Transaction Trends Winter 2019

Winter 2019

THE BLOCKCHAIN ALTERNATIVE How the technology is becoming a mainstream payment option

ALSO INSIDE: New Sales Tax Legislation for 2020 PAGE 10

5 Welcomed into ETA's Hall of Fame PAGE 16

Consumer Privacy Law Changes PAGE 20

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contents

The Official Publication of the Electronic Transactions Association Vol. 24 | No. 4

features 12 The Blockchain Alternative

By Christine Umbrell

The technology originally used to facilitate Bitcoin and other cryptocurrencies has expanded in use cases over the years and is now being employed to solve frictions inherent in business functions—including transactions. Blockchain technology is an innovation in information registration and distribution, say sources, and it offers new tools for authentication and authorization in the digital world. How the tech underpinnings of blockchain can facilitate cross-border and faster payments, and how the industry is responding.

16 Legendary Leaders: ETA's Hall of Fame

This fall, five well-known payments industry leaders and trendsetters were inducted into ETA’s Hall of Fame. From niche entrepreneurs and corporate CEOs to a computer programming expert and consultant, these five professionals have have either developed, led, or innovated at some of the most significant businesses in the payments world. Get to know them here.

departments 2 @ETA Announcements and ideas from ETA 3 Intelligence Vital facts and stats from the electronic payments world and ETA

8

Politics & Policy Changes to sales tax

collection in 2020

10 Industry Affairs Gen Z's demand for payments innovation

20 Payments Insider A look at the new California Consumer Privacy Act

22 Ad Index 24 People ETA's new CEO Jodie L. Kelley

talks about her priorities and goals for the organization

TRANSACTION trends | Winter 2019 1

Electronic Transactions Association 1620 L Street NW, Suite 1020 Washington, DC 20036 202/828.2635 www.electran.org ETA CEO Jodie L. Kelley Director, Communications Laura Hubbard SVP, Government Relations Scott Talbott Vice President, Industry Affairs Amy Zirkle Director, Regulatory Affairs Philip (PJ) Hoffman Publishing office: Content Communicators LLC PO Box 938 Purcellville, VA 20134 703/662.5828 Subscriptions: 202/677.7411 Editor Josephine Rossi Editorial/Production Associate Christine Umbrell Art Director Janelle Welch Contributing Writers Michael Coleman, Brandes Elitch, Patrick Nolan, Josephine Rossi, Scott Talbott, Christine Umbrell, and Amy Zirkle Advertising Sales Alison Bashian Advertising Sales Manager Phone: 703/964.1240 ext. 280 Fax: 703/964.1246 abashian@conferencemanagers.com

Editorial Policy: The Electronic Transactions Association, founded in 1990, is a not-for-profit organization representing entities who provide transaction services between merchants and settlement banks and others involved in the electronic transactions industry. Our purpose is to provide leadership in the industry through education, advocacy, and the exchange of information.

The magazine acts as a moderator without approving, disapproving, or guaranteeing the validity or accuracy of any data, claim, or opinion appearing under a byline or obtained or quoted from an acknowledged source. The opinions expressed do not necessarily reflect the official view of the Electronic Transactions Association. Also, appearance of advertisements and new product or service information does not constitute an endorsement of products or services featured by the Association. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided and disseminated with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice and other expert assistance are required, the services of a competent professional should be sought.

Transaction Trends (ISSN 1939-1595) is the official publication, published four times annually, of the Electronic Transactions Association, 1620 L Street NW, Suite 1020, Washington, DC 20036; 800/695-5509 or 202/828-2635; 202/828-2639 fax.

POSTMASTER: Send address changes to the address noted above.

Copyright © 2019 The Electronic Transactions Association. All Rights Reserved, including World Rights and Electronic Rights. No part of this publication may be reproduced without permission from the publisher, nor may any part of this publication be reproduced, stored in a retrieval system, or copied by mechanical photocopying, recording, or other means, now or hereafter invented, without permission of the publisher.

2 Winter 2019 | TRANSACTION trends

@

ETA

Customer-Centric Payments

“T

he customer is always right… .”This phrase was coined in the early 20th century by department store tycoons, but it’s enjoying a renaissance in the technology industry. And nowhere is this truer than in payments.

In this issue of Transaction Trends, we explore the ways in which technology is providing new and better customer experiences and, in doing so, presenting new revenue opportunities for the payments industry. Across all platforms, technology is powering the arc from a productcentric to a customer-centric approach. Customers expect—indeed, they demand—that the products and services they use make their lives easier by delivering what they want, in ways they want, when they want it. The companies that are responding and meeting those expectations are the ones succeeding. This is a lesson I learned while in the software industry, and it’s crystal clear that it also is true in the payments space.

Examples abound. As I go about my daily life, I am hyperfocused, as I’m sure you are, on how payments is evolving and integrating itself into every aspect of our lives. I thought about this recently during a trip to the gas station—one of those annoying but necessary tasks.

I am a person who rarely notices if my tank is running low. Historically, I’d realize I was driving on fumes, frantically try to figure out how to get to the nearest pump, and hope that I could find one in time. With the advent of smartphone apps, finding the nearest gas station has become much easier.

Now, my car’s in-dash navigation system not only tells me I’m low on gas; it guides me to the nearest gas station.

But what about payments? In the past, we needed attendants to accept cash and/or credit cards. By the 1990s, customers began to pay directly at the pump. Then, in the mid-2010s, the introduction of apps advanced the payment process, enabling us all to pay from our smartphones while collecting loyalty points in the process. We no longer had to carry cash, or worry about whether we had our wallet with us in the car.

The next step is the merger of these technologies. In the near future, not only will my car navigate me to the nearest gas station, I also will be able to pay for my gas through my car’s infotainment system. It will be even easier than pulling out my smartphone and using the app. The internet of things (IoT) will make the future of payments frictionless and seamless.

For me, and most consumers, that’s a relief. After all, the customer is always right.

Jodie L. Kelley CEO Electronic Transactions Association

INTELLIGENCE

Analysts Predict Holiday Spending Boost The National Retail Federation (NRF) has forecast an increase of approximately 4 percent in holiday retail sales during November and December compared to the 2018 holiday season. NRF expects consumers to spend between $727.9 billion and $730.7 billion during the 2019 holidays, excluding purchases at automobile dealers, gas stations, and restaurants. Online and other nonstore sales are expected to increase between 11 percent and 14 percent.

Online sales during the 2019 Thanksgiving weekend in the United States started off slowly, with Thanksgiving Day and Black Friday sales falling short of initial estimates. However, the long weekend finished off with a record-breaking $9.4 billion in online sales on Cyber Monday alone, an increase of $1.5 billion from Cyber Monday 2018, according to figures from Adobe Analytics. Consumers spent a total of $81.5 billion online between Nov. 1 and Dec. 2, 2019, according to Adobe—more than half of the $143.8 billion in online sales Adobe anticipates for the entire holiday season.

“Omnishoppers,” who shop both online and in-store, are expected to spend twice as much during the holidays as those who favor

one channel, according to the “Annual Holiday Spend Trends” report

by Cardlytics. Last year, brick-andmortars’ share of spend declined 1.6 percent over 2017, while online-only merchants increased their share 1.9 percent. But many brick-and-mortar shops have been investing in their online offerings, enabling more shoppers to choose their channels during the holidays, according to the firm.

Adobe predicts that on Christmas Day, purchases made via smartphone will surpass purchases made via desktop computer for the first time ever.

Loyal customers account for a significant amount of holiday sales, driving 70 percent of purchases, according to Cardlytics. Its study shows that repeat customers spend 43 percent more than new customers during this time of year.

