US processors will
be impacted as a result of the transaction. For the 385 FIs that use
Ultradata for core processing, it should be good news to hear that D+H is
making the acquisition to build a stronger base in the US. Or so the story
goes.

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Buyer/Investor

Target

Swiftsure Capital,
other angel investors

Viableware

Payments Scheme

Another payments processor in the consumer dining niche gets more
funding. Viableware is the innovation company behind RAIL, the fullservice restaurant payments system the utilizes hand-held terminals when
settling up a restaurant tab. Investors anted another $6.5 million on top of
an earlier $1.0 million round. RAIL enables self-swipe card payment, bill
splitting and tip calculation without server intervention. Receipts are
emailed.

Investors like us

Loop

Wireless Payments

Launched recently and showcased at Money2020, Loop is striving to find a
position of détente among the mobile payments combatants by delivering a
way to use mobile phones and wallets with any POS terminal having a
mag stripe reader. So far, management has sorted out 60 percent of the
terminals (although they claim it’s 90 percent). A KickStarter.com
investment of $150 or more will get you a card swipe fob and a
transmission dongle so you don’t need to drag your wallet out anymore.
So, while the NFC v. 2D v. RFID bigots hash it out and until EMV either
dies or makes a go of it, Loop will make us all look cool and dazzle
cashiers the world round.

Provenance Ventures,
Saturn Partners

Chirpify

Mobile and Social
Payments

Chirpify, the folks behind the #DoGood social benefits hashtag, have
raised $4.0 million on top of the earlier round of $2.0 million. The
Portland-based company marries social networking with purchases,
donations, and group events. Users need to be facile with Twitter to make
things happen.

MoneyGram

Nexxo

Money Transfer

MoneyGram takes a step toward kiosk distribution by acquiring Nexxo
Financial and its 200 money transfer kiosks located in California, Illinois
and Texas. Funds can be delivered to 15 LATAM countries. Lower labor
means lower cost and higher margin. Good move for MoneyGram.

Dorado Industries

Payments Emphasis

Possible Strategy

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Buyer/Investor

Target

Payments Emphasis

Possible Strategy

Floodgate,
Initialized Capital,
Rothenberg
Ventures

Buttercoin

Bitcoin Trading

Likely to be but one of hundreds of similar investments, Buttercoin
raises $1.0 million to expand its Bitcoin trading and remittance
operation. Funds will also be used to begin operations in India
(naturally) and open six new markets (if Bitcoin is universallyaccepted and border neutral, are “markets” germane any longer? ) Just
a thought.

Menlo Ventures,
Morgenthaler
Ventures,
Pitango Venture
Capital

Check

Mobile Banking and
Payments

Once known as Pageonce, “Check” raises a whopping $24.0 million in
a Series C round. The Check app tracks bill timing, sends alerts, and
suggests alternative spending patterns.

Returning investors
and a customer

Paydiant

Mobile Payments

You can’t pick up a trade rag or the popular press these days without
seeing a passage on Paydiant; they’re everywhere. Yet, like all startups, Paydiant needs money to keep growing (well, not all, read the
history of Litle & Co.) Paydiant offers bar code-centric solutions to
avoid NFC wrangling and to keep out of V.me’s way. Returning
investors and one of its whale-sized customers tossed $15.0 million on
the table bringing total funding to $35.0 million.

Google

Bump

P2P Technology

Once a PayPal favorite, Bump technology was used early on to initiate
mobile transactions between phones. PayPal left Bump at the altar in
favor of its own solution. Bump has now become part of Google, itself
in dire need of some oomph for its Wallet strategy. Naturally, terms of
the deal were not disclosed so we’ve got nothing more to say.

Dorado Industries

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Buyer/Investor

Target

Payments Emphasis

Possible Strategy

Village Ventures,
Contour Venture
Partners, others

Zipmark

B2B Payments

Founded by ex-VC guys, Zipmark provides B2B payments for SMB
companies through its hybrid network structure that links participating firms
and moves AR/AP monies is a single day. The objective is to avoid
remittance delays caused by paper check and ACH transactions. New and
returning investors add another $1.5 million to the kitty to propel market
growth.

