Payments on Fire®: Recent Episodes
Glenbrook Partners, LLC
Podcasts from Glenbrook Partners on the latest developments in payments and fintech. Featuring interviews with opinion leaders, Glenbrook's own take on emerging technologies and industry trends, other news and views on this dynamic industry.
Glenbrook's Chris Uriarte and Samantha Gordon continue their global payments regulation series with Scott McInnes, Partner at Bird & Bird, focusing on the European Union.
Tune in as they explore the EU's highly regulated landscape, the challenges of inconsistent national enforcement across 27 member states, and developments on current regulatory topics:
- Payment Services Directive - PSD2 to PSD3 evolution
- Payment Services Regulation (PSR) objectives and adoption timeline
- Digital euro goals and requirements
- European Digital Identity Wallet framework and ambitions
- SEPA Instant obligations
- Upcoming BNPL regulation
- Apple NFC access and wallet competition
- Strong Customer Authentication (SCA) implications for agentic commerce
Kicking off a series of regulation-related episodes, Duncan Douglass, payments attorney and Partner at Alston & Bird LLP, joins Chris Uriarte and Samantha Gordon to turn the confusing and sometimes tedious topic of US payments regulation into an entertaining and enlightening update.
The conversation begins with who actually regulates payments in the US and how US payments oversight differs from the UK and EU, then flows into developments on current regulatory topics:
- Ongoing Reg II/Durbin litigation relating to interchange
- The Fed's 2023 proposed debit cap reduction
- Latest preliminary approval of the Visa/Mastercard merchant settlement
- Credit Card Competition Act's status
- Illinois's IFPA delay, and practical challenges of state-by-state rules
- Surcharging, and operational complexities across network rules and state laws
- GENIUS Act stablecoin issues
- Early rule questions around agentic commerce
Drew Edmond and Chris Uriarte chat with Nikhil Konduru, Chief Commercial Officer at Lithic, to discuss modern card issuing infrastructure and where the market is headed.
They break down the issuing stack and discuss issuer-side tools to improve authorization outcomes, reduce fraud and servicing costs, and increase transparency. The conversation also covers cross-border approval and economics, and explores agentic commerce via Nikhil's "Intent Toll Booth" thesis: liability drives control, issuers may demand intent data, and regulatory and network rules may need to evolve.
Going global with your payments strategy requires far more than choosing a single payment provider: companies must weigh local acquiring versus cross-border acquiring, country-by-country payment preferences, entity structure, tax implications, compliance requirements, authorization performance, currency handling, and provider coverage.
In this episode, Chris Uriarte joins Glenbrook colleagues Samantha Gordon, Simon Skinner, and Drew Edmond to explore the complexities and potential benefits for merchants and platforms to consider when expanding payments globally.
The Glenbrook team is taking stock in June 2026 to see how the predictions from our January episode are holding up. Tune in for updates on trending topics in payments, including agentic commerce, stablecoins, cross-border and instant payments, risk and fraud, and the regulatory landscape. We also share insights on the "hot off the presses" news on tokenized deposits and the Visa/Mastercard interchange settlement.
In this episode, Russ Jones welcomes Preston McCaskill, Chief Operating Officer for Zelle, an open loop fast payments network owned and operated by Early Warning Services that moves money directly between two bank accounts in the US.
Listen in as they discuss network's growth into small business payments, the onboarding process for financial institutions, and Zelle's settlement process and alias directory. They also cover expanding use cases like pilots in the bill pay domain, and Early Warning's intent to bring the same trust, speed, and convenience of Zelle to consumer cross-border payments with stablecoins.
In this episode, Drew Edmond is joined by João Del Valle, CEO and co-founder of EBANX, to talk about the origin story of EBANX, why Brazil has historically been such a difficult market for non-Brazilian merchants, and what João has learned as the company has expanded into new regions.
Listen in as they cover some of the biggest topics shaping the next phase of global payments, including Pix and Pix Automático in Brazil, payment optimization when looking at local payment methods, and perspectives on agentic commerce and stablecoins.
This episode is a follow-up to our 2024 discussion with Stripe and Entersekt on the use of 3-D Secure (3DS) in markets where strong customer authentication is not mandated, particularly the United States. That earlier conversation was grounded in Stripe's analysis of US 3DS transactions and explored a counterintuitive but important finding: when 3DS is deployed selectively in unregulated markets, its presence can become correlated with higher-risk transactions, limiting its effectiveness and in some cases negatively impacting authorization outcomes.
Since that episode, several developments have occurred, including new analysis by Stripe examining 3DS usage and performance in markets where authentication is required by regulation, a substantial increase in the use of EMVCo "network" tokenization, and research and messaging developed by Entersekt regarding the continued use of authentication in conjunction with tokenization.
Chris Uriarte is delighted to welcome back Amandeep Batra from Stripe and Dewald Nolte from Entersekt to address these developments and to explore how authentication and tokenization interact in practice across different regulatory environments.
In this episode, Chris Uriarte speaks with Blake Breathitt, Senior Vice President of Platforms and Financial Services at Adyen, about one of the biggest growth engines in the industry over the past few years - platform payments.
Listen in as they discuss the nature of this interesting segment of the industry, the nuance behind platform payments, and just what's driving this platform payment phenomenon.
In this episode, Chris Uriarte welcomes Keith Briscoe, VP, Advocacy and Education at the Merchant Risk Council, and Allan Shearer, Executive Director, Head of TMT Relationship Management at J.P. Morgan, to focus on the evolution of card network fraud monitoring programs, and in particular, VAMP, Visa's Acquirer Monitoring Program, which combines fraud and dispute metrics to better manage risk at both merchant and acquirer levels.
Listen in as the group discusses industry reactions, data transparency and reporting challenges, and implications for enforcement of new thresholds.
Over the past several episodes, we've been building a conversation about how stablecoins are reshaping the global payments landscape. These conversations surfaced something important: this isn't just a technology story. It's a story about access. And there's another critical piece of the puzzle: the infrastructure that makes stablecoin payments actually work on the ground in emerging markets.
In this episode, Chris Maurice, the CEO and co-founder of Yellow Card, joins Drew Edmond to explore how stablecoins are transforming global payments, especially in emerging markets, by addressing liquidity issues, reducing costs, improving compliance transparency, and enabling faster cross-border transactions. Listen in as they highlight the challenges of legacy infrastructure, regulatory evolution, interoperability, and the evolving role of banks and technology platforms in this ecosystem.
It's an auspicious year and month for us at Glenbrook as on March 1, 2026 we mark the 25th anniversary of the founding of our firm, celebrating a quarter-century of pushing forward the frontiers of payments knowledge and strategy and our continuing efforts to build the broader global payments community.
A lot has happened in payments over the last 25 years and there could be no better way to celebrate the progress of the industry and the firm than to talk to the people who played such seminal roles in shaping both: In this episode, we speak with Glenbrook's three founding partners - Carol Coye Benson, Scott Loftesness, and Allen Weinberg.
Listen in as they recall the early days of the firm, discuss how Glenbrook's strategy work expanded to form our education and global practices, consider the evolution of the "payments professional", and reflect on payments industry shifts over their years both in and out of Glenbrook.
Join Glenbrook's Russ Jones and Ashley Lannquist for a detailed discussion on the state of stablecoins, focusing on market developments, regulatory and policy impacts, usage patterns, and competition from other improved payments systems.
Learn more about the stablecoin landscape in our 2-hour, self-paced course, Stablecoin Essentials.
Trust is fundamental to payments.
Gaining and maintaining trust in the payments ecosystem has always been challenging, but it becomes increasingly difficult as the industry rapidly advances and innovates. How does our trust model evolve when we move from a world where consumers are always virtually or physically present to make a purchase to a new world where robots are doing their bidding?
In this episode of Payments on Fire, Chris Uriarte welcomes Jenny Hadlow, Chief Operating Officer, and Rory O'Neill, Chief Marketing Officer, from Checkout.com to discuss the findings from their recent report "Trust in the Digital Economy 2025" and explore the interesting dimensions of trust that merchants, consumers, and service providers need to be aware of in today's ever changing digital economy.
2026 is set to be another dynamic year in payments. Join our Glenbrook partners as they discuss their perspectives on industry trends and what they'll be keeping an eye on this year, including:
- Agentic Commerce
- Tokenization
- Stablecoins
- Fast Payments
- Cross-Border Payments
- Subscription and Recurring Payments
- Card Interchange and Surcharging
- Regulation and Banking Trends
- Risk and Fraud
If you missed our Advanced Payments workshop in San Francisco last month, tune in to this episode to hear Yvette Bohanan and Russ Jones discuss the key topics and conversations from the session, including card network updates, stablecoins, and agentic commerce.
Join us for a live, virtual Advanced Payments workshop on May 12-13 for more updates and insights into critical industry topics, or deep dive into stablecoins with our new self-paced module.
In this episode, Yvette Bohanan and Ashley Lannquist welcome Scott Southall, Head of BaaS, and Will Artingstall, Head of Digital Assets Payments and e-Commerce at Citi, to dig into what recent stablecoin regulatory changes mean for the future of banking, how U.S. institutions are mobilizing behind digital dollars, why clients are asking about new forms of money, and what's next as stablecoins potentially go mainstream in the American financial system.
In this episode, Yvette Bohanan welcomes back Ran 'Goldi' Goldshtein, Senior VP of Payments and Networks at Fireblocks, to provide his perspective on the evolution of the digital currency space.
Tune in as they break down a stablecoin transaction, discuss the current state and adoption of blockchain technology, and review various use cases for stablecoins. They define terms like TradFi, Defi, and smart contracts, and explore the impact of tokenized deposits and AI on the digital currency landscape.
In this episode, Bryan Derman, Russ Jones, and Chris Uriarte share their first-take analysis of last week's proposed settlement of the long-running antitrust litigation between Visa/Mastercard and a group of merchants regarding Payment Card Interchange and Merchant Discounts.
The discussion covers the basic parameters of the settlement proposal and then investigates some of the possible reactions by merchants, issuers, and networks were the settlement to be approved the by judge.
In this episode, Yvette Bohanan welcomes back David Maimon, Head of Fraud Insights at SentiLink, for the final episode of this year's fraud series.
Listen in as Yvette and David reflect on state of fraud as 2025 comes to a close. They discuss rising identity theft reports, the persistent challenges of measuring fraud losses, and the alarming trends associated with synthetic identities, stolen identities, and insider fraud. The conversation explores issues around various payment systems, agentic AI tools, and the regulatory gaps that contribute to escalating fraud incidents.
Chris Uriarte and Drew Edmond are back from Money 20/20 and join Yvette Bohanan on this episode to provide their insights on the prevailing themes and standout announcements.
Tune in to also hear tips for navigating the conference and overall thoughts on the evolution of Money 20/20 and other industry events.
We've seen a big push in recent years to improve cross-border payments. And yet, cross-border payments remain problematic for consumers and businesses, particularly in emerging markets or parts of the world with volatile currencies or limited availability of correspondent banks. At the center of this challenge is a concept called liquidity.
In this episode, Yvette Bohanan and Ashley Lannquist welcome Mouloukou Sanoh, CEO and Co-Founder of MANSA, to explore liquidity challenges in cross-border payments, the transformative potential of stablecoins in emerging markets, and the strategic role of fintechs and banks in evolving global payment infrastructures. Listen in as they discuss practical solutions to these complex issues, aiming to unlock liquidity and scale payments efficiently across borders.
We joke that all conversations should be recorded at Glenbrook because they often lead to some interesting podcast episodes. If you have 15 mins, tune in for a fly-on-the-wall perspective in this bonus Fanning the Flames on recent developments in agent protocols.
Russ Jones and Yvette Bohanan reflect on the history of the Secure Electronic Transaction (SET) protocol and how it compares to modern protocols being developed for agentic commerce by companies like Google, Stripe, and Basis Theory.
They explore why protocols and standards are important, what makes them take hold or "get off the ground like a lead balloon", and how recent announcements in this space are shaping our current view on agentic payments.
The three major takeaways from stablecoins are that they are fast, global, and low cost. But why are they low cost? Thus began our quest to dive into the economic ecosystem of stablecoins.
When creating material for our workshops or roundtable meetings, we're always thinking about how to give slides the "Glenbrook treatment" - how do we get past the headlines and down to fundamentals?
In this Fanning the Flames episode, Russ Jones and Yvette Bohanan take you behind the scenes to show the "making of" our new stablecoin economics slide. Listen in as they discuss the points of monetization and key revenue streams in the stablecoin value chain, and address questions around practical usage and the evolving landscape.
Take a deeper look at stablecoins (and other industry trends) at our upcoming 1-day Advanced Payments workshop on December 4th in San Francisco. Space is limited - enroll today!
In this episode of Payments on Fire, Chris Uriarte welcomes Anne Hay, Chief Marketing Officer, and Mike Kaplan, Chief Revenue Officer, from PayNearMe to discuss the evolution and optimization of the payments experience.
They explore the broader concept of payments optimization and how improvements and customization in all aspects of the payments journey can lead to organizations getting paid faster and with a lower total cost of acceptance.
Listen in as they highlight the challenges faced by billers in sectors like healthcare and utilities, and provide insights on the growing importance of alternative payment methods and meeting customers where they are.
In this episode, Bryan Derman welcomes two highly respected members of the investment community who represent the two sides of that business: Tim Chiodo, Managing Director and Lead Analyst for Payments, Processors and Fintech at the global investment bank UBS, and Chris Kim, a public and private market investor who leads payments and fintech activities for Capital International, one of Capital Group’s three equity units.
Tune in as we discuss what’s happening in the market with publicly traded companies, digital wallets, the merchant acquiring space, and private equity. We’ll consider what investors look for in a payments company, explore new flows, and debate the impacts of regulation, stablecoins, and M&A deals before closing out the episode with an investment perspective lightning round.
“97.0% for those whose full personal information was freely available on the darknet” experienced identity theft attempts, according to a key finding in SentiLink’s recent report on the probability of loss.
In part three of our series on payments fraud trends and tactics, we welcome back David Maimon, Head of Fraud Insights at SentiLink, to dive into how David and his team use a “data-driven” approach in their investigations and how they have applied their research to predict the fraudulent use of identity information.
Tune in to hear how an evidence-based approach can help your team engage in effective fraud prevention.
In our 2024 Wrap Up episode, we looked into our crystal ball to predict how different payments themes may evolve in the coming year; however, this industry delivers headlines at a rapid-fire pace (by the way, are you subscribed to Payments News?) and it can be hard to keep up.
To help you read the tea leaves in the mountains of publications, Yvette Bohanan rounded up Chris Uriarte and Drew Edmond for this mid-year update on payments industry trends. Tune in to hear updates and perspectives on the following topics:
- Regulation, including the Durbin Amendment, CCCA, and Click-to-Cancel
- Stablecoins
- Agentic Commerce
- Tokenization
- Fraud and Risk, including Visa's VAMP and passkeys
In this episode, Drew Edmond is joined by Chanan Lavi, CEO and Co-founder of Kipp, to discuss solutions to one of the most common card decline reasons - non-sufficient funds. Listen in as they talk about how to optimize these transactions and explore the implications for merchants, issuers, and consumers.
How fast is fast enough?
When we look at fast payments data across countries, the US comes in pretty far behind in transactions per capita. And on the surface, this makes sense. FedNow is still new, and RTP volumes are relatively low.
Join Russ Jones and Will Eisler at the Glenbrook water cooler as they debate a looser definition of fast payments, explore challenges for adoption of traditional fast payments systems in the US, and ponder if the US actually has a more advanced and widely adopted “fast” payments ecosystem when we consider how Americans are experiencing faster money movement.
In our third episode in a series to spotlight the latest in global developments in payment systems from a financial inclusion lens, Sonja Kelly, Global Head of Women’s World Banking Institute, joins Joanna Wisniecka to dive into design principles for inclusive digital financial systems and how all end users benefit when design considers the specific needs of women.
Listen in as they discuss barriers to women’s financial inclusion, the critical importance of addressing safety and trust issues, and potential benefits and risks associated with emerging technologies like AI and CBDCs.
In this episode, Rehman Baig, Chief Product Officer at FlexFactor joins Drew Edmond to talk about how FlexFactor is rethinking payments optimization through a Merchant of Record model. For most people in the industry, “Merchant of Record” is usually associated with global tax compliance and marketplaces, not optimization. But FlexFactor is using it to directly address failed payments and auth rate challenges in a way that merchants simply can’t do on their own.
This is a fascinating conversation for anyone working to solve performance issues at scale, especially if your team has ever looked at your decline rate and said, “We’ve tried everything. What now?”
Would you let a software agent, powered by AI, search, select, and complete a purchase on your behalf? Will a merchant be able to tell if there’s a human or robot behind the transaction? What about risk and regulation concerns?
Russ Jones and Drew Edmond spent some time at the Glenbrook water cooler this week to consider the rapidly emerging topic of agentic commerce and agentic payments. Tune in as they explore different industry perspectives in order to understand the implications of this new technology in the payments ecosystem.
In a series of episodes, Glenbrook's Joanna Wisniecka will to bring you up to speed on what’s happening globally as countries modernize payment networks and reach individuals and businesses through faster payment systems.
In this episode, Joanna welcomes Sabine Mensah, Deputy CEO of AfricaNenda, a leader in financial inclusion, to explore Africa's dynamic path towards inclusive instant payment systems and the need for continued innovation and collaboration to enable access to financial services for all Africans on the continent by 2030.
Here’s a payments conundrum for you: We now have more ways to authenticate access to an online account or app than ever before. And yet, account takeover (ATO) - basically unauthorized access to an account - is at record levels.
In this episode, Glenbrook’s Yvette Bohanan and Chris Uriarte are joined by Rocky Scales, CEO of IDgo, to explore this multifaceted problem.
Tune in as they discuss the vulnerabilities in authentication techniques, the need for better consumer education, and how financial institutions and businesses can implement more secure and user-friendly authentication systems to counteract evolving threats from sophisticated fraud methods.
In this episode, Brant Peterson, Head of Enterprise Product, North America at Worldpay, joins Drew Edmond to talk about payment optimization through the perspective of a payment service provider. Worldpay is one of the world’s largest global PSPs - it processed over 2.5 Trillion Dollars in 2024, which was made up of 50 Billion transactions.
Tune in to hear their perspectives on payment optimization and solutions that PSPs can offer merchant customers to help them improve their approval rates.
With this episode, we are launching a series to explore the current state of global financial inclusion efforts from a payments perspective.
Joanna Wisniecka joins Yvette Bohanan to chat with Michael Wiegand, Director of Inclusive Financial Systems at the Gates Foundation, about the work the Foundation is doing globally and the transformative impact of digital financial inclusion on economies and societies.
Spec co-founder and CEO Nate Kharrl joins Yvette Bohanan on Payments on Fire to dig into some of the tactics and tech that is enabling today's fraud schemes, and how GenAI is redefining the payments risk landscape.
Glenbrook partners Bryan Derman, Chris Uriarte, and Simon Skinner jump on a special Fanning the Flames episode of Payments on Fire to give a first take on the Global Payments acquisition of Worldpay. Tune in to hear their strategic perspective on the deal.
David Maimon, head of Fraud Insights at SentiLink, joins Yvette Bohanan for another episode to raise awareness about different fraud tactics and their impacts.
In this conversation, Yvette and David explore the intricacies and implications of Credit Profile Numbers (CPNs) and synthetic identity fraud, as well as “zombie debt” and assumed identity fraud. Listen in to hear the implications of these fraud schemes and how industry professionals can get ahead of them.
“Payments Performance Optimization” is a pretty broad term, and it might mean different things to different people.
In a series of Payments on Fire episodes this year, Glenbrook’s Drew Edmond will be talking to guests who are approaching payments optimization from a variety of different angles, with a focus on primarily online, card not present merchants.
At the end of the day, a merchant wants the maximum number of good transactions to be authorized successfully. It sounds so simple. But is anything in payments really simple?
In this episode, Oban MacTavish, CEO and Co-founder of Spade, joins Drew to explore this issue by focusing on merchant data, and how issuers make decisions about card transactions.
As legal and regulatory restrictions have become relaxed in recent years, we’ve been noting the increasing prevalence of surcharges on payment cards here in the U.S.
Perhaps it was inevitable that the practice would become more commonplace in our market, which is known around the world for relatively high rates of card interchange and a relatively light touch in financial services regulation.
Surcharging is a tricky issue with a lot of different stakeholder perspectives to consider. In this episode, Emily Tsitrian, co-founder of Yeeld, joins Bryan Derman and Drew Edmond to share industry insights on this emerging practice and how businesses can best implement surcharging while staying compliant.
In 2024, to our great delight, we had a conversation with David Maimon, Head of Fraud Insights at SentiLink. We’re fortunate to welcome David back for a quarterly series this year to check in on payments fraud writ large - to better understand what’s happening and why.
Listen in to this episode as Yvette and David discuss the evolution and resurgence of check fraud, the increasing sophistication of fraud rings targeting banks and the government, and the adaptation of new technologies, including Generative AI, for criminal activity.
In this episode, Anthony Sharett, President of Pathward, joins Glenbrook’s Bryan Derman to share insights on the evolving partner banking space, the importance of risk and compliance frameworks, and Pathward's mission of financial inclusion. Tune in as they also discuss potential policy and regulatory changes due to implications of major discrepancies in the banking-as-a-service arrangement between fintech platform Synapse and its banking partners.
In this episode, Debbie Bartoo and Russ Jones join Yvette Bohanan to discuss Glenbrook’s focus on payments education and share some of the fun and fascinating things that have happened in facilitating workshops for 34,000 (and counting) payments geeks. Listen in to hear behind-the-scenes insights from their workshop experiences and highlights from the latest offering, On-Demand Learning, as Glenbrook continues to evolve payments education with the changing industry landscape.
Booshan Rengachari, CEO of Finzly, joins Glenbrook’s Elizabeth McQuerry and Simon Skinner to discuss how software, fast payments, and open banking are reshaping the banking industry and the way we think about financial services.
Tune in as they cover the challenges of modernizing legacy banking systems, the rise of fast payments, and the potential of open banking to integrate banking services into everyday life. The episode also explores fraud prevention in fast payment systems and the evolving role of banks amidst competition from fintech companies.
The Glenbrook partners reflect on key trends and challenges in the payments industry that shaped 2024 - from generative AI, open banking, the evolving regulatory landscape, and the rise of fast payment systems worldwide. And you can't get the Glenbrook team in a "room" without discussing ongoing fraud implications, orchestration in merchant payments, and the progress of tokenization. Tune in to hear insights from our industry experts on these themes and more as we wrap up the year and look towards 2025.
Real end-to-end testing requires real-world transactions. Sometimes that’s not too difficult to do if you are implementing payments in your own country. But step outside your border, and it gets a bit harder.
People new to payments turn to logical solutions when faced with this problem. Can you call the acquirer? Won’t they have test accounts for us to use? (Probably not.) Can’t we just drip a few transactions through with a few live customers to see how it goes? (Sure, but you may wait a long time to run through all the scenarios you would like to see - and there usually isn’t patience for that in a launch environment.)
It’s tough, but don’t be discouraged. Mercifully, a subspeciality of payment providers has set out to solve this problem. And that is the focus of this episode.
Steve Semelsberger, CEO of Testlio, joins Yvette Bohanan and Drew Edmond to discuss the evolution of quality management alongside payments testing.
Payments and treasury are two sides of the same coin. Payments teams are responsible for the customer journey - payments into a company and sometimes disbursements to sellers, app developers, content creators, or vendors. Their role usually includes working with banks and other providers to ensure money moves into and out of the company’s accounts correctly and efficiently.
Treasurers are responsible for managing cash, ensuring the efficient flow of funds, and ensuring that things like currency conversion are not eroding margins. Fintechs often have those goals and are usually searching for a bank sponsor who understands what they are trying to build.
Debopama Sen, Head of Payments at Citi Treasury and Trade Solutions, joins us for this episode to explore how treasury and payments professionals can collaborate on opportunities presented by the evolving payments landscape.
Yvette Bohanan and Russ Jones celebrate the 10-year anniversary of the announcement of Apple Pay by reflecting on its origins, challenges, and successes. The episode highlights key features like tokenization, encryption, and biometric authentication, emphasizing Apple Pay's focus on security, privacy, and convenience. Tune in to take a look back at Apple Pay’s significant impact on the payments industry and a look forward to its continued expansion.
One of the existential challenges remaining in payments is the need to accurately authorize transactions conducted online. While markets like the EU, UK and India have mandated strong customer authentication for online transactions, the U.S. is the largest market where such stepped-up authentication remains optional. Only a very small portion of eCommerce purchases utilize the 3-D Secure protocol due to lingering concerns about imposing friction and delay on a consumer base that thrives on convenience and fully understands its chargeback rights.
The Payments Performance team at Stripe recently published a blog post noting that in their controlled testing of 3-D Secure, the impact on approval rates was negative compared to running similar transactions without additional authentication. We were surprised by those results and wondered what the card issuing community would make of that counter-intuitive finding.
In this episode of Payments on Fire, we decided to get both sides of the story from two good friends of Glenbrook. Amandeep Batra from Stripe joined us to provide the merchant perspective; Dewald Nolte of Entersekt, a leader provider of 3-D Secure Access Control Server solutions joined us to offer the issuer perspective.
While “paying into” a company comes with nuance and complexity, it’s really nothing compared to what is involved when a business attempts to make an outgoing payment.
Most of us don’t think very much about these “payouts”. It’s been the domain of ERP software for decades, often an asterisk mentioning “supported payments”. Whether you are talking about B2B payments, expense reimbursements, or mass disbursements to gig workers, payouts started having a moment a few years ago.
Manish Vrishaketu, Chief Customer and Operations Officer at Tipalti, joins us for this episode to dive into why payouts have been overlooked for so long, what makes them challenging to master, and what is happening that may make things better and easier for a “niche” specialization in our industry that happens to be incredibly important for every company on the planet.
It’s September 2024, and this month, we’re focusing on business-to-business payments. B2B payments are difficult because so much information must be exchanged for them to process efficiently. But there’s more to it than that.
B2B payments are many things to many people - for finance teams, they are “payables”; for gig economy companies, they are “payouts”; for providers, like insurance companies, they are “claims payments.” The list goes on - and within each of these sub-categories, there are niggling nuances that are requirements for making these payments streamlined and affordable.
For today’s episode, we pulled a favorite from our vault - number 146, a discussion between George Peabody and Robin Gandhi. Since this aired in March of 2021, Robin has moved to a post as Chief Product Officer at Nium, and TripActions has rebranded to Navan. But the underlying ideas discussed regarding B2B are still important - and this idea of multi-player fintech and what it means for B2B payments is quite relevant.
The introduction of real-time payments in the U.S. market has been unfolding for several years now, but it seemed to pick up momentum in the last year as FedNow came to market. We now have over 1,000 banks live with real-time payments (at least for receiving) and a solid majority of transaction accounts are now reachable via FedNow, The Clearing House’s RTP system, or both.
We wanted to understand whether we might be reaching the elusive “tipping point” for real-time payments in the U.S. and which players and what kind of use cases might be driving the growth. So, we turned to an old and respected friend of Glenbrook to share a perspective.
In this episode, we go deep on the state of real-time with Dimitri Dadiomov. Dimitri is CEO at Modern Treasury, which gives him a birds-eye view of transaction trends as his company connects major corporations and leading-edge fintech platforms to a growing set of major banks in order to enable and streamline the origination of many money movement use cases.
Sometimes an episode sticks with me. It just keeps coming back in different ways. Reading an article, having a conversation, even watching TV can make me stop and reflect on a recording. This is exactly what has been happening since we sat down with Dr. David Maimon, Head of Fraud Insights at SentiLink, to talk about fraud.
As always, we covered a lot of ground in this episode. As you might expect, we talked fraud trends. What you might not expect is a conversation, most enlightening, on the psychology of fraud and those who perpetrate it.
Many thanks to David for sharing his insights on the dark web, on this podcast and regularly on LinkedIn. If you are not following him there, you should be.
Last but not least, a shout out to Georgia State University and the work they are doing in their Evidence-based Cybersecurity Research Group. Good stuff.
In this Fanning the Flames episode of Payments on Fire, Glenbrook’s Bryan Derman, Chris Uriarte, and Russ Jones discuss Mastercard's bold June announcement to eliminate manual card number entry for eCommerce transactions in Europe by 2030, and explore the challenges and necessary steps to achieve this goal.
The conversation centers around three core components from the announcement: tokenization, streamlined guest checkouts, and authentication via passkeys. Tune in to hear more about the mechanics of these technologies, their industry adoption, and implications for merchants, issuers, and cardholders.
Authentication and identification are top of mind for payments professionals battling fraud these days. We’ve made progress over the past two decades in managing payments risk in the digital era, but fraud continues to evolve and often seems to be one or several steps ahead. The classic cat-and-mouse game has moved to a point where “Are you really you?” and “Should you have access to this account?” are the questions that are both increasingly critical and elusive to answer.
In this episode, we take the long view, talking with Ori Eisen, CEO and Founder of Trusona. We reflect on what the payments industry has gotten right, the current challenges, and the future of authentication and identity. And, to pay attention to the here and now, we asked Ori to share his best practice tips for implementing passkeys.
As scams, ransomware, account takeovers, and old-fashioned data breaches persist in our personal and business lives, we are all pondering how to get ahead in the cat-and-mouse game that global fraud rings seemingly have mastered.
With this episode, we’re setting the stage for a series of discussions on authentication and identity, the critical components of tackling this pervasive issue. We’re embarking on a journey of perspective gathering from some of the industry’s leaders in risk management, authentication, and digital identity with this 2015 “from the vault” episode of Payments on Fire. Listen as Philip Andreae converses with George Peabody about the FIDO Alliance and its mission to bolster and streamline authentication.
As you listen to this episode, consider the progress made since 2015 — have we come far enough, fast enough?
For decades, technology, regulations, and dissatisfaction with the status quo have formed a powerful triad, driving payments innovation. This triad is fueled by investors and innovators seeking to disrupt and legislators and agencies seeking to enforce compliance, increase transparency, and enhance fairness.
In this episode, John Pitts, Head of Policy at Plaid, sat down with Yvette Bohanan to discuss open banking and its potential to change the finance industry’s playing field: How consumers manage their personal financial lives, how financial service providers compete, and what this means for businesses. Listen to hear how, once again, the triad is at work reshaping the payments industry.
