Dorado TrendWatch Q4 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.

TrendWatch 2.0 Q4 2015

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Random Thoughts

So Much for Exclusivity

Americans just don’t care for exclusive arrangements, it seems.

Indeed, we prefer choices. For instance, when given an opportunity

to rid ourselves of the highly regulated and heavy-handed taxi

industry, we jumped at the chance and supported Uber and Lyft. In

San Francisco, our support was so strong that the largest cab

company is near filing for Chapter 11 and, in New York City, the

value of a taxi medallion has fallen by 40 percent. See? Choices

work.

We’ve seen this American characteristic in payments for decades.

“What do you mean you only accept Visa?” was heard loud and

clear by merchants in the 1970s, and duality ensued. When Visa

and MasterCard planned to jointly launch their Entrée debit card in

1987 to protect their credit card franchises, merchants (and

Attorneys General for 11 states) said “thanks, but no thanks” and the

45 debit card networks in existence at the time continued to provide

consumer and merchant choice.

Recently, merchants have begun to recall the consumer penchant for

choice and have been signing up for multiple mobile payments

schemes in addition to their own in-app payment programs. Why?

Because there are a number of us Americans who prefer to do things

our way, not just Dunkin Donuts’, Subway’s, or Walmart’s. In the

case of Walmart, consumers thankfully have lots of options ranging

from Walmart Pay to MasterPass with MCX CurrentC in the middle.

And, Dunkin Donuts is now an Apple Pay merchant while Subway

is covering its bets by taking both Android and Apple Pay.

Try as they might to stake out exclusive deals with, say, appliance

manufacturers in the IoT world, or wearable startups in hipster land,

payments schemes and card brands will continue to be taught the

lesson that Americans hate the notion of “one size fits all.” And,

that’s good for everyone; save for two, maybe.

2

Fan Boy? No, But Close

We don’t even like the term but when it comes to what we see in

JPMorgan Chase, we’re treading dangerously close to earning the

title.

Consider: Chase cut a ten-year deal with Visa in 2013 that gave it a

copy of VisaNet. With the stroke of pen, the bank formed its own

closed-loop network giving it an edge on the merchant services side

(the bank is zeroing in on a trillion dollars in annual processing

volume) and the ability to learn even more about its depositors’

purchasing activity.

Consider: The bank feels emboldened enough to launch Chase Pay,

an Apple, Android, Samsung (et al) Pay competitor and designed it

to work in the QR code environment. And, while the jury is still out

on QR versus NFC (or HCE), it’s tough to quibble with the decision

because of what Chase did next.

Consider: The bank signs up with MCX to become that mobile

payments coalition’s premier partner. Prior to doing the deal with

Chase, MCX found itself in an asymmetrical situation, i.e., no

issuers. Given Chase’s girth in the card world, the bank has rubbed

some salve on the coalition’s problem.

When you sum it all up, Chase has taken a very bold step in

payments (mobile and otherwise) – one with a ton of risk, mind you

– but, isn’t it about time somebody stopped the dithering? Sage

moves or not on Chase’s part, at least somebody else sees the folly

of banks and merchants spitting from the sidelines while card

brands, processors, and others play Lawn Darts with the payments

industry.

So it goes; off to a marathon.

Until next time.

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Table of Contents

2015 Predictions Re-visited 4

2016 Predictions 7

TrendWatch Scorecard/Summary 8

2015 Payments Industry Yields 9

Interesting Quarterly News That Got No Respect 10

Q4 M&A/Investor Activity 15

Useful Links for Quieter Companies 21

Back in the Day! 22

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2015 Predictions Re-visited

• 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” page.

Dec: Half credit for the Global Payments/Heartland deal?

• 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.

Dec: Didn’t happen. This prediction resurfaces in 2016 with a broader meaning.

• 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.

Dec: Blew this one too. Still, do we really need a jillion wallets and MNOs? We think not.

4

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More 2015 Predictions Re-visited

• 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.

Dec: Guess the JPMorgan Chase/MCX deal makes two.

• 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.

Dec: So, how does Walmart Pay fit in? Could make the iOS/Android speculation irrelevant.

• 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.

Dec: Millennials tell us Twitter is for “dinosaurs.” So there you have it.

