From ACH To IoT: Looking Back On A Year Of Trackers

In 2016, the PYMNTS.com Tracker series kept tabs on practically everything within the payments and commerce ecosystem, from A to Z (that’s ACH transfers to Ziosk). During these 12 months, the Trackers followed the biggest developments, news and headlines from around all segments of the payments ecosystem. It was a busy year throughout the world of payments, with plenty of new technology making headlines along the way.

As the year opened, our inaugural Faster Payments Tracker looked at the looming arrival of the new Same Day ACH. The spring brought coverage of mobile advertising and payments on the go at food trucks as small, smart device-powered businesses, and in the fall, we looked at the biggest trends in digital security at the annual Money20/20 Conference in Las Vegas. Winding down the year, the most recent Trackers examined just what it takes to get all those Christmas presents ordered online to loved ones across borders.

From using virtual reality to overhauling the retail industry to shifting trends in cross-border payments, here are some of the highlights from our 2016 Trackers.

DEVELOPER TRACKER

The Developer Tracker has been keeping tabs on what was a breakout year for virtual reality in the software development space.

The most recent Tracker featured several virtual reality (VR) headlines, as a study from Augment found that VR and augmented reality (AR) have the potential to transform the online retail industry, and the online retail player seemed to embrace the news, debuting a home design VR app.

It wasn’t just the end of the year that saw advancements in VR, however, as the March issue of the Developer Tracker featured an interview with Hrvoje Prpic, founder and CEO of Trillenium. Prpic and his team are hoping to use VR technology to transform luxury and high-end retail as we know it.

Trillenium is a white-label virtual reality company that caters to the retail sector by providing 3D, VR and even offline applications aimed at turning shoppers of luxury goods and services into buyers via virtual showrooms, allowing companies to highlight popular or high-priced items. Prpic noted that these virtual stores could improve on current online shopping setups, which allow customers to easily sort by price and overlook higher-end goods.

He also said that he sees applications for VR in industries other than retail. He imagined luxury hotels offering guests previews and tours of their rooms and property via VR, along with use cases in other segments.

“With virtual reality, it’s immediate — you put the glasses on, and you are there,” Prpic said.

Could this mean that, in the new year, we’ll view more of our online purchase through rose-colored VR glasses?

DIGITAL BANKING TRACKER

The Digital Banking Tracker looks at how old ways of banking are evolving with the advent of faster technology that allows customers to get real-time updates on their accounts, share money with ease among contacts and even open accounts with a selfie.

Getting on board with this new technology is key for banks and financial institutions as they look for ways to attract millennial consumers. This year, the Digital Banking Tracker looked at millennials’ financial habits and why younger users favor digital banking solutions over traditional banking models.

In June, PYMNTS spoke with Chris Britt, CEO of Chime, a mobile-first banking platform about how big banks get it wrong with the millennial crowd. Britt told PYMNTS’ Karen Webster that many millennials see bigger banks as “the man” and complain that they do not get the services they want from these larger institutions. This frustration with older institutions’ business models creates an opening for new companies like Chime, whose average customer age is 26, to move in on their territory.

Research from Halifax Savings found most 18-to-24-year-olds want real-time tools to help them keep track of their finances. Britt said many institutions are failing to win over this age group by not offering such a service. He even went so far as to say these banks have an “adversarial” relationship with consumers and an ulterior motive for keeping consumers in the dark about their finances.

“The banks philosophically don’t want you to know your balance exactly because they’re hoping a subset of these guys go negative so they can earn their fees,” said Britt.

However, if you offer consumers the tools they want, they will use them. Britt said the average Chime direct deposit user logs on to the app on a daily basis to stay on top of their finances.

Chime also makes an effort to reach millennials where they already shop.

“The next retail is not Rite Aid — the next retail is [Apple’s] App Store and the PlayStation Store,” said Britt. “So, we designed a product for people who are in those channels all the time.”

PYMNTS recently reconnected with Britt for the December Tracker cover story to discuss the trends he expects to see in digital banking in 2017. The company saw its transaction volume increase tenfold in 2016, while its member base doubled. Britt said he expects consumer frustration with traditional banks will drive more interest in mobile-first platforms like Chime.

“We think the current state of traditional banking creates a great opportunity for new entrants like Chime, and I think we’ve seen that over the course of 2016,” said Britt.

His advice for big banks? Shift to a consumer-first approach or risk getting left behind.

“We believe we’re bringing a fresh approach to banking and consumer banking in particular,” said Britt.

