Dorado Trend Watch Q3 2012

TrendWatch 2.0 Q3 2012

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.

October 22-23, 2012

http://www.paymentssource.com/conferences/atmdebit/�

Dorado Industries 655 Deep Valley Drive, Suite 125-P Rolling Hills Estates, CA 90274

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Random Thoughts

Wow, What a Quarter! Well, four months actually. Sorry for the delay. Wow, What an Industry! So, who remembers back to the days when the only electronic payments conference was called “ATM/X” where “X” was a number from 1 to 10? Back then (ATM/8 was held in 1985 at Opryland in Nashville) “retail delivery” and ATM were synonymous terms. Hell, ATM ISOs didn’t exist, shared transactions barely moved the needle, and the biggest question going into the show was which vendor (NCR, IBM, or Diebold) would have the biggest booth and best party. How things have changed. In October 2012 alone there four commercially sponsored payments conferences and the Chicago Fed held its 10th annual Payments Symposium. The logos on our front page note that three events were held on the same dates. Together, they drew nearly 4,000 industry vendors, participants and pundits. All this hoopla over an industry that got no respect for its first 30 years. Opryland? Wow, What a Bold Move! You have to hand it to the payments companies and other industry players that really stepped it up a notch in Q3. For example: Starbucks took a $25 million flyer with Square and gave this $3.25 billion start-up the right to process all of its debit and credit card transactions while accepting Square Wallet as a tender type. Gutsy.

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American Express begins to shed its 150 year old reputation for member exclusivity in favor of a more inclusion persona. Its Bluebird offering made joint with WalMart is sure to disrupt the prepaid card market. Bitcoin runs the risk of being viewed as irrelevant (for now) if its “Black Friday” sales event scheduled for November 9th fizzles out. Bitcoin merchants will be offering discounts on gold, lower transaction fees, and free Pampero Rum in an effort to establish Bitcoin was a legitimate tender type. PayPal/Discover forges what some are calling the “fifth network” in their alignment for network routing and merchant acceptance. Discover is always looking for volume and PayPal is striving for acceptance in brick-and-mortar locations. A match made in heaven. Merchant Customer Exchange (MCX) is formed by nearly two dozen retailers. The idea of merchants collaborating isn’t all that new – consider their efforts related to Durbin. What is unique is that large and moderately large retailers, most category killers in their respective verticals, are willing to put aside their differences and sort out this mobile payments thing. Finally, in the Not So Bold category, the higher-ups at Nacha voted down the association’s effort to bring same-day ACH settlement into being. The UK, Mexico, Singapore, and the Netherlands can pull this off but 50 Nacha voting member FIs and regional associations can’t? Truly un-bold! Until next time.



www.doradoindustries.com 3

Table of Contents

2012 Predictions 4 TrendWatch Scorecard/Summary 6 2012 Payments Industry Yields 7 Interesting Quarterly News That Got No Respect 8 Q3 M&A/Investor Activity 12 Useful Links for More Information 20 Back in the Day 21




2012 Predictions

• Four new payments schemes designed to maximize mobile phone functionality while eliminating the need for retailer check out lanes will proliferate – two will be launched by merchants, two from third parties.

Mar: More entrants in the QSR, fine dining and tavern sector. Waiting on the big box guys. Late add: Intuit acquires AisleBuyer, one of the check out lane disrupters paying between $80 and $100 million.

Jun: JC Penney announces plans to eliminate its fixed site POS installations in favor of tablet and smartphone equipped roving checkout personnel.

Sep: Nordstrom equips its stores with 6,000 mobile POS devices and downsizes its checkout register footprint. WalMart executive pines for the future day when signature authentication disappears.

