Friday, February 27, 2015

Mark your calendars for APEX Europe | Brochure now available!

APEX Europe is the international meeting place for prepaid, technology and retail executives to grow business and identify consumer needs.

Access Insights: Hear next generation consumer needs - and gain a better understanding of how to position your company to capture new business.

Participating retailers include: Home Retail Group, Zalando SE, Coop Danmark, Dansk Supermarked, M&S, Tesco Bank, John Lewis, Nordic Choice, Auctionata and more
Hear from other merchants on the new path to purchase:
  • How omni and multi channel strategies are impacting every customer touch point, from in-store payments to gift cards
  • How mobile can tangibly improve customer engagement and drive bigger conversions and increase in-store visits
  • How mobile can tangibly improve customer engagement and drive bigger conversions and increase in-store visits
  • How digital gift cards are transforming brick-and-mortar institutions' strategies
  • The impact of ApplePay and digital wallets on retail marketing and couponing
  • The implications of new in-store technologies, including iBeacon and geolocation
  • How e-commerce executives are anticipating customers' evolving needs across Europe     
Participating programme managers include: Bankable, IQcard, Tuxedo Money Solutions, Perfect Incentive, 3V, WEX, Payment Card Solutions (UK) Ltd., eNett International and more
Hear from industry stakeholders on new consumer needs:
  • New innovations in grants administration
  • Prepaid's evolving role in gaming
  • The rise of new use cases, including social media payments, prepaid for the affluent and alternative banking platforms
  • The latest developments in corporate payments, and how to identify new opportunities
  • The implications of the latest regulations, and the impact on product development
  • The latest consumer-centric links between prepaid and loyalty
  • What's blocking global issuing?
  • Partnership opportunities with new players, from cryptocurrency to P2P technologies     

Join attendees from across Europe to meet, partner and devise powerful new partnerships. Use the code XU2940BLOG to save. Register now to lock in the lowest rates.

We look forward to meeting you in Marbella, Spain in May this year!   

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Thursday, February 26, 2015

Live at APEX | The Benefit of Linking Bitcoin Implementation to the Existing Payments Structure

Live at Apex: The Benefit of Linking Bitcoin Implementation to the Existing Payments Structure

Welcome to the fourth and final installment of the “Live at APEX” series on the official All Payments Expo Blog. The final session at this year’s conference addressed the benefits of linking bitcoin implementation to the existing payments structure. It focused on the market opportunities for Bitcoin in the under-served and financial wellness categories. I would like to thank our panel, Ed Boyle (Blade), Steve Beauregard (GoCoin), Cathy Corby Iannuzzelli (Corby & Company), and our moderator, Tim Sloane (Mercator Advisory Group) for joining us today. It has been an amazing 3 days and I hope you, the reader, enjoyed reading as much as I enjoyed writing.

Financial services are costliest for the poorest individuals. In fact, “[t]he average underbanked household has an annual income of only $25,500, yet spends 10 percent of that on fees and interest charged by the alternative financial service sector.” To make matters worse, the number of banks in the U.S. reached its lowest total since 1934, in 2013 and this number is continuing to decrease. Rural areas have been hit particularly hard by these bank closures and considering that 85 percent of the poorest counties in the U.S. are rural, the closures disproportionately affect low-income households.

Nearly all non-debt financial services require an initial “cash-in” in order to use the services. Many banks require a minimum balance to open and maintain a checking account, and failure to do so results in a penalty, thereby making opening and maintaining a bank account prohibitively expensive for low-income households. This forces these individuals to turn to alternative financial services, many of which charge “an arm and a leg” to use their services. The question is whether Bitcoin can provide the unbanked and underbanked with improved access to financial services. The answer is YES!

As previously discussed in, “Live at APEX: Digitizing of Money Movement, Remittance, and P2P,” Bitcoin is radically changing the remittance and P2P industries. This is because Bitcoin’s cost structure fits very well within these industries. For example, traditional remittance companies charge 8-12% per transaction, whereas a Bitcoin transaction does not require a fee. It should be noted that to incentivize the Bitcoin network to expedite the transaction, there is generally about a 4¢ fee. Nonetheless, this cost savings is large enough to radically change the remittance industry.