5

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More 2015 Predictions Re-visited

6

• 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.

Dec: Bingo! Chase and ChaseNet sign up with MCX.

• 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.

Dec: Geez, who’s the EMT crew giving these guys life support? Guess we blew this one too. It’s probably all those

Stanford students collecting their just desserts from Iowa Hawkeyes on Rose Bowl game wagers. Now, that there

was a blaze of glory!

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2016 Predictions

• The Big Three – Alphabet, Apple, and Facebook – will go on an acquisition tear in the payments

arena to put some distance between each other and the rest of the pack.

• Lesser known payments schemes will begin closing up shop.

• VC/PE interest in payments startups will diminish while traditional bankers will step in with

partnership and investment deals.

• Despite intrigue created by CFPB’s interest in foreign transfers, the cross-border money

movement sector will heat up – new players and some M&A.

• Banks and credit unions will throw caution to the wind and begin offering their depositors

proprietary branded digital wallets to combat the zeal merchants have for steering customer

loyalty.

• In another search for scale, two established merchant services processors will merge.

• Blockchain will remain the new “glowing object on the horizon” but efforts to institutionalize it will

not move the needle much in 2016.

• In-app payment options (e.g., “One Click” by Amazon) will go on autopilot and become less of an

“end” and more of a “means to an end.”

7

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TrendWatch Scorecard/Summary – Q4 2015

Market & Industry Situation 1 – Chase Pay and Walmart Pay will soon be in the wild. Let the games

begin.

2 – Check out what Diebold and NCR are doing; very cool.

3 – Huge pops in volume over the Christmas season.

4 – It’s an election year; no news, no nothing. Except for CFPB.

5 – Another good, but not great, year but some super big IPOs.

6 – Everyone’s making money, it seems. Except China.

7 – FinTech companies continue to probe ways to peel off some of the

payments sector income.

8 – Companies that haven’t gotten the message will have a hard time in

2016. Fortunately, there are some folks that take this stuff seriously.

Industry Players To Watch “The Pays”: The summer of 2016 is shaping up to be a real slugfest.

MCX: When it’s the contrarians that are saying a company will survive,

it’s not a good sign.

Apple: Not that Apple gives a whit about share price but current pressure

may force the company to accelerate its Watch and iPhone plans.

Fed Faster Payments: The vote’s been taken and, though nothing’s public

yet, it’s a safe bet that there’s a consensus on direction in place.

Every Retailer With In-app Payments: Choice or no choice? Tough call

for a number of ideology-driven merchants.

The Internet of Things: If your refrigerator can pay for your milk, will

your toaster order the Pop Tarts?

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 High

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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 12/31/15 closing prices.

Q4 did us as few favors as Q3; this includes the meager FDC and Square IPO yields but also the rich payoff

provided by the Global Payments bid for Heartland. So, why is this important? Ten years ago, it wouldn’t have been

but today’s mega-complex of payments scheme providers and hangers-on makes for a respectable investment

opportunity and attracts VC and PE firms in droves. As entrepreneurial readers will point out, this business runs on

investment dollars until the transactions materialize. Oh, and while the Dow took back 2.5 percent in 2015, our all -in

average yield before dividends was 7.7 percent. Bitcoin haters might take note of the resurgence BTC experienced

for the year – a hedge against traditional tender, or just a fluke? YGIAGAM.