• CFPB or DOJ will put the buy-here, pay-here segment for automobiles and accessories out of business. Mar: Looks like CFPB is using the shotgun approach - 10,000 notices to companies have been issued in the first six months of its

existence! Annual report was issued March 31, 2012. Worth a quick read at: http://files.consumerfinance.gov/f/201204_cfpb_ConsumerResponseAnnualReport.pdf

Jun: Perhaps payday lending is getting all the attention since there are more of these lenders than the others. Then again, maybe CFPB’s cup runneth over with credit card complaints posted by consumers.

Sep: Looks like California might lead the way toward BHPH regulation; two bills pending in Sacramento.

• At least one of the top ten FIs will be merged out. Mar: Nothing yet but it’s still early. Jun: Might want to fire up the popcorn popper, this one could take a while. Sep: Looks like we’re going to whiff this one.

• Congress will turn its back on efforts to repeal Durbin and/or materially alter Dodd-Frank. Mar: Looks like Congress won’t have to do anything despite certain GOP candidates claiming they intend to repeal Durbin. Jun: Two words: “election year.” Might not happen until 2013, if then. Sep: Post-debate poll numbers suggest that this prediction may fall flat leading to some corrective action in 2013. Late add: for sure!

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http://files.consumerfinance.gov/f/201204_cfpb_ConsumerResponseAnnualReport.pdf�




2012 Predictions

• American Express will prevail in its suit with DOJ. Mar: The longer the suit continues, the better this prediction looks. Jun: Then again, the July 13, 2012 settlement with Visa/MasterCard could put things in a cocked hat. Sep: Despite the outcome of the suit, the new “more inclusive” American Express is beginning to look interesting. Bluebird may change

a lot of things.

• By yearend, China UnionPay’s base of cardholders will be 120 percent of Visa’s. Mar: Could happen. After all, who would have thought AMEX volume would have topped MasterCard’s in 2011? Jun: WTO finds China out of compliance with reciprocity agreements, excluding other acquirers from operating there. Might change

things. Sep: CUP continues to make its cards more accepted with a third-party processing agreement with Nets, Europe’s third largest

processor. RBR report: CUP issues one-half of all new cards in the world.

• Nokia’s partnership with Microsoft will save it from extinction. Mar: Nokia’s still in the game and swinging for the fences. Microsoft is trying mightily to make the deal work. Jun: Maybe not if Windows 8 flops. We should know soon after its release date in October. Yet, if the iPhone 5 comes out in

September, all bets are off for Nokia. Sep: Nokia is selling its headquarters building for $250 million. Microsoft might not be able to pull this off.

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TrendWatch Scorecard/Summary – Q2 2012

Market & Industry Situation 1 – Money2020 and other shows were loaded with new ideas. 2 – Cardtronics takes down another competitor, Diebold and NCR getting

aggressive. 3 – Interlink volumes “bottoming out.” Really? 4 – CFPB hammers American Express hard. 5 – AMEX Bluebird and WalMart should start the fur flying again. 6 – Mixed messages again this quarter. Lower guidance from the prepaid

sector. 7 – Lots of M&A and VC/PE money this quarter.

Industry Players To Watch V/MA: Lots riding on the outcome of the merchant settlement. Isis: Third party reviews of initial Austin efforts not so hot. Expect on-the-fly changes to software and enrollment procedures. MCX: Merchant mobile wallet goes less stealthy at Money2020. The Gap joins the party. Bluebird: AMEX’s low-fee prepaid card designed for distribution through WalMart stores could be a market disrupter and very good for the card issuer. Wright Express: Continues its torrid acquisition and diversification strategies while changing its name to WEX. Mainstream payments play in the works? Discover: “Think differently, act bravely” says Beth Horowitz, DFS EVP.

5. New Venture Growth 4. Legal/Regulatory Issues

1. New Payment Forms

2. ATM Restructuring 3. POS Volume Trend

High

Low

Med

High

High

Med

High

Positive

Mixed

Negative

6. Earnings Announcements

7. Industry Investments




2012 Payments Industry YTD Yields

Sources: Company releases, Morningstar.com, Bloomberg.com 2012 YTD yield excludes dividends; based on 12/30/11 and 9/28/12 closing prices

“The rich just keep getting richer” they say. Our basket of payments equities takes its lead from the Dow and S&P indices which popped up a few points this quarter and generates an overall return of 20 percent for the year so far, Green Dot’s drubbing notwithstanding.

