Executive Interview: Ray Sobczyk, Senior Associate at TSG
The Executive Interview Series provides readers with exclusive insights from movers and shakers in the payments industry. The Payments Industry is under continuous transformation, as such this series provides diverse perspectives on everything from strategy to payments technology and to the future of the industry.
In this interview, TSG sat down with TSG Senior Associate Ray Sobczyk to learn more about his experiences in the payments industry and his work with TSG’s Buy/Sell team.
For any entity that wants to offer payment processing, the essential question is what does it cost?
Most merchant acquirers such as ISOs, payment facilitators, and integrated software vendors (ISVs) rely on third parties for front-end authorizations and back-end settlement services. These third parties have spent years investing into major technology platforms that are needed to process transactions. These players include global brands like Elavon, Fiserv, FIS, Global Payments, JPMorgan Chase & Co., and others. Every merchant acquirer that does not have these in-house systems, partners with a company that does. For example, Square leverages JPMorgan Chase & Co. to process its transactions.
To solve for the question of what these entities pay for third party processing services, The Strawhecker Group (TSG) recently completed the ninth edition of its Processing Pricing Benchmark Study.
When Stripe announced earlier this year that it had picked up another $600 million in funding, it said one big reason for the funding was to expand its API-based payments services into more geographies. Today the company is coming good on that plan in the form of some M&A. Stripe is acquiring Paystack, a startup out of Lagos, Nigeria that, like Stripe, provides a quick way to integrate payments services into an online or offline transaction by way of an API. Paystack currently has around 60,000 customers, including small businesses, larger corporates, fintechs, educational institutions and online betting companies, and the plan will be for it to continue operating independently, the companies said.
First Citizens BancShares in Raleigh, N.C., and CIT Group in New York announced plans to merge Friday, creating what would become the country’s 19th-largest bank holding company with roughly $110 billion of assets and a branch network stretching from coast to coast. The deal would combine two of the industry’s most acquisitive companies in recent years. First Citizens, the parent of First-Citizens Bank & Trust, has acquired more than 25 community banks over the past decade and now has $48 billion of assets than 550 branches in 19 states. CIT, meanwhile, bought the $23 billion-asset OneWest Bank in Pasadena, Calif., in 2015 and earlier this year acquired the $8.3 billion-asset Mutual of Omaha Bank.
We invite you to participate in an interactive, roundtable discussion moderated by The Strawhecker Group (TSG). Panelists from Pure Storage, TSG, and leading debit card provider, Netspend, a Global Payments company, will discuss topics such as:
The evolution of the Payment Processor Industry
Preparing your Payment Processor platform for growth
The Financial Industry accelerating digitization and how that impacts Payment Processors
Four Key Factors identified to facilitate high growth
How Pure-as-a-Service - Pure’s on-demand storage model - impacts TCO and agility
The pandemic has changed how customers shop. As businesses continue to find innovative ways to make sure customers feel safe and in control of their environment in stores, QR codes have become a go-to method for creating contactless payment experiences that customers have now come to expect. For customers, this technology allows them to easily access menus and pay for food at restaurants, pay for a carton of milk at the grocery store or nectarines at the farmer's market and more. QR code technology has recently seen a resurgence due to the drive for contactless payments during the pandemic lockdown, and that surge is continuing.
The state of the consumer, according to banks, per commentary and numbers in earnings season … is … resilient. At least in terms of third-quarter results that gave insight into card spending and charge-offs. Robust? That may be stretching things. Then again, of course, it could have easily been worse. Thus far into earnings season, a slew of big banks, spanning J.P. Morgan, Citi, Wells Fargo, Bank of America and Goldman (where consumer deposits stood at $96 billion in the latest tally, up $4 billion in the quarter) have shown variations on a theme: We’re emerging from what seems (so far) to be a nadir seen earlier in the year. And loan loss reserves, taken in anticipation of souring loans, may have been overly pessimistic.
May require account to read. Charee Mobley, who teaches middle school in Fort Worth, Texas, had just $166 to get herself and her 17-year-old daughter through the last two weeks of August. But that money disappeared when Ms. Mobley, 37, ran into an issue with Square’s Cash App, an instant payments app that she was using in the coronavirus pandemic to pay her bills and do her banking. After seeing an errant online shopping charge on her Cash App, Ms. Mobley called what she thought was a help line for it. But the line had been set up by someone who asked her to download some software, which then took control of the app and drained her account. In the pandemic, people have flocked to instant payment apps like Cash App, PayPal’s Venmo and Zelle as they have wanted to avoid retail bank branches and online commerce has become more ingrained.