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

Alliance Data Systems 284.05$ 276.57$ (7.48)$ (445.1)$ -2.6%

American Express 93.03$ 69.55$ (23.48)$ (25,353.0)$ -25.2%

Blackhawk Network Holdings 38.92$ 44.21$ 5.29$ 276.7$ 13.6%

Cardtronics 38.58$ 33.65$ (4.93)$ (200.7)$ -12.8%

Discover Financial Services 65.50$ 53.63$ (11.87)$ (5,708.3)$ -18.1%

Euronet Worldwide 54.90$ 72.43$ 17.53$ 883.5$ 31.9%

Fidelity National Information Services 62.21$ 60.56$ (1.65)$ (314.8)$ -2.7%

First Data (Since IPO) 15.75$ 16.03$ 0.28$ 50.4$ 1.8%

Fiserv Inc. 70.97$ 91.46$ 20.49$ 5,214.5$ 28.9%

Everi (fka GCA) 7.17$ 4.39$ (2.78)$ (214.4)$ -38.8%

Heartland Payment Systems M/A Pending 53.94$ 94.81$ 40.87$ 1,528.5$ 75.8%

Jack Henry & Associates 62.14$ 78.06$ 15.92$ 1,335.7$ 25.6%

MasterCard Worldwide 86.18$ 97.43$ 11.25$ 18,112.5$ 13.1%

MoneyGram International 9.09$ 6.27$ (2.82)$ (163.2)$ -31.0%

PayPal 41.60$ 36.20$ (5.40)$ (6,588.0)$ -13.0%

Square (Since IPO) 12.80$ 13.04$ 0.24$ 78.5$ 1.9%

Total System Services 33.95$ 49.80$ 15.85$ 5,197.8$ 46.7%

Western Union 17.91$ 17.92$ 0.01$ 5.7$ 0.1%

Vantiv 33.95$ 47.42$ 13.47$ 3,340.3$ 39.7%

Visa 65.55$ 77.55$ 12.00$ 10,150.8$ 18.3%

.

Bitcoin Closing Price 315.95$ 430.05$ 114.10$ 36.1%

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Interesting News This Quarter

Subject Source/Date Substance

Samsung Finextra

January

The Consumer Electronics Show is always good for a couple chuckles and 2016 has started off on

the right foot. Samsung has partnered with MasterCard to deliver it’s pay-by-fridge solution for

harried households incapable of making out a shopping list. The new Samsung refrigerator comes

complete with a HUGE tablet in the appliance door that allows consumers to order and pay for

household groceries as supplies dwindle. FreshDirect and ShopRite are early partners in the

Samsung Family Hub ice box while MasterCard has trotted out its marketing team to brand the

offering “Groceries by MasterCard.” Wait, it gets better. The refrigerator has a camera in it so

homeowners can use a mobile app to “visualize” what’s in the box when ordering. Does this mean

that the light is always on? Gotta love the Internet of Things!

MasterCard Finextra

January

On a more serious note, MasterCard has come out swinging in the impending slugfest for control

over payments made with wearable devices. MA has inked a partnership deal with Coin (heads up:

these things usually wind up being acquisitions), the startup that recently launched its multi-card

product (which, by the way, works like a dream.) Coin has considerable experience in

miniaturization of payments componentry and MasterCard is betting that being there first with

device partners like Atlas Wearables (fitness), Moov (training), and Omate (fashion smartwatches)

will solidify its claim to the wearables payments space.

Moven Bank Innovation

January

Bank want-to-be, Moven continues to redefine financial services with a new program that promotes

merchant products to the startup’s base of depositors. The latest offering includes four firms: Blue

Apron and Handy deliver food and cleaning plus handyman services while Cups and Arcade offer

discounts on coffee and restaurant meals. Earlier consumer-friendly Moven initiatives include gift

accounts and a referral service. What’s next, toasters?

Mozido

TabbedOut

Presser

October

Two TrendWatch favorites, Mozido and TabbedOut have partnered to enhance consumer dining

experiences through use of the TabbedOut mobile app. Mozido adds the ability to join restaurant

wait lists, make reservations and split the bill and pay to TabbedOut’s complement of services –

deal finding, restaurant locations, food ordering and bill review. Both companies have found each

other in their respective quests to saturate the value chains in consumer verticals, a match made in

heaven.

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Interesting News This Quarter – Continued


Tender Armor PayBefore

December

There’s a new tool available for combating card not present (CNP) fraud. Or so claims new market

entrant Tender Armor. The company’s service dubbed CvvPlus generates a daily security code sent to

enrolled consumers via text or email. The daily code is used in place of the on-card CVV when online

purchases are made or when ordering by telephone. Prepaid card scheme provider InComm will be

integrating the service with its GPR cards beginning in 2016. We hope this works; Lord knows we’re

going to need it when issuers and retailers become EMV-compliant one of these days.

