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Tuesday, April 24, 2012
Western Union Seek Banks for Co-Branded Card Products
- April 24, 2012, 4:30 p.m. ET
Western Union Seeks Banks For Co-Branded Card Products
By Andrew R. JohnsonOf DOW JONES NEWSWIRES
Western Union has a "tremendous loyal following and strong brand awareness," which could help banks attract new customers, said Philip Philliou, a payments consultant with Philliou Partners LLC.
NEW YORK (Dow Jones) -- Western Union Co. (WU), the largest money-transfer business in the world, is looking to offer co-branded prepaid cards in partnership with large U.S. banks as it tries to strengthen ties with mainstream lenders, its chief executive said Tuesday.
Western Union does not have any partners for the cards but is in discussions with banks to offer a prepaid card that could carry both the company's name and that of a partner bank, Hikmet Ersek, president and CEO of the Englewood, Colo.-based company, said in an interview.
"We are quite open to that," Ersek said. "We don't have it launched but we ... have it in our program" plans.
Western Union, whose main business is offering remittance and bill-payment services to consumers for a fee, in 2010 began offering its own prepaid cards, which function like a regular debit card but do not have a checking account attached.
Its cards run on MasterCard Inc.'s (MA) payments network and are available online and in more than 19,000 U.S. locations, including 7-Eleven stores. The cards are issued by MetaBank, a subsidiary of Storm Lake, Iowa-based Meta Financial Group Inc. (CASH), though the cards are not marketed under its name.
Revenue from prepaid cards increased 17% in the first quarter from a year earlier, though it only made up 1% of Western Union's total revenue, the company said Tuesday.
Traditionally marketed to low-income consumers by alternative financial-services providers including Green Dot Corp. (GDOT) and NetSpend Holdings Inc. (NTSP), prepaid cards are becoming more common as some mainstream lenders including U.S. Bancorp (USB) and American Express Co. (AXP) have started offering them. But some of the products have garnered criticism from consumer groups for carrying high or hidden fees.
Western Union has a "tremendous loyal following and strong brand awareness," which could help banks attract new customers, said Philip Philliou, a payments consultant with Philliou Partners LLC.
U.S. consumers are expected to load $353.8 billion on to "open-loop" prepaid cards in 2014, up from an estimate of $183.1 billion for 2011, according to Mercator Advisory Group. Open-loop cards are typically those that carry the logo of MasterCard or Visa Inc. (V) and can be used at multiple locations.
Co-branding prepaid cards with banks would further Western Union's efforts to partner with mainstream financial institutions to offer its products, which are used to send money to people in foreign countries and pay bills. Globally, banks make up 60% of the agent network that sells its money-transfer services, but they have been a smaller part of its business in the U.S.
That has started to change in recent years, though, as large lenders including U.S. Bancorp and Regions Financial Corp. (RF) look to generate additional fee revenue by offering its money-transfer services and other products in their branches.
Western Union said Tuesday that SunTrust Banks Inc. (STI) also agreed to join its agent network, with plans to offer services in its branches and eventually through its online banking site.
A co-branded prepaid card could give Western Union "kind of a halo" by having the name of a recognizable bank backing it, said Ben Jackson, a senior analyst in the prepaid advisory service at Mercator.
Western Union's first-quarter profit rose 17.6% from a year earlier to $247.3 million, or 40 cents per share, in line with consensus estimates.
Its shares added 11 cents to close at $18.06 Tuesday.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com
www.philliou.com
Friday, April 13, 2012
Philliou on EBay's PayPal Offers Offline Payments For Retailers
EBay's PayPal Offers Offline Payments For Retailers
By DOUG TSURUOKA, INVESTOR'S BUSINESS DAILY
Posted 04/12/2012 02:21 PM ET
Posted 04/12/2012 02:21 PM ET
David Marcus, PayPal's new president, unveils PayPal Here on March 15 at an event in San Francisco. View Enlarged Image
EBay's (EBAY) making good on a vow to offer technology that lets businesses of all sizes accept almost any form of payment through its PayPal electronic payment system.
The push by the San Jose, Calif.-based auction pioneer moved ahead recently with the rollout of two new payment products. One is PayPal Here, a service that lets small merchants accept online, offline and mobile payments. The other is a partnership between eBay and Home Depot (HD) that lets the hardware chain's customers use PayPal to make offline payments at nearly 2,000 U.S. Home Depot outlets.
