Canright Financial

Top 15 Payments Articles after Apple Pay Announcement

September 10th, 2014 by Canright Communications

I spent my morning commute reviewing my Twitter feed and boy, was it flooded. Today’s payments news, needless to say, was dominated by news and analysis of Apple’s entry into the payments market, with a smattering of attention given to the latest payments-related data breach at HomeDepot. Google got one mention, Amazon none. To save you the trouble of wading through twitter for the gems, I pulled out my top picks.


The Apple Hype, Reaction, and Analysis


Apple Dazzle or Apple Schmazzle?

“[…] Apple is not trying to disintermediate the banks but, what they have done (as has PayPal and others) is laid a front-end wrap around banking to reduce the friction and the relationship.  What this means to me is that, like Starbucks and Uber apps, banks will be wrapped in layers of processing through APIs and apps by others, gradually reducing the visibility of banking to a pure utility status.”


Will Apple Legitimize Mobile Payments?

“Apple wants to replace the old leather wallet with its digital version. But whether the trendsetting company can kickstart the mobile payments landscape to the next level remains to be seen.”


 Did We Just See The Future of Mobile Payments?

“Say hello to Apple Pay. It’s the new kid on the payments block and, depending on how things unfold, it could be the new Gorilla in the mobile payments ecosystem.”


 iPhone, NFC & Apple Pay: How Should Banks React?

After years of speculation, Apple has finally revealed its mobile payments strategy: Apple Pay. This is good news for (U.S.) iPhone users who want to ‘tap to pay’, but what about the majority of smartphone users who are using an Android device? What about those of us outside of the U.S? And what about the banks who want to offer a solution to a wider demographic?”    


 Why Do You Have to Buy an iPhone 6 to Get a Working Digital Wallet? Think Different.

“Mobile payments can and should be universal. At their best, they increase access to the banking system for everyone by making payments easier. They improve commerce by making transactions quicker and more efficient, lowering costs.”      


 Apple Pay’s First Impressions

“The seven need-to-knows about Apple’s new iPhones and mobile payments”


Apply Pay Tries to Solve a Problem That Really Isn’t a Problem

“It’s a dangerous business to bet against Apple’s ability to make a product that you didn’t think you needed as part of your daily life. But “Apple Pay” looks as if it may be one of those offerings that doesn’t live up to the company’s hype.”


With Apple Pay, a Push Into Mobile Payments

“Times technology columnist Molly Wood says consumers may see a rise in the use of mobile payments now that the iPhone has a chip that will work at tap-to-pay payment terminals.”


Apple Looks to Swipe the Payments Market

Need account to read

“The California-based company has previously upended industries from music to mobile phones and, with other prominent technology companies such as Google and Facebook, is considered a threat by the biggest US banks.


The Future of Banking: Google Think Series

“Watch my full speech to understand the future of the banking industry and why I predicted in 2009 and again in 2011, that the smartphone would redefine the very nature of banking.”  


FIS Acquires Clear2Pay—Industry Implications?

“On September 3, 2014, FIS’ acquisition of Clear2Pay was announced, indicating an expected close in Q4 2014. What does this combination mean for the payments and banking industries? Is it a game-changer? How should competitors respond?”  


On the Home Depot Data Breach


ICBA Statement on Home Depot Data Breach

“This breach is yet another reminder why information sharing is vital among all participants in the payments system—better, timelier information translates into greater fraud detection and prevention on behalf of consumers.”


 The Truth About Home Depot’s Security Breach: Hacking Was Easy

“The fact that two massive breaches of such similarity happened just months apart indicates a major problem with the system. Gaining entry is simple.”


A Tiny Bit of Solace for Bankers in Home Depot Breach

“If there’s a silver lining for banks in the Home Depot data breach, it’s this: most experts agree banks are getting better at deterring card fraud.”


Meanwhile, in Europe…


Mastercard Announces Contactless Acceptance

MasterCard has announced today that it is establishing contactless acceptance as standard by 2020 for merchants accepting MasterCard® and Maestro® in Europe, ensuring that, consumers will be able to pay with their contactless cards and NFC enabled devices at all point-of-sale (POS) terminals in Europe by 2020.”


Who Loses in the Mobile Payments Game?

September 5th, 2014 by Canright Communications

As with any industry in the midst of disruption, the payments industry has been receiving a lot of attention by the tech media. Discussions of mobile payments firms and technologies generally end up speculating on who will “win.”

Will it be Amazon? What about the major card issuers? Or PayPal, the previous disruptive force “fighting to stay relevant,” in the words of one commentator? Will it be an upstart startup financial technology firm like Square, Stripe, Braintree/Paypal? And with this week’s announcements, what about Apple? Or MCX, an alliance of large retailers.

