Dorado Industries TrendWatch Q1 2016

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 Q1 2016

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Random Thoughts

Where’s All This Heading?

There used to be a roadmap for payments; I can’t find it any longer

but I’m sure it’s around here somewhere. It was a pretty simple

piece of cartography laid out on an XY matrix; a few converging

lines, all heading to the upper right hand corner because growth and

revenue were always constant. Today’s roadmap looks like a child’s

drawing of his dog, Tige (Google it.) Payments have to move faster

so there’s a high-speed monorail moving left to right and back again

but there’s only one class of service - pricey. Payments have to be

more secure so there’s a set of switch-backs and “S” curves with

two, no three, maybe four authentication factors to keep fraudster

under the culvert. MasterCard wants us to authenticate using a

“selfie,” whatever that is, so there’s a bunch of detours for the older

generations to get around. Millennials don’t want to take the time to

enter an email address to get their monthly stipend so there’s an

overpass for them. Every which way we turn, there’s a toll road for

tokenization, encryption, or authentication fees. Trouble is, we’re

not entirely sure we’ll know when we’ve arrived or where we are.

Take, for instance, the new payments freeway the U.S. Federal

Reserve Bank is designing through its Faster Payments and Secure

Payments Task Forces. Aside from the old snide comment about a

camel being a horse designed by committee, the intention seems

well founded. The Fed plans to publish a white paper by year end

describing the roadmap and surrounding landscape. In the

meantime, at least one eager player is going forward with its own

plan for faster payments.

The Clearing House, the organization once known as the New York

Clearing House, announced over a year ago that it would reshape the

payments landscape by launching a real-time payments scheme in

the U.S. That consortium owned by the nation’s largest banks is

bringing some heavy partners into the mix to make it all happen.

2

The Lines Are Being Drawn?

TCH and FIS are about to launch a pilot for same-day ACH

payments. Meanwhile, TCH has inked deals with ACI Worldwide

and Vocalink to add additional technical oomph and processing

power. Jack Henry & Associates has signed on early to enable its

banks and credit unions to participate when the new roadway’s

stripes and curbs have been added.

In other big bank highway construction news, two other FI-owned

consortia – Early Warning and clearXchange – have merged.

Following the nuptials, the new enterprise announced that Bank of

America and U.S. Bank are the first owners to take advantage of the

newly launched real-time payments P2P engine.

So, B2B might take the TCH route while P2P runs on the EW

frontage road? Forget the roadmap, we’re going to need GPS.

Clearing off this quarter’s Post-It notes

Visa just qualified for the cover of Time magazine with its Quick

Chip software update. Quick Chip will take 18 seconds off the time

it takes to conduct an EMV transaction. Has anyone seen a business

case for blockchain that they consider plausible or at least non-

hallucinogenic? Is anyone else concerned that the frequency of

Botnet fraud attacks has doubled in one year and at the same time

the Internet of Things has quadrupled in connected devices? Could

this be the result of the fact that the most common and worst home-

use network router passwords in 2015 were “QWERTY” and

“123456,” again?

Forget the roadmap; we need to re-read Darwin.

Baja fishing season opens tomorrow!

Until next time.

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Table of Contents

2016 Predictions 4

TrendWatch Scorecard/Summary 6

2016 Payments Industry Yields 7

Interesting Quarterly News That Got No Respect 8

Q1 M&A/Investor Activity 13

Useful Links for Quieter Companies 18

Back in the Day! 19

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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.

Mar: A couple of purchases already made in virtual reality and analytics fields.

• Lesser known payments schemes will begin closing up shop.

Mar: Google says goodbye to their prepaid debit card offering.

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

partnership and investment deals.

Mar: Q1 2016 VC/PE pools received record funding yet set a record for the smallest number of

actual investments made.

• 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.

Mar: Transferwise gains another $58 million in VC funds to expand globally. Meanwhile,

WorldRemit raked in $45 million. More “follow the money” evidence.

• 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.