CVC Capital
Partners

Powa

eCommerce Payments

CVC invests a staggering $76 million in Powa as it moves into the mobile
payments sphere under the “mPowa” handle. UK-based for now, the SaaS
platform provider is moving ahead with low-cost chip and PIN readers, apps,
and an mPOS platform. The curious issue here is that CVC is a majority
stakeholder in Skrill, a payments platform that already has a U.S. presence
via its paysafecard.com acquisition. We’ll likely hear more from both Skrill
and Powa on US shores.

Goldman Sachs

United Merchant
Services

POS Transactions
Processor

Don’t recall this happening that often but a wire house brokerage has taken
an investment position in a POS processing firm to accelerate global
expansion. Goldman Sachs Specialty Lending Group is funding UMS but
declined to mention how much is involved so that’s all we have to say about
either.

Parallax Capital

IdenTrust

Digital ID Services

IdenTrust, formerly a bank-owned consortium before being cashed out by
Polaris Software, is now majority owned by Parallax, a PE firm. Terms
were not disclosed. The target claims to provide more than six billion digital
certificates per year in the UK alone. Wonder who got the bigger payday,
the banks or India-based Polaris?

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Buyer/Investor

Target

Payments Emphasis

Possible Strategy

WorldPay

Century Payments

Merchant Processing

Aptly named WorldPay continues its expansion plans and acquires
Century Payments, a beefy provider of white label payments
solutions. The transaction brings tens of thousands of additional
merchants to WorldPay. Royal Bank of Scotland must still be
miffed that it had to sell WP in 2010; we wonder when the equity
firms owning the majority interest are going to take the cash and run.

Undisclosed
Investors

Deem

eCommerce Platform

Somebody with lots of cash burning a hole in his pocket puts up $70
million to capitalize Deem, a stealthy eCommerce player former
known as Reardon Commerce. Corporate investors include
American Express, Citibank, and JPMorgan Chase so there’s gotta
be something worth talking about. Still, just how big will the market
for eCommerce processors with clever schemes become?

Richard Branson

Clinkle

Mobile Payments

Clinkle had just pocketed $25 million in funds when Sir Branson
came along and plopped own a bunch more. Still stealthy, Clinkle
relies on high-frequency sound waves to chat between smartphones
and merchant terminals. College campuses are being targeted for
the first release with Stanford, University of Michigan, Duke, SMU
and ‘Bama reportedly in the queue. Not the first time sound wave
technology has been proposed (remember Zoosh?) but with this kind
of funding from these types of investors the main event should be
fun to watch.

eBay

Braintree

Payments Platforms

The vibe created by eBay’s $800 million purchase of Braintree
continues as speculation centers on how PayPal will utilize Venmo,
a recent Braintree acquisition, to punch up its mobile commerce
offering. The deal brings 4,000 merchants and $12 billion in
payments processing to PayPal, a firm considered by some to be
getting a bit long in the tooth.

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Buyer/Investor

Target

Payments Emphasis

Possible Strategy

Sequoia Capital

Shopular

Mobile Coupons

The mobile coupons space remains crowded as Shopular raises $6.4 million
to finance growth beyond the 40,000 stores already served. Shopular takes
on ShopKick and other notables in the space. Two recent segment changes
may tilt things somewhat – imbedding payment options in the shopping app
and the new PayPal Beacon and Apple’s support for iBeacon. Both may
wind up disrupting the playing field for Shopular and others.

Returning Investors

LevelUp

Mobile Loyalty/Payments

Returning investors plunk down another $7.5 million to spur LevelUp
growth. The loyalty marketing app rewards consumers for repeat behavior
and store shopping while giving merchants a no-fee card processing option.
LevelUp uses the “show me” approach and is rewarded when consumers
respond to promotions. LevelUp gets a share of the lift.

Heartland Payments

Leaf

Tablet Merchant Services

You don’t see this everyday; a mainline merchant services processor has
made a $20 million investment in Leaf, the tablet-based processor for
merchants in the quick service restaurant, fine dining, and boutique retail
verticals. HPY will bundle Leaf with its core payments products and utilize
its network of 800 relationship managers to promote the service. The times,
they are a-changing. Late add: Heartland and TabbedOut announce a
strategic marketing agreement.

Vantiv

Element
Payment
Services

Merchant Services

Surging Vantiv gobbles up Element Payment Services and captures much
needed encryption, tokenization, and EMV chip and PIN technology. No
terms were disclosed for this tuck-in acquisition.

