Imitation Meat, Loyalty On Demand And Remote Ordering: The Shape-Shifting Of Dining In 2019

https://www.pymnts.com/innovation/2019/restaurants-dining-trends-digital-technologies/

As is usually the case, there was plenty to see – and even more to eat – in the national restaurant show this week. During the early part of the week, 43,000 attendees descended on Chicago’s McCormick Place to feast on food samples, experiment with new cooking technology and wander among tables at an exhibition the size of 22 football fields, trying to get a taste for what’s next in in the industry.

And as always, there were some surprisingly big showings at the National Restaurant Show. In 2019, plant-based meats were the show stealer. Though they are historically associated with “hamburgers” that bore more than a passing resemblance to cardboard hockey pucks in both appearance and execution, the last 12 months have marked something of a meatless meat renaissance.

The team at Impossible Foods, which notched a $2 billion valuation early this year, took the opportunity at the show to tout their newly reformulated vegan burger, which reportedly blew viewers away with “how closely it mimicked beef.”

And while meatless meats and their apparent advances were the surprise stars of the show this year, the trend has been notably been building all year. Beyond Burger, an Impossible Foods competitor, is eyeing an IPO, while Don Lee Farms (maker of the veggie burger that bleeds) has been pushing global expansion.

“No one wants to eat a burger hidden with artificial or modified ingredients if they have the choice,” Danny Goodman of Don Lee Farms told PYMNTS earlier this year. “They want natural. They want organic. They want real.”

Or, at least it seems, they want it to taste as real as possible.

The most controversial food item of the day, incidentally, was Jimmy Dean’s sausage gravy stuffed hash brown, which was lovingly described as “meat and cream-filled toaster strudel made of crisp potatoes.” Its flavor is “exactly what you think” – which we assume means it tastes like a heart attack. It was a winner of the 2019 Food and Beverage Award in innovation – an award recognizing “industry-altering products that will shape the future of food and beverage.”

And while it makes sense that a restaurant industry event would focus on the food at the front of the house when handing out awards for innovations, the technical products running behind the scenes are increasingly creeping into the spotlight when it comes to being “industry-altering.”

The ongoing tension between restaurateurs and mobile delivery aggregators like Uber Eats, Grubhub and Deliveroo seems to continue as a powerful product driver. As Olo CEO Noah Glass noted in a conversation earlier this year, restaurant operators wrongly assumed they couldn’t be digitally disrupted because of the nature of what they sold. But, as Karen Webster explained, restaurants are in trouble today, because those third-party order aggregating plays have all matured into real threats to their customers’ loyalty.

“Restaurants sign on because they see it as a way to get orders, even though they run the risk of losing consumer loyalty to their brand, and perhaps even the consumer herself, as aggregators inevitably pivot their platforms – and their platform economics – to create their own branded food experiences,” Webster wrote.

But, as the latest edition of the Restaurant Readiness Index clearly indicates, there is no going back and hitting reset on this for restaurateurs, because customers are pushing for that simplified digital moderated checkout experience. By the numbers, nearly all (92 percent) report that using an app to place a QSR order is a positive experience.

Among offerings that drew attention this week in Chicago was Say2eat, a Messenger-based ordering solution that allows customers to order meals through Facebook Messenger. Designed as an alternative to mobile apps, Say2eat currently counts 168 million customers as users. Synk, on the other hand, is designed to provide a lower-cost alternative to third-party delivery. Using Google mapping, the software optimizes routes for delivery drivers so restaurants can keep their delivery operations in-house.

Gaining strength, but largely off the beaten path this year, were loyalty applications and offerings. According to the Restaurant Readiness Index, nearly eight in 10 QSR customers see loyalty programs as highly important, a view shared by about half of all managers.

Overall, the report found that approximately 80 percent of customers and managers have a positive view of loyalty programs. Among the more successful users of them are Starbucks and Dunkin’, which noted in their most recent earnings reports that they are critical to boosting sales and engagement – particularly when wedded to a mobile order-ahead program.

But at the big show for restaurants nationwide this week, loyalty didn’t get much love or big announcements.

There were, however, robots – specifically, serving bots. Introduced by Bear Robotics, Penny is a self-driving robot designed to deliver food and drink orders and bus tables. Swappable trays allow for different functions, and multiple Penny units can be programmed to work in a small space at once without issue. And then there is Sally, a bot that makes customizable salads, yogurt bowls, grain bowls and snacks using sophisticated robotics and algorithms to dispense accurate portions of hundreds of different ingredients.

Useful – but can it accept an order on the go? Offer points? Make a veggie burger that really tastes like the real thing? Stuff a potato hot pocket with sausage gravy?

Probably not, but then, there is always next year.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/innovation/2019/restaurants-dining-trends-digital-technologies/

Truecaller Denies Data Hack As Customer Info Shows Up On Dark Web

https://www.pymnts.com/news/security-and-risk/2019/truecaller-data-dark-web/

Data from Truecaller, the Swedish caller identity app company, is reportedly being sold in private internet forums, including data on customer phone numbers and email addresses of users around the world.

According to a report in the Economic Times, a cybersecurity analyst who monitors these types of transactions told the paper that the data is being sold on the dark web for around Rs 1.5 lakh (2000 Euros.) Data on global users are going for as much as 25000 Euros. Truecaller has 140 million users around the globe.

“It has been recently brought to our attention that some users have been abusing their accounts,” a representative for Truecaller said in a statement to the news outlet. “In light of this event, we would like to strongly confirm at this stage that there has been no sensitive user information being accessed or extracted, especially our users financial or payment details.”

Despite the statement out of Truecaller, the news outlet said it reviewed a sample of the data that is being sold on the dark web and found it that had personal identifiers including the user’s address and the mobile service provider. “The team has been investigating the matter and has found a very large percentage of the sample data does not match or is not Truecaller data,” Truecaller said in response to that.

The report noted that earlier in 2019 the caller identity app said it started looking into users accounts that may have abused access to its platform. It had previously set daily limits on the number of searches one account could do.

Truecaller went on to say in its statement that its database wasn’t attacked and that the data on its servers is “highly secured.” Still, cyber experts told the news outlet it’s not likely that such a large amount of data wasn’t accessed via a data breach.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/security-and-risk/2019/truecaller-data-dark-web/

How Subscription Services Can Disrupt Alcohol’s Confusing Distribution System

https://www.pymnts.com/news/retail/2019/subscription-services-alcohol-distribution-firstleaf/

Selling alcohol is a more complicated process than the average consumer generally appreciates when they order a glass of wine with their restaurant meal or pick up something at a liquor store. Some of the difficulty is that alcohol is one of the most regulated retail goods – and those regulations aren’t always consistent state to state, or even town to town. Almost 100 years post-Prohibition, there are dozens of towns throughout the U.S. where the sale of alcohol is still illegal.

