It is super instructive to hear about payments evolution. So, it’s time to take a trip. In this Payments on Fire® episode we speak with Charles Ifedi, one of the founders of Interswitch, one of the leading digital payments providers in Nigeria, and founder of customer engagement platform company eBanqo.

We hear a lot – and deservedly so – about innovative fintech companies but we hear very little about the advanced and highly competitive payment system already in place in Nigeria. Take a listen as Glenbrook partner Elizabeth McQuerry, partner in charge of Glenbrook’s Global payments consulting practice, talks with Charles about the Nigerian payments ecosystem, his role in developing one of the leading payments providers there and and his new venture in improving the front end of financial services with conversational AI .

Image taken from a commemorative sign celebrating the 10^th anniversary of the Verve card brand and featuring the Interswitch founders, taken at the company’s headquarters in Lagos, Nigeria. From left Charles Ifedi, Mitchell Elegbde and Akeem Lawal.

Payments in Nigeria are huge in every way. Its large population – some 200 million – allows digital payments to thrive even as the banked population remains stubbornly low at just under 40% of the adult population. Unlike the eastern Africa experience of telco-led companies like M-PESA, Nigerian telcos are not allowed to serve as payments providers. They aren’t banks but their agent networks serve an essential role in last mile service delivery. That said, recent regulatory changes are allowing partner companies of these telcos to apply for the country’s payments services bank license.

Nigerians have been able to take advantage of instant or real-time payments for a decade. You can’t say that for Americans. It’s quite common to see people making instant payments transfers from their mobile devices via the simple USSD menu interface on feature phones. Those with smartphones take full advantage of app-based interfaces.

These instant payments are often used to buy things in retail shops as well as to make business or personal transfers.  Payment by debit and credit card is also quite common and Nigeria is home to Verve, the pan-African card brand.

Listen in as Charles, who was Verve’s first CEO, reflects on developing the Interswitch brand and discusses how Nigerians are making payments at small and large merchants during the Covid-19 lockdown, the successes of ATMs and their challenges to growth, the failure of biometrics, and about the Nigerian payments ecosystem overall.

Payment authorization rates are a theme we return to regularly on Payments on Fire® because they matter so much to merchants, issuers, and the payment providers in between. If an issuer declines more transactions than its peers, the merchant and the issuer, in fact, leave money on the table. The merchant loses sales. The issuer loses interchange revenue.

In this episode, we speak with Stripe‘s Jeanne DeWitt, head of revenue and growth for the Americas, for a deep look into how her company maximizes AUTH rates for itself and its hundreds of thousands of sellers. We discuss COVID-19’s impact and some of the creative responses to it. We also address Stripe’s maturation into an enterprise provider, at enterprise orgnization, and wrap with a look ahead at the future shape of the payments industry.

In Glenbrook’s Payments Boot Camp® and in our payments consulting work, we use our Domains of Payments framework to subdivide the major use cases and payment contexts into a half dozen categories or domains. The Remote Domain contains cross-border e-commerce, a particularly challenging use case where the buyer and seller are separated by distance and, in the case of cards, credentials are presented without the cardholder present. This is card on file (COF), card not present (CNP) transactions live. Just add cross-border complexity.

If you sell via e-commerce in the EU, Middle East and to the global market, you’re crossing borders. That means regulatory compliance. It also means you want your customers to pay you in the manner to which they’ve become accustomed. Germans and Belgians like SOFORT and PayPal. The Dutch prefer the domestic iDEAL system. The UK is card-centric.

To reach customers in those countries and beyond, you need a payment services provider with reliable connectivity into those domestic systems, access to global card systems, and the ability to maximize authorization rates.

Credorax is a PSP founded in Israel with a strong technology focus that has also become a Malta-based bank in order to expand its EU presence as an acquiring bank.

In this Payments on Fire® episode, George and Credorax COO Moshe Selfin discuss the initial impact of the novel coronavirus on the travel segment and then move on to authorization optimization.