Moreover, unlike banks that require minimum balances, there is no minimum Bitcoin balance requirement. In fact, the smallest amount a person can have is 0.00000001 BTC, called a Satoshi, or approximately 0.00025 of a penny. Because a single bitcoin can be broken down into such small amounts, it can be used to conduct transactions in U.S. dollars, as well as in Tanzanian shilings. This has important implications for remittances and P2P payments because anyone can send value to anywhere in the world, without having to rely on a third party intermediary.

Cross-border transactions can require up to seven intermediaries before they are completed; Bitcoin requires zero. Not only do these intermediaries add to the cost that is borne by customers, but the process is also very time-consuming. This is a reason why companies such as Money Gram and Western Union are able to charge such high fees for remittances; they speed up the process. Their services are still slower, more expensive, and generally less convenient than Bitcoin. They do however solve the “last mile problem,” which is something that Bitcoin has not yet solved. While it is easy to send and receive Bitcoin, only a small number of merchants accept it and it may be difficult to convert into fiat currency, but this is changing.

More than $100 million in venture capital was invested in Bitcoin companies this past year. Companies, such as Ripple Labs and Circle Financial are designing solutions to solve the last mile problem. There has also been significant investment in Bitcoin ATM companies to make it easier to obtain bitcoin (find one near you). Plenty of other areas along the supply chain have also been invested in and are currently being worked on.

Although we are not there yet, by linking Bitcoin implementation to the existing payments structure and decreasing costs, the lives of hundreds of millions of unbanked and underbanked individuals around the world will be improved by giving them access to inexpensive financial services. It does not however end with remittances and P2P payments. E-mail was the first application of the Internet and services such as Netflix were previously inconceivable. A digital currency is only the first application of Bitcoin. The next one is just waiting to be conceived.

Matt Gertler is the Head of Strategy at the Digital Currency Council (“DCC”) and is pursuing his JD/MBA at USC. He is experienced in FinTech, having worked for Venmo, Braintree Payment Solutions, and Earnest before joining the DCC.

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Wednesday, February 25, 2015

Live at APEX | Exploring the Right Bitcoin Applications for Retailers

Live at Apex: Exploring the Right Bitcoin Application for Retailers

 Welcome back to the official All Payments Expo Blog. We just wrapped up the “Omnichannel Forum: Exploring the Right Bitcoin Application for Retailers.” The forum addressed how technological innovation will change the face of retail by considering the latest experiments in point-of-sale (“POS”), loyalty, and gift card applications. I would like to thank our panel, Brad Chun (TechCaf√©), Judd Bagley (, and Sony Singh (Bitpay), and our moderator, Steve Beauregard (GoCoin) for joining us today.

POS transactions are going to undergo a massive overhaul in the coming years. Beginning in October 2015, merchants that do not switch to the Europay-MasterCard-Visa (EMV) chip standard will be liable for any resulting credit fraud. This is coinciding with a switch from Windows XP based systems to cloud based POS solutions. A significant benefit of storing the system on the cloud is that it is much easier to change or add more functionality. For example, if the system is stored in the cloud, merchants can begin accepting Bitcoin almost immediately. Such a change previously would have required getting new hardware if not completely replacing the old system.

But why would a retailer want to accept bitcoin? Traditional payment processors charge 2-3% whereas bitcoin merchant service providers provide this service for 1%. This does not take into account credit fraud, which increases the 2-3% cost to merchants. Bitcoin is also fully secure, so there is no concern for many credit frauds, such as charge backs. Additionally, Bagley shared statistics from Overstock, showing that the average Bitcoin transaction is three-times greater than the average USD transaction. He suggested that Overstock’s most loyal customers are those that pay in Bitcoin.