Although the impact of recent tariffs on consumer confidence remains unknown, the NRF holiday forecast is a positive one, anticipating a bigger rise in spending than occurred in 2018, which saw just a 2.1 percent increase in holiday sales compared to 2017. NRF takes into consideration a variety of indicators when making its forecast, including employment, wages, consumer confidence, disposable income, consumer credit, and previous retail sales.

Nearly half (49.6 percent) of the population in China made purchases via proximity mobile payment within a six-month period in 2019, according to eMarketer, which released the “China Mobile Payment Users 2019” report in October. That percentage is expected to rise to 53.5 percent in 2020 and 60.5 percent by 2023.

These payment types are particularly popular in China since the country is a “mobilefirst” market—meaning most internet users’ first device was a mobile phone. In 2019, mobile payments in China represented 61 percent of the 947.1 million proximity mobile payment users worldwide, according to eMarketer. Alipay and WeChat Pay are the most widely used proximity payment services in the country; both companies have introduced QR code-backed payments into the daily habits of consumers.

Proximity mobile payments also are widely used in offline retail via a QR code scan. Among mobile payment users, the most common applications for these payments include convenience stores (62.5 percent), shopping malls (50.5 percent), and street stalls (45.8 percent), according to eMarketer.

anyaberkut/Getty Images

SolStock/Getty Images

Proximity Mobile Payments Gain Ground in China

TRANSACTION trends | Winter 2019 3

INTELLIGENCE Malware Poses Increasing Threat to Smartphones The number of attacks using malicious mobile software nearly doubled between 2017 and 2018, jumping from 66.4 million attacks to 116.5 million, according to the recently published “Mobile Malware Evolution” report from Kapersky Labs. Although the number of devices that have been attacked has grown, the number of malware files has decreased, meaning the quality of mobile malware has become “more impactful and precise,” according to Kapersky.

Much of the latest malware has been designed to compromise users who do not have appropriate security solutions installed on their phones, according to the researchers.

“In 2018, mobile device users faced what could have been the fiercest cybercriminal onslaught ever seen,” said Victor Chebyshev, a security expert at Kapersky.

“Over the course of the year, we observed both new mobile device infection techniques, such as DNS hijacking, along with

an increased focus on enhanced distribution schemes, like SMS spam. The trend demonstrates the growing need for mobile security solutions to be installed on smartphones—to protect users from device infection attempts, regardless of the source.”

Other findings featured in the report include significant increases in attacks using mobile malicious cryptocurrency miners as well as a rise in the detection of installation packages for mobile banking Trojans.

Moves & Mergers Allegiance Merchant Services has appointed R. Scott McFarland as president. McFarland will help lead the fintech company’s expanded vision and growth. He previously served as part of the founding management team for Payment Alliance International and in various executive roles.

Clearent has announced changes to its leadership team.

Pam Joseph, a leader in the payments industry and current chair of the Clearent Board, has been named CEO. Founder Dan Geraty will be stepping down as CEO and transitioning to the role of chairman of the Clearent Board of Directors.

Elavon, a merchant acquirer and subsidiary of U.S. Bancorp, has agreed to acquire Sage Pay, a payments gateway business based in the United Kingdom and Ireland. The acquisition is part of Elavon’s strategy to help customers become more digital and efficient in the global economy, according to the company. “This acquisition brings tremendous talent and leading technology to Elavon, which can be leveraged across the European market,” said Hannah Fitzsimmons, president and general manager of Elavon Merchant Services, Europe.

The agreement was signed on November 17 and is subject to regulatory approval.

EVO Payments Inc., a provider of payment technology integrations and acquiring solutions, announced it has acquired Delego Software, a provider of integrated payment solutions.

First American announced the appointment of Dana Odom to its leadership team as vice president of integrated software vendors, a new position designed to lead business development sales efforts across the company’s vertical-focused integrated payments channel. Most recently, Odom managed the North American ISV channel for Nuvei, following successful tenures at Clearent, TSYS, and PayPros.

Global Payments Inc. has announced an agreement with Desjardins Group to acquire its existing merchant acquiring business and portfolio of approximately 40,000 merchants.

4 Winter 2019 | TRANSACTION trends

Global Payments will enter into an exclusive 10-year marketing alliance agreement, under which Desjardins will refer members to Global Payments for payment technology and acquiring solutions.

Matt Miller has been named senior vice president of sales for NMI. Miller will be based out of NMI’s office in Roselle, Illinois, and will be responsible for leading the company’s global sales team. He also will join NMI’s Executive Committee.

Yuval Ziv has been named managing director of SafeCharge and head of global acquiring for Nuvei. Ziv will develop and execute on acquirer acceptance strategies and will oversee the combined organization’s global acquiring solution.

NXGEN International and Payscape, companies recently backed by Parthenon Capital, have acquired BluePay Canada, formerly known as Caledon Computer Systems Inc. Together, the combined companies of NXGEN, Payscape, and BluePay Canada form a new financial technology company that operates in 46 countries and processes more $13 billion in payment volume annually for over 25,000 merchants.

Paysafe Group has appointed Alan Osborne as its chief information security officer. Osborne will be responsible for cyber and physical security across Paysafe and will lead ongoing development and implementation of the company’s global IT risk and business continuity strategy.

REPAY, a provider of vertically integrated payment solutions, has announced the acquisition of APS Payments, an integrated payments provider focused on the B2B vertical.

The Women’s Network in Electronic Transactions (Wnet) and the European Women Payments Network (EWPN) have announced a collaboration to allow their respective memberships to share the benefits of both networks. Through the new alliance, Wnet and EWPN members will have access to both organizations’ websites, networking opportunities, events, and mentorship programming.

An increase in the quality of cyberattacks and an overall 12 percent increase in the dollar amount associated with fraud were noted during the one-year period from Q2 2018 to Q2 2019, according to Forter’s recently released Fraud Attack Index. Fraudsters are shifting their focus from brute force attacks involving highquantity targets to higher-quality, directed attacks.

Cyberthieves are transitioning their efforts beyond the point of transaction and are gaining access to consumers’ accounts in creative ways. Forter found that more than 1.5 million individuals whose accounts had been compromised also had additional, illegal accounts opened in their names.

Fraudsters also are diversifying into softer nonfinancial currencies and moving beyond transactional credit card fraud into loyalty account fraud and policy abuse, which has risen 89 percent over last year, according to the Fraud Attack Index.

Fraud in the form of buy online/return in-store increased by 23 percent over the previous year, and buy online/pick up in-store also increased by 23 percent. Abuse of couponing programs rose 10 percent, according to Forter.

“The industry as a whole has done a tremendous job detecting and preventing payment fraud at the point of transaction. This eliminates the amateurs. We’re seeing fraudsters now shift their efforts earlier in the customer journey, gaining access to consumers’ accounts,” said Michael Reitblat, CEO and co-founder of Forter. “Merchants need to respond by implementing a continuous and automated approach that assesses events throughout the entirety of the customer journey.

It’s no longer sufficient to focus solely on chargebacks and credit card fraud at the point of transaction. Only a fully integrated fraud prevention platform will enable merchants to address fraud in a holistic and accurate manner across the entire customer journey.”

Zhonghui Bao/Getty Images

Cybercriminals Exploit Gaps in Merchants’ Protocols

Fast Fact

UK cardholders made 1.5 billion debit card transactions and 314 million credit card transactions in July 2019; these numbers are up 9 percent from the same period one year earlier.