The podcast includes the Credorax creation story. While technical capabilities were the core of its start-up phase, it was the EU’s PSD2 regulation that created its market strategy and steered its business evolution. While many in the payments industry complain about regulation, it’s true that mandates move markets and, as Credorax saw, create opportunity.

Take a listen to how a this not-yet-quite-global company positions itself in an increasingly crowded market and its approach to delivering value.

In this special episode of Payments on Fire®, Glenbrook partner Elizabeth McQuerry, partner in charge of Glenbrook’s Global payments consulting practice, leads a conversation on the development and adoption of realtime payments in developing markets.

Joining Elizabeth are Miller Abel, Deputy Director, Principal Technologist at Bill & Melinda Gates Foundation and Gene Neyer, Executive Advisor to Icon Solutions, board member at the US Faster Payments Council, who has supported Gates-funded projects in Pakistan and Tanzania.

This discussion was originally scheduled to take place at the 2020 Payments Canada Summit.

If the development of faster payment, instant funds transfer systems is important to you, take a listen to this episode on the development of these instant push payment systems in developing markets. Many of the issues and concepts discussed apply to developed market concerns and you will gain important insight into the multiple paths governments and leading tech firms take in system and ecosystem development.

Anchoring the discussion is the set of principles for financial inclusion codified in The Level One Project Guide, a work product of the Bill & Melinda Gates Foundation.

An essential principle is the role of real-time payments as an economic development tool. Digital payments have to have the immediacy of cash to be transformative. No one can afford to wait for a payment to wander for a few days through an antiquated banking system when they have to buy fuel in 20 minutes.

Digital payments also have to solve for specific use cases which quickly leads to the need for an API layer to embed payments into purpose-built apps. The discussion addresses these principles and illustrates them with examples like the agriculture-focused version Uber for tractors.

To address the necessary transaction switching and connectivity infrastructure, the Gates Foundation has built the Mojaloop platform, an open source initiative to ease development for  governments and commercial entities alike. Miller takes us through its genesis and applications.

Elizabeth, Gene, and Miller discuss the extraordinary and growing penetration of inexpensive smart and surprisingly capable feature phones in markets like Nigeria and Myanmar.

They also discuss the “stack” of rules, rails, account providers, and apps that enables innovation, a model that applies to both developed and developing markets.

This is a comprehensive discussion that touches on the roles of government and commercial stakeholders and how they differ across countries, payment economics, and the multiple paths to broad deployment of real-time payments. Take a listen.

Take a listen to Don Cardinal, GM of the Financial Data Exchange and Glenbrook’s George Peabody as they discuss the FDX API and its importance to the fintech and financial services community. It’s important to end users. And it’s a great example of how comprehensive standards can be developed swiftly.

The “supermarket” days of financial institutions providing all of our financial services and holding all of our accounts are long over. Brokerages, insurance companies, and the expanding array of fintechs compete to hold, manage, or organize our assets.

With so many custodians of our financial data, it can be difficult for an individual to generate a complete picture of her finances. That’s been a longstanding problem that was addressed over two decades ago by data aggregators like personal financial management app Mint.

Individuals found this single portal approach quite useful. All we had to do was provide the aggregator with the login credentials to each of our online accounts. The aggregator would then log into that account on our behalf, “read” our data off of the web page, and display all of that data in a single consistent fashion (this is “screen scraping”, the method of data gathering that started it all).

This single view capability has been a compelling proposition that dozens and dozens of firms have emulated in the years since.

Further, use cases have proliferated where a fintech, for example, simply needs access to one or two accounts in order to fulfill its goals. The mobile app model has just accelerated the expansion of apps needing access to user account data.

Yodlee and Plaid, now a Visa company acquired in a whopping big transaction, are examples of companies selling access to user account data either through screen scraping or, in a more modern approach, direct integration to individual financial institutions.

Direct integration to each bank or credit union’s data is, of course, inefficient because each banks exposes its own interface. The syntax and functions of each vary making everyone’s development and maintenance tasks more difficult..