In this episode, we fan the flames to get Glenbrook’s hot takes on the proposed Capital One acquisition of Discover. Now that the dust has settled a bit on the February announcement, and while we wait with bated breath to see if the regulators will sign off on this deal, we wanted to debate the potential winners and losers - and possible outcomes - of an acquisition.
We spend some time discussing how this combination would impact some key stakeholder groups - networks, banks, processors, payment service providers, businesses, and merchants. Now that our thoughts are on the record, we're eagerly anticipating what we got right and what we missed if this intriguing acquisition comes to fruition.
In this episode, Yvette Bohanan is joined by Glenbrook Managing Partner Bryan Derman and guests Michele Alt and Adam Shapiro, Partners at the Klaros Group.
The result is a lively discussion about regulators and the impact of the current regulatory environment on banks and fintechs, a topic of utmost relevance in today's rapidly evolving industry landscape. The economy and all that is at play during a major election year create a fascinating backdrop for this conversation.
The process of accepting payments is a labyrinth of complexity, and payment service providers are the guiding lights that help merchants navigate this maze. They assist in deciding which payments to accept, how to connect to networks, and, most crucially, how to optimize revenues and reduce risk.
But what about the providers themselves? Is their work getting more or less complicated? We sat down with Trevor Nies (SVP, Global Head of Digital) who leads Adyen’s digital payments organization, to explore this question as it relates to pay by bank. We discussed the pay by bank landscape in the US compared to other countries and why the US seems to be facing some headwinds. And, more importantly, what merchants should be thinking about when it comes to implementing pay by bank.
In Episode 231, Samantha Gordon and Simon Skinner discussed the orchestration framework they developed to help our clients decipher a somewhat overused term in the industry. It was a great discussion, and if you missed it, I recommend you give it a listen. We covered a lot of ground in that episode that sets up this conversation with John Lunn, CEO and Founder of Gr4vy.
While preparing for this podcast, John observed that “every merchant has an orchestration platform; they just don’t call it that.” That struck a chord as incredibly insightful. Merchants, at least those with the engineering resources to do so, have been adding software infrastructure to their operations to improve authorization rates, handle tokenization, route to different networks, and a host of other capabilities that simply do not come with the basic developer API toolkit. Those without engineering teams to help automate these capabilities are left to manual or ad hoc means to manage their operations. Either way, operational gaps often lead to lost revenues, increased costs, and sub-optimal customer experiences. Using the orchestration framework to guide our conversation, we discuss how orchestration is enabling merchants to do things differently—with more latitude and agency over their payments operations.
We invite you to delve into this episode, which shifts the conversation from “What is orchestration?” to “Why is orchestration so powerful?” It's a valuable discussion you won't want to miss.
Glenbrook's Russ Jones often chats with professionals working for companies inside the payments industry who are providing payments and services to end users such as businesses, enterprises, governments, and individuals. Or they may be working at an enterprise, a merchant, or a biller. And they’re all trying to figure out how to save money in payments.
In this episode, Russ joins Yvette to talk through 8 simple ideas about how you make money in payments.
Acquired by Mastercard in 2017, the UK’s Vocalink manages the UK’s Bacs payment system, ATM LINK switching platform, and the Faster Payments System, FPS. To make this more tangible, consider these statistics: Vocalink processes over 90% of UK salaries, more than 70% of household bills, 98% of state benefits, and powers 60,000 ATMs.
Vocalink’s influence goes beyond the UK, with technology that powers fast payments infrastructure in countries such as the US, Thailand, Sweden, the Philippines, Peru, and Saudi Arabia - just to name a few.
Vocalink’s origin story, which began in 1998, spurred payments modernization efforts worldwide. For this episode, we sat down with Gregor Dobbie, former CEO of Vocalink, to discuss what we can learn from Vocalink’s journey and what the future holds for core payment systems.
Have you ever wished for a “payments sherpa”? Someone who would share their experiences, opinions, and advice about this industry - the uncut, “real real” of what can happen and what to remember as you move along your payments journey. In this episode, we sit down with one of our favorite payments industry sherpas - Steve Klebe.
No stranger to our podcasts, this time Steve talks about payments partnerships. This is a topic Steve is passionate about - and for good reasons. Partnerships - the successful ones - make this industry go around. The right partnerships can make the industry better, bring novel and differentiated offerings to the market, and make the payment transaction easier, more secure, and more valuable to consumers and businesses.
Steve has invested about half his career creating successful strategic partnerships for Verifone, CyberSource, Google, and more (frequently going out on a limb to do it), and he survives to tell his tale. We hope you enjoy listening to this episode as much as we enjoyed recording it.
As humans, our brains like to organize things - classify them, put them in silos. This thinking often works to our advantage - enabling deep analysis and understanding. Sometimes, though, it can work against us. We can be bound to a siloed thought process - a “this or that” false choice that causes us to miss the greater value inherent in doing both.
In searching for guests who will inspire us to eschew false choices in favor of unexpected combinations, we met Glendy Kam, Chief Product Officer at Tassat. In this episode, Yvette enjoyed geeking out on payments innovation with Glendy and digging into how Tassat is creating an infrastructure enabling $1.4Tr in payments for commercial bank customers.
For all the participants who have been through a Glenbrook workshop and have asked about real-world use cases for distributed ledgers and blockchain technologies in payments, or are trying to figure out how to combine new and existing technologies to solve a problem, this episode is for you. Enjoy!
In this episode, Glenbrook Partners Yvette Bohanan, Russ Jones, and Chris Uriarte sat down with Julie Fergerson - a long-time payments professional who co-founded the Merchant Risk Council in 2000 and returned a few years ago to take on the role of CEO for what is now an industry-leading, global non-profit.
We talk with Julie about how the payments industry has changed over the last two decades, with both the professionalization of payments and of fraud, and why she is now spearheading a certification program for the industry.
True to form, we also had to share our hot takes on topics such as “pay by bank”, and the looming US Credit Card Competition Act. We hope this inspires you to think about your personal career path in payments and your role as a leader in this industry.
Be sure to check out Glenbrook’s preparation course to help you demonstrate your command of payment and fraud knowledge and get ready to take the CPFPP exam.
In this episode, we are exploring one of the “buzziest” buzz words in payments today - orchestration.
If you have been in the payments space for a long time, your reaction to hearing about orchestration might be “What’s all the fuss about? We’ve been evolving these capabilities for decades.” If you are new to the industry, you may think this is some kind of high-performance jet fuel that is painfully needed to improve a rather opaque transaction processing environment.
Joining Yvette Bohanan are two Glenbrook colleagues, Simon Skinner and Samantha Gordon, who have been digging into orchestration solutions. They will be helping us define orchestration, offer a perspective on who should consider orchestration, and for those of you who do, a framework for thinking about orchestration.
Launching a payment product requires big moonshot thinking alongside a lot of agonizing over the details. Understanding the market, the customer journey, and the technology - from every angle requires patience, persistence, and a beginner’s mindset to learn from every success and failure. Thinking about launching a new form of currency, however, is on another level altogether.
There’s an entire population of a country to consider - what does each segment of the population require to be able to use the currency? Then, there is the currency’s role in supporting the economy. How will a new currency be protected from counterfeiting, and what controls will be required to prevent its misuse? How will it work with legacy payment systems and commercial banks? And how will it adhere to laws in place today and be prepared for tomorrow? Last but certainly not least, which technologies will enable all of these things and more?
These were just some of the thoughts bubbling through my mind when I sat down with Jim Cunha, former EVP at the Federal Reserve Bank of Boston, to discuss the capstone project of his career - Project Hamilton - and the questions he and his team sought to answer as they embarked on their CBDC experiment. I hope you enjoy hearing Jim’s insights on digitizing the world’s reserve currency - I sure did.
It is a rare occurrence when we get to have ALL the Glenbrook partners in one episode of Payments on Fire!
Glenbrook is kicking off the new year with a (lengthy) conversation on what payments industry trends and developments we think are the most interesting, compelling, and controversial at the moment, and what to watch as we move into 2024.
Debbie Bartoo, the editor of Glenbrook’s daily Payments News, guest hosts this Fanning the Flames episode of Payments on Fire alongside colleagues Justin Pituch and Will Eisler.
Listen in as they discuss some of the top payments headlines of the year - fast payments, rising interest rates, BNPL, mobile wallets, identity, CBDCs, and (just a bit of) regulation.
If you want to stay on top of the rapidly evolving payments world with all the headlines delivered each day to your inbox, subscribe to Payments News today.
What if every time you went to pay for something at a store, the clerk behind the counter had a different terminal for each card network - one for Visa, another for American Express, and a few others for local domestic networks? That was what much of the world was like decades ago - and it still is a bit like that in some countries today. But in 1999, collaboration entered the picture when Europay, Visa, and Mastercard came together to create a common specification for Chip and PIN so that any chip-enabled card could be read from any chip reader anywhere in the world if both complied with a common EMV specification. That significantly impacted Chip and PIN adoption - for merchants and consumers.
Today, EMVCo supports seven EMV technologies. As a consumer, when you insert your card into a reader, “tap to pay,” or pay using Secure Remote Commerce, or as a merchant, accept payment through a mobile device or a QR code, support a tokenized card credential, or 3D Secure technology, you are benefiting from the work of EMVCo.
In this episode, we talk with Oliver Manahan to understand how EMVCo fulfills its mission, catch up on its 2023 initiatives, and try to peek over the horizon to see what might be in store next for EMVCo.
Debit routing - once again, all the rage.
On July 1, 2023, the US Federal Reserve’s clarification on Reg II went into effect. The clarification confirms that Reg II - which required unaffiliated debit network routing as part of the Durbin Amendment - also applies to CNP environments.
What were we thinking in 2015 when debit routing at POS, contactless payments, and chip and PIN were “of the moment”? What lessons can we glean from a conversation then that apply now? We’ve pulled Episode 16 from our vault to find out.
We hope you enjoy this far-reaching discussion that moves from some EMV fundamentals to the implications of having a long tale of adoption, how consumer behavior and payment capabilities have to evolve in concert, and the reaction of fraudsters when things change in large, complex environments like the card system.
And stay tuned for our next episode where we welcome EMVCo to the show to see what they are up to these days and take a peak over the horizon.
Glenbrook's Bryan Derman, Chris Uriarte, and Drew Edmond are back from a few days of learning, networking, and speaking (including a live broadcast from the Money Pot) at this year's Money 20/20 conference in Las Vegas.
Chris and Drew talk with Yvette Bohanan about the noteworthy payments trends they observed at the show and what related themes our team is paying attention to.
Creating a great purchase experience may start with a frictionless checkout process, but it doesn’t end there. In fact, it takes a lot of effort to create a well-functioning payment platform and a cross-functional operations environment to keep a business running smoothly and customers happy. Like most things in life, it’s easier to talk about doing this than to do it. So it helps to learn from someone else’s experience about what has worked or hasn’t worked for them.
In this episode, we go big - talking with two Google leaders, Luda Sokolov and Aarti Bharathan, who have been on a relentless mission to make the work of the Google teams supporting payments for billions of people worldwide more efficient, stable, and scalable.
“So, have fees gone up?”
Yvette Bohanan starts with the tough question in this Fanning the Flames episode.
In our August Payments Post, Chris Uriarte and Justin Pituch observed an underlying theme of broad downward pressure on the cost of merchant processing as well as fee backlash directed towards card networks.
Tune in to hear our thoughts on these fees and the impact on stakeholders across the industry.
We get the opportunity to work with many different types of merchants in our Merchant Practice at Glenbrook: Global omnichannel retailers, marketplaces, commerce platforms, utilities, you name it. One of the major categories that we work with is subscription merchants, and they come with their own unique needs and perspectives.
Subscription merchants and merchants that have recurring payments as part of their business model rely on the ability to charge their customers on an ongoing basis. In this Fanning the Flames episode, Drew Edmond joins Yvette Bohanan to dive deep into an issue that has grown in importance with the continued growth of the subscription economy: involuntary churn.
Listen in to hear Drew shed light on this tricky and important topic for subscription merchants.
Last week, we hosted the first Payments on Fire Live Stream event on the future of fast payments in the U.S.
This episode highlights the panel conversation with Bernadette Ksepka, Federal Reserve Financial Services, Elena Whisler, The Clearing House, and Bryan Derman, Glenbrook Partners.
Policy abuse, a form of first-party fraud, occurs when a customer - whether legitimate or a professional posing as a legitimate customer - manipulates a business’s policies for financial gain.
In this episode, Yvette Bohanan and Chris Uriarte sit down with Eyal Elazar, Head of Product Marketing at Riskified, to discuss policy abuse trends and the implications of consumers and professional criminals increasingly engaging in these schemes.
Government leaders, policymakers, and a host of incumbent and new providers are focusing on cross-border payments. Innovating to increase transparency, lower cost, and make funds available in near real-time is showing up on agendas and roadmaps across the globe.
Money and resources are being thrown at this problem from every possible angle. Yet friction points persist. Money does not get to beneficiaries with equal speed. Costs remain high and hidden. Compliance screening and due diligence create delays.
Ryan Zagone, Head of Americas for Wise for Banks, and Glenbrook’s Joanna Wisniecka join Yvette on this episode of Payments on Fire to raise a fundamental question: Is technology the whole answer? And if it isn’t, what is?
Globally, cross-border payments represent $156 trillion annually - roughly 25% of global GDP - and are projected to reach nearly $250 trillion by 2027. From a payments industry perspective, these transactions account for approximately $40 billion of $2.1 trillion in fee-generated revenues, excluding foreign exchange (2022 McKinsey Global Payments Report). These attention-grabbing numbers have been in the line of sight of regulators, innovators, and incumbents with increasing urgency. Improvements in domestic systems have matured in many countries, leading to conversations on how new fast payments systems can go cross-border. And, indeed, they are in several regions. Central Bank Digital Currencies are piloting cross-border payments, too.
In this episode, we’re looking at the rapidly evolving space of cross-border payments with Glenbrook colleagues who have been traveling the globe working extensively with regulators, corporations, and governments on cross-border initiatives.
The payment provider space is a complex and crowded field in the payments universe, particularly when it comes to supporting merchants. Independent Sales Organizations, Payment Facilitators, and Commerce Enablers all work to simplify payment acceptance for merchants, yet they each craft specific go-to-market strategies and differentiated value propositions. The diversity of these stakeholders underscores the diversity of merchants' payment acceptance requirements.
In this episode, we had the opportunity to talk with Jared Isaacman, Founder and CEO of the Integrated Payments Provider, Shift4. Over the past 24 years, Shift4 has evolved by addressing the unique requirements of merchant categories and sub-categories in the increasingly complex Point of Sale (POS) environment. Jared’s insights on how he bootstrapped the company to an IPO, successfully integrated multiple acquisitions, and often takes a problem-solving approach that highlights a different ethos than his peers makes this conversation soar.
Each month, Justin Pituch recaps the news that got Glenbrook talking in his Payments Post. In a "double feature" for June and July, Justin covered two major themes: 1) organizations responding to greenfield opportunity in fast payments and 2) organizations recalibrating their post-COVID fintech bets.
In this Fanning the Flames episode, Justin and Yvette Bohanan discuss these developments, as well as Justin's recent Payments Views posts on the pain of B2B and how ISO 20022 could help solve B2B data challenges.
We find ourselves pondering many questions since the FedNow® launch, the third fast payments network introduced in the US.
To gain perspective on the questions that have been asked and answered, and those that remain, we’re giving a second listen to Episode 10 - when George Peabody sat down with Carol Coye Benson to discuss The Clearing House’s announced plans for a multi-year effort that resulted in their fast payments network, RTP®.
Issuer tokens, network tokens, EMV tokens - whatever you call them - continue to be a hot topic for merchants, payment service providers, issuing banks, processors, and the networks themselves. This “sleight of hand” substitution of a payment account number with an indistinguishable alternative carries with it a robust set of capabilities that have promised to reduce the value of breached payment account information, lower the cost of card replacement, and enable unique account numbers for the expanding universe of payment-enabled devices.
In this episode, Chris Uriarte and Russ Jones discuss how tokens are implemented in the “card present” and “card not present” environments and how EMV tokens are becoming normalized in interchange tables, scheme fees, and provider services. As tokens move squarely into mainstream card processing, this conversation highlights important distinctions in network and provider implementations, fees, and regulations that should be on everyone’s radar.
Payments on Fire Episode 21, originally aired: June 15, 2015
Network tokenization - the promised land of payments. Like most promised lands, the journey there is epic and, well, hard.
One question we hear from our clients, workshop participants, and the folks in our Merchant Round Table is: Are we there yet?
We dug into our vault to understand the journey - where we started and how far we’ve come. We found Episode 21, when George Peabody and Russ Jones discussed network tokenization (aka issuer tokenization, aka EMV tokenization).
This conversation is an excellent episode to get the history, essential workings, and context for an important, if not long in the tooth, technology reshaping how payment credentials are propagated and managed in our digital era.
Yvette will be catching up with Russ and Chris Uriarte to discuss recent developments in network tokenization on an upcoming podcast - and try to decide when we’ll arrive at our destination.
While payment facilitation has opened up a new segment of service providers within the payments industry, embedded finance is opening up the world of payments to every company.
The allure of embedded finance is rooted in the deepening of the customer relationship through offering meaningful financial products. This deeper relationship comes in the form of increased customer loyalty - or “stickiness” - and new revenue streams accretive to the company’s core business.
This is all well and good, but payments and financial products are regulated, complex, and often require support at the critical moment of the transaction or afterward. How is customer support evolving to meet the needs of companies and customers in the world of embedded finance? How should providers be thinking about customer support?
In this episode, Yvette sits down with Ashley Isenberg, VP of Revenue and Strategic Partnerships at Finix and Glenbrook’s Drew Edmond to explore the ongoing evolution of customer support in the payments industry.
With all its associated technologies (neural networks, symbolic reasoning, search algorithms, probabilistic reasoning, expert systems, and more), AI has been evolving in universities, the government, and corporations for decades. But only those with a keen interest in this technology have been paying close attention to its progress. Meanwhile, a chatbot helped you when you contacted support. Or you used Alexa or Siri to answer a question, play some music, turn on your lights, buy something online, pay your bills, or tell a joke. In our lives, we have caught glimpses of AI’s potential but no clear line of sight as to how powerful the underpinning technologies have become or how quickly they are evolving.
With the unveiling of ChatGPT and similar tools, we are now face to face with the AI era. In his book, Impromptu: Amplifying Our Humanity Through AI, Reid Hoffman says, "Much of what we do as modern people—at work and beyond—is to process information and generate action. GPT-4 will massively speed your ability to do these things, and with greater breadth and scope. Within a few years, this copilot will fall somewhere between useful and essential to most professionals and many other sorts of workers. Without GPT-4, they’ll be slower, less comprehensive, and working at a great disadvantage.
The Payments Industry is interesting because it is constantly changing, and technology has always been a significant change agent. For decades, networks, processors, PSPs, merchants, and financial institutions have invested in technology to increase adoption, create new services, manage risk, and accelerate initiation, clearing, and settlement.
In this episode, Yvette Bohanan is joined by Frank Young, a 35-year veteran of the fintech space, and Glenbrook’s Russ Jones to think about how AI might transform the payments industry and how organizations should mobilize for this transformation. It’s time to start talking about this topic seriously - with each other - and not just asking ChatGPT.
Payments on Fire Episode 1, originally aired: September 7, 2014
Innovation in the payments industry is a funny thing. Sometimes payments lead. Sometimes technology leads. Increasingly around the world, regulators lead.
In preparing for an upcoming podcast on Neural Language Models (NLMs), Yvette thought about Glenbrook's first Payments on Fire podcast episode - in 2014 - on Bitcoin. So we're pulling it from the vault to share.
If you have ever wanted to eavesdrop on industry thought leaders contemplating the implications of something new, here’s your chance. This is eavesdropping at its best - and a great reminder that innovation and disruption are not just about technical feasibility.
In Part 2, Yvette Bohanan continues the conversation from Episode 206 with the commercial practice team at Glenbrook. We cover some new topic areas, including banks, risk and fraudsters, and the investment community in this macroeconomic environment. Listen in to see what we're watching, where we might see some blind spots, or where the next set of curveballs will be coming as we get into the back half of 2023.
Russ Jones chats with Yvette Bohanan about Glenbrook's new Payments Boot Camp Intensiveworkshop. Listen in to hear more details including agenda highlights, workshop format, and who should attend.
Register for any session before July 10 to automatically receive a 10% discount!
Each month, Justin Pituch recaps the news that got Glenbrook talking in his Payments Post. In May, he observed a burst of news highlighting new technology reshaping how American consumers make purchases and verify their identity. At the same time, other articles underscored how American consumers are struggling to fulfill financial obligations against the backdrop of continued economic uncertainty.
In this Fanning the Flames episode, Justin and Yvette Bohanan consider these forces and potential implications for the future of payments.
Some people know Glenbrook for our Payments Boot Camp workshops, some know us for our book - Payment Systems in the US - while others know us for this podcast. Interestingly, while we do all of those things, we are, in fact, a consulting firm. A consulting firm that believes educating industry professionals is a great way to make the industry stronger.
Our consulting practice gives us a front-row seat to stakeholders across the value chain. Whether they are in start-ups or central banks, we hear what’s on their minds every day and have the opportunity to help them tackle challenges, identify growth opportunities, and instigate change.
In this episode, Yvette Bohanan sits down with Bryan Derman, Chris Uriarte, and Drew Edmond to take stock of payment industry trends as we reach the halfway point of 2023, to hear their perspectives on what’s hot, what’s not, and what are they watching as we venture into the second half of the year.
In payments, as it is in life, a simple question is often wrapped in complexity. The complexity of the payments acceptance landscape, with an increasing number of stakeholders and technology providers, changing regulations and rules, and Issuers implementing new authentication and authorization mechanisms - any one or a combination of these could lead to major and minor impacts to the operational and financial performance of a business.
And while this has been the case for several decades, we find ourselves in a macroeconomic environment that requires us to find operational efficiencies, which places the payments team under increasing pressure to maximize the number of successful payments, lower the cost of accepting payments, and support customer acquisition to drive incremental revenue.
Long story short, these “simple questions” are being asked more often and at higher organizational levels. Why are simple questions hard to answer? Yvette Bohanan talks with Klas Bäck, Founder and CEO of Pagos Solutions, and Glenbrook’s Drew Edmond.
In the US, fast payments discussions have centered around person-to-person, business-to-business, bill payment, and digital wallet funding in/out scenarios. In 2022, RTP® processed $72B, the majority of this volume communing from PayPal and Venmo funding activity. Zelle has reached a highly respectable $629B in person-to-person payments, traversing into “person-to-sole proprietor” territory. ACH, the workhorse of bulk payments is, as we say “hotter than ever” with Same Day ACH seeing an 86% year-over-year increase growing from $943B to $1.758B annual volume. But what about consumer-to-business purchases? Is there an opportunity for the US to see momentum in open banking and fast payments move into the commerce domain as they are in India, Brazil, and other countries? What will it take - and are we ready - to “pay by bank”?
Yvette Bohanan welcomes Eric Shoykhet, CEO & Co-Founder of Link Financial Technologies, to this episode to share his thoughts on the topic.
A 2022 report from the CFPB titled Buy Now, Pay Later: Market trends and consumer impacts noted that from 2019 to 2021, the dollar volume of BNPL originations through five lenders surveyed grew by 1,092 percent, from $2 billion to $24.2 billion. BNPL adoption continues, not just in the US but globally, making it one of the most watched payment methods in the world.
BNPL’s rapid ascent has raised questions about its use: Who is choosing to use BNPL? Is it helpful or harmful to consumers’ credit and overall financial well-being? Does it improve financial inclusion? Is it displacing other forms of payment at checkout? A quick online search leads to mixed data points and inconsistent findings, often based on modest sample sizes and extrapolations.
To answer these questions, we sat down with Kristin Carlson, Global Products and Analytics Data Scientist, and Zach Tondre, Director of Credit Risk Market Planning at LexisNexis Risk Solutions, who conducted a longitudinal study to obtain insight into these and other questions.
In this episode, we explore the intersection of three significant payment trends: helping small businesses modernize their payment acceptance options, embedded finance, and the consumer lending phenomenon known as Buy Now, Pay Later. We look at the potential market - asking ourselves if there is demand from small businesses and consumers. Then we unpack the opportunity using our BNPL “flywheel” to examine the critical success factors for any BNPL solution.
Yvette Bohanan and Debbie Bartoo are joined by Bobby Tzekin, Founder and CEO of Wisetack (and Glenbrook Payments Boot Camp alumnus) to examine how technology, consumer and small business demand, and banking are opening up a very large market in the BNPL space - one that has a lot of potential and a lot of nuance.
In this episode, we are taking a closer look at the relationship underpinning much fintech innovation in payments – the fintech, bank, and BaaS trilogy. These 3-way partnerships have spurred innovation, increased access to financial services, and created offerings that appeal to a broad range of businesses and consumers. But in the context of these 3-way partnerships, new and existing risks abound, and relationships between counterparties are not well-established – making this a perfect haven for bad actors.
Join us as we explore the current state of payments risk management across these alliances, and discuss the opportunities to make this new landscape safe, strong, and sustainable.
There are a lot of headlines in the payments world. Payments News is Glenbrook’s curated news feed of the headlines that matter most every day, but we’ll readily acknowledge that it can be a lot to digest. That’s why we’ve introduced Payments Post, a month-end roundup of the news items that got us talking as a team along with some commentary about why we think they’re particularly important to the direction of the industry.
Glenbrook’s Justin Pituch joins Yvette Bohanan in this Fanning the Flames episode to discuss the implications of the top April headlines, which were all related to account-to-account (A2A) payments.
Cloud-based platforms, machine learning that increasingly improves or eliminates routine tasks, the phenomenon of “everything” as a service - platforms that stand on their own and tech stacks that embed complex capabilities into other software with minimal coding - these are just some of the technologies reshaping what is commonly referred to as “back office” financial operations.
At the same time, these technologies are reshaping the customer journey - particularly when it comes to payments. New payment experiences facilitated by digital wallets, digital currencies, fast payment systems, and sophisticated transaction monitoring tools are increasing sales, lowering costs, enabling global expansion, unlocking new revenue streams, and speeding up settlement cycles.
However, as we know, a critical component for maximizing any technology investment is the leadership of an organization. In this case, the relationship between the payments leader and the Chief Financial Officer is front and center.
In this episode, Yvette Bohanan is joined by Vivek Sharma, Head of Revenue and Financial Management at Stripe, to consider the importance of this relationship and how, by joining forces, these leaders can help the C-Suite achieve the organization’s broader strategic objectives.
Wrapping up our three part series exploring Brazil’s Pix, Carlos Brandt, Head of Management and Operations for Pix at the Central Bank of Brazil, sits down with Yvette Bohanan and Elizabeth McQuerry to discuss some of the keys to Pix success and what the future looks like as Pix continues to transform Brazil’s payments landscape.
In the second installment of our series on Pix, Carlos Netto, CEO and Co-Founder of Matera and Sarah Hoisington, Vice-President of Strategy and Marketing discuss what makes Pix “tick", and the challenges and opportunities presented to the banks responsible to implement this new payment system.
There are a lot of headlines in the payments world. PaymentsNews is Glenbrook’s curated news feed of the headlines that matter most every day, but we’ll readily acknowledge that it can be a lot to digest. That’s why we’ve introduced PaymentsPost, a month-end roundup of the news items that got us talking as a team along with some commentary about why we think they’re particularly important to the direction of the industry.
Glenbrook’s Justin Pituch joins Yvette Bohanan in this Fanning the Flames episode to discuss the implications of the top March headlines, including stumbling blocks for fintechs and their sponsor banks, a bank-led battle for the checkout page, and a clearer view of the path forward for U.S. fast payments.
Call them what you will - Instant Payment Systems, Fast Payment Systems, Real Time Payments - or by their brands UPI, RTP® and more - these payment systems are experiencing success around the world.
As the US stands weeks away from launching FedNow, we decided to take a closer look at the success of one of the hottest newcomers to the instant payments scene - Brazil’s Pix.
As it turns out, there is much to be learned from success.
Launched in November 2020, in just 2 years Pix had processed R$13 Trillion. Remarkable as that statistic is, it is more impressive when you realize that within 7 months of its launch, Pix was processing more volume than credit documents (DOC), electronic transfers (TED), and bank slips combined. By February of 2022, Pix had overtaken debit and credit card transaction volumes. By December of 2022 Pix broke a record - processing more than 100 million transactions in 24 hours.
If that is not enough, it looks to be accomplishing what many countries hope for with a new fast payment system - Pix has moved the needle on the financially underserved, shifting from 50% of the population being unbanked to 75% of the population using Pix.
In this first episode of a 3-part series, Yvette Bohanan sits down with Cici Northup, Joanna Wisniecka, and Elizabeth McQuerry to discuss the “state of play” for fast payment systems and the key questions to ask about what the future holds for all of us as the world enters a phase of transformative modernization.
In this latest episode of Fanning the Flames, Yvette Bohanan catches up with Joanna Wisniecka and Cici Northup after their recent attendance at the 2023 Payments Summit and the Fintech: Innovation, Inclusion, and Risks Conference. Listen in to hear why “FOMO is not the answer” when implementing fast payments (or anything, really), and their other key takeaways on the digital currencies and fraud topics.
Joanna is currently on the road again at the Women in Payments USA Symposium, moderating a panel on fast cross-border payments. If you are there, be sure to connect with her!
What do Fintechs have to do with the cereal aisle? Tune in to this episode of Payments on Fire: Fanning the Flames to hear the answer to that question and more, as Glenbrook’s Chris Uriarte and Drew Edmond prepare for MRC Vegas 23.
Ever wondered what makes banks so sure they know where to send payments? Well, they often aren’t. Until now. Take a listen to Yvette Bohanan and George Peabody as they speak with George Throckmorton, Senior Director at Nacha and the head of Nacha’s Phixius data network initiative.
We’ve reached our final destination on Glenbrook’s 2022 tour of local payment methods around the world. Joanna Wisniecka joins Yvette Bohanan on this episode of Fanning the Flames to chat about her recent trip to Jordan. Joanna walks us through her experience opening and making payments with a Zain Cash account, and also provides insights into JoPACC (Jordan Payments & Clearing Company) initiatives throughout the country.
