Payments Innovation

Sizzle Or Fizzle: Restaurants Rule, FireEye Flounders And Lending Club Is Back On The List

The Olympic athletes are undoubtedly the biggest Sizzle of all this week, and Team USA has given new meaning to the word. The focus and discipline of these athletes is inspiring. For instance, Katie Ledecky, the 19-year-old swimmer who’s crushing world records left and right, takes focus and discipline to a whole new level. She put going to Stanford on hold until after the games. And at 19, she doesn’t even have one of the essential teenage accouterments — a driver’s license — since the time needed to get one would compete for her time in the pool and winning gold. That’s a girl who knows what she wants and what she needs to do to get it.

So, while seemingly paling in comparison, this week had its fair share of Sizzles — and some interesting Fizzles.

Here ya go…

 

SIZZLE

Restaurants

Restaurants — the epicenter of payments innovation, it seems — were on the receiving end of a couple of new opportunities this week that could drive even more feet into them and help them grow. As Yelp continues to figure out its own path to monetization, it announced a new feature that automatically adds consumers to the waitlist of restaurants listed on Yelp. That comes courtesy of Nowait, a startup that will integrate into Yelp. Nowait is an app for casual dining establishments that do not take reservations. It lets customers check on wait times at their faves, put their name on the waiting list and be sent a text once a table is ready. Good for the consumer, good for the restaurant and good for Yelp — since it actually gives people a reason to want to use it more. Oh, and good for Nowait, who picked up an $8 million investment from Yelp in the process.

Then, there was the announcement of Square Capital’s partnership with Upserve, a restaurant management system (the same one that also acquired Breadcrumb from Groupon in May) to extend working capital to restaurants. This marks the first move by Square Capital to extend working capital outside of the Square “ecosystem” and perhaps a new move to extend its Square platform into a valuable new group of SMBs. Upserve is said to have a fancy, slick restaurant management algorithm that could help Square Capital refine its own fancy, slick risk management algorithm to make better lending decisions. SMBs and restaurants in particular often have trouble raising capital given the risk profile of these businesses — 59 percent of all restaurants fail within the first three years. This could come as a welcome relief, as lending decisions will be based on data about the viability and success of the business, which helps everyone.

Barcode-Based Mobile Payments

CVS announced yesterday that it will launch its own mobile payments app, CVS Pay, which will expedite payment when prescriptions are being picked up. The app will allow users to scan their prescription barcodes, which will trigger a cloud-based payment. What CVS says is unique about CVS Pay (clearly not the name) is that it enables HSA and other co-pay information to be stored in the app so that the proper amount is charged to the user’s registered card at checkout.

It’s a Sizzle on a few levels, including the full-on embrace of cloud-based payments, the use of barcodes and the ability for consumers to split payments between HSA accounts at checkout. Whether it is a full-on Sizzle will depend on whether enough consumers will use it. It’s worth noting that CVS supports no other mobile wallet at this point.

Global Citizens

Global citizens, those individuals who prioritize their investments in family and family experiences outside of their own, have been forced to wade through an array of expensive and hard-to-understand options to get tuition payments from one country to the U.S., where a lot of international students want to study. In addition, the many hops that these payments make on their way to the receiving institution — and the FX and service charges that get deducted along the way — make it impossible for the institution to accurately map payments to student. Reconciliation becomes a massive headache for the institution, especially when tens of thousands of remittances hit them at one time, which is the nature of the tuition payments beast.

Boston-based venture Flywire was started seven years ago to enable these high value, low transaction volume payments via any payment method to be sent by these families anywhere in the world. Its pitch is to the institution and how it makes it a snap for the receiving institution to reconcile those payments easily, even if they come from a variety of funding sources.

Then, yesterday, Mastercard, in partnership with Plastiq, announced that it will enable cross-border tuition payments via any Mastercard branded debit or credit card from Chinese students (or their parents, more probably) to the U.S. Its pitch to the family is to use their local Mastercard branded credit or debit card to make those payments.

The PYMNTS Global Citizen Index shows that 31 percent of international students studying in the U.S. are from China, which is the largest source country. There are 539,000 Chinese global citizens, individuals who generally have the wealth or discretionary income to support their pursuits, including seeking health care and studying abroad, which represents 0.039 percent of China’s total population. Of those surveyed, 89 percent of Chinese students said they relied on their family to pay tuition and living costs while studying abroad.

Sixty-one percent of Chinese students are currently seeking their bachelor’s degrees, while 29 percent are vying for their graduate degrees, according to the index.

So, having easy ways to pay for those global citizens to pursue their goals — a total Sizzle.

 

FIZZLE

Apple And The Aussies

A couple of weeks back, Australia’s three biggest banks complained to the Australian regulator that the only way that they could have a digital wallet presence on Apple’s phone is to become a provisioned card in the Apple Pay app and pay 15 basis points on each transaction. These are the same banks that have created their own digital payments apps that are NFC-enabled, and that’s what they would like to be able to offer their customers. Their ask of the regulator was permission to negotiate jointly with Apple in a way that did not run afoul of antitrust regulations in order to get access to Apple’s NFC innards.