Evolution of a Standard

Into this gap is the Financial Data Exchange organization. With over 100 members https://financialdataexchange.org/pages/members
from a wide range of companies – Chase, Plaid, FS-ISAC, Intuit, PNC, Fannie Mae, Truist, Cashflow Solutions – its goal is to standardize the domain of permissioned at a sharing through an API layer in operates in front of financial institution data.

FDX is a true standards organization. Its members pay dues, yes, but their more important contribution is time and effort. Working groups take on particular technical and usage aspects, develop them, and generate draft standards for the entire membership to ratify.

One of its working groups focuses, for example, on the user experience, on the use cases that benefit from data sharing and how to make that process transparent and secure for end users.

In this Payments on Fire® episode, George and FDX Managing Director Don Cardinal discuss the API, its many reasons for being, and the standards development process.

They also discuss Akoya, Fidelity’s former data sharing unit that is now owned and operated by The Clearing House and 11 member banks. Akoya serves as a central integration provider making it easier for a fintech app to connect its users to the banks subscribing to the Akoya service.

So take a listen. FDX is important to the fintech and financial services community. It’s important to end users. And it’s a great example of how comprehensive standards can be developed swiftly.

Welcome to Payments on Fire® and to our third, now annual, discussion with Steve Ledford, SVP Products and Strategy at The Clearing House, and the leader of his company’s Real Time Payment Network initiative.

As in prior conversations, Steve and George discuss the growth of the RTP Network both in terms of transactions and dollar volume as well as an important metric, the growth in the number of financial institutions and FI processors who are already or in process of connecting to the network.

The evolving set of use cases supported by a new payment system is often surprising. Few expected Zelle’s leading use case to be rent payments. While the RTP Network is in its infancy, Steve shares a number of use cases already in flight.

Changes to the network’s rules also position it for expanded use. For example, the network’s recent increase in transaction size limit to $100,000 positions it far better for B2B transactions.

Like all bank services, strong user authentication is critical and firmly out of scope for the new network. Banks will have to improve their authentication processes because account takeover is a real risk.

As Steve says in this discussion, banks can also reduce the risk of accountholders sending money to bad actors simply by well-timed messaging. Financial institutions can adopt best practices that have evolved in the UK and other markets with similar systems in place. For example, the bank should ask the accountholder if they personally know the recipient of the funds and if they have been pressured to make the payment within a certain timeframe. Both questions are meant to caution the accountholder before pressing Send.

Steve also addresses the announcement of FedNow and its ripple effects on the RTP Network.

New national payment rails are a once in a generation event. New rails, better data representation techniques, and mobile devices make for an innovator’s playground. Take a listen.

Be Safe. Be Well. Help Out.

This is our era’s unprecedented event. I hope you’re staying safe, your family is all well, and you’ve got what you need for what looks to be a pretty long time. On the upside, I’ve seen and experienced people helping one another like never before. That gives me confidence we’ll be able to mitigate COVID-19’s impact on our healthcare system – and on all of us. The downside is obvious. The weight of the pandemic is going to come down heaviest on those with the fewest resources. Helping out is our best response.

Among the Exploiters of The Pandemic

There are characters out there, however, who are bent on taking advantage of this global challenge because the corona virus has only added gasoline to the growth of e-commerce and online fraud of all kinds.

While e-commerce volume skyrockets as so many hunker down, online credit applications are rising at traditional lenders, challenger banks, and fintechs. Responding to the pandemic, some fintechs are making it easier than ever for sole proprietors to get loans in the hopes of having their business survive the pandemic. For similar reasons, others are encouraging government action in support of their SMB customers.

These laudable efforts will attract fraudsters in droves. What could be better than overburdened systems (Robinhood anyone?) and modified onboarding and underwriting processes?