With many of us still experiencing cold and rainy winter weather, let’s look to warmer climates as Glenbrook’s Chris Uriarte walks us through his payments journey in French Polynesia.
If you’ve attended a Payments Boot Camp, you’ve heard us say that payment systems are domestic by nature. The experience Chris has in the islands of French Polynesia really brings that point home. Listen in to hear his observations and key takeaways on local payment methods.
The next destination on our journey around the world is Singapore! Glenbrook’s Chris Uriarte and Bethany May come on the show to share their stories using local and regional payment methods. Listen in to hear their experiences including using GrabPay, QR codes, and even paying a friend back for dinner using digital currency.
While at the Singapore FinTech Festival, Bethany also had the opportunity to participate in a Central Bank Digital Currency pilot put on by the Monetary Authority of Singapore. She provides her insights on the “purpose bound money” trial and overall observations on the research and experimentation being done on CBDCs in Singapore.
Next up in Glenbrook’s travelogue series, Nikhat Choudhury joins Yvette Bohanan to share her experience making payments on a recent trip to Turkey.
In this double feature episode, Elizabeth McQuerry and Bethany May also provide observations on the local payments scene in Ethiopia, including their use of the e-money wallet Telebirr.
In 2022, travel started to get back to “normal” and the Glenbrook team had many opportunities to get out and about. No trip would be complete without running a few payments experiments. Over the next 5 Fanning the Flames episodes, we’ll take you with us on our journeys to hear first hand experiences and observations with local payment networks across the globe.
To kick the series off, Elizabeth McQuerry joins Yvette Bohanan to discuss a recent trip to Brazil.
We’ve talked a lot recently about how important it is to stay up to speed on regulations. In this episode of Payments on Fire®, George Peabody and Chris Uriarte are joined by Michael Borgia, Partner at Davis Wright Tremaine, to discuss data security and privacy and the steps regulators are taking in this space.
Glenbrook has been providing payments education for over 15 years. In that time, over 35,000 payments professionals have attended Glenbrook workshops, including the popular Payments Boot Camp. The Payments Boot Camp provides a thorough overview of the global payments industry - an industry that is constantly changing. As you can imagine, the material for our workshops changes with it.
Glenbrook’s Russ Jones joins Yvette Bohanan to discuss the refreshed Payments Boot Camp agenda as well as the newly designed Advanced Payments workshop. Listen in for a behind-the-scenes look at how Glenbrook’s education content is curated and why certain topics may not be included at all.
If you are interested in attending a Glenbrook workshop, click here for upcoming opportunities to learn and network with your peers.
We talk about ACH a lot at Glenbrook (even coining the phrase “ACH is Hot”) and there’s a reason for that. More than 29 billion ACH Network payments were made in 2021, valued at close to $73 trillion. While ACH technology has been around for decades, modernization has made this system virtually unrecognizable from what existed in the 1970’s, and it continues to evolve.
In this episode of Payments on Fire®, George Peabody and Yvette Bohanan are joined by Michael Herd, Senior Vice President of ACH Network Administration at Nacha. In the conversation, Mike walks us through the state of ACH, insights on volume and growth, and new Nacha operating rules.
https://pof.glenbrook.com/
Glenbrook’s Bryan Derman, Chris Uriarte, Cici Northup, and Joanna Wisniecka are back from Money20/20 and return to Payments on Fire to debrief with Yvette Bohanan in this Fanning the Flames episode. If you listened to Episode 180, you know what hot topics the team was anticipating at the conference. Was it everything they expected? Tune in to hear the highlights and observations.
https://pof.glenbrook.com/
Glenbrook’s Bryan Derman, Chris Uriarte, Cici Northup, and Joanna Wisniecka are back from Money20/20 and return to Payments on Fire to debrief with Yvette Bohanan in this Fanning the Flames episode. If you listened to Episode 180, you know what hot topics the team was anticipating at the conference. Was it everything they expected? Tune in to hear the highlights and observations.
https://pof.glenbrook.com/
Becoming a fintech is no easy task. There’s the foundational idea, there’s the team, the market opportunity, macroeconomic conditions, and the necessary skills of running a business. Never easy and today it’s even tougher for new fintechs given rising interest rates, consumer hesitation, and the uncertain global economy.
There’s also the make-or-break concern of regulatory compliance.
In this Payments on Fire® episode, Cameron Peake, partner at VC firm Restive Ventures (recently renamed from Financial Venture Studio) joins Glenbrook’s Yvette Bohanan and George Peabody in a discussion on the regulatory and contractual issues fintechs face.
Cameron’s firm takes a hands-on approach in helping their fintech investments navigate those complexities. And in these conditions, a guiding hand has to be a welcome value-add for a fintech looking for a VC partner. Smart money is always better than the clueless variety.
https://pof.glenbrook.com/
Becoming a fintech is no easy task. There’s the foundational idea, there’s the team, the market opportunity, macroeconomic conditions, and the necessary skills of running a business. Never easy and today it’s even tougher for new fintechs given rising interest rates, consumer hesitation, and the uncertain global economy.
There’s also the make-or-break concern of regulatory compliance.
In this Payments on Fire® episode, Cameron Peake, partner at VC firm Restive Ventures (recently renamed from Financial Venture Studio) joins Glenbrook’s Yvette Bohanan and George Peabody in a discussion on the regulatory and contractual issues fintechs face.
Cameron’s firm takes a hands-on approach in helping their fintech investments navigate those complexities. And in these conditions, a guiding hand has to be a welcome value-add for a fintech looking for a VC partner. Smart money is always better than the clueless variety.
https://pof.glenbrook.com/
Join Wordline's Michael Steinbach and Glenbrook’s Elizabeth McQuerry and George Peabody to hear the story of SEPA’s creation, the Single Euro Payments Area. You’ll also learn about Worldline, Europe’s largest processor.
It's an amazing story. If you are concerned with how networks work, or thinking of building network-based processes, there are lessons here - and cautions.
https://pof.glenbrook.com/
Yvette Bohanan hosts Glenbrook’s Bryan Derman, Chris Uriarte, Cici Northup, and Joanna Wisniecka to discuss their attendance at the upcoming Money20/20 conference. Listen in to hear what noteworthy payments trends the team is paying attention to and what related themes they expect to surface at Money20/20. We’ll catch up with them after the conference to see what takeaways were most surprising or interesting.
If you are attending Money20/20, we’d love to connect! Please reach out to Bryan, Chris, Cici, or Joanna on Our Team page or connect directly on LinkedIn.
https://pof.glenbrook.com/
Most of us see payments innovation as the force that moves markets. That’s true when it comes to user experience and the tech that moves money. But it is government regulation and business contract rules that guide and control what financial services players can, and can’t, do with their shiny new tools. Or crusty old ones.
Regulation in the US is a complex, multi-layered reality for incumbents and fintechs alike. In this Payments on Fire® episode, Jennifer Aguilar, Sr. Associate at law firm Alston & Bird, provides a crisp review of payment system rules, federal and state regulations, Regs E and Z, and more.
https://pof.glenbrook.com/
Glenbrook’s Russ Jones returns with George Peabody and Yvette Bohanan on this episode of Payments on Fire® to discuss tokenization - a substitution of a high value primary account number with a digit that, in many cases, looks just like the original PAN, but isn't.
Tune in as they break down how tokenization works and the security it provides, amidst numerous cooking metaphors.
https://pof.glenbrook.com/
Merchants rejoice? Credit card interchange regulation is on the table with the Credit Card Competition Act of 2022. But the new rule proposed by Senators Dick Durbin and Roger Marshall is pretty unusual, and the researchers at Glenbrook have been hard at work trying to figure out what it means for the industry. How is it different from existing debit interchange regulation and credit interchange regulation in other jurisdictions? And how will players across the value chain react if the rule takes effect? Will anything really change? Glenbrook’s Justin Pituch joins Yvette Bohanan to discuss potential implications.
https://pof.glenbrook.com/
Glenbrook’s Drew Edmond joins Yvette Bohanan on the show to recap his experience at the PaymentsEd Forum in Washington DC earlier this month. In addition to attending the conference, Drew also spoke on a panel about “How collaboration at scale can improve outcomes” with Jordan Kaplan from Groupon and Jonathan Lee from Netflix, moderated by Tyler Heun from checkout.com.
Tune in to hear more about Drew’s panel discussion as well as the major topics of conversation around the conference “water cooler”.
https://pof.glenbrook.com/
If you’ve attended a Glenbrook Payments Boot Camp®, chances are good that you remember reviewing push and pull payments during the key concepts. The determination for whether a transaction is push or pull comes down to who is sharing their payment address. If the receiver is sharing, it is a push payment. If the sender is sharing, it is a pull payment. But what if the sender and receiver are not personally involved in initiating the transaction?
Russ Jones joins George Peabody and Yvette Bohanan on this episode of Payments on Fire® to talk about delegated push payments, where another party has permission to initiate a push transaction on the sender’s behalf. Listen in as they discuss the nuances around delegated push payments and the use cases for these transactions.
https://pof.glenbrook.com/
Glenbrook’s Neel Saunshi and Yvette Bohanan return to explain the Proof of Work consensus
algorithm. Listen in as they discuss what it is, how it works, and the environmental impact from
the associated energy consumption.
https://pof.glenbrook.com/
In this Fanning the Flames episode, Neel Saunshi joins Yvette Bohanan to discuss a very hot topic in the industry - NFTs. Tune in as they break down smart contracts, what’s happening behind the scenes, and examples and applications for how this technology is being used to disrupt various industries.
https://pof.glenbrook.com/
Glenbrook’s own Elizabeth McQuerry and Joanna Wisniecka just returned from spending a couple of weeks in Kenya leading training on inclusive payments systems.
While in the country, they got to play end-users of digital payments and experimented with M-PESA’s mobile money e-wallet. You may have been following their payments adventure on Glenbrook’s LinkedIn page.
Listen in to hear more about their experiences, some quick insights into other learnings from Kenya, and what fast payments developments they are seeing on the continent.
https://pof.glenbrook.com/
Chuck Huang, Founder and CEO of Citcon, joins George Pebody and Yvette Bohanan on this episode of Payments on Fire® to chat about digital wallets across the globe. Listen in to hear their thoughts on where the industry is headed as the consumer payment choice continues to diversify.
In this episode of Payments on Fire®, George and Yvette Bohanan welcome Ahon Sarkar, GM of Helix by Q2. Listen in as they discuss embedded finance, multi-tenancy, participating in the FedNow pilot, and bringing online, physical and financial worlds together into a consistent experience that is meaningful to customers.
George and Yvette welcome back Robin Gandhi in this episode of Payments on Fire®. Formerly of TripActions (Episode 146), Robin is now the chief product officer of Nium, a firm specializing in bringing cross-border payments capabilities to banks, fintechs, and large and medium enterprises.
Glenbrook has been taking a deep dive into Global Payments lately - check out recent recorded webinars. This conversation with Robin highlights the complexities and considerations involved in moving money across borders and the importance of in-country access to domestic payment systems.
Thanks for visiting your “podcast home”, Robin!
Just off the plane from Nashville, Glenbrook’s Elizabeth McQuerry and Cici Northup sat down with Yvette Bohanan to chat about attending NACHA’s Smarter Faster Payments Conference, where Elizabeth also participated in a session with the US Faster Payments Council. Tune in to hear their takeaways and why this year was “not your grandma’s NACHA conference”.
In this episode of Payments on Fire®, Yvette Bohanan is joined by Patrick Chen, co-founder of SpecTrust, to discuss payments risk, fraud, and the age-old question of good versus evil. Listen in to hear how organizations can combat fraud while still providing the best customer journey.
In this episode of Payments on Fire®, George Peabody and Yvette Bohanan are talking payment trends and best practices with Fiserv’s Casey Klyszeiko, Head of Carat and eCommerce at Fiserv.
Tune in to hear Casey, a Payments Boot Camp alum himself, discuss the consumer payments journey and the questions merchants should be asking in order to deliver the right payments experience for their customers.
In this timely episode of Payments on Fire®, Yvette Bohanan has gathered teammates at Glenbrook (Elizabeth McQuerry, Erin McCune, Cici Northup, and Joanna Wisniecka) to discuss the payment infrastructure supporting the foreign policy actions being taken as a result of the situation in Ukraine.
In the past week, the UK, EU, and Switzerland announce sanctions against Russia, – with
Switzerland setting aside a long-standing tradition of neutrality in participating in these actions and the US announcing sanctions against Russia’s central bank in a move that prohibits Americans from doing any business with the bank as well as freezes its assets within the United States. These measures are also targeting the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation. As markets opened February 28, the Russian Ruble had fallen 29% against the dollar to an all-time low, after the U.S., European Union and Canada agreed to disconnect some Russian banks from the SWIFT interbank messaging system.
We’re going to explore SWIFT and other payment infrastructure used to implement foreign policy on a routine basis, and why these recent announcements, in some respects, are taking this to a new level.
In this episode of Payments on Fire®, George Peabody will have back on the show two people that our listeners know well. Yvette Bohanan from Glenbrook Partners’ Education Team will co-host this episode, the second episode from 2022.Keeping the listeners updated about the digital currency systems, Yvette and Bethany May (new Senior associates) are promoting a webinar series about Central Bank Digital Currencies in February and another one in March about cross-border payments systems. Not by coincidence, today’s guest is an expert on this topic.George will also welcome back Ran Goldi, CEO of First Digital Asset Group to talk about the huge expansion of the stable coins business, how cryptocurrencies can benefit cross-border payments with small fees and almost instantly transfer. That would interoperability between the systems involved. Let’s hear Ran’s insight about it.
2022 just started and we got so much to see and learn this year. But, we are not alone in this learning journey. Machine Learning and Artificial Intelligence are here to stay, so we also should learn why and how it works for the payments industry.
Starting this season of Payments on Fire®, we will have Ismini Psychoula discussing fundamental technology, AI and ML, and its role in financial services. Ismini is a Research Scientist at OneSpan. OneSpan is a global organization that is focused on digital banking security and e-signatures, delivering trust and business productivity solutions for more than 10,000 customers in 100 countries. In the financial industry, more than half of the top 100 global banks rely on OneSpan solutions to protect their online, mobile and ATM channels.
Ismini Psychoula got a PhD in Computer Science with a thesis about Privacy-Preserving Machine Learning for Smart Healthcare. At OneSpan she’s Researching and designing privacy preserving and explainable machine learning models for financial systems.
In this episode, you’ll hear about Ethical AI, AI feeding and monitoring, Machine Learning bias and how it all affects the financial system. We’ll take a deep dive in the research to prevent fraud and increase transaction security.
Come to the Payments on Fire® website for:
- Expanded show notes
- Podcast transcript
The complete Payments on Fire® episode catalog
The new year is coming with lots of innovations for the payment industry. Some of them will impact some companies and/or all the industry, changing how things work on the marketplace. George welcomes back Russ Jones to Payment on Fire and they will uncover the lens of the game-changing innovations, including talking about the upcoming events and changes that really matter to the arc of the payment industry. Glen is a Payments Consultant, Analyst, Co-Author of "Payments Systems in the U.S.” and partner at Glenbrook Partners.
In this episode, Russ will discuss the Webinar presented by him and Yvette Bohanan between December 15th and 16th about innovation and payments, with topics like types of payment systems and technologies, how the different use cases lay out what's unique about each, variations and differences around the world and how the payments industry is structured.
You’ll also hear about core system modernization, systems running 24/7/365, strong customer payment authentications and several other topics. Let’s hear George Peabody and Russ Jones talk about what to expect for the payments industry in 2022.
Come to the Payments on Fire® website for:
- Expanded show notes
- Podcast transcript
- The complete Payments on Fire® episode catalog
The Glenbrook Education schedule
If you’re an e-commerce merchant selling across border, you’ve got to answer a few questions:
- What methods of payment should you support in each country you sell in? Not every country is as infatuated with cards as is the U.S.
- And even if customers in those countries are using cards, how do you optimize your authorization rate? If you’re not sophisticated about this, your decline rate could exceed 40%, a huge hit. It turns out routing transactions via local acquiring banks is one answer. But how do you do that?
- Subscription services store card numbers or a tokenized version to initiate periodic payment transactions. They never want to have a card declined because they, honestly, don’t want to have to contact customers to request they update their card account info because some portion of those customers are going to decide to cancel little used subscriptions. How does a merchant mitigate those lost payments?
Serving the e-commerce needs of merchants operating across borders is a primary focus of payments service provider BlueSnap. In this conversation with BlueSnap CEO Ralph Dangelmaier and Payments on Fire® host George Peabody, you’ll hear how multiple discrete steps combine to keep AUTH rates high and costs in line.
You’ll also hear from Ralph, a respected payments industry veteran, his views on fintechs and the opportunities available to new players in payments.
Come to the Payments on Fire® website for:
- Expanded show notes
- Relevant links
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
Payment scams and the fraudsters who perpetrate them are everywhere. And as we speed up payments, the ability to send money from one account to another in near real-time, there’s a lot to like for users. And for fraudsters.
Scammers love it when they convince us to send them money from our own accounts. This is called authorized push payment fraud and it is a growing problem.
To shed light on APP fraud, its impact, and some approaches to detecting fraudster coercion and the misdirected payments it causes, join Glenbrook’s George Peabody and PJ Rohall, Fraud Subject Matter Expert at Featurespace, a fraud management software company. PJ is also the co-founder of About Fraud.Com, a community site for the fraud management industry.
In this episode George and PJ discuss the growth of APP fraud, the range of scam types, and a few techniques to detect and deter it. You’ll hear him describe examples of the impact APP fraud has caused on individuals, many least able to weather this kind of financial damage. Psychological damage is real.
Then come to the Payments on Fire® website for:
- Expanded show notes
- Links to UK Finance reports and Take Five for Fraud resources
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
Financial health and inclusion in the US remain as major concerns and challenges for the nation, the millions who struggle with access to affordable financial services, and payments experts focused in this arena.
Join Glenbrook's Erin McCune and Justin Pituch as they speak with a recent panel of expert practitioners in the financial health space: Kimberley Gartner, Arjan Schutte, and Ryan Falvey.
Kimberley is Chief Growth Officer at Canary, a company that helps businesses establish emergency relief funds for their employees. Arjan and Ryan both work in the venture capital space; Arjan leads Core Innovation Capital and Ryan heads up Financial Venture Studio.
Come to the Payments on Fire® website for:
- Expanded show notes
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
This podcast with Mimi Joy explores consumer financial wellbeing in the US and initiatives to improve access to quality financial services for low and moderate income Americans. Mimi shares her perspective as Head of Partnerships at the Financial Health Network, a leading authority in the space.
Topics discussed include:
- The current state of the financial health landscape
- Research on the effect of the pandemic on low and moderate income consumers and their financial wellbeing
- New approaches to serving the needs of vulnerable consumers
- Key financial health lessons for payments professionals
Come to the Payments on Fire® website for:
- Expanded show notes
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
Multiplayer fintech takes payments services to levels of depth and breadth not seen before. The breadth of payments platform services enables other fintechs to bring comprehensive capabilities to their customers.
Listen to this conversation with Modern Treasury’s CEO Dimitri Dadiomov, its Chief Growth Officer Rachel Pike, and Glenbrook’s Erin McCune. You’ll hear:
- The creation story of Modern Treasury and the market conditions that proved demand
- The central role of enterprise payments operations
- How payments as a service is evolving as a business
- How its customers deploy its range of capabilities
- Why ACH is taking off in the fintech space
Come to the Payments on Fire® website for:
- Expanded show notes
- Video
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
In this wide ranging Payments on Fire® episode featuring gateway provider NMI, you’ll hear how payment industry roles continue to evolve as tech and consumer preferences change. Topics covered include:
- The evolution of touchless payments from QR to Tap on Phone NFC transactions
- What a gateway does
- How a white label provider sells and who uses its services
- What an ISV needs to think about when considering the role of payments facilitator
- COVID-19’s impact on merchant and consumer payments
Take a listen to this conversation with Kyle Pexton, president and CFO of NMI and Nick Starai, NMI’s Chief Strategy Officer as they talk with Glenbrook’s George Peabody about the arrival of the NextGen ISO and how NMI is helping them, their bank customers, ISVs, and VARs get SMBs into payments acceptance.
Come to the Payments on Fire® website for:
- Expanded show notes
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
Fast payments will move the US payments market. But to get there, we need fintech to expose those capabilities. Zelle, the RTP Network, Same Day ACH, push to card, and eventually FedNow all need providers that connect up to those rails. For an enterprise or its software developers, a single integration to all sure would be easier. In this Payments on Fire® episode featuring Dwolla, you’ll hear:
- A practitioner’s view of how ACH and RTP differ and are being used?
- Why B2B digital payments are growing and what you need to know what’s enabling that growth
- Learn what a provider must do to bring multiple payment systems to its enterprise customers. It isn’t simple
Take a listen to this conversation with Dwolla’s Brady Harris and Adam Steenhard as they talk about realtime access to fast payments (and more) with Glenbrook’s Elizabeth McQuerry and George Peabody.
Come to the Payments on Fire® website for:
- Expanded show notes
- Video
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
- Curious about how fast payments systems like Zelle, the RTP Network, and FedNow work?
- Many fast payments use cases aren’t about speed. Find out why.
- Fast payment systems are national “must haves” around the world.
Take a listen to this conversation with Glenbrook’s Elizabeth McQuerry and ACI Worldwide’s Craig Ramsey.
Come to the Payments on Fire® website for:
- Expanded show notes
- Video snapshot
- Podcast transcript
- The complete Payments on Fire® episode catalog
- The Glenbrook Education schedule
Glenbrook’s fintech payment series continues with this look at Veem in a deep convo with Marwan Forzley, CEO.
- Curious about how fintechs solve client problems?
- Fintechs aren’t just about payments; they blend commerce enablement into their offerings
- The payment solution that solves the data problems - as well as moves the money - provides the most benefit to the customer
- Did you know that fintechs don’t do anything new? They just do it better.
Take a listen to George and Veem’s CEO Marwan Forzley as they talk about how Veem built its international payment network for small and medium business (SMB) customers. Listen to Marwan describe the commerce services and integrations Veem has done to drive traffic over the network.
Come to the website for:
- Expanded show notes
- Podcast transcript
- The complete catalog of Payments on Fire® episodes
- The Glenbrook Education schedule
- Curious about how fintechs solve client problems?
- Fintechs aren’t just about payments; they blend commerce enablement into their offerings
- The payment solution that solves the data problems - as well as moves the money - provides the most benefit to the customer
- Did you know that fintechs don’t do anything new? They just do it better.
Take a listen to George and RoadSync’s CEO Robin Gregg as they take a deeper look into how fintech’s solve specific problems for specific industry segments. RoadSync provides payments and commerce services to the logistics and trucking industries.
Come to the website for:
- Expanded show notes
- Video clip
- Podcast transcript
- The Payments on Fire® episode catalog
- The Glenbrook Education schedule
- How do you secure bank to bank transfers between counter parties when the payment system itself lacks strong authentication?
- Can you balance the cost, speed, and security of transactions across multiple payment networks?
In this episode of the Payments on Fire® fintech series, join Glenbrook’s Nicole Pinto and George Peabody as they speak with Eli Polanco, CEO and Founder of Nivelo. Her company offers risk scoring for ACH transactions to improve payment success rates and reduce fraudulent transactions. Listen as she speaks to her entrepreneurial experience and insight into the evolution of bank-to-bank payments.
Show notes include:
- A look at the ACH and its advantages
- Useful links to other sources
- Podcast transcript
- Video snapshot
- The Payments on Fire® episode catalog
- The Glenbrook Education schedule
There's a huge shift on the horizon.
- Want to learn about the state of cryptocurrencies in payments today?
What about the entrepreneur’s journey in leading edge fintech and payments technology?
Take a listen as Glenbrook partners George Peabody and Yvette Bohanan talk crypto, Diem, CDBCs, and the evolution of digital money with Ran Goldi, CEO of First Digital Assets Group. Goldi’s entrepreneurial story and experience with VC are well worth hearing as are his predictions for digital money’s future.
Show notes include:
- A deep dive into cryptocurrency evolution
- Links to other sources
- Podcast transcript
- Video snapshot of Goldi's elevator pitch
- The Payments on Fire® episode catalog
- The Glenbrook Education schedule
Prepaid cards are the “apps” of the card world. Join George and Fiserv’s Head of Prepaid Dom Morea as they introduce prepaid’s twin modalities - open loop and closed loop - and then dive into how the gift card industry has morphed into a far broader set of uses cases. And plan to return for the next episode as they discuss open loop’s evolution.
Card payments have four modalities:
- Charge Cards. There are charge cards that are a form of very short term credit, you pay off in full the monthly statement
- Credit Cards add the option of revolving all or a portion of the debt obligation and, if you do, you pay interest on those charges
Both of these are products that we buy as consumers or businesses. And we’re paying with money we don’t have at the moment of the transaction. They are “pay after” products.
- Debit Cards. Debit Cards, on the other hand, are a feature of a specific checking account. It draws on funds that are available right now. It’s a “pay now” method. As soon as the issuer authorizes the transaction, a hold for that amount is placed on funds in your account.
- Prepaid Card. The final modality operates in “pay before” mode. That’s the prepaid model where funds have been placed in an account to be spent at a later date. Like debit, prepaid draws on funds that are already in place. In most cases, the prepaid funds owned by an accountholder are pooled in a single bank account.
Prepaid is used in two different manners
- Open loop prepaid cards are network branded (think Visa and Mastercard). They can be used anywhere the network’s cards are accepted.
- The second approach is closed loop. This is the domain of the gift card where a merchant has pre-sold an obligation to provide goods or services up to the value in the prepaid account.
Prepaid Use Cases Abound Prepaid is big business. Go into any chain drugstore and you’ll see a rack with both open and closed loop prepaid cards for sale. For years, the physical footprint of that “prepaid mall” has been the most profitable square footage in the store.
The prepaid world has some very interesting dynamics. Unlike credit card products that may be issued to millions of cardholders and used for all kinds of purchases, a prepaid program may only serve a few thousand and may be locked down for special purposes.
The Apps of Cards That’s why we think of prepaid as the “apps” of the card world. Prepaid lends itself to some very specific use cases and program types.
In this first of two interviews with Dom Morea, Fiserv’s Head of Prepaid, we cover closed loop prepaid and some of the new and growing use cases Fiserv has supported, often driven by COVID-19.
Here’s Dom discussing B2B use cases for closed loop prepaid programs:
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In our payments education workshops, we make the point that today’s fintechs rarely do something entirely new. At the macro level, our activities and the transactions they produce haven’t changed. We buy food and clothing. We pay rent.
But where and how we do these things has been transformed by technology.
A Great Time to Be a Fintech Fintechs are the newer, nimbler businesses that are most often changing how we do things. We buy tickets online, get takeout using our mobile phones, and file insurance claims via an app.
Fintech entrepreneurs are busting old processes with much improved user experiences and “value for money” propositions.
It’s a great time to be a fintech.
The building blocks are in place. Powerful cloud-based capabilities are common. APIs connect these tools. Rich data and machine learning generate specific, actionable insights. iOS and Android give smartphones super powers. Business models like payment facilitation help some fintechs. You can even become a bank.
Multiplayer Fintech Builds a Winning Service Individual fintechs are partnering with others to develop and deliver compelling new services. This is multiplayer fintech. Think of it as the fintech supply chain. The direct provider of services to the customer uses the specific payments capabilities of other fintechs to expand and strengthen what it delivers to its customers.
This approach lets the provider get to market faster with better capabilities than its competitors. That builds a competitive moat for a period of time. And expands the company’s revenues through a broader range of services.
Not Always Easy in B2B The ability of these fintechs to displace incumbent vendors and processes (“How we’ve always done it”) can be hindered by the target company’s size and reliance on legacy systems. Their complexity presents a barrier. Dismantling it can take a lot of time and change management process support.
For mid-sized firms, however, the choice to shift to cloud-based service delivery is fast becoming a no-brainer. The work from home imperative has only accelerated the decision.
Prospering Despite COVID We all know that the Travel and Hospitality industries have taken a COVID-inflicted beating. But not every company serving those needs has suffered.
TripActions, focused on corporate travel, just raised $155M at a $5B valuation to help enterprises analyze travel and expense data.
Join TripActions’ Robin Gandhi and George as they talk about how TripActions has prospered in the last year with its travel expense management service that makes both the COF and the employee smile.
TripActions has employed those building blocks and partnerships with firms like Visa, Stripe, and Modern Treasury. Using the multiplayer fintech approach, TripActions now has a service that has rewritten how an enterprise manages its travel and expense management processes. For the employee, the hated expense report submission process can be virtually eliminated.
TripActions’ services could not have been built even five years ago. Without today’s technical building blocks and those partner-provide capabilities, TripActions could not have built its services and hit the market as it has.
It’s a good time to be a fintech.
Here’s Robin talking about multiplayer fintech:
Read the Transcript at the Payments on Fire® website
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GPay is Google’s app for payments, financial services, rewards, and, is expanding its capabilities, its partnerships, and its ambitions. Join Glenbrook’s George Peabody and Yvette Bohanan as they talk GPay with Steve Klebe, Google's head of GPay business development and Google's Processor and Partnerships work.
Fairly recently, Google’s payments services were a disjointed collection of point solutions. Today’s GPay is far more than a rebranding job. Listen between the lines to what Steve has to say. The implications are many.
Way More Than a Wallet A lot has happened since Steve joined us in July 2019.
GPay has added incentives and loyalty more deeply as well as added expense management with automatic receipt discovery when sent to your Gmail account or via the camera. The incentives can turn into real money.
In the U.S. Google has teed up its Plex bank account offerings in partnership with Citi and Stanford FCU (other FIs to come) for launch in 2021. You can already add bank accounts to GPay through Google’s partnership with Plaid.
GPay is becoming a very competent user interface to the banking services offered by the FIs themselves. Google provides the UX and the data that matters. The bank does what it does.
Does this disintermediate the banks or give them a new channel through which they can offer their services? We will decide but personal experience suggests the GPay interface has a lot going for it.
Google has added these new capability and consolidated others under the single GPay roof. Its ambitions now go beyond simply being a repository for payment credentials and loyalty cards with a sprinkling of P2P payments on top.