"Small businesses want to accept all forms of payments. They want their cash quickly and they want it in a safe and affordable way," David Marcus, recently promoted to president of PayPal, said of PayPal Here. "We're (also) going after very large merchants in the offline world through Home Depot."
Both the in-store program at Home Depot and PayPal Here are crucial tests for eBay, says Philip Philliou, managing partner of Philliou Partners, a New York City-based payments consulting firm.
"If eBay can convince consumers that PayPal is universally accepted online, at leading retailers like Home Depot, and at micromerchants, PayPal will emerge as a trusted brand, a payment network and a merchant acquirer that will rival MasterCard (MA), Visa (V), Discover andAmerican Express (AXP)," Philliou said in an email interview.
The Home Depot initiative and PayPal Here also jibe with a new vision for eBay sketched out by CEO John Donahoe last year. Donahoe wants eBay to be a hot spot for innovation and a global marketplace for all businesses, online or offline.
EBay hopes PayPal's big user base will help its new online-offline foray reach critical mass.
"We're at a stage right now where scale matters and where having users matters," Marcus said. "PayPal has 100 million active users. That's a huge competitive advantage."
PayPal Here Is Here
PayPal Here, unveiled March 15, lets small merchants accept payments by swiping customer credit cards with a thumb-sized card reader or dongle attached to a mobile device such as a smartphone. Merchants also can use the service to scan and process checks with a phone camera, invoice directly from a mobile app or make payments through other PayPal in-store options.
PayPal Here is available in the U.S., Canada, Australia, Hong Kong, and parts of Europe and Asia.
On March 15, eBay also issued an updated version of its PayPal Mobile app for Apple's (AAPL) iPhone. It lets customers locate local businesses that accept PayPal Here.
Analysts say PayPal Here is pivotal to eBay's larger offline strategy of diversifying outside online payments to point-of-sale transactions. It also helps eBay compete against rivals like Google (GOOG) and MasterCard, which are also developing mobile payment options.
"With smartphone and tablet penetration growing rapidly, we think it's important for eBay to have a presence in the (market for small merchants) at the same time that it offers point-of-sale solutions to large merchants," JPMorgan analyst Doug Anmuth said in a March investor note.
Philliou says PayPal Here follows similar products launched in the last few years by mobile card reader startup Square, electronic payments provider VeriFone (PAY) and financial software maker Intuit (INTU).
"These solutions are chasing garage sales, food stands, flea markets and school fundraising events that have historically only accepted cash and maybe checks," Philliou said. "The other companies proved that the micromerchant space is a viable opportunity for electronic payments and PayPal is now swooping in to capitalize on it."
Philliou says of PayPal: "Sometimes it is fine to be a fast follower."
The Home Depot deal, unveiled Feb. 28, shows PayPal aims to chase the payments market for big stores. PayPal's in-store system is being gradually rolled out to all Home Depot outlets. Earlier this year, the company's tested the system in five Home Depot stores.
Home Depot customers with PayPal accounts can use a PayPal plastic card or mobile phone number and PIN combination to make purchases at checkout.
EBay says it will soon announce other retailers that will offer the PayPal in-store payment options.
www.philliou.com
Sunday, April 1, 2012
What Merchants Need To Do When They Learn That Their Processor has been Compromised?
Merchant processor, Global Payments, is in a world of pain. As if the security breach was not bad enough, Visa's withdrawl of support truly hurts. The processor's pain notwithstanding, what are Global's merchant clients to do? Haven't merchants learned what to do in such crisis situations based on previous major hacks?
Here's what we have been advising our clients since 2007:
- Over communicate with the processor. Ask the hard questions and seek validation. This may sound shameless but it is often better to have experienced outside help handle this for you.
- Encryption and tokenization of card data is an absolute necessity, not a nice to have. Make sure your transactions are being processed in such a manner. If not, find a processor who can do this for you. Make this a 30 day priority. Get it done.
- Back up processor. Every large merchant needs to have a standby processor that can be switched on seemlessly. Yes, you will pay for this service that you may never use but that is what is insurance is. Security breaches are becoming more commonplace. Be prepared. If your current processor or internal IT department suggests that a backup is not technically feasible, fire them both. We've arranged this for several of our retailer clients and can get it done.
More to follow on our client conference calls. Stay tuned.
Philip@philliou.com
www.philliou.com
© 2012, Philliou Partners, LLC