The virus that causes COVID-19 can survive on banknotes, glass and stainless steel for up to 28 days, much longer than the flu virus, Australian researchers said on Monday, highlighting the need for frequent cleaning and handwashing. Findings from the study by Australia’s national science agency, CSIRO, appear to show that in a very controlled environment the virus remained infectious for longer than other studies have found. CSIRO researchers found that at 20 degrees Celsius (68 Fahrenheit), the SARS-CoV-2 virus remained infectious for 28 days on smooth surfaces such as plastic banknotes and the glass found on mobile phone screens.
The economy may have fallen into recession, but processors and online stores can expect a healthy holiday season this year, according to projections released Thursday by ACI Worldwide Inc. The Naples, Fla.-based payments provider said e-commerce transactions will jump 27% globally in the fourth quarter compared to the same period last year as consumers continue to rely on online commerce during the pandemic. The projection is based on trends in “hundreds of millions” of online transactions ACI has seen in recent months from global merchants, the company said.
PayPal says it’s launching a “buy now, pay later” service in the U.K. that lets shoppers finance their purchases over three interest-free monthly instalments. The U.S. tech giant is perhaps better known for its online payment tools, but it’s been branching out into credit in the years since it acquired lending platform Bill Me Later. Now, the company is taking on the likes of Sweden’s Klarna and Australia’s Afterpay, whose point-of-sale loans have increased in popularity recently. It rolled out its “Pay in 4” product in the U.S. just last month and is now following up with a separate offering for the U.K. called “Pay in 3.”
Apple’s recent acquisition of Mobeewave is the newest testament to an upswing in contactless payment options and COVID-19 is accelerating the trend even further — proving banks must prepare accordingly. Mobeewave enables merchants to accept payments from shoppers directly from their smartphones rather than purchasing a separate point-of-sale (POS) device — completely sidestepping traditional payment terminals. Increased access to this technology directly benefits small- and medium-sized businesses and growing enterprises struggling from pandemic-related challenges, allowing them to easily accept contactless cards or tap-to-phone payments, while customers can enjoy methods much less susceptible to contamination.
China has started one of the biggest real-world trials for its digital currency as it pushes closer toward creating a cashless future. Last week, the government in Shenzhen carried out a lottery to give away a total of 10 million yuan (about $1.5 million) worth of the digital currency. Nearly 2 million people applied and 50,000 people actually won. The winners can now download a digital renminbi app to receive the digital yuan and spend it at over 3,000 merchants in a particular district of Shenzhen. The south China technology hub is home to some of the country’s biggest tech giants including Huawei and Tencent.
Digital banking app Revolut is planning to apply for a bank charter with the Federal Reserve Bank of San Francisco and California’s Division of Financial Institutions within weeks, CNBC reported on Monday, citing people with knowledge of the matter. Even though Revolut’s bank charter will be with California, it will allow the lender to operate widely throughout the United States through interstate agreements, according the report.
The Libra Association, the organization developing Facebook's cryptocurrency project, continues to hoover up top talent from the traditional financial services space, hiring former HSBC man Ian Jenkins as chief financial officer and CRO. Jenkins joins former HSBC Europe CEO James Emmett, who was appointed managing director of Libra Networks just last month. Libra is recruiting an array of top talent from across the financial services industry as it bids to reassure regulatory authorities about its governance procedures.
One of the digital underground’s most popular stores for peddling stolen credit card information began selling a batch of more than three million new card records this week. KrebsOnSecurity has learned the data was stolen in a lengthy data breach at more than 100 Dickey’s Barbeque Restaurant locations around the country. On Monday, the carding bazaar Joker’s Stash debuted “BlazingSun,” a new batch of more than three million stolen card records, advertising “valid rates” of between 90-100 percent. This is typically an indicator that the breached merchant is either unaware of the compromise or has only just begun responding to it.
Barnes & Noble has confirmed a cyberattack impacting Nook services and potentially exposing customer data. Over the weekend, as reported by Bleeping Computer, Barnes & Noble customers complained across social media of outages. Some customers were unable to access their Nook libraries, their previous purchases had vanished into thin air, others were not able to log in to the firm's online platform, and connectivity issues between sending or loading new books ran rampant. As noted by The Register, the outage also spread to physical outlets, where it appeared that some cash registers were also "briefly" unable to function.
Wednesday's suit follows an April letter TD sent Plaid, demanding the company stop using the bank's logo and branding, and accusing the aggregator of unfair competition. Plaid responded two weeks later, denying liability and refusing to change its practices, the bank said. "After repeated attempts to work through these issues with Plaid, TD is taking legal action to protect our customers and our brand," Greg Braca, the bank's president and CEO, said in a release posted on its website Wednesday. "Plaid's intentional, unauthorized use of TD's name, trademarks and logos is deceptive.