Industry Player 12/31/2011 9/28/2012 Price Cap Value YTD 2012 Yield

Alliance Data Systems 103.84$ 141.95$ 38.11$ 2,267.5$ 36.7%Cardtronics 27.06$ 29.76$ 2.70$ 109.9$ 10.0%Discover Financial Services 24.00$ 39.73$ 15.73$ 7,564.6$ 65.5%Euronet Worldwide 18.48$ 18.79$ 0.31$ 15.6$ 1.7%Fidelity National Information Services 26.59$ 31.22$ 4.63$ 883.4$ 17.4%First Data (Future Use)Fiserv Inc. 58.74$ 74.03$ 15.29$ 2,383.7$ 26.0%Global Cash Access Holdings 4.45$ 8.05$ 3.60$ 277.6$ 80.9%Green Dot 31.22$ 12.23$ (18.99)$ (773.8)$ -60.8%Heartland Payment Systems 24.36$ 31.68$ 7.32$ 273.8$ 30.0%Jack Henry & Associates 33.61$ 37.85$ 4.24$ 355.7$ 12.6%MasterCard Worldwide 372.82$ 451.48$ 78.66$ 10,178.6$ 21.1%NetSpend 8.11$ 9.83$ 1.72$ 151.0$ 21.2%Online Resources 2.42$ 2.93$ 0.51$ 15.1$ 21.1%TNS 17.72$ 14.95$ (2.77)$ (69.5)$ -15.6%Total System Services 19.56$ 23.70$ 4.14$ 817.2$ 21.2%Visa 101.53$ 134.28$ 32.75$ 27,703.2$ 32.3%




Interesting News This Quarter

Subject Source/Date Substance

Bank of America ATM Marketplace September

• U.S. Patent Application 102429 assigned to Bank of America covers a “contactless automated teller machine.” Final approval is probably a few years away and what may come about as a result is anyone’s guess. Yet, if mobile comes of age while the patent weenies are doing their thing, we could come out the back side with ATMs that respond to NFC, RFID, or 2D technology rather than magnetic stripe cards. What do FI deployers do in response? Better question, what do ATM ISOs do? Might be a lot of new artificial reefs created as we transition to a new way of initiating an ATM withdrawal and older devices are swapped out.

WalMart Reuters September

• WalMart takes a baby step in the direction forged by Nordstrom, that is one of reducing the friction associated with store checkout. Employees of the Rogers, Arkansas supercenter will test iPhones equipped with an app that enables users to scan items and (ultimately) make payments without the help of a cashier. Nordstrom has gone a step farther but equipping its stores with 6,000 sales associate mobile terminals to ease checkout congestion and noise.

Citibank ATM Marketplace September

• Vaunted ATM and deployer and former ATM manufacturer Citibank takes a page from Wells Fargo’s book and launches e-receipts at its ATMs. Users may opt for emailed receipts complete with or without copies of deposited checks or decline a receipt altogether. Clearly a move to reduce the cost of ATM operations through paper reduction, this step also gives Citibank another opportunity to deliver marketing messages to its depositors.

Kuapay Mobile Payments Today

August

• Kuapay, a southern California-based mobile wallet provider that raised $4.0 million in Q2 2012, has already branched out to another geography. This time it’s NYC through a relationship with The Bean, a local independent chain of coffee and food shops and Little Pie Company (guess what product it purveys). Working with The Bean allows Kuapay to do a straight-up comparison with the Starbucks/Square lash-up. In addition to payments handling, the Kuapay app enables store coupons, user offers and rewards. Kuapay claims to have the lowest acceptance cost for merchants but declined to name the price.