Australia also happens to be a place with a lot of contactless terminals and consumers with contactless cards. People use them a lot at the stores in which they shop — cards + terminals = ignition. So, if Apple Pay were to get a head of steam, those 15 basis points could end up costing those banks real money. Real money in the sense that interchange is next to nothing in the Land Down Under and so those 15 bps would come out of their hide.

Too bad, said Apple, who yesterday fired back with an assertion that providing access to the NFC antenna would “fundamentally diminish the high level of security that Apple maintains on its devices,” turning a blind eye just for the moment to the account takeover issues that have plagued Apple since launch. Apple also accused the banks of behaving like a “cartel” in an effort to control prices, which is kind of hilarious since, to be part of Apple Pay, banks must pay exactly what it asks for. Fizzle and fail.

Online Lending

After a one-week hiatus, Lending Club finds its way back onto the Fizzle list. It reported Q2 earnings on Monday that showed losses even deeper than analysts had expected, and they were already bracing for the worst. CEO Scott Sanborn also announced that Lending Club’s CFO said bye-bye — something she wanted to do earlier in the year but was persuaded to stay on by giving her more stock, which has lost half of its value since that time.

Online lender OnDeck also reported a mixed bag of earnings on Monday. It also reported losses – but losses that weren’t as bad as forecasted. Loans under management were up, but so were loss reserves, which have doubled as unpaid balances have increased 57 percent. CEO Noah Breslow blamed a change in its business model, but investors didn’t seem persuaded. OnDeck’s stock price closed down nearly 2 percent on Monday.

FinCEN X-Border Prepaid Rules

In a rather unusual move, FinCEN withdrew its rule intended to make it harder for bad guys (AKA drug cartels) to use gift and prepaid cards to move their illicit piles of now-digital cash across borders. The rule proposed that money stored on these cards count toward the federal requirement that anything over $10,000 in cash be reported to the government. FinCEN claims that lack of a rule has made it harder for it to crack down on bad guys’ tools of the trade, like money laundering and drug trafficking, so it created one in an attempt to cut as much of it off at the pass as it could. The DOJ reports that $24 billion in cash makes its way into Mexico every year, some of it on prepaid cards.

After intense lobbying from the Network Branded Prepaid Card Association (NBPCA), FinCEN pulled it back and said it’d rethink things. Its position was that such a rule would subject “vulnerable” consumers, whose only bank account is a prepaid card, to unnecessary friction and scrutiny and make “poor people seem like second-class citizens.” It also argues that it would be impossible to implement because border control agents would have to install card scanners, which are expensive and could impinge on a consumer’s privacy. NBPCA also said that there are built-in failsafes already — load limits, for instance — designed to prevent bad guys from using good tools to do harm.

Hopefully, to keep the situation from being a Sizzle for the bad guys, the industry and FinCEN can work this out. Perhaps the biggest Fizzle is that this all happened in Nov. 2014, and we just found out about it.

And speaking of bad guys relative effectiveness…

 

FireEye’s Earnings: Two Fizzles For The Price Of One 

FireEye CEO Kevin Mandia and FireEye write off much of their recent and coming woes to something that, to most of us, probably sounds like pretty good news: Cyber espionage attacks sponsored by the Chinese have dropped off. According to FireEye’s data from June of this year – state sponsored hacks originating in China have fallen 90 percent this year.

The good news here for consumers and American businesses is that this strongly indicates that the Chinese have decided to make good on their 2015 agreement with the U.S. to curb and curtail intelligence hacking in American systems. The Chinese government, of course, maintains they have never sponsored any hacking of U.S. corporate computers – but as of this year, their professed lack of support can actually be tied to rapidly falling numbers.

That is good news – and a security silver lining if there ever was one – and it is a fizzle we are more than happy to report.

But is FireEye’s fizzle this week a security sizzle?

As FireEye noted in their earnings – cybercrime is still alive and well in the United States, it’s just smaller-scale and not under an organized state banner.

“While our services personnel are responding to more attacks this year than prior years, the scope and scale of these attacks is simply different,” Mandia noted on an earnings call. “The average duration and size of each incident response engagement was smaller than in years past.”

“That complexity isn’t that high in ransomware attacks where it’s obvious how you scope it, and what you do about it is sometimes less complex than the tenacious attacks by state-level actors and folks who want to maintain access,” he said.

So the attacks are still coming – they are just mostly about stealing actual money than long-term surveillance these days.

And though we don’t have access to Mandia’s data – a quick survey of our headlines this week bears out the claim; PYMNTS has written 14 breach stories in the last 7 days.

Clearly hacking is alive and well, and a sizzle for cyber security would be putting too fine a point on it.

But even noting that – if there were ever a fizzle we could be happy to see, Chinese professional hacking is probably the only one we’ve ever been tempted to cheer for.

FireEye, on the other hand, will have some rough sledding from their Fizzle – as of the beginning of this week FireEye shares had fallen more than 62 percent in the last 12 months. But on the upside – a few more complicated breaches of the type that tends to come at the end of the year – and FireEye’s earnings will be right back up there.

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