“I think you’ll see some of these bigger banks probably try to take more of a consumer orientation and try to deliver products that create more highly satisfied consumers.”

DIGITAL IDENTITY TRACKER

Throughout the issues of the 2016 PYMNTS.com Digital Identity Tracker, we reported on what could be the end of a familiar security protocol — the username and password — and the dawning of new biometric authentication.

In the most recent issue of the tracker, we reported on advances in biometrics from Nok Nok Labs, BioCatch and EyeLock. What’s more, the tracker featured a report that projects that nearly 70 percent of organizations will likely stop using usernames and passwords within the last year.

Concerns about whether password data was too easy of a target for fraudsters were only made worse as security breaches wreaked major havoc on companies and major political candidates alike.

For the October Digital Identity Tracker, PYMNTS took a closer look at some of the strategies that are replacing passwords and PINs, including biometrics, EMV and smartphone-based security. We caught up with FIDO Alliance President Brett McDowell to find out more about these new authentication methods.

McDowell noted that there is good reason for the biometrics boom — these methods, such as iris and fingerprint scanning, improve on many of the security weaknesses that doom legacy methods, like usernames and passwords. What’s more, McDowell said, these solutions do more than just build on their predecessors and can even make a customer’s experience with a product even simpler.

With major players in the space, like Google and Mastercard, rolling out solutions that use a person’s voice, eye, photo or other biometric indicators, it seems biometrics aren’t going anywhere anytime soon.

McDowell said that he was not surprised to see such big names readily invest in the technology. He pointed out that the interest of big companies was driven by a desire from their customers for new security methods and that biometric technology offers businesses the chance to have a strong customer authentication process without sacrificing the user experience.

“In short, biometrics are here to stay,” McDowell told PYMNTS.

And we’ll be keeping an eye on just how strong the tech’s staying power can be in the year to come.

FASTER PAYMENTS TRACKER

It’s been an exceptionally busy year within the Faster Payments Tracker ecosystem, with plenty of news in the United States and around the world. In September, Same Day ACH, the faster payments scheme here in the U.S., made its much-anticipated rollout.

Despite debuting in the second half of 2016, the network already seems to be popular. The new faster payments scheme was responsible for nearly $5 billion in payments volume in just its full first month of activity alone. That large sum was the result of 3.8 million transactions conducted over the course of October, with an average transaction value of more than $1,000, NACHA reported.

Same Day ACH transfers and other forms of real-time payments certainly have the power to transform the banking industry and B2B payments. But what if there were other, “sexier” solutions? With Phase 2 of the faster payments transition looming, what other technologies could hold promise in the space?

In the January issue of the tracker, PYMNTS spoke with Dr. David Evans about the “Kim Kardashian of financial technology” — blockchain — and what to expect from other faster payments technologies.

Evans said he gave the nickname to blockchain because he sees it as a “sexy” solution that may not hold the real-world applications some early adopters had hoped. He pointed out that, while the tech may be the trend of the times and the word of the moment, it may not be so practical to live with.

He noted, however, that blockchain could hold some fatal flaws when it comes to same-day payments. Bitcoin itself, Evans said, the currency built on blockchain, has had problems operating via the high-maintenance blockchain network. If banks are to use the technology, Evans predicted that blockchain will have to be separated entirely from bitcoin, which could be a costly and complicated process, meaning that other software innovations in financial technology, beyond the blockchain, could have an impact on the faster payments space.

With Same Day Phase 2 approaching in the not-so-distant future, the faster payments ecosystem is set for a big shift in 2017, whether via blockchain or, perhaps, some other, even sexier technology.

INTERNET OF THINGS TRACKER

Over the course of 2016, the Internet of Things Tracker explored how greater connectivity is being introduced across a wide spectrum of items, from cars to coffee cups. But as greater connectivity among devices arises, so does the need to keep these connections and connected devices safe and secure.

In the March issue of the IoT Tracker, PYMNTS spoke with Federal Trade Commissioner Terrell McSweeny about the agency’s role in the IoT realm and how to protect consumers as devices become increasingly connected. While McSweeny sees lots of opportunity for the IoT space, she believes the agency’s responsibility is to “protect consumers from bad consequences” that exist within this new territory.

“As we fill our lives with connected devices, we are filling our lives with things that can create vulnerabilities,” said McSweeny.

“There are risks associated at the edge of devices being hijacked, being used to attack systems, that could have far more severe consequences as well.”

And the costs of these attacks could be severe. According to research from LexisNexis, fraud is expected to reach $7.2 billion by 2020. The risk of fraud is prompting eCommerce companies to seek out IoT solutions against cyberattacks.