Mar: No major announcements as yet.

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

Mar: All quiet so far; waiting to see the Global Payments/Heartland deal close. The

TransFirst/TSYS deal comes close but the buyer falls short of the “established” qualifier.

4

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2016 Predictions

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

not move the needle much in 2016.

Mar: Lots of activity; BofA looking to patent apps and processing, over $1.0 billion has been

invested in blockchain through new VC pools or direct plays.

• 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.”

Mar: It appears that the “steering wars” has begun with both Visa (Visa Checkout) and

MasterCard (MasterPass) offering up new partnership deals with key mPOS and eCommerce

retailers.

5

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TrendWatch Scorecard/Summary – Q1 2016

Market & Industry Situation 1 – No material offerings came forth; a pity.

2 – Lots of bank announcements of new card-less solutions.

3 – Volume did not swoon in Q1 as experienced in the past.

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

5 – Crickets.

6 – Strong FI and eCommerce player earnings.

7 – Bloom off the FinTech rose? Hopefully not.

8 – Lots of new attention to authentication technologies – facial recognition

gaining traction.

Industry Players To Watch Walmart: Walmart Pay is due out soon. Watching the competition might

be equally valuable.

The Clearing House: Will the big banks co-opt the Fed’s effort to stabilize

the drive to Faster Payments?

clearXchange: How will the other owners respond to BofA’s CEO firing a

shot over their bows?

The Blockchain Organism: Just how fast can the financial and non-

financial worlds move to embrace distributed ledgers? It only took twenty

years to put ERP in place.

Starbucks: Will changes in its rewards program lead consumers to break

the caffeine habit or find another supplier?

5. New Venture Growth

4. Legal/Regulatory Issues

1. New Payment Forms

2. ATM Restructuring

3. POS Volume Trend

Low

High

High

Low

Low

High

High

Positive

Mixed

Negative

6. Earnings Announcements

7. Industry Investments

8. Payments Industry Security Med

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2016 Payments Industry YTD Yields

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

2016 YTD yield excludes dividends; based on 12/31/15 and 3/31/16 closing prices.

Given the pounding a few of our colleagues experienced early in the year, to survive Q1 of 2016 with essentially flat

yields is quite a feat. The Dow and S&P didn’t do much better, closing 149 and 77 basis points in the green,

respectively. Bitcoin seems to have found its point of equilibrium at +/-$400. The inter-day hourly price changes

remain volatile, but the end of day valuation usually drifts to the $415 level. Its never good to have the NYT chatting

one of our holdings being a potential acquisition target – AXP, for instance. Recent IPOs haven’t done well, either.