But the bulk of that back-end complexity comes as the direct result of the unique three-tiered sales process for alcohol and spirits. Alcohol producers – wineries, distilleries and brewers – must sell their products to wholesalers. The system is controversial within the industry, with supporters noting that it controls the flow of alcohol within the U.S. and critics pointing out that it creates an unnecessary layer of middlemen that unnecessarily raises prices.

Outside the industry, however, most people don’t have much of an opinion on the subject, because it is mostly invisible to consumers.

But the evolving consensus is that the digital economy is disrupting, and possibly displacing, the system – mainly by exploiting loopholes.

Online marketplaces like Drizly mostly stand outside the system, by aggregating prices across a variety of retail sellers. Wine flash sale sites build relationships with lots of distributors – still within the three-tiered system – but act as a force that exerts downward pressure on wine pricing. Shots Box CEO JC Stock noted in a recent interview with PYMNTS that despite the fact they had originally conceived of their distilled products delivery business as an online-only endeavor, they had to open a single physical store just to get the licensing they needed to sell online.

“We had to buy a retail store to fulfill this dream. It was a learning process, and a very expensive one,” Stock told Karen Webster.

There is another workaround to the three-tiered system, a loophole leveraged by Firstleaf and other wine subscription clubs. While the tiers are mostly legally mandated to be separated (producers can’t be wholesalers, wholesalers can’t be distributors, etc.), wine clubs are the exception, in that they can hold dual licenses. What that means in practical terms is that the service can both purchase wine directly from vintners and sell to consumers directly, as long as they sell on subscription instead of allowing shoppers to order bottles a la carte.

“At Firstleaf, we are investing in higher quality wine and shipping it directly to consumers, cutting out steps that add cost. Great wine always begins in the vineyard directly, with the small farms to bring in the product .We skip the importers and import the wines ourselves.”

The experience of using the service is otherwise similar to the DTC commerce experience. The user starts the experience with a brief online quiz, which asks about white vs. red vs. rosé vs. sparkling preferences, what region they prefer their wine to come from, and how much on average they drink per month. From there, the user gets a three-bottle introductory box for just a $4.95 shipping fee.

Once the bottles are consumed, the wines can be reviewed with a thumbs-up or thumbs-down, and users can leave comments. That data feeds the artificial intelligence to generate suggestions for future boxes.

After the initial box, every future shipment will consist of six wines (for $79, plus tax and $9.95 shipping) delivered automatically every two months. Users can make specific substitutions within orders three times.

The service, by all accounts, works better the more consumers use it and interact with it by selecting or deselecting wines. Most reviews indicate it is a better service for wine novices than for those that already have highly developed palates and preferences.

It might not singlehandedly bring down the three-tiered system – but as Firstleaf and other digital alcohol players are proving, there are workarounds. How long they can survive the competition or adjustments remains to be seen.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/retail/2019/subscription-services-alcohol-distribution-firstleaf/

Unexpected eCommerce Boost Pushes Earnings Beat For Target

https://www.pymnts.com/news/retail/2019/target-earnings-revenue-ecommerce-sales/

Target notched an impressive beat when it reported its Q2 earnings earlier this morning (May 22), with earnings and sales both clearing analyst predictions.

Net income clocked in at $795 million, or $1.53 per share. That is a beat on results at this time last year, when Target reported earnings of $718 million, or $1.33 a share, a year ago, well ahead of analyst estimates of an EPS of $1.43. Revenues came in at $17.63 billion, a 5 percent increase from 2017’s Q1 result, and ahead of estimates for $17.52 billion. Same-store sales were up 4.8 percent, up from a year ago and ahead of 4.2 percent estimates. Target also reported that traffic at stores was up 4.3 percent, transactions overall were up 4.3 percent and the average transaction amount was up 0.5 percent.

Online sales, however, were the start of the earnings show with a 42 percent surge, driven by the introduction of curbside grocery pickup at Target locations. Online sales now represent 7.1 percent of the retailer’s total sales, up from 5.2 percent a year ago.

“We continue to see a healthy economic backdrop for our business,” CEO Brian Cornell said, noting that Target is “well-positioned to deliver strong financial performance in 2019 and beyond.”

Big Q1 rollouts for Target included intimates and sleepwear brands Auden, Stars Above and Colsie, all of which were well-received. The retailer also launched an environmentally friendly brand of cleaning products called Everspring during the first three months of the year.

“When we incorporate our merchandising efforts into all the other initiatives that are driving our business … something really special happens for our guests,” CMO Mark Tritton told analysts. “Target becomes more relevant to them and they choose to shop us more often.”

Over the last year and a half, Target has developed a reputation as retail’s most avid survivor, according to an analyst note from Morgan Stanley earlier this month.

“Now, there are signs Target’s shipping-related deleverage is narrowing, particularly as it invests in fulfillment options … which promote higher traffic and reduce costs,” Morgan Stanley said ahead of earnings.

Target has also skillfully managed to generate buzz – and regain some of that late 90s, early 2000s “Tar-jay” feeling – with the launch this month of its limited-edition line of Vineyard Vines’ preppy apparel and accessories. The move generated long lines, sellouts and countless internet and social media mentions. On Tuesday (May 22), Target said the Vineyard Vines launch is already “one of the most successful” brand collaborations it’s ever done.

Target shares are up about 8.8 percent for the year, and the good earnings news drove that upward trajectory. The retailer’s shares were up 7 percent when market trading began.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/retail/2019/target-earnings-revenue-ecommerce-sales/

Plaid Launches Plaid Direct In Open Banking Innovation Push

https://www.pymnts.com/innovation/2019/plaid-direct-open-banking/

A new service launched Wednesday (May 22) called Plaid Direct enables “two-way connectivity across the financial ecosystem and makes it easier for consumers to move money between their accounts — whether it’s in a neobank, FinTech, or big box bank account,” according to a statement from Plaid.

In a blog post, the company said it now offers a “lightweight integration specification that allows banks and FinTech applications to quickly and easily become a data source in the Plaid network. By doing so, businesses can enable their customers to enjoy open banking-style connectivity across their toolkit of financial services providers.”

Changing regulations and open banking are redefining the obligations of financial institutions, forcing them to rethink their strategies and implement new technological approaches. New legislation, such as PSD2, is raising the bar for FIs by allowing organizations like FinTechs to provide financial services. Such rules require traditional FIs to securely open up their customer data and require new levels of transparency from service providers, which must reveal everything from fees and exchange rates to liabilities and transaction time frames.

Here’s how the service works, according to Plaid: “Once you have integrated via Plaid Direct, end users can select your institution or app in Plaid Link and connect their accounts with personal financial management apps, such as Drop and Qapital. Your customers can also use their accounts as a funding source for other services, such as Acorns and Coinbase.”

Plaid said the new service already has sparked innovation, via Varo Money. It’s offering consumers an “unprecedented level of financial freedom” by enabling consumers to use funds from their Varo account to fund their Betterment account.

