Welcome to episode 4 of the Mobile Payments Today podcast. I’m your host, Will Hernandez. This week I’m going to dive into the news. The first thing I’m going to start with is Mobile P2P. We talked about it last week, and two weeks ago I had the interview with Lou Anne Alexander with Zelle. I think it’s worth mentioning again this week, because the Q2 results for both Venmo and Zelle. It shows consumers are adopting mobile P2P in large quantities.
Venmo and Zelle, together, combined for $42b worth of transactions in Q2. $28b for Zelle and $14b for Venmo. Both were significant increases from Q2 last year, as well as increases from the first quarter of this year. I bring it up again, because mobile P2P is showing its value to consumers. Both Zelle and Venmo are solving the problem of paying people without cash, and both are easy to use.
The next news I wanted to bring up was GrubHub buying LevelUp for $390m. GrubHub revealed that during its Q2 earnings call. It surprised a lot of people, because there wasn’t an official announcement. A lot of people didn’t even know LevelUp was for sale. They are a payments and loyalty platform, which was originally designed specifically for quick-service restaurants. They started flirting with the idea of bringing their platform to other retail segments, specifically super marketing. So you can see why a company like GrubHub acquired them. It will be interesting to see how GrubHup utilizes LevelUp. They envision them operating like a separate company.
Q&A – Don Bush, VP of Marketing – Kount
Will: Thanks for taking the time to talk. How’s it going?
Don: Will, it’s good to be here. This is a topic most people are interested in.
Will: Definitely. It’s something that comes into the news, again and again as we go into 2018. On that note, focusing primarily on ecommerce and mobile fraud. Obviously, ecommerce fraud is costing online merchants billions of dollars a year. Experian had a study earlier this year, which found ecommerce went up in 2017 from 2016, by 30%. What are two primary reasons that are contributing to the increase?
Don: You’re right, I see studies all the time that say 20-40 percent increases in fraud year-over-year. I think there is a couple of things we can first talk about. One, fraudsters are getting better. They’re smart, they’re sophisticated, they are very well networked. They create software and other tools, that make doing their dirty work faster and easier. Barrier to entry, to become a real effecting criminal online is pretty low. You read, just like I do, data breaches. When you have that much data available to you, and the tools, things become easier.
For instance, I have a video I pulled of YouTube; a 14 year old talking about breaking into PayPal accounts so he can play his Pokemon game, and it wouldn’t cost him. It’s so easy, a kid can do it, right?
Another thing is back in 2015, the United States started going to their chip and pin cards. It was late 2015, so I wouldn’t have expected to see a lot of change in that year. But in 2016 and 2017, we started seeing a shift, from criminals who would use counterfeit credit cards, physical cards they would make; they shifted those efforts with the chip and pin cards to online.
Online fraud is quite honestly, easier to commit. You don’t have to show up in person, it’s cause ‘card not present’ for a reason. Yet, the data for financial tools like credit cards or accounts, or other financial things you buy things online with, all you need is the information. If I have Apple Pay, I don’t have to scan my credit card. I just put the number, experiation date, the code in, then I’m good. So, criminals can buy that data pretty easily and then use it online. No physical presence is necessary, no physical piece of plastic is necessary. As we’ve see chip and pin migrate into stores, as they put in the new hardware, requiring that, the fraudsters don’t just quit and retire. They just shift their tactics, and they’ve shifted them online. Which has helped exascerbate the growth we’re seeing.
Will: You mentioned how the criminals are staying ahead of the times. Maybe sometimes staying a step ahead of the fraud prevention. How does Kount keep pace with these guys? Especially, if they’re coming up with new tools.
Don: You bring up a good point, Will. They have one job to do, they steal from you, me, and other businesses. If you’re a business, you have financial regulations, compliance, PCI, all these different things we have to comply. They don’t have any rules, so they can work faster. They don’t have to meet regulations.
So when you’re a merchant online, you have a business to run, financials, inventory, logistics, all these things to manage. Fraud is only a piece of that. Our company, that’s all we do. All we do is look at what the fraudsters are up to: what are the new techniques, what are the tools they’re using. How are they getting past systems today? What are they doing to make it difficult of merchants and retailers online. So, that’s our job. We get to stay ahead of these folks, because that’s all we do. We assist those merchants, with that piece of their business that’s payments and fraud. So with that singular focus, it gives us a great advantage in staying ahead of the fraudsters.
