Merchant Payments Digest

The Merchant Payments Digest is a regular update from Oliver Wyman focusing on merchant-relevant payments topics. Our goal is to provide the latest updates in the payments landscape to help keep merchants apprised of the many developments in the rapidly shifting payments space.

We welcome your thoughts and feedback on this inaugural version and we look forward to sharing editions with you in the future. To have a discussion with Oliver Wyman on your payments issues and opportunities, please contact Beth Costa at payments@oliverwyman.com.

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.

PAYMENTS SPOTLIGHT


	Transformational payments solutions: Subway, FreshDirect and The Cheesecake Factory have begun rolling out payment bots for Facebook Messenger across the US, allowing their customers to securely complete payments using Mastercard’s Masterpass digital payment platform without having to leave the instant messaging service. The Masterpass-enabled bots use artificial intelligence to enable consumers to interact with retailers, place orders and complete payments. The bot experience delivers the convenience of customising a gift card through Messenger integrated with Masterpass payment functionality to enable a simplified checkout experience. Source: Retail Info Systems (https://risnews.com/subway-freshdirect-and-cheesecake-factory-launch-chatbots-messenger)

	Regulatory landscape:The Financial CHOICE Act has been successfully voted out of the House Financial Services Committee and on to the full House of Representatives for a floor vote. The Financial CHOICE Act is a proposed bill that would repeal parts of Dodd-Frank including the Durbin Amendment capping debit interchange. Jeb Hensarling, Chairman of the House Committee on Financial Services, authored the bill and has led discussion on it over the past year. The U.S. Supreme Court refused to hear an appeal to a recent ruling that annulled the $5.7 billion settlement between Visa and Mastercard and retailers. The ruling that originally annulled the deal indicated it did not adequately protect the interests of objecting merchants, such as Amazon, Target, and Starbucks, because it prevented them from being able to sue Visa and Mastercard over fee practices in the future. Visa, Mastercard, and a group of smaller retailers had tried to revive the settlement via the appeal on the grounds that it improved practices in credit card fees. The Supreme Court’s refusal to hear the appeal enables retailers to bring additional litigation against Visa and Mastercard. Sources: US News & World Report (https://www.usnews.com/news/articles/2017-05-04/jeb-hensarlings-financial-choice-act-looms-over-dodd-franks-future) Financial Regulation News (https://financialregnews.com/industries-react-prepare-fight-around-renewed-repeal-debit-card-price-controls/) Bloomberg (https://www.bloomberg.com/politics/articles/2017-03-27/top-u-s-court-won-t-reinstate-5-7-billion-credit-card-accord)

	Customers’ evolving expectations: Another mobile operator is offering a proprietary loyalty program for its “Pay” app, this time in Russia. Russia’s largest mobile network operator MTS has launched MTS Money Wallet, an online payments and money transfer service that incorporates loyalty points, offers and discounts. The new service combines all payment tools on one platform, including e-wallet, bank cards and customers’ mobile account balances. Customers have the option to make payments and money transfers from the e-wallet through a smartphone or through the MTS website. In addition, the service automatically enrolls users into the MTS Bonus program, MTS’s proprietary loyalty program that offers loyalty points and access to exclusive offers and discounts. This comes at a time when other mobile operators, such as Samsung Pay, have recently implemented rewards for their mobile payments apps. Source: PR Newswire (http://www.prnewswire.com/news-releases/mts-launches-mts-money-wallet-unique-service-to-combine-all-payment-solutions-613574473.html)

	Data:Samsung announced that its new Galaxy S8 will employ facial-recognition technology for mobile payments. The Galaxy S8 will use multiple verification techniques including iris and facial recognition to authenticate users to make payments. Past Galaxy phones have used facial recognition to unlock phones but this will be the first foray into authentication for financial transactions. Source: Bloomberg (https://www.bloomberg.com/news/articles/2017-03-16/samsung-s-new-s8-said-to-adopt-facial-recognition-for-payments)