Source: UK Finance, October 2019

Infographic Worldwide Noncash Transactions On the Rise 600 538.6

Noncash transactions (billions)

481.2

400

39.8 41.3 72.6

389.0

38.5

357.8

36.8

34.7

34.9 27.3 29.4

30.4

56.9

37.3

200

435.8

98.6

38.9 41.4

103.5

45.4

114.8

50.1

124.4

43.1 49.3 96.2

Global Latin America Middle East, Africa

55.6

133.8

Emerging Asia Mature Asia-Pacific Europe (Including Eurozone) North America

130.3

137.9

145.4

152.9

160.6

2013

2014

2015

2016

2017

0

Source: “World Payments Report 2019,” published by Capgemini, Capgemini Financial Services Analysis, 2019, www.capgemini.com

TRANSACTION trends | Winter 2019 5

INTELLIGENCE

Transaction value for digital and physical goods purchased via remote payments is expected to exceed $6 trillion in five years, representing a growth of 53 percent from current transaction volume, according to the report, “Mobile & Online Payments for Digital and Physical Goods: Opportunities, Pain Points, and Competition, 2019-2024,” published by Juniper Research.

Purchases made via mobile device are expected to increase approximately 60 percent by 2024, according to Juniper, with 21 percent of purchases being made via PCs, laptops, and connected TVs. Because more simple and everyday transactions will be completed online, the average value of individual transactions is expected to decline.

Physical goods will account for almost 80 percent of online retail purchases in 2024, according to the research. Juniper predicts that traditional retailers with omnichannel offerings will likely be successful. “Bricks-and-mortar retailers have to go beyond simple e-commerce to become digital-first companies,” said Morgane Kimmich, a research author. “Retailers must fundamentally embrace the digital era by optimizing data analytics and embracing new technologies, enabled by radical internal organizational change.”

Juniper also assessed the digital strategies of 25 leading

Muhla1/Getty Images

Online, Mobile Sales To Grow More Than 50 Percent by 2024

bricks-and-mortar researchers, and named Home Depot as the top company in terms of agility and innovation in e-retail.

“The Home Depot’s retail services are built on an omnichannel strategy, offering customers a comprehensive network of physical stores alongside robust online shopping experiences,” concluded Juniper. “Analytics [are] leveraged to adapt to evolving customer behaviors and AR technology to enable customers to visualize virtual products in the real world via their smartphones.”

agrobacter/Getty Images

U.S. Consumers Continue To Carry Cash

6 Winter 2019 | TRANSACTION trends

Cashless payments have become omnipresent, but consumers still want flexibility in their payments choices, according to a new J.D. Power Pulse Survey. Despite using credit and debit cards, 82 percent of consumers continue to carry cash, including 78 percent of 18- to 29-year-olds, according to J.D. Power. One in four said they typically carry at least $50 in cash.

Sixty percent reported carrying cash in case of emergency, while 50 percent want to have cash on hand for small purchases, according to the survey results. In addition, 40 percent carry cash to pay tips, and 30 percent use it in stores where cards are not accepted. More than three-quarters of survey respondents (78 percent) said they believe stores and restaurants should be required to accept cash.

Of those surveyed, 67 percent had used cash to make a purchase the previous week, compared to 61 percent who had used a debit card, 54 percent who had used a credit card, and 20 percent who had used a mobile wallet to make a payment. Many survey participants also cited security breaches of electronic payments as a concern and a reason for continuing to make cash purchases.

ETA HAPPENINGS

1

2

3 6

4 7

5

1. ETA members attending the Annual Fly-In visit Capitol Hill before morning meetings.

2. ETA SLF attendees make connections at the Mastercard Opening Reception on the Grand Lawn.

3. Global Payments Inc. CEO Jeffrey Sloan gives the opening keynote at ETA SLF. 4. 2019 ETA Hall of Fame honoree, Linda Perry, gives her acceptance speech during the Induction Ceremony at ETA SLF. 5. Mastercard Chief Privacy Officer Caroline Louveaux gives the morning keynote at ETA SLF. 6. Thursday Networking Reception sponsored by Worldpay, from FIS at ETA SLF. 7. Courtney Robinson, financial inclusion lead at Square (right) and Melissa Koide, CEO and director at FinRegLab (center) discuss financial inclusion through fintech at the Fintech Policy Forum, which was moderated by Andrew Bigart, partner, Venable LLP (left).

TRANSACTION trends | Winter 2019 7

&

POLITICS

POLICY

A Taxing End to the Year Critical changes at the state level coming in 2020

By Scott Talbott

B

E-Commerce Tax Laws

In June of 2018, the U.S. Supreme Court handed down a decision in South Dakota v. Wayfair. The primary question was whether state governments could require sellers with no physical state presence to collect and remit sales tax for goods sold within states. The court decided state governments were in fact allowed to do so, changing the way merchants collect sales tax from their out-of-state customers.

Prior to the ruling, the old test required a merchant to have a physical presence in the state to collect sales tax on purchases from consumers who lived in that state—a “substantial nexus” the Court ruled was not outdated. Under the new regime, sales tax collection requirements are also based on the merchant having an “economic nexus” with its out-ofstate customers’ home state. The new test is for merchants to collect sales tax from customers residing in states where the merchant makes $100,000 in annual sales or 200 transactions.

As a result, state policymakers began to update their sales tax laws to reflect the Wayfair decision.

This issue affects ETA members who work directly with merchants, specifically those who work with small merchants and those who operate in states where payment services are considered taxable.

In updating their sales tax laws to reflect the decision in Wayfair, some states struggled with the complexity of collecting sales tax from online stores, like Amazon and eBay. To address this challenge, some states are using the concept of “marketplace facilitators.” A marketplace facilitator is a shopping platform like Amazon or eBay, where buyers and sellers are connected. However, there is a risk that a state taxing 8 Winter 2019 | TRANSACTION trends

mediaphotos/Getty Images

enjamin Franklin famously once wrote that the two certainties in life are death and taxes.

But as payments industry professionals, we like to amend this phrase: taxes, and very active and complex environments of state legislations regarding taxes, are certainties for this industry.

While this doesn’t ring quite as nicely as Franklin’s idiom, it is a serious trend in payments. There are two key policies where state sales tax laws are in flux: e-commerce sales and real-time sales tax collection. Though different, and sometimes affecting different states and types of payments companies, both legislative trends represent potential changes to compliance, the cost of business, and industry classifications in the eyes of state governments nationwide.

authority could apply the term, and thus the responsibility to collect sales taxes, to ETA members like payment processors and/or payment facilitators, which play a role in payments but do not selling anything. Such an attribution could create negative effects on the ability to conduct business across borders. ETA worked with many states to include specific language excluding payment processors from the definition of marketplace facilitator.

Additionally, a court case currently pending before the Louisiana State Supreme Court addresses the question on whether Walmart, in its capacity as a marketplace, is responsible for collecting sales tax from sales made by third-party vendors that utilize its web-based marketplace. Such a change would mean that payment processors would be responsible for collecting sales tax made by third-party vendors. ETA filed an amicus curiae—a “friend of the court” brief that expresses our opposition to the application of the state sales tax law to processors.

The bottom line is that the door has been opened for state governments to re-examine their sales tax collection laws for merchants, which could create challenges for payment processors and ETA members. ETA engages with policymakers across the country to lend expertise and resources, provide access to ETA member experts, and help build support for laws and regulations to create a secure and reliable payments ecosystem.

Real-Time Sales Tax

Currently, in state houses across the country, efforts are underway to implement real-time sales tax collection requirements.

These efforts are usually tied to policymakers modernizing tax collections and closing revenue gaps in their budgets.

Real-time sales tax collection legislations ask payments companies to calculate, collect, and remit the sales tax portion of purchases to state governments in real time. To someone with no knowledge of the acquiring industry, this seems simple enough a task. However, to mandate such a monumental change would cost significant compliance costs for payments companies and merchants, resulting in higher prices for state consumers—all with no tangible gain to the states.

The presence of real-time sales tax collection in this docket is unfortunate and monotonous. Over the past two years, we engaged in education in 50 states and direct advocacy in three on this bad proposal.