Industry Player 12/31/2015 3/31?2016 Price r Cap Value r YTD 2016 Yield

Alliance Data Systems 276.57$ 220.00$ (56.57)$ (3,365.9)$ -20.5%

American Express 69.55$ 61.40$ (8.15)$ (8,802.0)$ -11.7%

Blackhawk Network Holdings 44.21$ 34.30$ (9.91)$ (518.3)$ -22.4%

Cardtronics 33.65$ 35.99$ 2.34$ 95.2$ 7.0%

Discover Financial Services 53.63$ 50.92$ (2.71)$ (1,303.2)$ -5.1%

Euronet Worldwide 72.43$ 74.11$ 1.68$ 84.7$ 2.3%

Fidelity National Information Services 60.56$ 63.98$ 3.42$ 652.5$ 5.6%

First Data 16.03$ 12.40$ (3.63)$ (652.9)$ -22.6%

Fiserv Inc. 91.46$ 102.58$ 11.12$ 2,829.9$ 12.2%

Everi (fka GCA) 4.39$ 2.21$ (2.18)$ (168.1)$ -49.7%

Heartland Payment Systems M/A Pending 94.81$ 101.38$ 6.57$ 245.7$ 6.9%

Jack Henry & Associates 78.06$ 84.57$ 6.51$ 546.2$ 8.3%

MasterCard Worldwide 97.43$ 94.50$ (2.93)$ (4,717.3)$ -3.0%

MoneyGram International 6.27$ 6.12$ (0.15)$ (8.7)$ -2.4%

PayPal 36.20$ 39.60$ 3.40$ 4,148.0$ 9.4%

Square 13.04$ 15.28$ 2.24$ 732.5$ 17.2%

Total System Services 49.80$ 47.58$ (2.22)$ (728.0)$ -4.5%

Western Union 17.92$ 19.29$ 1.37$ 779.2$ 7.6%

Vantiv 47.42$ 53.88$ 6.46$ 1,602.0$ 13.6%

Visa 65.55$ 76.48$ 10.93$ 9,245.7$ 16.7%

.

Bitcoin Closing Price 430.05$ 415.16$ (14.89)$ -3.5%

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Interesting News This Quarter

Subject Source/Date Substance

Starbucks Presser

April

Tuesday, April 12 was the day selected by Starbucks to change the loyalty, mobile payments, and

stored value paradigms. Whereas, we used to be rewarded based on the intensity of our caffeine

addiction, now we’re going to get double the value based on the amount of coin we drop in the

coffers. 2 stars for every dollar spent adds up quickly when paying $6 for a latte. Hopefully,

Starbucks won’t also be adopting the rewards dilution gambit favored by the airlines and will keep

the payoff thresholds reasonable. Not counting on it.

clearXchange Bank Innovation

April

Now, this is odd. clearXchange co-founder and rabid supporter, Bank of America, uses its CEO,

Brian Moynihan to publicly encourage his fellow collaborators to get off the schneid and catch up to

where BofA is with respect to usage and promotion of the P2P network. (clearXchange parent

company, Early Warning announced Bank of America’s go-live status in March of this year and

included U.S. Bank in the release.) In the same stream of consciousness discussion with analysts,

Mr. Moynihan noted that, while on a sharp growth trajectory, the bank’s mobile wallet payments are

still less that .2 percent of BofA plastic payments. Strange bedfellows and all that.

FutureProof Retail Mobile Payments

Today

January

You need to read the underlying story a few times to gather the full details but, FutureProof Retail

is attempting to convert consumers’ mobile phones into grocery store POS devices and to eliminate

the need for checkout lanes, altogether. A tall order; read on. Users need the specific app for each

grocery store using the system (oops.) Android only, for now (oops.) Users scan product barcodes.

Produce is a bit troubling; need to find the store scale, weigh the goods, and take a picture of the

resulting weight (oops.) The app has the user’s payment information (debit or credit) and will

complete the checkout. Then, the shopper needs to drop by the checker to confirm things (oops.)

Well Rome wasn’t built in a day. Bet the Romans didn’t starve to death while it was under

construction, though.

JPMorgan Chase Mobile Payments

Today

February

If this takes us one step closer to “fan boy” status with JPMorgan Chase, so be it. Chase

announced during its earnings call that Chase Pay will soon be accepted in Starbucks retail

locations. Quite a coup for Chase and probably good for Starbucks since the bank is offering fixed

pricing to merchants accepting the new mobile app. Chase is currently the card processor for the

barista house – another win for the merchant side of the bank – and First Data handles its mobile

transactions. Having Chase Pay share branding real estate with Apple Pay on Starbucks terminals

isn’t all bad either. Hat tip to the folks from New York and Seattle.

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Interesting News This Quarter – Continued


American Express Business

Intelligence

March

BI reports that American Express filed a patent in 2014 that would allow its card members to use rewards

points to pay for goods and services acquired by way of a mobile device. Uber jumped on the program

early and others are also queuing up. An interesting distinction in the patent application is that the AXP

Membership Rewards program need not be linked to partnered merchants. That is, users could elect to use

their MR points to make the purchase and the company settles the bill in U.S. greenbacks. The patent

appears to address two immediate American Express needs – driving consumer purchase volume in the

face of rising merchant pressure to use other payment types and reducing the amount of unused loyalty

points. Sounds like a plan in view of the global quest to find alternative currencies; Bitcoin, for instance.