“Varo’s goal is to help our customers make smart financial decisions by ensuring they can see their full financial picture, ideally across all their money apps. The Plaid Direct specification enabled us to easily build into the Plaid network and enable our customers to do just that,” said James Pelham Burn, product manager at Varo.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/innovation/2019/plaid-direct-open-banking/

Comcast Wants To Follow Amazon, Google And Apple Into The Healthcare Game

https://www.pymnts.com/healthcare/2019/comcast-device-amazon-google-apple/

Comcast reportedly is getting into healthcare — the latest example of how technology is proving entry for a variety of tech and communication-focused firms into one of the largest industries in the U.S., a group that includes the likes of Amazon, Google and Apple.

According to CNBC, the Comcast healthcare effort centers around a yet-to-be deployed device to “monitor people’s health,” which is set for a pilot later this year. The report, based on knowledge from two unnamed sources, said the “device will monitor people’s basic health metrics using ambient sensors, with a focus on whether someone is making frequent trips to the bathroom or spending more time than usual in bed. Comcast is also building tools for detecting falls, which are common and potentially fatal for seniors, the people said.”

The report added that the device won’t be a “communications or assistant tool,” and won’t be capable of other tasks such as web searches or controlling household appliances or utilities. “Comcast plans to offer the device and related service to at-risk people, including seniors and people with disabilities, but the timing, pricing and roll-out plan have not been finalized,” the report said. “It will start to experiment with pilots, which are not limited to Comcast customers, by the end of 2019, with potential commercial release in 2020.”

Healthcare is at the verge of a wave of innovation and disruption via the efforts of Big Tech and other companies that are more associated with digital payments and commerce than medical care and medicine.

Amazon stands as one of the main example of that, and seems to be helping to blaze the path that Comcast is following. As PYMNTS has covered, Amazon wants to enable Alexa, its voice-activated digital assistant, to keep tabs on customers’ medicine and provide personal health updates, and is taking steps to achieve that. Amazon said Alexa is HIPAA-compliant and that five healthcare companies including Cigna, Livongo Health and hospital partners have created new Alexa skills, enabling Alexa to make appointments at urgent care facilities, track prescription drug shipments and provide doctors with information once a patient is released from the hospital.

As for Google, its plans to disrupt healthcare and play a major role in that industry include using data and artificial intelligence (AI). That’s according to Toby Cosgrove, an executive advisor to the Google Cloud health care team. Such tools could allow Google to help medical professionals better spot health trends and determine more efficient — and perhaps even less expensive — treatment plans. AI in healthcare will reach $36.1 billion by 2025, according to a recent report.

Wearables, too, are part of this building wave of disruption and innovation in healthcare. For instance, Google has said it would work with Fitbit, a maker of wearable devices, on healthcare initiatives tied to consumer and enterprise health situations, with Fitbit using Google’s new Cloud for Healthcare API to help the company integrate further into the healthcare system. Through this collaboration, Fitbit can connect user data with electronic medical records (EMR).

For its part, Apple also has a hand in wearables, and in offering encouragement toward exercise and healthy living through those devices. Earlier this year, for instance, Aetna said that via the Apple Watch, the insurance provider’s Attain app will give Aetna members access to personalized goals, the ability to track their daily activity levels, access to health action recommendations and the ability to earn rewards for taking actions that improve their overall well-being. According to Aetna, reward opportunities include the ability for eligible users to earn their Apple Watch via participation in the program.

Apple is also working with Johnson & Johnson’s Janssen Pharmaceuticals unit to study whether the Apple Watch can be used to prevent strokes.

But wearables aren’t the only focus for Apple when it comes to healthcare. It will provide its Health Records feature on the iPhone to the upwards of 9 million veterans in facilities all over the country. That means veterans will be able to peruse their health records and see secure medical info, all organized in one app on their iPhones. Things like immunizations, conditions, allergies, procedures and lab results will all be displayed, and veterans will be able to see a summarized health profile on demand.

As all this shows — and the new Comcast effort confirms — the world of healthcare promises to be built in large part by the contributions of commerce and payments and web-focused firms.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/healthcare/2019/comcast-device-amazon-google-apple/

How eTailers Level Up Their Checkout Game

https://www.pymnts.com/news/retail/2019/ecommerce-checkout-shopify-uber/

To prevent consumers from leaving their carts behind before they pay, businesses need to have strong online checkout processes that convert online shoppers into customers. The aim is to head off the real and pertinent issue of checkout abandonment, which, according to some estimates, happens to a staggering share of eCommerce carts.

Some estimates say almost seven in 10 — or 69.6 percent — of all online shopping carts end up deserted, according to the latest PYMNTS Checkout Conversion Index. And that calculates to lost eCommerce sales of $260 billion because shoppers don’t hit that buy button and complete their purchases. The pressure is on enhance and streamline online checkout processes with so much in the balance.

From Amazon to Shopify, tech companies and eCommerce retailers are adopting features to up their checkout games (and presumably improve conversions in the process). These are just some of the functions companies are employing to help bolster their checkout processes on eCommerce websites.

All — or 100 percent — of the top 30 merchants in Q2 2018 offered product ratings, reviews and recommendations. Google Shopping, for instance, has been redesigned and users can read reviews or watch video content on certain products and they can filter by brands or items. The example given by Google was a shopper looking for a set of new headphones filtering for attributes like “wireless” or a brand like “Sony.” At the same time, news surfaced that the new shopping experience would include the insertion of a little blue shopping cart logo. The company noted per reports that it would “show shoppers they can seamlessly purchase what they want with simple returns and customer support, backed by a Google guarantee.”

All — or 100 percent — of the top 30 merchants in Q2 2018 offered rewards. Through the Uber Rewards program, for instance, riders in the U.S. earn points for their Uber X, Premium and Pool rides along with Uber Eats purchases. Passengers earn 1 point for every $1 they spend on Uber Pool as well as Uber Eats, and earn 2 points for every dollar they spend on Uber X. Riders who reach certain thresholds then meet levels such as gold, platinum and diamond. The latter tier, in one case, offers customers who earn a minimum of 7,500 points free Uber Eats delivery on three orders. This tier of riders also attains “special access to highly rated drivers” as well as complimentary upgrades in addition to “premium support.” 

Nearly all — or 98.7 percent — of the top 30 merchants in Q2 2018 offered free shipping. And shipping methods through eCommerce retailers are becoming faster: Amazon, for instance, plans to invest $800 million during Q2 to make delivery speed for Prime members one day instead of two. One-day delivery is an option on some goods as of now. Amazon Chief Financial Officer Brian Olsavsky said in response to a question from an analyst, “We have been offering obviously faster-than-two-day shipping for Prime members for years — one day, same day, even down to two-hour delivery for Prime Now — so we’re going to continue to offer same day and Prime Now morphing into, or evolving into, a free one-day offer.”