ETA is working to educate policymakers on the costs and impact of such significant changes to payments processing.

Engage in 2020 and Beyond

With such critical changes coming at the state level, and accelerating activity into the new year, now is a great time to engage with ETA to stay up to date on the latest changes that will affect your business.

ETA has prepared resources to help members and their merchant customers stay in compliance with new tax laws.

A state tax chart shows mandated intrastate sales tax collections, specifically when retailers sell taxable goods or services

to customers in different states. ETA’s memo on marketplace facilitators is a high-level, state-by-state chart that lays out how states have defined the term “marketplace facilitator.” It is a useful tool to understand how states are looking at sales tax obligations, and how it applies to payment facilitators and payment processors. These resources are free to ETA members and available on ETA’s website.

Further, subscribe to Voice of Payments: It Pays To Be Heard, ETA’s monthly grassroots advocacy newsletter. Voice of Payments: It Pays To Be Heard is a member benefit that delivers digestible, actionable updates from the federal and state government affairs departments to help you advocate for payments, without retaining lobbyists or maintaining a presence in Washington. ETA members subscribe on ETA’s website.

Finally, join us at ETA events in Washington and across the country. ETA routinely hosts fly-ins, policy briefs, lunch and learns, networking events, and other forums designed to put policymakers in touch with payments industry experts. As you plan your travels for 2020, make sure you plan to participate in ETA’s advocacy efforts.

Changes to the law at the federal and state level, particularly ones that impact taxes, are certain to happen in 2020.

Together, we can work to keep our industry compliant, active, and innovative. TT Scott Talbott is senior vice president of government affairs at ETA. For more information, please contact Talbott at stalbott@ electran.org or Grant Hannah, government affairs coordinator, at ghannah@electran.org.

TRANSACTION trends | Winter 2019 9

INDUSTRY AFFAIRS

Gearing Up for Gen Z Young consumers demand payment options, presenting challenges and opportunities for payments companies

By Amy Zirkle

N

kate_sept2004/Getty Images

o conversation about technology—in payments or otherwise—is complete without making mention of the first digitally native generations: millennials and Gen Z. With these new consumers come demands for innovation, but also new opportunities for revenue—and, of course, some challenges.

Millennials are the first digital generation. Now leaving their salad days of early adulthood, millennials and their payment preferences have informed the strategies and products of payments companies in the last decade or so.

Payments companies realized that legacy products—magstripe terminals and magstripe cards alike—simply would not catch the attention of millennials in the same way that sleek, tech-forward, integrated systems would. Take the proliferation of imbedded payments, loyalty and order-ahead apps, smart terminals, swipe dongles, and mobile commerce as examples of tech innovation meeting demand for new products.

Which is not to say millennials reinvented the wheel for the payments ecosystem, on the issuing or acquiring

10 Winter 2019 | TRANSACTION trends

side. “Plastic” is still very much at the top of the charts for consumer popularity. Not only are credit and debit cards the most popular electronic payment type, they are the most popular payment type outright in the United States. In fact, plastic cards are predicted to become more popular and more frequently used in the years to come as we move toward cashless commerce and more integrated e-commerce, like buy-online/pick-up-in-store and mobile order ahead.

For Gen Z, a new slate of payments products is coming into relevance, and these innovations are truly changing the way young consumers expect to engage in commerce.

Gen Z is a generation defined by tech-savvy consumers reaching the end of adolescence and the beginning of early adulthood. As a digitally native generation and the first to grow up in the constant presence of smartphones, Gen Z is increasingly defined by its trend-setting preferences for new payment types.

According to a recent study from ETA member Paysafe, Gen Z consumers have more experience making inapp payments on their smart devices, including tablets and phones, than any other generation; they are twice as likely to make such payments. Further, the study found that one in three Gen Z consumers have used a mobile wallet like Apple Pay or Google Pay, and 14 percent use these apps regularly.

The trend is true of millennials, too. About half of Gen Z and millennial consumers buy goods on their phones more frequently than any other platform, Paysafe found, whereas only about one third of Gen X and 10 percent of boomers prefer mobile shopping. The majority of early adopters of mobile payments technology fall between the ages of 18 and 34, according to Payments Industry Intelligence.

Voice commerce also offers a look into the types of embedded, frictionless payments the next generation of consumers will demand. Fifty-two percent of Gen Zers said they would use a voice assistant to pay for a subscription service, and 51 percent said they would make a one-off

purchase using a voice assistant like Amazon’s Alexa or Apple’s Siri.

Similar changes in consumer demand can be seen in the way people pay one another. According to BillTrust, 30 percent of Gen Z consumers have never written a check, preferring to transfer funds electronically, and 79 percent use peer-to-peer apps on a regular basis.

All of these trends represent opportunities. Think of the ways mobile payments have changed transportation through apps like Uber and Lyft, or the way one-click ordering has powered mobile commerce growth. As brick-and-mortar retail becomes more integrated with e-commerce and smart devices—not only phones, but wearables, smart speakers, cars, and even houses—take a larger role in the commerce experience, convenient and secure payments technology opportunities seem limitless. ETA members stand to gain as they create and monetize payments innovations that will power these types of solutions.

All of this is very aspirational, but not without challenge.

These products are the “chocolate cake” of our industry: exciting, rich, saccharine innovation that we collectively covet.

However, we also need some broccoli—the diligence, security, and risk mitigation that the payments industry does better than anyone else—in order to ensure success.

And, like the generations of consumers before them, Gen Z consumers are very concerned about security. With new

measures like Secure Remote Commerce, tokenization, biometric authentication, machine learning, and end-to-end encryption, the payments industry is deploying the most secure payments products ever. But additional steps must be taken to ensure that the Gen Z consumers are just as aware of these security measures deployed to protect their data as they are the convenience or power of the new technologies the industry delivers to the market.

It is the challenge of our industry and our association to balance innovation with security, boost awareness, and champion data standards in order to capitalize on new payment methods tailored to the next generation. As the industry’s voice, ETA will work to keep the security innovations prominent in the national conversation on payments technology. We’ll also work with our partners—at the PCI Security Standards Council, EMVCo, the card brands, merchant acquirers, and sales channels—to make sure that the entire ecosystem is represented and recognized for its innovations in security and products alike.

With a new generation of consumers reaching maturity, and new products coming to market to serve that generation, we will only see more innovative, more secure, and more convenient solutions develop. TT Amy Zirkle is vice president, industry affairs, at ETA. Reach her at azirkle@electran.org.

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TRANSACTION trends | Winter 2019 11

THE

BLOCKCHAIN A LT E R N AT I V E

Experts explain how the technology can facilitate cross-border, faster payments, and more

By Christine Umbrell

12 Winter 2019 | TRANSACTION trends

sionals, blockchain’s business value-add is projected to grow $176 billion by 2025, according to Gartner Inc.

Payments Potential

Some companies and merchants are looking to blockchain to facilitate international transactions. Blockchain “has the potential to resolve inefficiencies and provide a faster, cheaper, and more secure alternative” to the current cross-border payments system, says Saiful Khandaker, a software architect and founder of Fama Cash, a global fintech company.

“Blockchain is like a spreadsheet where the record is written, documenting that money comes from User A and is transferred to User B, with all of the records saved in once place.” Payments solutions powered by blockchain are costeffective, almost immediate, secure, and transparent, according to Khandaker, and they have the potential to “solve the problems associated with intermediaries, particularly with cross-border.”