For the October tracker, PYMNTS spoke with Randy Vanderhoof, executive director of Smart Card Alliance, about how companies can protect consumer data in the highly connected IoT age. He pointed out that encryption and tokenization solutions have been among the most effective approaches to keeping data safe in the world of IoT.

“Even if there is a data breach and someone is able to penetrate the network, they’re not going to be able to extract data that could then be used to commit payment fraud,” said Vanderhoof.

Looking ahead, expect further developments around keeping consumer and business data safe and secure in a world of expanding connectivity.

MPOS TRACKER

Inside the pages of the 2016 mPOS Tracker, we’ve seen how consumers and businesses alike are gravitating toward new, cashless payment solutions.

While there may not have been many early adopters, mobile wallets designed for consumers, like Apple Pay and Android Pay, are starting to catch on. The November mPOS Tracker reported an increase in mobile payment usage in Europe and Apple Pay’s expansion of mobile wallet service to 26 new banks and credit unions around the U.S.

Meanwhile, businesses of all kinds, from restaurants to retail stores, looked to modernize their payment methods and the layout of their locations by embracing mobile payment acceptance solutions. Our most recent tracker featured news on the arrival of new mPOS solutions from PAX and Traveling Vineyard, among others.

In April, PYMNTS caught up with Ayr Muir, founder of Massachusetts-based QSR and food truck Clover Food Lab. Muir built his own mPOS system from scratch in order to accommodate the unique needs of Clover, which changes its menu on the fly several times a day. Muir hired a local college graduate to build a bare-bones POS when the company was founded, and the rest, as they say, is history, as Clover has now grown from a single food truck to include seven brick-and-mortar restaurants and five trucks.

The mobile credit and debit card and contactless payment solution is working so well, Muir said, that his food trucks have stopped accepting cash, and the policy could soon come to the company’s physical locations.

“Cash is really expensive to handle,” Muir explained.

“I love not having cash aboard the trucks, and I think [Clover employees] love it, too. It’s just one less point of risk, and I think it’s a safer way to run the business. It also means we don’t have to handle dropping the cash at banks.”

PAYMENTS AS A SERVICE TRACKER

The shopping experience has come a long way since the days of counting dollars and cents and waiting for a checkout clerk to count your change. The Payments as a Service Tracker looks at how the payment process has evolved from old-school cash registers to digital wallets and full-service payment solutions.

These solutions are not only offering more convenience to consumers; they are also offering merchants and new opportunities to build customer loyalty. In August, PYMNTS spoke with Stephen Goodrich, president and CEO of ZipLine, the company that developed Cumberland Farms’ SmartPay app. The app can connect to a user’s checking account, allowing them to activate a gas pump, pay for gas and receive promotions. For merchants, it offers the benefit of not incurring processing fees.

But the long-term benefit of the app is that it keeps customers coming back, said Goodrich.

“The consumer who ends up enrolling on this platform typically stops shopping around and shopping with competitors and only shops at one merchant,” he said.

And that loyalty has paid off. Merchants that adopt a ZipLine app system similar to what Cumberland Farms’ SmartPay system have seen 5–6 percent revenue growth.

Goodrich, who said the SmartPay app was inspired by Target’s REDcard loyalty program, believes merchants will be attracted to the savings the app offers. Like Target’s program, he believes the SmartPay app can help Cumberland Farms gain deeper insights into customers’ preferences by collecting data.

“With products such as SmartPay, there’s a direct connection with the consumer and an opportunity for the merchants to learn about the consumer,” said Goodrich.

“The greatest value of this product to merchants is the direct connection that it creates with the consumer and the loyalty it builds.”

OMNICOMMERCE TRACKER

These days, it’s a pretty safe bet that most people walking down the street have a smartphone in their pocket. Inside the 2016 Omnicommerce Tracker, we reported on the impact that smartphones and tablets are having on the online commerce world.

In May, the Omnicommerce Tracker covered a new study from Bronto Research that reported that more than half of smartphone users use their mobile phones for shopping. What’s more, we reported on several mobile headlines in the December issue, including a new mobile VR app from online retailer Wayfair.

But what about using mobile data to reclaim wasted ad dollars?

This past August, PYMNTS caught up with Mike Harkey, Foursquare’s vice president of business development, who said that the company is using information gathered from its apps to learn more about consumer behavior and help businesses use that data to improve marketing plans and grow revenue.

