Welcome to 2016.
By the time you’re reading this, you’re probably putting most of 2015 behind you — except for crunching those final numbers as the fourth quarter wraps up. But before you dismiss the year that way, PYMNTS has gathered the stories that drove its ecosystem in 2015 by recapping what perked our readers’ interest most in 2015.
Topping that list, of course, is Apple Pay, mobile payments, Amazon, Amex, Target, data breaches, eBay’s slump and some more bank hacks.
So, before you bid adieu to 2015, catch the biggest stories of the year (in payments) that will shape what’s to come for 2016.
1. Could Amazon Do To Groceries What It Did To Books?
In April 2015, MPD CEO Karen Webster wrote about Amazon’s launch of Dash, saying that it “might be the best look we’ve had so far into how Amazon thinks about omnichannel.”
And its plans to totally disrupt the grocery category, for a start, she noted.
“Omnichannel was a topic of passionate debate at Innovation Project 2015 and a concept that all retailers are trying vigorously to enable. Pure-play etailers, like Birchbox, Nasty Gal and Warby Parker, are opening physical storefronts. Pure-play retailers, like Max Mara, Oscar de la Renta and Louis Vuitton, now have online sites. Multichannel retailers, like Nordstrom, Macy’s and Best Buy, were among the early adopters of online and are doubling down on their ability to let consumers toggle seamlessly between digital and physical retail channels,” Webster continued in her column.
With everyone this year in a mad rush to go “omni,” consumers with digital tools at their fingertips and a future that will be driven by the Internet of Things just puts more pressure on retailers to move right along with them. Online marketplaces, like eBay, 1stdibs, Alibaba and even Etsy — and more recently Groupon and Square — have put in place their own omnichannel on-ramps for merchants who are part of those marketplaces.
Of course, Webster noted, “It’s no big secret that Amazon’s ambition is to make Amazon the center of a consumer’s shopping universe — for consumers to start their discovery there and end up with a virtual basket of goodies bought and paid for on their site. And that’s not entirely surprising since its virtual storefront was the only one it’s had now for more than 16 years. Over that space of time, it’s built a marketplace behemoth around the notion of easy, one-click checkout.”
But what does that vision look like? Read the rest of her column here.
Imagine this scenario.
Susan is driving around town and realizes her car is low on gas. She isn’t quite sure where the closest station is. She can’t use her phone to search since she’s driving. Her purse with her wallet in it is in the backseat and out of reach.
Luckily for Susan, she’s driving one of the cars that’s powered by SAP’s newly launched Vehicles Network. The SAP Vehicles Network, an endeavor three years in the making, leverages the cloud and connected commerce to allow her to find not only the closest gas station but the closest one with the cheapest gas.
Once there, fueling up doesn’t even require that she climb into the backseat to retrieve her purse and wallet. Data shared via the cloud activates the pump she pulls up to. All she needs to do is put the gas in her car, and the SAP Vehicles Network does the rest. Payment is completed via the Samsung Pay app, as well as other partners, including FIS, ZipLine and P97.
The SAP Vehicles Network was announced on Oct. 20 and marks the first of its kind for SAP in the mobile payments space. It’s partnership with Samsung Pay also has the potential to accelerate the usage and adoption of Samsung Pay, given the ease of use and frequency with which consumers drive their cars and fuel up. Samsung/SAP’s car commerce was born out of co-innovation projects with companies including Volkswagen AG, Shell, Verifone, Toyota Info Technology Center U.S.A. Inc. and BMW AG.
But that’s just the tip of this connected car commerce innovation.
Once Susan has filled up and is back on the road, the SAP Vehicles Network can help her reserve parking, open off-street parking gates and pay for on-street parking — all via her Samsung Pay mobile wallet.
3. Have Amazon’s Chickens Come Home To Roost?
Amazon’s Q3 earnings announcement is a tale of two companies.
A year prior, Amazon’s quarterly results were so bad that even The New York Times was mocking the company with its report, which kicked off with a snarky lede: “The chickens are not coming home to roost at Amazon just yet, but they are checking the flight schedule to Seattle.”
And rightfully so.
Amazon’s 2014 Q3 earnings showed an operating loss of $544 million, despite having $20.58 billion in sales. The loss was more than 20 times that of the $25 million in 2013’s third quarter earnings. One year later, it appears those chickens had come home to roost. Which, for Amazon, means turning a profit — and the eCommerce giant did so for the second quarter running. So, the question is: Has a new Amazon arrived? Earnings beat expectations as Amazon posted a profit of $79 million on a revenue of $25.36 billion. This is a stark contrast from the company’s previous operating losses.