Indeed, cross-border settlements were highlighted in a November white paper from Juniper Research titled “Five Most Promising Use Cases for Blockchain.” The researchers noted that with traditional cross-border models, clearing firms involved in transactions have independent processing systems; each party involved in the process keeps its own copy of each transaction record; and a lack of standardization between clearing houses and banks results in high costs and lengthy settlement periods. A blockchain-based system, by contrast,

spainter_vfx/Getty Images

D

isruptors in the payments industry continue to emerge, presenting both challenges and opportunities for savvy payments professionals. One of the most powerful innovations promising to shake up the traditional payment rails is blockchain.

Blockchain is a distributed database that maintains a continuously growing list of ordered records, called “blocks.” This technology was originally used to facilitate Bitcoin and other cryptocurrencies, but has expanded in use cases over the years and is now being employed to solve frictions inherent in business functions—including monetary transactions.

Some forward-thinking payments professionals are recognizing blockchain technology as an innovation in information registration and distribution. Coindesk notes that blockchains are good for recording both static and dynamic data, and they can store data in three ways: in an unencrypted manner, meaning it can be read by every blockchain participant; in an encrypted manner, meaning it can only be read by participants with a decryption key; or via hashed data, meaning it can be presented alongside the function that created it to show the data wasn’t tampered with.

Blockchain technology offers new tools for authentication and authorization in the digital world that preclude the need for many centralized administrators, enabling the creation of new digital relationships, explains Coindesk.

And perhaps of greatest significance to payments profes-

TRANSACTION trends | Winter 2019 13

Using the new technology, “everything stays in one blockchain, where everyone can see” the movement of funds, explains Khandaker. “It speeds up the settlement process, and it helps with security” as the data stays in one location—within the blockchain.

Once the record is written in the distributed ledger, “it cannot be altered or changed by anyone, and all of the bank and settlement information can be stored in one place.”

matejmo/Getty Images

Blockchain Benefits

“IT’S NEVER BEEN SO EASY TO START A PAYMENT NETWORK THAT SERVES YOUR BUSINESS NEEDS. DEVELOPERS AND COMPANIES CAN SOLVE PROBLEMS ON THEIR OWN WITHOUT WAITING FOR FINANCIAL INSTITUTIONS TO COME OUT WITH A PRODUCT.” —TAMMY CAMP, STRONGHOLD

“would increase standardization [and] substantially reduce the risk of error (including double-spend) and indeed the time taken for error checking,” according to the white paper.

The Juniper report also notes that while the time-based efficiencies inherent in blockchain are a benefit, the greatest “savings” will likely come from compliance and credit history, rather than through paperwork reduction. “Blockchain affords complete traceability of financial documentation, allowing financial institutions to have far greater visibility on participants.”

14 Winter 2019 | TRANSACTION trends

Blockchain-facilitated payments may offer several benefits, but they are likely to gain in popularity as just one option in the payments world—serving as an alternative to, rather than a replacement for, traditional payment rails. “There’s not a clear ‘winner’ yet, and we don’t know that there will be,” explains Tammy Camp, CEO and co-founder of the blockchainpowered financial platform Stronghold, who discussed the topic at the recent TRANSACT Tech San Francisco. Her company offers a “one stop point of integration” for different types of payments, including both ACH and blockchain options, and it has partnered with IBM in cross-border settlements.

“It’s never been so easy to start a payment network that serves your business needs,” Camp says. “Developers and companies can solve problems on their own without waiting for financial institutions to come out with a product.”

The blockchain solution used by IBM, powered by Stronghold, has regulatory components built into the solution, according to Camp. “We ensure regulatory compliance, including built-in KYC [know your customer] enforcement,” she explains. It’s also been designed to freeze assets once suspicious activity is detected, and has revocable permissions built into the infrastructure.

Blockchain facilitates real-time and cross-border payments, all in one—“it can actually happen that fast,” says Camp. In addition, Camp believes that blockchain payments facilitated by her company’s solution are safer than cash—with a much more transparent history. “You don’t know where your $20 bill has been” before it gets to you, “but you can see the full lineage” of funds transferred via blockchain, explains Camp. “You can see where they have been used—that’s what’s so powerful.”

Blockchain technology can scale in meaningful ways, says Camp. In addition to cross-border uses, it also allows payments adoption in some under-served populations. Camp points to the example of cannabis, which is illegal under federal laws but legal under many state laws. “Using these networks [facilitated by blockchain technology] to settle payments in a closed-loop network” is a creative solution for cannabis sales that can help merchants maintain regulatory compliance, she says. “These types of blockchains make a lot of sense.”

Blockchains also can enable “smart contracts” and other token-based transactions that, according to a report from Deloitte, will likely be used in the future to help ensure artists, agents, producers, and other creatives receive their share of revenues generated by their work, no matter how it is used or repurposed.

Early Adopters

Recently, blockchain adoption hit a turning point, with the technology being leveraged for more practical business applications, according to Deloitte’s “2019 Global Blockchain Survey.” In 2018, financial institutions and fintechs led the way in blockchain development. But over the past year, more organizations in more sectors, including technology, media, telecommunications, life sciences, healthcare, and government, have expanded and diversified blockchain initiatives, according to Deloitte.

Globally, large financial institutions and card companies have recognized the potential of blockchain. As of early 2018, nearly 60 percent of the top 50 wholesale banks were engaged in at least one blockchain-enabled industry initiative in trade finance, according to McKinsey & Co. As of mid 2019, that number had increased to nearly 90 percent, according to McKinsey, leaving fewer than 10 banks not pursuing at least one initiative.

The Juniper research found that blockchain-powered B2B “will become increasingly competitive in the future, considering that Visa and IBM launched their respective cross-border payments solutions this year—B2B Connect and Blockchain World Wire, respectively.” As blockchain technology matures and gains wider adoption, the researchers predict that more banks and financial institutions will join the Visa, IBM, and Ripple networks, “which will need to significantly differentiate themselves to attract new customers.” Ripple, a U.S.-based real-time gross settlement company and a provider of blockchain payments, enables its network of more than 200 banks and financial institutions to send money globally using advanced blockchain technology.

Joining the blockchain fray in September, Mastercard announced a partnership with R3, an enterprise blockchain software provider, to develop and pilot a blockchain-enabled cross-border payments solution that will initially focus on connecting global faster payments infrastructures, schemes, and banks, supported by a clearing and settlement network operated by Mastercard.

In another example, J.P. Morgan has created a Blockchain Center of Excellence that “leads efforts for applications of distributed ledger technology within J.P. Morgan,” according to the company’s website. This includes a partnership with Quorum, an open-source blockchain platform based on Ethereum, that “underpins” the financial institution’s Global Network Payments initiative.

Retail Applications

Transaction processing via blockchain in the retail environment, says Khandaker, “is not there yet—but it’s going to happen.”The technology is not fast enough, and cannot process the volume required of the retail environment, but those capabilities are clearly on the horizon, he says.

“Right now, there is no protocol that can process the volume” that the large card companies currently handle, he says. “With blockchain, the speed is not there yet—but it will be.” In fact, his company is considering partnering with the Australian Red Belly Blockchain currently in development by researchers at the Uni-

TRANSACTION PROCESSING VIA BLOCKCHAIN IN THE RETAIL ENVIRONMENT “IS NOT THERE YET­—BUT IT’S GOING TO HAPPEN.” —SAIFUL KHANDAKER, FAMA CASH

versity of Sydney’s School of Information Technologies. Trials of Red Belly have indicated the technology can process between 440,000 and 660,000 transactions per second.

Khandaker foresees a time when payments will be facilitated by blockchain processing solutions at retail establishments via mobile wallet. Banks will likely be involved in these solutions to enable customers to access the funds in their banking accounts, with users’ transaction histories embedded in the blockchain.

Payment via credit also will be an option, Khandaker predicts.

“If you have a mobile wallet and an account where the bank will issue credit,” you will be able to make payments via blockchain technology, both online and offline, says Khandaker. “Then you will settle” and make the payment back to the bank, “and the whole history will be evident in the blockchain platform.”

