Transact 16: A defining moment for post-disrupted payments

Thousands of payments and fintech professionals gathered in Las Vegas for Transact 16, held April 19 to 21, 2016, at the Mandalay Bay Resort and Casino's Convention Center. The annual conference, hosted by the Electronic Transactions Association, drew a record crowd of approximately 200 exhibitors and 1,000 companies from 30 countries, according to ETA sources.

The event included a mobile app and a varied menu of exhibits, presentations and keynote addresses designed to appeal to a diverse international audience. Some of the conference highlights included:

• Educational session tracks: Six educational tracks, titled Going Global, Integrated Payments, Investments and Funding, Mobile Pay, Politics and Policy, and Security Technologies, provided in-depth information on each segment's technologies, competitors and changing customer behaviors.

• ETA University: The ETA presented Intro to Electronic Processing, a foundational course for the association's education and Certified Payments Professional program and other program-related curricula. Certified CPPs have the necessary knowledge and skills to perform competently in the complex payments environment, the ETA stated.

• Payment Facilitator Day: The second annual Payment Facilitator Day was designed for existing payment facilitators and companies considering the business model. Participants included software companies, independent software vendors and marketplace technology companies focused on a specific vertical market. "We thought that the PayFac addition was an incredible new addition to the conference," said James Ruffer, Chief Technology Officer at Paay. "We were pleasantly surprised by how many new faces we met and by how ISOs are now much more willing to adopt new technologies."

• The Payments Pitch Off: The Payments Pitch Off, a Shark Tank styled competition sponsored by Intuit Inc., was held in the middle of the exhibit hall. It gave 11 contestants 10 minutes each to wow a judging panel with innovative new electronic payments technology. "We're grateful to Intuit for making this possible," said Jason Oxman, ETA Chief Executive Officer. He noted that the competition gets more important every year due to the accelerating pace of innovation. This year's award went to Forter, a security company that provides frictionless fraud prevention to enterprise-scale retailers.

• Keynote addresses: Keynote speakers included senior executives from Square Inc., First Data Corp., PayPal Inc., Verifone Inc. and Discover Financial Services. "It was obvious by Jacqueline Reses, the head of Square's lending division delivering the keynote on Wednesday, that lending is a huge focus of Square's business," said Sean Murray, publisher and Editor-in-Chief at deBanked, an alternative lending industry trade publication. "Square's value as a loan originator is starting to overshadow its prowess as a payment processor."

Evolving ecosystem trends

Payments analysts, exhibitors and attendees spotted common threads in exhibit hall booths and breakout sessions that may reveal shifting perspectives on the changing payments ecosystem. Some speculate that the industry has entered into a new era following a turbulent decade of disruption. Several of the most established brands have notably regrouped, even rebranded, to meet the challenges of consumer-driven marketplace models, they stated.

Following are several ways in which emerging trends are reshaping the payments ecosystem:

• Identification and personalization: "With all of the changes taking place in the payments industry, there is going to be a return to focus on identification awareness that will allow for safer and more secure payment transactions," said Matt Ozvat, Vice President of Developer Integrations at Vantiv Inc. "Certain industries will be able to utilize identification tracking or recognition with a greater consumer experience. For example, a local restaurant that you frequent might be able to know your food, drink and seating preferences." Payments will continue to trend toward a much more immersive and engaged technological experience, he added.

• Secure, cloud-based, open architecture: In their keynote address, First Data's President Guy Chiarello and Executive Vice President Dan Charron emphasized the need for acquirers to provide simple, powerful, secure and open architecture designed to facilitate "simple setup, inventory and product management, orders, and payments."

• Accelerate EMV certification: U.S. acquirers, merchants and card brands are actively seeking ways to fast track EMV (Europay, MasterCard and Visa) implementation. "Hacks mainly happen in traditional integrated POS environments," said Rhonda Boardman, Vice President of Strategic Development, Acquiring Channel at Ingenico Group. "Ingenico's semi-integrated solution removes PA DSS from the POS scope and helps our partners fast track EMV certification." The solution is part of a "constant roadmap" that Boardman expects will continue to evolve in response to market demand.

• Omnichannel solutions: "Verifone's Carbon platform is a hardware device integrated with countertop and mobile experience," said Hitesh Anand, Vice President of Product, Commerce Enablement and Mobile at Verifone Inc. "It comes with a customizable platform that supports third party apps on Android and enables third party developers to adapt solutions for numerous use cases." Anand went on to say that payment data is completely sandboxed in the semi-integrated solution, preventing malware from getting in. "It's next-generation, multi-purpose POS," he added.

