So, What Could Go Wrong? Merchant Advisory Group Annual Conference 2011

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1 So, What Could Go Wrong? Merchant Advisory Group Annual Conference 2011

2 On the Interchange Front NACHA is controlled by Regulated issuers. Historically, NACHA has been resistant to the notion of interchange except where irresponsible ODIFs are involved. Still, the ACH is now facing its own battles with a small but growing amount of fraud. If payments aggregators like PayPal continue to flourish, it s just a matter of time before ACH interchange is introduced and it will favor RDFIs. General Purpose Reloadable prepaid cards escaped Durbin and Reg II. Already several FIs regulated and exempt have announced plans to launch gateway products centered on GPR cards as the recordkeeping mechanism. Probably not the end of the world for merchants but troublesome, none the less. Large issuers are making it extremely easy for disenfranchised depositors to vote with their feet as Senator Durbin put it. How many will bolt from Citibank, Bank of America, Wells Fargo, and others is yet to be seen. However, rest assured that credit unions and independent banks are moving heaven and earth to insure that each of these effected depositors know that they have options. Every defector from a regulated bank to an exempt FI doubles merchant costs. 2

3 Just When Mobile Starts Rolling Mobile holds great promise for merchants but there some thunderheads out there. There are only two manufacturers of NFC chips in the world. One has an 80 percent market share. Worldwide demand for NFC chips is exploding, particularly in already proven markets the U.S. isn t one of them yet. Even with sufficiently enabled mobile handsets in place, we need a robust number of terminals to answer when they call. The top four global terminal manufacturers hold 70 percent market share. 25 percent of all terminal manufacturers are based on China (hold onto that thought). In the U.S., four wireless operators dominate the market and are hell-bent on branding NFC-enabled phones. With handset branding comes the right to hold each mobile phone s Secure Element hostage in exchange for considerable access rent. Jail breaking iphones and rooting Android devices are options but could be klunky. 3

4 EMV To The Rescue? 1. Question: What level of direct input does the merchant community have in setting domestic and international EMV specifications and rules? 2. Question: How many legitimate/workable solutions exist for reducing electronic payments fraud risk by one-half? 3. Question: How close is the U.S. to creating a foolproof and fully integrated program for elimination of fraud in online and other CNP purchasing? 4. Question: What are the chances that EMV, tokenization, or out of band authentication will materially reduce the cost of PCI compliance? Answers: 1. Zero, zip, nada, no way Jose. 2. About a dozen. 3. About a country mile away. 4. Same odds as being hit by lightening twice. 4

5 Whose CUP Runneth Over? Quick. Name the largest card brand in the world. Visa? Nope, China UnionPay holds a 29.2 percent edge over Visa s 28.6 percent share. Fortunately, 99 percent of those cards are found in China. Cautionary Note: 50 million Chinese traveled abroad in But wait, which networks around the world accept CUP cards on a reciprocal ATM basis today? PULSE/Discover Link (UK) NYCE Most domestic networks in Europe, Australia, UAE, Taiwan, Russia and Japan What two US card brands have MOUs with China UnionPay for market expansion and exploration of trans-border acceptance? MasterCard and American Express Oh, and Elavon has inked a deal with CUP to accept its debit and credit cards at U.S. and U.K. merchants processed by that bank-owned merchant services processor. 5

6 So, What Could Go Wrong? New Payments Market Entrants Payments Price Disruption Industry Malaise Over Security Seller Power Within Mobile Marketplace 6

International Trends in Prepaid

International Trends in Prepaid Chris Truelson SVP Product Development TSYS Prepaid, Inc. October 19, 2007 1 Overview TSYS is the largest payment processor in the world More than 7,000 global team members