Will: So now, these days, you have something else to look at with mobile and mobile fraud. With so much commerce being done with a mobile device. With Amazon, QSR’s, so much more mobile buying. So with that aspect of it, what are the challenges Kount is seeing with mobile fraud?
Don: I think there are a couple of things. One, companies that are doing business via mobile, have some strategic things to think about. First, is there customer going to buy from their mobile device? You can buy a car online today if you wanted to. You can buy a car using an app, but most people aren’t going to. They may do their research, go to a comparative site. But most people, if they are going to buy a car that way, they will use a desktop or larger screen so they can get a better look. If I’m seeling cars, I’m having research more focused than the purchase. If I’m seeing tickets to a ball game, or theater, I may have a customer more inclined to purchase from a mobile device. So, strategically I have to look at it differently and gives me things to work on.
Second, the payment. When you start looking at how things are purchased via mobile device. You have a smaller screen, how do I engage them when it comes to payment? There are 250+ payment types around the world. I certainly can’t have them all available. Which will be most profitable to me as a business? The problem we see is a lot of folks out there, because they don’t focus on what we do every day, they take what they did on one platform, let’s say on a desktop and move it to a mobile device. You and I both know, that isn’t a great experience.
The last part of this is the business that create apps. Order ahead, pick-up. Well if you haven’t looked at fraud, if fraud is an afterthought, that isn’t a good thing. And it sneaks up on folks that do a lot of POS or card present. If all I’ve ever done is have someone swipe my credit card, and now I’m going to create an app, I might not think of the differences between a ‘card present’ and ‘card not present’ transaction. And they’re very different.
Will: It sounds like the mobile environment, the ecommerce is different than desktop environments. It almost sounds like mobile can be more of a minefield for retailers, over desktop. Is that fair to say?
Don: I think for those not planning ahead for their mobile channel, you’re absolutely right. We call it a 911 situation. They release an app, they haven’t considered fraud, and the fraudsters are taking advantage. Once you release an app, it’s hard to unrelease that. It hurts the customer experience. So you have to fix it quickly. Planning ahead, looking at the platforms as different, is critical.
Will: In terms of planning ahead, we’ve seen the payments industry do some things to stop fraud. We talked about EMV at the point of sale being a help. We also see how that fraud has migrated to online. Do you see the payments industry, in terms of the networks, leading the charge with tokenization. Do you see the industry is doing enough to combat fraud?
Don: We work a lot with those networks and financial institutions. They are working feverishly. But, they are big organizations with legacy platforms that don’t change on a dime. Chip and pin tech was available in the 90’s. So twenty years ago, that was available and just go around to be in place three years ago. So I think they’re trying, but they are moving slowly. The pace of fraud, as you said 30 percent, that’s rapid. So that’s how companies like us, Kount, can come in and bridge that gap. We can move much more quickly and efficiently, and mitigate the fraud.
They have started some things. They started with the CVV code on the back of cards. The problem is that’s a static piece of information. Static information can be stolen easily. If I go on a dozen different websites, I can buy credit card info that includes the CVV code. So you have to have a dynamic solution to a static problem. And that’s where we come in, we bridge that gap where they’re trying to come up to speed as quickly as possible but can’t move the ship quick enough.
Will: From Kount’s perspective, I was listening in on a webinar, for those who didn’t listen, what are some of the baseline things merchants should be doing now to combat all types of fraud?
Don: There are a couple of things we tell all merchants. The first, do your own audit. Look at your own system. With the kind of growth happening with fraud, what you did last year isn’t good enough this year. The growth is too rapid. You audit your financials, look at where you’re making money or losing money, the same things need to happen when talking about payments and fraud. That needs to be done, and everyone can do that internaly.
Secondly, we do a seminar series around the world. We meet with hundreds of merchants, and talk about the issues they’re having. What I do at those, I ask “Raise your hand, if in the last thirty days, you’ve gone to your own app or site and made a purchase”. Because fraudsters do that all the time. They can tell by the way the checkout goes and experience goes, whether or not this is a sophisticated merchant or not, and whether they can break in and steal things. Go to your own site or app, make a purchase, it’s good practice anyway.
The third thing, many merchants do this but many don’t; what does a normal customer look like in your business. I say that, because if I buy airline tickets, I react different than buying shoes. If I’m a shoe salesman, and have a site or app, I need to know what my average customer looks like. Do they buy during business hours, or overnight? And questions like that, what are those normal activities that I see? And if I don’t know what my normal activities are, I don’t know what my abnormal activities are. And every merchant can do that, they have the information, data, they just need to do the analysis.