Earnings were boosted by particularly strong sales in the U.S., which were up 23 percent on the year to $25.4 billion. Operating income was $406 million in the third quarter. Cloud computing also gave the eCommerce giant a boost for the quarter.
Amazon’s strong results shot its stock up 10 percent on Thursday (Oct. 22) during after-trading hours, where it closed at $618.70/share. This quarter’s strong results followed a strong Q2 when Amazon posted a quarterly profit of $92 million (a nice change of pace from the $126 million loss a year prior). During that quarter, Amazon’s stock price closed up almost 19 percent during after-trading hours and secured its place as the world’s biggest retailer by market cap, knocking Walmart out of the position it held for a very long time.
4. Unmasking Dread Pirate Roberts — The Bitcoin Edition
If only Piper Chapman’s (the protagonist in the Netflix series, “Orange Is The New Black”) girlfriend knew the alleged Dread Pirate Roberts and his Libertarian bitcoin Web project, Silk Road, maybe she wouldn’t have had to ask Piper to carry the suitcase full of drug money that landed Piper in the slammer.
In the drama that unfolded in a federal courtroom in New York, Silk Road’s alleged mastermind, Ross Ulbricht, AKA the now-convicted Dread Pirate Roberts, was on trial with details salacious enough to be Netflix’s next miniseries. Or the sequel to “The Princess Bride.” Dread Pirate Roberts is a character in this classic book and film, whose identity is never known and easily mistaken.
“Ross was the perfect fall guy,” the defense claims.
And so the drama behind the Silk Road trial began. In this case, the Silk Road isn’t a story of the ancient silk and spice trading routes to Asia. It’s about drugs, bitcoins and the leader who masterminded it all. And the real identity of that mastermind.
The journey down the Silk Road since Oct. 2013 wasn’t smooth sailing for Ulbricht, a Texan with a degree in physics, who was eventually convicted in February (and sentenced to life in prison in late May) of being the Dread Pirate Roberts — AKA the alleged captain of the site used for drug trafficking, money laundering and criminal activities. That site was sunk when the FBI busted it after a two-year investigation that followed the bitcoin trail into the newest generation of cybercrime on the Dark Web.
So, was the man who says on his LinkedIn profile that he wants “to use economic theory as a means to abolish the use of coercion and aggression amongst mankind” the same man who created the site that the federal government says ran the massive online illegal drug trade that brought in billions of dollars for selling heroin, cocaine and crystal meth? Those billions of dollars, however, were masked by the allegedly unsuspecting digital currency known as bitcoin that allows users to mask their true identities.
According to a federal jury and judge, the answer was a resounding yes.
5. New Year, Better Ways To Hack ATMs
Nope, this isn’t a projection for 2016.
This was a story that came out in early Jan. 2015 that dug into how the world’s cybercriminal population isn’t always on the hunt for better and more efficient ways to use technology to separate individuals from their money.
With the new year in 2015 came a new variation on the ATM skimming attack that started cropping up throughout 2014. Called “black box” attacks, they rely on hooking up an ATM to a piece of hardware (a “black box”) in order to push commands that force the machine to dispense cash.
What this report showed is that thieves in 2015, however, seemed to have begun refining the method some, according to security blogger Brian Krebs. Particularly enterprising cybercriminals recently added an element to the black box attack — a USB-based circuit board that investigators believe was used purely to fool the ATM’s core into believing it was still properly connected to the cash dispenser.
6. Auction Sales On eBay Down Sharply In February 2015
It’s been a roller coaster of a year for eBay. Now, forging into 2016, it’s first full year without PayPal under its umbrella, eBay has a lot to prove in terms of getting its marketplace back on the map. And 2015 proved to be a challenging one for eBay as it already had hit a snag by the second month of the year.
In February, eBay saw its signature online auction sales fall by 26.2 percent, according to data from ChannelAdvisor.
“Auctions are not convenient, and they’re really only good for a niche part in today’s eCommerce world,” ChannelAdvisor CEO Scot Wingo noted on the precipitously falling numbers. “As eCommerce has gone mainstream, people are less into it for treasure hunting.”
Wingo noted that the recent trend among shoppers online has been pointedly away from the deal-hunting type satisfaction that eBay auctions (and possibly online flash sales) bring to consumers. Instead, it seems, customers are opting for direct sales.
EBay’s next roundup of quarterly earnings late this month should give us a better indication of what’s happened since.
7. The Future Of American Express
In another top PYMNTS story, MPD CEO Karen Webster tells the year that was for American Express. Hint: It wasn’t a good one. Amex is likely one company that’s ready to put 2015 behind it.
