Industry Pulse

Credit CheckMobile WalletInformed InsightIndustry PulseQ4 2014

Trends and Regulatory Updates

Last Updated:  Dec 14th, 2014

Trends to Watch

  • Alipay: Chinese e-commerce sales tripled from 2006 to 2013, surpassing the U.S. with $294 billion in transactions last year. The driving force behind this growth is AliPay.
    • Alipay: $519 billion processed in 2013, ~50% of China’s total e-commerce
    • PayPal: 30% of U.S. total e-commerce transactions
    • Amazon: 20.6% anticipated market share in 2016
  • M-PESA: Kenya currently boasts the highest rate of mobile payment technology adoption, as more than 80% of the country’s population pays for goods and services on their smartphones.
    • How it works: Like buying minutes on a pay-as-you-go phone plan, M-PESA users purchase “mobile money” that allows users to transfer funds to individuals or businesses via text.
    • 17 million Kenyans use M-PESA, accounting for 31% of the country’s GDP
      • Beyond ease of use, this technology is also improving incomes. Rural Kenyan households that adopted M-PESA, saw a 5%–30% rise in income.
  • Launch of MCX: Announced in August of 2012 and expected to launch this year, the MCX, or Merchant Customer Exchange, is an attempt by over 55 retailers to provide a singular mobile wallet option to their customers. MCX is expected to launch during 2014, however no firm date has been released at this time.

    • MCX’s recent partnership with Paydiant will allow MCX members to integrate complete mobile wallet capabilities and value-added services into their own branded iPhone and Android applications. Going beyond payments, the MCX wallet will allow merchants to develop integrated loyalty and rewards programs.

  • Big Box omni-channel is gaining momentum.
    • According to a June 2013 study by RSR, creating a consistent customer experience remains the most valued retailer capability, but 54% OF RESPONDENTS indicate their biggest inhibitor is lacking a single view of customer across channels.
    • 75% OF RETAILERS surveyed said that omni-channel fulfillment was “VERY IMPORTANT.”
  • Retailers currently perceive creating enterprise-wide visibility as the best opportunity for technology enablement. However, customer visibility, customer insights, and a single customer interaction platform that crosses channels all present huge opportunities and returns for retailers able to incorporate them into their sales and marketing.
  • As detailed by Forbes, many big name retailers have shifted from attempting to leverage social media to generate sales and instead are using the channels to generate customer "delight"


Regulatory and Technology Update

  • IRS
  • The IRS has recently issued guidance that Bitcoin will be taxed as property. The implications of this are a big deal because that means that if Bitcoin is sold at a profit, it's subject to capital gains tax, potentially requiring users to track their purchase and sale price for each bitcoin.
  • Durbin Amendment
    • On July 31, 2013 U.S. District Judge Richard Leon sided with retailers and rejected the debit interchange rate cap set by the Federal Reserve under the Durbin Amendment in 2011. Judge Leon’s decision could result in reduced debit card interchange rates by more than 50%.
    • Based on the original amendment, the Federal Reserve capped transaction fees for debit cards at 21 cents per transaction for large institutions (greater than $10 billion in assets) with an additional allowance of 5 basis points (.05%) of transaction value to account for fraud losses, and an additional $.01 cent per transaction for fraud prevention (if certain fraud prevention standards established by the Board are met).
  • EMV
    • Visa Inc. and PULSE, a Discover Financial Services company, have annoaunced an agreement to enable financial institutions that issue EMV debit cards on both the Visa and PULSE networks to use Visa's common debit solution.>

    • The cost of updating non-EMV complaint hardward is expected to cost north of $6 billion dollars over the next 3 years, with the bulk of this spending occuring in the early part of 2015 as major retailer rush to update their exsiting infrastructure.

    • EMV Rollout: Encrypted cards make up between 1% and 5% of the cards currently in circulation in the US, but rapid card turnover and commitment from the banking industry has experts expecting this number to climb to 90-95% within the next 2 years.

    • Visa intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions, effective October 1, 2015.
    • MasterCard's April 2013 acquirer readiness date represented the first step in preparation for MasterCard’s liability shift, which takes effect October 1, 2015 (not including fuel). With the full liability shift for all transactions scheduled for October of 2017.
    • The US has been the number one country for credit card fraud in the last five years due to lack of chip payments, a figure that is estimated to cost card issuers $2.4 billion annually.
    • With EMV migration ongoing and deadlines for retailers to implement active EMV readers by October 2014, it is important for eCommerce retailers to prepare themselves as well.
      • From 2002 to 2012, card present fraud dropped 67% as the UK rolled out their adoption of EMV.
      • However, in the initial years of the rollout card not present fraud saw a 69% increase in fraud.
      • As ecommerce merchants instituted new policies to avoid fraud and the processing companies updated their algorithms, card not present fraud has since dropped to its lowest levels ever.