Exercising Open Banking One of the major payments and fintech trends for 2021 is open banking, the ability of third parties to access accountholder data.
PSD2 has driven this in Europe and India’s Unified Payment Interface (UPI), both pushed by mandate, enables a vigorous open banking ecosystem in that country. Google Pay, formerly Tez, has been a huge success in India. Of course, market pressure is the driver in the U.S.
Google is now exploring the potential for GPay to assume the role of "super app" along the lines of WeChat Pay or Alipay. Yes, that’s a big leap but there are hints of its ambitions. For example: Google has built over 100 HTML games optimized for low bandwidth networks and low memory smartphones, all targeted toward supporting its NBU (Next Billion Users) effort. GPay will be one of the presentation surfaces for these GameSnack.
Fairly recently, Google’s payments services were a disjointed collection of point solutions. Today’s GPay is far more than a rebranding job. Listen between the lines to what Steve has to say. The implications are many.
Read the transcript
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A Global Phenom Realtime Retail Payments (RTRP) systems are a global phenomenon. These systems exist or will soon in over 50 countries around the world. Some have been in operation for decades. The UK’s Faster Payments system, operated by Mastercard’s Vocalink unit, has been in operation for over ten years. Still others are still in the design stage.
These account-to-account systems (A2A) have gained in regulator popularity because:
- They are fast. The receiver has near instant availability
- They are push payment systems. Transactions don’t take place unless the sender has enough money to fund the transaction. In other words, authorization takes place before the transaction
- User authentication is up to the financial institution
- These systems operate year round, 24x7
- They are inexpensive. Transaction pricing is fixed, regardless of the value of the payment itself
- They have rich data carrying capability
- Some include a new message type called Request for Payment, essentially a digital invoice message that prompts the payer to send money and smooths account reconciliation.
Still New to the US Most Americans still have no idea there’s a new national payment system in operation. Or that a similar one will begin operation in a few years. Wallets like Venmo and the Cash App abound. But an entirely new set of payment rails? That happens once in a generation.
Some of those Americans, on the other hand, may have experienced what a system like this can do. Zelle is a fast push payment system that moves money between banks accounts. But Zelle is more of a directory-enabled messaging layer. The money movement between banks relies on older payment rails like ACH and wires. New Age messaging and user experience; old fashioned settlement.
Key RTP Characteristics Payments geeks, like Payments on Fire® listeners, know that the Real Time Payments Network takes a different approach. Operated by bank processor, The Clearing House, the RTP Network leaves management of the user experience and the use case up to the bank, the processor, or the provider serving a particular industry.
The RTP Network provides:
- The messaging between the sender and the receiver and each of their banks
- Nearly instant availability of the funds into the receiver’s account (by network rule)
- 24/7/365 operation (ACH and wires take a break after working hours)
- Instant settlement between the sending and receiving financial institutions
In short: the RTP Network provides the plumbing and pipes. What it looks like and how it’s used is up to another stakeholder.
Members of the network are financial institutions who either expose the RTP rails themselves or sponsor third party access so that those entities can make use of them. Nothing groundbreaking there.
An RTRP with RTGS One of the impressive features of the RTP Network is that interbank settlement, the movement of funds between the sender and receiver banks, happens in realtime. The two banks settle their positions instantly. Settlement happens in realtime for every transaction. That’s what a realtime gross settlement (RTGS) does.
Contrast that with a system like Zelle that provides instant messaging among the stakeholders but typically leaves the final movement of monies between banks to an overnight batch process via ACH. And this is net, not gross, settlement. The amount includes all of the day’s transactions.
The RTP network achieves its RTGS capabilities using the following technique:
- RTP requires each member financial institution to pre-fund monies sufficient to handle its transactions. The money to operate the system has to be in place ahead of time. This eliminates settlement risk between the banks
- Each FI’s monies are pooled in a single pooled account, owned in common by the RTP Network’s member financial institutions. This pooled account is held at the the Federal Reserve
- The Clearing House maintains a ledger that tracks every transaction, that debits and credits FI pairs in realtime for each transaction
- Each Member FI is responsible for making sure it has enough funds to cover each of the transactions initiated by its accountholders. Each FI uses another open loop payment system, FedWire, to move monies into and out of its share of the pooled account as needed.
A Maturing System That’s a lot of background to help US contrast this system against the other four mostly digital systems in the U.S. (If you’re not clear on that, join us for the best in payments education at a Glenbrook Payments Boot Camp®)
The RTP Network is in its fifth year of operation. In this Payments on Fire® episode, Steve Ledford updates us on:
- The growth in member financial institutions
- The growth in transaction volume
- The expanding set of use cases
- Who is using the RTP Network
- How COVID-19 accelerated usage in new use cases
So, take a listen.
Here’s Steve talking about those new COVID-driven use cases.
For a snapshot of how the faster payments phenomenon is growing in the U.S. here is the 2020 Faster Payments Barometer.
Read the episode transcript
Find more podcasts, visit Glenbrook's Payments on Fire® site
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Read our COVID-19 Payments Industry eBook
Continuing our payments in fintech series, we talk about one of the major changes in the payments industry over the last few years: the installment lending phenomenon. Companies like AfterPay, Klarna, and Affirm (that just IPO'd and saw its stock double in one day) are leaders in this buy now, pay later (BNPL) space and appeal to Millennial and Gen Z users as well as the merchants selling to them.
These firms offer a range of installment payment options: three, six, and 12 month payback periods are typical. The interest rate gets lower the shorter the payback period and, for the shortest period, that cost is eliminated. The merchant pays for it as promotional financing. These installment loan options generally increase the size of the sale and, because the BNPL provider may take on the risk and guarantee the sale, they remove a measure of risk from the merchant. In other words, for multiple merchant categories, they increase sales.
BNPL providers accept multiple methods of payment: credit and debit cards and, of course, they may encourage the use of ACH as a low cost funding source.
For younger demographics, a majority of them without credit cards and credit histories, these services enable them to transact.
Sezzle is a player in this arena with a unique, very short term product that charges no interest to the consumer because the purchase is paid back in six weeks. The costs are born by its merchant customers. Sezzle has particular appeal to sub-prime or young consumers who may not even have a credit score.
Take a listen as Sezzle’s Chris Bixby, VP of Growth, and Glenbrook’s George Peabody dissect the Sezzle proposition and discuss the changing face of Retail in the post-COVID era.
Watch Chris describe why his customers choose the Sezzle payment option:
Faster Payments: Fundamental Tech for Payments Innovation Payments innovation comes in waves. And the wave that’s breaking on the U.S. - having swept over 50 countries around the world - is faster payments. Also referred to as Real-time Retail Payments (RTRP) these systems are fundamentally different from what’s come before:
- They are push payment systems
- They are new, systemically important domestic systems
- Risk and economic models are dramatically different than what’s come before
- They run 24/7 365 days a year. Go ahead, push money to and between accounts during your Sunday midnight snack
- Novel messaging and data formats open up new use cases and deep integration opportunities
Most important, these are “clean sheet of paper” payment systems built for the Digital Age.
Glenbrook has been working with these systems for over a decade. Our global experience gives us unique insight into how these systems are used and their real and potential impact on multiple stakeholders.
Why This Course is For You If you are responsible for payment products and services in any way and you're looking to differentiate your services, join Glenbrook’s Russ Jones and Yvette Bohanan on this deep dive examination of how faster payments is fundamentally altering payments industry dynamics.
Here are other reasons for you to join the workshop:
- Smart, expert workshop leaders to guide the group through the materials, make it interactive, and love QQ&A
- A crisp look at what these systems do, don’t do, and how overlay offerings in the UK, India, Australia, and Mexico extend their utility
- A deep dive into how The Clearing House’s Real Time Payment Network Request for Payment message operates and how the RTP Network settles (it’s a very new approach)
- Workshop attendees from across the industry bring unique questions and perspectives
- The workshop description has many more reasons. Check it out.
Take a quick listen to learn more about the workshop from one of its leaders, Russ Jones. George and Russ take a quick, fun tour through why this course is different.
Go here for the workshop detail, schedule, and registration.
The Fintech Phenomenon is rarely about doing something entirely new. It’s about doing things in a new way that better fits the needs of the target market. The fintech model also enables the provider to reach underserved market segments.
Lending is, of course, the core offering of banks. But between their legacy processes, underwriting requirements, compliance demands, and more, they simply aren’t nimble enough to serve new segments in our evolving economy.
And the banking crisis of 2008 left them even more risk averse.
That’s left small business lending wide open to fintechs.
Case in point: the online seller, that small business that makes a product or buys wholesale and sells direct to customers through their own website and, for most, through marketplaces like Amazon and Shopify.
Cash Flow is Everything Here’s where success can kill a business. If their online store and what they’re selling catches on, they’ve got a tiger by the tail. They’ve already invested their own money to get the store off the ground. But they have to keep buying inventory in order to fulfill orders. Where’s the capital to pay for that inventory to come from in order to do that?
As the founder of multiple small businesses, I can tell you that cash flow management is a daily concern. It’s no different for these Amazon sellers because Amazon pays out every two weeks and it may take a month or more for the funds from some transactions to hit the seller’s bank account. With cash flow “everything” for the SMB, funding business growth is a major challenge. To keep up, you have to reinvest to feed the beast. You take all your earnings and put them into new inventory.
That’s where our guest for this episode comes in. Keith Smith is co-founder and CEO of Payability, a firm that has loaned over $2.5B since 2015 to Amazon and Shopify sellers.
Data Enables the Model Payability, sitting between the seller and the marketplace, sees massive data sets that help it and its algorithms determine risk. Given the volume of data, the myriad sources of these signals, it’s impossible for humans to do the underwriting. Machine learning can examine far more signals than a human can ever handle. So, as Keith puts it, Payability’s staff “trains the robots” to help the company accurately price financing for those who would otherwise be locked out this kind of business.
The Money Supply Chain In the business of selling money, you have to have access to it. You have to be part of the money supply chain.
Drastic changes in the finance ecosystem have taken place since 2008. With traditional banks stepping back from small business lending, fintechs have entered the money supply chain, as the new distributor of funds, enabled by their ML-based underwriting and risk models.
The fintech underwriting sophistication has been a boon to traditional sources of financing, both banks and institutional investors. They still sell money; they just do it through the new fintech channel.
The COVID Accelerator As a funder of online businesses that have benefited from the COVID-driven shift to e-commerce, Payability has prospered in 2020. As Keith put it “we’ve seen four or five years of growth out of a single year.”
In Glenbrook’s payments consulting work, our discussions with merchants, billers, sellers, and their technology parters have included this common refrain. COVID has hurt many but others, able to respond to the challenges and opportunities of the digital shift, have prospered.
Find more podcasts and commentary at Glenbrook's Payments on Fire® site, check out our blog Payments Views, and subscribe to the best payments industry news feed, Payments News. Read our COVID-19 Payments Industry eBook.
In a crisp explanation of account takeover and authentication risks, George and Robert Capps, Vice President, Market Innovation, at NuData Security. They discuss the findings of a recent NuData report and its experience with the sophistication of online fraudsters. NuData’s techniques are all about foiling cybercriminals as they bang at the front door of financial institutions, merchants, streaming services, and more.
Payments on Fire® listeners know that we’ve been taking a steady look at fraud issues over the past few years. Fraudsters have been pouncing on every opportunity, taking advantage of pandemic relief payments as well as the shift from card present to card not present, remote commerce transactions. If this topic didn’t matter, we wouldn’t be talking about it.
Measuring and detecting what the fraudsters are up to and their impact is critical. To better understand what’s going on, we speak with Robert Capps, Vice President, Market Innovation, at NuData Security, a company that specializes in behavioral biometrics.
NuData published in Q3/2020 its e report on cybersecurity trends. And the findings are really interesting.
What They Found The current scourge is account takeover. ATO is a concern for financial institutions, for retailers, streaming media companies, and more.
Attack method sophistication goes well beyond reuse of stolen user IDs and brute force password guessing.
It is an arms race of increasingly complex and sophisticated attack and detection techniques.
NuData and others have expertise in behavioral analytics, tools that detect, among other things, bots that are build to emulate human interactions at the account login page. The use of CAPTCHA is one technique to deter these attacks. But the fraudsters have responded, going so far as to establish call center-scale operations with staff endlessly filling in CAPTCHA forms to add the human touch and smarts in what are otherwise highly automated ATO attacks. This is human farming to get around CAPTCHA and other rudimentary defenses.
Financial institutions and retailers aren’t the only targets. In this age of stay at home orders, streaming services have become targets of opportunity. Parasitic use of streaming service accounts has risen as the fraudsters sell streaming service account credentials.
The Defender’s Balancing Act There are dedicated professionals working on both sides. But the defenders have the harder job. Besides having to protect every door and window, they also have to keep it simple for good users to transact. Adding friction to a transaction flow increases the shopping cart abandonment rate. That’s bad for the ecommerce merchant and insults the customer. It’s a tough balancing act.
Part of that balance is handled by “step up” authentication based on the level of risk. A bank might let a session proceed to a balance inquiry without asking for further customer input. But if a new payee is added to the account, the bank might insist on sending a one time code to the customer via email or SMS.
Getting to Good ASAP Providers of authentication services see activity from a lot of devices. Building profiles based on these devices and the many variables surrounding each transaction, they use the profiles to efficiently track the behavior of each in order to separate the known good profile from the questionable.
A technique to “get to good” faster is to pool that profiling information in anonymized form from across all of the clients who agree to participate.
COVID Impact Robert discusses the shifts in fraud given the pandemic. As a percentage of transactions, fraud increased substantially in the travel segment. And for those retailers operating in the physical world the shift to e-commerce was sometimes overwhelming. That’s a story we’ve heard a lot at Glenbrook. Check out our COVID Series book.
Podcast transcript
Take a listen as George and Deluxe’s President and CEO Barry McCarthy discuss how the company continues to adapt to and prosper in the digital age. Barry talks about the journey the company has taken, in recent times shifting from a conglomerate model grown via acquisition to today’s streamlined and focused small business focused organization.
The Journey from Paper to Digital Services In Glenbrook’s Payments Boot Camps® we make the point that fintechs rarely invent new functions out of whole cloth. What they do excel at is reimagining and reengineering the processes that incumbent players have been locked into for years.
It’s the incumbent’s inability to adapt that puts them at a competitive disadvantage.
As Charles Darwin put it:
“The species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”
We make this point in our training. Incumbent firms, no matter what the industry, survive and succeed over decades only if they have the ability to adapt to change in their environment. You only have to glance at the moves Visa and Mastercard have made over the last five years - the acquisitions of Plaid and Vocalink (among many) come to mind - and it’s obvious adaptation is at the core of their respective strategies.
In this episode, we speak with a company that has over 100 years of adaptation behind it. Starting with the invention of the checkbook a century ago Deluxe Corporation has expanded and adapted its offerings to the digital needs of its customers.
Take a listen as George and Deluxe’s President and CEO Barry McCarthy discuss how the company continues to adapt to and prosper in the digital age. Barry talks about the journey the company has taken, in recent times shifting from a conglomerate model growing by acquisition to today’s more streamlined and focused organization.
Open banking. It’s a term we started to hear about at the end of 2016 and since 2019 interest has remained high. That’s according to Google Trends. Along with those searches, the related hot topics were PSD2 and APIs.
Regulation and technology is opening up access to bank accounts for payers, billers, and service providers. But the state of that openness varies by region and country with important consequences for billers, merchants, and their payment providers.
In this wide ranging discussion, George and Duncan Barrigan, Chief Product Officer at GoCardless, cover a range of topics, all through the lens of the company’s primary value proposition, the use of direct debit from bank accounts to enable recurring and one-off payments across 30 different countries.
As you'll appreciate, stitching together a network capable of using the domestic low cost rails (think ACH and BACS) in 30 different countries to provide both domestic and cross-border recurring payments is no easy task.
Topics discussed include:
- The definition of open banking
- What the impact of open baking has been
- Where open banking is taking off, and where it isn’t
- Recurring payments defined and use cases
- APIs and integration
- How a biller or merchant can move customers from one payment method to another
- Cross-border direct debit
- And, of course, the GoCardless value proposition, something its financial backers believe in given its recent $95 million raise.
Financial inclusion for the poor is a global challenge. In this episode, we dive into the story of Mojaloop, a platform that enables interoperability and transaction routing between mobile money system operators, banks, and other providers. It’s a fascinating, and evolving, story. Take a listen.
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Individual Benefits, Nation Building Impact Financial inclusion for the poor is a global challenge. Over two billion adults lack access to financial services. While that number is declining - and in no small part because of the work done by this episode’s guests - that level of digital disenfranchisement and cash dependence suppresses well being at multiple levels:
- Individuals must spend significant time to pay bills when they must travel to the biller or its agent, never mind travel to acquire cash. Carrying cash, of course, comes with its own set of risks
- Families suffer as time away from work and home reduces family income
- Entrepreneurs and small businesses face the same time penalty, high transaction costs, and uncertain credit access
- Entire countries experience diminished GDP because of productivity losses and transactional friction. Cash-based transactions also fuel the shadow economy, making audits and taxation very difficult
While Kenya's M-Pesa is the most well known exemplar, there are hundreds of systems around the world offering digital payments, bill pay, savings accounts, microlending, and other services to their accountholders.
Not Without Concerns Financial inclusion efforts are not without downsides as some credit extension services, riding the e-money rails laid down by the provider, charge usurious rates. Gambling services are similarly problematic.
With success, e-money systems become systemically important to a country and, therefore, pose a level of systemic risk should the operator go offline for technical or security reasons.
And as with every digital activity that touches money, there is the problem of fraud.
But these are not insurmountable challenges. Some are candidates for regulation-based cures. Others can be addressed by providers themselves.
The Network Effect Matters Another challenge to the growth and health of mobile money systems is interoperability among those systems. In many countries, multiple e-money systems compete for accountholders but do not interoperate. A user on one system cannot send money to a user on another. That condition adds friction, reducing the e-money value proposition for all stakeholders.
The challenge becomes even more acute, and costs rise, when the sender and receiver are in different countries.
Ecosystem Enablement A thriving digital ecosystem and economy requires the right conditions:
- Regulation that encourages innovation while also protecting the end user
- Low cost enabling infrastructure, and
- User-focused services that meet real needs
The Bill & Melinda Gates Foundation has taken on financial inclusion for the poor in multiple ways, through support of:
- Development of guiding principles for the delivery of financial inclusion through the Level One Project
- Creation of guidance for regulators to speed accountholder onboarding while limiting fraud and risks concerns
- Support for the development of open loop software designed to speed system interoperability. Called Mojaloop, this open source effort’s goals include the development of a reference platform
In this episode, we dive into the Mojaloop story with two leaders of the work:
- Paula Hunter, Executive Director, of the Mojaloop Foundation
- Kosta Peric, deputy director, Financial Services for the Poor at the Bill & Melinda Gates Foundation
It’s a fascinating, and evolving, story. Take a listen. And, if financial inclusion for the poor in developing markets is important to you, get involved with Mojaloop. It's quite a team.
For a front row seat on payment innovation you have plenty of choices. Yes, Stripe and Square are based in the tech hotbed of the Bay Area and it’s tempting to stare at their success. But a look around the world reveals the evolutionary breadth of how payments are made, regulated, and brought to market. India and China alone reveal how remarkably different approaches can scale to enormous dimensions.
There’s no better guide to what’s happening in payments around the world than Glenbrook’s own Carol Coye Benson. In this episode, Carol and George discuss her new book Global Payments and the Fintech Innovations Changing the Industry.
Carol spent much of the last decade traveling throughout the world consulting to organizations on the impact of technology and business models on national payment infrastructure. The book is informed by the scores of discussions she’s had with tech executives, the leadership of development banks, government agencies, and fintech start-ups.
Take a listen to why she wrote the book, some of what she found, and her take on some of the big questions still to be answered.
Here's how she introduces the book via video:
2020 has been an active period for payments innovation. COVID-19 has been a forcing function for digital payments across multiple payment domains. “Touchless” and “contactless” payments are now common themes of retailer advertising.
And, of course, many other trends have accelerated this year. Fintechs, mobile wallets, the expansion of open banking initiatives, and point of sale lending are trends with impacts spreading across the market. 2020 has also seen the increased legitimacy of blockchain-based payments as demonstrated by central banks around the world consider and even pilot digital fiat currencies.
These are the topics Russ Jones and Yvette Bohanan will present in Glenbrook’s Innovation in Payments Insight Workshop coming up December 8th and 9th. If keeping up with the changes in our industry and developing real insight into the key trends is important, you won’t find better guides than Russ and Yvette.
Take a listen. Check out the agenda.
COVID is a forcing function for digital channel growth across the world as consumers and businesses reduce their reliance on physical interactions. We’ve seen usage shifts in how bank accountholders in Peru transact - from branch to digital - as well as big shift in payment behavior.
We outlined a lot of this in our own COVID series on Payments Views.
Many merchants have turned to online as a matter of survival. Many restaurants, for example, have added order ahead and curbside pickup as standard offerings just to stay in business.
Our assessment is that, even with an effective vaccine and adequate immunization rates, we’re never going to return to the same point. E-commerce transactions have increased, yet again, permanently. How much volume returns to the physical point of sale domain once COVID is behind us is unknown. But it’s not going to go back to previous levels.
That shift is an opportunity for many in the payments industry, including fraudsters, those unwelcome stakeholders. They are taking advantage of merchants who weren’t prepared for their new or increased online payment volumes.
We’ve spoken with a number of fraud management firms on Payments on Fire®. In this episode we speak with Eyal Raab, VP of Sales, at fraud management company Riskified about his firm’s expanding approach to fraud management for merchants whose goal is to maximize authorization rates.
Fraud management is complex. Merchant needs vary considerably. And what the fraudsters are up to constantly changes. Payment fraud management and fraud are both growth industries.
You’d have to be aggressively disinterested in the payments industry not to be aware of its attraction to investors. The COVID-19 pandemic has done nothing to dampen the interest, if not outright enthusiasm, for the payments industry among investors of all stripes.
Actually, the pandemic has lit a fire under key industry segments like the e-commerce domain, digital banking, and disbursements.
The dynamics of change pushing the payments industry ahead are only increasing.
Incumbent Consolidation
The payments industry has been dominated by networks and processors. While networks have remained largely independent, the processing industry has undergone tremendous consolidation over the last decade, accelerated recently by the giant acquisition of First Data by Fiserv. Scale really matters in processing.
But that scale comes at the cost of agility because the incumbents must rely on the systems they already have and the ones they’ve acquired. Consolidation onto just a few platforms is hard. And that means incumbents don’t benefit as clearly from newer technologies based on cloud computing and APIs.
Start-ups Abound
While investor interest in what are typically public companies remains strong, it is interest in start-ups and young companies demonstrating early success that drives early investors. These companies need cash to grow and equity financing is a primary source. It could be an individual with cash looking for a higher return on a portion of her portfolio. Family and friends as well as wealthy individuals are typical of “angel” investing.
Venture capital is another source that often fuels the shift from proof of concept to the first minimum viable product and, often beyond, through multiple rounds of raising venture capital.
Fueling the Next Incumbents
Fueling the growth from business teenager-hood to young adult are growth equity firms that bulk up the business’s overall capabilities. While a cool technical idea can form the core of a new business, it takes business infrastructure like a global salesforce, enterprise-grade financial controls, and more to build a company that can execute on its potential.
In this Payments on Fire® podcast, George talks with Steve Sarracino, Founder and Partner of Activant Capital, a growth equity firm based in Greenwich, CT. Steve’s firm is an investor in Finix and Bolt, companies that precisely fit his investment criteria. And he loves the payments industry for its past and, of course, for its potential.
(Listen to Payments on Fire® Episode 106 with FInix's Richie Serna)
Like those of us at Glenbrook, Steve sees lots of change ahead for the payments industry. And, like us at Glenbrook, he wants his company to influence and prosper from its evolution.
This Payments on Fire® podcast is a joint production of Citibank and Glenbrook. Tony McLaughlin of Citibank interviewed our partner Erin McCune about the U.S. payments market and business transactions in particular.
The U.S. payments landscape is in the midst of unprecedented change -- triggered by the COVID-19 pandemic, new faster payment infrastructure, open banking and an overall acceleration of digitization. Business payments are particularly ripe for change.
The pandemic has exposed businesses’ reliance on manual processes and motivating digitization and cloud migration. Although businesses have talked about pursuing electronic payments and treasury modernization efforts for some time the pandemic reveals the risk associated with manual processes dependent upon being in an office and reliant on the mail for delivery of invoices, checks, and other business documents. All of a sudden back office digitization is a c-suite concern.
The emergence of faster payments has also catalyzed change in the business payments space. Real time infrastructures were purpose built for business transactions. Not because they are fast -- suppliers grant their buyers payment terms, it’s not about speed. The new infrastructures have robust data capabilities that are very important to business-to-business payments.
Small businesses write and receive the majority of B2B checks and faster payment has tremendous potential to erode their reliance on manual invoicing and payment processes. Request-to-pay (R2P) capabilities associated with new real time rails are effectively electronic invoices, with the added value of a round trip payment logically associated with the invoice. For many smaller businesses, this could be the key to eliminating checks. For larger organizations where a single payment is associated with a number of invoices, and there is a need to provide more complex explanations of what a payment is for ISO 20022 remit messages (separate from the payment transaction itself) prove useful.
Additionally, there’s an enormous potential associated with API integrations between business back office solutions, bank partners, and payment infrastructure. Even relatively small businesses have an array of financial providers: multiple bank accounts, a credit facility, an ERP or accounting system, a CRM, a billing/invoicing solution, and other additional enterprise software tools. Knitting information together across systems and using these different solutions to embed and automate processes associated with sending, receiving, and applying payments provides significant value to businesses.
Speaking of data sharing, it’s useful to note that open banking in the U.S. is market-led, rather than the result of a mandate. But that doesn’t mean it isn’t happening -- there’s a great deal of momentum. Security concerns and the advent of new faster payments rails are pushing financial institutions to innovate and collaborate. Nacha’s Phixius and Afinis solutions and FDX are examples of cooperation between industry players. The card networks are also making acquisitions in this space, with Visa acquiring Plaid and Mastercard acquiring Finicity.
To add to everything else that’s happening, there’s a lot of buzz around CBDC at the moment. It’s a global phenomenon. The United States has a strong interest in the concept because of our desire to maintain the dollar’s position as a dominant currency for international trade. However, it’s still too early to know what a CBDC would look like in the U.S. and how consumers and businesses would interact with a new type of government-issued coin.
Tony asked Erin how the global pandemic has impacted Glenbrook. She observes that our focus at Glenbrook hasn’t changed dramatically as a result of the pandemic (although we’re not traveling like we used to!): we were working with clients across the value chain to digitize payments and related business processes before the COVID-19 and continue to do so today. Demand has intensified, but it hasn’t really shifted focus.
But in the midst of societal upheaval as a result of the pandemic, at Glenbrook we are also thinking deeply about how we can employ our expertise to help businesses and consumers at risk. We do a lot of work on financial inclusion in the developing world. How can we apply that thinking here at home, to help businesses and consumers weather uncertainty, bolster the economic recovery, and build an equitable foundation for financial health and sustainable businesses on a longer term basis? We don’t quite know yet, but we are excited to explore new avenues for our consulting practice.
NACHA’s Phixius is a new service for the exchange of the information about a payment between the sender and receiver. Take a listen to Payments on Fire® host George Peabody as he discusses Phixius with NACHA Advisor Peter Tapling. He helps us understand Phixius, how it works and where it applies. It’s a compelling idea.
One of the long standing shortcomings in payments systems has been the degree to which the data about a payment can be shared. If we can share the data about the payment, to have it run alongside the payment instructions, then we can do things like:
- Streamline bill payment
- Streamline supply chain payments
- We are able to get away from sharing bank account information
- We can check the status of accounts, regardless of financial institution
One of the advantages of check payments is that, when physically mailed, the letter can contain the check as well as an explanation of what that check is paying for, perhaps including copies of all the invoices. That data is hugely important to the supplier.
This payments metadata, the data that describes what a payment is for and all of the conditions around a transaction, is hugely valuable. Both the sender and receiver need it. It is used by every accounts payable and receivable department. Sure, it’s great to get paid. But without the metadata, it can be difficult to know the account to credit or to know which invoice, or invoices, the payment applies to.
Communication of payment metadata has been a bear. Some payment rails, wires for instance, have little or no ability to carry data beyond what’s needed for the payment itself. The card rails have only limited descriptive capability. ACH messages have some data carrying capability but usage has been limited.
Many of today’s realtime system like the UK’s Faster Payments and the RTP Network in the US use the rich encoding capability of ISO 20022 to represent the metadata. That’s a big improvement on how to represent payment metadata.
Another reason communicating this information has been difficult is the reality that today, when this data is shared, it happens as a result of a bilateral connection via API. A service provider attempting to bridge this data gap would have to have dozens and dozens of these bilateral API relationships, if not hundreds, to reach all participants in a major industry segment such as automobile or aircraft manufacturing. That’s impossible.
NACHA, rule making body of the US ACH system, has a role to play here because the ACH carries 62% of payment volume, excluding wires of course, and 66% of supplier payment volumes.
Recognizing that role, NACHA has made an out-of-model move with the introduction of its Phixius services. NACHA is now the operator of a system that carries payment metadata regardless of which payment system actually moves the money. Phixius could be useful in wires, RTP Network, Zelle, ACH, and even cards.
Phixius sits in between financial institutions, payments services providers, and others that provide payment services, to serve as a hub for the sharing of payment information. Each party connects to Phixius just once, eliminating the need for one-to-one integrations. Phixius refers to these stakeholders as credentialed service providers.
Phixius is defining operating rules and data requirements for individual uses cases.
Phixius uses distributed ledger technology to build trust among its participants in the data shared over the system. Phixius itself does not store the data nor does the distributed ledger contain the data about the transaction. It only contains a unalterable mathematical representation of the fact that the sending and receiving parties vouch for the data and agree on how it is used. The ledger can be audited by Phixius and the two parties involved in the transaction. But another node on the network could not interrogate the ledger to determine who is trading with whom.
So, it’s refreshing to see an instance of blockchain technology doing useful work, at scale, that has nothing to do with cryptocurrencies.