MagSpoof Wired

November

There’s a $10 tool in the wild that can make our lives hell. MagSpoof can predict the next number in a

sequence of PANs. Big deal, you say? What if the number being solved for is the new American

Express card you are about to receive after losing your current card? The device is about the size of a

quarter and is loaded with a learning algorithm to determine what your new card number will be. So, the

fraudster holding your old card and a MagSpoof tool is set to go on another shopping spree even after

your old card has been blocked. Hopefully, APX and others have gotten wind of MagSpoof and fixed

their systems. Anyone willing to bet not?

Campus Card Programs CU Times

December

Remember when you could have a credit card that would benefit your alma mater? Not so much these

days, it seems. Thank the CARD Act. Card issuer payments to universities in the U.S. plummeted by

60 percent in 2014 according to the CFPB due, in large part, to the CARD Act’s new reporting

requirements. Meanwhile, Capital One, a long time backer of Campus Card Programs, left the market

in 2014 and Bank of America has cut is number of programs by 50 percent. Credit unions have stepped

in to fill part of the void but are targeting alumni associations instead of colleges to avoid the specter

(and CFPB purview) of extending credit card offers to students. More than one way to skin a cat, they

say.

Money Transfer Industry BI Intelligence

January

Our 2016 prediction regarding the MTS industry notwithstanding, there may be good reason to weigh

the opportunity cautiously. The CFPB announced this month that complaints lodged against Money

Transfer Industry players rose by 49 percent in 2015 compared to the prior year. Eighty percent of the

filings named Western Union, MoneyGram, PayPal and Chase. Most of the complaints centered on the

level of fees charged. Doesn’t it follow, though, that the number of complaints would track with the

growth in service volume? We think so but suggest that FIs and merchants interested in the sector recall

past CFPB behavior as consumer claims begin to mount. In short, it isn’t pretty.

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Coinbase BI Intelligence

November

Coinbase is the largest provider of Bitcoin denominated wallets with 2.8 million in existence; existence that is,

but not necessarily use. Absence of usage makes the retailer community nervous so Coinbase now offers a

Bitcoin Visa debit card in hopes that the volume will climb. The thought is that the new form factor will

increase system symmetry and drag along more merchant acceptance. Good thought; and good luck.

Fed Faster Payments Presser

October

Over 300 payments executives have been meeting by telephone and in person in an effort to build a framework

of criteria for use in crafting a newer, faster, payments system for the United States. It seems, however, that a

couple of industry players, FIS and The Clearing House, have jumped the gun with a preemptive move on the

Fed Faster Payments initiative. The two companies have announced plans to team for the creation of a

“ubiquitous real-time payment system for the United States.” For its part, FIS has a wealth of experience in

faster payments, having engineered a similar offering in the UK. TCH announced its intentions to change the

playing field in payments over six months ago so this teaming effort should come as no surprise. Unless, of

course, you’re the Fed.

Early Warning Services Presser

November

Early Warning Services has partnered with Fiserv to provide the mega-processor with real-time verification

and funds availability services to enhance its existing NOW Network. The lash-up brings real-time bill payment

and deposit services to 50 percent of the country’s 12,000 banks and credit unions. An added dimension is that

bill payments feature loops in the SMB segment, a key factor in payments acceleration according to research

conducted in 2014 by none other than the Fed. Are we looking at a potential second respondent to the Fed’s

Faster Payments RFP when its released later this year? We’re counting on it. No one likes a one horse race.

Financial Innovation

Now

Presser

November

Sorry for being single-threaded but there’s another BB rolling around the Fed Faster Payments ballroom that

needs some air time. Financial Innovation Now is a consortium of Amazon, Apple, Google, Intuit, and PayPal

that has been formed to “. . . . promote policies to help foster greater innovation in financial services.” Hmm, no

bankers, processors, card companies, and other framers of the status quo have been invited to play. Favorite

policies the coalition wants to promote include (in its words): a) establishing the trust and safety of new

technologies, b) reducing barriers and enhancing system access for the underserved, c) enabling real-time

payments, d) expanding the consumer and small business lending marketplace, and e) unlocking the power of

financial applications. It has yet to be seen if FIN (catchy acronym) will be an advocacy group for new

regulations or yet another Fed Faster Payments RFP respondent (wouldn’t that be a hoot?)

