Brion BonkowskiManaging Director
May 29, 2013
Boot Camp Week 1Improve your Payment IQ
Names & Nomenclature in the Modern Payments Ecosystem
Overview of Recent Consolidation
The Next 5 Years – Major New Entrances
Wrap-up / Q&A
Introduction
Who is Interested in Payments?
Understanding the Landscape
Ecosystem PlayersSchemes IssuersAcquirersProcessorsTechnology Vendors
Agenda
My Story – Moving into the Payment Space
Who is ROI Payments?
Why a Boot Camp Series?
Introduction
Who? Roles including Finance, IT, Sales, Marketing, and Treasury are all involved in the payment chain
at some point It is rare when someone is specifically assigned to payments, as such many people find
themselves unprepared to navigate the payment ecosystem ROI Payment Webinars attract
A cross section of industries, including state/local government, non-profit organizations, eCommerce, SaaS and payment industry insiders
Senior Finance folks (CFOs, controllers, etc), technology execs, operations managers and sales/marketing team members
Why? People become involved in payment projects and need a holistic overview of the industry so
that they can dive deep into their project, work, etc. Wikipedia and Google searches don’t provide a comprehensive understanding
Result? Everybody can benefit from an increased “Payment IQ” Comprehensive understanding helps in today’s environment (rapidly evolving)
Who is Interested in Payments
Useful to use a transaction flow to orient the ecosystem players
For this example, we’ll use a Visa credit transaction
Future boot camps will cover various transaction flows in detail3 and 4 party networks, closed loop systems, emerging networks, etc
ROI categorizes vendors into 5 major categories:Schemes, Issuers, Acquirers, Processors & Technology Vendors
Understanding the Landscape
Typical Credit Transaction Parties
Customer
Cardholder Merchant
TechnologyIssuer Acquirer
Inte
rchange
Processor
Schemes
Ecosystem Players by Category
Schemes set the rules and standards in a transaction network, establish branding and spurring adoption
Provide Customer (cardholder) and Business (merchant) rules, regulations and pricing schemes
There are commercially adopted schemes and, in certain countries, regulatory promoted schemes
Schemes
Global Regional Emerging
Issuers own the customer relationship (i.e. they issue plastic and get cards into the wild)
Issuers are a customer of the schemes (Visa/MC/etc)
Issuers profit from debt, card holder fees and interchange
Issuers
#1 in US Volume#1 in US Market Share
Acquirers own the merchant relationship and enable businesses to participate in the payment network
In the US, Acquirers typically work through channel partners, called ISOs or “Super ISOs”, who act as their feet on the street selling and implementing solutions for merchants.
Acquirers take liability for merchant activity, including financial obligations, regulatory requirements, security compliance and scheme rules & regulations
They acquire the payment chain on behalf of merchant - which processor to use, which technologies work with their networks, etc.
Acquirers
#1 in US Volume#1 in US # of Merchants
Processors handle the “muck” of transaction processing and are often called Backend Networks
The industry has a small number of large processors, primarily because the economics support processors that can operate at large scale
They are technology focused banking networks performing back office functions such as: Authorization and settlement Funds transfer to the merchant Statement generation & interchange calculation Dispute management Equipment and software certification
They generally own or have relationships with various front end networks (intermediates between merchant and issuing bank to authorize cards)
Processors
48% US Marketshare
Technology is the most complex and disparate part of today’s payment ecosystem
The Technology Space is innovating very quickly -- ROI focuses most of its attention on this part of the payment chain
ROI includes everything from PSP’s to Payment Gateways to terminals in this bucket
Technology is where merchants interact with the payment ecosystem Proxy transactions to front end networks Implement business rules (tax, fraud, notifications, rebills, verification, etc)
Technology layer keeps merchants from having to interact directly from a technical standpoint with processors unless scale warrants it
Technology Vendors
ROI Payments classifies payment ecosystem into 5 categories: Schemes, Issuers, Acquirers, Processors and Technology VendorsNOTE – The payment space is complex and multi-layered. Many vendors
play in several categories and/or resell or bundle each others’ servicesPrime example is First Data, who is the processor for most of the major
commercial banks in North America including Bank of America and Citi
Today’s Webinar should be considered a starting point to understanding the industry
High level terms - ROI has assembled a glossary of terms relevant to the payment ecosystem that will help you understand statements, create RFP’s, and negotiate contracts. If you would like a copy of the ROI glossary, please let us know.
Ecosystem Recap
What’s Next?
Recent acquisitions show change in the ecosystem Visa acquires CyberSource (2011)
Acquisition positions Visa in the Technology Space with a leading enterprise payment platform and SMB gateway
Vantiv acquires Litle (2013) Acquisition moves Vantiv from processing into online retail solutions with
expertise in rebilling, tokenization, and reconciliation (2013) Ingenico acquires Ogone
Acquisition provides global payment gateway to the hardware manufacturer (2013)
Groupon acquired FeeFighters (2013)- demonstrates companies outside of the ecosystem are vying for entry into the market.
Lesson learned? Many processors are building technology portfolios to increase solution set
and stay relevant ROI predicts more acquisitions and consolidation in 2013/14
M&A Activity Shows Industry Change
Mobile and Internet commerce are causing change and introducing new competitors and technologies to payments
Major new players will enter the payment stream in the coming years, such asMobile / telecom carriers (ATT, Verizon, etc)Technology companies (Apple, Microsoft, Google)New payment methods are gaining traction (Bitcoin)
Regulatory and competitive forces may change the face of the payment chain as we know it today
Missing Logos – Upcoming Entrances
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Contact Information:Brion [email protected] x: 2134
Questions & Contact Info