And 95.3 percent of the top 30 merchants in Q2 2018 offered live site help. Technology companies are rolling out new services to condense business conversations and tasks into one place: Shopify, in one case, rolled out a new mobile app dubbed Shopify Ping per reports last year. Merchants can manage tasks through messaging without needing to switch between apps and tools through the tool. Shopify Director of Product Michael Perry said in an announcement at the time, “Shopify merchants are conducting many business conversations across multiple apps every day, not only to run their day-to-day operations, but also to manage customer inquiries. Shopify Ping was created to make all of this easier to manage.” Perry added, “It’s a one-stop messaging app that lets them spend more time on what matters most — running their businesses seamlessly and deepening customer relationships.”

Nearly eight in 10 — or 79.3 percent — of the top 30 merchants in Q2 2018 offered guarantees or refunds. Pet Plate, for instance, has a money-back guarantee if a dog isn’t satisfied with the company’s pet food on the first try. Consumers enter the company’s conversion funnel by clicking “start now” or “see plans or pricing.” They are then taken into a flow that asks various questions about their dog (such as breed or birthdate, according to the website). The site will then find the appropriate number of calories for a dog via an algorithm on the back end and will suggest a plan based on how much food a dog needs.

From Pet Plate to Google, eCommerce retailers and technology firms are using features at checkout that could help drive conversions. And, with checkout processes slowly homogenizing and features that were rare becoming common, it is more important than ever that retailers approach their checkout processes strategically to maximize their conversion rates.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/retail/2019/ecommerce-checkout-shopify-uber/

Helping The Smallest Businesses Navigate Credit – And Taxes

https://www.pymnts.com/today-in-data/2019/small-businesses-credit-lending-taxes/

The gig economy is gaining ground, as an increasing number of workers have specialized skill sets. But even the savviest of individuals may need help navigating what they owe to Uncle Sam at the end of a gig, at the close of the quarter or on April 15. Likewise, small business owners need credit to help them get operations in place to get top lines flowing. As relayed in recent coverage and interviews with Fundbox and Keeper Tax, the needs (and opportunities) are significant.

Data:

$1.4 trillion: Value of the small business lending market as estimated by the CFPB.

$3,500: Amount it may cost a bank to underwrite a loan through traditional means.

40 percent: Number of small business owners with a  “less than pristine” credit score, as estimated by Fundbox.

20 percent: Keeper Tax’s estimate of gig workers’ tax “overpayment.”

32.2 percent: Share of gig economy workers with specialized skills, measured at the end of 2018.

https://www.pymnts.com/today-in-data/2019/small-businesses-credit-lending-taxes/

CheckFree founder Kight leads $2.5M Series B investment in FI Navigator

https://www.mobilepaymentstoday.com/news/checkfree-founder-kight-leads-25-million-series-b-investment-in-fi-navigator/

Former CheckFree Corp. founder and CEO Pete Kight led a $2.5 million Series B investment in Fi Navigator Corp., a web-based data and analytics platform for the banking industry, according to a release from the company.

The funding round was supported by Commerce Ventures, an early-stage investment firm that focuses on fintech companies. Several other prominent venture capital firms and private investors also participated in the funding round, officials said.

“Pete Kight inexorably altered the payments landscape through CheckFree, which remains one of fintech’s greatest success stories,” Steve Cotton, founder and CEO of Fi Navigator, said in the announcement. “Pete continues to advance innovation in fintech and possesses an uncommon ability to identify avenues of business model disruption.”

Fi Navigator said the funding comes at a time when the company is rapidly expanding its data and analytics offering, FIN Advisor and FIN Reporter, which serves financial institutions, vendors and consultants.

“FI Navigator dramatically advances industry analytics closer to automated consulting with instant, comprehensive assessments of any financial institution,” Kight said in the release. “That unique ability has the potential to transform the B2Bank sales and consulting models.”


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https://www.mobilepaymentstoday.com/news/checkfree-founder-kight-leads-25-million-series-b-investment-in-fi-navigator/

Marqeta raises $260M in Series E funds to expand payment card issuing platform

https://www.mobilepaymentstoday.com/news/marqeta-raises-260m-in-series-e-funds-to-expand-payment-card-issuing-platform/

Marqeta Corp. has raised $260 million in a Series E funding round led by Coatue Management. According to a press release, this latest round values the company at $2 billion.

The round was backed by several new investors, including Vitruvian Partners, Spark Capital, Lone Pine Capital and Geodesic. They join the firm’s existing investors Visa, Iconiq, Goldman Sachs, 83 North, Granite Ventures, CommerzVentures and CreditEase.

The firm said the new funding round will be used to expand its modern card issuing platform into new domestic and international markets.

“We are in the midst of a transformation in card issuing around the globe,” Marqeta founder and CEO Jason Gardner said in the announcement. “When today’s innovators are in need of modern payment solutions, they aren’t turning to banks as their primary issuers anymore and want a platform built for their needs.”

Oakland, California-based Marqeta, founded in 2010, uses open APIs to allow companies such as Square, DoorDash, Kabbage and Instacart to create customized payment cards for their customers. The firm has 300 employees worldwide and recently opened a London-based office for its expanding European business.


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https://www.mobilepaymentstoday.com/news/marqeta-raises-260m-in-series-e-funds-to-expand-payment-card-issuing-platform/

Nuvei agrees to buy UK payments firm SafeCharge for $889M

https://www.mobilepaymentstoday.com/news/nuvei-agrees-to-buy-uk-payments-firm-safecharge-for-889m/

Nuvei Corp. has agreed to buy U.K.-based payments firm SafeCharge International Group Ltd. in a cash deal valued at $889 million (669 million British pounds), according to a regulatory filing.

SafeCharge shareholders will receive $5.55 a share in cash under the agreement. The purchase price represents a 25% premium based on the SafeCharge purchase price at the end of business yesterday.

“The price premium Nuvei is offering reflects SafeCharge’s leading position in the high-growth e-commerce market, the strength of its own technology platform, its diversified and stable customer base, and the significant experience in the payments industry of SafeCharge’s payments team,” SafeCharge chairman Roger Withers said in the filing.

SafeCharge CEO David Avgi said the agreement positions the combined companies well in their respective markets, noting that Nuvei is a strong competitor in the U.S. and Canadian payments business. Nuvei, based in Plano, Texas, was previously known as Pivotal Payments, but changed its name in late 2018. 

Nuvei Chairman and CEO Philip Fayer said the company is very excited about the acquisition, noting the agreement would create a leading payments firm with significant scale.

“Our businesses are highly complementary from multiple perspectives, including geography, technology, key verticals and customers,” he said. “We think the technology platform SafeCharge has developed is exceptional and will serve as the go–forward foundation from which we will continue to grow the combined businesses and provide best-in-class products and services to our customers and partners.”

The deal is expected to be completed by the third quarter.