Calling 2015 “the year to forget,” Webster chronicled the year that was for the struggling payment network. Like losing one of its crown jewel partnerships, the Costco card, to Visa/Citi in February. A few weeks later, JetBlue, a card partnership that Amex had since 2005, also pulled the plug in favor of a deal with Barclays and MasterCard.
In late July, Amex was hit with a class action suit over claims that it failed to disclose how material Costco was to Amex’s business. That announcement tanked its stock and wiped out close to $9 billion from its market cap. In May, Amex tragically lost its president and successor to CEO Ken Chenault, Ed Gilligan. Chenault was forced to suddenly reshuffle the executive decks to fill the very large void that Gilligan left.
Amex’s year was filled with fighting off a major antitrust case that made it so the company can no longer prohibit merchants who accept its card from steering consumers to its rivals at Visa and MasterCard. And finally, a court ruling in late December formally confirmed a case that said American Express can continue to implement its no-steering policy, in which the payments giant can now dissuade merchants from moving its customers to cheaper payment types.
Yes, Amex is certainly hoping for a better 2016.
8. Why Payments Players Should Be Worried About The Anthem Breach
In late January, the nation’s second-largest health insurer, Anthem Inc., was breached, allegedly by a Chinese cybercrime ring known as “Deep Panda.” Though the full depth and breadth of the breach is unknown, as many as 80 million Americans could have had their Social Security numbers, email addresses, names and physical addresses compromised in the latest attack.
In the “thankful for small favors” category, no payment card details were compromised, but the errant Social Security numbers leave open a virtual buffet of fraud options. Even if these numbers never go up for sale on the black market, which they likely will since they fetch a lot of money, this latest breach points to a problem that the industry’s foremost security experts have been talking about now for a while: Cybercriminals are adaptive, like what they are doing for a living and will find new ways to ply their trade if one avenue gets shut off.
The question of “what should we do differently” is one of the conversations we at PYMNTS had at The Innovation Project 2015 this year. We’ve asked the man who had to think deeply about this problem in the aftermath of 9/11 as the director of the NSA and the U.S. Cyber Command, General Keith Alexander. He said it’s all about connecting the dots. When it comes to cybersecurity, however, the payments ecosystem is getting much sharper at connecting those dots.
The CFPB began to take the first steps toward more intensive legislation of the short-term, small-dollar borrowing space, also known as payday lending. In late March, the federal consumer watchdog agency announced that it was considering a proposal that would require lenders to take additional steps to ensure consumers have the ability to repay these loans.
The proposed rule would also restrict payment collection methods that apply fees “in the excess.”
“Today, we are taking an important step toward ending the debt traps that plague millions of consumers across the country,” CFPB Director Richard Cordray remarked at a field hearing on payday lending in Richmond, Virginia, in March. “Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay. The proposals we are considering would require lenders to take steps to make sure consumers can pay back their loans. These commonsense protections are aimed at ensuring that consumers have access to credit that helps, not harms, them.”
The announcement caused a bit of a stir in the days following, though much of the reaction was positive. The New York Times’ editorial board ran with the headline, “Progress on Payday Lending,” to lead off its thoughts on the subject, while The Washington Post went with the slightly less laudatory (but still pretty encouraging), “Payday lending is ripe for rules.”
And indeed it is really hard to rally behind anything called a debt trap, and it is hard to imagine anyone being a strong supporter of seeing hard-working Americans trapped in a vicious cycle of debt. That said, a holy war on short-term lenders might not be the solution that is actually warranted, because it seems possible that the nature of payday lending is not all that well-understood, even by highly educated watchers.
10. How 100 Banks Got Hacked And Lost $900 Million
In February, it was reported that over 100 banks worldwide had been hit in a cyberheist that Russian cybersecurity firm Kaspersky Lab estimates could have netted as much as $900 million in stolen funds.
The massive theft was discovered in late 2013 when an ATM in Kiev went crazy and started dispensing cash at apparently random intervals throughout the day, despite the fact that no one had touched the machine. Further investigation by Kaspersky indicated that a cash machine gone wild, dropping piles of cash with little-to-no prompting, was actually the absolute least of the bank’s problems. The bank’s real issue was that its internal computers had been compromised by malware.
That malware lurked on the back end of the bank’s computer systems for months, sending back video feeds and images that gave a gang of cybercriminals a wealth of information about how the bank carried out its daily routines, according to the investigators.
This international criminal syndicate — with members hailing from China, Russia and Europe — was able to successfully impersonate bank officers at over 100 banks around the world. The group was able to do far more than just turn on various cash machines; they also managed to transfer millions of dollars from banks in Russia, Japan, Switzerland, the United States and the Netherlands into dummy accounts set up in other countries.
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