I do not know. But I can tell you for sure who is most likely to lose: community banks.

It’s a shame, because community banks are well-positioned to capitalize on the convergence of local ecommerce and the new epayment technologies.

After Our Customers

There are plenty of large banks, large card issuers, and more nimble financial technology companies that are after bank customers, given the increase in mobile-money related transactions. Data from the global business advisory firm AlixPartners, for instance, show that some 40% of smartphone and tablet owners have used their device for money-related transactions in the last month.


Community banks have a lot against them, to be sure. Their marketing budgets are tiny by comparison to the larger banks and merchants. They are perennially on the short end of technology budgets, with maybe one full-time technology executive overseeing part-timers and outside vendors. They face regulation from all sides, including pronouncements on what kind of technology they can use and how they should evaluate it. Many failed during the financial crisis and many others are only now seeing major improvements.

Banks in general and community banks in particular also have themselves to blame, and the situation continues to deteriorate. “For the first time in our survey, the most preferred provider of the digital wallet has shifted from consumers’ primary bank to PayPal,” write Bob Hedges and Teresa Epperson in “.”

Many have put themselves in the position of getting cut out of a bigger share of the mobile payments revenue stream. It’s natural but not helpful for an industry under regulatory assault to hunker down and focus inwardly, and banks tend to view the payments ecosystem from an internal perspective, rather than a customer perspective.

A Bank-Centric View

When you read about mobile anything in banking, you don’t read so much about mobile commerce. Instead you read about the banking industry’s own mobile segments: mobile banking and mobile payments. Most technology and banking analysts believe that mobile will become the dominant channel for banking in the next few years. Yet many community banks have not even set up mobile banking systems, let alone ventured into mobile payments and mobile money management.

All community banks, however, should be devising mobile strategies. It’s important to consider the role that mobile applications and partnerships will have in the eventual merging of mobile commerce, money movement, and financial.

Mobile apps in which checking balances and making payments are the highest functions will not engage consumers over the long term. Ideally, banks themselves should be working on apps for customers that include person-to-person (P2P) payments, merchant rewards, corporate banking services, and mobile payments.

This may require going outside existing system partnerships and experimenting with a mix of small technology innovators, app developers, and commerce providers. The main point is that there is plenty of room for agility and development for community banks, and their unique position can be leveraged to a competitive advantage.

Community Banks Know Local

Community banks remain in a better position than they might realize, and banks that are willing to innovate will find that they can out-maneuver their larger rivals. As Hedges and Epperson put it, “While the consumer perception trends should be alarming, banks still hold a trust advantage when it comes to safeguarding personal data and using data in the best interests of their customers.”

If the future of ecommerce really is social, local, and mobile, who better to bring these channels together than an innovative local bank? They have relationships with consumers and merchants, and social means face-to-face in this space. Given that local knowledge, banks are in a good position to find the mix of card, commerce, and communications services they can provide in combination with local businesses. Rather than looking at mobile banking and payments, the stock in trade of banks, they would do well to broaden their focus, to mobile commerce and financial management.

Yet the questions remain:

  • Is it too late?
  • Can banks make money at mobile and related services?
  • How best can community banks approach building a mobile strategy?

I would love to hear your thoughts.

Google and Apple are After Your Customers, Battle Banks on Mobile Phones

August 20th, 2014 by Canright Communications

It gets even worse. Amazon’s launch of Local Register has caused quite a stir among the mobile payment standard-bearers Paypal and Square. Paymenteye gives a look at who runs the greatest danger stepping up to the giant, and what can safely be done to mitigate the latest advance.

The average consumer’s banking relationship is dominated by making payments. So why are banks doing so little to defend this critical beachhead?

That is the question McKinsey & Co. asks it in its August study, “The Digital Battle that Banks Must Win.”

The report finds that “nonbank attackers” from large telecommunications companies to nimble technology firms are defining the standards of digital banking as more consumers make payments on their smartphones. The smartphone is the “beachhead” where banks are most vulnerable to losing customers to competitors outside the banking industry.

Canright Financial blog 2

“For now, the payments business remains squarely within the core bank franchise, but attackers such as Google, Apple and PayPal threaten critical source of revenue,” the study says.

These competitors have several advantages over traditional banks, including fewer regulatory constraints, a higher risk appetite, and greater leeway from customers.

The study outlines steps banks can take to get out of the defensive posture and drive traffic to their digital banking channels, starting with payments. It also divides consumers into eight profiles, based on point-of-service payment preferences.

