Dorado Industries TrendWatch Q3 2015

TrendWatch 2.0 Q3 2015

Payments System Industry

Synopsis

Notice: Materials contained in this document are drawn from several media sources, and Dorado Industries is not responsible for their accuracy. Opinions expressed

herein are presented without warranty. Brand names are the trademarks of their respective service offerors.

The reports of my death have been greatly exaggerated!

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Random Thoughts

“Do As I Say, Not . . . . .”

Another card brand “deadline” has come and gone and the Earth is

still rotating on its axis, our payments are not any safer than before,

and transactions now take more than a bit longer. Aw, progress.

Seems like the Triple DES and PCI DSS eras all over again.

Thousands of merchants are standing by the roadside watching the

EMV parade go by because they’ve done the math and things just

don’t add up while consumers (this one, in particular) see their

transaction times at Home Depot and other EMV-compliant retailers

double in length. And we chuckle at cashiers’ inability to sort things

out when something goes wrong. Terminal vendors and technology

players like CardFlight are raising VC money by the bushel to

deliver EMV readers to traditional POS devices, tablets, and

smartphones in anticipation of a crush of smartcard transactions

which, we figure, are a long ways off. Meanwhile, individual FIs

and other issuers are advising us that new cards will be arriving any

day now while their own trade associations admit that only 50

percent of US cards will be EMV-enabled by December. Hey,

where’s the gnashing of teeth over banks showing up late for the

party? If Dorado Industries was a retailer (well, it is, sort of) and

had gotten dressed up for the party and nobody showed, we’d be

pissed. Can’t imagine the amount of ruffled feathers sitting around

the table at NRF, NACS, and MAG meetings these days. Maybe,

one of these days, the card brands will get the issue of payments

system security right; but , we doubt it. Oh, and about that chip-

and-signature clap-trap? Let’s re-think that, shall we?

“Faster Is Better, They Say. Really?”

No one enjoys the final elimination round of an NHRA Top Fuel

drag race event more than the TrendWatch editorial staff. Sure, fast

is cool. But, is it the best we can do when re-architecting a

payments system?

2

Instead of faster, how about “more secure” or “cheaper” or “less

regulated” or “universal?” There are currently lots of smart bankers,

merchants, processors and (dare we say it) consultants burning lots

of midnight oil under the watchful eye of the Federal Reserve Bank

trying to figure out how the US can “improve” its payments system.

For the most part, it’s assumed that the objective is more speed and

we think there’s more to the story. Fortunately, the Fed is also

spearheading the Secure Payments Task Force to bring some

balance to the approach. Here’s hoping that both task forces

complete their assignments at the same time; otherwise, we might

wind up with a solution that meets the objective but which no one

really wants. Like EMV.

So it goes; off to Baja!

Until next time.

Dorado Industries



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Table of Contents

2015 Predictions 4

TrendWatch Scorecard/Summary 6

2015 Payments Industry Yields 7

Interesting Quarterly News That Got No Respect 8

Q3 M&A/Investor Activity 13

Useful Links for Quieter Companies 19

Back in the Day! 20

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2015 Predictions

• While a Herfindahl index analysis of the third party EFT processor segment might suggest no further mergers

would pass the DoJ sniff test, that’s not the case for merchant services players. There should be room for two

more major M&A transactions. One will occur in 2015.

Mar: Nothing so far. No guts, no glory.

Jun: Well, this is going nowhere fast. A couple of small plays but nothing to write home about.

Sep: Another round of foreign currency devaluations should do it. Check out the “Industry Yields” on page 7.

• Two digital wallet providers will fold up their tents and return to the desert.

Mar: Softcard is the first to go; Loop Pay became Samsung Pay (doesn’t count). Still waiting for number two.

Jun: Delays in Android Pay and Samsung Pay launches to Q4 gives new life for a few of the hangers-on.

Sep: Nothing this quarter; Christmas season will take its toll.

• At least one mobile network operator (MNO) will leave the playing field for the sidelines.

Mar: Could claim victory with the players in Softcard but that’s not fair. Still waiting for a hard fall.

Jun: Still waiting for one of the southern U.S. MNOs to make a move.

Sep: (Aug) Apple’s entrance as an MVNO may spur someone to exit stage left.

• Trade and popular press scribes will hail the three joint ventures that will occur in 2015 between issuers (or their

processors) and retailers.