Socure is an identity management company serving financial institutions old and new, fintechs, and marketplaces that extend credit via online applications. Socure’s service operates right at their front door, at “day zero,” when the applicant first appears at the provider’s digital door. The company promises to reduce fraud, reduce the manual review of questionable applications, and onboard more customers through its KYC services.

In this Payments on Fire® episode, George speaks with Rivka Gewirtz Little, SVP Marketing & Strategy at Socure on a range of topics, from the what and how of Socure’s service to the larger concerns of fraud rates, model governance, and the definition of identity.

Socure’s Own Digital ID

Socure is working on its own version of a digital identity, essentially taking all that it knows about each individual and creating a profile that is updated based on the individual’s behavior, system changes, etc. This “Socure Identity” then can be used beyond the Day Zero identity proofing step but for subsequent authentication when the individual returns to Socure’s customer’s website or app.

FI Internal Collaborate on Identity

An encouraging evolution in enterprise organization is the growing collaboration of the produce line leadership within traditional financial institutions in the areas of risk management and marketing, teams with traditionally conflicting goals. Marketing wants as little friction as possible; Risk wants to keep the bad actor out. In the past, each product line fought its own battles and chosen its own solutions. Now that the digital channel is firmly established even among incumbent and with more flexible tech available, coordination and alignment is taking place.

Data Minimization

“Data minimization” has achieved buzzword status. And its meaning varies depending on who you are. Essentially, it means a provider should hold only that data that’s necessary and no more. For a Socure that lives on massive data resources, data minimization is meaningless. Socure has to be an exceptional custodian of all of that data.

George and Rivka discuss another connotation for that term, the ability of the accountholder or user to release only the data that’s relevant to the transaction. Showing a driver’s license to prove you’re over 21 is a classic case of over-sharing.

So, take a listen. Stay safe.

For more on digital identity and synthetic identity in particular, check out Episode 115 – Finding the Phantoms – Synthetic Identity and the Issuer – with Naftali Harris of SentiLink.

Sometimes events delay things. Other times, they hasten them. At Glenbrook, the corona virus has sped us along a path we’ve been traveling for some time. The path is digital delivery of the Glenbrook Payments Boot Camp®.

In this Payments on Fire® episode, Russ Jones, partner in charge of Glenbrook’s education team, talks with George about two major changes in our payments education program.

1. Digital Delivery – what it looks like, how it works, and when we will launch it for our public participants
2. Curriculum Update – how Glenbrook maintains the currency of our training and some of the major updates made recently

As you’ll hear Russ say, we’re excited by the capabilities of today’s teleconferencing capabilities, how we can use them to inject a high level of interactivity into each session, and the challenge of bringing the Glenbrook Payments Boot Camp® magic to the digital medium.

Join us April 7-9 for the Glenbrook Payments Boot Camp® digital edition. No travel required!

All of us at Glenbrook wish you the very best of experience and outcome as each and all of us navigates the corona virus threat. Be calm, carry on, and keep your social distance.

Fraudster innovation is a constant. As the defenders of payment transactions thwart one fraud vector, these innovators, playing offense, switch tactics.

Today, the problem of knowing who you are, that you are who you say you are, in the digital domain demands stronger authentication techniques. Many of those rely on the attributes, the data, provided by the user or by the applicants in the case of credit extension.

In turns out that even the data supplied by applicants can be both entirely bogus and sufficient to convince a credit issuer to onboard the applicant and extend credit. This is the problem of synthetic identity.

To explore the synthetic identity challenge, take a listen to this conversation with Naftali Harris, CEO of SentiLink, a company focusing on detecting synthetic identities. Coming from years at Affirm, Naftali and the SentiLink team serve credit issuers struggling with this new fraud vector.

First, let’s define synthetic identity using the Fed’s Synthetic Identity Fraud in the U.S. Payment System Payments Fraud Insight white paper as the source:

“The generally agreed-upon definition of synthetic identity fraud is a crime in which perpetrators combine fictitious and sometimes real information, such as SSNs and names, to create new identities to defraud financial institutions, government agencies or individuals.”