NACHA designed Phixius. It recruited important users of the system. Phixius is live in pilot and a broader rollout is scheduled in Q4 or Q1 of 2021.
NACHA is not a well heeled organization with tons of money to market the Phixius brand to the fintech and financial institution communities. The idea is compelling but, as a network build, faces an adoption curve that will be climbed on the strength of that idea.
In this Payments on Fire® George and Scott Giordano, VP and Sr. Counsel, Privacy and Compliance at data privacy management firm Spirion, talk about what can and has gone wrong, the high cost of sanctions for failure, and how to reduce the risks attendant with the handling of personal data.
Privacy.
It’s a huge issue. Many of us are concerned as individuals with how our personal data - our personally identifiable information or PII - is shared by social media and throughout today’s massive data ecosystem without our knowledge or without our case by case granting of permission.
As a result of those concerns, various jurisdictions around the work have enacted privacy-focused legislation that has teeth. The EU’s General Data Privacy Regulation (GDPR) focuses on data protection and privacy where consent for PII is required. It also addresses data domicility, where the data about an EU system must reside. GDPR applies to entities doing business in Europe - i.e. it applies to thousands of US companies.
In the US, one of the leading regulatory steps is on the ballot this year in California. Its proposed data privacy regulation, the California Consumer Privacy Act (CCPA), would provide for:
- The right to know about the personal information a business collects about them and how it is used and shared;
- The right to delete personal information collected from them (with some exceptions);
- The right to opt-out of the sale of their personal information; and
- The right to non-discrimination for exercising their CCPA rights.
Any business doing business in CA will be affected by the CCPA, including data brokers.
These regulations are an attempt to return a measure of control to individuals over the sea of personal data that makes it possible, for instance, for an entity to correlate the data of a handful of payment transactions to identify an individual with high confidence.
The ramifications of these regulations are many. In this podcast, we hear of how a Midwest bank, that does not business itself in the EU, became subject to GDPR regulations because of the activities of one of its clients.
We are living in a world where the social implications of wide data sharing are obvious.
What’s not so clear are the business ramifications of privacy regulations and the data custodianship they demand.
In this Payments on Fire® George and Scott Giordano, VP and Sr. Counsel, Privacy and Compliance at data privacy management firm Spirion, talk about what can and has gone wrong, the high cost of sanctions for failure, and how to reduce the risks attendant with the handling of personal data.
We are at the beginning of a decades long evolution of how privacy is supported and data is managed. Shaping that path will be regulations, the decisions reached through multiple lawsuits, and the response by technology and data providers.
In this episode, George speaks with Rafael Lourenco, EVP and Partner of fraud management provider ClearSale. Rafael returns to Payments on Fire® to address COVID’s impact including new online threats and the consumer behavior changes that challenge the customer checkout experience and fraud detection.
COVID-19 has contorted how merchants do business into new shapes. COVID-19 is forcing some merchants, often inexperienced with the online world, to make a swift digital transformation with all of its benefits and downside fraud risk.
For example, numerous brick-and-mortar merchants have rushed to embrace online commerce as they attempt to fill the revenue hole in their business. Others, as we’ll hear in this Payments on Fire® podcast, have suddenly found new demand for what they offer.
Even fraud management companies have found themselves dealing with unexpected shifts, including new behaviors of good customers.
- Consumers new to the online channel have suddenly appeared. Their checkout and payments behavior maybe confused and uneven.
- Prior customers may decide to become quarantine refugees and move in with friends and family at a different address. The new shipping addresses raises a red flag at the merchant’s fraud detection system.
As we’ve seen countless times after natural disasters, fraudsters see opportunity in the misfortune of others. The pandemic is no different. It’s also encouraged fraudsters who formerly operated in the physical world to attack the online channel. After all, they need to make a living, too.
Rafael takes us through these scenarios, what ClearSale has observed since very early in the COVID-19 outbreak, and some of the adjustments ClearSale’s full outsourced fraud management service has had to make.
He also discusses the role of machine learning and artificial intelligence (ML/AI) in fraud management. ML/AI has dropped ClearSale’s need for manual review from 30% of orders 10 years ago to 5% today.
ClearSale differentiates its service partly based on the extent fraud analysts examine the case before a questionable transation is declined. Rafael points out that, unlike an individual merchant who must maintain the same staffing level despite volume fluctuations (think Cyber Monday and mid-July), ClearSale’s fraud analyst team works across multiple merchant categories. That means, when one segments is busy another is less so. The result is “staffing in the cloud.”
For more on how COVID-19 has affected payment flows and the payments industry, read Glenbrook’s COVID Impact series.
Take a listen to Rapyd's Eric Rosenthal and Glenbrook’s George Peabody as they discuss Rapyd’s swift global expansion, its ability to quickly build new capabilities, and the firm’s cloud-based tech stack. It uses its “white label PayPal” model to payment-enable a wide range of companies and use cases.
Programming Payments Has Been Hard
Among the many evolutions in the payments industry over the last decade, and only accelerating today, is the programmability of payments. Prior to that, a portion of payments providers - gateways, processors, and even networks - provided access to their services via direct integration to whatever interface they cared to expose. The API is the layer now employed for that purpose.
A single interface to core services is, of course, the basic stock in trade of a gateway, an outfit that exposes a single interface to its customers with the promise, among many, of reaching a broad swatch of acquirers out the other side. Networks like American Express and Mastercard have long provided access of their own.
But this approach, for the many merchants and businesses shifting to digital payments, had a number of shortcomings.
First, none of these integrations were truly comprehensive. One gateway could get you to the UK, but others were necessary to reach the rest of Europe, often on a country by country basis because payments are local and domestic. To sell in a country, you have to connect to the methods its citizens use. Cards along won’t do it. So, global reach through a minimum set of providers was a challenge.
A second concern was the effort required to connect to so many providers. A merchant would have to carefully assess the ROI for each development effort in order to sell, say, in Austria or Thailand. Or to take advantage of the fraud services of American Express. Implementing and maintaining so may interfaces - and the contracts or partnerships that exist alongside the technical effort - is a lot of work.
Things Have Improved - A Lot
The way over these barriers is now broadly available. A number of providers have applied a common insight - that merchants, enterprises, and sellers will flock to a provider that offers a single, straightforward API that abstracts the complexity of payments so that they can focus more on their commercial goals.
Multiple providers now offer a single integration through which merchant can reach a global audience and the global range of payment methods.
That’s one of the insights that inspired firms like Braintree, Stripe, Adyen, and others, including the firm Rapyd, the subject of this Payments on Fire® episode.
Built on the Cloud
Rapyd is a young company building out its capability to global scale in a very short period of time. In this discussion with Rapyd’s Eric Rosenthal we hear how the firm’s use of Amazon Web Services has allowed the company to scale operations around the world in a reliable and, critically, compliant manner with respect to data privacy and domicility.
Eric illustrates the company’s model - a white label PayPal as he calls it - through an example of Rapyd supporting a cash collection supply chain challenge for a global CPG manufacturer.
Flexibility and Speed
In our payments consulting work on behalf of merchants and billers, when we support their choice of payments provider, we increasingly see one or more firms like Rapyd competing against incumbents like First Data and Chase. We expect to see them more often in the future.
Incumbents using legacy infrastructure lack the flexibility to be responsive. We frequently hear about the years long implantation projects some legacy providers require. While a single firm may have built, at one time or another, every possible bit of functionality a merchant may want, the reality is that such breadth is not available on a single platform. Hence those long integration timelines.
The ability of these newer entrants to address incremental use cases is impressive. Of course, some of their components lack the functional depth achieved by incumbent competitors. But that gap will narrow with time and faster than in prior years.
By outsourcing the core plumbing to cloud providers like AWS or Microsoft’s Azure, firms like Rapyd are able to put more wood behind the arrow aimed at their customer’s business goals. Freed of much of the operational burden of running the plumbing, they can deploy their talents where the impact is greatest. And that changes the game.
The transition away from paper to an all digital payments world has been underway for decades. But in the last few years the pace has accelerated. Global tech availability and focused development talent is letting software eat the payments world. Other enablers include business models such as payments facilitation and the focus on commerce, not just payments, for merchants.
COVID-19 has simply added fuel to the fire. In May, for the first time, Mastercard reported that over 50% of its volume was card not present, transactions all in the digital payment space. The pandemic is yet another forcing function pushing digital payments deeper into our lives, across the key payment use cases employed by individuals, merchants, enterprises, and government.
Keeping up with all this is what we do at Glenbrook. In this Payments on Fire® episode, Glenbrook's Russ Jones and George talk about what’s hot and how that gets examined in our upcoming Digital Payments Insight Workshop. It will be held online June 24 and 25th. For more on the workshop, check it out here.
Russ and George talk about the online training experience and how interactivity is supported by the tools we use and the flow we establish. So, take a quick listen to get a taste of what’s hot. If you like it, we look forward to seeing you at the workshop. No trains, planes, or automobiles needed.
Take a listen to Craig McDonald, Chief Business Officer of Trustly and George as they discuss how Trustly makes its proposition possible. While Trustly is ramping up its U.S. presence, it does have timing on its side. In this pandemic-constrained age, merchants will be looking for lower cost payments and certainty. Trustly appears to have attributes to meet those concerns.
In our payments education and payments consulting work, we frequently discuss payments “rails” - the networks and systems that move money either between banks in the open lop payments model or within a single operator’s closed loop network. Think cards, wires, and ACH when you hear “open loop.” Think PayPal when you hear “closed loop.”
Each set of rails connects to an account of some kind. And has to present itself to the end user to make payment initiation easy.
We know how to write a check and understand how a wire is initiated. We all know how to initiate a card transaction at both the physical point of sale and online. There’s another important system that most of use all the time if we’re employed. If we actually use it to send a payment, we might know what it’s really called. That, of course, is the automated clearing house, the ACH system.
The ACH has incredible attributes. Almost every financial institution connects to it so the network effect is huge. And, for the financial institutions that use it, it’s very inexpensive. It can be used to both credit or debit an account.
But it has some big shortcomings, too. It runs in batch, overnight and a couple of times during the day. It is not a real time payment. There is no authorization. And when a debit transaction is initiated, the system has no way of knowing if there are funds in the account to be debited.
A number of companies have come and gone over the years who have tried to take advantage of its cost and ubiquity but have been unable to overcome competition from cards, especially debit cards, or the challenges of fraud and security.
But more modern tools are available today from both the technology and the rules/regulations angles that make the ability to pay a merchant from one’s own bank account, certain for both parties, possible.
That’s the topic of this Payments on Fire® episode. Trustly has combined broad connectivity into the ACH system with machine learning to effectively guarantee payments to merchants at a lower cost than debit cards. It’s a fascinating example of how new tech can broaden the utility of a system that is decades old.
Take a listen to Craig McDonald, Chief Business Officer of Trustly and George as they discuss how Trustly makes its proposition possible. While Trustly is ramping up its U.S. presence, it does have timing on its side. In this pandemic-constrained age, merchants will be looking for lower cost payments and certainty. Trustly appears to have attributes to meet those concerns.
This illuminating Payments on Fire® episode takes a deep look at a very new Brazilian payments platform called Conta Zap (Zap Account in English) and how a group of community minded people came together with Conta Zap to provide basic income to economically displaced Brazilians during the COVID-19 outbreak.
The story illustrates how the combination of entrepreneurial thinking, technology, and right-thinking regulation can make a real impact on even those living at the edge.
The Situation
This story is about how that wallet was put into the field to serve a particular community in real need. That community is made up of mostly fishermen, like the one pictured below, living in the Vergel do Lago neighborhood in the northeastern city of Maceio. Most residents are fisherman who sell their catch to restaurants, a transaction shut down due to COVID-19 restaurant closures.
Already living on the edge, that shutdown put enormous pressure on the 20,000 fishermen working in the area.
How It Started
Conta Zap is a digital wallet that simplifies moving money for P2P, bill payment, and other consumer-based transactions. Under Brazilian bank regulations, Conta Zap is also a “payment institution” able to handle payment transactions on behalf of its user but not to be a lender itself.
When word of the fishermen’s plight reached Conta Zap leadership the idea of using its wallet to get emergency funds to the fishermen was born. The Zap do Bem (roughly translated as Zap for Good) service came to be, based on the Conta Zap wallet. A group of corporate funders donated the funds for the fisherman with each fisherman receiving the equivalent of $35 USD, a meaningful figure to these impoverished workers.
The idea of Zap do Bem started in mid-March before it was clear that the federal government was going to provide an emergency stipend to poor Brazilians. To get those stipends to the millions of unbanked Brazilians, the government took advantage of recent Brazilian Central Bank regulations that allow for easy opening of low value accounts. These so-called CAIXA Tem digital accounts are offered by the government owned CAIXA Econômica banks. Remarkably, more than 40 million accounts are expected to be opened by individuals who previously did not have an account.
As with Conta Zap, this has allowed Brazil to disburse funds relatively easily and safely to millions of people. Of course, this hasn’t stopped people from lining up to take money out as cash but it is a very big, important first step in creating a digital ecosystem.
Multiple Layers of Tech, Regulatory Foresight, and Good Will
The story is a digital one. The Zap do Bem was not about helping speed cash distribution. Stakeholders combined technology from multiple parties, the generosity of donors, and these important regulatory guardrails to create a valuable service. Here are the ingredients to Zap do Bem’s layer cake:
- The Fishermen. The fishermen needed digital accounts and the means to spend their money.
- The Merchants. Conta Zap enrolled merchants to accept payments from the Conta Zap wallet.
- The Donors. A collection of corporate and individual donors agreed to provide the funds to help the fishermen get through the pandemic.
- Conta Zap provided the digital wallet, enrolling the invited fishermen participants via text message. A Brazilian celebrity sent a message to recipients assuring them that the offer was legitimate.
- Oi, one of the country’s leading telcos, enabled Conta Zap to verify customer identity using Oi’s geolocation capability for address verification and to help validate the fishermen’s income level by looking at purchase records for prepaid airtime. Oi also helped identify merchants in the neighborhood. That allowed Conta Zap to get those merchants enrolled so the fishermen could begin to spend the donated funds.
- WhatsApp, by virtue of exposing its capabilities programmatically, Conta Zap, was made available to beneficiaries entirely on WhatsApp using an AI interface as seen in the screen shot below. This approach allows Zap to provide its digital wallet service at very low cost.
- Regulators. The enabling regulation allows accounts with low balances and modest activity to be opened with minimal personal identification requirements, i.e. your name, national ID number, and birthday.
Screenshot and translation of Zap do Bem:
| Hello! I’m the virtual assistant for Conta Zap and my name is Zapelino. Here you can pay your bills, top up services and much more. Type the option the you want to do now: 1 – Open my Conta Zap 2 – Create a Login 3 – How to open my account 4 – How Zap works 5 – Zap card |
We’ll plan to follow up on these developments in the future. Listen in now as Elizabeth McQuerry interviews Roberto Marinho, CEO of Conta Zap, and César Souto, a Member of the Board of Directors. If you would like to become a donor, click here and scroll to the bottom of the page for instructions.
There’s no clearer indicator of COVID-19’s economic impact than payment metrics. In this Payments on Fire® episode, we speak with Bryan Derman, Glenbrook’s managing partner, and Glynn Frechette, SVP of PSCU’s Advisors Plus division, in a discussion of PSCU’s payment trends analysis. Glynn provides an exceptionally detailed view into the pain, and some real gains, that the pandemic has brought to U.S. payments activity.
PSCU’s analysis points to both the depth of transaction volume declines for a number of segments, especially travel and fuel. And since so many restaurants are shut down (another segment hammered by the pandemic), the data shows how supermarkets and groceries have benefited.
There’s plenty of detail in this podcast so take a careful listen. To keep up to date on what PSCU is seeing across the country, go to its Resource page. For more, check out PSCU's infographic for the week ending May 3rd.
It is super instructive to hear about payments evolution. So, it’s time to take a trip. In this Payments on Fire® episode we speak with Charles Ifedi, one of the founders of Interswitch, one of the leading digital payments providers in Nigeria, and founder of customer engagement platform company eBanqo.
We hear a lot - and deservedly so - about innovative fintech companies but we hear very little about the advanced and highly competitive payment system already in place in Nigeria. Take a listen as Glenbrook partner Elizabeth McQuerry, partner in charge of Glenbrook’s Global payments consulting practice, talks with Charles about the Nigerian payments ecosystem, his role in developing one of the leading payments providers there and and his new venture in improving the front end of financial services with conversational AI .
Payments in Nigeria are huge in every way. Its large population – some 200 million – allows digital payments to thrive even as the banked population remains stubbornly low at just under 40% of the adult population. Unlike the eastern Africa experience of telco-led companies like M-PESA, Nigerian telcos are not allowed to serve as payments providers. They aren’t banks but their agent networks serve an essential role in last mile service delivery. That said, recent regulatory changes are allowing partner companies of these telcos to apply for the country’s payments services bank license.
Nigerians have been able to take advantage of instant or real-time payments for a decade. You can’t say that for Americans. It’s quite common to see people making instant payments transfers from their mobile devices via the simple USSD menu interface on feature phones. Those with smartphones take full advantage of app-based interfaces.
These instant payments are often used to buy things in retail shops as well as to make business or personal transfers. Payment by debit and credit card is also quite common and Nigeria is home to Verve, the pan-African card brand.
Listen in as Charles, who was Verve’s first CEO, reflects on developing the Interswitch brand and discusses how Nigerians are making payments at small and large merchants during the Covid-19 lockdown, the successes of ATMs and their challenges to growth, the failure of biometrics, and about the Nigerian payments ecosystem overall.
Payment authorization rates are a theme we return to regularly on Payments on Fire® because they matter so much to merchants, issues, and the payment providers in between. If a big issuer declines more transactions than its peers, the merchant and the issuer, in fact, leave money on the table. The merchant loses sales. The issuer loses interchange revenue.
In this episode, we speak with Stripe’s Jeanne DeWitt, head of revenue and growth for the Americas, for a deep look into how her company maximizes AUTH rates for itself and its hundreds of thousands of sellers. We discuss COVID-19’s impact and some of the creative responses to it. We also address Stripe’s maturation into an enterprise provider, at enterprise orgnization, and wrap with a look ahead at the future shape of the payments industry.
In Glenbrook's Payments Boot Camp® and in our payments consulting work, we use our Domains of Payments framework to subdivide the major use cases and payment contexts into a half dozen categories or domains. The Remote Domain contains cross-border e-commerce, a particularly challenging use case where the buyer and seller are separated by distance and, in the case of cards, credentials are presented without the cardholder present. This is card on file (COF), card not present (CNP) transactions live. Just add cross-border complexity.
If you sell via e-commerce in the EU, Middle East and to the global market, you’re crossing borders. That means regulatory compliance. It also means you want your customers to pay you in the manner to which they’ve become accustomed. Germans and Belgians like SOFORT and PayPal. The Dutch prefer the domestic iDEAL system. The UK is card-centric.
To reach customers in those countries and beyond, you need a payment services provider with reliable connectivity into those domestic systems, access to global card systems, and the ability to maximize authorization rates.
Credorax is a PSP founded in Israel with a strong technology focus that has also become a Malta-based bank in order to expand its EU presence as an acquiring bank.
In this Payments on Fire® episode, George and Credorax COO Moshe Selfin discuss the initial impact of the novel coronavirus on the travel segment and then move on to authorization optimization.
The podcast includes the Credorax creation story. While technical capabilities were the core of its start-up phase, it was the EU’s PSD2 regulation that created its market strategy and steered its business evolution. While many in the payments industry complain about regulation, it’s true that mandates move markets and, as Credorax saw, create opportunity.
Take a listen to how a this not-yet-quite-global company positions itself in an increasingly crowded market and its approach to delivering value.
In this special episode of Payments on Fire®, Glenbrook partner Elizabeth McQuerry, partner in charge of Glenbrook’s Global payments consulting practice, leads a conversation on the development and adoption of realtime payments in developing markets.
Joining Elizabeth are Miller Abel, Deputy Director, Principal Technologist at Bill & Melinda Gates Foundation and Gene Neyer, Executive Advisor to Icon Solutions, board member at the US Faster Payments Council, who has supported Gates-funded projects in Pakistan and Tanzania.
This discussion was originally scheduled to take place at the 2020 Payments Canada Summit.
If the development of faster payment, instant funds transfer systems is important to you, take a listen to this episode on the development of these instant push payment systems in developing markets. Many of the issues and concepts discussed apply to developed market concerns and you will gain important insight into the multiple paths governments and leading tech firms take in system and ecosystem development.
Anchoring the discussion is the set of principles for financial inclusion codified in The Level One Project Guide, a work product of the Bill & Melinda Gates Foundation.
An essential principle is the role of real-time payments as an economic development tool. Digital payments have to have the immediacy of cash to be transformative. No one can afford to wait for a payment to wander for a few days through an antiquated banking system when they have to buy fuel in 20 minutes.
Digital payments also have to solve for specific use cases which quickly leads to the need for an API layer to embed payments into purpose-built apps. The discussion addresses these principles and illustrates them with examples like the agriculture-focused version Uber for tractors.
To address the necessary transaction switching and connectivity infrastructure, the Gates Foundation has built the Mojaloop
platform, an open source initiative to ease development for governments and commercial entities alike. Miller takes us through its genesis and applications.
Elizabeth, Gene, and Miller discuss the extraordinary and growing penetration of inexpensive smart and surprisingly capable feature phones in markets like Nigeria and Myanmar.
They also discuss the “stack” of rules, rails, account providers, and apps that enables innovation, a model that applies to both developed and developing markets.
This is a comprehensive discussion that touches on the roles of government and commercial stakeholders and how they differ across countries, payment economics, and the multiple paths to broad deployment of real-time payments. Take a listen.
The “supermarket” days of financial institutions providing all of our financial services and holding all of our accounts are long over. Brokerages, insurance companies, and the expanding array of fintechs compete to hold, manage, or organize our assets.
With so many custodians of our financial data, it can be difficult for an individual to generate a complete picture of her finances. That’s been a longstanding problem that was addressed over two decades ago by data aggregators like personal financial management app Mint.
Individuals found this single portal approach quite useful. All we had to do was provide the aggregator with the login credentials to each of our online accounts. The aggregator would then log into that account on our behalf, “read” our data off of the web page, and display all of that data in a single consistent fashion (this is “screen scraping”, the method of data gathering that started it all).
This single view capability has been a compelling proposition that dozens and dozens of firms have emulated in the years since.
Further, use cases have proliferated where a fintech, for example, simply needs access to one or two accounts in order to fulfill its goals. The mobile app model has just accelerated the expansion of apps needing access to user account data.
Yodlee and Plaid, now a Visa company acquired in a whopping big transaction, are examples of companies selling access to user account data either through screen scraping or, in a more modern approach, direct integration to individual financial institutions.
Direct integration to each bank or credit union’s data is, of course, inefficient because each banks exposes its own interface. The syntax and functions of each vary making everyone’s development and maintenance tasks more difficult..
Evolution of a Standard
Into this gap is the Financial Data Exchange organization. With over 100 members https://financialdataexchange.org/pages/members
from a wide range of companies - Chase, Plaid, FS-ISAC, Intuit, PNC, Fannie Mae, Truist, Cashflow Solutions - its goal is to standardize the domain of permissioned at a sharing through an API layer in operates in front of financial institution data.
FDX is a true standards organization. Its members pay dues, yes, but their more important contribution is time and effort. Working groups take on particular technical and usage aspects, develop them, and generate draft standards for the entire membership to ratify.
One of its working groups focuses, for example, on the user experience, on the use cases that benefit from data sharing and how to make that process transparent and secure for end users.
In this Payments on Fire® episode, George and FDX Managing Director Don Cardinal discuss the API, its many reasons for being, and the standards development process.
They also discuss Akoya, Fidelity’s former data sharing unit that is now owned and operated by The Clearing House and 11 member banks. Akoya serves as a central integration provider making it easier for a fintech app to connect its users to the banks subscribing to the Akoya service.
So take a listen. FDX is important to the fintech and financial services community. It’s important to end users. And it’s a great example of how comprehensive standards can be developed swiftly.
Welcome to Payments on Fire® and to our third, now annual, discussion with Steve Ledford, SVP Products and Strategy at The Clearing House, and the leader of his company’s Real Time Payment Network initiative.
As in prior conversations, Steve and George discuss the growth of the RTP Network both in terms of transactions and dollar volume as well as an important metric, the growth in the number of financial institutions and FI processors who are already or in process of connecting to the network.
The evolving set of use cases supported by a new payment system is often surprising. Few expected Zelle’s leading use case to be rent payments. While the RTP Network is in its infancy, Steve shares a number of use cases already in flight.
Changes to the network’s rules also position it for expanded use. For example, the network’s recent increase in transaction size limit to $100,000 positions it far better for B2B transactions.
Like all bank services, strong user authentication is critical and firmly out of scope for the new network. Banks will have to improve their authentication processes because account takeover is a real risk.
As Steve says in this discussion, banks can also reduce the risk of accountholders sending money to bad actors simply by well-timed messaging. Financial institutions can adopt best practices that have evolved in the UK and other markets with similar systems in place. For example, the bank should ask the accountholder if they personally know the recipient of the funds and if they have been pressured to make the payment within a certain timeframe. Both questions are meant to caution the accountholder before pressing Send.
Steve also addresses the announcement of FedNow and its ripple effects on the RTP Network.
New national payment rails are a once in a generation event. New rails, better data representation techniques, and mobile devices make for an innovator’s playground. Take a listen.
Be Safe. Be Well. Help Out.
This is our era’s unprecedented event. I hope you’re staying safe, your family is all well, and you’ve got what you need for what looks to be a pretty long time. On the upside, I’ve seen and experienced people helping one another like never before. That gives me confidence we’ll be able to mitigate COVID-19’s impact on our healthcare system - and on all of us. The downside is obvious. The weight of the pandemic is going to come down heaviest on those with the fewest resources. Helping out is our best response.
Among the Exploiters of The Pandemic
There are characters out there, however, who are bent on taking advantage of this global challenge because the corona virus has only added gasoline to the growth of e-commerce and online fraud of all kinds.
While e-commerce volume skyrockets as so many hunker down, online credit applications are rising at traditional lenders, challenger banks, and fintechs. Responding to the pandemic, some fintechs are making it easier than ever for sole proprietors to get loans in the hopes of having their business survive the pandemic. For similar reasons, others are encouraging government action in support of their SMB customers.
These laudable efforts will attract fraudsters in droves. What could be better than overburdened systems (Robinhood anyone?) and modified onboarding and underwriting processes?
Socure is an identity management company serving financial institutions old and new, fintechs, and marketplaces that extend credit via online applications. Socure’s service operates right at their front door, at “day zero,” when the applicant first appears at the provider’s digital door. The company promises to reduce fraud, reduce the manual review of questionable applications, and onboard more customers through its KYC services.
In this Payments on Fire® episode, George speaks with Rivka Gewirtz Little, SVP Marketing & Strategy at Socure on a range of topics, from the what and how of Socure’s service to the larger concerns of fraud rates, model governance, and the definition of identity.
Socure’s Own Digital ID
Socure is working on its own version of a digital identity, essentially taking all that it knows about each individual and creating a profile that is updated based on the individual’s behavior, system changes, etc. This “Socure Identity” then can be used beyond the Day Zero identity proofing step but for subsequent authentication when the individual returns to Socure’s customer’s website or app.
FI Internal Collaborate on Identity
An encouraging evolution in enterprise organization is the growing collaboration of the produce line leadership within traditional financial institutions in the areas of risk management and marketing, teams with traditionally conflicting goals. Marketing wants as little friction as possible; Risk wants to keep the bad actor out. In the past, each product line fought its own battles and chosen its own solutions. Now that the digital channel is firmly established even among incumbent and with more flexible tech available, coordination and alignment is taking place.
Data Minimization
“Data minimization” has achieved buzzword status. And its meaning varies depending on who you are. Essentially, it means a provider should hold only that data that’s necessary and no more. For a Socure that lives on massive data resources, data minimization is meaningless. Socure has to be an exceptional custodian of all of that data.
George and Rivka discuss another connotation for that term, the ability of the accountholder or user to release only the data that’s relevant to the transaction. Showing a driver’s license to prove you’re over 21 is a classic case of over-sharing.
So, take a listen. Stay safe.
For more on digital identity and synthetic identity in particular, check out Episode 115 – Finding the Phantoms – Synthetic Identity and the Issuer – with Naftali Harris of SentiLink.
Sometimes events delay things. Other times, they hasten them. At Glenbrook, the corona virus has sped us along a path we’ve been traveling for some time. The path is digital delivery of the Glenbrook Payments Boot Camp®.
In this Payments on Fire® episode, Russ Jones, partner in charge of Glenbrook’s education team, talks with George about two major changes in our payments education program.
- Digital Delivery - what it looks like, how it works, and when we will launch it for our public participants
- Curriculum Update - how Glenbrook maintains the currency of our training and some of the major updates made recently
As you’ll hear Russ say, we’re excited by the capabilities of today’s teleconferencing capabilities, how we can use them to inject a high level of interactivity into each session, and the challenge of bringing the Glenbrook Payments Boot Camp® magic to the digital medium.
Join us April 7-9 for the Glenbrook Payments Boot Camp® digital edition. No travel required!
All of us at Glenbrook wish you the very best of experience and outcome as each and all of us navigates the corona virus threat. Be calm, carry on, and keep your social distance.
Fraudster innovation is a constant. As the defenders of payment transactions thwart one fraud vector, these innovators, playing offense, switch tactics.
Today, the problem of knowing who you are, that you are who you say you are, in the digital domain demands stronger authentication techniques. Many of those rely on the attributes, the data, provided by the user or by the applicants in the case of credit extension.
In turns out that even the data supplied by applicants can be both entirely bogus and sufficient to convince a credit issuer to onboard the applicant and extend credit. This is the problem of synthetic identity.
To explore the synthetic identity challenge, take a listen to this conversation with Naftali Harris, CEO of SentiLink, a company focusing on detecting synthetic identities. Coming from years at Affirm, Naftali and the SentiLink team serve credit issuers struggling with this new fraud vector.
First, let’s define synthetic identity using the Fed’s Synthetic Identity Fraud in the U.S. Payment System Payments Fraud Insight white paper as the source:
“The generally agreed-upon definition of synthetic identity fraud is a crime in which perpetrators combine fictitious and sometimes real information, such as SSNs and names, to create new identities to defraud financial institutions, government agencies or individuals.”