Mar: Jungle drums are beating but, as yet, no major announcements.

Jun: Walmart/Green Dot re-up agreement doesn’t count but it looks a lot like what will happen.

Sep: AXP cuts a deal with Sam’s Club after being shown the door by Costco.

4

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More 2015 Predictions

• A truly viable mobile payments solution for owners of Android phones will arrive late in 2015 to compete with iOS

(and Apple Pay.)

Mar: Acquisition of Loop Pay by Samsung sort of fits the bill but not quite. Google’s acquisition of the Softcard

carcass sort of fits the bill but not quite either. Still waiting.

Jun: Android Pay, though delayed, will give consumers something to consider. Merchant acceptance will be the

kicker.

Sep: Samsung Pay went live September 28, a bit light on issuers. Android Pay took its first breath on September

10. So far, Atlas hasn’t shrugged.

• Try as it might (e.g., Buy With Twitter) to reverse its waning fortunes, Twitter’s year on year growth will be one-half

its current rate of 30 percent.

Mar: No statistics as yet but anecdotal evidence suggests that Twitter volume is on the wane. Probably a Q4

prediction.

Jun: Holding firm on this one until Twitter proves us wrong. Daily volume looks way down.

Sep: (Aug 3) Twitter shares hit an all time low since its IPO on a disappointing forecast and remain in the dumps.

• There is a deal to be had between MCX (CurrentC) and a banking consortium and it will be announced late in

2015.

Mar: MCX claims that issuers are lining up. Where, it won’t say.

Jun: Maybe the new leadership will warm up to the idea of a banking consortium becoming a partner.

Sep: Ohio CurrentC beta should tell the tale.

• Clinkle will disappear; but in a blaze of glory.

Mar: Still taking nourishment but through a straw.

Jun: Clinkle staffing down to about a dozen after seven key employees marched out en mass in May over sellout

rumors centered on Apple.

Sep: Still here, but hanging by a mere thread.

5

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TrendWatch Scorecard/Summary – Q2 2015

Market & Industry Situation 1 – Samsung Pay and Android Pay are now in the wild. Let the games

begin.

2 – Cardless ATM access gaining traction. Why, we’re not sure.

3 – Consumer credit levels swell as credit cards are swiped more often.

4 – Quiet on The Hill this quarter and CFPB is focused on lending.

5 – Another good, but not great, quarter.

6 – Non interest income still bolstering FI earnings in a big way.

7 – Lots of capital flowing into payments as new ideas and consolidation

economics drive decision-making.

8 – Experian takes a 15 million record hit. Loop Pay gets hacked for its

secret sauce. Scary times.

Industry Players To Watch Retailers and Banks: Proverbial EMV line in the sand has been crossed.

Now what?

New Players: The payments conference season is upon us. Who’s

planning on “disrupting” the industry this year?

Apple: At the rate it’s buying artificial intelligence companies, one wonders

what the next watch, car, or television will do for us.

Fed Faster Payments: Fed releases its Draft 3 Faster Payments criteria to

the market for comment.

Starbucks: Will its planned acceptance of Apple Pay crimp its own app

and prepaid card volume?

The Internet of Things: Will the demise of Quirky and sale of Wink force

a re-think of the “smart home?”

5. New Venture Growth

4. Legal/Regulatory Issues

1. New Payment Forms

2. ATM Restructuring

3. POS Volume Trend

High

Med

High

Low

Med

High

High

Positive

Mixed

Negative

6. Earnings Announcements

7. Industry Investments

8. Payments Industry Security Med

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2015 Payments Industry YTD Yields

Sources: Company releases, Morningstar.com, Bloomberg.com, Coinbase.

2015 YTD yield excludes dividends; based on 12/31/14 and 9/30/15 closing prices.

Man, oh, man! We were just getting over our swollen nether regions caused by the Greeks when

China decided to come clean and kicked the props from under its Yuan. The Dow and S&P took it

on the shins, losing 8.7 and 6.8 percent, respectively. Meanwhile, our basket of payments equities

posted a 2.8 percent gain over last year – after giving back a bunch of gains from Q2. Multi-faceted

processors did very well and most payments houses scratched out a decent living. Single-stream

folks took it on the chin. There’s a message here?