Now we’re looking for phantoms. Uh-oh.

There are terabytes of personally identifiable information for fraudsters to use because of data breaches and our own over-sharing of our personally identifiable information. Knowledge-based authentication based on static data like SSNs, birthdays, and the name of our hometown isn’t hard to break. Nor is this static data generally protected by tokenization or encryption in any way.

The fraudsters know what we know. Uh-oh.

And because the real data presented by the fraudster creating a virtual identity is often that of a child or an elder or even the deceased, well, it’s super hard to detect. That comes from my GLenbrook colleague Yvette Bohanan who has years of risk management experience at Amazon, Google, eBay, BofA and others.

Of course, the fraudster’s goal in making up a new identity is to open a credit line in order to subsequently defraud the issuer, perhaps by carefully using a credit line carefully for years to build up a high credit limit before busting out with a lot of spending and then disappearing to a beach somewhere.

Multiple Types of Synthetic Identities

A startling aspect of some synthetic identity fraud is that it doesn’t take advantage of purloined PII. All of the data used by the credit application is made up out of whole cloth and thin air. The proper format of a social security is well known so why not generate a random one? After all, the federal government doesn’t operate a central SSN repository with realtime validation. A variant approach relies on real and fake data, combining, for example real names with made-up SSNs.

To explore the synthetic identity challenge, take a listen to this conversation with Naftali Harris, CEO of SentiLink, a company focusing on detecting synthetic identities. Coming from years at Affirm, Naftali and the SentiLink team serve credit issuers struggling with this new fraud vector.

On Payments on Fire® we’ve talked with gateway operators, processors, tokenization specialists, fraud management firms, and others – all providers who help payment acceptors handle their payments.

The range of services and business value they deliver varies a lot. Some providers do everything. Others, like Spreedly, the subject of this Payments on Fire® podcast, focus on a narrower set of functions and business outcomes.

Payment Flow and the Payment Service Provider (PSP)

When we talk about merchant acquiring in the Glenbrook Payments Boot Camp, we highlight the following transaction flow:

1. The merchant or its ISV, perhaps running as an PayFac, accepts the customer’s payment
2. They connect to a gateway or a processor
3. The gateway routes the transaction to an acquiring bank or its processor OR the merchant connects directly to one of these entities
4. The transaction is routed by the acquirer or processor into the payment network and on to the accountholders’s financial institution

That picture oversimplifies the tasks at hand. Depending on what kind of merchant you are, the set of payment-based services you need can vary substantially.

If you answer yes to any of the following, there are payment service providers ready to help you with specific tools:

• Are you an e-commerce merchant
• Is omnichannel commerce important?
• Are you strictly a bricks-and-mortar operation?
• Are you a biller or a heavy user of invoicing?
• Do you operate unattended devices like vending machines and kiosks?
• Are you global or have global aspirations?
• Are you an SMB or enterprise-class payment acceptor?

Some payment service providers (PSPs) are owned or captives of larger upstream entities. Their role is to capture an ever widening stream of transactions to flow on to their parent company. CyberSource, owned by Visa, may not care a lot about who the acquirer is but the company’s transaction handling drives revenue for Visa.

Other independent PSPs like NMI and, in today’s podcast, Spreedly, focus more on the needs of the merchant. NMI anchors it many other talents around its core gateway. Spreedly might be considered is a gateway to gateways. It connects to processors and has developed a broad set of connections into domestic systems around the world. Spreedly is a also payments tokenization provider.

Given that range, Spreedly refers to itself as a merchant-facing payments infrastructure provider. More casually, Spreedly is a layer of glue between the payment acceptor’s operations and the payment systems that the acceptor needs to support. Payment orchestration is another in vogue term to describe what Spreedly, and others, do.

This is an evolving story and marketplace. Definitely worth a listen to Justin Benson, CEO of Spreedly, as we talk about what his company does and a range of industry topics including tokenization, risk, and more.