Merchants that are open to new technologies will likely recognize the value of accepting blockchain payments—which are expected to cost less in processing fees and result in faster receipt of funds.

With this payments evolution will come opportunities for payments professionals—opportunities to innovate. “Payments companies can develop protocols or expand upon existing protocols to create new solutions,” Khandaker says.

Camp cautions payments professionals to do their homework when looking to partner with companies that facilitate blockchain. “There’s a lot of noise out there,” she says. “The blockchain solutions that are suited for payments are not necessarily the bigger names.” Camp suggests looking at the companies that are specifically verticalized for payments.

It remains unknown just how disruptive blockchain will be within the payments industry. But it’s critical that payments professionals recognize that this technology is here to stay. As Khandaker says, blockchain will eventually become part of the mainstream payments process—just one more option for consumers to choose when making purchases. TT Christine Umbrell a contributing writer to Transaction Trends. Reach her at cumbrell@contentcommunicators.com.

TRANSACTION trends | Winter 2019 15

Members of the ETA Hall of Fame are recognized at the 2019 Induction Ceremony at ETA’s Strategic Leadership Forum. From left to right: Paul Garcia (2018), Diane Vogt Faro (2018), Donna Embry (2019), Tom Wimsett (2019), Linda Perry (2019), and ETA CEO Jodie Kelley.

Stalwart leaders and technology trendsetters honored as the 2019 inductees 16 Winter 2019 | TRANSACTION trends

I

n September, five renowned leaders in the electronic payments industry were welcomed into the ETA Hall of Fame. ETA established the honor to recognize the achievements of professionals from all corners of the industry who have made significant and lasting contributions to the payments world.

“The five impressive inductees to the ETA Hall of Fame embody the spirit of bold leadership and innovation that defines the payments industry,” said Jodie L. Kelley, CEO, when they were announced. The honorees were feted at the ETA Hall of Fame Breakfast, presented by Visa, during the 2019 Strategic Leadership Forum in Boca Raton, Florida.

Donna Embry

With more than 50 years of experience in the payments industry, Donna Embry has a perspective that few others can rival. She currently serves as senior vice president of global payments strategy for Evolve Bank & Trust and as president of Embry Consulting LLC. Across her long and distinguished career, Embry has held multiple executive positions in the payments industry, including chief payments officer for Payment Alliance International, executive vice president of product and marketing for Vital Processing, and senior vice president of electronic banking for PNC Bank. While at Vital in the 1990s, Embry led the team that developed and launched VirtualNet, the first network capable of processing e-commerce gateway transactions.

A foreign languages major in college, Embry was introduced to computer programming at BankAmericard, where she was trained by IBM and gained deep understanding of computer languages and IT—a precursor to product development and management. “It changed my life. It changed my career. It actually took me to the heart of payments and to the heart of understanding and learning about technology,” she said during her acceptance speech.

As a member of ETA, Embry’s contributions have been numerous and significant, particularly in the early days of ETA’s professional development programs. She literally wrote the book on the industry, having authored ETA’s first publication, The Encyclopedia of Terminology for the Acquiring Industry, and developed and taught the inaugural introduction series of classes for ETA University.

She’s also received many industry accolades for her accomplishments, including the ETA Distinguished Payments Professional award in 2016.

But success didn’t always come easily for Embry. She describes herself as “extremely shy” in her early career—so much so that it could have stunted her accomplishments. “I was told it would be a career breaker if I couldn’t learn to get up [and speak] in front of people,” she explains, “because I would just stay pigeonholed in building technology and being in the background.”

She persevered with the help of a patient boss and mentor who coached her daily until she was able to present her vast knowledge to hundreds of people. “For me, the biggest obstacle I ever faced was getting past that shyness,” she says.

Embry reflects on the evolution of technology, automation, and interconnectivity during her five decades in the business.

These days, she says social media and “social mobility” are likely to be the biggest catalysts for changing the future of payments.

“Now instead of merchants, issuers, and financial institutions being in the lead, which it was for years, now you’ve got the consumer in the lead. And the consumer is directing how things happen and how things change.”

She advises younger professionals to home in on their passions. “Don’t necessarily be thinking about payments,” Embry says. “Because passion fuels a lot of how you move forward. Capitalize on your strengths.”

Mary Gerdts

Mary Gerdts didn’t set out to become a leader in the payments industry nearly three decades ago; she just needed to pay her bills, so she took a job at a small ISO in Chicago.

Fast-forward more than 28 years. During that time, Gerdts not only mastered the industry, she created a cutting-edge payments architecture and became founder, CEO, and president of two leading payments industry firms. POST Integrations, founded in 1991, provides credit card processing services exTRANSACTION trends | Winter 2019 17

clusively to the hospitality industry, representing a pioneering force in the way hotels are served by the merchant acquiring industry. Gerdts then founded EboCom in 2000 as a technology company providing full service back-office transaction processing, another innovative venture that brought sophisticated automation and efficiency to back-office processes in the industry.

An active member of ETA since 1991, Gerdts served on the Board of Directors for 10 years and was ETA’s president from 2002-2003. In 2004, she was named ETA Member of the Year.

Gerdts also co-founded the Women’s Network in Electronic Transactions (Wnet) in 2005, served as its executive director from 2005-2008, and assumed the role of president in 2008.

Hailing from a mid-western farming community, Gerdts got into payments “quite by accident,” and with “no intention of doing it for a business.” But she made a connection with a director of finance at a local hotel who eventually encouraged her to branch out on her own. “I just fell in love with the hotel industry…and that never changed,” she says.

Despite her tremendous success over the years, Gerdts says she is “most proud of is the beautiful people that we’ve put together as the staff. These are really phenomenal people with great hearts, extraordinarily talented, extraordinarily intelligent,” she explains. “Everybody does their job 110 percent every day.

There are no slackers.”

Looking ahead to the future of payments, Gerdts expects blockchain to become a larger factor. “Blockchain is sitting around the edges and I think, fundamentally, it has a lot of applications in a wide swath of industry,” she says. “I think you’ll see a lot of technology play off of that.”

But an even bigger potential change confronting the payments industry, Gerdts says, is that major tech are players such as Apple and Amazon are milling around. The ramifications could be profound.

“It wouldn’t take much for them to dominate and take over,” she says. “It would not take much for any one of those players … to, for example, buy a back-office process like me and put all the pieces together in a heartbeat—and literally take it from end to end.”

Gertz calls it “an honor and a privilege” to be inducted into the 2019 ETA Hall of Fame.

“My induction came as quite a surprise to me,” she says.

“It has been more than 15 years since I served as the ETA’s president, and I look back with great pride and appreciation for everyone who paved the way before me.”

Pam Joseph

A “well-known, well-respected, and well-liked” trailblazer in the payment space, Pam Joseph is an industry executive with 18 Winter 2019 | TRANSACTION trends

decades of leadership experience.

Currently, Joseph is operating partner with Advent International, a global private equity firm, and was recently named CEO of Clearent. Prior to working with Advent, she was president and chief operating officer (COO) of TSYS, and she served for 14 years as vice chairman of U.S. Bancorp’s payment services division. At U.S. Bancorp, she had executive responsibility for all electronic payment products—a business worth $5 billion—and for 30 percent of the corporation’s revenue. She joined U.S. Bancorp in 2001 through the acquisition of Elavon, where she was president and COO. “Despite the power and the status that she had in the industry, she was really an everyday person,” said John Barrett, president, North America, at NXGEN Payment Services, who was a member of the ETA Hall of Fame Nominating Committee and who introduced Joseph at the ETA Hall of Fame Breakfast. “She was a friend of the ISO, even though she worked for a bank.”