Once the EMV standard is implemented, the new POS systems will be NFC-enabled. This will allow retailers to accept mobile payments such as Apple Pay and Google Wallet. When you consider beaconing and push notifications alongside these new payment methods, retailers can interact with customers in new ways. Communication does not end when customers leave the store, but may be triggered when they or near it, or even at home when watching a retailer’s commercial. While the last idea might only be an idea currently, it is not a stretch of the imagination that future generation televisions will have the capability to share this information.

Bill Ready (PayPal) explains the importance of mobile in the retail space is that consumers are looking to fill spare moments throughout the day with their mobile devices. He says that “if a retailer can get an app on a consumer’s phone, [it has a] tremendous opportunity to interact with that consumer,” regardless of the customer’s location. This allows retailers to create contextualized experiences tailored to individual customers. Presumably this will increase sales. Considering that both Apple Pay and Google Wallet still rely on the credit card networks, and still suffer with the same 2-3% processing fee, the question remains of how Bitcoin can be implemented alongside a mobile strategy.

We are probably still a few years away. Ideally, customers would be able to link a debit or credit card to a Bitcoin wallet and behind the scenes have the payment processor convert the USD into Bitcoin seamlessly. While we are not quite there yet, Xapo has created a Bitcoin debit card that may solve this problem. However, it is currently in beta testing and not available in the U.S. or India. A solution that is available in the U.S. is provided by one of our sponsors, Gyft. Gyft purchases gift cards as a wholesaler and resells them to its customers. While they can pay by credit card or Bitcoin, customers are encouraged to pay by Bitcoin by being offered an extra 3% in reward points because there are no transaction fees. A Forbes article explains how this method was vital in the author only paying in Bitcoin for a week.
Matt Gertler is the Head of Strategy at the Digital Currency Council (“DCC”) and is pursuing his JD/MBA at USC. He is experienced in FinTech, having worked for Venmo, Braintree Payment Solutions, and Earnest before joining the DCC. If you have any questions, please tweet @magertler using, #APEXLV15, and they may be included in a future post.

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Live at APEX | Digitizing of Money Movement, Remittance, & P2P

 Live at Apex: The Digitization of Money Movement, Remittance, and P2P

 Welcome back to the official All Payments Expo Blog. We recently concluded the “Disruptive Technology Forum: Digitizing of Money Movement, Remittance, & P2P.” The forum centered on the many changes that are occurring in the movement of money, from new rules and regulations to an influx of non-traditional, online players. I would like to thank our panel, Tammi Shapiro (Fiserv), Ajay Hans (Mobetize, Corp.), and Peter Kelly (ABRA), and our moderator, Robert Courtneidge (Locke Lord) for joining us today. Their insight and expertise greatly simplified a very complicated and rapidly changing ecosystem.

In an APEX podcast, Rik Willard (MintCombine) suggests that Bitcoin and other alternative financial services are potential category killers in remittances. He gives the example of Mpesa, a service that allows people to transfer money throughout Kenya almost instantaneously and inexpensively. For example, there is a 12% transaction fee to transfer money from the U.K. to Kenya with conventional remittance companies, whereas there is only a 3% fee with Mpesa. Seeing as 90% of Kenyans are unbanked, but 80% of Kenyans have mobile phones, Mpesa and other similar financial services are radically changing the remittance industry.

Still, services such as Mpesa charge a 3% fee and Bitcoin, as well as other alternative financial services offer means to transfer value at a near-zero cost. One such service is Venmo, which allows two individuals to send money to one another, called person-to-person (“P2P”) payments. There is no fee if the money originates from the user’s bank account or debit card, but there is still a 3% fee for using a credit card. Meanwhile, companies such as Circle Financial and Ripple Labs are attempting to change this by developing platforms based on the Bitcoin system that enable the transfer of money anywhere in the world for pennies, if not for free. This is in contrast to Venmo, which is currently limited to people residing in the U.S.

Seeing as Bitcoin and other alternative financial services improve upon a number of deficiencies in how we currently move money, it is not surprising that banks are studying Bitcoin intensively. In fact, Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and Wells Fargo have all published reports on Bitcoin for their customers. Bank of America reported that Bitcoin may emerge as a serious competitor to traditional money-transfer providers. Still, Bitcoin cannot be massively adopted until there is further regulatory clarification. Barry Silbert (SecondMarket) explains that “banks are waiting for clearer guidance at the federal level on how businesses are having interactions with bitcoin,” in addition to other state regulatory concerns.