Dorado Industries



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13


Apple ATM

Marketplace

January

ATM Marketplace cites a Quartz news outlet discovery of an Apple patent which might extend the iPhone

manufacturer’s reach in payments. The patent specifies how iPhone users could transfer funds among one another

using text, phone calls, or email. If the company proceeds with the offering, Apple could become a competitor to

Venmo and Square Cash along with a half dozen other players. There’s always room in the pool for one more, we

think.

JPMorgan Chase Finextra

October

JPMorgan Chase blows the doors off of the 2015 Money/2020 conference, twice. First, it announces the launch of

Chase Pay, it’s proprietary payments scheme for bank customers. When teamed with ChaseNet, the solution brings

benefits to both consumers and merchants, a concept lost on other mobile scheme operators. Second, Chase Pay has

become a premier partner with MCX, bringing Walmart, BestBuy, Shell and Target into the fold. Chase’s

announcements raise a number of key questions about the technology (QR versus NFC), the future for

PayPal/Paydiant, and why it is going to take six to nine months for things to crystallize (after all, the MCX retailers

already have the scanners needed for Chase Pay?) Odd bedfellows or not, the Chase Pay/MCX move may change the

course of payments history. Then again, there’s the Sony Betamax and Walkman tales to learn from.

In a subsequent press release, Chase announced that it has partnered with P97 Networks to attack a problem that has

been bedeviling mobile payments (and EMV) for quite some time. P97’s Petrozone platform brings pay at the pump

convenience to gasoline retailers and benefits consumers wishing to use their smartphones as a payments form factor.

Slick as STP.

OmnyPay Mobile Payments

Today

October

Speaking of retailers and payments, OmnyPay has positioned itself as the retailers’ friend in mobile payments. Led

by three VeriFone veterans include Bill Melton, OmnyPay is a private label solution designed to “re-gain customer

loyalty lost to others.” Actual payments run on existing rails and the solution is integrated with existing POS systems

and backend analytics. Like other new entrants, OmnyPay takes advantage of existing scanner technology by using

QR codes. Competition is always good, they say, and we think any Melton-backed venture is hard to bet against.

Diebold ATM

Marketplace

October

What goes around, comes around. Decades ago, a very large Japanese company with very little ATM market share

(Omron) piloted an ATM that had no screen or keypad. It didn’t do so well because it was ahead of its time. Diebold,

the ATM industry giant, has taken the “less is more” concept a bit further and debuted a new device with no screen,

PIN pad, receipt printer or card reader. The “Irving” ATM uses both NFC and QR code technology for transactions.

(Iris-scan technology is also available for truly puckered up security worrywarts.) Good ideas are infrequently new;

merely recycled.

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14


Early Warning Services PYMNTS.com

October

Early Warning Services, the fraud prevention firm owned by a coalition of banks including Wells Fargo, Bank

of America, JPMorgan Chase, BB&T and Capital One, repositions Authentify, a company it acquired last April.

The new posture for Authentify combines multiple authentication layers into a single offering. Users can draw

on biometrics, NFC, two-factor, out-of-band (voice and text), and device binding to assure themselves that the

customer is, in fact, the customer. The offering moves the company farther out in the payments spectrum from

fraud prevention to fraud blocking, a not-so-subtle differentiation. Clever.

MCX Mobile Payments

Today

October

Well before the Chase Pay connection with MCX was made public, MCX, the retailer consortium for mobile

payments, announced a new relationship with Buy It Mobility Network, a TrendWatch 2.0 favorite. MCX will

use BIM technology to securely link consumer checking accounts to the CurrentC mobile wallet. The rationale

is elegantly put by the coalition’s CEO, Brian Mooney. “With BIM’s technology and ability to pay via a

checking account, consumers will soon have several options for paying for goods and services using CurrentC.”

(Emphasis added.) Startup BIM already has 3.0 million customers using its platform so there’s an opportunity

to give CurrentC a bit more bulk from the get-go.