Joseph currently serves as a board director for Paychex, TransUnion, and Adyen. She also is a member of the Board of Trustees for Spelman College and chairman of Women Leaders in Action, a nonprofit organization that helps educate young women in Africa. “[ Joseph is] very much about empowering women leaders in the space,” said Barrett. “She would go out and help anybody that asked to participate in events and organizations that promoted the industry, promoted women leadership, and promoted success across every aspect of payments.”

In 2019, Joseph also was awarded the Pay It Forward Award from ETA in recognition of her impressive legacy of leadership and community service.

“Through her efforts in the industry, she helped pave the way for a lot of the ISOs and MSPs in this business to be a viable distribution channel for payments,” said Barrett.

Linda Perry

From her beginnings as a teller at a Michigan bank during the Vietnam War to her ascent to senior vice president and head of U.S. acquirer and processor sales for Visa in later years, Linda Perry learned the payments industry inside-out.

At Visa, Perry established and developed a department to manage the credit card giant’s relationships with its member-bank acquirers, third-party issuing and acquiring processors, software vendors, and ISOs. After leaving Visa, she created and managed two global acquiring conferences, both in

London. She also ran a payments consulting practice, advising merchants, processors, and acquirers.

Perry is currently a consultant for Digits, a company that provides merchant processing for software platforms. Always willing to share her industry savvy, Perry served for 13 years on the ETA Board of Directors, providing insight into Visa’s views of the acquiring world and, most importantly, promoting the acquiring perspective inside of Visa. Much of Visa’s appreciation of acquirers and ISOs during that time was due to Perry’s perspective and advocacy of the ISO and processing world.

“It’s absolutely no exaggeration to say that in those early days of ETA trying to gain a foothold and the eyes of the card brands, it was Linda that that gave the ETA legitimacy,” said Holli Targan, partner, Jaffe Raitt Heuer & Weiss, and the ETA Nominating Committee member who introduced Perry at the breakfast. “The industry has recognized her significant contributions by awarding her the Mover and Shaker Award, MWA, a Lifetime Achievement Award, and the Most Influential Women in Payments Award, not once, not twice, but three times. Linda has the unique talent of hatching an idea, motivating the people around her, and putting in the hard work necessary to bring it to successful fruition.”

A co-founder of Wnet, Perry says she was lucky to have supervisors early in her career— mostly young men, she notes—who gave her opportunities to spread her wings and develop her skills. “I had really good bosses,” she recalls. “[They] said, ‘Yeah, go try that.’ They didn’t think, ‘Oh, women can’t do this.’”

Perry says staying positive, educating herself, and taking calculated risks served her well over the years. She also advises early and mid-career payments professionals to build strong relationships, respect each other, and “have big dreams and plans.”

“Don’t be afraid to apply for jobs that you’re not quite qualified for, but you know you can do,” Perry says. “Say, ‘Okay.’ Say you can do things. Just go, change paths when you see an opportunity, and take that road.”

Tom Wimsett

Tom Wimsett was just 19 years old when he started out in the payments space. He began doing data entry work with National Processing Company (NPC) in 1983, eventually rising to president and CEO, a position he held from 1998 to 2002. Under his leadership, NPC pioneered industry practices like value-added services, interchange plus pricing, and chargeback automation.

In 2003, Wimsett struck out on his own, forming Iron Triangle Payment Systems. He served as chairman and CEO

until 2010 when he sold the company to Vantiv for $620 million. Wimsett has actively served as a director or advisory board member of numerous payments industry organizations, including MasterCard, ETA, Visa, Discover Card, and NACHA. He also served as a member of the ETA Board of Directors, and in 2008, he was honored as the ETA Member of the Year.

The diversity of scale of the organizations he’s worked with over the years afforded Wimsett “great learning opportunities” that he’s applied to the various positions he’s held during his career. He currently serves as chairman of ControlScan, and as a board director of Revenue Management Solutions. In addition, Wimsett is an independent board director for Jack Henry & Associates.

At his induction ceremony, Wimsett said he had the “good fortune” to meet legendary Southwest Airlines CEO Herb Kelleher, who was renowned for his management style.

“His corporate culture and operating mantra was simple, and it was one that I quickly adopted and tried to employ throughout my career,” Wimsett explains. “Now that mantra is well known today, but it involves putting your employees first, creating a challenging but rewarding and enjoyable environment for your employees, and they’ll take care of your customers.”

Asked what he is most proud of during his career, Wimsett cites his role in bringing more transparency to pricing within the payments industry during his tenure at NPC. “Initially that was a troubling idea to certain folks. And then of course competitors I think felt like that we were opening up a kimono in the industry, but [they] quickly followed suit.”

The industry pioneer also predicts that payments, despite the recent technological disruptions, will continue to be a profitable industry with myriad opportunities.

“For the past three decades, payment card acceptance has generally grown at seven to 10 percentage points greater than GDP,” he explains. “Think about that. If GDP is growing at 3 percent a year, and payment cards are growing at 9-12 percent a year, you’re working in an industry that’s growing at three to four times the growth rate of the general economy. And that’s going to create opportunities for people. I think there’s going to continue to be just tremendous opportunities in the payments industry.”

He also encourages the industry’s ambitious professionals to make use of the ETA. “If your company is not involved in a committee within the ETA, I would strongly encourage you to do so,” Wimsett says. “It’s good for the industry, it’s good for your business as well.” TT TRANSACTION trends | Winter 2019 19

PAYMENTS INSIDER

New Privacy Guidelines Launch in the Golden State The California Consumer Privacy Act empowers consumers to access information on how their data is being collected and used

By Brandes Elitch

How CCPA Came To Be

The journey to the requirements included in CCPA began about two years ago, when Alastair Mactaggart, chairman of the board at Californians for Consumer Privacy, decided to construct a ballot initiative. His group had

Vertigo3d/Getty Images

T

he California Consumer Privacy Act (CCPA) is set to take effect Jan. 1, 2020, with enforcement beginning on July 1, 2020. Consumers in California have many new rights under this law, which features comprehensive information privacy requirements.

Now is the time for merchants to evaluate how they collect and store a consumer’s personal information, provide transparency and notice to the consumer, and respond to consumer requests for information and erasure.

With the law taking effect imminently, payments professionals and merchant clients should understand that CCPA may have relevance even for those companies that are not actively engaged in collecting consumer personal data. Consider the customer relationship management systems (CRMs) in place at many companies—these systems are used by salespeople, customer service representatives, vendor and supply chain management, and other departments, including recruiting, marketing, and warranty and repair service.

Increasingly, the independent software vendors (ISVs) that payments companies work with are building CRM into their software platforms, right along with time and attendance, inventory management, and scheduling capabilities. CRMs are just one example of how payments companies might be interacting with consumer data.

observed that a small number of mega corporations had access to a great deal of personal information about the consumers who use their services.

During fall 2017, they submitted their plan and started gathering signatures for a statewide ballot initiative. In May 2018, Mactaggart’s group was approached by two members of the California legislature, Sen. Bob Hertzberg (D-Van Nuys) and Assemblymember Ed Chau (D-Monterey Park). Hertzberg and Chau asked Mactaggart to withdraw the ballot initiative if they could get the state legislature to pass a law addressing the concerns outlined in the initiative. A few weeks later, CCPA was

Learn more about the California Consumer Privacy Act and its effect on your business. Visit www.electran.org/industry-affairs to download the ETA CCPA White Paper.

20 Winter 2019 | TRANSACTION trends

voted into law unanimously by the legislature and was signed into law by the governor. The law is subject to enforcement by the California attorney general, with penalties of up to $2,500 per violation.

The new law is complicated, and many details have yet to be worked out. But the general goals, as explained by California policymakers, are to offer consumers dedicated pathways to access information on how their data is being collected and used, and to put controls in the hands of consumers on how their data is monetized.