The SafeCharge board has agreed with the terms of the agreement and plans to recommend that shareholders approve the deal, according to the filing.

 


Topics: Financial News, POS, Region: Americas, Region: EMEA, Regulatory Issues, Technology Providers


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Indian consumers' familiarity with e-payments propels higher retail sales

https://www.mobilepaymentstoday.com/news/indian-consumers-familiarity-with-e-payments-propels-higher-retail-sales/

Payments technology company Financial Software and Systems has published India Payment Trends 2018, a report that highlights consumer payment trends, as well as spending habits and patterns.

Highlights from the FSS report include:

  • October was the busiest month, with $73.2 million in transactions, 11% higher than the monthly average of $65.8 million.
  • On average, customers spent 8% more during the festive season.
  • Friday is the busiest time of the week, with 27% of total sales generated from 3–6 p.m.
  • VISA has the largest market share, accounting for 47% of total transaction volume and value.
  • Debit cards accounted for 74.5% of the total volume, while credit cards dominated in terms of value, at 58.2% of the total.
  • More than 90% of failed transactions are due to “do not honor” and customer-related issues; the average monthly rate of successful transactions stood at 88.9%.
  • An increase in adoption of digital payments and growing consumer familiarity with digital payments is a key factor propelling higher sales, FSS said.

Topics: Mobile Apps, Mobile Payments, Region: APAC

Companies: FSS


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Mastercard, Interac Team On Canada Cross-Border Payments

https://www.pymnts.com/mastercard/2019/interac-canada-cross-border-payments/

Mastercard and Interac, the global and domestic payment networks, announced Wednesday (May 22) they are collaborating to offer customers in Canada a fast and easy way to send money internationally.

In a press release, the companies said Interac is using Mastercard Send, a push-payments service to send money cross-border, on the Interac eTransfer platform. That will enable customers to send money from Canada to bank accounts in Europe. Mastercard and Interac said National Bank will be the first bank to pilot the new service for its banking clients.

“Interac e-Transfer is the go-to way to move your money securely in Canada, as represented by the millions of people who use it each day for their personal and business affairs,” said Peter Maoloni, vice president, product and platform delivery, Interac in the press release. “We think this offering with Mastercard and National Bank to offer a cross-border solution that will leverage the trust and reliability of the Interac e-Transfer brand, will be a game-changer in international remittance — making it easier for financial institutions to connect to the networks, and for their customers to move their money internationally.”

According to Mastercard and Interac, Canada is a big market for international payments given its diverse population. Numerous businesses in Canada operate global marketplaces. Citing the World Bank, the companies said $25.4 billion in remittances were sent from Canada to other countries. With the firms partnering up, Canadians will be able to log in to their mobile or online banking services and send funds using the Interac e-Transfer brand.

“Consumers and businesses today operate globally. Whether it’s traveling abroad, sending money to family or friends overseas, or purchasing products from a business in another country, the ability to move funds across borders quickly, easily and securely is becoming a must-have,” Ramesh Jayakrishnan, director of push payments for Mastercard in Canada, said in the same press release. “Financial institutions need cost-effective and trusted solutions to meet their customers’ expectations. This new offering will connect banks to Mastercard Send to help improve customer experience and future-proof their cross-border payment service, all while using the existing Interac e-Transfer platform.”

Mastercard and Interac said the service will be rolled out to other financial institutions in Canada in which they can enable customers to send money to international bank accounts, and down the road to mobile wallets and cards.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/mastercard/2019/interac-canada-cross-border-payments/

Nuvei To Acquire SafeCharge For $889M

https://www.pymnts.com/news/partnerships-acquisitions/2019/nuvei-to-acquire-safecharge/

In an all-cash deal valued at $889 million, Nuvei Corp plans to purchase SafeCharge International Group Ltd. The firms noted that shareholders of SafeCharge would receive $5.55 of cash for every share – a premium of 25 percent to the stock’s closing price on Tuesday (May 21), Reuters reported.

SafeCharge shares increased by as high as 24 percent to 435 pence, which was near the 436 pence that Nuvei offered prior to “paring some of the gains,” per the report. SafeCharge noted that shareholders would still get a final dividend of 7.22 pence per share, which was previously announced.

Nuvei, which is based in Plano, Texas, was known at one point as Pivotal Payments prior to becoming renamed. Credit Suisse is serving as a financial adviser for Nuvei, while Shore Capital is reportedly in that capacity for SafeCharge. The deal comes amid the market debut of Finablr in the UAE and Network International in Britain.

In other recent news, digital payment company Nexi notched $2.3 billion in its initial public offering (IPO). The event marked the third IPO for a company related to payments in less than a year, and was reportedly the largest European IPO this year as of April. Shares of the company were given at nine euros each, which provided the firm with a value of 7.3 billion euros with debt.

The firm sold shares to upwards of 340 investors from around the world, and more than 100 from Italy. The offers also encompassed a capital increase of 700 million euros. Bain Capital, Advent International and Clessidra SGR were investors in the company. It was reported that the firm’s debt stood at 1.7 billion euros, and capital increase proceeds are going toward decreasing that. The European IPO market had a slow start to 2019, but the Nexi move and others signal that it is starting to warm up.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/partnerships-acquisitions/2019/nuvei-to-acquire-safecharge/

Consumers Who Use Mobile In-Store Are More Frequent Brick-And-Mortar Shoppers

https://www.pymnts.com/news/mobile-payments/2019/in-store-smartphones/

Mobile commerce has become part of the daily routine for many consumers — who are not just using devices to shop on the go, but also in-store and for a variety of product categories.

In the 2019 edition of the Remote Payments Study, PYMNTS collected and analyzed survey data from 2,300 American consumers to see how shopping habits have changed and evolved from last year.

Once upon a time, it was predicted that the rise of smartphones would spell the end of traditional retail, but that hasn’t really happened. In the study, nearly half (48 percent) of consumers who own smartphones use them while shopping in stores.

How are consumers using mobile devices in-store? Nearly half (46.8 percent) use them to access in-app discounts, while slightly fewer (43.3 percent) look up product information. And roughly one-third use their devices to “showroom” — one of retailers’ biggest fears a few years ago — to compare prices at competitors. But they don’t necessarily buy items from other stores on the spot.

These activities range in frequency, though. Close to half (48.1 percent) said they look for discounts every time they are in a store, 35.5 percent look up product information every time they are in a store, 39.8 percent reported comparing prices some of the time and 27.6 percent said they look up product reviews once in a while.

This reinforces one of the findings from the report: that consumers tend to purchase through the channels on which they shop. What this means is that consumers who purchased items on smartphones were most likely to have first found them on smartphones. Conversely, those who paid for their most recent purchases in stores were most likely to have first discovered those items in stores.

In-store smartphone usage also seems to relate to brick-and-mortar foot traffic, which goes against the narrative that smartphones are killing physical retail.