For the full report, click here:

Five Stats You Need to Know from the Fed’s Latest Payment Study

August 20th, 2014 by Canright Communications

Debit Card Use Soars, B2B Checks Fall as Fed Revises Initial Data

exhibit_1Source: The 2013 Federal Reserve Payments Study

Grab a cup of coffee and some sharp pencils. There is plenty of new data to sift through in the Federal Reserve’s revised 2013 payment study.

The 192-page report, released last month, updates a December 2013 payment study and includes new data on credit and debit cards, wire transactions, cash deposits, withdrawals, and third-party fraud payments.

The reports are part of the Fed’s ongoing effort, started in 2001, to help banks plan for the future by measuring broad trends in noncash payments.

In addition to information that is compared with previous studies, this report contains new estimates of total unauthorized transactions (third-party fraud) involving checks, ACH, and cards as well as some information on the use of alternative payment initiation methods provided by depository institutions including commercial banks, savings institutions, and credit unions.

Here are a few highlights that we found interesting:

Noncash Payments Grow at Slower Rate

There were an estimated 122.4 billion noncash payments, excluding wire transfers, in 2012, with a value of $174.4 trillion.

The number of noncash payments in the U.S. increased at a compound annual rate (annual rate) of 4.2 percent from 2009—the year examined in the previous study. That is down slightly from the annual rate of 4.6 percent over the 10-year period from 2003 to 2012.

B2B Checks Falling

It is no surprise that business and consumers are writing fewer checks these days as more payments move online.

Business-to-business (B2B) checks fell faster than any other category, confirming industry assessments that B2B checks have been challenging to replace.

From 2009 to 2012, the rate of decline for the number of B2B checks accelerated to 3.8 percent per year compared with a decline of 3.5 percent per year from 2006 to 2012.

Nonetheless, overall paper check writing continues to persist as a significant portion of noncash payments, but interbank processing and clearing of these checks are virtually all electronic. As in 2009, almost all checks in 2012 were either cleared by electronic image exchange or converted to ACH payments.

Increasingly fewer checks enter the banking system as paper at all: in 2012 about one in seven checks was deposited by accountholders as an electronic image rather than paper.

Value of ACH Payments Triple Previous Estimate

The total number of Automated Clearing House (ACH) payments previously reported in the December 2013 report has been revised downward slightly to 21.7 billion.

The new estimate of the value of in-house on-us ACH payments of $144.1 trillion is approximately triple the size as the previously reported value.

Debit Card Use Soaring, Fraud Rate Falling

The number of debit card payments increased more than any other payment type from 2009 to 2012.

In 2012, the number of debit card payments had reached 47.0 billion—much higher than the 26.2 billion credit card payments in the same year. The number of debit card payments exceeded the number of credit card payments for the first time in 2004.

And while credit card fraud grabbing headlines, debit cards fraud is on the decline. Single-message, or PIN, debit card transactions had the lowest fraud rate among all general-purpose cards in 2012 by both number and value. The ranking applies to debit cards used for both purchases and ATM cash withdrawals.

Credit-Card Comeback

After declining from 2006 to 2009, credit card payments (including both general-purpose and private-label) returned to growth from 2009 to 2012.

The number of credit card transactions grew at an annual rate of 7.6 percent, rising from 21.0 billion in 2009 to 26.2 billion in 2012.

The number of private-label credit card transactions, which led the decline from 2006 to 2009, bounced back strongly at an annual rate of 17.1 percent.

The number of general-purpose credit card transactions, which were relatively flat from2006 to 2009, increased a total of 4.2 billion or 6.8 percent annually.

Read More Here:

The 2013 Federal Reserve Payments Study Summary Report released on December 19, 2013, was updated on July 24, 2014, to reflect revised estimates.

For a summary of the revisions, click here:

For the full report, click here.

Market and Regulatory Changes Prompt Investment Policy Review

June 9th, 2014 by Canright Communications

The continued low interest rate environment, ongoing regulatory reform and record stockpiles of corporate cash have contributed to a renewed focus on the investment policy process. While most large companies have an investment policy statement to help guide their cash investments, many privately held or smaller firms may not. It is considered best practice for companies to implement one.

Read the entire article here.


Taking on International Supply Chain FX Risks

June 2nd, 2014 by Canright Communications

As the US economy continues to strengthen, many treasury teams are wisely reviewing established payment practices to allow them to take full advantage of new growth opportunities. A US company that has taken the time to explore and implement finance and treasury processes that work best with international suppliers and customers will have greater opportunities to maximize rewards and gain a competitive advantage.

Read the entire article here.