DISCLOSURE: What follows is a summary of important legal and regulatory issues, but it does not cover every legal or regulatory issue. You should always consult counsel. If you would like to find a certified digital currency attorney, you can check the member directory at the Digital Currency Council.

At the federal level, the Financial Crimes Enforcement Network (“FinCEN”) imposes certain requirements on money service businesses (“MSB”). A business may be considered a MSB if it offers any of the following products and services: money orders, traveler’s checks, money transmission, check cashing, currency exchange, currency dealing, and prepaid access. The regulations require MSBs to ensure that their services are not being used for nefarious activities and requires that these companies: file Suspicious Activities Reports, implement an anti-money laundering (“AML”) program, and check customers against OFAC’s Specially Designated Nationals List, in addition to a number of other requirements.

Because Bitcoin is pseudo-anonymous, it is not known who the real-identities of the parties to the transaction are, only their Bitcoin addresses. This is a major reason why banks were initially hesitant to engage with Bitcoin: they are worried that they will be punished for not getting sufficient information about their customers. Bitcoin companies are beginning to find ways to obtain this information from customers, which has led to banks beginning to partner with Bitcoin companies. There is still a long way to go. For example, because of U.S. regulations, Bitcoin wallet, Xapo, is unable to offer its debit card product in the U.S. until it can find a banking partner.

This lack of clarity also exists at the state level. Whereas states such as North Carolina and Texas regulate Bitcoin Companies within their existing money transmitter laws, states such as New York are attempting to create an entirely new type of license, coined the “BitLicense.” The BitLicense is highly controversial as some welcome clarity while others point out that Bitcoin is a technology and not something that should be regulated. The proposed BitLicense is currently undergoing its second iteration, with New York welcoming comments on the proposal until March 6, 2015. You can read the most recent proposed regulations here.

Matt Gertler is the Head of Strategy at the Digital Currency Council (“DCC”) and is pursuing his JD/MBA at USC. He is experienced in FinTech, having worked for Venmo, Braintree Payment Solutions, and Earnest before joining the DCC. If you have any questions, please tweet @magertler using, #APEXLV15, and they may be included in a future post.

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Tuesday, February 24, 2015

Live at APEX | Knowing the Unknowable: Payment Predictions

Live at Apex: Knowing the Unknowable

Welcome to the official All Payments Expo Blog. The purpose of the “Live at APEX” series is to highlight the key takeaways from this year’s panels in a manner that is both informative and enjoyable, even if you were unable to attend this year. If you have any questions that you would like answered in a future post, tweet me @magertler using, #APEXLV15.

We just wrapped up the “Knowing the Unknowable: Payment Predictions” panel. While it is impossible to know the future, our panel of payments experts, Stefan Happ (American Express), Jack Stephenson (First Data), and Amir Wain (i2c) did an awesome job explaining what they think the payments ecosystem is going to look like in the not-to-distant future. I would like to thank them and our moderator, Matt Harris (Bain Capital Ventures) for joining us today.

What impact does Bitcoin have on the existing payments infrastructure?

Bitcoin is a technological innovation that will radically change the existing payments infrastructure. Bitcoin solved the Byzantine Generals’ Problem, which is a computer science problem that asks how trust can be established between two unrelated parties over an unsecured network, such as the Internet. Bitcoin offers the first practical solution to this problem in that it  allows for the safe, secure, and permanent transfer of ownership in digital property at a near-zero cost. Accordingly, Bitcoin offers a potential alternative to conventional payment processers that charge merchants 2-3% in fees.