Now we’re looking for phantoms. Uh-oh.
There are terabytes of personally identifiable information for fraudsters to use because of data breaches and our own over-sharing of our personally identifiable information. Knowledge-based authentication based on static data like SSNs, birthdays, and the name of our hometown isn’t hard to break. Nor is this static data generally protected by tokenization or encryption in any way.
The fraudsters know what we know. Uh-oh.
And because the real data presented by the fraudster creating a virtual identity is often that of a child or an elder or even the deceased, well, it’s super hard to detect. That comes from my Glenbrook colleague Yvette Bohanan who has years of risk management experience at Amazon, Google, eBay, BofA and others.
Of course, the fraudster’s goal in making up a new identity is to open a credit line in order to subsequently defraud the issuer, perhaps by carefully using a credit line carefully for years to build up a high credit limit before busting out with a lot of spending and then disappearing to a beach somewhere.
Multiple Types of Synthetic Identities
A startling aspect of some synthetic identity fraud is that it doesn’t take advantage of purloined PII. All of the data used by the credit application is made up out of whole cloth and thin air. The proper format of a social security is well known so why not generate a random one? After all, the federal government doesn’t operate a central SSN repository with realtime validation. A variant approach relies on real and fake data, combining, for example real names with made-up SSNs.
To explore the synthetic identity challenge, take a listen to this conversation with Naftali Harris, CEO of SentiLink, a company focusing on detecting synthetic identities. Coming from years at Affirm, Naftali and the SentiLink team serve credit issuers struggling with this new fraud vector.
On Payments on Fire® we’ve talked with gateway operators, processors, tokenization specialists, fraud management firms, and others - all providers who help payment acceptors handle their payments.
The range of services and business value they deliver varies a lot. Some providers do everything. Others, like Spreedly, the subject of this Payments on Fire® podcast, focus on a narrower set of functions and business outcomes.
Payment Flow and the Payment Service Provider (PSP)
When we talk about merchant acquiring in the Glenbrook Payments Boot Camp, we highlight the following transaction flow:
- The merchant or its ISV, perhaps running as an PayFac, accepts the customer’s payment
- They connect to a gateway or a processor
- The gateway routes the transaction to an acquiring bank or its processor OR the merchant connects directly to one of these entities
- The transaction is routed by the acquirer or processor into the payment network and on to the accountholders’s financial institution
That picture oversimplifies the tasks at hand. Depending on what kind of merchant you are, the set of payment-based services you need can vary substantially.
If you answer yes to any of the following, there are payment service providers ready to help you with specific tools:
- Are you an e-commerce merchant
- Is omnichannel commerce important?
- Are you strictly a bricks-and-mortar operation?
- Are you a biller or a heavy user of invoicing?
- Do you operate unattended devices like vending machines and kiosks?
- Are you global or have global aspirations?
- Are you an SMB or enterprise-class payment acceptor?
Some payment service providers (PSPs) are owned or captives of larger upstream entities. Their role is to capture an ever widening stream of transactions to flow on to their parent company. CyberSource, owned by Visa, may not care a lot about who the acquirer is but the company's transaction handling drives revenue for Visa.
Other independent PSPs like NMI and, in today's podcast, Spreedly, focus more on the needs of the merchant. NMI anchors it many other talents around its core gateway. Spreedly might be considered is a gateway to gateways. It connects to processors and has developed a broad set of connections into domestic systems around the world. Spreedly is a also payments tokenization provider.
Given that range, Spreedly refers to itself as a merchant-facing payments infrastructure provider. More casually, Spreedly is a layer of glue between the payment acceptor's operations and the payment systems that the acceptor needs to support. Payment orchestration is another in vogue term to describe what Spreedly, and others, do.
This is an evolving story and marketplace. Definitely worth a listen to Justin Benson, CEO of Spreedly, as we talk about what his company does and a range of industry topics including tokenization, risk, and more.
In this Payments on Fire® podcast, we examine the role of a payment service offered through a commerce solution targeted at the small and medium business (SMB) market. To do that, we talk with Nan Siler, Head of Payments Strategy and Operations, at Kabbage.
The small and medium business market is important to both the national and local economies. It’s big. According to the U.S. Small Business Administration, over 40% of GDP is generated by this segment. Over the last decade and more, SMBs have come to face new competition (Amazon and the high concentration of Big Retail) and a less willing lender community of traditional financial institutions. Kabbage has stepped into that environment.
Kabbage has loaned over $9B since its inception to some 220,000 customers and last fall added a new service, Kabbage Payments, to ease payment and invoicing for its SMB customers.
SMBs live and die on cash flow. If a big customer’s payment doesn’t come in on time, the business owner can end up paying her employees but not herself.
Kabbage has built sophisticated onboarding and lending models around the needs and realities small businesses. Cash flow management includes, of course, timely access to money, via lending, to fill funding gaps or help expand the operation.
Nan takes us through how Kabbage’s Payments solution complements Kabbage Funding, its lending operation, and how the two come together to provide better insight on the business’s cash needs. With better insight, the goal is to help the small business borrow less money for shorter periods of time when funding the day-to-day with the expectation that Kabbage can provide larger sums to meet the capital requirements of business expansion.
Many independent software vendors (ISVs) bring payments capabilities to their merchant customers to meet functional expectations as well as enjoy payment related revenues. Indeed, the ISV is now the channel through which many SMBs acquire payments acceptance capabilities. The payment-focused PSP group, and especially the Independent Sales Organization (ISO), no longer control that channel.
Kabbage, while not an ISV, has built its payment service to help merchants get paid faster. Every SMB wants that. So, take a listen to Nan as she discusses both the lending capabilities of her firm and how the new payment service complements that funding function.
As our lives shift online, our providers needs strong digital representations of each of us in order to make authentication and authorization decisions. Besides payment transactions, there are the diverse risks they must manage when, for example, we establish new credit relationships, add new payees to our online accounts, and move money in new ways. The providers of these capabilities—and often a single party offers multiple services—must be concerned with the associated risks each poses.
This is the special domain of risk and fraud management companies. In this conversation with Payfone’s CEO Rodger Desai, we focus on digital identity services and the role of the mobile ecosystem in particular. Take a listen.
Many risk and fraud vendors base their services on different data types, such as the email address, SSN, or phone number.
In Payfone’s case, it is the combination of the mobile number, the device it is connected to, and the mobile network serving it that have powerful attributes to measure against. Relevant data attributes include:
- Tenure. How long the mobile subscriber has had the phone number tells a lot about the subscriber itself.
- Phone’s Aren’t Free. Unlike email addresses which are cost-less, almost anything to do with a phone costs money, i.e. the service and device costs. Therefore, phone-based frauds, for the fraudster, cost money. Such hacks don’t scale as well as a card data breach. But when there is a phone-based hack, the impact on the victim can be particularly severe.
- Lots of Activity to Examine. With 50% of American eleven year olds having phones, we generate a rich history using our phones. For billing purposes alone, that activity is tracked by the mobile network ecosystem and, given appropriate privacy controls, can be used to support risk decisioning.
- Even More Data. Biometric unlocking of devices, behavioral fingerprinting—how we actually interact with the device user interface—and device fingerprinting—the digital portrait developed from such rich data—expand the data available for risk assessment.
The union of all this data paints a crisp digital identity once algorithmic power has been applied to it.
In this episode of Payments on Fire® we discuss the risk assessment capabilities the mobile ecosystem provides with Payfone’ CEO Rodger Desai. His long experience in mobile “phone intelligence” informs this discussion. He explains how some very large clients are using Payfone’s scoring capabilities to assess transactional and account risk while addressing the challenge of improving the user experience. Risk and convenience are often at odds. Payfone’s services are designed to mitigate that conflict.
Today’s digital identification capabilities are powerful. But fraudsters are fast moving and well funded. For the relying parties—those enterprises that take on the risk—the role of defense is a tough one. Priorities, cost, business goals, even awareness vary. Each and every party’s approach to risk assessment is unique. Risk tolerance for the same transaction will differ from bank to bank, from enterprise to enterprise.
In other words, individual enterprises can assemble strong risk assessment and mitigation capabilities while, from a systemic view, there will always be gaps to be exploited. The best we can hope in today’s environment is for each enterprise to raise its security game.
The U.S. has just come off a record setting holiday shopping season with e-commerce sales rising over 18%. While the numbers aren’t in yet, there’s no doubt the fraudsters also had a record year. There are so many ways to defraud consumers, merchants, and financial institutions.
At Glenbrook, we are optimistic about our longer term ability to deter, prevent, and detect fraud. Our kit is getting better. The combination of tech and rule making will payoff: strong authentication enabled by standards-based smartphone-enabled biometrics; regulations requiring strong authentication as put forward in the EU through its SCA rules; and our expanding ability to detect new attacks using tools that operate within the transaction flow.
It is this last area that is the topic of this Payments on Fire® episode. Fraud detection tools operated by or on behalf of merchants that examine transactions are today’s major line of defense against payment, loyalty, and coupon fraud. In this conversation with Colin Sims, COO of fraud prevention company Forter, the development, deployment, and maintenance of a modern fraud management platform is the topic.
Colin and George discuss how fraud management and prevention technologies continue to evolve, Forter’s own approach, the role and impact of PSD2 and SCA regulations in the EU, and how fraud continues to adapt. While machine learning is a central technology, Colin makes clear that human effort and insight is what makes the difference.
Deployment of “clean sheet of paper” payment systems is a once in a generation event. In over 50 countries, new account-to-account push payment systems are either in full scale operation, implementation, or fully committed planning stages. The U.S., for example, has the RTP Network in operation and, in a few years, the FedNow system will be online.
This is hard, serious work. Technology decisions need to be paired with equally rigorous rules making. One of the major concerns for these systems is what to do when a transaction is sent in error or initiated by a fraudster. In contrast to card systems, dispute resolution capability is not a standard feature. These choices should reflect clear agreement and follow through by the system’s key participants.
In this Payments on Fire® podcast, Glenbrook’s Elizabeth McQuerry talks with builders of dispute resolution, complex messaging, and connectivity capabilities developed around Australia’s New Payments Platform (NPP).
Joining Elizabeth are Jack Baldwin, Chairman of BHMI, a U.S.-based developer of bank-grade settlement and reconciliation systems, and Nathan Churchward, Head of Product, Emerging Services at Australia’s Cuscal Limited. Cuscal is a developer of payments capabilities that include card issuing and acquiring, mobile payments, fraud prevention, switching and settlement.
There’s a lot to be gained by learning from someone else’s experience. Nathan and Jack address the dispute resolution process, ISO 20022 messaging, and the significant effort needed to build out systemically important payment infrastructure. Take a listen and you’ll gain a deep appreciation of the interplay of rules, regulations, technology, and effort.
Glenbrook Partners is working with the U.S. Faster Payments Council to help shape rules in the U.S. and address significant concerns around system interoperability, directory services, and dispute management. Take a look at the Faster Payments Barometer based on our industry survey. And visit the U.S Faster Payments Council site for more.
If you thought bitcoin was dead as a payments system, take a listen to George and Jimmy Nguyen, founding president of the Bitcoin Association, as they discuss Bitcoin SV, a new version of bitcoin that is a significant upgrade to the performance and capabilities of the original bitcoin protocol put into the world a decade ago.
From a payments perspective, bitcoin has failed. While successful as an albeit volatile store of value, its failings include:
- It is slow, only able to handle 2 or 3 transactions per second with a peak rate of 7. Visa handles 50K at peak holiday times with aplomb.
- While transactions are irrevocable, they are not immediately written to the blockchain. Core design specifies that that happens every 10 minutes but when the network is under load it has taken hours.
- Processing cost is too high, measured in dimes and dollars, and also volatile
- As the processors, known as miners, are rewarded with fewer bitcoins for their work, they’ll have to rely on processing revenues, transaction fees, to stay viable. Costs are already too high
- There’s the high power usage of the network that’s needed to maintain consensus, essentially trust in the network.
If you thought bitcoin was dead as a payments system, take a listen to George and Jimmy Nguyen, founding president of the Bitcoin Association, as they discuss Bitcoin SV, a new version of bitcoin that is a significant upgrade to the performance and capabilities of the original bitcoin protocol put into the world a decade ago.
Jimmy brings a refreshing view on cryptocurrencies and payments. Jimmy provides a great review of how bitcoin works and why both its performance and its economics are broken. He explains the advantages of the Bitcoin SV fork and why it was necessary. Suffice it to say, bitcoin’s evolution is subject to the often fractious politics of that community where competing interests inhibit long term thinking.
Bitcoin SV has intriguing potential. Micropayments, sub $1 transactions, have never found a home in electronic payments. BSV could apply there.
BSV is also designed to use enormous blocks in order to keep processing costs low and provide the ability to store massive amounts of data about the payment.
Join Jeff Brown, president of VPay, a firm specializing in insurance claims payments, and George Peabody of Glenbrook Partners in this deep dive discussion of how the work of claims processing is done and how he approaches B2B payments, compliance, and the value-added services needed by the company’s customers.
The B2B Domain
We’re all familiar with the card present POS domain, card not present Remote domain, P2P payments, and the Bill Pay domain. A phone tap here, a card swipe there, a bill payment to the utility company. On a day to day basis, our personal experience with payments is these areas.
The B2B and B2C payment domains are very different. There is a wide range of industries with very specific payment needs. (Listen to episode 92 to hear how customized payments can become. Roadsync’s Robin Gregg talks about the special paper check type built just to serve independent long haul truckers.)
Insurance is Huge
One of the biggest industries is insurance. Premium payments in the U.S. alone are over $1.2 trillion. Payouts by stakeholders, such as healthcare systems and property & casualty insurers, and made to individuals claimants and service providers amount to trillions more.
Insurance is definitely big enough to be a very attractive vertical to a payments service provider.
Knowing Your Customer's Business
If you are a PSP serving a particular vertical market in the B2B space, you have to know at least as much about the vertical you serve as you do about payments operations and services. For example, if you’re making healthcare payments, you have to comply with the strict data privacy requirements specified by HIPAA regulations. You may have to support specific data formats. And you should help your business customers deliver useful features to their own customers.
If you want a great explanation of how payments fits into a vertical market, you can’t do better than listening to this episode of Payments on Fire®.
Digital disruption and financial inclusion are focus areas throughout the developing world and the topics are white hot in Colombia. Listen in as Hernando Rubio, CEO of Moviired, speaks with Elizabeth McQuerry and George Peabody about Movii and payment / financial inclusion ecosystem in Colombia.
Financial Inclusion in Colombia
Although one of the first countries in Latin America to make a big policy push for financial inclusion, those efforts focused a “banking correspondents” or agents in local stores carrying out basic financial services on behalf of banks. While these correspondents greatly improved access to financial services, they have not fully produced the desired results. According to the World Bank, fewer than half of all adults have a bank account and only a handful (less than 5%) have a transaction account from a telco led service. Very few Colombians use those accounts to pay bills or buy something on the internet. Cash is still preferred.
Enter the SEDPEs
In 2015 regulators in Colombia created a new category of licensed financial institutions called a special company for electronic deposits and payments, or SEDPE by the Spanish language initials. While a bank can also pursue this type license to focus financial inclusion efforts, the main conceptualization of SEDPEs are fintechs that gain authorization to take deposits and make payments – the two most basic (and still lacking) aspects of financial inclusion. SEDPEs are not allowed to make loans but can partner with others to make small credits available.
Movii
Rubio’s Movii was the first SEDPE to be authorized by regulators. Movii is a classic digital service that offers a wallet for storing funds, access to a reloadable debit card from Mastercard for buying in stores and on the internet, bill payment, mobile top ups and transfers to other Movii users. Movii also recently connected to the new national real-time payment service (Transferencias Ya) in order to be able to reach all account holders in Colombia. Movii builds off the company’s experience managing Moviired, an extensive network of physical agents in stores and bank correspondents throughout Colombia, that people use for those basic payments. Hear how a company disrupts itself as it lays the foundation for the next generation of financial services.
The merchant acquiring industry continues its large scale shift from a payments-led to an operations-led purchasing decision for the merchants it serves. Historically based on independent sales organizations (ISOs) and non-bank acquirers, the party that increasingly provides payment acceptance is the independent software vendor (ISV).
This makes sense for a number of reasons:
- Software is Vertical. Today, the first IT choice more merchants make is the software they use to run their business. This makes sense. Tools that improve overall business operations have a greater impact on success than the comparatively minor differences among payment providers. Auto parts stores need inventory management. Salons need scheduling. Ice cream and coffee shops need quick order entry. Daycare providers need security controls.
- Payments are Horizontal. Every merchant, regardless of its segment, needs to take payments. While many segments have particular requirements for payments, payment acceptance alone is a commoditized service.
- The ISV is the First Point of Contact. Given its primary role, the ISV has moved into an excellent position to sell and profit from payment acceptance.
- Taking a Back Seat in Selling, Payments is Infrastructure. The payments industry has multiple ways of enabling ISVs to sell payments. The ISV may use a gateway to reach multiple acquirers with the gateway itself selling value-added capabilities in areas like fraud management. The ISV may use the payfac model for fast onboarding of new merchants. The ISV may, itself, become an ISO. Multiple forms of business relationship all provide some measure of revenue sharing with the ISV.
Differentiation in Payments Via New Paths
Differentiation based on value-added services drive revenue in payments. For that reason, we have seen non-bank acquirers and ISOs focus on particular vertical market segments to drive and secure long term revenues. A decade and more ago, Heartland Payment Systems (acquired by Global Payments) doubled down on the restaurant vertical by developing special services for restaurant operators as well as acquiring restaurant-focused ISVs. That lesson has been learned by many since.
Over the last few years, differentiation has also stemmed from how well the payments provider serves the ISV and its developers. Integration of payment services both into the ISVs code and within the provider’s own code base is important. A single API that exposes all of a provider’s services is preferable to integration work requiring knowledge of an API tied to each function. Micro-services based capability is also welcome.
Payment Facilitation as Enabler
While not, in and of itself, a new approach, the payment facilitation model is a major enabler of payment service delivery via ISVs. The payfac model is based on network rules that allows an intermediary to act as the merchant of record in order to provide payment system access to smaller merchants. PayPal did this first for ecommerce merchants. Stripe is another card not present example. Square used the payfac model to offer sellers in the physical world access to card acceptance.
ISVs who become payfacs assume responsibility for the activity of their small merchant customers. So, choosing to become a payfac has its complexities and risks. A number of providers, including Finix, bring expertise in the payments facilitation model to help ISVs make that decision.
In this Payments on Fire®, take a listen to Glenbrook’s Nicole Pinto, Drew Edmond, and Finix CEO and founder Richie Serna as they discuss the payfac phenomenon and the larger shift to the ISV as payments provider. This is a cool conversation about a sea change event in the merchant services industry.
Take a listen as George and Nick Starai, Chief Strategy Officer of NMI discuss the role of the independent payments gateway and its evolution as a technology and business enabler for today’s providers of payment acceptance: ISOs, ISVs, and merchants.
A key technology and business partner for merchants and the first-line providers of payment services (think ISVs and ISOs) is the payment gateway.
At their simplest, gateways provide a single interface to their users that, once built, lets the party using it switch between acquirers with relative ease in order to get better performance, service levels, and/or pricing.
For independent software vendors (ISVs) selling line of business software this flexibility allows their customers to choose their acquirer of choice from the range of acquirers supported by the gateway. Many such relationships are in place long before the ISV relationship is established. ISVs can’t insist that their potential customers change acquiring banks in order to use their software. That’s one use case for a gateway.
Another is the Independent Sales Organizations (ISOs) that also realizes the necessity of using gateway technology in order to reach their increasingly demanding merchant customers. Placing stand-beside payment terminals next to a cash register is no longer nearly enough. Integration of payments into the overall business process of even a smaller merchant is now table stakes. Gateways can help make integration of more advanced capabilities happen.
Independence Means Acquirer Neutrality
Many formerly independent gateways have been acquired by processors. What processor wouldn’t want to move all the transactions managed by the gateway onto its own systems? It’s all about volume, after all.
But for independent software vendors, independent sales organizations selling to ISVs and merchants, and for many merchants themselves, an important virtue of the gateway function is its processor and acquirer independence.
Value-added Services
Gateway operators generally charge flat fees for each transaction handled so they have every incentive to expand the volume of transactions they manage as well as to provide value-added services that increase revenue on each transaction handled.
To increase volume, gateways make it as easy as possible for a customer to integrate to the gateway. They make their APIs simple and robust so it’s easy to add new services. The gateway provider builds software developer kits (SDK) to support in-app payments and makes sure their code runs on every important operating system.
Gateways often specialize on a particular payment domain such as large ecommerce merchants or in-store systems. Others offer a broader set of services. NMI, the subject of this Payments on Fire® podcast, supports both EMV terminals and the card not present environment.
Payment Facilitation
The payment facilitation business model has broadened card payment acceptance to the wide base of small merchants who would otherwise not qualify for a traditional merchant account.
The greatest impact of this payfac model is how it streamlines the onboarding process. Instead of the days-long underwriting process traditionally needed, sellers working through a payment facilitator (PayPal, Square, and Stripe all employ that model) can start to take payments within minutes of creating an account.
Because of that swift onboarding, the payment facilitation model reduces sales friction for ISVs. Their customers can install the ISVs line of business software and start taking payments at the same time.
For the ISV, there’s also the opportunity to earn revenue from their customer’s payment transaction flow. We’ve seen multiple merchant companies selling software services earn substantial revenue from the payments side of their business. NMI provides essential infrastructure services for the payfac business model including onboarding, sub-merchant account creation, KYC, and other reporting services.
The NMI Story
Nick relates NMI’s growth and service expansion. It’s a cool story that speaks to the industry’s evolution as well as the company’s own growth. By the end of the podcast, you’ll understand how enabling technology and new business models have shifted, yet again, the payments ecosystem. The gateway and payment facilitation services offered by NMI help move ISVs and tech-forward ISOs into a first position over traditional providers of merchant services.
Take a listen to Ian Drysdale of Zelis Payments and George as they discuss how complex the payments process is in the healthcare industry.
Near the peak of payments complexity and specificity is the healthcare industry. If you’ve ever looked at an explanation of benefits letter from a healthcare insurer, you’ve had a glimpse into the complexity of these payments. Multiple parties are paid a lot of money, before you may be required to ante up a co-payment yourself.
Regulation, compliance, the huge range of services delivered, and the scale of the healthcare ecosystem—from giant healthcare insurers to the local dentist—make healthcare payments a challenging, and attractive, market to serve. It is an enormous business-to-business market. Americans spent $3.5T, over $10K per person, in 2017. We spend something like 1 in 6 of our dollars on healthcare.
Simply getting the payment to the right party is complicated. Consider the imaging clinic that operates within a big regional hospital. It has its own back accounts, its own P&L, its own accounts receivable. Getting payments routed into the right account isn’t easy.
Checks still dominate in this industry because the development and maintenance of databases to track bank accounts is a major headache for a payer like an insurance company. Dropping a check in the mail, along with invoice information, at least communicates what’s necessary despite slow speed and high cost.
That’s where Zelis Payments and Ian Drysdale, its president and guest on this Payments on Fire® podcast, come in. Zelis Payments specializes in shifting healthcare payments from check rails to ACH rails. Using the service, providers get paid within a two or three days instead of two weeks. That speed has a huge impact on cash flow, a business metric of particular importance to smaller providers.
Zelis Payments also enables an EDI message format that communicates what’s being paid for in a manner consumable by the accounts receivable software in almost every healthcare provider’s office. Matching up the ACH deposit to what it covers is automated. While neither ACH or EDI are considered modern technologies, pairing them tightly produces real efficiencies.
Another area of complexity Ian discusses is healthcare fraud. Unfortunately, no small number of providers enter fraudulent claims into the system. They add up to huge numbers.
Zelis Payments adds value specific to the healthcare industry around the general functionality of EDI and ACH rails. If you’re a dentist getting paid 10 days faster than before, that added value is a very good thing.
Need an early warning system for what payment system hackers are about to do? Then knowing what’s happening on the dark net is imperative.
In this episode of Payments on Fire®, George speaks with Aamna Zia, VP of Finance and Growth at Flare Systems, and David Hetu, its Chief Science Officer. Based in Montreal, Flare Systems operates a dark net monitoring system that brings intelligence to the InfoSec and fraud management teams at banks.
The dark net is a mysterious place for most of us. It exists on something called Tor, an internet overlay that is designed for anonymity. Using a purpose-built browser, users can access websites, chat rooms, and the like, similar services to those we use on the open internet. The anonymity feature makes performance slow but it also works.
And that’s why it is the hub that marketers of stolen card numbers, user IDs and passwords, personally identifiable information, and hacking tools use to buy and sell. It’s this activity and the discussions around it that Flare Systems monitors and reports on.
Among the findings of Flare’s analytics is the fact that the vast majority of card data sellers probably have to live with their parents to get by. There’s not a lot of money in that particularly tired approach.
Obviously, there’s plenty of money to be made in payment fraud, though. Account takeover (ATO) fraud is growing quickly as recent losses on the UK’s Faster Payments system demonstrate. Synthetic identity fraud is fueled by the kind of data sold on the dark web.
Take a listen as Aamna Zia and David Hetu as they describe how Flare Systems works and what the hackers are up too. Then, if you’re on a bank’s infosec or security team, try to get some sleep.
Listen to George and Jacques Soussana, General Secretary, of nexo Standards, an organization based in Europe with global goals to establish interoperability of hardware, software, and data across the point of sale and e-commerce domains.
Interoperability in a Complex Ecosystem
The payments industry is in a period of especially swift change. New methods of payment, new payment systems, new ways to initiate a purchase.
Innovation can be wonderful, improving convenience, speed, and reliability. But there is a downsides to all of this creativity: Interoperability. Connecting disparate systems is technically challenging and faces business questions such as “what's the ROI on connecting to yet another system?”
Today interoperability may be difficult or impossible by design. Payment methods stood up by individual companies often remain closed or must rely on other payment systems to actually move transactions.
In what is an increasingly integrated world with payments as an embedded experience, interoperability challenges show up both at the physical point of sale and online. Acquirers often use proprietary adaptations of standard protocols to “enhance” their capabilities and, to a degree, erect competitive barriers. The software used to connect point of sale terminals processed by one vendor must be changed when those same POS devices are connected to another provider.
Further complicating the merchant challenge is the merchant-facing software that connects to those terminals. That software connects to each brand of payment terminal in a proprietary fashion. While gateway providers simplify the payment interface for these independent software vendors (ISVs), each gateway provider has its own approach.
For merchants, then, there’s no such thing as “plug and play” software to connect to terminals or to connect those terminals to payment networks.
This complexity was bad enough when card rails were the only payment method of consequence. Today, however, domestic and regional payment methods are changing, adding account-to-account push payment systems like the U.S Real Time Payment Network from The Clearing House or the European SEPA Instant Credit system.
In other words, there are new payment rails, the systems that actually move money, that matter.
So, this complexity problem must overcome and that is the goal of nexo Standards, the organization Jacques represents and the topic of today's Payments on Fire® discussion.
Getting stakeholders to work on the common goal of interoperability is no easy task. Most often, participants come from competitive companies. Most of these organizations are large because, first, they have to be large to afford the investment in participation, and, second, they have to be large to realize the financial benefits of actual implementation.
This is known as the “Herding Cats Problem” and they aren’t kitty cats.
nexo Standards, and its prior incarnations, has been working on point of sale standards for over a decade. The nexo FAST standard that addresses the physical point of sale, EMV, and how to connect within the SEPA framework is nearly 1,000 pages long. And there are multiple nexo specifications including the Retailer protocol that describes the interfaces between a card payment application and a retail point of sale system
Other nexo standards address security, terminal management, the acquirer connection, and implementation.
So, a complex technical and business environment with nexo Standards bringing a comprehensive set of specifications to address it.
nexo Standards Annual Conference (attendance is free, in London)
A Better Way, Please
Last week I tried to connect my accounts at two different banks. Between account type mismatches (my bad), long account numbers, ACH micro-deposits, and balky websites, well, I’ll confess I put a check in the mail as a “quicker” way of overcoming the electronic barriers. Snail mail. Really?
That situation, and many more where speed matters, is exactly why the world is turning to faster payment systems that allow the accountholder to push money from an account she controls to a recipient in near real-time. To eliminate entry, and sharing, of bank routing and recipient account numbers, today’s faster payments systems are often enhanced by a directory that maps the recipient’s name to a mobile number or email address. The director connects those to the underlying bank account.
This is great stuff, especially for the United States where so many push payment methods exist based on closed loop or incumbent payment rails. The U.S. now has providers like Venmo using balance transfers and card rails (Visa Direct, Mastercard Send) to make realtime P2P transfers workable. NACHA has sped up the automated clearinghouse (ACH) system to run batches a few times a day to accomplish its Same Day ACH service.
We have Zelle, the P2P service stood up by Early Warning Services, that combines a directory with immediate funds transfer availability for the recipient and interbank settlement running over, yet again, an incumbent payment system, in this case the ACH.
Every one of these approaches has merit and traction.
New Rails, New Rules
That said, the new realtime systems are growing here too. Built with modern software and messaging protocols, they promise to change how both end-user settlement and inter-bank settlement is accomplished.
The first on the scene was the Real Time Payment (RTP) network from The Clearing House (TCH). Launched in 2017, the largest financial institutions and bank processors are integrating their core systems—the software that manages accountholder balances and transaction activity—to the RTP Network.
And this summer, the Federal Reserve announced it will build and operate its own faster payments system called FedNow. Like TCH, the Fed has operated multiple payment systems and been the preferred operator for the nation’s smaller financial institutions.
New Complexities
Competitive pressures, market guidance, and regulation are what move the U.S. economy. The Federal Reserve provided plenty of guidance to encourage development and deployment of faster payment systems. THC’s RTP Network was among the first to respond.
These new rails are a result of a multi-year effort by the Federal Reserve to shepherd the highly competitive U.S. payments industry toward the development of these faster payment systems. The RTP Network and FedNow are proof of its success and that of the Faster Payments Task Force, the group convened by the Fed to define the characteristics of the new approaches.
But there’s still a lot of work to do. Questions of governance, implementation, and more abound. Interoperability concerns are especially high. These are, after all, competitive systems.