Walmart BI Intelligence

December

We conclude this quarter’s breezy news section with a hat-tip to Walmart. The largest U.S. grocery (among

other things) retailer announced that Walmart Pay will soon be imbedded in the existing Walmart app; good

news for the 22 million active app users. Tender types include the usual credit, debit and prepaid brands and

Walmart gift cards. Walmart Pay is QR code-based (not surprising) so existing store equipment will be

sufficient. Almost immediately following the announcement, industry pundits began writing about the demise

of CurrentC, the MCX offering long underwritten by Walmart and other major retailers. We’re not so sure; at

least not in the short term. Walmart Pay won’t be in full roll-out for another six months – similar to the

theoretical timing for Chase Pay. If both efforts (and others with similar timelines) stay on track, the summer of

‘16 might rival that of ‘67. (Millennials can Google that veiled reference to a happier time.)

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M&A/Alliance Activity

Buyer/Investor Target Payments Emphasis Possible Strategy

Santander Ripple Cryptocurrency In keeping with our 2016 prediction, Spain-based Santander Group

has invested $4.0 million as part of Ripple’s $32 million Series A

round. The bank is not part of the R3 consortium of banks formed to

explore the options blockchain provides the financial services

industry; it appears to have already drunk the Kool Aid. Ripple also

announced “foreign exchange” and “currency exchange” solutions

concurrent with the new funding round.

Dan Henry,

MATH Venture

Partners

CardFlight mPOS terminals Seasoned entrepreneur, Dan Henry (ex-CEO of NetSpend) joins

others in a $4.2 million funding round for CardFlight, a developer of

mPOS terminals based on tablets and smartphones. This is one of

several funding rounds involving the terminal segment made in Q4 .

Since it’s a pretty safe bet that we won’t see a mobile payments

leader or standard soon, using these adaptable technologies for POS

acceptance sure looks like a sound bet.

Route 66 Ventures,

Anthemis Group,

Moneytime Ventures,

others

Moven Mobile banking platform Moven, the non-bank backed by CBW Bank of Weir, Kansas offers

free mobile banking services and supports decoupled debit.

Depositors receive fee-free ATM access plus budgeting tools and

PFM services. Returning investors pony up $12 million in Series B

financing to support Brett King’s non-branching “bank.” Simple, a

Moven competitor, was bought by BBVA for $117 million in 2014;

lot’s of money in the business of banking these days.

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M&A/Alliance Activity - Continued


Oak HC/FT,

Stanford-StartX

Fund, Matrix

Partners, others

Poynt mPOS terminals Poynt, the mPOS terminal company launched by Osama Bedier two years

ago, gathers up another $28 million in capitalization funds to support a

manufacturing ramp-up. Mr. Bedier is the former Google executive charged

with getting Google Wallet off the ground. The Poynt terminal is also EMV

ready so folks who left their mobile phones behind (perish the thought) can

also insert their chip cards (assuming their bank is EMV compliant). We’ll

say it again, there’s lots of money in terminals.

Crosslink Capital, Wildcat Venture Partners, Leapfrog Ventures, Correlation Partners

Zebit Credit card program Zebit is a service offered by employers to employees who fall into the

underserved category. Users receive credit card-like purchasing benefits for

goods offered through the Zebit Market and pay zero interest on their

purchases. Series A investors like the concept and have added $10 million to

the company’s coffers to finance working capital and for platform expansion

opportunities. Product lines participating in the Zebit Market include

Panasonic, Canon, Garmin, HP, LG, Cuisinart, and others. Bankers looking

to make a play in the emerging FinTech world might take a look here.

Simon Williams,

Camelot Financial

Capital Management

NerdWallet Financial services

information

It’s not a wallet in the truest sense but NerdWallet does contain value. The

four year old company attempts to provide unbiased information in response

to the 30 million-plus inquiries it receives each year from consumers looking

for help. An ex-Citibank executive invests $5.0 million to raise total Series

A capitalization to $69 million. A whole lot of money for answering

questions.

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Buyer/Investor Target Payments

Emphasis

Possible Strategy

Visa Inc. Visa Europe Payments scheme Visa Inc. does what it should have done when it went public in 2007 and acquires

Visa Europe for €21.2 billion. All the regulatory approvals will take nine more

months to complete – why is this so hard? V Europe owners will reap a huge

windfall gain just like US banks did from the 2007 IPO. One downside of the deal

for the US parent is the removal of the regulatory moat the Atlantic Ocean has

provided for the past few decades. The indirect consequences of new regulatory

exposure could be considerable for Visa as suggested by the recent ruling on

interchange in Europe; 20 bps for debit and 30 bps for credit. Yikes.