Industry Player 12/31/2014 9/30/2015 Price r Cap Value r YTD 2015 Yield

Alliance Data Systems 284.05$ 258.98$ (25.07)$ (1,491.7)$ -8.8%

American Express 93.03$ 74.12$ (18.91)$ (20,417.4)$ -20.3%

Blackhawk Network Holdings 38.92$ 42.39$ 3.47$ 181.5$ 8.9%

Cardtronics 38.58$ 32.70$ (5.88)$ (239.3)$ -15.2%

Discover Financial Services 65.50$ 51.99$ (13.51)$ (6,497.0)$ -20.6%

Euronet Worldwide 54.90$ 74.09$ 19.19$ 967.2$ 35.0%

Fidelity National Information Services 62.21$ 67.08$ 4.87$ 929.2$ 7.8%

First Data (Future Use)

Fiserv Inc. 70.97$ 86.61$ 15.64$ 3,980.2$ 22.0%

Everi (fka GCA) 7.17$ 5.13$ (2.04)$ (157.4)$ -28.5%

Heartland Payment Systems 53.94$ 63.01$ 9.07$ 339.2$ 16.8%

Jack Henry & Associates 62.14$ 69.61$ 7.47$ 626.7$ 12.0%

MasterCard Worldwide 86.18$ 90.12$ 3.94$ 6,343.4$ 4.6%

MoneyGram International 9.09$ 8.02$ (1.07)$ (61.9)$ -11.8%

PayPal (Since 7/20/15 IPO) 41.60$ 31.04$ (10.56)$ (12,883.2)$ -25.4%

Square (Future Use) .

Total System Services 33.95$ 45.44$ 11.49$ 2,268.1$ 33.8%

Western Union 17.91$ 18.35$ 0.44$ 250.3$ 2.5%

Vantiv 33.95$ 44.92$ 10.97$ 2,720.3$ 32.3%

Visa 65.55$ 69.40$ 3.85$ 3,256.7$ 5.9%

.

Bitcoin Closing Price 315.95$ 239.05$ (76.90)$ -24.3%

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Interesting News This Quarter

Subject Source/Date Substance

7-Eleven PYMNTS.COM

September

7-Eleven has partnered with DoorDash, an online delivery service to deliver convenience store

merchandise to your door, right now. No piker in the delivery service realm, DoorDash has raised

over $80 million in capital and has made its name in restaurant and other food deliveries. The

service will be initiated soon in Chicago, Los Angeles, and NYC although we think this service is

better suited to Seattle and Denver, where the craving for munchies will overshadow the notion of

paying a delivery service premium for merchandise which, itself, has a premium price “baked” in.

Sorry, couldn’t resist.

Apple Watch Mobile Insider

September

So, is Apple Watch long for this world or a flash in the pan? BI Intelligence cites a study by

Wristly wherein 66 percent of those surveyed considered themselves “very satisfied” with the

wearable and another 31 percent were “somewhat satisfied.” Combine a 97 percent approval rating

with 11,000 downloadable apps for the Apple Watch and it’s hard not to declare the product a

winner. Apple Pay? Well, maybe not so much.

Fiserv Presser

September

Yet another processor has joined the ranks of the cardless access ATM devotees. Fiserv is pleased

with the results of the pilot test run with VyStar Credit Union in Jacksonville, Florida over the past

several months. Fiserv’s processing partner in the test was Payments Alliance International which is

keen on the idea of re-curving the growth rate of ATM transactions (currently flat) and device

functionality (pretty anemic compared to its potential.)

ShopTalk conference and

trade show

PayBefore

September

Mark your calendars for May 16-18, 2016. These are the dates scheduled for the inaugural

ShopTalk conference to be held in Las Vegas. The show’s founders are Anil Aggarwal and

Jonathan Weiner, the brains behind Money20/20 (which itself, is coming up soon.) Anil and

Jonathan are joined by Don Kingsborough, founder of the Blackhawk network. ShopTalk is

focused on exploring and discussing the ways consumers stumble onto products, shop and buy.

Anil and Jonathon sold Money20/20 shortly after last year’s show and are moving on to other

things. This conference should be winner for those interested in the nexus between consumers and

retailers. Bankers, take note.

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Interesting News This Quarter – Continued


Kerv Finextra Here’s a wearable payments solution we can get behind. Kerv is a payments ring made of Xirconia

material and operates without batteries in any country where contactless technology exists. Based in the

UK, the company is using Kickstarter to get its initial funding of $120,000. If all goes well, the first

rings will ship in April 2016. We think it’s worth laying a few quid on the No Pass line just to see how

this thing works.

