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VIews

Trends to note in a preventing thieves from producing and using counterfeit
cards. PCI is mandatory; EMV is not.
time of rapid change Despite all the work done by ISOs, Verizon recently

estimated that only 20 percent of all businesses are PCI-
By Brandes Elitch compliant. (The card brands report more optimistic
figures). Not only do merchants have to be PCI compliant,
CrossCheck Inc. but they also must check all their vendors and service
providers to ensure they are also compliant – including
t's hard to remember that back when electronic their POS system provider, processor, and providers of
ticket capture came along, some of the largest banks other portals or applications.
exited the acquiring business to concentrate on the
I issuing side. The banks that remained demonstrated I was shocked when I heard someone say at the ETA's
that bankers do not know how to sell and cannot be taught Transact 17 show that the EMV implementation date
how to sell either. This gave impetus to the community of of October 2015 was really "just the start of a five-year
bankcard salespeople variously called independent sales business plan"; merchants were told there would be an
offices (ISOs), merchant service providers, merchant level absolute liability shift if they were not fully compliant at
salespeople (MLSs), agents, and more. that time. There is a serious credibility gap here.

These people were independent, changing sponsoring Finding opportunity
banks and processors with regularity, but times have
changed. The sales process, technology and accompanying This is a thrilling time to be in the merchant bankcard
certifications and increasingly demanding requirements business. Aside from the opportunity to replace all
from the card brands have made for a complicated sale deployed terminals with new EMV-compatible ones,
today, which is why you see salespeople working with excitement is growing about fundamental changes in
independent software vendors and value-added resellers the merchant community. One aspect of this is the Retail
that provide business management software applications. Apocalypse. While this blight pertains primarily to large
shopping malls, no brick-and-mortar merchant is immune.
As a result, more and more salespeople are employees, And this is related to another big factor: the emergence
as opposed to 1099 contractors or resellers. While the of the GAAFA – Google, Apple, Amazon, Facebook, and
"good old days" were about focusing on selling or leasing Alibaba. These five companies are going to rock the world
equipment at high margins, packing the rate and dealing of payment processing. Consumers buying directly from
with high merchant attrition (for example, 20 percent), Amazon are not visiting local merchants. If you are an ISO,
sales have become more technical today and generally call these are the same merchants you signed and supplied
for more specialized, highly trained MLSs. This is a good terminals to. What will happen to your monthly residuals
thing for merchants. when consumers stop visiting their stores?

Clamoring to get in Against this backdrop, financial technology (fintech)
providers see opportunities to replace legacy core
The number of companies that want to be part of the systems, legacy technology, clunky applications and
payments business today is impressive. But only a everything related to the customer experience. You might
handful of processors dominate the industry. A recent think the fintech sector is primarily focused on displacing
study by The Strawhecker Group found that the 10 biggest commercial banks, but you would be mistaken. In a
acquirers processed four-fifths of all bankcard volume in recent article in Let's Talk Payments, staff writer Aditya
2016. Chase processed $1 trillion in payments. Of the 10 Khurjekar wrote, "[T]he scope of this effort is positively
largest, six are banks or bank spin-offs, three are pure play overwhelming, because it covers the following behaviors:
processors, and one does back-end processing for five of pay, invest, save, lend, borrow, gift, donate, transfer, hedge,
the largest banks. insure, securitize, trade, identify, and secure." Something
is going on here; a lot of money is being bet on it.
Consolidation is occurring rapidly. Recently, GTCR
purchased Sage N.A., First Data Corp. purchased Fintech will not displace commercial banking, nor will
CardConnect, TSYS purchased TransFirst, PayPal banks relinquish their hold on payment processing.
purchased Braintree, and last year Vantiv purchased Fintech has targeted commercial banks, but no bank has
Moneris. What has changed is that the buyers wanted more ever failed by betting on the wrong technology, or by not
than a bigger portfolio of merchant accounts. They wanted being agile enough to implement new technology faster
the means to become integrated technology providers. For than its peers. A commercial bank would never make a
the last two years, MLSs have focused on EMV (Europay, mistake as huge and embarrassing as the EMV mandate
Mastercard and Visa) and the Payment Card Industry issued by the card brands. Banks are not technology
(PCI) Data Security Standard (DSS). PCI was formulated to companies, but their daily workflows and systems and
prevent card data theft and data breaches. EMV focuses on procedures are based on technology. They have the

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