Apple Pay Barron’s

March

Financial institutions still sorting through the mobile wallet conundrum might consider the following

research conducted by Piper Jaffray. Forty-four percent of surveyed merchants have used or requested

information on mobile wallets. Of these, 67 percent are interested in Apple Pay and cite customer demand

as the reason. The level of interest for the others falls quickly: Android Pay is 18 percent, PayPal comes in

at 8 percent, and Samsung Pay trails the others at 7 percent. Apple’s 43.6 percent share of the U.S.

smartphone market could be a contributing factor. On the other hand, Samsung Pay’s imbedded non-NFC

solution (Loop Pay) may be why merchants aren’t as inquisitive about that payment option.

ExxonMobil Mobile Commerce

Daily

March

Old timers will recall the excitement caused by ExxonMobil when it launched its dongle-based SpeedPass

in 1997 – yes, we’ve been at this for nearly twenty years. Even though the RFID solution worked well for

the gasoline retailer, attempts to broaden its usage to McDonalds and Stop & Shop stores languished. The

SpeedPass Timex watch didn’t get very far either. ExxonMobil now offers mobile device users the option

to download the SpeedPass+ app which will work with pumps in 6,000 of its locations. The app plays on

both Android and Apple devices while Touch ID can be used on Apple Pay enabled phones to complete a

transaction at the pump. Receipts are virtual and held within the app but can also be printed at the pump

for anal retentive types. SpeedPass always was a hit in colder climates for obvious reasons and

SpeedPass+ will likely move some share in sunny California.

Mobile Payment Apps Payments Journal

March

Bluebox Security, part of Lookout, the cybersecurity player, conducted security tests on ten mobile

payment apps and found all ten to be lacking in encryption scheme strength – a bit scary; read on. Neither

the Federal Trade Commission nor the Electronic Funds Transfer Act currently have standing or provisions

to address losses linked to mobile payment apps offered by non-FIs. Not the cheeriest of news, true, but it

fits on the page. Here, too, we have an instance of technology outpacing regulation and consumer

protections. Anticipate more attention to these concerns once the elections are over.

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Mobile Payments Business

Intelligence

April

So, why aren’t mobile payments usage figures skyrocketing? The U.S. Federal Reserve sought to find the

answer to this often-asked question and surveyed 1,802 mobile phone owners who had not used mobile

payments in the previous twelve months. Asked “how much interest would you have in using mobile payments

if all concerns and issues were resolved?,” 74 percent responded that they had zero interest in making payments

using a mobile device. A few handfuls said they might consider using an in-store app or buying physical items

through their mobile web browsers. Twelve percent said that bill payment on a phone might come in handy.

Moreover, 80 percent of the no-interest responders stated that they believed that existing forms of payment are

easier than mobile phones. Is it possible that we’re all behaving like salmon, swimming upstream against the

tidal wave of lack of interest? Certainly hope not; but the results of this survey suggest we might be.

Bank of England Finextra

January

In electronic payments, it has often been the case that the United States watches what the Bank of England is

doing and frequently plays the fast-follower role. Well, we might just do it again. Bank of England has

announced plans to prepare a blueprint for overhauling the UK payments system, again. This time, the focus is

on high value real-time gross settlements (RTGS or Chaps), a system which was revamped just twenty years

ago. This time around, the Bank wants to encompass distributed ledger (blockchain) options. A ten-hour

outage of the Chaps system in 2014 has triggered the Bank’s keen desire to make a wholesale change in the way

things work in the UK. Hopefully, this case of the sniffles across the Atlantic won’t result in the U.S.

developing the flu, or worse.