Wienerschnitzel Mobile Payments

Today

August

Nobody loves a hot dog more than the Dorado Industries staff. Yet, in this health-conscious

environment in which we live, the lowly Chicago, New York or Los Angeles wiener is on the outs. It

follows that a hot dog vendor would do just about anything to remain top-of-mind. Chili-dog peddler,

Wienerschnitzel, has launched a “Wiener Rewards” mobile app that allows frequent visitors to earn

free meals. The interface sounds a little clunky; it requires an in-store sign-in and use of a three digit

code which the clerk keys into the POS device. Still, free “gourmet” hot dogs plus a free corn dog or

sundae on your birthday is nothing to sneeze at. And there’s a prepaid payments option in the app as

well. Now, if DoorDash would deliver the goodies we order ahead, life would be grand.

PayPal Bank Innovation

September

PayPal is tinkering with its P2P application again – after the head of its consumer business took off for

somewhere else. Indeed, the top dog bolted the day before PayPal.me was announced. PayPal.me uses

URLs for use by those paying you. The URLs can be sent via text or in emails in a relatively simple

manner but, for now, PayPal.me is not fully integrated into the company’s mobile app. Did we mention

that PayPal.me is optimized for mobile but runs on a desktop? Thought not. Sorry, not ready for prime

time just yet.

Bitcoin PaymentEye

October

Bitcoin protagonists will be dismayed to learn that the cryptocurrency is as dead as the proverbial do-do

bird in Australia. Thirteen of the country’s seventeen cryptocurrency exchanges were shut down in

September, leaving bankers and businesses with the clear picture that the jig is up. Despite the fact that

10 percent of Bitcoin’s value is domiciled in the land of OZ, merchants received lukewarm responses

from customers and banks poked fingers at the token’s lack of transparency and regulatory oversight.

Well, they would, wouldn’t they?

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Discover Presser

August

Discover Financial Services demonstrates once again that achieving global acceptance status doesn’t mean you

have to own everything, everywhere, lock, stock and barrel. DFS has inked an agreement with Elo Global

Cards, the largest Brazilian credit card brand, allowing Elo cardholders to make purchases internationally and

access cash outside of Brazil. The Discover Network, PULSE, and Diners Club all are in on the deal. Caught

up short on the acceptance side less than ten years ago, the Discover Network now encompasses 185 countries

and territories, making it the (claimed) third largest acceptance network in the world. Refreshing.

Mozido PayBefore

September

Mozido, another globe-trotting US player, has launched TradeEase, a platform that enables merchants in China

to sell through e-commerce sites to customers in Russia and vice versa. There are lots of moving parts in the

arrangement including PayEase, a Mozido affiliate; Yandex.Money, a Russian payments processor; the Bank of

China, and the Suifenhe Government, part of the Chinese governing body located on the border between China

and Russia. Plus, the Russian and Chinese e-merchants and their customers, of course. Now, if Mozido can

make this work, why can’t the Fed get US retailers, bankers, and processors to come together on a new and

elegant payments solution for America? Oh, right; they’re trying.

Chase Bank Payments Insider

September

We’re not sure why this is news but here goes. Reuters reports that merchants using Chase Bank’s version of

VisaNet will experience lower interchange fees when Chase acts as both the card issuer and the transaction

acquirer. Really? Back in 2013 when it was created, even a blind squirrel could see the advantages that

“ChaseNet” would create under these conditions. With retailers clamoring for lower acceptance costs, what

better way than to treat “us-on us” transactions as interchange-free and start the merchant services negotiations

from there. What confounds us is that it has taken so long for the popular and business press to see the logic of

the 2013 deal. Particularly when it’s realized that there is little chance that another arrangement like ChaseNet

can ever be replicated. Very smooth play, Chase.

Kash Finextra

September

While the Fed and 320 (make that 319) of the best and brightest minds in payments confer on how to make the

US payments system faster and more secure, another stealthy startup has stepped up to disrupt the system.

Kash has been around for the past year, working in seclusion on “liveACH,” an API that uses proprietary

algorithms and ACH rails to offer up a payments solution that does away with traditional interchange pricing.

