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TROUBLES IN RUSSIA FOR THE CREDIT CARD NETWORKS: During Visa's earnings call yesterday, CEO Charles Scharf warned that Russia's legislature could pass a series of changes that overhauls the Russian payments system and places tight regulation on foreign electronic payment companies, "as early as tomorrow." The changes might include requirements that domestic data-processing and transaction data remain onshore, as well as volume caps on foreign payment systems, such as Visa and MasterCard. Russia has also announced the creation of its own national electronic payments network. Russia's moves come in response to U.S. sanctions over Russia's annexation of Crimea. The sanctions targeted banks and individuals with close ties to President Vladimir Putin, and required Visa and MasterCard to suspend service to several card-issuing banks in Russia.
The major card companies would certainly be dealt a significant blow if Russia goes ahead with the new regulations and plans for an alternative network. "Keep in mind, this is all still fluid," Scharf said on the call. But he admitted that any of the changes could ultimately cause Visa to reconsider opportunities in the Russian market: " ... none of this is certainly helpful for Visa if passed, parts might even cause us to rethink our domestic processing opportunity in Russia." Visa, which has 100 million cards issued in Russia, says the Crimean troubles have already spurred a clear drop-off in cross border volume - or purchases where the card-issuing country is different from the merchant country.
But concerns that other countries could follow suit in creating alternative payment infrastructure may be premature, says analyst Josh Olson."The Visa and MasterCard networks have true competitive advantages," he tells us. "It's easier said than done to duplicate these payments networks." During the earnings call, Scharf also sounded an optimistic note on Visa's ability to compete against nationalized systems: "We firmly believe that what we have to offer goes well beyond what a national payment scheme can offer in terms of the capabilities of our network, our global acceptance, our ability to be accepted across all channels, [and] fraud screening."
STARBUCKS MOBILE PAYMENTS VOLUME SKYROCKETS: On yesterday's earnings call, Starbucks executives highlighted the company's phenomenally successful mobile payments app, which we estimate channeled revenue of $314 million in the first quarter. CEO Howard Schultz said that in U.S. and Canadian company-operated stores, the app is channeling 14% of transaction volume, which represents 75% year-over-year growth. He also said 10 million Starbucks customers are using the app. Schultz reiterated that national retailers and tech companies have approached the company asking whether or not it would white-label the app. He did not say whether the company would do so, only that Starbucks was actively discussing the possibility.
GLOBAL NFC SIM SHIPMENTS UP 159%: A trade group representing manufacturers of SIM cards, the identifying circuits found in nearly all mobile phones, says shipments of near-field communication (NFC) SIMs skyrocketed to 78 million last year, a 159% jump over 2012. NFC technology is one of several wireless technologies competing for popularity as mobile payments solutions. SIMalliance Chairman Frédéric Vasnier predicted that NFC SIM shipments would continue to rise "in all developed markets" in 2014. "The signal is loud and clear," Vasnier said. "The infrastructure has been laid for the future mass roll-out of secure SIM-based NFC services." These numbers follow other recent signs of NFC's resurgent popularity, including PayPal's sudden friendliness toward the technology. (Payments Cards & Mobile)
SHOPKEEP RAISES $25M IN ADDITIONAL FUNDING. Point-of-sale provider ShopKeep has raised $25 million in a series C funding round, bringing the company's total venture funding to $37 million. The New York-based startup provides cloud-based point-of-sale systems, primarily to small retailers and quick-service restaurants, though sources tell us that the company plans to expand its product to sit-down restaurants. Last month, ShopKeep competitor Vend raised $20 million in series B, as venture funding for payments technology startups exploded to a five-year high.
SQUARE PLANS AMBITIOUS EXPANSION FOR NYC OFFICE: Mobile payments company Square has announced plans to establish an east coast headquarters in Manhattan's SoHo neighborhood, expanding the company's New York team to more than 350. The company said its employees would move into the offices this summer. The move signals aggressive expansion plans from Square, which today employs 30 in New York and 800 worldwide. Square's financial health and supposed razor-thin margins were recently the subject of speculation after the company was rumored to be in sales talks with Google - rumors the company has repeatedly denied.
FACEBOOK AND APPLE EXECS ON PAYMENTS: In case you missed them, here are two key payments-related statements from earnings calls earlier this week.
Sheryl Sandberg, Facebook COO, during the company's earnings call, trying to deflect the idea that Facebook has to provide a major payments platform - such as a way to log in and pay across retail websites - if it's to be relevant for online retailers: "I guess [it's] really important to know that, our advertising business is very relevant for e-commerce and that doesn't depend on taking payments and it doesn't depend on a payment strategy because we provide a really great opportunity for marketers to find customers who are then going to go ahead and buy their products both online and offline."
Tim Cook, Apple CEO, speaking on the payments potential of Touch ID, the fingerprint-reader on the company's iPhone 5S, as well as the fact that nobody has yet figured out how to create payment tools better than the old-fashioned wallet: "We have almost 800 million iTunes accounts and the majority of those have credit cards behind them. We already have people using Touch ID to buy things across our store, so it's an area of interest to us. And it's an area where nobody has figured it out yet. I realize that there are some companies playing in it, but you still have a wallet in your back pocket and I do too which probably means it hasn't been figured out just yet."
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