For instance, when asked how often they visit brick-and-mortar shops, 17.7 percent of consumers who used smartphones in stores said they do so daily and 63. 8 percent said weekly. This is a considerably higher share than the 5.8 percent and 63.2 percent, respectively, among those who do not use smartphones in stores.

This implies that retailers shouldn’t fight in-store smartphone usage, but instead encourage it by enhancing the mobile experience.

Sixty-three percent of the consumers who first discovered their last retail purchases in physical stores ended up paying in those stores, for example. Just 24.5 percent purchased items they’d found in stores on their smartphones, and 26.2 percent purchased them on their personal computers.

Digital wallet usage is still fairly low. Just 5.6 percent of consumers in Q1 2019 used them to make a retail purchase. Most use stored credit cards (38.9 percent) and debit cards (38.7 percent).

Figure 4

In Q1 2019, nearly half of consumers (46.4 percent) manually entered their payment information into their phones, an increase from 43.2 percent in Q1 2018.

When consumers use mobile wallets, PayPal is the most popular; 61.8 percent who have mobile wallets had set PayPal up on their smartphones in Q1 2019, a 3.1 percentage point increase over Q3 2018. Usage of Apple Pay and Google Pay stayed fairly consistent over those three quarters.

Figure 5

Despite low mobile wallet usage, consumers aren’t dissatisfied with the technology. More than three-fourths (77.4 percent) of those whose latest purchases were retail products and who used smartphones to pay report being “somewhat” to “extremely” pleased with them. This is slightly more than the 75.2 percent whose last purchases were food items.

Very few (12.8 percent) flat out said they were dissatisfied with mobile payments for retail goods, while more were dissatisfied with mobile payments for food (18.2 percent).

Who is more likely to make remote purchases? According to the study, consumers with annual incomes exceeding $100,000 were more active remote shoppers for retail goods (50.5 percent) and food (44.5 percent).

By age, smartphone usage tends to transcend generational differences, and consumers in all groups had relatively high smartphone usage rates; 59.7 percent of Gen Z and 52.9 percent of bridge millennials bought via smartphone.

Table 2

Seniors were much more likely to buy via computer (71.1 percent) and millennials had the highest usage of mobile generally (9.0 percent). The study found low usage of voice-enabled commerce across all ages.

Smartphones have become the digital commerce tool of choice among all ages and most income levels, whether to transact, browse and research or to compare prices in-store.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/mobile-payments/2019/in-store-smartphones/

nbkc bank Joins INV Fintech

https://bankinnovation.net/2019/05/nbkc-bank-joins-inv-fintech/

INV Fintech, the sister accelerator to Bank Innovation, today announced the addition of nbkc bank as a member of its ecosystem. 

Currently in its seventh startup class, INV Fintech fosters innovation through information sharing, interactions and potential collaborations between startups, financial institutions and technology providers. Since 2015, it’s supported more than 50 startups in their efforts to grow their businesses. 

nbkc joins Fiserv, TIAA, Associated Bank and other financial institution members of INV Fintech. “We are excited to welcome nbkc,” said Rodrigo Suarez, principal of INV Fintech. “As a forward-looking community bank, nbkc will bring valuable perspectives to our startups, and it’s a great addition as we grow our ecosystem and continue pushing for fintech-bank collaborations.”  

nbkc has been actively working with fintech startups through its own accelerator program, Fountain City Fintech, launched in 2018. “As an early adopter, we work with fintechs in many ways – as an early-stage beta partner, as an investor or with a bank of record relationship, for example. Our goal is to be the fastest and easiest bank to work with in mutually-beneficial relationships,” said Eric Garretson, chief financial officer at nbkc. “INV Fintech aligns perfectly with our desire to be part of the ecosystem of forward-thinking people and companies in the financial services space.” 

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5AMLD and its Effects Over the Crypto World

https://thefintechtimes.com/5amld-and-its-effects/

By Simone D. Casadei Bernardi, Senior Managing Partner at Blockchain ConsultUs Ltd.

Pressured by the realities of the modern world, with the risk of terrorist attacks higher than ever, new virtual currencies changing the way we think about money, and unprecedented attempts to access to complete financial anonymity, the EU decided to follow US’s lead and enforce new legislation aimed at dealing with these potential threats. It is the first time when an EU-wide directive regarding cryptocurrency entities is adopted, but far from likely to be the last.

How did we get here and why?

Simone D. Casadei Bernardi, Senior Managing Partner, Blockchain ConsultUs Ltd.

As the world evolves and current reality becomes more complex with every passing year, so must the State’s policies. In the past decade, we’ve seen world-changing events and found ourselves dealing with a new order of things. Scandals like the Panama Papers, the horrendous rise of terrorism and its migration into the heart of first world countries, mainly European countries, proved decisive in making EU regulators launch a crackdown on money laundering and terrorism financing.

One of the products of EU’s new “iron fist” policy when it comes to the movement of money on its territory is the creation and adoption of the 5th Anti-Money Laundering Directive or 5AMLD for short. An upgrade of the 4AMLD, its declared purpose is to strengthen EU member states’ grip on money transfers, particularly regarding beneficial ownership, electronic identity, and for the first time, over entities that deal with virtual currencies.

To understand how determined EU regulators are to add as much transparency as possible in the financial world, it worth considers the fact that the first AMLD was introduced in 1991. It took 25 years for two updated versions, the 2- and 3-AMLD, to be introduced, yet in the past three years, we’ve seen the 4th and 5th renditions, while the 6AMLD is already on its way.

The directives of the 5AMLD must be implemented in all EU States by the 10th of January 2020, which might prove unrealistic since a few members have yet to enforce the rules imposed by the 4AMLD, although the deadline for that has already passed.

5AMLD: an overview

The most notable change brought by the latest version is the broadening scope of the affected parties.

In simple terms, what the 5AMLD does is take the 4AMLD’s policies and make them mandatory to more financial actors, or “obliged entities” as they’re referred to in the official text. It also focuses on additional transparency provisions regarding beneficial ownership, heightened security measures surrounding third-world countries that present a high risk for either terrorism or money laundering, and a decrease to 100 Euro of the benchmark at which prepaid card users have to be identified.

It is also the first EU-wide regulatory directive that deals explicitly with cryptocurrencies by including virtual currency exchange platforms and wallet providers into the list of “obliged entities.”

After January 2020, when the 5AMLD will be implemented on State level, both wallet providers and virtual currency exchanges will have to comply with the 5AMLD’s set of anti-money laundering requirements. This means they’ll have to carry out identity checks for clients and beneficial owners, plus report on suspicious transactions. The aim is to reduce the anonymity that comes with using cryptocurrencies in an attempt to cripple criminal organisations by restricting their new-found financial freedom of movement in the virtual currency world.

Change is inevitable though, and a long-term approach is best, both in terms of company policy and the cryptocurrency world as a whole.

How will 5AMLD affect the Crypto-industry?

