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:General Motors announced the launch of Marketplace – a commerce platform for on-demand purchases of goods and services and reservations, with the ability for customers to pay directly from the car’s dashboard. The in-vehicle touchscreen will allow GM customers to interact with different merchants across the retail, fuel, hospitality, food, hotel and transportation industries. Merchants such as Starbucks, Dunkin’ Donuts, TGI Fridays, Shell, ExxonMobil and Priceline.com have signed up for Marketplace. Source: General Motors (http://www.gm.com/mol/m-2017-dec-1205-marketplace.html)

	Regulatory landscape: American Express has now moved to eliminate the requirement for customer signatures for both credit and debit card purchase transactions processed on its network. The move follows similar actions taken by Mastercard and Discover to eliminate signatures in reaction to merchant’s demands to reduce customer friction. Migration to EMV technology and rise of mobile payments have also reduced the reliance on signatures as a means to mitigate fraud. Source: Bloomberg (https://www.bloomberg.com/news/articles/2017-12-11/amex-joins-mastercard-discover-in-dumping-signature-requirement)

	Customers’ evolving expectations: According to Visa’s recent consumer survey, 86% of consumers are keen to use biometrics for identity verification and payments authorization. Close to half the consumers surveyed viewed biometrics as a more secure alternative to the traditional methods of relying on a password or PIN, with more than 60% viewing them as being faster and more convenient. Banks and merchants are likely to integrate biometric technology into their apps going forward, in order to enhance payments experience for customers. Source: Visa (http://pressreleases.visa.com/phoenix.zhtml?c=215693&p=irol-newsarticlePR&ID=2322713)

	Data:The average consolidated cost of a data breach which today is ~$4 million globally, is expected to increase significantly with General Data Protection Regulation (GDPR) regulations taking effect across Europe in 2018, where fines can go up to €20 million or 4% of annual turnover. To minimize this risk, Finextra predicts that the focus for issuers and merchants in 2018 will be to ensure the safety of account and payments data across online channels. This is particularly required in the context of increasing digital commerce volumes and EMV finding success in reducing fraud at physical stores. Omnichannel tokenization to secure data across digital channels including e-commerce, recurring one-click ordering and in-app payments is expected to gain traction. Source: Finextra (https://www.finextra.com/blogposting/14848/2018-trends-safer-data-faster-payments-better-experiences)
	New providers: With the expiry of Amazon’s patent on one-click checkout in September ’17, Magento, a commerce platform provider, is now offering ‘Instant Purchase’ as a standard feature to merchants using its platform. A faster checkout based on stored payments credentials and shipping information minimizes customer friction by reducing the time taken to place an order by over 90%. The process also leads to lower cart abandonment - driving higher conversion and repeat purchases. Source: Magento (https://magento.com/blog/magento-news/new-instant-purchase-checkout-boosts-sales)

PARTNERSHIP SPOTLIGHT

In a deal valued at over $1 BN, TSYS announced that it would buy Cayan - a payments technology provider focused on integrated payments and seamless omni-channel experience
- TSYS expects to strengthen its position in the small and medium sized businesses (SMB) segment in the U.S. through this deal
- The deal is reflective of the trend wherein merchant demand for integrated payments is driving M&A activity in acquiring

Source: TSYS
(https://www.tsys.com/news-innovation/press-media/press-releases/2017-press-releases/20171218-TSYSAcquiresCayan.html)

Didi, China’s largest ride-hailing company has forayed into payments by acquiring 19Pay, a third-party payment-services provider
- With this acquisition, Didi can develop and offer its own payments solutions instead of relying on China’s two payments giants - WeChat Pay and Alipay
- With over 20 MM ride orders per day, Didi has a strong existing customer base to offer payments solutions and the move is likely to intensify competition in the space
- The People’s Bank of China (PBOC) controls the issuance of licenses to payments providers, and acquiring a provider with an existing license is the preferred route for new players entering the Chinese payments market

Source: Caixin
(https://www.caixinglobal.com/2017-12-20/didi-chuxing-picks-up-a-payment-license-101187170.html)

MERCHANT SPOTLIGHT

Walmart Pay, the mobile wallet offered by Walmart is now accepted at over 4,700 stores and is likely to surpass Apple Pay in terms of active U.S. users by the end of 2018
- Active users are those that transact at least twice a month using the service
- As the world’s largest retailer, Walmart is enrolling several thousand customers each day on Walmart Pay, and is able to get 2 out of 3 new users to transact again within 21 days

Source: Bloomberg
(https://www.bloomberg.com/news/articles/2017-11-07/walmart-pay-threatens-to-surpass-apple-in-u-s-mobile-payments)

Albert Heijn, a Dutch supermarket chain is piloting "tap to go" technology that allows customers to pay for their purchases without having to go through the traditional checkout process
- Customers who use the supermarket’s app can tap an electronic shelf upon picking up an item, and walk out; the payment is automatically transferred from their linked bank account within 10 minutes

Source: Ahold Delhaize
(https://www.aholddelhaize.com/en/media/media-releases/albert-heijn-testing-tap-to-go-technology/)

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.