PayNearMe

Presser

April

A timely announcement from PayNearMe and OfficialPayments.com provides a bit of breathing room for a

few U.S. citizens – millions maybe. Working in conjunction with 7-Eleven stores throughout the country,

taxpayers with and without bank deposit accounts can use PayNearMe barcodes to identify monies delivered to

7,000 convenience store locations to make tax payments. There is a small glitch, however. Payments are

limited to $1,000 per day and taxpayers can only make two payments per tax period (generally, a quarter) using

this method. Still, not a bad solution for last minute tax return filers – like us.

First Tech FCU Presser

March

First Tech Federal Credit Union becomes the first credit union to join the clearXchange network. The credit

union can now offer its 420,000 members access to online and mobile P2P services fulfilled through the large

bank-owned system. Users rely on recipient’s telephone number or email address for directing the funds.

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11


The Clearing

House

Pressers

March

The U.S. Federal Reserve is in the midst of sourcing and evaluating a new system for real-time payments. Two large

taskforces – Faster Payments Task Force and Secure Payments Task Force – are busily working on effectiveness and

security criteria to aid in the design and selection processes. In the meantime, The Clearing House isn’t allowing the

grass to grow under its feet. It has executed a partnering agreement with Jack Henry & Associates to enable the 6,300

banks and credit unions served by that processor to utilize the TCH real-time payments engine (when it is ready), an

obvious movement in the direction of system ubiquity on the user side. On the technology front, The Clearing House

and D+H Corporation have struck a deal to leverage the technology provider’s experience with real-time payment

engines in Europe and Asia. This supply-side move dovetails with the 2015 announcement that FIS and TCH are

working together on a real-time solution. So, the pieces are just about pulled together for TCH to offer a real-time

payments solution in the U.S. Now, all we need to find are consumers and businesses willing to use and pay for it.

Cheesecake

Factory

Mobile Payments

Today

March

You knew this one was coming. Cheesecake Factory has entered the mobile payments app wars with its “CakePay”

app for Apple and Android phones. Powered by the folks at MyCheck, the app generates a four digit code which is

given to the server when ordering. Integration between the POS system and the app tracks the order, provides the

ability to split the tab with others, and handles final payment including tip and taxes. Sadly, the app won’t work next

door when you go to Starbucks to wash down the double fudge wedge of pie, but it’s a start.

Amazon Business

Intelligence

March

Consumers who can stand the annoying sound of Alexa, the Amazon virtual assistant on the Echo in-home device,

will be pleased to learn that the app now comes with a payments feature provided through Capital One. If you’re not a

Capital One customer, you’re out of luck, but might consider the option if running payments through your connected

device is appealing. In that respect, though, you would be in the minority according to a 2015 survey of consumers by

Accenture. That survey produced similar results to the Fed’s study of mobile devices for payments. Eighty-one

percent of survey respondents were either not interested or neutral to the idea of using connected home devices for

payments. Ever wonder what the early 1980s surveys on consumers’ intended use of ATMs said? It wasn’t pretty.

Walmart PayBefore

March

Mega-retailer, Walmart, applies pressure to other FI and merchant card rewards schemes by launching its own cash

rewards program called “3-2-1 Save.” Holders of the merchant’s prepaid MoneyCard will receive 3 percent cash back

on purchases made on Walmart.com, 2 percent back on fuel purchases at its own stores or Murphy USA sites, and 1

percent back on in-store or other Visa or MasterCard accepting retailers. It’s hoped that the combination of

MoneyCard’s prepaid nature and the rewards program will modify the way the card is viewed and used by Walmart

shoppers.

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12


Microsoft Business

Intelligence

March

Microsoft was one of the first major companies to embrace Bitcoins. Microsoft users could fund their accounts

with the volatile currency and make purchases from Xbox and Windows stores selling games, music, and

videos. Alas, this is no longer true. MSFT has put all on notice that it will no longer accept Bitcoins for account

funding. Holders may still use them until exhausted or request a balance refund. Perhaps Microsoft’s decision

will propel the expected crash landing for Bitcoin which has ceased attracting the multi-hundred millions it has

been posting since its inception eight years ago. Meanwhile, investments in blockchain funds, startups, and

security providers have moved up exponentially in the past two calendar quarters.

