The Strawhecker Group
NF Edition #517 - 8/05/16
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Highlights this week...

The Path to Wall Street with an Eye on Growth
TSG Exclusive Interview with CardConnect's CEO, Jeff Shanahan

On July 29th, 2016, CardConnect announced the completed merger with Fintech Acquisition Corp. CardConnect is an innovative and growing payment technology company, providing payment solutions to more than 65,000 large enterprises and small to medium sized businesses. In 2015, CardConnect had $21 billion in annual processing volume with 256 million processed transactions. With the closing of the deal, CardConnect became a wholly-owned subsidiary of FinTech Acquisition Corp., and FinTech has been renamed CardConnect Corp. With that said, the CardConnect common stock started trading on August 1, 2016 on the NASDAQ under the symbol “CCN”.

Recently, several members of The Strawhecker Group (including TSG’s co-founder Kurt Strawhecker, Senior Associate Ray Sobczyk and Business Intelligence Manager Jared Drieling) sat down with CardConnect CEO Jeff Shanahan to understand how going public will impact CardConnect and what payment opportunities the company will put on its sights going forward. After all, one of the main reasons fast-growing companies go public is to fund further expansion. Click here to read the Q/A

Check Out TSG's Hottest New eReport

  • Payments Industry 101: This report can serve as a guide to understanding the landscape of the U.S. payments industry. This material, expertly curated by TSG Associates, provides excellent coverage of the payments ecosystem and the industry’s opportunity, as well as valuable insights into merchant acquiring, credit card issuing, and general industry trends. Seasoned executives, and newcomers alike, will find substantial value in the contents. Preview | Purchase

TSG in NYT: Chip Credit Cards for Dummies (That's All of Us)
The New York Times | 8.05.16

There is reason to hope. About 75 percent of credit cards are chip-enabled. If all businesses upgraded their terminals — which they are not required to do by law — at least the confusion over whether to swipe or insert would be settled. So far, about one-quarter of the nation’s merchants have made the transition, said Jason Oxman, chief executive of Electronic Transactions Association, a trade group for companies that deal with payment products and services. But while many of them have the terminals, they are waiting to get them certified for use, said Jared Drieling, the business intelligence manager for The Strawhecker Group, a consulting company for the industry.

Bitcoin Worth $72M Was Stolen in Bitfinex Exchange Hack in Hong Kong
Fortune | 8.03.16

Nearly 120,000 units of digital currency bitcoin worth about US$72 million was stolen from the exchange platform Bitfinex in Hong Kong, rattling the global bitcoin community in the second-biggest security breach ever of such an exchange. Bitfinex is the world’s largest dollar-based exchange for bitcoin, and is known in the digital currency community for having deep liquidity in the U.S. dollar/bitcoin currency pair. Zane Tackett, Director of Community & Product Development for Bitfinex, told Reuters on Wednesday that 119,756 bitcoin had been stolen from users’ accounts and that the exchange had not yet decided how to address customer losses.

Related:

Square's Pricey Bet Pays Off as Merchants Pick NFC, EMV Readers
ISO & Agent | 8.03.16

The tough move from free to fee for its readers has Square adjusting its strategy to lure merchants, but it also opens the door wider to new markets, according to CEO Jack Dorsey. "It's a global platform and we can look more globally in getting sellers in new markets," said Dorsey during Wednesday evening's second quarter earnings conference call. Dorsey did not provide investors with specifics on sales of its new mobile card reader, but did report anecdotal examples of growth, such as the Coachella music festival, where contactless "tap" payments  increased to 11% from 1% the year before.

Related:

Eighty Percent of Mastercard U.S. Consumer Credit Cards Have Chips
Mastercard | 8.03.16

Mastercard today announced that 80 percent of its U.S. consumer credit cards have chips, representing an 88 percent increase in chip card adoption since the October 1, 2015 liability shift started to bring EMV-secured payments to the U.S. The company also sees 1.7 million chip-active merchant locations on its network, representing nearly 30 percent of the U.S. merchant population and a 374 percent increase in chip terminal adoption since October 1, 2015. In terms of U.S. dollars, counterfeit card fraud is down over 60 percent at Mastercard’s top 5 EMV-enabled merchants.