	New providers: Indian Prime Minister Narendra Modi announced the launch of the Bhim-Aadhaar Pay app, an app which authenticates users to make payments through their smartphone using their fingerprint . Only merchants need to download the app; users simply need to have an Aadhaar-linked bank account (27 major Indian banks are already on board) and a mobile phone. The Indian government also launched two incentive schemes for the Bhim app to reward users for introducing new ones to the platform via a referral bonus and for using the app via a cashback incentive. Source: Times of India (http://timesofindia.indiatimes.com/india/with-new-govt-app-use-fingerprint-to-pay/articleshow/58188140.cms)

PARTNERSHIP SPOTLIGHT

Airbnb has agreed to buy social payments startup Tilt, the P2P money transfer provider focused on group payments and crowdfunding.
- Tilt should help Airbnb with group payments, such as for friends to split the cost of an Airbnb rental
- Tilt reports that over 500,000 groups used its product, which has a unique ability to offer cross-currency payments and thus may be particularly beneficial for Airbnb
  
  Source: Skift (https://skift.com/2017/02/23/airbnb-buys-payments-company-tilt-travelers-split-trip-costs/
Ant Financial will take over helloPay Group, the online payments platform used on South East Asian eCommerce platform Lazada, via a merger. helloPay will be rebranded into AliPay in its local markets
- helloPay staff will join Ant Financial in its Singapore office, although all of the company's services will remain unchanged and the rebranded helloPay will remain separate from the Alipay app
- The move is the latest signal of intent by Ant Financial to become a leading power-broker in the global payments industry. Recently the firm raised its offer for US-based money transfer service MoneyGram to $1.2 billion
  
  Source: TechCrunch (https://techcrunch.com/2017/04/19/ant-financial-hellopay/)

MERCHANT SPOTLIGHT

McDonald’s McDonald’s announced that it will offer mobile order-ahead and pay-ahead functionality on its mobile app. McDonald’s stated the order-ahead feature will be available at 20,000 locations globally by the end of the year. As with other such apps already in the market, customers will be able to place an order anywhere, pay for it, and then pick it up at the restaurant later. To keep these orders from clogging its restaurants, however, pick up will take place curbside or in the drive-through lane given payment will already be completed in the app.

Source: Business Insider (http://www.businessinsider.com/mcdonalds-joins-the-mobile-order-ahead-craze-2017-3)

PrintempsPrintemps, the French department store, launched AliPay acceptance in all 18 of its stores in late 2016. Printemps was the first in France to accept AliPay, enabling luxury shoppers from Asia to pay with their mobile phones using the same format they are accustomed to in Asia.

The result is two-fold: enhanced customer experience, plus the opportunity for cost savings. Chinese customers accustomed to paying with AliPay at home can maintain their same payments habits, reducing friction at the point-of-sale. And merchants may experience cost savings relative to cross-border card-based transactions, according to AliPay’s partner Wirecard.

AliPay, with 450 million Chinese users, has been exploring expansion and recently cut deals with BNP Paribas, Barclays, UniCredit, and SIX to expand acceptance across Europe in 2017 to 930K merchants. But the AliPay app enables more than just payment acceptance; AliPay users will be able to search for merchants that accept AliPay and receive promotional offers from them.

Source: NFC World(https://www.nfcworld.com/2016/12/06/348872/alipay-expands-across-europe-deals-major-banks-payment-providers/ ; https://www.nfcworld.com/2016/11/09/348365/48365/)

The Merchant Payment Digest is a new monthly newsletter from Oliver Wyman focusing on merchant-relevant payments topics. Our goal is to provide the latest updates in the payments landscape to help keep merchants apprised of the many developments in the rapidly shifting payments space.

Oliver Wyman is a leading global management consulting firm with over 50 offices in 26 countries that combines broad industry knowledge and expertise with close partnerships and relationships.

Oliver Wyman has a dedicated global Payments team that draws on years of industry-shaping work across all aspects of Payments, brings deep expertise in digital and retail, and leverages our state-of-the art research partners at Celent to help our clients develop strategies that capitalize on the winds of change in the Payments landscape.

We welcome your thoughts and feedback on this inaugural version and we look forward to sharing monthly editions with you in the future.