MasterCard Business Insider

February

MasterCard plans to roll out an app this summer that is likely to make the Baby Boomer generation scratch its

collective head. The app will replace passwords with a selfie in a way similar to Alibaba’s “Smile To Pay”

system. Once a selfie has been recorded, users will merely blink into the camera to authorize a payment (the

blink insures that a photograph is not being used). If nothing else, the app may force the Boomer generation to

learn more about their smartphones. Although, since no paper manual is provided for any form of consumer

electronics anymore, how could that be?

Visa Presser

February

Visa has high hopes that the Internet of Things will continue to grow and the card brand intends to be at the

leading edge of providing secure payments to consumers concerned about privacy. Industry pundits view the

expansion of Visa Ready to the IoT as just another effort to steer transactions and they might be right.

Nevertheless, early players in the effort include Coin, Accenture, Fit Pay and Samsung. Visa foresees the

Ready, VDEP, and Visa Token Service security schemes making strides with manufacturers of wearables,

automobiles, appliances, clothing, and public transportation support devices. Probably an accurate assessment.

MasterCard Presser

March

MasterCard doesn’t plan to cede the IoT or wearables space to the competition and trotted out a payments

enabled golf glove at the Arnold Palmer Invitational (which MasterCard sponsored, of course.) Pro and amateur

golfers alike will be able to use their tricked-out golf glove while on the links to purchase a bite to eat, a brew at

the 19th hole, or more golf stuff at the pro shop. Callaway is participating in this endeavor. Anyone recall what

a golf glove looks like after a couple of rounds or after being stuffed in a golf bag for a month or so? Good luck

with this one, MasterCard.

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M&A/Alliance Activity

Buyer/Investor Target Payments Emphasis Possible Strategy

Idinvests Partners,

Wellington Partners,

Crunchfund

Onfido Identity verification Following the mantra that “identity is the new currency,” investors

inject $25 million into Onfido, a UK and US-based provider of

background identity information on new employees and partners for

companies like Airbnb, Taskrabbit, and Uber. Onfido stands to gain

from the recent bankruptcy of its competitor, Jumio, last month. As

company CEO Kassai says, “trust is the new global currency.” Total

capital raise thus far by Onfido is $30 million.

Blackhawk Network Giftcards.com Gift card reseller Seventeen year -ld Giftcards.com is acquired by Blackhawk for $120

million. The purchase includes OmniCard, a provider of business

incentive and rewards cards. The purchases enables Blackhawk to

expand its non J-hook marketing efforts and brings with it a pretty

valuable web domain name with huge recognition value. Nice move.

BlackRock Square mPOS Investment management firm, BlackRock, acquires 5 percent of

mPOS player Square for $30 million. Readers with a good head for

math will note that the valuation basis for the investment is $600

million, far less that today’s $4.7 billion market cap. Nice work if you

can get it!

nanoPay MintChip Digital currency The Royal Canadian Mint selects loyalty and payments startup,

nanoPay as the winner in its auction to sell four year-old MintChip.

Royal Canadian Mint is a federally-established corporation that

produces Canada’s coins and money for other countries. The digital

replacement for fiat currency came into being in 2012 with the intent

of eventually being sold on to an independent ownership model.

NanoPay intends to work with in-country processors and issuers to

further develop acceptance and usage for P2P, POS, and loyalty use

cases. Of course, the U.S. Fed could have gone down the same path,

and still could, if its Faster Payments program fizzles.

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M&A/Alliance Activity - Continued


PrePaid Ventures KEEPS

American

Prepaid card scheme Bet you never knew this niche market existed. NexisCard promoter, PrePaid

Ventures, pays an undisclosed amount for KEEP American. The target

issues Visa-branded cards for lawsuit, workers’ compensation, and Social

Security settlement awards. KEEP claims to have 100,000 account

relationships smack dab in the midst of a $4 billion personal settlement

marketplace. Naturally, the cards eliminate the need for checks, help

streamline settlement operations, and improve the bottom line for plaintiffs’

counsel. And, who doesn’t favor making attorneys wealthier?