Interesting News This Quarter – Continued


PayPal/Discover Payments Source September

• PayPal and Discover have formed an arrangement whereby PayPal can receive POS payments over Discover’s rails. This network lash-up gives PayPal an entry way into Discover’s 7 million relationships with U.S. retailers. PayPal’s 50 million accountholders would likely appeal to Discover as well. PayPal’s huge international presence has got to be high on Discover’s rationale for cutting the deal. One has to wonder what the deal does for Pulse, the Discover-owned PIN debit network that could see its transactions routed to PayPal where they might be converted to ACH transactions for settlement. Well, to make an omelet, you have to break a few eggs we suppose.

PreCash Payments Source September

• PreCash, a payments services player that caters to the unbanked segment, has launched a mobile wallet called FlipMoney. The service’s key focus is on getting cash into and out of the wallet in real time. Users pay $1.00 and 1.0 percent to deposit payroll or government checks and $1.00 plus 3.0 percent for others. PreCash relies on services provided by Chexar to take the risk out of immediate payment services embedded in the FlipMoney wallet.

Fiserv PaymentsSource September

• Sensing that its bank and credit union clients need a competitive response to Square, PayPal and Intuit mobile merchant services plays, Fiserv will roll out its SpotPay reader. SpotPay is similar in operation to the other offerings and includes benefits tied to the processor’s numerous other services. The UChoose rewards program comes along too plus instant funds credit for checks scanned via Fiserv’s remote deposit capture feature. The Accel/Exchange network rails will be used to insure faster funds movement and settlement. There will be a consumer side application as well but as yet the underlying system (i.e., POPMoney or Accel/Exchange) has not be decided.

Fidelity National Information (FIS)

PaymentsSource October

• FIS launches PayNet, a real-time transit portal for P2P, eCommerce, bill pay, mobile and international funds transfer. PayNet leverages existing FIS network assets including NYCE to move the funds directly from an accountholder’s relationship with a participating FI to the intended recipient. There’s a 30 minute “do over” provision included in the service to handle buyer’s remorse. The initial roll-out phase in currently in motion while full deployment is expected in early 2013. Just think what ClearXchange could become if it decided to offer the same service!






Research in Motion (RIM)

The Paypers October

• For the few of us left using RIM smartphones (and every Canadian ever born), there’s hope on the mobile wallet front. Coming as no surprise really, EnStream, the joint venture between Canadian mobile carriers Rogers, Bell and Telus has selected Research in Motion to enable smartphone payments through mobile wallets. RIM will manage security credentials for SIM cards in BB devices as well as Android and Windows phones. We’re waiting for the iPhone/AT&T holding period to lapse so we can join the big leagues, leaving BB to our northern neighbors.

Dwolla Dwolla Blog September

• Dwolla, the “little engine that could” from Iowa may be getting closer to gaining full respect in the eCommerce sector. PayTap, an aggregator of payments and a payment option on Amazon’s site, now incorporates Dwolla accounts as one of its settlement options. PayTap has a social aspect to it, allowing more than a single buyer to share the expense of a purchase. The same service also enables single or shared bill payments and the use of credit or debit cards for settlement. Dwolla might be worth a second look for mCommerce and eCommerce players seeking a way to avoid traditional card network rails.

Dwolla TechCrunch October

• Dwolla’s back at it. The rogue payments network has partnered with mFoundry to launch MassPay, a payments tool for business customers looking for alternative remittance methods to check-writing and wire transfers. MassPay is similar to PayPal’s business space offering except it supports 2,000 payments at once versus 250 for PayPal and, of course, it’s far cheaper. Payments over $10.00 cost 25¢ and those below the threshold are free. PayPal’s offering is currently priced at 2 percent per payment, capped at $1.00. Admittedly, most of Dwolla’s MassPay users are start-up companies but we all have to start somewhere, right?