No Cash Allowed: Stores Refusing to Accept Money
Boston Globe | 8.04.16

At Amsterdam Falafelshop in Kenmore Square, you can choose hummus or tahini for your $7 sandwich. And you can pick from a dozen toppings, from pickled cauliflower to fresh feta and olives. What you can’t do is pay with cash. As technology allows us to make purchases with a barcode scan or an iPad click, more and more retail outlets, restaurants in particular, are experimenting with no-cash policies, from the salad chain SweetGreen to Amsterdam Falafelshop to Clover Food trucks.

Chip Card Nightmares? Help Is on the Way
The Wall Street Journal | 8.02.16

After pulling out the stopwatch for over 50 transactions at various retailers in recent days, I can confirm that it takes twice as long to pay with a chip card than with a card swipe or mobile payment—on average, 13 seconds versus 6 seconds. Think about it this way: If you made two purchases every day for a year with a chip card instead of a swipe or smartphone, you’d spend 85 extra minutes at the checkout counter. That’s nearly an hour and a half of your time, to give someone your money.

IBM Said to Be in Early Talks to Acquire Revel Systems
Bloomberg | 8.01.16

In a bid to grow its retail sector reach, International Business Machines Corp. is in discussions to acquire Revel Systems Inc., people familiar with the talks said. Conversations are still at an early stage and may first involve trials of Revel’s iPad-based point-of-sale system, which are expected later this year, the people said. Revel and IBM declined to comment. Revel could help fill a void in IBM’s retail services product line. IBM sold its point-of-sale terminal business to Toshiba Tec Corp. for more than $800 million in 2012. 

Under Pressure, Big Banks Vie for Instant Payment Market
The New York times | 8.01.16

In this digital age when almost anything can be had in an instant, the movement of money can seem glaringly slow. Most people paying a housekeeper or collecting money for an office pool still use cash or a check, which can take days to go through — a relative eternity that banking regulators worry is impeding commerce and economic growth. The slowness has led many Americans to new mobile services, like PayPal’s Venmo or Square Cash, which make it possible to pay a friend instantly with just a phone.

Credit Suisse Report Explores Blockchain Impact on 14 Public Stocks
CoinDesk | 8.03.16

New research from financial services giant Credit Suisse seeks to analyze the impact of blockchain on 14 existing market participants and their stock performance. Written in response to investor questions, companies examined include major exchanges (the Australian Securities Exchange and Nasdaq), incumbent business process facilitators (Computershare and Equiniti) as well as financial services providers (Experian and JPMorgan).

What Mobile Payments Can Learn From Debit Cards (Circa 1995)
PYMNTS | 8.01.16

If we’re really serious about igniting mobile payments, maybe it’s time to stop looking to the future for our ideas and inspiration, and instead look back in time to how another transformative payments innovation got off the ground. Like back to 1995. 1995 was the year that “Toy Story,” “Apollo 13” and “Batman Forever” were breaking box office records. It was the year that Mariah Carey’s “Fantasy” topped the pop charts and the 26-year old millennials now working in FinTech startups were sipping from juice boxes in kindergarten class.

67% Of Consumers Still Label Facial Recognition Technology As 'Creepy'
Retail TouchPoints | 8.02.16

As many of 79% of U.S. consumers are fine with the idea of scanning a product on their mobile device to see product reviews and recommendations for other items they like, according to RichRelevance. But consumers still have two big ‘no-no's when it comes to the personalization of shopping. For one, 67% of shoppers think it’s creepy when retailers use facial recognition technology to identify prior shopping habits and relay this information to a salesperson. Additionally, 64% say they would be creeped out if a salesperson greeted them by name on the store floor because their mobile phone or app signals their presence.

Blockchain Compliance Firm Elliptic and LexisNexis Bring Bank-Grade Risk Management to Bitcoin
IBT | 8.03.16

Blockchain intelligence firm Elliptic and LexisNexis Risk Solutions have partnered to deliver "bank-grade risk management on bitcoin transactions". The deal integrates LexisNexis anti-money laundering risk management data into Elliptic's Bitcoin transaction monitoring and compliance products. The two firms have built a proof-of-concept that leverages financial intelligence data from LexisNexis Risk Solutions and presents it alongside Elliptic's proprietary risk scoring.

A Small-Merchant Security Program Makes Progress, But Not Without Some Grumbling
Digital Transactions | 8.02.16

A relatively new program geared at shoring up data security at small merchants is making progress toward a crucial January deadline, but not without some full-throated grumbling, if comments and questions at an industry trade show this week in Grapevine, Texas, were any indication. The program, aimed at technology companies that integrate payments applications into retailers’ business-management systems, is backed by Visa Inc. and the PCI Security Standards Council and is intended to address a tide of data breaches caused by misaligned systems. Personnel from technology companies who complete specialized training and pass an examination earn the designation Qualified Integrator/Reseller.