Fiserv ACI Worldwide Community Financial Services business line

Online, mobile, and tablet banking

ACI pulls the plug on community bank and credit union processing by

selling its CFS business line to Fiserv for $200 million or roughly one times

top line revenue. CFS emphasizes online and mobile banking and was once

part of S1, an ACI acquisition made in 2011 for approximately $540 million.

The sale enables ACI to return to its “stick to one’s knitting” strategy of

servicing the needs of large financial institutions. Other online banking

providers like Jwaala are likely ecstatic to see ACI exit stage left.

TSYS TransFirst Merchant processing Who says the U.S. doesn’t manufacture things any longer? TSYS pays

$2.35 billion to TransFirst parent company ,Vista Equity Partners, to expand

its nascent merchant acquiring business (TSYS will rank sixth in the U.S.

when the deal is done.) TransFirst delivers 235,000 merchants to the deal,

supported by 1,000 FTE. Vista Equity Partners paid $1.5 billion to Welsh,

Carson, Anderson for the company in October 2014. That transaction netted

WCA more than $700 million over the amount paid to GTCR in 2007. So,

in just eight years, three companies manufactured $1.6 billion. Not too

shabby although we’d rather see the U.S. manufacture something useful, like

back scratchers or beer kegs.

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Blackhawk Network NimbleCommerce Digital commerce Blackhawk swoops down to nab another component of digital

marketing, NimbleCommerce. The target providers e-tailers with the

ability to customize and deliver product and service promotions across

an integrated network of resellers and publisher-branded sites. System

users can remain local in focus or expand to global offerings as best fits

the product. For Blackhawk, another distribution link in the prepaid

and rewards payments chain. Terms were not disclosed.

Giesecke & Devrient, Visa and CyberSource executives

Fit Pay Wearable payments technology

San Francisco-based startup, Fit Pay, has developed a service for

adding contactless payment capabilities to wearable devices.

Manufacturers of these devices (tie clips, cuff links, sweat bands, etc.)

work with Fit Pay to wire in their technology for seamless payments.

G&D along with Michael Orlando and Scott Stevelinck have ponied up

$3.1 million to get the ball rolling. Fit Pay is the engine behind the

new payment smart strap for Pebble Time users (think of it as a less

expensive alternative to Apple Pay on an Apple Watch). The

Kickstarter campaign for the “Pagare” strap found 2,777 takers and

raised over $200,000 in product launch monies. Good first start.

TriplePoint Venture Growth, BDC Corp, and Silicon Valley Bank

WorldRemit Money transfer service Note to doubters of the potential growth for mobile based international

money transfer services: you might reconsider. Deloitte has ranked

WorldRemit as one of the Fast 50 growth companies and the firm just

raised another $45 million in VC funding. Total funding exceeds $200

million. Monies will be used for working capital (pre-funding of

disbursements) and global expansion. Now, if WorldRemit can remain

compliant with U.S. KYC regulations, we could have a real horse race

here – the leaders being Western Union and MoneyGram. By the way,

competitor TransferWise just initiated MTS services between the U.S.

and Mexico – a mere $25 billion annual market. Or, so Trump says.

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16


Motorola Solutions

Venture Capital,

Avalon Ventures

Orion Labs Push-to-talk wearable There’s just one thing wrong with smartphones – the phone. Orion Labs hopes

to take advantage of this shortcoming by distributing Onyx, a push-to-talk

“walkie-talkie” wearable. New investors provide $6.5 million in a new

funding round, bringing total investments to $16.25 million. The new version

of the Onyx is now smaller, has multi-function buttons, and posts longer

battery life. A personal digital assistant (read: Siri or Alexa) is also in the

works. Ideally, Orion Labs won’t screw things up by looping payments into

the offering, but don’t bet on it.

