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.

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.

PAYMENTS SPOTLIGHT


	Transformational payments solutions:Amazon is introducing a new feature called Amazon Pay Places, a wallet that customers can use for in-store and order-ahead purchases at merchants. By using the Amazon app, customers can make purchases in-store. TGI Friday’s is Amazon’s launch partner; in select locations, customers can directly order from TGIF’s menu and pay using the Amazon mobile app. This has the potential to lower transaction costs for smaller merchants and give them more access to Amazon’s large customer base. Source: Forbes (https://www.forbes.com/sites/quora/2017/07/24/amazon-pay-places-will-fundamentally-change-retail/#1cb79bf178b0)

	Regulatory landscape:The U.K. government has banned the levy of surcharges for card transactions starting 2018. The move puts an end to the current practice where merchants such as airlines charge customers an extra fee for processing card payments. This had served as a means for businesses to pass on the additional cost of processing payments to end-customers. While larger merchants are likely to absorb these costs, smaller merchants may find it challenging to do so. Source: BBC (http://www.bbc.com/news/business-40648641)

	Customers’ evolving expectations:Bitcoin’s recent surge in value has done little for it to gain acceptance among merchants as a form of payment. Although one merchant’s bitcoin transactions have tripled since 2014, only 3 of the top 500 online merchants accept bitcoin, down from 5 in the previous year. Its appreciation has raised concerns that it is more of an asset rather than a form of currency. Additionally, transaction costs for the cryptocurrency are borne by the customer rather than the merchant, thereby limiting its use to a smaller set of transactions. Source: Bloomberg (https://www.bloomberg.com/news/articles/2017-07-12/bitcoin-acceptance-among-retailers-is-low-and-getting-lower)

	Data:Womply, a Software-as-a-Service (SaaS) provider for small and medium-sized merchants launched a software solution to help merchants automatically create a database of customer profiles based on transaction data. Aimed at helping merchants increase customer loyalty via personalized promotions and targeted campaigns, the software provides search and filtering capabilities. Source: Womply (http://www.womply.com/press-12/press-release-womply-launches-customer-directory-for-small-businesses)

	New providers:Stripe, the global payments provider to merchants, is partnering with Alipay and WeChat Pay – two of China’s biggest digital payments providers. Through this move, Stripe will enable its merchants to sell to a large Chinese customer base. With a combined ~90% share in China, Alipay and WeChat Pay dominate the mobile payments market. Source: Bloomberg (https://www.bloomberg.com/news/articles/2017-07-10/stripe-partners-with-alipay-wechat-to-access-customers-in-china)

PARTNERSHIP SPOTLIGHT

Visa and PayPal are extending their strategic partnership in the U.S. and Asia Pacific to now also include Europe
- Merchant acceptance of PayPal is expected to increase via Visa’s existing digital enablement program that provides tokenization and other services to businesses
- PayPal will use its European banking license to issue Visa debit cards and accounts to customers and merchants
- Using Visa Direct, PayPal customers will have the option of real-time money transfers across different markets

Source: Visa
(http://investor.visa.com/news/news-details/2017/Visa-and-PayPal-Extend-Partnership-to-Europe-7182017/default.aspx)

USA Technologies and Chase have announced a partnership to expand secure cashless payments at self-serve and unattended retail stores
- The joint marketing effort is expected to help merchants better engage customers at the point of sale, and at the same time make customers more aware of cashless and mobile payments at unattended retail stores

Source: USA Technologies
(http://usat.client.shareholder.com/releasedetail.cfm?ReleaseID=1032436)

Mastercard announced a deal to buy Brighterion, an Artificial Intelligence (AI) focused technology company
- With this acquisition, Mastercard aims to augment its existing fraud detection, risk and security processes, and to enhance the digital customer experience
- The focus will be on advanced data-driven decisioning and authorization for transactions carried out at merchants

Source: Mastercard
(http://investor.mastercard.com/investor-relations/investor-news/press-release-details/2017/Mastercard-Enhances-Artificial-Intelligence-Capability-with-the-Acquisition-of-Brighterion-Inc/default.aspx)

MERCHANT SPOTLIGHT

Uber, the ride-sharing company, is launching an open-loop co-branded credit card for its U.S. customers with Barclaycard and Visa
- The move may help Uber drive customer loyalty; cardholders will also be able to use the card for transactions outside of Uber
- Lyft is also working on rolling out a co-branded credit card

Source: Fox Business
(http://www.foxbusiness.com/features/2017/07/30/uber-and-lyft-look-to-hail-credit-card-deals.html)

J.C. Penney, the retailer, announced it is integrating its credit card and customer loyalty programs with Apple Pay, in addition to rolling out Apple Pay across all stores nationwide
- With this move, all Apple Pay supported credit and debit cards, including the J.C. Penney Credit Card and the co-branded J.C. Penney Mastercard will be accepted nationwide
- By increasing payments convenience with its credit card on Apple Pay, J.C. Penney expects increased customer interest in its credit card and loyalty programs

Source: J.C. Penney
(http://ir.jcpenney.com/mobile.view?c=70528&v=203&d=1&id=2288174)

Swatch launched Swatch Pay, its second generation NFC-enabled contactless payments system in China
- In partnership with 11 Chinese banks, Swatch Pay accepts both debit and credit cards to be loaded on to the watches for contactless payments at Chinese merchants and stores
- This relies on merchants' contactless POS terminals along with a China UnionPay QuickPass icon to process payments

Source: Swatch
(http://www.swatchgroup.com/en/services/archive/2017/swatch_pay_the_cool_way_to_pay)