With consumers’ massive shift to ordering through digital channels comes an unfortunate — yet unavoidable — uptick in fraud. Qdoba selects its security vendors after performing a thorough review, Fox said, adding that the company continues to evaluate its partners' practices as time goes on. “Given that security is an ever-evolving part of the industry and there are bad actors that are always out there looking to do new things, we are always looking at how to stay one step ahead with the partners in our ecosystem,” he said. Fox takes the view that chargebacks are simply the cost of doing business in the digital space, where cards are not present.
U.S. retail spending grew a stronger-than-expected 1.9% in September, delivering a slight boost of confidence to a recent spate of signs that the U.S. economic recovery has lost momentum from the pandemic's toll. Consumer spending accounts for about two-thirds of U.S. economic activity, and retail sales are a key measure that includes spending on gasoline, cars, food and drink. In September, spending increased across almost every type of store or food establishment, the Commerce Department said Friday. People spent big on clothes again, up 11% compared to August. And they even returned to beleaguered department stores, where spending jumped nearly 10% last month after falling in August.
Thanks to Prime Day 2020, small- and medium-sized businesses in 19 countries made $3.5 billion this week on Amazon. That’s according to the retailer’s own stats. In typical Amazon fashion, the company didn’t disclose how much revenue it made during the two-day event, nor did it say anything about total sales. Amazon did mention that the $3.5 billion third-party sellers made represents a 60 percent increase over their earnings during Prime Day 2019. It also made a point of noting that third-party sales grew more than its own.
American workers continued to hit the unemployment line in large numbers last week, with 898,000 new claims filed for jobless benefits. Economists surveyed by Dow Jones had been looking for 830,000. The total for the week ended Oct. 10 was the highest number since Aug. 22 and another sign that the labor market continues to struggle to get back to its pre-coronavirus pandemic mark as cases rise and worries increase over a renewed wave in the fall and winter. The number represented a gain of 53,000 from the previous week’s upwardly revised total of 845,000.
When the coronavirus pandemic shuttered offices around the United States in March, many companies told their employees that it would be only a short hiatus away from headquarters. Workers, they said, would be back in their cubicles within a matter of weeks. Weeks turned into September. Then September turned into January. And now, with the virus still surging in some parts of the country, a growing number of employers are delaying return-to-office dates once again, to the summer of 2021 at the earliest. Google was one of the first to announce that July 2021 was its return-to-office date. Uber, Slack and Airbnb soon jumped on the bandwagon. In the past week, Microsoft, Target, Ford Motor and The New York Times said they, too, had postponed the return of in-person work to next summer and acknowledged the inevitable.
Shift4 Payments, a leading provider of integrated payment processing, announced a contactless QR code ordering solution for restaurants. This solution provides restaurants with a custom QR code that can be displayed on table tents, placemats, etc. for customers to scan with their phone in order to view the menu and place their order. The order is sent directly to the restaurant’s point-of-sale (POS) system so that it can be prepared and served like any other order. This innovative technology is fully integrated with a number of leading POS systems and is offered completely free of charge to Shift4 clients.
Zuza, an innovative business management software provider, proudly announced the release of its new e-commerce platform. It is a user-friendly online ordering management system designed to help merchants provide an utterly contactless purchase experience to customers. The e-commerce platform works together with Zuza's technology to help restaurants, and retail stores manage their operations under one symbiotic ecosystem. "Merchants need the right tools to adapt and evolve with the changing times, especially in this day and age," said Danny Mikhail, Founder, and CEO of Zuza. "With Zuza, merchants are always equipped to confidently face the future and focus on maximizing growth potential."
Square on Thursday announced the general availability of its Terminal API, which allows developers to build links between the Terminal card reader and custom-built point-of-sale systems. Square points out that the API is not only designed for iOS and Android developers, but also web and desktop developers. Terminal is Square's touchscreen alternative to legacy, keypad credit card machines. Launched in 2018, Terminal functions as an all-in-one card processing device, accepting physical debit and credit cards as well as mobile payments through Apple Pay, Google Pay, and NFC.
Afterpay, the leader in "Buy Now, Pay Later" payments, announced that its in-store solution is now available to all U.S. customers at some of the best retail stores nationwide. Shoppers can use Afterpay to buy items in select retail stores using their Afterpay card, a virtual, contactless card stored in their digital wallet. Just like using Afterpay online, customers can pay for their in-store purchases in four installment payments, without the need to take out a traditional loan or pay upfront fees or interest.1 Shoppers can use the Afterpay they know and love, with the added benefit of taking home their purchase that very same day.