And number four, talk to you payment provider. They may have tools you aren’t using today. We have several partners – BrainTree, PayPal, BlueSnap, Cayan, Chase Payment Tech. All partnered with Kount. And if you’re a merchant for one of those, they may have tools available you aren’t taking advantage. Because they want to help you.
So those are four things all merchants can do. It doesn’t cost them anything, except time. And of course if they’re serious about stopping fraud, we can help. We can look at a ROI, and help reduce fraud and even increase revenue.
Will: Don, thank you for taking the time this week. This is an important topic right now. We’re continuing to talk about it. Kount is out there fighting the good fight. We’ll be talking in the next couple of weeks. I look forward to our next conversation.
Don: Thanks Will, see you next time.
Will: I’m here now with Bradley Cooper. Thanks for coming onto the show.
Bradley: Thank you very much Will.
Will: We decided it might be a better idea to talk about the blockchain side of things. We talked about loyalty blockchain app, and how the space is growing.
Bradley: You’re seeing a lot of interest. A lot of companies are coming up with solutions for it. For example, they will take a customer and if they purchase a lot of things, we’ll generate tokens for those customers to redeem purchases, get a discount. So you’re seeing a lot of interest, but not a big roll out. Which is a problem in the blockchain industry.
Will: Is there a reason we’re not seeing that rollout?
Bradley: I’ll give you a great example of that. IBM announced their big blockchain platform for financial services. Right now it’s just a proof of concept. They literally said ‘we’re waiting to see if we’re going to get enough interest or enough support for this’. So I think this should tell you a lot about this industry. There are a lot of interesting concepts but not many people understand what blockchain is. They don’t have the infrastructure to do it, and they don’t have employees who understand blockchain technology.
Will: Is that something holding back the industry? You mentioned a couple of things. Are those things the reason why it isn’t taking off like people hoped?
Bradley: I think it’s a variety of things. One reason, the simple fact BitCoin has this reputation for being for criminals. I think that prevents some companies from jumping on. I think it’s the lack of understanding and expertise of the market. I see stories all the time of colleges starting up blockchain programs. People asking them to do that are the blockchain companies, because they don’t have the employees. We’re seeing interesting solutions, and eventually we’ll reach the tipping point.
Will: When you talk about the tipping point, do you mean we’ll see more adoption or a time when these things go away. Where these companies go out of business. Because there just isn’t enough use. Which tipping point do you mean?
Bradley: That’s a great question. I’d say the biggest tipping point is when we get a really good solution, that a lot of companies use it. I also think we’ll see a lot of these smaller companies disappear. Especially if you look at the initial coin offering market. There are so many false or misleading scam artists running ICO’s. That sort of stuff is going to contract.
Will: Usually when I have these conversations about blockain, I always we should talk about BitCoin. The value has gone up and down tremendously. At now it’s going up. What’s your take on what’s going on with the price and value?
Bradley: It depends on a lot of factors. There’s so much speculation, especially in the Chinese market. Where any little event will cause a massive uptake or downtake in the market. I’m not sure we’ll ever see it stabilize. I think it’s either going to go so extremely high it makes people rich, or so low that everyone forgets about it. I don’t think we’ll see much in the middle. I think Ethereum, or some other virtual currency comes into the market, we’ll see BitCoin lose some of its market value.
Will: One more thing to touch base on, supply chain management. I have seen commercials about it, they are showing how a product will go from Point A to Point B, using the blockchain. Talk a bit about what’s going on there, why we might be seeing more in the future.
Bradley: Sure, we’re seeing WalMart itself started using the technology. Just to track where is our produce coming from, especially Romaine lettuce because the e. coli outbreaks. So you want to be able to track, where was this grown, where was it infected. But you’re starting to see smaller startups use this technology as well. One tracks in Islamic countries, whether food is Halal, clean to eat. They track that, where it was grown, who raised it, who was the butcher, things like that. That’s going to be a good product for retailers and food. And we’re going to see a lot more of that, especially wih the demand for transparency from consumers.
Will: Sure, that’s one area I didn’t think about in terms of application. Thanks for taking the time this week, I appreciate it. We’ll be talking about.
Bradley: Thank you so much.
Posted with permission from www.MobilePaymentsToday.com
Photo Credit: iStockPhoto.com
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