• Pure hardware play: "The transition from fixed to mobile costs is frequently prohibitive," said Simon Stokes, Chief Commercial Officer at Miura Systems, a U.K.-based global device manufacturer. "Small footprint, modular solutions, such as the Miura M010 platform, have multiple configuration options designed to meet changing requirements and create flexible, future-proof POS systems."

• Peripheral-to-terminal products: Many next-generation payment devices can interface with integrated POS architecture or function on their own; many are used interchangeably by merchants who can seamlessly navigate from customer-facing to mobile environments. Many have their own EMV applications. "The Castles Technology MP200S is a perfect device at a perfect time, when a lot of developers need to have an EMV solution to integrate into their payment systems," said Dave Cunningham, Senior Vice President Sales, U.S. West for Castles Technology International Corp. "It has Bluetooth, Wi-Fi, Micro USB and GPRS/3G connectivity and can be used as a PIN pad or fully functioning terminal."

• White-label solutions: "We provide a suite of easy-to-use solutions that our partners use in a variety of vertical markets," said Mitchell Cobrin, founder and Chief Catalyst at AnywhereCommerce. "Our global EMV and mPOS experts understand payments, allowing developers to quickly and confidently integrate certified payment functionality." The company's modular POS tablet solution supports numerous clerk-facing and customer-facing solutions in one single product and platform, using self-diagnostics to continually monitor all attached devices, he added.

• The IoT: Next-generation payment solutions are increasingly becoming part of a broadening global network of connected devices known as the Internet of Things (IoT). "The IoT is exciting," said Paul Galant, CEO at Verifone. "I've never seen more money and talent flow into a space." Galant predicted that low-level sensors will carry out many small tasks, such as monitoring homes and aiding in restocking refrigerators. Legacy "feature phone" terminals lack the bandwidth and processing power to do these things, he said. Verifone is evolving from a traditional device manufacturer to a services model, he added.

• Managed security services: The evolving threat landscape combined with consumers' increasing use of connected commerce makes managed security service offerings attractive to large and small merchants alike. Atlanta-based ControlScan is a Managed Security Service Provider specializing in delivering the technical expertise and security know-how to keep businesses secure. The company's vulnerability scanning service helps large and small business owners detect and promptly remediate vulnerabilities. "The newly released PCI External Vulnerability Scanning service involves a completely redesigned delivery model that significantly advances the user experience," said Steve Robb, Senior Vice President of Security Marketing and Product Strategy at ControlScan. "We applied customer feedback, industry best practices and our internal expertise to create a dynamic and intuitive deliverable."

• PCI compliance tools and resources: Reno-Nev.-based Conformance Technologies created a PCI Toolkit, designed to help payment acquirers and ISOs ensure that all of their merchants comply with the Payment Card Industry Data Security Standard (PCI DSS) and related standards established by the PCI Security Standards Council. "Getting and keeping merchants compliant is no easy task," said Darrel Anderson, President of Conformance Technologies. "Our ToolKit solution takes the headaches and hassle out of 3.1 PCI compliance validation while helping you manage and report portfolio compliance."

• Alternative lending: "At Transact, it also became apparent that there is value between lenders/merchant cash advance companies and payment processors beyond just boarding accounts and setting up splits to facilitate loans and advances," noted deBanked's Murray. "Lenders can still use ACH as the methodology while referring their customer to payment processors to leverage existing relationships into merchant account residuals." Murray has seen the model work especially well for processors engaged in customer acquisition. "It's not a passive [referral] arrangement anymore," he said. "In some ways the balance of power in these partnerships has shifted from the processors to the lenders."

Innovation playbook

"Disruptive innovation may feel like it has just burst upon the scene, but in reality many of these changes have developed slowly over time, as disruptors learn the space," said Mike Gardner, CEO at Agreement Express Inc. "Look at the math behind Square: the margins aren't great; losses are huge, but even if Square fails, they've rewritten the formula, profoundly changing merchant acquiring, rate structures, onboarding and underwriting models."

Gardner has observed similar trends in the wealth management industry. Three years ago robo advisors began to replace traditional wealth management advisors, creating a self-service investment space. It didn't take long for large incumbent firms, such as Vanguard and Charles Schwab, to make huge investments to compete and ultimately win back customers, he noted.

"If brands don't recognize and replicate the disruptor models, then extinction will be on their horizon," Gardner said. "Companies must progressively think their way through what is possible and if that renaissance isn't happening, we won't see those big logos in the exhibit hall next year."

Editorial Note:

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