Angel investors

including Tim Keith,

John Beletic, and

Jay Kassing

Modo Payments

Mobile payments infrastructure

Five year-old Modo Payments increases its Angel funding to $4.0 million with

another $2.0 million round. Modo focuses on the “plumbing” required to

move value between various elements of the payments infrastructure by way of

its “Digital Payments Hub.” Significant players on either side of the hub

include Staples, Starbucks, 1-800 Flowers, and GameStop.

Napier Park Global Capital, Camden Partners

Bluefin Secure payments Bluefin raises $6.0 million to expand its PCI-validated point-to-point

encryption system for both integrated and standalone solutions in the retail,

mPOS, call center and kiosks environments. Device-driven, the encryption

scheme prevents any in-the-clear viewing of customer data as an adjunct to

other systems working against data breaches. Those of us concerned about the

impact of the burgeoning P2P use case might consider taking a peek at

Decryptx and other Bluefin products.

Reserve Dash Restaurant/bar app Reserve, a digital app portfolio company, makes its fifth acquistion in the

hospitality sector as it pays an undisclosed amount for Dash, a bill-splitting

and payment solution. Currently operating in 250 bars and restaurants in four

major cities and adjacent to several dozen college campuses (really? bars near

colleges? How odd), the acquisition will help expand Reserve’s other assets

and increase downloads at the App Store and Google Play.

Dorado Industries



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17


Menlo Ventures Signifyd Fraud protection Retailer losses stemming from fraudulent transactions are infuriating but so

are lost sales linked to receiving false negatives on transaction authentications.

Signifyd believes it is solving both problems with its E-Commerce Assurance

plan that insulates retailers from chargebacks. Menlo Ventures and others

have funded Series B for $20 million just seven months after Series A for $11

million closed. The Signifyd system takes no longer to process and boasts a

90 percent approval rate in an environment where one percent either way has

tremendous impacts on the retailer’s bottom line. “Authentication is the new

currency,” they (we) say.

Peter Thiel, others Appcard Loyalty and payments One of a growing number of direct-to-merchant delivered loyalty card

programs, Appcard, raises $20.0 million on top of an earlier $6.5 million

round. Similar to competitor, Five Stars, the system integrates with merchant

POS systems, track new and returning customer activity, grinds out reams of

analytics, and aids with the payment process. Loyalty pay-backs can be

structured in virtually every way conceivable to trigger repeat business. A

shame the banking industry hasn’t spent more time on the carrot instead of the

stick.

FT Partners MovoCash Tokenized P2P Watch for this one to either explode or implode. MovoCash has designed and

built (most of) the technology necessary to enable users to create their own

tokens for P2P or online payments. FT Partners has put up $700k in seed

money to keep things moving along. The system takes prepaid funds,

generates a Visa or MasterCard transaction set, and enables the underserved

market and others to generate a tokenized transaction with far less hassle.

Only on thing missing: a sponsoring bank. With a bank, MovoCash could be

something truly innovative; without it, not so much. Best of luck, guys.

Dorado Industries



(310) 544-1316

[email protected]


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

Reserve Stable of hospitality payments apps www.reserve.com

Bankjoy White label mobile banking app for

credit unions

www.bankjoy.com

Revel Systems iPad POS system developer in a recent

deal with Verifone for better payment

management

www.revelsystems.com

Cayan Developer of integrated and standalone

POS systems for SMB organizations

across multiple verticals

www.cayan.com

http://www.reserve.com/

http://www.bankjoy.com/

http://www.revelsystems.com/

http://www.cayan.com/

Dorado Industries



(310) 544-1316

[email protected]


Back in the day!

19

Congratulations to our Q4 winners of Dorado gear. They

recognized that Rear Admiral Grace Hopper coined the

phrase “debugging the system” after observing a moth

escaping from a Mark II mainframe in 1947.

No trivia contest this quarter; just a

reminder that there’s more to life

than work. Take a kid fishing!

Date post:	11-Apr-2017
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Dorado Industries TrendWatch Q1 2016

Economy & Finance