Dead Pool Amazon Register

POS device It took Amazon just 18 months to realize that it’s not particularly good at the brick

and mortar side of things. The company has dropped its Amazon Register device,

a dongle and application which allowed merchants to plug the reader into a tablet

or smartphone and accept plastic payments. Even its impressive pricing (100 bps

below the rest) couldn’t save the effort. Meanwhile, Amazon is also dumping its

daily deals and Amazon Local app to become more svelte for 2016.

Heartland Payments Digital Dining

Restaurant POS systems Heartland does another dive into the hospitality vertical and buys Digital Dining, a

provider of restaurant POS acceptance and management services. Heartland

already has 130,000 restaurants and suppliers in its stable and Digital Dining ups

its market share and brings along new hospitality tools that HPY was missing.

Good move.

Securitas Diebold’s electronic security business line

Electronic security Sweden-based Securitas makes a bold move into the U.S. electronic security realm

by acquiring ATM giant Diebold’s business line for approximately $350 million or

roughly one times revenues. Diebold was the third largest provider of these

services and the buyer gets 1,100 employees and 55,000 monitored customer

locations. Wonder what Diebold is going to do with the cash?

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18


Columbia Pacific

Advisors, Fenway

Summer Ventures

CARD.com Mobile banking platform Is there a pattern developing here? CARD.com offers banking services to

consumers equipped with a mobile phone and debit card. This prepaid debit

card offeror (The Bancorp Bank is the issuer) is posting high marks for funds

gathered ($450 million) and month-over-month new account openings as it

competes in the non-branch banking space. Sadly, there’s an overly cute

twist to CARD.com; it has licensed characters from Fox, DreamWorks and

others to attract the hipster set with quaint card designs.

KPCB Align Commerce

Blockchain payments Kleiner Perkins offers up $12.5 million to help Align Commerce penetrate

the SMB market for foreign and domestic peer-to-peer transfers for B2B

purchases. The Align system confirms the invoice issued by the seller who

receives an email advice. The funds are then remitted locally and settled with

the seller in its local currency. Align isn’t the first to use blockchain

technology to emulate the Western Union model, nor will it be the last.

Q2 Holdings Social Money Digital banking software Bank software provider, Q2, buys Social Money, the inventor of SmartyPig,

among other business lines. SmartyPig is a goals-based savings program

offered by banks who utilized Social Money’s other direct-to-digital banking

platforms. SM offers a real-time core product named CorePro, the real

nugget in the $10.6 million deal. Appropriately, Social Money and

SmartyPig are headquartered in Iowa, hog heaven.

Diebold Wincor Nixdorf

ATM manufacturing So, here’s where Diebold is parking its money (and a bit more) received in

the Securitas deal. The long rumored takeover of Wincor Nixdorf by

someone will cost Diebold $1.8 billion. WN has sold one million ATMs

around the world and had recently suffered earnings declines. The combined

company will be branded as Diebold Nixdorf. Hope this isn’t the case of the

weaker becoming strong through affiliation. Tough industry these days.

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19


GoCoin Ziftr Cryptocurrency processing GoCoin is one of three processors who handle three off-brand digital

currencies – Litecoin, Dogecoin, and Tether. Ziftr is a credit card processor.

The business combination creates a company that will offer a Swiss Army

knife-like digital wallet complete with Visa, MasterCard and blockchain

currency options. GoCoin made headlines last year when it integrated with

Shopify’s e-commerce platform and cut a deal with Apriva. GoCoin’s

merchant base is pretty small – 12,000 – so there’s lots of room for growth.

Or, so the story goes.

TransUnion Trustev Fraud protection There big money in fraud (protection) they say and one of the Big 3 in credit

data reporting firms, TransUnion, wants a piece of the action. The recently

IPO-ed TU pays $44 million for Ireland’s Trustev so that it can expand its

presence in e-commerce fraud detection and protection. Trustev uses

behavior analysis and machine learning tools to build threat matrices which

should help TransUnion with its already robust anti-fraud offerings.