The New Organizing Principle - The US Faster Payments Council
To keep the evolution of the U.S. faster payments moving forward, the US Faster Payments Council was formed. Many Task Force members have joined as members of the Council.
The Council serves as an industry-led organization that supports collaboration across multiple areas including security, end user education, and interoperability.
In other words, the Council will be herding some very big cats.
The U.S. Faster Payments Barometer
To support its education and collaboration efforts, the US Faster Payments Council is conducting a survey of industry views on faster payments advancements. A multi-year survey, to monitor the momentum and evolution of Faster Payments here in the U.S. market.
The survey is designed to identify key criteria for market adoption, broadly gauge momentum for various use case applications, and seek to address challenges to be solved in order to have a well-established Faster Payments ecosystem.
Take the Survey
Talking Faster Payments
In this Payments on Fire® episode, Faster Payments Council Executive Director Kim Ford discusses the Council’s work, the U.S. Faster Payments Barometer survey, and where we are today with Glenbrook’s Beth Horowitz Steel and Elizabeth McQuerry. Take a listen and take the survey. You’ll contribute to the Council’s education, planning, and prioritization work.
For a nanosecond, about seven years ago, I thought the payments industry was entering a steady state where change, while sure to be accelerated by technology, was going to settle down to the familiar sedate pace the payments industry had taken for decades.
Hah! Payment industry evolution has leapt forward since then based on, yes, technology, but also new rules, regulations, business models, and changes in attitude toward how money moves, security, and privacy.
One major trend I didn’t anticipate then was the global phenomenon of faster payments, now in active implementation or operation in some 40 countries around the world. Another, of course, is cryptocurrencies but I’ll leave that one alone for now.
The emergence of faster payments is a function of new technology with new transaction switching infrastructure and (mostly) a common messaging standard in the form of ISO 20022. But it’s also a function of rules and market response.
Even in the United States, a nation whose payment strategy is largely set by competitive forces, the central bank has had significant influence in launching new settlement capability. (And now, the Fed is planning to build its own version).
Europe and India are standouts when it comes to government guidance and strategy setting for banking and payment systems.
The European Union’s active role in evolving payments policy is recently expressed in the second Payment Services Directive (PSD2).
PSD2 has chosen to address one of the most vexing digital security challenges: strong customer authentication or SCA. Article 4(30) of the directive defines SCA as:
“an authentication based on the use of two or more elements categorised as knowledge (something only the user knows), possession (something only the user possesses) and inherence (something the user is) that are independent, in that the breach of one does not compromise the reliability of the others, and is designed in such a way as to protect the confidentiality of the authentication data”
For anyone familiar with authentication requirements, this is hardly a novel approach. That said, as far as the payments ecosystem goes, however, this is a sea change.
This is also a necessary change. Faster payment systems, where the sender pushes the payment to the recipient, make the sender’s bank responsible for authenticating its accountholders. The accountholder has to prove to her bank that she has the right to access her own account and to initiate a payment.
Unfortunately, phishing and malware are attacks that make account takeover easier than ever. There’s been an uptick in authorized push payment fraud in the UK due to ATO.
Therefore, enforcement of multi-factor authentication is seen as a necessary response.
Point of sale transactions already meet the SCA requirement. The card is something you have; The PIN is something you know. That’s enough to meet the SCA requirement. Oh, right, in the US, we don’t put PINs on credit cards. They do in Europe. We’re going to need biometrics in the US (something you are).
PDS2’s SCA mandate requires that multi-factor authentication be used whenever a user logs into her bank account or makes an e-commerce payment. Whenever payment risk is a possibility, SCA has to be used (there are plenty of exemptions but that doesn’t change the point).
Every stakeholder—every bank, every e-commerce site—must comply by doing something they have not done before.
That means a lot of work.
In this Payments on Fire® episode (Episode 100!), I speak with Russ Jones, Glenbrook’s partner in charge of our Education work and a preeminently insightful payments consultant. Russ takes us through SCA, its relationship to other standards, and the impact of its now somewhat delayed implementation.
Russ concludes the conversation with the rather chilling observation that history is about to repeat itself. The US will experience in the digital arena what the US experienced at the physical point of sale.
When EMV chip cards were mandated in Europe, card fraud at the POS and the ATM migrated to the US. Reliant on the static data of the mag stripe, the US became a global magnet for magstripe card fraud.
Once SCA becomes broadly implemented in the EU, in 2021 and beyond, online fraudsters will redouble their already considerable attacks on US financial institutions, tech providers, and merchants. While security tools are more common than ever—FIDO capable smartphones are one example—the US lacks a single entity to mandate and enforce multi-factor authentication in payments.
Scared yet?
One of the privileges of using a card to make a payment is the ability to dispute that charge should something go wrong. Maybe you ordered one garden rake but got charged for two. Perhaps you ordered a sweater and, as my colleague Allen Weinberg puts it, “got shipped a box of rocks.” Or you discover a charge that you didn’t make on your card account and believe it’s fraudulent.
In all those cases, the dispute process involves a chargeback.
The cardholder disputes the charge, the issuer credits the customer for the amount of that charge if it’s an obvious mistake or fraud, and, depending upon the chain of liability rules and the type of transaction, one party—the issuer, the acquirer, or the merchant—will have to bear the cost of the chargeback.
For merchants, just getting a chargeback message is a cost in the form of a fee paid to its acquirer. How does $5 and (way) up sound? Chargebacks, as a payments cost, are no financial joke.
The card system also views the chargeback rate—the percentage of transactions that result in a chargeback—as a leading indicator of poor merchant behavior. Once a merchant’s chargeback rate approaches one percent of its transactions, the merchant’s acquirer or PSP is going to put it on notice. If the merchant doesn’t lower that rate pronto the merchant could lose the ability to accept card payments.
The chargeback process is also a cost to issuers who are generally the party first called by the unhappy customer (issuers will often ask the customer if she or he has called the merchant, too).
In other words, chargebacks are a result of something going wrong and they can be a costly hassle for everyone because, for many stakeholders, chargeback handling is still dealt with manually.
In this Episode 99 of Payments on Fire® we talk with Rick Lynch, VP of Business Development from Verifi, about the impact of chargebacks on merchants and issuers. He updates us on rule changes by Visa and Mastercard. And he addresses the process and techniques needed to handle these post-authorization events.
While only mentioned in passing during the episode, Verifi is being acquired by Visa, in another example of expansion by card network operators into adjacent payment ecosystem roles.
The global spread of digital payments gets a huge boost from giants like Google. Google’s Google Pay is far more than just a wallet, and the subject of this Payments on Fire® episode with Steve Klebe.
Steve heads Google’s Processor and Partnerships business and has terrific experience in our industry, working with payment gateway CyberSource, payment security firm RSA, and carrier billing firm BilltoMobile. He’s also served multiple times on the board of the Electronic Transaction Association.
In other words, a true payments geek.
Here’s what we talked about:
- The evolution of Google Pay from its 2011 launch as Google Wallet and the various incarnations since then
- Google’s business model for GPay and the degree to which the data generated by GPay transactions influence (or not) the advertisements we see on sites using Google’s advertising services
- Transit payments, Google’s role in the W3C’s Payment Request API, and how Google pulls it into its own tools
- The Google Pay value proposition and how it combines the value of hundreds of millions of cards on file, their organic growth through Chrome’s auto-fill, Google’s own sales, and making those credentials available to third parties via Google Pay
- The new Google Pay APIs that focus more on convenience than payments: event ticketing, airline boarding passes, and more
- Google Pay India, renamed from Tez, and its role in the UPI framework that enables secure bank-to-bank transactions.
We conclude with thoughts on the Open Banking phenomenon and Google’s intentions in that area.
Here on Payments on Fire® we've spoken a lot with risk and fraud management firms that generally offer some combination of services and technologies that promises to lower customer exposure to payments fraud, data theft, and operational risk.
There’s another dimension to cyber security that’s based on expertise - before and after a data breach. That's the subject of this episode.
First, a company needs to understand its overall exposure. What do we have and what can we afford to lose? That takes a technical assessment of the firm’s internal and external defenses. It also takes an understanding of what the company has to lose, from reputation-based good will to loss of R&D investment through the theft of intellectual property. Such concerns are now top of mind for corporate directors tasked with shepherding their companies in the complex cyber domain.
Yes, there’s a role for insurance.
Post breach, there is the work of uncovering what happened, the maintenance of evidence so that proper forensic procedures can be taken, and the painful resolution process that may include fines (PCI) and litigation.
All of this is well understood territory for Chris Uriarte, Chief Information Officer at Aon Cyber Solutions who joins George in this episode.
Topics discussed include:
- The kind of activities and efforts needed to address today’s cyber risk
- How IoT threats are no longer confined to cheap surveillance cameras
- The sophistication of the cyber criminal industry
- The interlocking roles of threat analysis, risks assessment, and insurance
- The rise of ransomware and the particular exposure larger organizations face from this threat
The task of risk management in the payments business keeps getting bigger. Where once the concern was confined to payments alone - starting with counterfeit checks and currency - payment electronification has created a universe of potential risks. Risk now includes fraudulent cards, system and network hacks, data breaches, and account takeover with all the havoc that can produce.
And we’re seeing how these impact the reputation and value of businesses even when the hack has nothing to do with payments. (By the way, bogus checks and counterfeit twenties are still a problem.)
We’ve touched on this topic in multiple ways on Payments on Fire®. We’ve spoken with Ethoca about its data sharing capabilities. We’ve spoken with Feedzai about its AI and machine learning technology. We’ve spoken with White Pages Pro and its data correlation capabilities. And we’ve spoken to companies deeply involved in the problem of online identity.
Each of those has a particular approach, a particular technology, or a combination of approaches, to apply to the problem of e-commerce or CNP fraud.
In this podcast, we talk to Tricia Phillips, SVP of Product and Strategy, at the fraud and risk management firm Kount. Protecting some 6,500 e-commerce merchants, banks, and payment platforms, Kount takes a deeply layered approach to the risk and fraud management.
This deep dive discussion takes us into not only Kount’s approach but into what fraudsters are doing today and the damage they can do, even to non-payments companies like Yelp. It’s a scary scene. Tricia takes us through it with insight and experience.
If Risk in Payments is a topic of interest, check out our upcoming Insight Workshop by the same name. Led by Russ Jones and Yvette Bohanan, you won’t find a more knowledgeable team to guide you through what is, as I hope we’ve demonstrated, one very complex topic.
One of the biggest payments challenges for merchants is how to handle payment data - whether it’s at the POS or in the remote domain where e-commerce and mobile payments take place. A lot of this concern is driven directly by PCI DSS compliance and broadly by the reputational risk data breach represents.
One of the major techniques merchants employ, in order to remove the need to store payment data, is tokenization - the replacement of the high value card data with a low value representation managed by another party. Merchants just store the token for lookup purposes while the third party maintains the database that links these low value tokens to the true primary account number or PAN.
At Glenbrook, we refer to these as merchant tokens because they are specific to and paid for by the merchant. We’ve also heard them referred to as acquirer tokens because the tokenization function is often performed by the merchant’s acquirer, processor, gateway, or payment service provider.
Makes sense, right? Put the radioactive payment card data into another party’s hands.
But for large and mid-size merchants, the provision of tokenization services to an acquirer has a few downsides:
- The token database maintained by the provider is specific to the merchant. If the merchant wants to shift to another provider, tokenization portability can be an issue and a costly one.
- In our merchant work, we are seeing the largest ones looking at a multi-acquirer topology for cost, redundancy, and channel flexibility purposes. But each acquirer will use its own tokenization scheme, adding complexity and limiting functionality.
- Omnichannel merchants may employ one provider for POS transactions and another for ecommerce. That doesn’t work when you want to provide a consistent experience to your returning customer. You want a token that works across channels, i.e. an omnichannel token.
In this Payments on Fire® episode we talk with Alex Pezold, CEO of Token, an acquirer neutral, independent tokenization provider. We talk a lot about protecting payment and bank account data. But we also address the growing need for protecting other data assets and how tokenization can help accomplish that.
Digital identity is one of the most solution resistant challenges to online commerce and, indeed, our online lives. It is basic to online trust, an elusive condition undermined by data breaches, abuse of our data by service provider, and fraudsters.
That’s not say we aren’t trying. Providers of all stripes are applying their value add to the problem. Smartphone makers have a role. Fraud management providers see themselves as having a role because they see so many users visiting their merchant customers’ websites or using their apps.
Networks do, too, as evidenced by Mastercard’s recent interest in identity services.
Then there are specialists in identity who play a role between the end user and the party granting access to a service, i.e. a bank. Today’s podcast is with SecureKey, a Canadian firm that has built a system to generate online trust while not sharing too much data between the parties.
Blockchain technology has increasingly gotten the attention of those in the identity space because the idea of having an immutable database as a single source of truth for identity credentials just seems so obvious.
Well, it’s not exactly as simple as putting your drivers license on a blockchain. SecureKey has partnered with IBM to use blockchain technology in support of its function as a provider of identity services.
SecureKey’s Verified.Me service gives the user the ability to quickly identity themselves and to share only the personally identifiable information they consent to share. Customers include Canadian banks CIBC, Desjardins, RBC, Scotiabank and TD. BMO and National Bank of Canada will be available later this year.
Take a listen to this conversation with Andre Boysen, SecureKey's Chief Identity Officer, and Glenbrook’s George Peabody and imagine the power of coupling a service like this to strong authentication services that use biometrics.
Ever wonder about EMVCo's role in the development and implementation of its technical specifications? Take a listen to Bastien Latge, EMVCo's director of technology and Glenbrook's George Peabody as they discuss EMVCo's EMV®* QR Code Specification for QR code-based transaction initiation in the card system. While developed card markets are shifting to contactless cards and NFC-using mobile phone wallets to kick off payments, the QR code offers a flexible, very low cost alternative. There's a lot to learn here.
Most of us are familiar with QR codes to retrieve product information from websites or print media, or perhaps when authenticating a mobile device to a web page.
In payments, many of the caffeine-reliant among us use the Starbucks app with its 2D barcode to initiate the transaction. It makes it so easy to know when we have enough gold stars to ask the barista for a drink on the house.
Some merchant apps use a QR code for the consumer to present when initiating a payment transaction that calls on card on file payment credentials. Walmart Pay for example.
In China - and really throughout Asia - providers like Alipay and WeChat Pay have been hugely successful with QR code-using payment apps.
In Japan, the proliferation of closed loop QR code-based payment tools, each encoding data differently, has created a cacophony of incompatible approaches. A new industry collaboration effort is attempting to lower the technical noise level by using a common technology provider.
The card industry, named because of those 85.60 mm × 53.98 mm (3 3/8 × 2 1/8 inches) pieces of plastic we carry around, is, of course, far more than the cards it uses to initiate a transaction. Their rules and global networks are unparalleled in reach and sophistication.
But at the edge of those networks, the card format is becoming less important (think mobile wallets) and useless in those markets lacking a terminal infrastructure. To make sure card network transactions can take hold in card-less regions, the card brands put their technical specification organization to work.
In 2017, EMVCo released its EMV QR Code Specification, designed to encode and represent the card message structure in QR code format.
A major hallmark of the EMV Chip Specification in cards is the generation of dynamic data, of a cryptogram unique to that transaction, that prevents replay attacks. The EMV QR Code Specification supports such dynamic data as well as the issuer tokenization framework also codified by EMVCo. Even the payment account reference number (PAR) is accommodated here.
To accelerate use of QR code EMVCo recently built self-assessment tools for both merchant- and consumer-presented that validate the QR format. Certification to individual networks and acquirers is not supported by the EMVCo tools.
- EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC.
Payments on Fire® usually focuses on a single topic, typically a fintech company and the business or personal challenges it addresses. In this episode, we take another direction by bringing together three fintech leaders to talk about their company offerings, how they connect up to payments, and some of the obstacles they’ve faced.
George talks with the leadership of three companies working in very different areas: remittances, small business logistics payments, and healthcare.
- Mike Gaburo, CEO of Brightwell Payments, a company delivering a mobile payments app to global workers for their payroll distribution, enabling card-based purchasing as well as remittance services
- Robin Gregg, CEO of RoadSync, a business software provider that enables electronic payments to SMBs in the logistics sector; and
- Alan Nalle Chief Strategy Officer of Patientco, a payments platform with intuitive, mobile-friendly tools for Health Systems to enable patients to pay their healthcare bills.
This conversation illustrates the breadth of payments and the focus required to solve the specific payments needs of each industry segment.
Robin, Mike, and Alan will join Glenbrook partner Beth Horowitz Steel on her panel called Innovative Solutions - Solving Difficult Payment Needs at the Fintech South conference, held April 22 and 23 in Atlanta.
Five years on from Apple Pay’s release, contactless payment cards are just getting off the ground here in the US but in much of the rest of the card world, contactless payments of both kinds are common practice. In London, half of the card transactions are contactless. The same is true in Canada. While it’s true that the vast majority of these are card-based, not via mobile wallets like Apple Pay and Google Pay, even the mobile wallets are gaining momentum.
To expand contactless usage, Mobeewave has developed software tools for financial institutions to integrate into their merchant app that turn the merchant’s smartphone into a contactless acceptance device. No added hardware: software only.
We’re talking with Maxime de Nanclas, Mobeewave‘s co-CEO and co-founder. A firm based in Montreal, Mobeewave has worked to turn smartphones into general purpose contactless payment terminals.
This is cool tech and, as Maxime tells it, a great journey for the company. Take a listen as he describes what their software does, how they built it, and their experience navigating the complexities of device certification.
The UK and the EU take a very different approach to payments industry evolution than here in the States; the former directed by government mandate, the latter by marketplace dynamics and the lighter touch of regulators. But both are responding, at different speeds, to the need of fintechs and enterprises for access to bank-based data and services.
The Payment Services Directive 2, PSD2, written in 2015 and in effect since January of 2018, addresses a range of concerns including a ban on surcharging on card payments and limiting consumer fraud liability exposure from 150 to 50 euros. But its major impact is its enablement of Open Banking through the granting of access to payment rails and payment data managed, up until PSD2, only by banks. Banks are required to open up programmatic access, via APIs, to that data.
In this Payments on Fire® episode, we dive into the UK and EU experience with the PSD2 a year after it going into effect. We take a look at its impact on Open Banking, the opening up of payment rails to these fintechs and other non-bank players.
To do that, Myles Stephenson, CEO of B2B payments firm Modulr, discusses his firm’s experience as an Electronic Money Institution, an organization chartered by the UK’s Financial Conduct Authority (FCA) under PSD2 rules. Under its provisions, Modulr gains, or will gain, the ability to initiate payments on behalf of its customers as well as access customer data.
While incumbent financial institutions are hardly thrilled at the prospect of opening up their systems to fintech competitors and the cost of doing so, the operational improvements for customers and increase in competitive activity are expected to generate many benefits.
Cross-border B2B payments are frustrating, time consuming, and expensive, especially for small and medium businesses. To dig into why and what's being done to overcome those concerns, join George and Marwan Forzley, CEO of Veem, for an explanation.
SMB B2B payments, particularly cross border payments, have always been time consuming to accomplish and expensive to do.
They are time consuming because sending an international “wire” payment was historically slow with uncertain delivery timing and with uncertain, and high, costs to both the sender and the receiver. For the sender, the process of initiating a cross-border payment has always taken no little time compared, for example, to writing a check.
Cost is a second concern because cross-border payment economics are not always transparent. At least a few times a year, when Glenbrook gets paid by one of our international clients, the funds we receive are less than what we invoiced. While our client sends us the correct amount at the prevailing exchange rate, intermediaries along the way may take “bene deduct fees” - beneficiary deductions - from the funds in transit in order to compensate themselves for their services. I prefer the more accurate term of “lifting fees."
This uncertainty of timing and cost affects millions of small businesses participating in the global supply chain.
Companies like Veem, Western Union, TransferWise, PayPal and many others compete on speed, predictability, low cost, and global reach. Super helpful integration into business accounting and AR/AP functions is a big plus.
Veem’s story is compelling as it began using the bitcoin blockchain to send money between its operations in multiple countries. Since then, the company has added other partners and its own in-country account balances to fund transactions. Veem’s SMB customers can send money to 90 countries and receive funds in 25. The company has served over 100,000 SMB customers.
If blockchain, cross-border, B2B, small business and fintech are terms that interest you, take a listen to George and Marwan as they catch up on the company, SMB pain points, and the impact of Chinese tariffs on Veem customers.
If you're in Atlanta in April, check out the Fintech South Conference. Glenbrook partners Elizabeth McQuerry and Beth Horowitz Steel will be there. Get in touch!
The digital marketplace model brings together buyers and sellers and, frequently, handles the money and payouts to the sellers.
As my guest today has determined, digital infrastructure, e-commerce usage, competition, and workforce characteristics influence a country’s ability to establish a flourishing marketplace component to the economy.
This marketplace economic model is a useful one enabling, among other use cases, the gig economy. Adopted in countries like China, the US, Canada, the UK, Australia, and other established markets, this episode’s guest, Tomas Likar, Head of Business Development and Strategy at Hyperwallet, has done a lot of thinking about its role in these and other countries.
This podcast was prompted by Hyperwallet’s February 2019 release of its Marketplace Expansion Index report, the MEI, that evaluated the marketplace readiness of some 36 countries.
A surprise is the early stage of marketplace adoption in a number of otherwise highly developed countries.
The application of the marketplace model to human labor is, of course, not without controversy and concern. Steady employment with guaranteed benefits is no longer an attribute of employment in many countries, replaced by the uncertainties of the gig economy. That’s the downside concern. On the other hand, these marketplace services provide access to otherwise unavailable work and that is good news for individual and, by extension, domestic economic well being.
Take a listen to this conversation with George and Tomas Likar of Hyperwallet for an overview of marketplace adoption and the variables affecting its uptake.
The business of merchant services continues to undergo two forms of transformation. First, the merchant services businesses, either as acquiring banks or via non-bank acquirers, has undergone massive consolidation over the last five years and more. Fiserv’s takeover of First Data, announced on January 16, is just the latest example.
The second sea change is the expansion of products and services these entities deliver. What was a fairly innovation-averse industry has become, under the competitive pressure of companies like PayPal and Square, far more committed to delivering value that helps customers run their business, not just accept card payments.
At the POS, Square changed the merchant services game by delivering a great deal more business value to the small merchant than the traditional ISO or agent focused on placing stand-beside terminals next to dumb cash registers. For the price of payment processing, Square has given those merchants inventory, time and attendance, sales and marketing focused reporting, and more.
As a result, the giants in this game have been forced to respond. In 2013, First Data acquired Clover to reach small retailers and restaurant customers. Others, like Global Payments’ Heartland unit, have invested heavily in serving the mid-tier and larger restaurant industry.
To deliver similarly broad services, TSYS recently come out with three new merchant offerings targeted at micro merchants, single shop operations, and larger merchants. The new line is called Vital, at vitalpos.com and its solutions are called Vital Mobile, Vital Plus, and Vital Select.
Along with the new Vital hardware, we can expect the offering, taking advantage of cloud delivery, to expand its software and services line-up in the future - a trick that the old POS terminal model never could pull off.
Take a listen to this episode’s discussion with Gavin Rosenberg, vice president of product marketing, at TSYS. It’s a revealing conversation about the decision making and product strategy of a major provider of merchant services.
This Stuff is Hard
As the remote payments domain (think in-app and browser-based payment transactions) continues to grow at around 15% a year, that growing number means the size and scale of fraud losses are going to increase. And they have - in both absolute terms and as a percentage of overall transaction volume. That also means rising chargeback rates for many merchants.
Rising fraud in the online world is also a result of better security technology in the physical world. While EMV chip cards have dropped counterfeit losses way down, the fraudsters still have their own bills to pay. They’ve just shifted more aggressively to the card not present channel.
A Delicate Balance
All e-tailers face a delicate balance in managing fraud. If they err too far on the side of fraud minimization by tightening approval standards too far, they leave good sales on the table and insult customers with unnecessary declines (the “insult rate”). Of course, those customers promptly go to another site to make their purchase.
The e-tailer’s sales and marketing team, then, tells the fraud manager that she’s killing sales.
If the approval standards are too loose, on the other hand, the e-tailer risks the twin threats of higher fraud and chargeback costs and, if the chargeback rate exceeds 1%, placement on a watch list if that rate stays over 1%. Not a good list to be on because the the merchant could lose card acceptance privileges if the problem is not addressed.
The Smaller E-Tailer is Challenged
While Amazon continues to gobble up half of the growth in US commerce volume, it still means that there is room for smaller online merchants to prosper. It also means they face growing fraud losses. Unlike their larger competitors who can afford internal fraud management teams and technology, small and mid-tier e-tailers have limited time, budget, and skills to meet those needs.
Fraud management is a non-trivial problem even for the largest enterprises. They deploy a layered set of technologies, ranging from table stakes tools like address verification system (AVS) to device and behavioral fingerprinting and on to rules engines, AI, and machine learning controls.
That level of sophistication is beyond what the mid-tier e-tailer can handle. Some enterprise customers don’t want to deal with that complex task either.
The Outsourced Option
That’s where the wholly outsourced proposition comes in. The third party fraud management service provider assembles the necessary technology, makes the right integrations with shopping carts and other software providers, puts an analyst team in place to decide on questionable transactions, and offers its services for a fee.
ClearSale (www.clear.sale) is a provider in this space. Take a listen Rafael Lourenco, its EVP, and George as they discuss fraud management in this segment, how the ClearSale service is deployed, and some merchant best practices. Rafael breaks down this topic very clearly. Definitely worth your time.
Ecommerce fraud rates are rising and that means more cardholders are seeing unauthorized charges on their accounts.
The cardholder remedy is to call either the merchant or the issuer to flag the problem. If the cardholder turns to the issuer to resolve the problem, the remedy is often an expensive chargeback for the merchant and a generally lousy experience for everyone.
Ecommerce Merchant Pain Ecommerce merchants have invested heavily in fraud detection tools because in the remote payment domain liability rules make them responsible for fraud losses. Ecommerce merchants employ sophisticated fraud management processes and tools to detect fraud in realtime to stop authorization (best in class fraud rates are 25 bps - 35 bps).
On top of that, they must eat the direct costs associated with stolen goods and services. These include a chargeback processing fee from the acquirer as well as the merchant’s internal costs to manage the chargeback process. If the merchant fights the chargeback, the merchant has to gather the supporting evidence (the receipt or copy of the order) and submit it to the acquirer.
Disputes and chargebacks re initiated by cardholders for a range of reasons including fraud, authorization, various processing errors, and consumer-specific disputes. Examples of consumer dispute codes include products or services not as described, counterfeit, misrepresentation, and failure to process a credit.
https://www.worldpay.com/global/support/support-articles/what-are-chargeback-reason-codes-visa-and-mastercard
Issuer Pain For issuers, disputes and chargebacks are painful, too. In the POS domain, issuers hold the liability for fraud losses. If a counterfeit card is used and the issuer authorizes the payment, the issuer owns that liability. Issuers also bear the customer servicing and communications costs as chargebacks initiate with the cardholder’s call to the issuer.
Consumers Game the System Zero liability rules have taught U.S. cardholders that they don’t have to worry about fraud and that they have broad powers to dispute a transaction.
Knowing that, too many cardholders are taking advantage of these rules. Digital merchants, in particular, are suffering from friendly fraud (not exactly an accurate term) that occurs when a cardholder, for example, disputes the charges made by another family member. For some digital merchant, over half of their chargebacks are friendly fraud, purchases for which the cardholder is truly responsible but able to renounce (“It wasn’t me!”) because of the rules.
Such high chargeback rates carry other risks for these merchants. Once a merchant’s chargeback rate exceeds 1% of its transactions, that merchant is put on a watch list, a remediation plan, and faces the possibility of losing card acceptance privileges. High chargeback rates also increase authorization declines for the merchant, losing even more good transactions.
Card Network Remediation On the face of it, there’s an asymmetry when it comes to liability. Merchants shoulder a large burden. With that in mind, both Visa and Mastercard updated their chargeback rules in 2018.
In a chargeback mitigating move, Mastercard recently announced an end to the automatic renewal of free trial subscriptions.
Timely Data Sharing In other words, chargebacks are a pain. Steps to reduce chargeback cost and frequency are a Good Thing.
One approach is to speed up data sharing. For example, once an issuer determines that a transaction is fraudulent, a timely message to the merchant could halt a product shipment. While the rules would still make an ecommerce merchant liable for the chargeback costs, the merchant wouldn’t lose the cost of order handling, shipping, and the item itself.
Similarly, if merchants can share their cardholder fraud experience back to the issuer then that financial institution can adjust its fraud detection models and algorithms.
Such data sharing is the proposition of Ethoca, a firm that federates bank fraud signals from hundreds of major global issuers and connects to thousands of merchants in the developed world in order to share alerts and chargeback messages.
In this conversation with Keith Briscoe, CMO at Ethoca, we talk about the chargeback problem, hear some truly astounding chargeback stories (hackers aren’t the only fraudsters), and discuss Ethoca’s role in this space.
Fraud prevention today is about how quickly we can separate good customers from questionable ones and, for those doubtful transactions, use the right set of tools and data sources to optimize speed, costs, and fraud losses.
When it comes to fraud prevention, it turns out that data is key. No revelation there, but how we manipulate it, gather it, and assure its provenance is undergoing major change. What would be a revelation to fraud managers of a decade ago is the unbelievable amount of data and the wide variety of sources that we have today. It’s a flood.
The only means we have to make sense of this data deluge is through algorithmic examination. Rules engines and neural networks are staple approaches. In recent years, application of artificial intelligence and the newer incarnation of machine learning (“let the computer figure it out based on all the data it sees”) has become a hot, and effective, area for fraud prevention. Only machines can find correlations among all that data in order to identify potential fraud.
A number of firms focused on the fraud prevention problem employ techniques that gather data and then analyze it in order to provide their customers like e-commerce merchants or financial institutions with a risk score. Companies specializing in device fingerprinting, for example, gather the relevant data (think IP address, mobile IMSI number, device type, OS version, browser software version, etc.) to create a profile or “fingerprint” of that device in order to generate a history of its behavior. Threat Metrix, owned by LexisNexis Risk Solutions, is an example.