A Straight Path to Receivables Reconciliation

May 27th, 2014 by Canright Communications

Though straight-through reconciliation for receivables (STR) may often present more of a challenge than straight-through processing for payments (STP), recent advances in regulations, electronic payments acceptance and paper-to-electronic (P2E) conversion, allow companies to move rapidly toward the STR ideal. Many are now looking to achieve rates of success similar to what they have achieved with straight-through processing for payables.

Read the rest of the article to learn more about STR and its benefits.


The Popularity of Plastic Payments

May 4th, 2014 by Collin Canright

The future of payments may well reside on mobile devices, but today’s mobile payments consist of the plastic cards in your pocket or purse. Card payments now make up more than two-thirds of all noncash payments, according to a new report by the Federal Reserve.

In the same vein, my last several articles for Independent Banker magazine have dealt with the following card topics:

Profitable prepaid cards remain mostly elusive, but their potential still glimmers
Prepaid card use is soaring, and the checkless account cards are expected to help banks attract millennials and other underbanked customers. As of now, however, prepaid cards are not providing easy money to many community banks.

Four principles of the top-producing credit card programs
Community banks with highest producing credit card lending programs keep cardholders close to home. They also tend to use their card programs as part of their overall relationship-building activities, in many cases offering simple, stripped-down programs that solidify their customer relationships and their community bank brands.

Making the most of your card program year round
Community banks with successful credit and debit card programs plan their success. They understand that getting customers to use their cards consistently requires more than the occasional statement insert or special event promotion.

Vendors Promote International, Echeck Payment Options at IRCE

June 13th, 2012 by Canright Communications

My conversations with epayments exhibitors at the Internet Retailer Conference & Exhibition (IRCE), held June 5-8 in Chicago, brought two ecommerce payments themes to the fore: international payments and echecks.

The first seemed natural to me, as ecommerce frees retailers from geographic boundaries.

The second theme, the promotion of the echeck as a payments mechanism, surprised me at first, given that the technology is hardly new. It also delighted me because I prefer echecks to credit or debit cards as a web-based payment mechanism and do not find that it’s often available.

I did not make a complete tour of every payment vendor at the show, but here’s a rundown of the vendors I visited and conversations we had.

International Payment Options

When I mentioned to Allyson Stramotas, a marketer for Digital River, that a number of vendors were talking to me about international payments, she assumed I must have heard a lot about China. I had not, though I later found in my conference bag a card presenting the statistics for Alipay, China’s leading third-party electronic payment service. Geographically, a number of vendors pointed out their capabilities for Latin America in general and Brazil specifically.

For instance, Cobre Bem, based in Brazil, provides a PCI-compliant gateway to Brazilian and Latin American banks, providing connections to more than 80 different financial institutions and bank card organizations in Latin America. For its part, Digital River World Payments covers Latin America and Asia in its white paper “Online Payments in the BRIC Countries.”

Other international payments processors I talked to included Moneris Solutions, a joint venture between Royal Bank of Canada and the Bank of Montreal, which partners with BMO Harris in the United States. Moneris provides a whole suite of payment options, including loyalty programs and echecks, for retailers. They stressed the completeness of their solutions across all needs, from store to web to company accounting.

Payza and Order Bridge showed payment platforms. Payza, with an international gateway, presented an ewallet service that can be loaded through bank transfers, wires, credit cards, and other means, allowing you to both make and receive payments. Order Bridge seeks to make it easier to integrate a wide variety of payment, risk-management, and transaction tracking options into a merchant’s website.

2CheckOut exhibited its online payment processing service that integrates a merchant account and payment gateway in a single package, another way of making it easier for retailers to accept online payments. The 2CheckOut shopping cart seeks to open retailers to international customers by presenting international currencies upon checkout, which also supports 15 different languages. It does not require shoppers to create a separate payment account.

Several other vendors emphasized supporting international payment and currency options directly on a retailer website. JCB, a Japanese payment card, wants merchants to accept the card and display its logo on their websites and in their stores. “Japanese consumers love American goods,” said sales rep Charles Spatola. Providing a payment option they know and use will increase the likelihood of making the sale.

Planet Payment made a similar case for international currency support. The company provides in-store and ecommerce payments processing in international currencies so that shoppers can use their local credit cards at a store’s point of sale or see their currency symbol on the website. They receive a guaranteed exchange rate upon checkout, and Planet Payment ensures that it’s lower than other options, as a reason for the customer to buy more goods at the foreign exchange rate.

PacNet Services Ltd., however, impressed me with its comprehensive international payments processing. They did it with the most impressive piece of collateral from an educational point of view: the World Payments Guide 2011, a 720-page reference book and online guide to banking systems and consumer payments in every country in the world, including an explanation of PacNet capabilities.

