Merchant Payments Digest

The Merchant Payments Digest is a regular update from Oliver Wyman to keep merchants apprised of developments in the rapidly shifting payments space.

PAYMENTS SPOTLIGHT


	Transformational payments solutions:Mastercard introduced a new shopping experience based on augmented reality that relies on iris authentication for processing payments. Using the technology, customers can view products in a digitally immersive way. At checkout, Mastercard will authenticate a customer using Qualcomm’s iris authentication technology and subsequently allow them to pay using any card in their Masterpass enabled wallet. The solution was piloted at SAKS Fifth Avenue and Mastercard hopes that other merchants will follow suit, in a bid to capitalize on the shift to seamless omni-channel commerce. Source: Mastercard (https://newsroom.mastercard.com/press-releases/mastercard-eyes-the-future-of-retail-with-augmented-reality-shopping-experience/)

	Regulatory landscape:EMVCo released updated specifications (v2.1.0) for 3-D Secure (3DS), as a follow-up to v2.0.0 released in October 2016. The updates released by EMVCo now include new functionality for merchants to also initiate account verification for card-not-present (CNP) eCommerce transactions (e.g., using card on file to authenticate a subscription-based billing with no direct cardholder involvement), among other improvements. The improvements are expected to increase approval rates as well as mitigate fraud. Source: EMVCo (https://www.emvco.com/wp-content/uploads/2017/10/EMV-3DS-PR_FINAL.pdf)

	Customers’ evolving expectations:Venmo, the popular P2P offering from PayPal can now be used to pay at U.S. merchants’ mobile sites. Customers can pay with Venmo at over two million merchants that accept PayPal, and will be covered by PayPal’s purchase protection scheme. Venmo will charge merchants for processing payments, with the expectation that the app’s ubiquity will help drive increased sales for merchants. Source: Reuters (https://www.reuters.com/article/us-paypal-hldg-venmo/paypal-rolls-out-venmo-payments-to-its-u-s-retailers-idUSKBN1CM1GH)

	Data:IBM announced a new blockchain solution designed to improve cross-border payments. With this move, IBM aims to facilitate the settlement of cross-border payments in near real-time, and also lower the cost of processing such transactions. Using the distributed ledger technology allows different constituents access to transaction data across multiple currencies to facilitate efficient settlement, and the opportunity to offer data-enabled value added services. Source: IBM (https://www-03.ibm.com/press/us/en/pressrelease/53290.wss)
	New providers: In a move that signals its intent to move upmarket, Square launched the Square Register targeted at larger merchants. The point-of-sale hardware device comes with two screens – one for the customer and the other for the cashier – and is embedded with Square’s payments technology. Priced at $999, the device offers an integrated payments solution at a processing fee of 2.5% + 10¢ per transaction, as compared to the regular fee of 2.75%. Source: Square (https://squareup.com/news/introducing-square-register)

PARTNERSHIP SPOTLIGHT

China’s UnionPay is increasing acceptance of its credit and debit cards in the U.S., through a partnership with First Data
- The partnership enables First Data’s ~4 MM U.S. merchants to accept transactions made with UnionPay debit or credit cards across physical stores, online and mobile channels

Source: Business Wire
(http://www.businesswire.com/news/home/20171024005589/en/Data-Partners-UnionPay-International-Enable-In-Store-Online)

JPMorgan Chase is acquiring Fintech payments firm WePay, giving the bank’s ~4 MM small business merchants access to WePay's payments technology
- WePay is a Fintech firm that uses APIs to offer software with integrated payments capability and it will become a part of JPMorgan Chase’s merchant services business
- Its technology enables smaller merchants to accept payments easily by plugging into their existing technology and infrastructure. The acquisition highlights the demand among merchants for integrated payments solutions that are customized to their industry
- JP Morgan has identified small business as an area of strategic importance and the acquisition gives it the capability to address the needs of merchants in this segment

Source: Bloomberg
(https://www.bloomberg.com/news/articles/2017-10-17/jpmorgan-to-buy-payment-firm-wepay-in-rare-fintech-acquisition)

MERCHANT SPOTLIGHT

Uber is launching a credit card that integrates real-time tracking and redemption of reward points into the Uber app
- The card targets millennials by offering experience-based rewards such as annual credits for online subscription services like Spotify after spend thresholds are achieved
- The card is automatically provisioned into the Uber app upon approval and offers rewards of 4% on dining, 3% on travel, 2% on online purchases including Uber rides, and 1% on all other purchases

Source: CNN
(http://money.cnn.com/2017/10/25/pf/uber-credit-card/index.html)

New York’s Metropolitan Transportation Authority (MTA) announced that it will accept mobile payments and NFC enabled contactless cards across its subway, bus and train networks, starting early 2019
- The move is reflective of consumers’ preference to use contactless payments as a means of convenience
- With transit being a key habit-forming vertical due to the high frequency of customer touchpoints, this move is likely to increase penetration of contactless payments across other industries as well, since ~6 MM people in New York use the subway each day

Source: New York Post
(http://nypost.com/2017/10/20/mta-gets-ready-to-dump-the-metrocard/)

Oliver Wyman is a global leader in management consulting with offices in 50+ cities across nearly 30 countries. Our Payments practice works with constituents across the payments value chain to deliver insights with real impact, combining deep industry expertise with powerful consulting capabilities. To have a discussion with Oliver Wyman on your payments issues and opportunities, please contact Beth Costa at payments@oliverwyman.com.