The algorithms underwrite the transaction risk and clear it live using banking networks. Fees are in the .5

percent range. Not so stealthy are recent HR moves by Kash. Joe Saunders, former Visa President, has joined

as chair while Sam Wen, the technical genius behind Square, has taken on a development role. In the meantime,

VC Green Visor Capital has invested $1.5 million to keep things interesting.

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11


Giesecke &

Devrient

PYMNTS.COM

September

EMV-compliant debit remains a stumbling block for many of us. “That damned Durbin Amendment keeps getting in

the way,” some say. According to the company, Giesecke & Devrient have introduced the first dual-interface card in

the US market and it is fully compliant with Durbin Amendment tenets. The product can support both contact and

contactless interfaces and supports all major payment brands operating in the US today. Price? Not discussed in the

press release.

Citibank BI Intelligence

July

Driven by greater operating efficiencies, the impact of mobile, or just good timing, Citibank is learning to do more

with less. Year-over-year branch counts are down by 15 percent while account balances and retail card acquisitions

are up 7 and 10 percent, respectively. Two Citibank competitors have posted smaller branch network reductions – 5

percent for JPMorgan Chase and 6 percent for Bank of America. Meanwhile, US Bank executives plan to stand pat

with the branches they have; opting instead to diversify the branch fleet based on functionality.

EMV Presser

October

Here’s a clever idea: cover merchant EMV exposure during the re-terminalization period. Sterling Payment

Technologies, a purveyor of merchant acquiring services to the restaurant, hospitality and retail verticals, is offering to

cover up to $2,000 in merchant liability as client POS systems are adapted to accommodate EMV functionality. Many

of Sterling’s merchant portfolio fall into the small/medium retailer category, the group most often cited as being

unprepared for the EMV liability shift. The offer extends to Sterling’s ISO network for those existing or new

merchants struggling to bring their systems into conformity.

JCB Finextra

October

Japan credit card brand, JCB, is working with Fujitsu to make Apple’s Touch ID five times better. The company is

testing palm-scanning technology that uses multi-digit readers to authenticate system users. The customer waves,

rather than presses, the palm over the reader which ships the captured image to a remote authentication server for

comparison and approval. Others, those promoting facial recognition, would probably like to see this experiment fade

away.

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12


Apple TechCrunch

September

Here’s something that might keep you, your bankers, and merchants alike, up at night. Apple has a new app

named Been Choice which is promoted as an ad-blocker. That it is, and a little bit more. Users who sign up for

Been Choice agree to have their data routed through a VPN to Been Choice servers which analyze the streams

and remove advertising content. Sounds pretty good so far; read on. Also, the user has the option to share data

with others and be paid for it. The Been Choice terms of service claim that the app excludes personal

information and data held by financial and e-commerce services in the packets sold to third parties. Then again,

the app does read emails and texts to learn more about the user (and, theoretically, enhance the value of the

information to the third party.) One small glitch in this Orwellian app is that, for now, Been Choice is screening

Apple’s News service app which might cause some angina in Cupertino. [Hat tip: Steve Mott,

BetterBuyDesign]

Dwolla Bank Innovation

September

Iowa-based Dwolla puts a shot over the bow of the Fed Faster Payments Task Force by offering up a white label

service for FIs. It has created an API related to its FiSync application which banks can use for B2B transactions

over the ACH. Dwolla has eschewed variable pricing over flat rate pricing similar to its consumer P2P and C2B

applications. At the same time that it’s taking pot shots at the Fed and B2B, it is white-labeling its ACH

application; a decidedly obvious run at Stripe.

Visa Various Visa continues to have its up and down days. First, an appeals court reinstated an ATM access fee suit

involving three class actions. Not good; more legal costs. Next, the Australian Federal Court slapped the card

brand with an $18 million fine (plus another $2.0 million in litigation costs) for freezing out competing currency

conversion services on terminals that accept Visa cards. Not good; less money for “field research” junkets. On

the up-side front, Visa has cut a clever deal with Chevron which enables mobile smartphone users (NFC only,

please) to purchase fuel with their personal devices. Twenty Chevron stores in California will receive the

$10,000 to $100,000 system upgrades required to make NFC work with fuel dispensers during the test. Geez,

guys, Exxon Mobil’s Speedpass wasn’t quite as elegant but a whole lot cheaper. So it goes in the card brand

and mobile wars.

