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:Barclaycard has developed a new ‘Dine & Dash’ solution in the UK that allows customers to bypass the payments process and leave after they are finished with their meal. The new solution is driven by a small device placed on the table. The process works as follows: (1) customers tap the ‘Dine & Dash’ device with their mobile phone in order to check-in, (2) order food, and (3) leave after eating. The device will change color to denote successful payment. The solution is powered by the Barclaycard ‘Dine & Dash’ mobile application, where customers store their payment information. This solution was launched because Barclaycard research found that 36% of diners are frustrated with the current process of waiting for the bill, and 25% of customers would consider leaving the restaurant without paying the bill due to the long wait. Barclaycard will launch this solution in London in March. OpenTable currently offers a similar service called ‘Pay with OpenTable’ in the U.S. that allows diners who make a reservation through OpenTable to pay their bill via the OpenTable app and leave. Source: Barclaycard, OpenTable (https://www.home.barclaycard/media-centre/press-releases/Barclaycard-launches-first-Dine-and-Dash-restaurant.html) (http://openforbusiness.opentable.com/insider-information/how-opentable-is-bringing-mobile-payments-to-more-restaurants-diners-with-aloha-pos-integration/)

	Regulatory landscape: The US Securities and Exchange Commission (SEC) is examining tZERO, a blockchain subsidiary of Overstock.com, as part of the SEC’s widespread investigation into potential breaches of securities regulations in Initial Coin Offerings (ICOs), which are a means to raise funds for new cryptocurrency ventures, similar to an Initial Public Offering (IPO). Overstock.com’s CEO, Jack Byrne, believes that the SEC oversight will be beneficial for ICOs as a group moving forward. tZero launched an initial coin offering in December 2017 with a market value of approximately $250 million. Overstock.com was one of the first retailers to accept cryptocurrency as a form of payment in January 2014. Byrne has been a strong proponent of blockchain and cryptocurrency, expecting it to disrupt the financial services industry over the long term. Source: Fox Business (http://www.foxbusiness.com/markets/overstock-ceo-on-sec-probe-its-great-that-theyre-doing-this) (http://www.foxbusiness.com/markets/overstock-unit-opening-platform-to-trade-bitcoin-cryptocurrencies-as-us-securities)

	Customers’ evolving expectations: Millennials are breaking from traditional card habits. A recent survey from Bankrate shows that only one in three millennials carry physical cards; another survey found that people in the 18 to 24 age group use cash as their preferred payment method. This segment of consumers has become more debt conscious over time, impacting their use of credit cards. This could be attributed in part to the student loan burden. Source: Bloomberg (https://www.bloomberg.com/news/articles/2018-02-27/debt-conscious-millennials-ditch-credit-cards-threaten-industry)

	Data:Debit card fraud is on the rise. A recent report from FICO showed a 10% increase in debit card fraud in 2017 at locations where consumers use their debit card, which includes ATMs and merchant point-of-sale terminals. The increase in fraud is primarily through ‘skimming’; skimming is a type of card theft that uses a small device to attach to any card reader, including point-of-sale devices, and captures card information stored in the magnetic stripe. Outside of ‘skimming’, a study conducted by Javelin Strategy & Research shows that of the financial and non-financial data breaches in 2017, which includes SSN, credit card, debit card, and driver’s license fraud, debit card number theft was third highest. 16% of fraud victims had debit card numbers stolen through point-of-sale purchases, ATM withdrawals, and other hacking methods. Source: CNBC (https://www.cnbc.com/2018/03/06/protect-your-bank-accounts-from-rising-debit-card-fraud.html)
	New providers: Amazon is in talks with major US banks to offer Amazon-branded checking accounts. The primary targets for the Amazon-branded checking accounts are underbanked Americans who lack credit history or do not have credit cards. The underbanked is estimated to be one-third of the US population. Although the process is at an early stage, if successful, this will also allow Amazon to gain access to data on customer’s spending behavior. JP Morgan Chase is among the financial firms that have submitted a proposal to partner with Amazon for this new venture. Source: USA Today (https://www.usatoday.com/story/money/2018/03/05/report-amazon-checking-accounts-something-similar-could-coming-soon/394470002/)br>

PARTNERSHIP SPOTLIGHT

Discover and FitPay a subsidiary of NXT-ID, have partnered to allow Discover and its Alliance Partner network cardholders to make contactless purchases through wearables or Internet of Things (IoT) devices.
- By strengthening the payment experience, Discover is making a push towards “frictionless” payments, a key area of focus for merchants
- Additionally, the solution enhances the security aspect of payments by integrating FitPay’s digital wallet into the Discover tokenization platform, which utilizes a unique identifier to protect transactions

Source: Discover
(https://investorrelations.discover.com/newsroom/press-releases/press-release-details/2018/Discover-and-NXT-ID-Subsidiary-FitPay-Partner-to-Extend-Payments-to-IoT-Devices/default.aspx)

Alipay, merchant penetration is on the rise in Singapore. In order to attract more Chinese tourists, it has recently partnered with Suntec City, a major shopping center with over 350 merchant outlets.
- The two-year partnership allows Alipay to roll out its payment solution to all the merchants in the shopping center
- Chinese tourists contributed the largest share of the estimated 16 million tourists in the first 11 months of last year, according to the Singapore Tourism Board
- Alipay became a payment option in Singapore in 2015 and is accepted at more than 2,000 Singaporean merchants, including restaurants in open-air food courts and several theme parks

Source: The Straits Times
(http://www.straitstimes.com/business/companies-markets/suntec-city-to-launch-alipay-payment-option)

MERCHANT SPOTLIGHT

Walmart has entered into the wellness incentive space by utilizing ‘Directed Spend’, its current proprietary, point-of-sale decisioning program that is integrated with TSYS’ Advanced AuthControl solution to identify particular purchases within the customer’s healthcare plan.
- Customers that make qualified purchases at Walmart and Sam’s Club will earn incentive dollars through their wellness incentive programs, allowing customers to earn ‘wellness’ rewards through everyday purchases
- With healthcare spending reaching $3.4 trillion in 2016, wellness incentive programs have become more prominent, and Walmart hopes to capitalize on customers shopping for qualified wellness purchases at its locations

Source: Business Wire
(https://www.businesswire.com/news/home/20180307005412/en/TSYS-Announces-Agreement-Walmart-Implement-New-Payment)

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 or Rob Mau at payments@oliverwyman.com.