Echeck Options

The cost of payments filtered into the general media last year with the Durbin Amendment, which directed the Federal Reserve to place limits on the fees banks can charge for debit-card payments. For many years, credit- and debit-card processing fees have been roughly the same for retailers, regardless of who does the processing.

I believe that the increased promotion of echecks, an option that has been around for seven years, is driven in some way by today’s post-Durbin environment, in which transaction processing fees are no longer a standard three-plus percent. Electronic checks, which process as low-cost ACH transactions, provide lower transaction costs and can provide yet another option for consumers.

First Data argues as much in the latest version of an echeck white paper, which the payments processor provided at IRCE, “Electronic Checks: The Low-Risk, Low-Cost Way to Accept Online Payments.”

ACHFederal stressed the low cost and customer convenience of echecks. I agreed, as I prefer to pay by electronic check when it’s offered by a merchant, which it generally is not.

Payment fraud also arose as a topic of conversation, especially at the Authorize.Net booth. The company’s parent firm, CyberSource, estimates that merchants lost some $3.4 billion to fraud in 2011.

Finally, my favorite payments vendor of the show was Wipit, a service that allows online merchants to serve people without bank accounts (generally known as the “unbanked”). Unbanked customers use mobile devices that they load up at currency exchanges and mobile phone stores, explained Ian Williams, manager of business development.

Wipit allows them to open an account that they can add cash to in the same way. When they buy on the web, they choose the Wipit icon and pay from their Wipit account. The company has received a lot of attention since its founding in 2010, in part following FDIC concerns for the unbanked.

Whether it’s accepting cash, international payments, or echecks, the vendors face a common challenge: getting their logo for their payments option on a retailer’s website. That, in turn, depends on whether retailers believe that they can use payments channels to open new markets, increase sales to existing customers, or make paying at online checkout so easy that the customer rarely abandons the transaction.

Electronic Toll Collection Gets Easier

June 4th, 2012 by Canright Communications

Since August 2008, I have made at least one annual road trip from Chicago to New York state. Last week, my wife and I made our last drive to New York to see our daughter graduate from Bard College.

When we got to the New York State Thruway, I pulled into the cash-only lane, only to find that my Illinois I-Pass electronic toll transponder paid my fare. I don’t recall that ever happening. I remember that on the last trip, I pulled out my cash in New York, as I had done in Ohio on our first trips.

On this trip, it was electronic toll collection from end to end, beginning at the Chicago Skyway, to the Indiana Toll Road, across Ohio on its turnpike, and then into New York. (We took the northern route this time and skipped the Pennsylvania Turnpike, which is considering a plan to move to all-electronic toll collection.)

All of those states are now members of E-ZPass Group, an association of 24 toll agencies in 14 states. E-ZPass says it’s “the world leader in toll interoperability, with more than 22 million E-ZPass devices in circulation.” The E-ZPass usage statistics show a nearly 22 percent increase in E-ZPass transactions from 2005 through 2011. E-ZPass is not a universal electronic toll collection system, however.

From a consumer point of view, system interoperability (in this case, the ability to use one system on multiple toll roads) is wonderful because it saves time with faster toll paying and decreased traffic congestion. “E-ZPass has shaved at least seven billion traffic-jammed hours from our collective lives,” writes David Segal in a May 19, 2012, New York Times article. The U.S. General Services Administration, in its electronic tolling portal, adds that the systems also “increase fuel economy and reduce vehicle emissions by reducing the time spent in lines at toll booths.”

As in many areas of epayment, the U.S. may have spawned the technologies first but adopted them later. I recall the first electronic tolling system I came across when driving outside of Toronto, Canada, back in 1998. There is a decent, if uneven, overview article on electronic toll collection, its uses, and history across the world on Wikipedia, which also has an article covering the history of E-ZPass. For information on electronic toll technologies, visit Transcore, one of the world’s largest providers of electronic toll collection and other transportation systems.

There are problems, of course. Segal’s article carries the title “Trouble at the Tollbooth”. It focuses on a $50 E-ZPass fine that a woman received in the mail. She thinks the fine is unfair, and she doesn’t appreciate the company’s tone one bit.

We experienced something similar, though it resulted only in inconvenience. We did not have our I-Pass transponder once while driving the Indiana Toll Road and accidentally got in the wrong lane. Although we were able to pay by debit card in the noncash lane, the instructions on the card reader were vague and required a call to the toll attendant, who had to manually enter my debit card number into her terminal and raise the gate for us.

In addition to interoperable transponder-based systems, multiple and reliable methods of epayment at toll booths will be required to make toll payment even faster and easier.