UK Leads Europe in Card Fraud
IBT | 8.03.16

The amount of money lost due to fraud on credit and debit cards in the UK rose in 2015 by 18% to £492m (€585m; $656m), fuelled by online shopping and data breaches. The rise was the sharpest recorded in 19 European countries studied by Fico. The software analytics firm said card fraud was a growing challenge for the financial services industry as more and more consumers conduct transactions or shop online.

Yakuza Arrested Over Massive ATM Heist
Finextra | 8.03.16

Japanese police have arrested 11 men, including a Yakuza, in connection with the theft of Yen1.8 billion ($17.3 million) from cash machines across the country in a co-ordinated two-hour raid in May. The raid saw about 100 culprits use cloned Standard Bank cards to make approximately 14,000 transactions, each totaling Yen100,000, from cash machines located in convenience stores across the country.

Banner Health Breach Affects 3.7 Million
Bank Info Security | 8.03.16

Arizona-based Banner Health, which operates 29 hospitals, says it's notifying 3.7 million individuals that their data was exposed in a "sophisticated cyberattack." The organization has hired a forensics firm to investigate the attack after taking steps to block the attackers and contacting law enforcement officials. The data breach, which started when attackers gained unauthorized acess to payment card processing systems at some of the organization's food and beverage outlets, apparently also opened the door to the attackers accessing a variety of healthcare-related information, Banner Health says in an Aug. 3 statement.

Strong Job Gains, for Second Month, Reframe Economic Outlook
The New York Times | 8.05.16

The American economy roared ahead last month, as employers added 255,000 jobs, a bigger-than-expected gain that suggests the country’s growth rate may be more robust than thought just two months ago. The Labor Department report for July had been eagerly anticipated on Wall Street, in Washington and on the campaign trail after months of conflicting signals in recent months about the economy’s trajectory. The unemployment rate was flat at 4.9 percent.

Wells Fargo Says Small Business Optimism Ticks up Slightly
ABC News | 8.04.16

Small business owners showed a modest uptick in optimism in a survey released Thursday by Wells Fargo & Co. The bank's Small Business Index, which measures owners' sentiment, rose 4 points to 68 from 64 in the previous survey released during the second quarter. The index was 67 at the beginning of this year. The latest survey questioned 603 owners in early July. Owners had a slightly more upbeat assessment of their companies' current financial situation as well as their expectations for how business will be a year from now.

Cracking the Millennial Travel Mindset: Surprising Insights on Attitudes and Behaviors
American Express | 8.04.16

As the largest demographic since the boomers, Millennials are influencing the travel industry.  According to new data released from The American Express Future of Travel and the American Express Spending & Saving Tracker, Millennials are more optimistic and plan to travel more frequently (52.8% Millennials vs. 32.1% Boomers) in the next five years and spend more on travel than boomers (58% Millennials vs. 41.3% Boomers) in the same time frame.

ClearXchange P2P Payments Network Expands Through Visa and Mastercard Deals
Finextra | 8.02.16

Early Warning, the American bank-owned operator of the clearXchange P2P payments network, has struck deals with Visa and Mastercard that paves the way for debit card-based transactions on the platform. ClearXchange currently lets customers of its owners - Bank of America, JPMorgan, Wells Fargo, Capital One and US Bank - send funds directly from their bank accounts to the recipients' using only an email address or mobile phone number.

First Data Reports Second Quarter 2016 Financial Results
First Data | 8.01.16

First Data Corporation, a global leader in commerce-enabling technology and solutions, today reported financial results for the second quarter ended June 30, 2016. Consolidated revenue for the second quarter was $2.9 billion, up 2% versus the prior year period, or up 3% excluding currency impacts. Total segment revenue was $1.8 billion for the quarter, up 2% versus the prior year period, or up 4% excluding currency impacts. For the second quarter 2016, net income attributable to First Data was $152 million, which compares to a net loss of $26 million in the prior year period.