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M&A/Alliance Activity

Buyer/Investor Target Payments Emphasis Possible Strategy

Remitly Talio Mobile messaging Jeff Bezos-backed, mobile remittances startup, Remitly, uses a

portion of the $12.5 million in VC funds raised in March to acquire

Talio. Talio specializes in customizable mobile messaging and

Remitly is eager to link mobile payments and messaging to create a

new form of tender delivery. The company claims to move over

$300 million per year over its remittance app. This move isn’t too

dissimilar from Mr. Bezos’ drone-based approach to merchandise

delivery; wouldn’t it be cool for the money and message to be the

same thing? Good-bye delayed settlement. Are you listening, Fed

Faster Payments Task Force?

Allegis Capital, IA

Ventures, Resolute

Ventures, Tekton

Ventures

Signifyd eCommerce fraud

prevention

Signifyd helps eCommerce merchants avoid future chargebacks by

pre-qualifying them and then guaranteeing against a subsequent

dispute. The system relies on behavioral psychology and machine-

learning tools to evaluate consumer purchasing patterns. Investors in

this round provided $7.0 million in Series A funding. Earlier

injections raise the company’s total outside funding to $11.0 million.

First Data Transaction

Wireless, Inc.

Digital gift card platform Almost on the eve of its $3.0 billion IPO, First Data doubles down on

the gift card sector by acquiring cloud-based solutions provider,

Transaction Wireless. Looks like First Data is moving to corner the

market and will use TWI in conjunction with its recent Gyft

acquisition to provide both closed and open loop gift, incentive, and

rebate solutions. The TWI addition gives First Data the ability to

deliver prepaid solutions via email, mobile, social media, and digital

wallets. First Data is also a player in payroll card scheme

management and distribution through its Money Network solution.

Terms were not disclosed. Interesting niche strategy; ten or twelve

more of these might enable FD to service its $22.0 billion in debt.

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M&A/Alliance Activity - Continued


Sequoia Capital,

Visa,

American Express

Stripe Online payments Stripe, the five-year old startup that a number of more established players

would like to see crash and burn, attracts some very heavy investors in

another round characterized as “less than $100 million” by its CEO.

Valuation of private companies is always dicey but those in the know say

that Stripe is now worth far more than the $3.5 billion benchmark set in Q1

when $70 million strolled through the door. Stripe has been busy building its

online support persona and has rolled out one-click and buy buttons for its

clientele. Elon Musk and Peter Thiel are investors, making Stripe a celebrity

worth watching.

TBD Quicken Personal and business financial management

Established virtually on the heels of the PC explosion in 1984, Intuit is

trimming its sails and heading off in another direction. It has announced its

intent to sell its Quicken, QuickBase and Demandforce software tools. Users

will continue to be supported during the buyer search. Intuit generates $4

billion in sales annually and is valued at $20 billion. TurboTax and Mint, the

PFM platform, are not part of the deal. Some folks might recall that Quicken

won a knock-out of its primary competitor when Microsoft Money was

shuttered about a decade ago. Ideally, the thousands of banks that support

download feeds to Quicken users will be unaffected by the sale.

FTV Capital, Mosaik

Partners, Passport

Capital, Intel Capital,

North Hill Ventures

CashStar Prepaid cards CashStar, the enablement engine behind prepaid cards issued by QVC,

Starbucks and Home Depot, among others, raises another $15.0 million from

new and returning investors. Total raised capital for CashStar now stands at

$50.0 million. The transaction adds long-term industry player and investor

Miles Kilburn to the CashStar Board of Directors as an observer. Funds will

be earmarked for expansion of the engineering and project management

teams.

Dorado Industries



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Buyer/Investor Target Payments

Emphasis

Possible Strategy

EVO Payments

International

Citibank

Mexico

merchant

services

business

Merchant services Citibank pulls the plug on its Banamex subsidiary’s merchant services business in

Mexico. The unit is the second largest acquiring competitor in the country,

providing merchant services in nearly 100,000 locations. The parties signed a ten-

year marketing alliance for referral business and on-going services. EVO started

in 1989 as an ISO and has grown continuously through the acquisition of merchant

portfolios including those of big bank players in Spain (Banco Popular) and

Germany (Deutsche).

Unnamed investors Abra P2P payments Abra, based in northern California, has raised $14.0 million in VC money to

“disrupt the payments industry.” The Abra solution is blockchain-based and

utilizes a network of “human ATMs” that earn arbitrage monies by buying and

transferring digital cash among consumers equipped with the Abra app. The

target market is China and southeast Asia. Confused yet? Let’s see, I’ve got a

smartphone app, its uses blockchain technology, I want to move money to Fred

but there’s a human in the middle? Please call back when the cake is fully baked.