Although the description used to identify virtual currencies in the official 5AMLD document is broad, as to include as many options as possible (“a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically”), not all parties dealing with virtual currencies are subjected to the new directive.

Crypto to crypto exchanges, for example, are exempt of the 5AMLD, whereas fiat to crypto exchanges are specifically targeted for compliance. The reasoning behind it is that the 5AMLD’s role is to limit unlawful behaviour, especially one that can facilitate purchases using fiat currency to do harm. It is a sign that the EU is interested in fighting financial crime rather than stripping virtual currencies of their most valued attribute, that of anonymity. Even so, it is expected that regulations be even more inclusive of further entities in the future.

The same goes with wallet providers, where only custodian wallet providers, identified as those that maintain control using a private cryptographic key over their customers’ wallets, are included in the “obliged entities”. Non-custodian wallets, where just the users hold their private keys, are exempt, which again points to show the EU is interested in controlling the gatekeepers to limit money laundering and terrorism, rather than crack down on the virtual-currency concept.

Crypto significant figures mostly welcome the new regulations and view them as a great tool to bring more professionalism into the industry through heightened transparency and the exclusion of “shady” business.

Parting thoughts

The AMLD is an attempt to tighten the spectrum of the law and set a standard set of rules among EU member states. It is to be expected that some countries, following their own agenda, will either welcome the new changes brought on by the 5AMLD, or they’ll try to push back and delay its effects as much as possible.

Change is inevitable though, and a long-term approach is best, both in terms of company policy and the cryptocurrency world as a whole. Those who will jump at the change to be in line with the latest requirements as soon as possible, while placing great emphasis on making the transition hassle-free for clients and partners, are set to win over new business and position themselves as pioneers.

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Visa Uses NYC Mass Transit To Ignite Contactless Payments

https://www.pymnts.com/visa/2019/visa-uses-nyc-mass-transit-to-ignite-contactless-payments/

The first time is a charm.

In fact, the first time must be a charm.

No, we are not talking about first dates or so-called “meet cutes” in movies. We are talking about consumer acceptance of contactless payments in the U.S. – specifically, the use of such payments for mass transit in New York City. It’s an unforgiving environment where people are famously told not to look too long at other riders, so you can imagine the frustrations in store if those payments should fail while someone is trying to catch a subway to work.

In an new PYMNTS discussion, Dan Sanford, Visa’s global head of contactless payments, talked with Karen Webster about the May 31 launch of a contactless payments pilot involving the Metropolitan Transportation Authority (MTA) in New York City and Chase. The MTA, according to Visa, becomes the first U.S. transit agency to implement contactless payments using Visa’s global transit framework. That means riders can use any Visa credential – whether it’s a Visa contactless card, mobile device or wearable – to pay for rides (along with other retail purchases, of course).

In reality, and for the time being, this effort is about contactless cards more than other payment forms, but the impact could still be significant. “This is really going to change New Yorkers’ daily lives,” Sanford said.

Mass Transit Experience

That might sound like PR hype, but think about it from the point of big-city consumers – the rush for a bus or subway is often fraught with anxiety and anticipation, and there are always those times when a closed-loop fare payment method is out of funds right when that rush hour train is pulling into the station, or times when the contact fare technology sputters a bit, delaying the line past the turnstiles and causing people to miss their trains. Indeed, according to Visa statistics, 67 percent of riders have missed a train while waiting in line to reload a fare card. As well, 83 percent of consumers said they’ve had trouble getting their fare cards to work at turnstiles, and 66 percent have left funds on transit cards (the definition of leaving money on the table).

The pilot that starts May 31 involves the 4/5/6 lines between the Grand Central-42nd Station and the Atlantic Avenue-Barclays Center Station, as well as all Staten Island buses. Over time, all New York City subway lines and bus routes will accept contactless payments, Visa said.

But for that contactless future to advance, the technology has to work the first time, a vital step in making contactless payments a daily, even mundane habit for more consumers. Sure, this pilot only applies to big-city residents – and visitors to New York City, of course – but every successful contactless effort pushes the ball (chip?) forward, so to speak. As Sanford told Webster, the best messaging Visa can do around contactless is just directing consumers to places where it’s been implemented – including retail stores, not just mass transit stations – and make sure it works.

Moving Past EMV

The ongoing push toward more contactless payments in the U.S. comes as merchants and payment services providers move past their work of shifting to the EMV payment standard. Globally, of course, tapping to pay with contactless cards has already taken off: According to figures from Sanford during the PYMNTS interview, 48 percent of “face-to-face transactions” outside the U.S. involve contactless payment cards or other contactless payment methods.

But the U.S. is moving toward contactless with increased speed, at least according to many observers. Visa recently said that 80 out of Visa’s top 100 merchants by transactions in the U.S. currently offer customers the ability to tap to pay at checkout. As well, 11 out of the top 25 U.S. issuers are now rolling out newly available contactless cards.

For mass transit – upon which tens of millions of U.S. consumers rely daily – the path has largely been set by Transport for London, which operates mass transit for the U.K. capital. When it moved from closed-loop payments to open-loop contactless, Sanford said, “it just blew past everyone’s wildest expectations of just how quickly” consumers would gravitate to such payments in a busy, high-energy, little-room-for-error environment. Now, he said, “New York is leading the charge in the U.S.”

Whenever mass-transit systems change over their payment methods, there is often a period of time when station agents need to be on hand to educate consumers about using the new fare options. That could also be the case in New York City in the coming weeks, Sanford said. But success with contactless there – enabling consumers to pay not only for fares, but also such goods as coffee and snacks – could go a long way toward promoting other uses of contactless in other parts of the country.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/visa/2019/visa-uses-nyc-mass-transit-to-ignite-contactless-payments/

The SMB C-Suite’s Data Security Problem

https://www.pymnts.com/news/b2b-payments/2019/ioxo-smb-csuite-data-security-breach-cyber-risk/

In an environment of relentless cyber threats, small businesses (SMBs) still too often feel they are not targets for cyberattacks and data breaches. Less than two years ago, Manta researchers found that only 16 percent of small business owners believed they were at risk of a cyberattack, with most believing that the data within their systems was not desired by cybercriminals, and that they would be able to survive an attack should it occur.

Yet, the reality is far from so. Continuum analysts have estimated that the average cost of a cyberattack on a small business is about $54,000 — even higher for firms with up to 1,000 employees. A 10-person company that faces losses of more than $41,000 following a cyberattack may not be able to survive such a crippling hit.

While researchers found that SMBs are luckily waking up to the threat of cyberattacks, many continue to struggle in addressing that risk, with budget restraints and a lack of expertise preventing these firms from becoming as protected as possible.

Even in the last six months alone, IOXO Founder and CEO David Turcotte said he’s seen growth in SMBs’ understanding of their cyber risk exposure. In some ways, Turcotte told PYMNTS, small firms can actually be bigger targets for attackers — and the fallout of a data breach or system shutdown can be disproportionately large, too.