Global Payments Heartland Payment Systems

Merchant services

processing

We never saw this one coming (others, yes, but not this one.) Global

Payments will pay $4.3 billion for Heartland in a deal which still has some

regulatory hurdles to clear but should make shareholders of both companies

happy. The combined company will generate $3.0 billion in revenues and

$1.0 billion in EBITDA, annually. One downside of the deal is that

Heartland’s CEO, Robert O. Carr might become less vocal on payments

industry issues and that would be a bad thing. Good luck, gentlemen.

Investors like us WorldPay and First Data

Payments processors Two industry giants re-entered onto the publicly traded scene in Q4.

WorldPay squeezed out $3.3 billion in its IPO while First Data ginned up

nearly $2.6 billion. Total capitalization for both remains a bit murky because

of legacy ownership trails but at least there will be a bit more transparency as

each slug it out in an evermore competitive corral.

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20


Bessemer Venture

Partners, GV

(formerly Google

Ventures), others

Toast POS terminals Four year old startup, Toast, rounds up $30 million in Series B funding to

expand its Android-based tablet POS system from today’s 1,400

installations across 43 states to the rest of the world. Toast focuses on the

food and hospitality sector and competes with Square Stand, Revel Systems,

and First Data’s Clover. Heady competition, to be sure, but Toast thinks

that its Android platform is superior to existing iPad offerings. Time will

tell.

CVC Capital

Partners

Kount Fraud detection/prevention Boise-based Kount offers online and mobile fraud detection services for the

retail, financial services, and gaming industries. CVC recognizes the

company for its current offerings with Chase Paymentech, New Balance,

Spotify, Braintree and other marquee players and invests $80 million to

accelerate innovation and to provide better customer support. Lots of

money in fraud prevention, we say, again.

Corazon Capital,

Charge Ventures,

others

DipJar Digital donations and tips We regretted losing TipJar three years ago; it seems the concept of paying

for digital content was just too early. Now, DipJar has surfaced and has

raised $2.4 million in VC funding. DipJar provides digital boxes to allow

tips and donations to be made by consumers wanting to use a credit or debit

card to show their appreciation and largess. Tips and donations represent a

significant slice of the world’s trade and companies like DipJar will ensure

that it stays that way as consumers shy away from carrying cash.

Early Warning

Services

clearXchange Digital payments network Fraud prevention and risk management titan, Early Warning, will acquire

clearXchange, the digital payments network formed in 2011 by six large

U.S. banks. EWS is owned by most of the clearXchange banks and the

others will fold into the combined ownership group. All FIs will be able to

participate in the resulting effort to bring a new, safer and faster payments

system to the United States. Looks like there will be at least three

respondents to the Fed’s Faster Payments RFP.

Dorado Industries



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Useful Links for More Information

Here are some companies that haven’t received press coverage lately but which are

worth a look-see.

Company Role Link

SOLE Payroll card program with portability

features

www.solepaycard.com

Backbase Digital banking platform with super

analytics and end-user marketing

campaigns. 60+ FI clients and 70

million enrolled users.

www.backbase.com

Billhighway Nonprofit and association focused

payments integration platforms designed

to enable periodic payments (i.e., dues)

and donation campaigns.

www.billhighway.com

Chargebacks911 Chargeback remediation system

designed with merchants selling big

ticket items in mind. Impressive ROI

warranty program.

www.chargebacks911.com

http://www.solepaycard.com/

http://www.backbase.com/

http://www.billhighway.com/

http://www.chargebacks911.com/

Dorado Industries



(310) 544-1316

[email protected]


Back in the day!

22

Tsk, tsk. Nobody even bothered to Google the answer to last

quarter’s trivia contest. The Viewtron videotext partners were

AT&T and Knight Ridder newspapers. Damn, it’s a terrible

burden having a brain bucket cluttered with useless facts.

(Don’t ask me to reel off the birthdays of my grandchildren,

though.)

This quarter’s trivia question comes out of the same bucket

and targets the non-millennial set.

Who is the woman pictured here and what word did she add

to the lexicon of computer programming?

First correct email response wins some Dorado-wear.

Good luck!

Dorado TrendWatch Q4 2015

Mobile

Transcript of Dorado TrendWatch Q4 2015