Core Innovation
Capital

Wipit

Mobile Money Transfer

Core Innovation funds a Series A round for Wipit, a key player in
underbanked mobile services and other remittance services – international
money transfer, RDC, and bill payment. Core is the investment partner for
the Center for Financial Services Innovation, an advocate for inclusion of the
underbanked in global financial services.

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Buyer/Investor

Target

Payments Emphasis

Possible Strategy

TestLink

Airis ATM
Technology

ATM Services

UK-based TestLink pays $18 million to acquire Ohio-based Airis.
Both firms specialize in re-curving and supporting ATMs produced
by the major device vendors. TestLink gains access to the US
market and picks up a tremendous NCR and Diebold parts inventory.
An interesting end-game strategy or preparation for a slug of EMV
upgrades? Either way, a good move by the Brits.

OuterWall

ecoATM

Mobile Device Recycling

OuterWall (once known as Coinstar) pays $350 million for the
ecoATM network of mobile and electronic device recycling kiosks.
Coupled with its Redbox DVD dispensing asset and little known
Rubi coffee devices, OuterWall is capturing the kiosk business in
much the same way TRM captured the merchant copier machine
space in the last decade. Hope the results are better for OuterWall.

Ironwood Capital,
Connecticut
Innovations

Payveris

Money Movement Platform

Money movement company Payveris scores $5.2 million in Series A
funds to expand its mobile money movement application. Payveris
has been selected by Moven, the mobile debit card app folks, to
backbone their product.

Insight Venture
Partners,
CrunchFund, others

Branding Brand

Mobile Website Developer

Looking for a very cool mobile website for your enterprise? Check
out Branding Brand. Working with BB will put you in good
company – Costco, Ralph Lauren, American Eagle and all the big
boys. Investors seem to like the approach; plunking down another
$9.5 million to keep the dazzle coming.

ACI Worldwide

Official Payments

Government Payments
Acceptance

It’s happened again. Seems like OPAY has been owned by just
about everyone at one time or other. ACI pays $109 million to bring
the C2G processor into its shed. We hope the OPAY management
team fares well. If not, we’ll see them at the next payments
convention with something new. Right, Alex?

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Useful Links for More Information
We threw a lot of new names out again this quarter. Here’s a list of links for you to
learn more.
Company

Role

Link

Loop

Mobile payments

www.looppay.com

Check

PFM and payments processor

www.check.me

Deem

ecommerce platform

www.deem.com

Paydiant

ecommerce/mCommerce

www.paydiant.com

Buttercoin

Bitcoin trading exchange

www.buttercoin.com

Clutch

Gift card wallets

www.clutch.com

Akimbo

Prepaid card program

www.akimbo.com

clearXchange

P2P processor

www.clearxchange.com

Clinkle

Sound based authorization systems

www.clinkle.com

Dorado Industries

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Back in the day!
Network

State

B. Georgia

3. Relay

C. New York

4. Alert

D. Texas

5. Honor

E. The Carolinas

6. MAC

F. New York

7. NYCE

G. South Dakota

8. MOST

H. Connecticut

9. KETS

I.

10. Magic Line

J. Missouri

11. Cash Station

K. Florida

12. Yankee24

L. Iowa
M. California

14. BankMate

N. Washington

15. The Exchange

O. Louisiana
P. Maryland
Q. Kansas

18. GulfNet

R. Nebraska

19. CU24
Dorado Industries

2. Pulse

17. Cactus

First to email us a list of network numbers
matched to state letters wins a Dorado Industries
polo shirt.

A. Arizona

16. Star

The answer to last quarter’s photo contest was
trickier than we had thought. The network CEO
circled in the picture is Denny Dumler, long time
Colorado National Bank exec and former head
honcho for TransAlliance, the successor company
to The Exchange. We still cannot identify the
occasion but are certain that no collaboration was
in the works. The others include (L-R): Ron
Congemi, Dumler, Dennis Lynch, and Stan Paur.

1. Advantage

13. Shazam

This quarter’s challenge is to match the network
name with its state of origin. To keep things fair,
we omitted obvious matches like InNevada and
Alaska Option. There are a couple of cases where
more than one network emerged from a single
state so give it some thought.

S. Pennsylvania

20. CO-OP

T. Michigan

25

Illinois

(310) 544-1316

Dorado Industries TrendWatch 2.0 Q3 2013 Industry Review

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