Google/Discover Mobile Payments Today

October

• What again? Hard on the heels of Discover’s blockbuster partnership with PayPal for use of its network and introduction to its 7 million merchants, the fourth largest payment network leaks an upcoming announcement wherein Google’s wallet will take on card-like characteristics leading some pundits to refer to the offering as “your mobile wallet in your leather wallet.” The jury’s still out on the when and where particulars but Google’s chief wallet spokesperson, Osama Bedier, has a hard time not grinning from ear-to-ear when asked about “Google Wallet 2.0.” Stay tuned.





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Bank of America Reuters September

• Bank of America has partnered with Paydiant for a second round of mobile wallet testing. The bank’s first go-round involved NFC; results of that test were not widely publicized. The latest pilot is based in Charlotte and includes five merchants. Bank employees equipped with new iOS and Android devices store their card information in a cloud while an on-board app reads QR codes printed on merchant receipts to initiate the payment. Bank spokespeople explain that other technologies could be introduced to the mobile application but provided no specifics. Seems a tad klugey from here but time will tell.

PayDragon PaymentsSource September

• PayDragon is a unit of Paperlinks, the creative folks who custom design QR codes for consumers and businesses. Earlier this year PayDragon launched its “Takeout” application for food trucks and small restaurants. Device-loaded user payment information is accessed by email addressing. Consumers use Takeout to pre-order and pay for food items and arrange a convenient time for pick-up. The company has also launched “Checkout,” an app that permits scanning of published QR codes, product ordering, and payment. The products ordered are delivered anywhere is Continental U.S. for free. Yet another market disrupter.

Groupon PaymentsSource • Daily deal provider, Groupon quickly integrates its Breadcrumb acquisition made in May 2012 and uses that technology (and help from recent ex-PayPal hires) to offer up another competitor in the merchant services mosh pit. Readers provided by Infinite Peripherals enable participating Groupon retailers to accept the Big 4 payment cards at rates lower than generally available: 1.8 percent for swiped Visa, MasterCard and Discover cards and 3.0 percent for AMEX. Keyed in transactions are slightly higher plus a 15¢ fee. Groupon keeps its discount rates low by relying on its internal sales staff for merchant enrollment instead of ISOs. Sure to get some trade association’s dander up.




M&A/Alliance Activity

Buyer/Investor Target Payments Emphasis Possible Strategy Vantiv Litle &Co. eCommerce processor Vantiv (formerly Fifth Third Payments, formerly Midwest

Payment Systems) uses $361 million of its $500 million IPO money to gain a toehold in the eCommerce processing world. Litle & Co. posted 2011 revenues of $285 million and supports the eCommerce activities of Overstock.com, Ancestry.com, ShopNBC, and a host of others. No pay day for VC or PE players since Tim Litle has bootstrapped the whole show since 2001 with funds generated through the sale of predecessor company to First USA.

Grotech Ventures Plink Online-to-offline loyalty Plink raises another $3.0 million in growth capital to expand its presence in the QSR and casual dining restaurant sector. Plink enables enrolled consumers to earn loyalty points when eating at Arby’s, Burger King, Dunkin’ Donuts, Quiznos and others. Plink points are redeemable on Facebook as well as Amazon.com, The Gap, Home Depot, iTunes, Nike and others. The company earlier had raised $633,000 in angel investor funds from Matomy Media and Ahlborg Acquisitions.

T-Venture LevelUp App-based merchant services/loyalty

LevelUp is a SCVNGR merchant services offering that uses smartphone technology (card enrollment via on-board camera and QR code generation for transaction initiation) to enable low/no cost merchant services processing. LevelUp floored the industry last quarter by announcing a no interchange policy and merchant fees based on revenues generated. T-Venture adds $9.0 million to $12.0 million already committed by others (reported in TW Q2 2012). Not bad for a company with 200,000 active users and 3,000 merchants.