“In a larger organization, the risks are diluted,” he said. “Maybe they attack the legal department, or finance department, or payables. Sometimes, there’s a department within a department. But in a small business, there are two or three people [who] have the keys to the kingdom, and if you get the right one, if that person makes a mistake, their entire business can be shut down.”

Cyberattackers are increasingly going after accounts payable or payroll departments — the points of the enterprise where funds exit, and can be rerouted to a criminal’s bank account. This is the basis for the Business Email Compromise (BEC) scam, which often involves a phishing campaign against accounts payable professionals. Similar scams target payroll professionals with fraudulent emails, claiming to be from legitimate employees and requesting a change to their direct deposits.

While these attacks can be damaging, they don’t necessarily mean the demise of an entire organization. However, when accounts payable, accounting, payroll and other functions are all rolled under a single small business owner, a cybercriminal who is able to trick that CEO or steal their bank login credentials can spell the end for the company.

With that in mind, Turcotte warned that the CEO and the rest of the C-Suite can present some of the biggest cyber risks to an SMB. Sometimes, the cybersecurity policies that a typical employee must follow are viewed as voluntary for the CXO, he noted.

“The rank-and-file employees are working hard every day, and are given a set of tools, and they have to accept that,” said Turcotte. “The folks [who] have the authority to be exceptions to the rule are the ones [who] create security headaches for IT professionals.”

The C-Suite is indeed responsible for not only developing those tools and rules that the enterprise must follow, but is beginning to step up to the plate to lead investments in cybersecurity technologies. IOXO recently announced the launch of CloudWRX, a solution designed to help SMBs migrate entirely to the cloud, while maintaining the security and integrity of their data.

Key to the solution, Turcotte said, is its affordability. To make the cybercrime challenge even harder for small businesses, while the financial implications of an attack can disproportionately harm an SMB compared to a larger enterprise, the costs of cyber protection are disproportionately higher, too. IT professionals agree, with half of IT executives in a recent BAE Systems Applied Intelligence survey reporting that budget is the largest barrier to developing and deploying a comprehensive security plan (nearly the same said cybersecurity efforts are not a high enough priority for business leaders at their firms).

“Having an understanding of [cybersecurity] is really important. Once small businesses realize, ‘Okay, I’m at risk,’ the next step of ‘What do I have to do to protect myself?’ gets dicey,” he explained. “The cost for a lot of small businesses is astronomical.”

The high-profile data breaches and cyberattacks on global conglomerates and government institutions have, on one hand, perhaps misled the small business community about its vulnerability to cyberattacks. On the other hand, they have also raised awareness of cyber threats overall, and Turcotte said small business leaders are finally ready to acknowledge that they won’t necessarily be passed over by an attack.

It’s only the first step to getting secured, however. Adequate education and investment in affordable cyber solutions must be top of mind, particularly for the C-level executives who may think cybersecurity stands in the way of getting business done.

“Sometimes, cybersecurity processes and protocols may not be the most convenient,” said Turcotte. “You always have a push-and-pull relationship between convenience and security. But short-term convenience is not worth risking the entire company.”

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

https://www.pymnts.com/news/b2b-payments/2019/ioxo-smb-csuite-data-security-breach-cyber-risk/

Shadow Banking Casts Shadows Over Economic Heavyweights

https://www.pymnts.com/news/b2b-payments/2019/federal-reserve-shadow-banking-corporate-debt/

The U.S. and China have begun to concern some economists with record levels of corporate debt. However, when U.S. Federal Reserve Chairman Jerome Powell spoke on the issue during a conference in Florida earlier this week, it wasn’t so much the corporate debt levels that concerned him. It was the way some companies obtain that debt that could lead to problems.

His biggest worry, according to USA Today this week, was that some corporate borrowing is “financed opaquely, outside the banking” system, and that a reliance on shadow banking could “pose a new threat to financial stability.”

Shadow banking emerged largely in the wake of the financial crisis to enable financing when the traditional (and regulated) financial services sector pulled back on lending to limit risk. In the U.S., the Fed estimated in 2013 that shadow banking liabilities had reached $15 trillion. Most recently, regulators have turned their attention to the cryptocurrency shadow banking market.

Not every so-called alternative lender is a shadow lender. Many alternative and marketplace lenders simply offer an online portal through which a consumer or small business can obtain a loan from a traditional financial institution. Others actually partner with those traditional lenders to finance their loans.

What remains is the group of alternative lenders that critics have said charge sky-high rates for risky loans. The Federal Reserve is currently exploring how these players, and the rest of the alternative and online lending market, might be impacting borrowers and the economy at large.

China’s Shadow Banking Crackdown

Chinese authorities have also ramped up their efforts to address the systemic risks that the shadow banking sector poses to the strength of the overall economy. The nation introduced financial system reforms last year that saw regulators’ attention fixed squarely on the shadow banking space. Those efforts saw a sharp drop in stocks that made the nation the worst-performing stock market in 2018, Financial Times reported in April, when shares once again declined on concerns of a revamped war on shadow banking.

Analysts have estimated that China’s shadow banking sector is worth about $10 trillion today. Unlike the U.S., it is actually driven by the commercial banking sector, which keeps shadow assets off balance sheets.

Despite stock market volatility resulting from China’s shadow banking crackdown, the government’s initiatives have, so far, led to a 60 percent decline in banks’ shadow assets, and a decline in corporate debt from 134 percent of total gross domestic product (GDP) in 2017 to 128 percent of GDP in 2018, Natixis data showed, according to South China Morning Post.

“Most of the reduction is due to private corporations’ efforts to divest assets, given the constraints in assessing credit, especially since the clampdown on shadow banking,” said Natixis Chief Economist for Asia-Pacific Alicia Garcia-Herrero in an interview with the publication.

Considering China’s ballooning corporate debt levels, the shadow banking crackdown could continue to be a key tactic among financial regulators in the years ahead.

India Takes Note

More recently, financial regulators in India have taken steps to tackle the nation’s shadow banking sector. Reports last weekend in Bloomberg said economic issues in India are a key focal point in the country’s elections, particularly following a series of defaults by shadow lender Infrastructure Leasing & Financial Services last year.

“There is an imminent crisis in the [non-banking financial companies (NBFC)] sector,” said Corporate Affairs Secretary Injeti Srinivas in an earlier interview with LiveMint. “There is a credit squeeze, over-leveraging, excess concentration [and] massive mismatch between assets and liabilities, coupled with some misadventures by some very large entities, which is a perfect recipe for disaster.”

LiveMint also reported earlier this year that a combined $22 billion is now gone from two dozen shadow lenders, as investors become spooked about government crackdowns and the shadow banking industry’s impact on the broader economy. NBFC “investors are cautious … given near-term uncertainties,” said Citigroup Analyst Manish B. Shukla.

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