Paya, a leading provider of integrated payment and commerce solutions, has partnered with UtilityBilling.com, a market-leading and rapidly-expanding subscription billing and payment platform that supplies an end-to-end solution to hundreds of utility companies. UtilityBilling.com has incorporated Paya’s payments technology directly into its cloud-based billing platform, offering the utility companies it serves and their customers a more efficient and seamless way to make, process, and manage payments.
Financial technology leader FIS® announced that it has been ranked first in the 2020 IDC FinTech Rankings for the fourth consecutive year. The ranking highlights the top 100 global providers of financial technology based on prior-year revenue. FIS has been first in the IDC FinTech rankings for eight of the past 10 years. “FIS continues to grow organically while also making large strategic acquisitions and partnerships,” said Marc DeCastro, research director, IDC Financial Insights. “As the largest FinTech, FIS has been able to expand their global footprint, enhance their portfolio of products and services, and provide their clients with guidance and new opportunities.”
ACI Worldwide, a leading global provider of real-time digital payment software and solutions, announced Entergy Services, LLC will utilize its ACI Speedpay solution to launch a new mobile wallet bill payment channel. Entergy, which delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi and Texas, selected ACI’s market-leading ACI Speedpay solution—including moBills and Pay By Text—enabling the energy company to offer its customer base digital wallet notifications and the ability to make payments via mobile device.
Finexio, a rapidly growing AP payments as a service platform, today announces the closing of a $23 million capital raise, led with a strategic investment from Medalist Partners, an alternative credit manager based in New York. This growth investment supports Finexio's drive to simplify, optimize, and monetize the last mile of the corporate accounts payable process through its cloud based AP payments platform. This investment builds on Finexio's already impressive customer base, encompassing 400 customers representing $4 billion in annual AP spend, primarily in the manufacturing, hospitality, higher education, and business services verticals.
FIMBank, a private Malta-based bank, has enhanced its financial crime risk management capabilities with a platform from Fiserv, Inc., a leading global provider of financial services technology solutions. Robust functionality will assist the bank in managing risk and meeting regulatory requirements while providing scalability to accommodate growth and flexibility to adapt to a rapidly changing fraud environment.
“As a bank with a global presence, we take our financial crime and risk management responsibilities seriously, and have invested in technology that enables us to monitor transactions at scale and in a timely manner, commensurate with the size and nature of our business,” said Michael Davis, Group Chief Compliance Officer, FIMBank plc.
Signature Payments, a recognized market leader in payment processing, announced the appointment of Jeff Fortney as Vice President of Partner Relations where he will be responsible for recruiting and supporting new Agent and ISO partners. Fortney is an accomplished and well-respected payments professional with more than 25 years of experience in the industry. Fortney will focus on strengthening Signature's ISO and Agent partnerships while driving long-term strategic growth for the company. In addition to his involvement in the processing industry, Fortney is a regular contributor to various trade publications, and has served on various industry committees.
Ekata, a global leader in digital identity verification, introduces the Account Opening API, designed to take action on high-risk accounts to mitigate losses from synthetic identity fraud. The Account Opening API identifies potential bad actors from good customers during the online application process. "As more traditional personally identifiable information is compromised online, it’s easier for fraudsters to create and foster synthetic identities," said Bhavana Mathur, Vice President of Product Management at Ekata.
Save and Galileo announced a partnership agreement to use Galileo's powerful and customizable API-based payments processing platform to process transactions and funding of Save customers' Debit Invest debit cards and Save Market Savings accounts. Save, a fintech startup that enables higher yields on savings and checking accounts, and Galileo, the API standard for card issuing and digital banking, expect to process more than $7 billion of customer transactions in the first three years. Save joins other prominent fintech companies on Galileo's roster of clients, including Chime, Greenlight, MoneyLion, Monzo, Revolut, SoFi, TransferWise and others.
FSS (Financial Software and Systems), a global payments technology company, confirmed its expansion strategy for Canada in order to support the realization of the country’s payments infrastructure modernization plan set for roll-out in 2021. Payments Canada (the Government delegated payments association), Banks and numerous financial, payments and technology providers are unifying efforts to provide Canadian consumers with a future-proof platform offering realtime, enhanced and secure payments across multiple channels and devices for all physical, online, wire and person to person transactions.
Rapyd, a global Fintech-as-a-Service provider, announced today that it has entered into an agreement with InComm Payments, a leading payments technology company, to enable cash bill pay and load solutions at participating retailers across the United States. The partnership will empower participating billers and other consumer facing providers of goods and services, to provide cash payment options to their customers, allowing them to grow their businesses. Cash is still the most preferred method of payment in the U.S. for transactions under $25. This partnership opens up the entire digital economy to customers who prefer cash transactions for everyday activities such as paying bills.