M&A/Alliance Activity - Continued

Buyer/Investor Target Payments Emphasis Possible Strategy Fontinalis Partners, Andreessen Horowitz, Advanced Technology Ventures, angel investors

QuickPay Parking lot payments app QuickPay, one of those “do we really need this?” payments applications, raises $3.5 million (guess we do) to finance expansion. The app enables consumers to locate and pay for parking at 100 locations across 12 cities in California, Colorado, and Nevada. Parking lot owners are required to install a special gate at their entrances and exits to participate. A competitor to Flash Valet (page 17) we suppose.

Lightspeed, DCM,

FiveStars Merchant loyalty scheme Two-year old FiveStars raises $13.9 million in expansion money to promote its card-based closed loop loyalty scheme. Store locations lean toward eating, drinking, and smaller retailers. The system claims compatibility with 90 percent of existing point of sales systems. This tranche brings total funding to $16.0 million. Retailers establish their own loyalty thresholds and rewards directly through the online app.

Cardtronics ATM Network ATM fleet Cardtronics, already the largest ATM deployer in the U.S., pays an undisclosed amount for Minnesota-based ATM Network. Founded in 1996, ATM Network is a full-service ATM ISO with approximately 6,200 merchant own-and-load deployed units across a national footprint. The acquisition increases Cardtronics’ fleet by 10 percent to over 61,000 devices. Can’t be many more good sized fleets left we guess.

TSYS Central Payment

Credit card processor TSYS and credit card processor Central Payment form a joint venture with TSYS have a 60 percent interest in the deal. CP was launched in 2006 by twin brothers Matthew and Zachary Hyman. Wait, this sounds familiar. Is this the same TSYS that announced a JV with First National Bank of Omaha on March 1, 2010 and bought out FNBO on January 4, 2011? Looks like the Hyman boys are about to take early retirement. No matter, they’ve already started SpotOn, a retailer loyalty program to soak up their spare time.




M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy

Global Payments Accelerated Payment Technologies

Payments ISO Global Payments lays out $413 million to acquire APT. Accelerated focuses on small to medium merchants in the health care arena – dental, medical, pharmacy – as well as specialty retailers, automotive and veterinary verticals. The acquisition brings with it access to 700 resellers covering 30 different vertical markets. Annual card volume for APT exceeds $8.0 billion.

Braintree Venmo Money remittance service Venmo operated in beta mode for two years, coming out in early 2012. Braintree pays $26.2 million to get into mobile P2P to complement its credit card processing technology. Braintree anticipates that the Venmo buy will enable it to migrate its current stable of eCommerce customers (Fab.com, Airbnb, Uber, LivingSocial and the Angry Bird games) to mCommerce quickly. Venmo was funded initially by $1.2 million in seed money and raised a silent Series A (how dumb are silent rounds, anyway?) in August, 2011. In late news, Braintree closed a $35 million funding round, doubling its capitalization.

Shortcut Ventures, B-to-V Partners, Tengelmann Ventures, others

SumUp Mobile merchant services Jack Dorsey’s U.S. launch of Square creates another market ripple, this time in Europe. SumUp is another device-based merchant services scheme similar to Square, PayPal Here, Intuit’s GoPayment and others. The dongle attaches to Android or iOS phones and tablets enabling micro- and smaller merchants to accept mag stripe payments. Pricing is 275 b.p. on each Visa, MasterCard or EuroPay transaction. Investors ponied up $20 million Series A capital to fund a full launch in four European countries simultaneously. European transaction security rules are tougher than in the U.S. so we can probably expect an American end run sometime soon.




M&A/Alliance Activity - Continued Buyer/Investor Target Payments Emphasis Possible Strategy

Founders Fund Angel, WI Harper Group, SLP Ventures, Lion Wells Capital, Others

Wallaby Financial

Digital wallet WF has developed Wallaby Card, a cloud-based wallet designed to allow consumers to load multiple cards and to optimize card selection to gain full advantage of differing card rewards and other benefits. Selections are made based on transaction type, limited time offers, and other key factors. Investors laid out $1.1 million to get things moving. One small glitch in the consumer adoption equation: a $50 annual fee. Oh-oh.