Dead Pool Quirky Invention platform Quirky, the invention platform that responded to customer inputs on which

inventions to promote, has tanked. After burning through $170 million in funding

and the departure of its CEO, the company flat ran out of money and closed down.

Its storybook success, Wink, was immediately sold for $15.0 million to

Flextronics to partially satisfy outstanding obligations. Quirky and Wink may be

the first casualties of the pall mall rush to nesting the “smart home,” a subset of the

Internet of Things. Ideally, Flextronics will continue to support and expand the

Wink Hub which brings interoperability to the smart home. Otherwise, consumers

with smart homes which rely on the hub interconnectivity between Nest, Schlage,

Phillips, Chamberlain and other Internet-enabled home conveniences are going to

be, well, inconvenienced. There’s a message here somewhere, IoT fan boys.

Dorado Industries



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16


Iconiq Adyen Payments processing Iconiq, an investment fund backed by Mark Zuckerberg, Reid Hoffman,

Jack Dorsey and others, invests in Adyen, raising the valuation level to

$2.3 billion. This, less than nine months after General Atlantic opened its

wallet for $250 million. Adyen processes payments for Spotify, Facebook,

and Netflix plus other notables. $25 billion in payments passed through its

hands in 2014. See, Abra? Simple. No attempt to disrupt the payments

industry; just a straight-forward, get it done right the first time, strategy.

Bialla Ventures, Naveen Jain (InfoSpace), and others

Safe.Cash Digital asset vault Not that digital currency or blockchains are going away soon, it seems.

Investors have raised $1.2 million to help launch Safe.Cash, a vaulting

scheme which allows U.S. dollars to be traded with member banks for

digital tokens. Essentially, Safe.Cash is creating a cash-collateralized

digital token. Clever idea; wonder if it will fly. Probably not, since banks

won’t honor a check until its physically in hand and won’t disburse funds

until they’re collected. Just saying. So far, Safe.Cash member banks are

not named and the promoted smartphone apps haven’t shown up for iOS

or Android yet.

Newtek Premier Payments Merchant services Newtek (NASDAQ:NEWT) pays $16.5 million for Premier Payments, an

Elavon ISO with 2,500 merchant accounts. Premier was founded by

Jeffrey Rubin, who also founded Newtek and who has rejoined the (now)

parent company. Newtek is a business services management company that

offers insurance, cloud, payroll, and small business lending services. The

ISO roll-up continues; courtesy of EMV, we suspect.

Investors like us CPI Card Group Card production and payments

CPI Card Group announces plans to raise at least $100 million in an IPO.

CPI offers card production and personalization services, payments

acceptance, mobile technologies and fulfillment (card side). A bit of a late

bloomer in the IPO world (CPI is 30 years old), it should do well. Hope so.

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17


Envestnet Yodlee Cloud services (among

other things)

Yodlee, the company synonymous with “screen scraping” from long ago, has

been acquired by Envestnet for $660 million. Older readers will recall that

Yodlee led the charge in account data accumulation and PFM platforms.

Envestnet is a wealth management technology provider which will benefit

from reining in Yodlee’s 20 million paid users and 850 FIs. Makes sense to

us but hate to see an industry veteran toss in the independence towel.

Activant Capital ShopKeep Merchant services ShopKeep allows smaller merchants and independent retailers to remain

competitive with their bigger brethren by offering cloud-based POS solutions

coupled with inventory and staff management tools, a customer marketing

platform, and backend reporting and analytics. The company raises $60

million in Series D funding, upping its total outside capital to $97.2 million.

Nice to see the bigger terminal vendors forced into innovation by ShopKeep

and other up-starts.

Heartland Payment

Systems

TouchNet Information Systems

Campus solutions Heartland continues to build its strength in carefully selected vertical markets.

It pays $375 million for TouchNet, a dominant player in higher education.

TouchNet solutions run the gamut of payments from tuition to parking to

alumni donations to special on-campus events. TouchNet will be combined

with the existing Heartland Campus Solutions business unit for integration.

Aequitas Capital

Management, others

Mogl Network Offline commerce There’s yet another new e-commerce approach in town and its name is Mogl.