Fraud is the biggest reason that payment processors charge these fees. During an earlier APEX workshop, Rich Stuppy (Kount) reported that there were more than 1500 data breaches in 2014 and 76 percent of them occurred in the United States. This “perfect storm of fraud” is increasing as mobile payments become more ubiquitous. M-commerce makes up a disproportionate share of credit fraud relative to its share of transactions. In fact, a Jan. 25, 2015 survey by LexisNexis Risk Solutions found that “mobile payments account for 14 percent of transactions among merchants who accept them, [but] make up 21 percent of fraud cases.”

Bitcoin can prevent fraud.  In his, “Why Bitcoin Matters” article, Marc Andreessen (Andreessen Horowitz) offers an example of how Bitcoin could have made the “Target hack” impossible. He writes:

“You fill your cart and go to the checkout station like you do now. But instead of handing over your credit card to pay, you pull out your smartphone and take a snapshot of a QR code displayed on the cash register. The QR code contains all the information required for you to send Bitcoin to Target, including the amount. You click “Confirm” on your phone and the transaction is done (including converting dollars from your account into Bitcoin, even if you did not own any Bitcoin).”

A third impact that Bitcoin will have on payments is that “micropayments” will offer new monetization options for companies. Micropayments are transactions that involve payments between about 75 cents and a fraction of a penny. They have never before been practical because conventional payment system fees are too expensive for such small amounts. Since Bitcoin is divisible to the eighth decimal point, it provides a practical way to transfer values as small as fractions of pennies. For example, this offers content producers a new way to monetize their content, rather than having to rely on traditional subscription and advertising methods.

What current crazes will be irrelevant in 5 years?

There is a current craze of characterizing payments based on the device being used to conduct the transaction. We use terms such as point-of-sale (“POS”), e-commerce, and m-commerce; but, this is going to change. The lines between POS and mobile are being blurred, and they will continue to blur further. For example, eating at a restaurant has traditionally been considered POS, but OpenTable allows people to not only make reservations, but also pay for the meal via the app. Other companies, such as Lyft, Starbucks, and Subway are all changing the purchase experience.

The likely trajectory of this is that all types of payments will be streamlined. It is not hard to picture a future where you can go to a market, fill up your cart, type a few buttons on your phone, and leave (or maybe you will not even need to take out your phone). Monday’s keynote speaker, Jim McKelvey (Square) suggested that “Indoor Location Services” will allow for the streamline of payments in retail establishments and the technology is only a year or two away from becoming “good enough” to be mass adopted. He suggests that many retailers are not adopting now, thinking they have time to do it later. The risk of this is that a market-leading retailer (e.g. Barnes and Noble, Blockbuster) may wake up and realize that all of their customers switched to a competitor offering a better service (e.g. Amazon, Netflix).

What will the mobile operating systems (Apple, Android) bring to the table?

Mobile operating systems are going to radically change POS transactions. Both Apple Pay and Google Wallet work at retail establishments that have NFC-enabled POS systems. This is a total of only 220,000 merchants, or less than 3% of the market. The number of merchants is expected to significantly increase this year with the upcoming October 2015 deadline requiring merchants to convert from magnetic-stripe payment cards to the Europay-MasterCard-Visa (EMV) chip card standard. A merchant that cannot accept NFC payments after this date will be liable for any resulting credit fraud.

Another potential product from Google is a POS system named “Plaso,” which is currently being tested by Google employees. It leverages the Android platform to notify retailers when a Plaso-enabled device enters an establishment. Customers pay for goods and services at checkout by giving their initials to the checkout clerk. While there is no guarantee that Plaso will ever be released to the public, it is clear that mobile is changing how we pay for goods and services.

Mobile operating systems allow us to interact with our environment. While today this is somewhat limited to smartphones, in the coming years, “mobile” will include wearables. Samsung is already in the market and has its own operating system, “Tizen.” As wearables take new forms and are adopted, it is likely that new mobile operating systems will emerge that enable these devices to perform previously impossible things.

Matt Gertler is the Head of Strategy at the Digital Currency Council (“DCC”) and is pursuing his JD/MBA at USC. He is experienced in FinTech, having worked for Venmo, Braintree Payment Solutions, and Earnest before joining the DCC. If you have any questions, please tweet @magertler using, #APEXLV15, and they may be included in a future post.

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