Behavioral biometric companies may take that data and layer on how the owner actually uses their device, often by looking for keystroke patterns, screen tap rhythms, the angle that the phone is held, and more, in order to build a more nuanced profile that includes how the owner interacts with the device. That richer data then feeds into analysis and risk scoring. Mastercard’s NuData Security acquisition uses this approach.
Subsequent bidirectional data sharing can provide these firms with insight into the results of their decisioning.
As these firms gain customers, they see more and more devices and develop clearer visibility into the outcome of their work. As a result, it becomes a natural step to pool or federate the data they see from all of their customers. There’s an expectation that a card account, for example, will be seen at multiple merchant clients of the fraud solution provider. These repeat interactions will improve fraud detection for all when the cardholder is a bad actor or speed the transaction of a trusted one.
Data consortia where multiple financial institutions and merchants pool their fraud and chargeback data also exist. Ethoca is a prime example.
The deeper the data pool the better, provided, of course, there’s the ability to analyze it all.
Massive analytical capability is the foundation for artificial intelligence and machine learning. In the fraud prevention space, Feedzai is a firm that applies its analytics power to data sourced from multiple provider and techniques. Feedzai, like others providers who have attained a critical mass of customers, has also invested in federation of their data to improve, for everyone, its fraud prevention results.
In an earlier episode, we spoke with Feedzai CEO Nuno Sebastiao to get us grounded in how AI and ML apply to fraud prevention. In this discussion with Saurabh Bajaj, Feedzai’s Head of Product and Nick Stanchenko, product manager for Feedzai’s Risk Ledger, its data federation program, we go further. Saurabh catches us up on Feedzai's growth and then take a look at how Feedzai works and at the data sources it uses. Nick addresses federation, its value, and the light integration required.
Payment Innovation Moves to the Core
When we conduct our Glenbrook Payments Boot Camp, our first graphic illustrates the three essential steps in every transaction - initiation, funding, and completion. When looked at through the lens of of the past decade most innovation has been in initiation. Consider: Apple Pay, Google Pay, Venmo, QR codes. The list is long of ways to kick off a transaction.
Funding is all about where the money comes from. Usually a bank account, often a wallet holding money. Some innovation there but not a great deal. There are only so many ways to store funds.
Completion, the last step, is the most important to many participants as it’s when the transaction completes with the final movement of money.
Five years ago, in those boot camps, I said that completion, also called settlement, is the innovation-resistant phase of a transaction. Today, everything has changed.
In the U.S., we have new services such as Zelle and Venmo that appear to the end parties to deliver instant settlement. They may use card rails or bank rails like ACH to complete the transaction.
Two Forms of Settlement
In this discussion with Glenbrook’s Carol Coye Benson, we look at two forms of settlement: end party settlement - for example, an employer paying an employee - and then Carol focuses on the nuanced world of interbank settlement.
If you’ve heard the terms net settlement, gross settlement, or RTGS and wondered what they mean, take a listen.
Faster Payments and Settlement
We also talk about the phenomenon of faster payments and the settlement techniques these systems employ. 40 countries around the world are in one stage or another of deploying faster payment systems that push money from bank account to bank account. It's already in the US via the Real Time Payments Network from The Clearing House and, perhaps, a competing service from the Federal Reserve. (To get an update on the Real Time Payment Network, listen to Episode 81 of Payments on Fire).
These faster payment systems vary in their capabilities. Speed and data carrying capacity are just two variables. But we have seen that when a new payment system enters a market innovative offerings can flourish, provided access to that system is encouraged by rule, regulation, or both. However, that level of openness is not guaranteed. As Glenbrook have seen in our work around the world, some systems are essentially closed by market power or operating rules. These constraints limit the network effect's benefits of ubiquity, convenience and, often, cost.
This is an ongoing challenge. In this age of fintech, banks are under pressure to innovate. As owners or participants in new systems, some may choose to limit access to their fancy new rails in an attempt to forestall competitive market entrants. Others will be “encouraged” by regulators to open up. Of course, end party choices will play a big role, provided there’s a choice available.
The New Game
Settlement has traditionally been led by major commercial banks or the central bank of each country. That model still holds. In some markets, including the U.S., we expect a push and pull for control between those two entities. Christine Lagarde, Managing Director of the International Monetary Fund, suggests such tensions may justify the issuance by a nation's central bank of a fiat digital currency as a counterweight to the alternative control over payments by a concentrated set of banks and processors.
Settlement innovation has created a competitive environment that did not exist before. It will be the interplay of rules, regulations, technical capabilities, end party value proposition, and market power that will determine the evolution of each country's settlement platform. In some, regulators will shape the outcome. In others, system access for fintechs and the "open banking" model will be a determinant. For all, cost effective access for end parties is critical.
So much for thoughts of a static payments ecosystem.
If you think of yourself as a payments geek or just want to get under the hood of how money really moves, Carol is a terrific guide.
Restaurant payments is a complex area especially for those companies serving the mid-sized and large restaurant operator. They have different needs that extend well beyond payment acceptance but even that is a highly variable concern.
Ever notice that we pay differently depending upon the type of restaurant we’re in? It’s always been walk up and pay the central server at McDonalds. Applebees uses Presto table top devices to speed table turns, upset desserts (“that lava cake sure looks good”) and take payments. At most sit-down establishments, especially those in the fine dining segment, we still hand over our cards and the server walks away to authorize the transaction (later that night, the manual tip adjustment process determine the final clearing amount.)
For certain segments, order ahead is a priority. Order ahead dominates how pizza shop operate. Initially, that capability took market share from mom and pop pizza shops because only the largest operators in the “Big Pizza” segment could afford the necessary IT expertise. Now, mom and pop have multiple order ahead services to choose from.
But consider the complexities of integrating the order into the kitchen or at the barista’s station. Business process automation is a differentiator.
This podcast with Tim McKenna, VP of Sales, at Heartland Payment Systems, is both a deep dive into restaurant operator concerns and a revealing look into how a major payments provider has shifted its business model to serve mid-tier and larger restaurant operators.
Like Square, Heartland has realized the revenue benefits of expanded commerce services above and beyond the traditional payments revenue stream. By cross selling multiple services, Heartland expects to see 60% of its revenues coming from payments coupled with value-added services that automate the business of their customers.
If you’re interested in how the payments industry is evolving to market demands or how larger restaurant operators think about payments, Tim’s observations are well worth your time. Take a listen.
For those of you who didn't make it to Money20/20 and want to hear the latest on The Clearing House's Real Time Payments Network (RTP), take a listen to this update conversation with Steve Ledford, SVP at The Clearing House for the RTP Network. A year ago, The Clearing House got out of the gate with its Real Time Payments Network, a wholly new payments system based on the push payment model. A lot has changed - more banks have integrated into the system and many more are in process. By the end of June 2019, over 3,000 FIs are expected to connect to RTP, most via their bank processor. B2B payments are taking place over RTP between known parties. RTP Characteristics Not All Things TCH is not attempting to provide everything necessary for a ubiquitous push payment system. It relies on its FI participants and their processors to expose RTP capabilities to their customers. RTP hopesto have bank-friendly fintech partners use its rails through the traditional model that gives the new provider access to bank rails via a sponsor bank. Thus far, TCH has also steered clear of a native directory service, a necessary feature for broad use in P2P and C2B payments. Given the partial ownership overlap with Zelle's Early Warning Services parent banks and The Clearing House, no one will be shocked if Zelle becomes RTP's lead P2P directory provider. For that matter, few will be surprised when Zelle shifts to RTP for settlement. Of course, at least one business-facing directories will be needed for bill payments to take off. It's Taking a Lot of Work Connecting up a financial institution to the RTP Network requires deep integration into the FI’s core system, the software responsible for managing debits and credits. Connecting bank ledgers to any payment system is non-trivial, a fact that impacts how fast banks implement new payment rails like RTP. Tell Me All About the Payment A feature of the RTP network that holds enormous promise is its native use of the ISO 20022 messaging format. The standard's flexible and structured qualities--not an oxymoron--provide a major leap in data carrying capability. By representing the payment meta data, for example, ISO 20022 can support invoice information, letters of credit, and other business documents. Accounts receivable and accounts payable systems from multiple vendors will be able to communicate directly, reducing manual data input and data entry errors. The RTP Push In the U.S., we are accustomed to pull payment systems. We think nothing of giving our bank account information when we hand over a check or our card data when we hand our card to a merchant. We’re telling the payees where to go get their money so it can be pulled into their account. RTP and Zelle are both push payment systems. Such systems are characterized by near instant funds availability to the recipient, messaging to send and receiver, and irrevocable payments. That last is very different from the chargeback protections U.S. cardholders, in particular, enjoy. While Reg E applies to the sender's transaction account, accountholder protections will also be prescribed by the FI. To emulate some push payment attributes, RTP and most other immediate funds transfer systems offer a Request for Payment message type that essentially sends an instant invoice to the payer. The customer may press a Pay Now button that uses the Request for Payment Message on her screen. She then uses bank account credentials to authorize the payment. There may even be a redirect to the bank site. It's a flexible solution applicable to multiple use cases and payment initiation methods like embedded links and QR codes. Instant Clearing and Settlement The RTP switch runs software built by Mastercard's Vocalink unit, builder of the now 10 year old Faster Payments system in the UK. The RTP code base, however, is a new version, with native ISO 20022 messaging and an instant clearing and settlement system. That system uses a single, pre-funded account at the Federal Reserve common to all participating financial institutions. A separate ledger operated by TCH is the single source of truth, keeping track of the transfer of ownership of those pre-funded monies. Separate accounts, for each FI at the settlement bank, aren't necessary. So, instant clearing, no batch-based settlement. Lower risk, simpler management. Competition? If you've attended a Glenbrook Payments Boot Camp in the last couple of years, you know RTP and Zelle have some overlapping capabilities. Zelle, however, is targeted at P2P and C2B uses cases. RTP is a set of payment rails open to whatever use cases come along. In the short term, think B2B and payroll but there's no inherent limit to where it can go. Just don't expect it to take over POS payments any time soon. The UK's Faster Payments rails have operated for a decade and have barely touched merchant POS payments. Another fact boot camp attendees know is that there are two ACH operators in the US: The Clearing House and the Fed. The Fed is now floating the idea of operating an RTP analog of its own. Smaller Fish may be glad to see the Fed operate an alternate system. We'll touch on that more later but the Fed will have a lot of selling to do because, at the very least, adding a new set of rails requires a lot of integration effort by financial institutions and their processors. And I thought the U.S. payments landscape was settling down. Hah!
The payment industry’s responses to ongoing payment security are many. We have procedural approaches and technical ones. For example, we are requiring merchants to attest to their compliance with PCI security standards that themselves include procedural requirements.
Technical solutions are also called out by PCI and are, of course, being applied across the ecosystem. Encryption of payment data in flight is one approach. In the physical POS world, semi-integrated POS terminals connect directly to the acquirer’s front end instead of passing card transaction data back through the merchant’s workstation and enterprise system.
An important technique, and the topic of this discussion, is tokenization.
Tokenization is an ancient security technique. In the broadest sense, a token is just a dummy representation of something of higher value.
In cards, that means the replacement of a PAN with a number or even an alphanumeric value that represents the underlying PAN. The mapping between the two is stored in a vault with the owner restricting access to that vault. If a hacker gets ahold of a token value, it’s useless. It’s a value that, to the payments ecosystem, is gibberish.
Tokenization is used in pull payment systems where payment credentials are given to the payee by the payer so that the payee has the information necessary to go get the money. Think card numbers or the routing and account numbers on a check.
In card payments, there are two forms of tokenization: merchant and issuer tokenization. Merchant tokenization has been around for more than a decade. A response to PCI, merchants generally outsource that token vault to a third party so they no longer store PANs themselves. When the merchant needs to do a lookup or initiate another payment, the merchant sends the token to the upstream service provider who then looks up the PAN and sends it off for authorization by the acquirer.
That’s been around for awhile.
The newer innovation is what we call issuer tokens - token values that are at the heart of Apple Pay, Google Pay, Samsung Pay and more. These token values are real card numbers, issued by your bank, but unlike a PAN that can be used to initiate a payment everywhere, issuer tokens are expected to come, for example, from specific devices or merchants.
Every card in your Apple Pay wallet is represented by an issuer token and whenever that token is presented for authorization, data about where it’s coming from is sent along too. If the token is sent from another device, for example the one the hacker has, authorization will fail.
This approach is totally compatible with the current card payment system. No changes are needed at the merchant or the acquirer and minimal ones at the issuer.
Glenbrook will be conducting an Insight Webinar on December 13 called Tokenization Fundamentals. Russ Jones will conduct that webinar.
In this Payments on Fire podcast, George talks with Russ about issuer tokenization, its role in the Pays (Apple Pay, Google Pay, Samsung Pay), in e-commerce, and the need for new entities in the payments ecosystem to support tokenization. This gets complicated. There's now the need for token gateways.
Take a listen to the podcast and then sign-up for the webinar. Use the code POF80 to take 10% off the registration price.
In the US, there’s the automatic assumption that payment cards and perhaps PayPal are the way to pay online. But if you’re an ecommerce merchant trying to sell in the Netherlands, you’d better support the domestic system known as iDeal.
Connectivity into domestic payment systems is an important and complex issue. There are over 150 such systems across dozens of countries around the world. While not all are important to a given merchant, most are important to the acquirers and payment service providers serving ecommerce merchants.
Join George and Steve Villegas, VP Partner Management and Head of US Office, of London-based PPRO Group, a company that provides white label connectivity to these domestic systems by serving acquirers and PSPs alike.
Knowing who you’re dealing with online is critical if you’re taking transaction risk. Digital identity is tough. To address that challenge - and it is a challenge - relying parties, those who take on risk, employ two broad categories of technology: active tools that require user interaction and passive network-based approaches.
When the user is required to explicitly provide identifying information, we use the interactive approach. The merchant or lender or website owner asks for user IDs, passwords, perhaps data generated by multi-factor authentication techniques such as biometrics, or one time passwords generated by an app or a hardware key.
If you’re an ecommerce merchant or an entity trying to sell something online - lenders included - you don’t want to ask the customer to do more than absolutely necessary to complete a good sale. Transactional friction is deadly to revenues and a main cause of shopping cart abandonment.
So, you use passive approaches that examine whatever data the customer’s device can provide. Device fingerprinting, behavioral analytics, rules engines, machine learning, and the past behavior of card numbers are among the portfolio of decisioning tools that do not interfere with the user experience.
Data is the foundation of the passive approach. In this podcast, George speaks with Ajay Andrews, Senior Director, Product, at Whitepages Pro, a data provider and analytics firm about identity verification and how the linkage of key data items influences decisioning. It turns out that particular pairs are strong indicators of potential fraud.
We discuss where the data linkage approach fits in the overall portfolio, what drives merchants to adopt, and how the tool is integrated into automated decisioning and case management.
Alexa. Siri. Cortana. We’re talking to or at our machines. I walk into my office and say “Hey Google, what’s the weather?” or “Hey Google, when’s my first appointment?” When I’m driving in a strange town, it’s “hey Google, navigate to the [fill in the blank] hotel.”
This kind of hands-free access to information is hugely helpful and hugely popular. But there’s a long way to go toward a general purpose voice interface for every task we want to accomplish.
That said, we’re getting there. In this conversation with Central 1’s Alex Chan, we discuss the process of voice-enabling access to the high volume queries that credit union members make, i.e. balance inquiries, balance transfers, etc.
We cover what it takes to build an Alexa skill, the code that links Alexa’s natural language processing to the underlying application that executes the action.
Voice design, the process of imagining and codifying how the user interaction proceeds, is at the heart of a successful voice-enablement project. Alex takes us through that process. It sounds like fun.
While payments are a tiny fraction of today’s voice-based interactions, they’re coming along, too. Better design and broader participation is needed. As a recent (failed) demo proved, Siri can’t send me money if I’m not an Apple Pay Cash user.
Take a listen and get in touch if you've questions or comments. We'd love to hear from you!
During the Glenbrook Payment Book Camp we make clear that national payments systems are domestic by definition. Each country has its own set of systems to effect payments. We point out that national payment systems differ in many of their details. Regulation, operating rules, governance, ownership, technology, and more are highly variable.
At the same time, we also point out that major components are generally similar. An overnight, batch-based system for low-cost, low-value retail payments and an instant, irrevocable wire system for high-value transfers are typical of most countries.
Across the planet, countries are planning, designing, trialing or enjoying fully deployed immediate funds transfer systems, new ones that instantly transfer lower value payments. The UK's Faster Payments system and The Clearing House's Real Time Payments (RTP) are two examples of this system type.
Beside increased speed of payment, a second push for changes to national payment systems is the need for a richer representation of the data surrounding the payment transfer itself. Remittance data, for example, communicates what the payment is for, which invoices a payment may be covering, and what trade terms were taken by the payor. ISO 20022 is the internationally recognized method for representing this information and support for it has become a new priority not just for system operators but for financial institutions and enterprise customers.
Generally, major upgrades, never mind deployment of an entirely new system, are performed in a step-wise manner because of the critical nature of these systems, the cost, and the difficulty of herding system stakeholders through the many stages needed to achieve broad support and usage.
Undeterred by those realities, Canada is taking on a comprehensive upgrade to multiple systems over the next few years, including its overnight settlement and wire systems while simultaneously planning for its own immediate funds transfer system, codenamed Real Time Rails. Significantly, each system upgrade will include support for ISO 20022.
Payments Canada is the non-profit organization mandated by the federal government to manage, operate, and upgrade these systems.
In this Payments on Fire episode Glenbrook's George Peabody speaks with Justin Ferrabee, Payment Canada's COO about his organization's work, how its systems differ from those in the U.S., and what's ahead. It's a great conversation between payments geeks.
In this second discussion with First Data execs, George and Scott MacKay, Vice President, Strategic Solutions talk digital commerce in the automative space, both at the fuel pump and in the Connected Car.
The importance of full stack security, whether it's sole sourced or the result of an integration effort, to successful deployment of mobile commerce is a theme here.
Enabling the mobile experience at the fuel pump is complex. Petro sellers have a lot of legacy gear and the cost of upgrading that equipment is very high, a fact that has, at least, inhibited the pace of the EMV upgrade.
The richness of the mobile device's data such as device fingerprinting and back end intelligence makes it conceivable that a fuel retailer could skip EMV altogether. Maybe.
Scott also shares a look at payments and the Connected Car through the company's discussions with automobile manufacturers.
In this, the first of a two-part podcast series with First Data executives, Ajay Guru, VP of Merchant Fraud Solutions at First Data and George discuss the impact of fraud on the merchant, what the merchant has to do to manage it, and the classes of tools and techniques available to mitigate fraud.
Ajay addresses machine learning technology's remarkable ability to identify anomalies and makes candid remarks on the necessity of human analysis to determine whether these anomalies are indeed fraud.
Other topics discussed include behavioral analysis (how we enter our user ID and password into the browser) as well as the sophistication of today's manual and automated attacks. There is still a lot of CNP fraud taking place over the phone.
There's good detail on the technology and what fraudsters are up to. Take a listen.
Online trust requires a context-based understanding of who we transact with. Attributes about us are needed to build that trust but in many transaction contexts we share more than we need to.
To pick a simple example, the law says you must be 21 to buy alcoholic beverages but our current method of proof is to show our driver's license, an unnecessary oversharing of personal information. Why show that creepy barkeep where you live when you only need to prove you were born before 1997?
In this wide-ranging Payments on Fire podcast, George and Lockstep Technology CEO Steve Wilson discuss how we share the attributes that, in aggregate, define to the online world who we are.
Steve makes the case that security and identity professionals continue to encourage the oversharing of personal data. Now that we have sophisticated network-based fraud management tools - device fingerprinting, behavioral analytics, machine learning and AI - that generate a crisp profile of our devices and our behavior, the attributes that a user must provide could be limited to just what's required and no more.
An "attribute wallet" under the user's control - yes, another role for the smartphone - might prove to be a valuable authentication enabler.
This episode concludes with Steve's report on comments made by some of the deans of modern cryptography on the threat that quantum computing represents. It sounds like good news.
This episode of Payments on Fire covers two topics - payments in Atlanta and the essential challenge of online authentication and identity.
May in Atlanta - Fintech South and Glenbrook Payments Boot Camp
Everyone in the payments industry knows that Atlanta is a hotbed of activity. Coming shortly to Atlanta are two fintech-focused events that will add to the goings-on.
The Fintech South conference takes place on May 7 and 8. With great speakers - and great sponsors like Glenbrook and the Technology Association of Georgia - the conference describes itself as “FinTech South 2018 is a global exchange of insights, innovations and trends fueling tomorrow's financial tech industry.
“Attracting international companies and speakers across multiple industries, FinTech South is an opportunity to engage with 400 FinTech companies employing more than 130K employees globally, generating $72B in revenues, and processing over 118B transactions annually.”
Speakers include:
- Kathryn Petralia, President and Co-founder of Kabbage
- Barry McCarthy, EVP of Network and Security Solutions at First Data
- Nuno Sebastiao, founder and CEO of Feedzai, who is also a past guest on Payments on Fire.
- Right after the conference ends, Glenbrook will host our Payments Boot Camp on May 9 and 10.
Both events draw will attendees from all over North America. So if you want to expand your network, hear the latest at the conference and/or get smart about how payments work, come to Atlanta.
Authentication, Biometrics, and Banking
Authentication online remains one of the most challenging aspects of life online. Given the complete availability of personal data, account takeover has never been easier for the hackers. Knowledge-based authentication (KBA) asks softball questions like “what was your father’s middle name?” Easy stuff to find online. User IDs and passwords are even easier to find. We have a problem.
Strengthening the connection between an accountholder’s true identity - perhaps proven by a drivers license or passport - and the credentials that the user presents online is necessary and the topic of this Payments on Fire episode. George speaks with
Andrew Gowasack, CEO and co-founder, of TrustStamp, an identity verification company using AI and facial biometrics to create a strong, unique digital credential. For a few use cases, TrustStamp also employs a blockchain-based database.
Andrew knows all about the Technology Association of Atlanta, too. So, take a listen and geek out in this conversation about authentication, biometrics, and how to answer the online conundrums of “who are you?” and “do I trust you?”
The rise of Chinese mobile payment systems is the top global mobile payments story of the last few years. Alipay and WeChat Pay serve hundreds of millions of users with payments, loyalty programs, merchant coupons, and more.
QR codes are used to initiate many of these interactions especially within the point of sale (POS) domain. When there isn’t a legacy payment infrastructure in place, software is easier, and cheaper, to deploy than the hardware-reliant approaches used for card-based transactions.
To serve its millions of accountholders traveling around the world, Alipay is building out its acceptance footprint. In this episode of Payments on Fire, George speaks with payments industry veteran Souheil Badran about his role as president of Alipay Americas and the company’s plans for reaching US merchants in tourist hotspots and beyond.
Mid-market financial institutions have enormously strong relationships with their banking customers. But their size makes home grown IT difficult because it is simply too hard, and too costly, to meet all the B2B finance needs of their enterprise customers.
The answer, of course, is deeper integration to third party software systems like SAP, Oracle, JDA and the growing set of fintech providers brining point solutions to these institutions.
But that’s no simple task. These FIs often run on legacy systems, generally provided by a large bank processor. Integrating software built before the cloud and APIs and these modern point applications is not easy.
Into that gap is a new company called FI Span. Led by founder and CEO Lisa Shields, the company value proposition is to act as an API orchestration platform for banks. In other words, FI Span proposes to be the glue that connects legacy code or a processor’s banking platform to the growing base of fintech point solutions in the market.
The goal of becoming a one-stop shop for new tools for these B2B-focused banks will take time and focus. Connecting up nextgen software and data to older systems demands clever approaches and a lot of spade work. Maintenance of a growing set of evolving API interfaces is non-trivial, too.
A fintech startup serving fintech startups, incumbent bank processors, and mid-tier banks has a lot of work to do. Lisa is no stranger to the start-up world; she also founded Hyperwallet. Take a listen to this conversation about the technical challenges, the business model, and the goals Lisa has for her customers and for her company.
“Digital cash” has been a dream of the internet age for, well, almost the entire internet age. That goal requires instant payment settlement. It’s more than just sending a message that a payment has happened; it means the money has actually moved.
In this wide ranging conversation with Laurence Cooke, founder and CEO of nanopay, he discusses the platform his firm has built to move value between parties in both real-time and, when necessary, offline modes. More distributed than blockchain systems, nanopay is designed for multiple uses cases including B2B payments using ISO 20022 representation of the payment data.
If you’re at all curious about payment security, blockchains, distributed ledgers, or the instant payment systems now being deployed, take a listen to this conversation between Laurence and Glenbrook’s George Peabody. It’s quite a story and we touch a lot of bases.
Episode 69 is all about how the PCI Security Standards Council is responding to changes in security technology and how it is expanding its role and technology coverage across important new geographies. If payment security is on your screen, join Glenbrook’s George Peabody, partner and host of Payments on Fire, and Troy Leach, CTO for the PCI Security Standards Council as they discuss standards under development like PIN Entry on COTS, other new tools to mitigate data breach risk, and the Council’s work in Latin America, Asia, and India.
A little background...
We don’t need any more evidence for how difficult data security is. In payments alone the number of system components is so high that hardening them all has been functionally impossible. But we’re are making progress. There’s EMV. Data devaluation through encryption and two forms of tokenization - security tokens and payment tokens - reduces the amount of hack-worthy information available.
Guiding, steering, nudging, and corralling the payment card ecosystem toward stronger security is the PCI Security Standards Council. The PCI SSC has developed a 12 step standards program for the secure treatment of payment card data that goes well beyond data devaluation. Various enterprises looking to protect their own data assets, not just card data, use PCI DSS to guide their security program.
The Council’s activity is expanding along with the threats we face. As technologies emerge that benefit security, the Council considers how to employ and deploy them. For example, the Council has a certification program for the token service provider function that handles payment token vaulting and other life cycle management tasks.
Another example is its soon to be released PIN Entry on COTS standard. Commercial Off the Shelf (COTS) devices include the smartphone that’s by your elbow or in your hand right now. The standard makes clear that, with the right card acceptance hardware, PIN entry via a software-driven screen, rather than a physical encrypting PIN pad, is secure.
As you'll hear on the podcast, this is an exciting time in payments security development. Broad deployment of many important tools will take many years. That's the real news. As they come online, however, there's already reason for optimism. We just have to use what we have and get others to do the same.
Digital identity is a crisp sounding term that belies a complex layer of concepts. There is identity proofing. Identify verification. Identity assurance. Each addresses one element of the many questioned raised by digital identity.
- How does a bank really know the digital presence at its banking portal is associated with the accountholder?
- How can you, as an individual, release only the amount of data necessary to satisfy the parties to the transaction? We share more than we need to. I still get carded at a bar to prove I’m over 21 (what a waste of time!). When I show my license, the barkeep also sees my address, license number, and more. Definitely a case of oversharing.
- If parties such as utilities, government, and financial institutions vouch for that digital presence, should any of them be responsible for proving that digital presence is right and true?
- Simplifying complex problems for multiple stakeholders should be a formula for success. SecureKey is a long time player in the identity ecosystem, having built a federated identity platform linking Canadian citizens to government resources using bank-issued credentials.
SecureKey has evolved its system to make use of a mobile app as well as a blockchain-based database that securely points to data stored by banks, utilities, and government entities, all in a zero liability arrangement.
This conversation between Glenbrook’s George Peabody and SecureKey’s chief identity officer Andre Boysen dives into identity concepts, how SecureKey’s Verified Me system works, and its use of blockchain.
For more on digital identity concepts, look at NIST’s excellent set of Digital Identity Guidelines.
Voice is the natural user interface and the robots are coming to take it on. Enabled by high volume consumer devices like Amazon Echo, Google Home, Apple’s Siri and powered by artificial intelligence engines like Amazon’s Alexa, Google Assistant, and Apple’s Siri, we are headed toward making voice-enabled commerce and payments a common experience.
Russ Jones is Glenbrook’s “tech whisperer,” an expert observer of tech evolution and how it applies to payments. Join Russ and George as they discuss the development of the voice ecosystem, Amazon’s leadership, the intersection of voice and IoT, and where voice-enabled payments may flourish.
Payment innovation runs at multiple speeds. Changes in how a payment is initiated happen almost every day. Payments infrastructure change is a lot slower. But it’s happening. Nudged forward by the Federal Reserve’s Faster Payment Task Force, we are seeing the launch of the first entirely new payment system in decades. Called Real Time Payments (RTP) the new system switched its first real-time payment on November 13, 2017.
Built entirely around the rich payment messaging standard ISO 20022, we have a system that can carry both payment instructions and meta-data about the payment. Data rich, essentially instant, bank-fased account to account push transactions could be a game changer.
Join George and Steve Ledford, Senior Vice President, Product and Strategy, at The Clearing House (TCH) as they discuss the spread of real-time payment systems around the world and take a deep dive into RTP’s operation, rules, and use cases.
Once upon a time, text messaging systems didn't interoperate. But when they did, usage skyrocketed. Many of the world's mobile money payment systems still operate within that old "walled garden" model, limiting the ability of citizens in areas like Southern Africa to send money home to family, pay utility bills, and, most important, enjoy the benefits of an national economy that is payments enabled.
The Bill & Melinda Gates Foundation sees today's limited interconnection of payment systems as a high barrier to the poor's participation in that payment enabled economy. Fortunately, those barriers are beginning to come down.
In this Payments on Fire podcast, Kosta Peric, Deputy Director of Financial Services for the Poor at Bill & Melinda Gates Foundation joins George in discussing Mojaloop, the foundation's open source software initiative that provides interconnection capability between disparate payment systems. Informed by the foundation's Level One Project, the goal is to encourage a lower cost deployment of this critical payments infrastructure as well as the active collaboration among the operators of mobile money services, financial institutions, each country's central bank, and national regulators.
Listen for a view into how payments systems can improve the health and well being of millions of people as well as the nation's they inhabit. This is very cool and important work.
The intersection of new tech, faster payments capabilities, and forward looking regulation is enabling significant innovation in B2B, and consumer, payment services in the UK and EU. Join Glenbrook’s George Peabody and Myles Stephenson, CEO of business payments platform provider Modulr, as they discuss how modern tech and updated rules have created opportunities for fintech service providers. The challenges to incumbent banks are only getting bigger.