The offline commerce platform works with offline merchants who create an

offer that is displayed on the Mogl Network. Consumers seeing the offer

enroll their card and make the purchase. Merchants pay Mogl based on each

sale delivered. In theory, merchants can avoid the cost of maintaining their

own online presence and handling Internet payments. Investors paid $8

million to see if the premise is correct. So, who isn’t selling online these

days?

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18


Greylock,

Secondary Market,

Wellington

Management, others

Payoneer Money transfer services Payoneer, long a TrendWatch favorite, goes to bat for the eighth time

and comes up aces. Investors pour $50 million into Payoneer, a money

transfer service for small businesses and professionals. Newegg, airbnb,

and fiverr are marquee clients for Payoneer which offers transfers in 150

currencies utilizing a staff of 500 in offices located in Silicon Valley,

Europe, and Asia. When it started in 2005, Payoneer was focused on

providing remittances to ex-pat temporary and contract workers.

They’ve come a long way since.

PayPal Modest Contextual commerce PayPal continues to seek a path to ubiquity and has acquired Modest in

hopes of adding more tuck-in locations for using PayPal’s payment

services. Modest was founded by two ex-Obama campaign techies. The

company delivers customized storefronts, apps and buy buttons for

merchants of all sizes. The company will be combined with Braintree,

another player acquired by PayPal in 2013 for $800 million. Certainly

better than a handful of “hope,” we surmise.

ROTH Capital

Partners, others

Revel POS services Revel jumped on the iPad early in the game and offers a host of POS

solutions for smaller merchants using the technology and uniquely

written retailer apps. MOST and others added $14 million to the

company’s coffers, raising the Series C round to $110 million. The

company, and others like it, continue to see a road to fortune lined with

SMBs seeking new ways to differentiate themselves from big box

merchants at the point of sale and with the customer experience.

FIS SunGard Financial services FIS pays $9.1 billion for SunGard to crack the Wall Street side of

financial services. The new FIS will book $9.2 billion in annual revenue

and service 90 percent of the world’s 50 largest banks. Meanwhile,

there are $200 million in cost “synergies” to be had for FIS. Big

companies bring big challenges. Good luck, FIS.

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Useful Links for More Information

We have changed up this section a bit. Here are some companies that haven’t received

press coverage lately but which are worth a look-see.

Company Role Link

Finanteq Superwallet options and online financing

coupled with cloud services

www.finanteq.com

Soundpays Canadian company with a patent on

payments executed via ultra high

frequency sound. Interesting television

marketing options.

www.soundpays.com

Hedgeable “The Google of investing.” Low barriers

to entry way to attract millennials and

their money as they plan for retirement.

If nothing else, good site to go to school

for youthful marketing techniques.

www.hedgeable.com

Dynamics We’ve snickered at Dynamics in the past

because of their “push-button” cards.

Not any more. Hell, we laughed at

Apple Watch too. If cards are going to

continue to exist (and they will, just like

passbook savings accounts and

pennies), these guys appear to have an

edge on innovative ways to give cards

greater value.

www.dynamicsinc.com

http://www.finanteq.com/

http://www.soundpays.com/

http://www.hedgeable.com/

http://www.dynamicsinc.com/

Dorado Industries



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Back in the day!

20

Thirty-two years ago, two major U.S. companies (neither of

them banks) announced the launch of a new cable service for,

among other things, home banking. Florida was the

introduction site. Even though the Internet existed in 1983, its

use was limited to government collaboration projects involving

a handful of universities. Private sector players wanting to

create better connectivity and customer convenience had to

forage on their own. Hence, Viewtron, a collaboration of one

telecommunications provider and a print media giant, was

created.

This quarter’s trivia contest asks you to name the two

innovators. Millennials needing an extra hand (or a

participation trophy) can glean the answers at:

https://www.youtube.com/watch?v=sgYkpk9nJnE

By the way, an industry observer wrote this prescient epitaph

for the cable-based videotext industry in 1984:

Tweaked for current times, these success concepts are still

applicable today, we think.

“No matter how many services are attached to systems offered by banks and videotext

providers, the future of home banking depends on factors beyond the control of either. Truly

user-friendly software must be developed, home computer penetration must increase

significantly and adequate transmission links (phone lines or cable) must be in place.”



Dorado Industries TrendWatch Q3 2015

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Transcript of Dorado Industries TrendWatch Q3 2015