Wright Express UNIK Fleet One

Brazilian payroll cards and US fleet fuel operator

Wright Express, now known as WEX, Inc., continues to pursue diversification and concentration strategies on a global basis. It pays $21.9 million to acquire a 51 percent interest in UNIK, a Brazilian payroll card processor and two days later gobbled up Fleet One, a privately held fuel card provider in the U.S. WEX paid private investors $369 million for Fleet’s $56 million in annual revenues, 210,000 active cards, and 60,0000 acceptance sites. Seems steep.

Investors like us Blackhawk Network Holdings

Gift card distribution Safeway Inc. announces plans to IPO a minority stake in Blackhawk, the grocery chain’s gift card distribution chain with presence in the U.S., Canada, Europe, Mexico and Australia. Claiming the asset is under-valued inside Safeway, it is hoped that the unit’s $100 million in annual EBITDA will generate an over-valued asset – cash – for the supermarket. Safeway shares post the announcement rose 3.7 percent. Good plan, maybe.

Acculynk PayLeap eCommerce payments gateway

Acculynk takes a down-market step by acquiring PayLeap, an eCommerce payments gateway with 4,000 small and medium retail customers. In so doing, Acculynk Direct has been formed as a new division. Acculynk enables PIN-based Internet payments using a unique encryption scheme and has traditionally concentrated on larger retailers.





Buyer/Investor Target Payments Emphasis Possible Strategy Citi Ventures, Rizvi Traverse Management, Starbucks Coffee

Square Mobile merchant services Old news but it warrants repeating that the latest round of $200 million in funding gives Square an imputed valuation of $3.25 billion. Estimated annual spend on Square equipped phones and tablets now exceeds $8.0 billion. Starbucks put up $25 million, or roughly 100 million lattes.

Thomvest Ventures, UPS Strategic Enterprise Fund, Mohr Davidow Ventures, Bluerun Ventures

Kabbage Online merchant lending Kabbage, one of those “no respect” companies, makes cash advances to online merchants who retail products through eBay and Amazon. The investors added $30 million to Kabbage’s already hefty $26 million in earlier rounds. Company plans call for more growth in international markets and retailers with physical presence. Advances range in size from $500 to $50,000. Underwriting involves data mining using UPS shipping data, potential recipient’s QuickBooks information, and the level of merchant activity on Facebook and Twitter. Guess Quick Ratio and Debt/Worth analyses are a thing of the past when lending to online merchants.

VantagePoint Capital Partners, Baird Venture Partners

edo Interactive Card based rewards Returning investors add $15 million in capital raising this Tennessee- and Illinois-based processor of card-based rewards and promotions to $54.3 million. edo currently has 140 bank partners representing more the 150 million cardholders. Promotions include offers and redemptions at Nordstrom, Target, Subway, and Home Depot. Proceeds will be used to help the company move down-market into the small and medium business market.





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Buyer/Investor Target Payments Emphasis Possible Strategy Trellis Partners, Austin Ventures, G51 Capital, 186K Ventures

Flash Valet Parking service and payments Austin-based Flash Valet raises $1.25 million to expand its cloud-based software service that enables users to notify parking valets when their car is needed and provides payment options. Obviously, it’s a mobile app but comes with a valet-side version to track time and attendance and other essential valet business analytics like joyriding and pilfering .

Altos Ventures, ATA Ventures, Pacifica Fund, Claremont Creek Ventures

Billeo Online payments Venerable online payments operator Billeo raises $4.2 million with room for another $2.0 million in Series C funding. Billeo works both sides of the payments street with its ZipThru Buy and ZipThru Pay applications. Founded in 2006, Billeo continues to expand its presence through relationships with 40 banks, 1,500 merchants, and 1.5 million consumers. At this rate, Billeo will soon become a candidate for a liquidity event.