Harkey recalled how the company used its popular Foursquare city guide app and Swarm check-in app to build a large stock of data around individual cities and their retailers, restaurants and other merchants. The apps, which currently have a user base of roughly 50 million, help consumers find new places and reward them for checking in and submitting other information. All activity adds to the database.

With such a massive skeleton of data, Harkey said, the company is using it to help merchants and marketers better understand consumer behavior via a new tool called Attribution. It allows marketers to see the results of an advertising campaign and compare the behavior of consumers who did and did not see the campaign via a dashboard.

“The marketer can actually see the real-world activity of the action between an exposed audience and compare it to an audience that didn’t see the campaign and then see how it performs,” Harkey said.

It may not be too long until marketers can finally know the true value of their advertising dollar.

UNATTENDED RETAIL TRACKER

Vending machines got a serious facelift in 2016. In several issues of this year’s Unattended Retail Tracker, we saw vending machine providers and operators throw off the shackles of accepting just quarters and distributing unhealthy snacks in favor of options that offer a wide range of products and accept almost any payment method.

The tracker’s inaugural issue, released in February, brought news of advances in coffee vending machines and loyalty programs. In April, we reported on the advent and increase of cashless payment acceptance in vending machines. And we featured news on a pizza-dispensing vending machine with a built-in oven in August. Our final tracker of the year, released in December, covered the arrival of Snapchat’s vending machine-distributed smart glasses and Coca-Cola’s trials of mobile vending sales in Asia.

In June, PYMNTS got the chance to catch up with Ernie Garcia, founder and CEO of Carvana, a company that allows customers to buy a new car via a vending machine, to find out more about this brave new world of vending machines.

Garcia said that consumers are eager for new ways to make purchases, including a better process for buying a car. He noted that many modern car shoppers are eager to do away with the inefficiencies and lack of transparency that often accompany picking out a new ride.

The company’s answer debuted earlier this year: a fully automated coin-operated car vending machine in Nashville, TN. The vending machine allows customers to make a purchase in just 30 minutes by selecting a Carvana-branded three-inch coin and choosing from a glass tower storing more than 20 new cars.

“People are already looking for alternatives to dealerships and will continue to do so, and that’s what Carvana is,” Garcia said.

We’ll have to wait and see what other unattended alternatives hit the scene in 2017.

X-BORDER PAYMENTS OPTIMIZATION TRACKER

Our X-Border Payments Optimization Tracker follows movement in international commerce. There was plenty to cover this year as cross-border commerce saw significant growth this year and is poised to grow even more over the next few years.

According to a survey from Pitney Bowes, more than two-thirds of global customers reported making a cross-border purchase this year. Meanwhile, Worldpay expects worldwide eCommerce to increase by 104 percent by 2020.

During the holiday season, cross-border trade spikes up significantly, which creates significantly more work for companies that ship goods between nations. In October, PYMNTS spoke with Chip Hull, vice president of FedEx Cross Border, about the solutions the company implements during the busy holiday season.

Last year, parent company FedEx saw a 15 percent increase in holiday season activity and delivered a record-breaking 325 million packages. This year, Hull noticed an increase in customers placing international shipping orders, along with alternative payment methods being used to pay for many of these transactions over conventional payment options.

“We have seen the rise of PayPal, Venmo, Alipay, and now, in parts of the world, alternative payments are preferred over credit cards,” said Hull.

Hull said consumers are drawn to the simplicity of the mobile environment, which has led to the boost of alternative payment activity. He expects alternative payment activity will grow over the coming years and said FedEx will power checkout solutions for online retailers looking to integrate with shopping carts on their platform as a way to boost its global reach.

Hull believes additional ways to expand the company’s reach are powering end-to-end solutions for enterprise customers and investing in omnichannel fulfillment to increase the company’s efficiency.

“I think capturing that piece, as well as the movement to the end consumer from a cross-border perspective, is very attractive to us,” Hull added. “So, we’re enabling the entire supply chain when we do that.”

With global commerce on the rise and alternative payment options increasing their reach, stay tuned for more interesting developments from the world of cross-border trade.

LOOKING AHEAD

So, there you have it, the year that was PYMNTS’ Trackers. What will the next year hold?

Well, with more improvements and changes to Same Day ACH, thousands of new millennials looking to open bank accounts, new forms of mobile and contactless payments and the need to keep it all safe, there’s sure to be plenty to talk about in the next 12 months.

Buckle your virtual seatbelts, and stay tuned to the PYMNTS.com Tracker series in 2017. We’re excited to see what’s next.