This includes data that is typically considered personal identifiable information under U.S. state data breach laws, including names, unique personal identifiers, account names, Social Security numbers, driver’s license numbers, passport numbers, and biometric information.

However, the law also includes aliases, IP addresses, personal property records, geolocation

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data, internet history, professional and employment information, and education information.

For example, the legislation gives consumers the right to receive answers to their requests for information at no charge, and within 45 days, in an electronic format that they can transfer, for the 12-month period preceding the access request. The request should be made in writing in a “readily usable format” and delivered through the consumer’s account by mail or electronically, as chosen by the consumer.

A business that collects consumer information is required, “at or before the point of collection,” to inform the consumer about the categories of personal information it collects and the purposes for collection during the previous 12 months, and provide notice of additional collection in the future. The consumer must be informed that he or she has the right to request deletion of personal information.

Additionally, if a business sells consumer personal information or discloses it for a business purpose, it must release the categories of personal information sold in the last 12 months, or notification if not sold, and the categories of personal information disclosed for a business purpose in the last 12 months, or notification if not sold.

These consumer “rights” represent just a sample of the new regulations facing data usage.

that exist today to manage the data governance process • How to address existing privacy controls and areas of concern that do not currently meet CCPA requirements • W hat is required to create a CCPA management program, including staffing and funding; how to address accountability and implementation, including ongoing monitoring and remediation; and how to help consumers exercise their rights.

Implications Beyond California

Perhaps the most surprising aspect of the new law is that the legislature governing the fifth largest economy in the world adopted this legislation in just one month’s time—and voted unanimously to do so. This indicates the level of discomfort that consumers have regarding the collection and sale of their data. Of course, consumers fear this data will be stolen in a data breach and used to compromise their payment information.

The California legislature acted because it saw no meaningful action by the large players that collect and sell this data. The breaches kept happening, even after these firms insisted that they were taking privacy protections seriously.

22 Winter 2019 | TRANSACTION trends

Brandes Elitch is director of partner acquisition, CrossCheck, and a member of the ETA Payment Sales and Strategy Committee.

ADVERTISERS INDEX

Prepping for Compliance

Businesses that could be affected by CCPA should conduct a comprehensive data mapping and inventory of personal information they have acquired or sold, update their privacy policy and California-specific consumer rights disclosures, and add the required “Do Not Sell My Information” link to their website.

According to a 2018 survey by PriceWaterhouseCoopers, 64 percent of businesses surveyed had not yet started to prepare for CCPA requirements. Payments companies can assist merchants in their compliance efforts by providing education on the following topics: • How to document current policies and procedures to collect, classify, and monetize personal data • How to identify capabilities and resources

ETA saw more than half of all states introduce data bills last year, and the organization anticipates more in 2020.

There are myriad restrictions, guidelines, and practices that the new law requires, and not all of them are relevant to payments companies. However, this law will have an impact on ETA member companies, and as an association, ETA must be focused on empowering its members with resources. For a more comprehensive look at the rules and regulations and how they impact businesses, download the ETA CCPA White Paper, developed by the ETA Payments Sales and Strategy Committee.

ETA member organizations, such as ISOs, MSPs, and ISVs, will have many clients that will come under the requirements of this new law. Merchants will look to payments companies to help them navigate compliance here, so it will pay to be familiar with the legislation and its requirements—this is the new normal.

Make sure to employ ETA resources, like the CCPA White Paper, to stay prepared. TT

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Jodie L. Kelley As CEO of ETA, Jodie L. Kelley brings more than 25 years of experience managing and providing strategic guidance to large organizations. Prior to joining ETA in September, Kelley was senior vice president and general counsel of BSA, The Software Alliance, where she oversaw revenue-generating activities for the organization, managed programs that support the software industry in more than 30 countries, and served as spokesperson for BSA and the business software industry.

Here, she talks to Transaction Trends about her move to ETA and future plans.

What attracted you to come to ETA?

What first attracted me to ETA was the industry. The payments industry is fascinating— innovative, dynamic, and evolving at breathtaking speed. It is essential to modern commerce and is converging with technology to fundamentally shift for the better the way that individual consumers live their lives and organizations run their businesses. It’s a complex but elegant ecosystem of businesses working together to create secure, accessible, and profitable products for consumers and businesses.

Once I learned more about the organization itself, I was even more attracted to the opportunity. This is a world-class organization that has a talented staff and an incredibly impressive roster of members. It offers a diverse array of products and services to its members, providing networking, thought leadership, education, and advocacy that is second to none. Together, that made clear that this was a tremendous opportunity.

What are your primary goals for your first year at ETA?

My primary goal is to ensure that ETA delivers the greatest value possible to our members in a rapidly evolving, highly competitive marketplace. It’s an exciting process and a challenging one. We need to ensure we understand the industry at a deep level, and that we’re thinking down the line and positioning ourselves to help our industry thrive.

It’s a fascinating time to be engaging in this introspection. ETA turns 30 in 2020, just as the industry is evolving in fundamental ways. As we celebrate all we have accomplished, we’re laser focused on ensuring that we are looking forward and building on our incredible history by creating new products and improving existing ones, dialing in on exactly what each segment of our diverse membership needs. That way, we 24 Winter 2019 | TRANSACTION trends

can strengthen our industry and our organization for the future.

tives of our members, so I see ETA leaning into that more in the future.

Who will be ETA’s core members in 2020 and beyond?

What is ETA doing to educate members and keep them informed on new technologies?

At our core, ETA represents payments. But what it means to be a payments company is changing rapidly, and our membership is changing with it. Traditional players remain a critical component of the eco-system and remain core members. But as technology converges with payments, as fintechs, ISVs, and others enter and help transform the space—and, in many cases, partner with traditional players—they are joining ETA as well. That is a strength—and a sign that we remain the place the industry turns for representation.

The payments industry is under increased federal and state-level scrutiny. What plans does ETA have to continue to address this?

There is no doubt that the payments industry is becoming more and more interesting to consumers and policymakers alike. One of our fundamental missions as a trade association is to be front-line advocates for our members, and given this increased focus, we will increase our efforts as well.

ETA advocates in DC, in the 50 states, and in Canada for good public policy to help ETA members to serve consumers and small businesses. ETA also provides its members with avenues to communicate with policymakers and shape policies that grow our ecosystem.

These programs—like our Voice of Payments: It Pays To Be Heard newsletter and ETA Action Alerts—are important tools we provide to payments professionals on the ground to support our initiatives. The most effective tool in our advocacy toolkit is the expertise and perspec-

Education is core to ETA’s mission, and there are lots of ways members can access the education we provide. From our biggest event— TRANSACT—to smaller events including TRANSACT Tech in Atlanta and San Francisco, to podcasts, newsletters, whitepapers, infographics, industry research, this magazine—if members are looking for information on a topic relevant to our industry, they can find it at ETA. We also offer formal education through ETA University and a certification, the Certified Payments Professional, which we’re currently updating.

I’m particularly excited about the programming at the TRANSACT. We always have such an incredible community of experts that exchange ideas every year at that event; this year—as we celebrate our 30th anniversary— we’ll have an increased opportunity to highlight the rapid innovation powering our industry on the largest stage in payments.

Anything else you feel is important to tell our readers?

Reach out to me! Send me an email, give me a call, find me at an industry event, or meet me for coffee as I travel for ETA. I would love the opportunity to connect with you and learn how ETA can better serve you and your business.

I’m also now on Twitter, so connect with me on social media as well. At the end of the day, our work at ETA is informed by what we learn from our members. So please, if you have ideas, feedback, or just want to introduce yourself, don’t hesitate to do so. TT

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