Digital River LML Payment Systems

Card not present processor Digital River pays $102.8 million to snag LML, a leader in eCommerce payments processing. The combined entity handles $20 billion in annual transaction volume generated by tens of thousands of companies. Naturally, the announcement drew potential litigation from a law firm inquiring about the LML Board’s efforts to shop the deal. Let’s see, LMLP closed at $1.87 the previous trading day and Digital River is paying $3.45. Seems like the DR Board is the one that bears scrutiny.





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Buyer/Investor Target Payments Emphasis Possible Strategy Matrix Partners, Ribbit Capital

Fuze Network Cash-based online payments Founded in 2009 in Salt Lake City, Fuze has raised $5.0 million in funding from various sources. The company offers its Swipe2Pay services to users wishing to pay credit card and other bills with cash by swiping the Swipe2Pay card at special terminals. 100,000 retail locations and numerous banks participate; $25 million in transactions per month run through the system. A companion product, BillPay Card, identifies cash-paying users at the point of sale and enables payment of recurring bills (utility, ISP services, etc.) at participating merchant locations in cash.

SignaPay Equity Commerce LP

POS ISO Two payments ISOs merge with SignaPay, a Dallas-based firm, coming out on top. The combined entity handles 14,000 merchants and $2.0 billion in annual sales. These intra-sector mergers just keeping happening.

Investors like us WorldPay Payments processor Advent International and Bain Capital announced intentions to sell the U.S. operations of WorldPay. AI and BC paid £2.0 billion for 80 percent of WorldPay from Royal Bank of Scotland in 2010. The two PE firms hope to generate $1.0 billion in proceeds from the sale of the Atlanta operation. The non-U.S. portion of WorldPay will be retained, for now.

ES Ventures, Pritzker/Vlock

Ubiquity Global Services

Prepaid BPO Former executives from TxVia – recently purchased by Google – form a business process outsourcing firm targeting the GPR programs found within the prepaid card industry. Investors funded $4.0 million in initial capital. The company has operations in El Salvador and the Philippines and plans to open a European office next year. Initial Ubiquity customers will likely be drawn from TxVia legacy clients.





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Buyer/Investor Target Payments Emphasis Possible Strategy MasterCard Truaxis Loyalty rewards Back when it was known as BillShrink, Truaxis helped users

save money by offering ways to reduce household bills. Today, the company helps banks and retailers deliver household-customized offers to their customers. MasterCard has acquired Truaxis to integrate its features into its network to deliver real time offers and post-offer analytics. It is thought that these features will promote brand loyalty on the banking side and stepped-up sales for merchants. Sounds right.




Useful Links for More Information

We threw a lot of new names out again this quarter. Here’s a list of links for you to learn more.

Company Role Link Kuapay Mobile Wallet www.kuapay.com

PreCash Unbanked financial services www.precash.com

PayDragon Restaurant ordering and payments www.paydragon.com

Plink Online loyalty www.plink.com

QuickPay Parking lot search and payments www.quickpay.com

FiveStars Merchant-based loyalty www.fivestars.com

Braintree eCommerce processor www.braintree.com

Wallaby Financial Smart mobile wallet www.walla.by

Fuze Network Alternative payments network www.fuzenetwork.com

http://www.kuapay.com/�

http://www.precash.com/�

http://www.paydragon.com/�

http://www.plink.com/�

http://www.quickpay.com/�

http://www.fivestars.com/�

http://www.braintree.com/�

http://www.walla.by/�

http://www.fuzenetwork.com/�




Back in the day!

Perhaps you forgot (or didn’t know) that IBM once made ATMs. Yep, right up until Diebold and IBM formed InterBold in 1991. These are pictures of IBM’s first two ATM models. BTW, the photo on the left was taken in 1972. First reader to email the model number for each unit to us wins a Dorado Industries polo shirt second place gets a T-shirt. Good luck!

Dorado Trend Watch Q3 2012

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