CyberSource Equips Merchants With Loyalty Fraud Solution to Protect Consumer Accounts
Visa | 8.03.16

CyberSource, a Visa Inc. company, announced the launch of its Loyalty Fraud Management Solution, a new service that helps businesses guard against fraudulent account creation and protect customers from illegal use of their loyalty accounts, including theft of points, miles and misuse of payment credentials. According to RFi Group, an estimated $238 billion in loyalty program rewards earned by consumers through airlines, hotels and other programs, have never been redeemed.

Vantiv Launches New Program to Fuel Growth for Partners
Vantiv | 8.01.16

Vantiv, Inc., a leading provider of payment processing services and related technology solutions for merchants and financial institutions of all sizes, announced the launch of its enhanced partner program, Vantiv Advantage. The Vantiv Advantage program includes financial rewards, value-added resources and product support to help fuel the growth of the company’s partners across all of its channels, large and small. “Vantiv Advantage makes it easier for our partners to sell, innovate and grow their business faster,” said Larry Drury, chief marketing officer at Vantiv.

Executive Shuffling Continues at The Bancorp
American Banker | 8.04.16

The Bancorp has a new chief operating officer, replacing an executive who had joined the Wilmington, Del., company just 16 months earlier. The $4.4 billion-asset company said in a press release Thursday that Hugh McFadden had become chief operating officer of its bank, handling areas such as lending, credit, compliance and risk management. McFadden, who held the same post at Modern Bank from 2011 and 2013, had also been an executive at Citigroup Private Bank.

New Leaf Community Markets is First Merchant to Use Visa’s Quick Chip, Deployed by Index, to Speed Consumer Chip Card Transactions

Yahoo! Finance | 8.03.16

Earlier this year, Visa announced Quick Chip, a technology enhancement that optimizes EMV chip card processing to not only speed up checkout times, but also significantly streamline chip implementation. Index, a leading retail software company that combines secure payments, measurement, and personalization, has deployed the first implementation of Quick Chip in the United States at New Leaf Community Markets, a chain of seven natural grocery stores in Northern California. New Leaf customers can now insert and remove their chip card from store payment terminals in about two seconds.

Barclays Set to Roll-Out Voice Biometrics
Info Security Magazine | 8.01.16

Barclays is the latest major bank to use biometrics technology to authenticate its customers after sharing plans to roll out voice recognition to its telephone banking service this week. The move should put an end to the use of the telephone banking passwords which are currently utilized by the bank to ensure those on the other end of the line are who they say they are. Password-based credentials always open up the risk that they could be phished from unsuspecting users.

Priority Payment Introduces MX Insights Data Analytics for SMBs
Green Sheet | 8.02.16

Big Data intelligence has historically only been accessible to larger companies. Priority Payment Systems is changing the game for small and medium businesses (“SMB’s) with the launch of MX Insights, a data analytics product that provides SMB’s with in-depth information about their business performance, customer profiles and spending habits - while also benchmarking them against a robust group of their local market competitors.

Fiserv Reports Second Quarter 2016 Results
Fiserv | 8.02.16

GAAP revenue for the company increased 5 percent in the second quarter to $1.36 billion, with 9 percent growth in the Payments segment and 1 percent growth in the Financial segment, compared to the second quarter of 2015. GAAP revenue for the company increased 5 percent in the first six months of 2016 to $2.69 billion, with 8 percent growth in the Payments segment and 1 percent growth in the Financial segment, compared to the prior year period.

Total Merchant Services Announces Groovv POS Countertop and Mobile Point of Sale Solutions

Total Merchant Services | 8.01.16

Total Merchant Services, a leader in payment services and solutions, today announced Groovv POS, a comprehensive and easy to use point-of-sale (POS) solution for merchants who want to grow and optimize their business. The new system includes advanced EMV-compliant and NFC-enabled payment features as well as powerful software for inventory management, robust reporting and integrated marketing tools. Groovv POS is ideal for independent restaurants, retailers and other small and medium sized businesses (SMBs) seeking advanced options to engage customers and streamline daily operations.

FIS and Arkansas Gov. Hutchinson Extend VC FinTech Accelerator till 2018
FIS | 8.03.16

FIS, a global leader in financial services technology, and the office of Arkansas Gov. Asa Hutchinson have committed to extending the VC FinTech Accelerator program until 2018. Celebrating the inaugural program with the Venture Center at the Clinton Presidential Library in Little Rock, Ark., Hutchinson and FIS president and CEO Gary Norcross agreed to share funding of the program through 2018. That means more early-stage startups will have the opportunity to develop and hone innovations that may disrupt the financial services industry and how consumers interact with it.

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