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May 2016

TSG in WSJ: More Chip-Card Headaches, This Time for Merchants

A few weeks ago, a woman used a counterfeit card to buy $400 worth of gift cards at a Harps grocery store—and then hit nine more stores in quick succession after the first attempt worked, sticking the regional grocer with a tab for $4,000 that previously would have been absorbed by the card-issuing bank.

“We’ve seen a significant uptick,” says Mike Thurow, vice president of store systems for Harps Food Stores, referring to counterfeit-card costs. The chain, which operates 80 stores in Arkansas, Oklahoma, Missouri and Kansas, aims to start processing chip transactions within the next couple of months.

Chargebacks among small and medium-size merchants rose 15% in the fourth quarter from a year earlier, according to a recent survey by The Strawhecker Group, a payments consulting firm. The industry believes the volume of chargebacks has likely risen since then, because the fourth quarter included only a few weeks under the new rules and it often takes a while for the costs to flow through to merchants.

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May 2016

TSG in Digital Transactions: Wall Street Punishes Square Despite the Merchant Processor’s Transaction Growth

It in its earnings report, Square said the low sequential quarterly growth was “largely due to the delayed signing of two new investors, which was a result of more challenging credit market conditions.”

Square thus finds itself exposed to the vagaries of the credit markets while delving further in the highly competitive small-business loan industry. Big players in the business include American Express Co., PayPal Holdings Inc., CAN Capital Inc., On Deck Capital Inc. and Kabbage Inc. The newest entrant is Shopify Inc., an Ottawa, Ontario-based e-commerce platform and merchant processor.

But there are dozens more. Jared Drieling, business intelligence manager at The Strawhecker Group, an Omaha, Neb.-based merchant-acquiring consultancy, keeps a list the players in the merchant-lending niche.

“There are a good 25 that have loan volumes of $20 million or more a year,” Drieling tells Digital Transactions News, adding that there are more providers below that threshold.

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May 2016

TSG in Digital Transactions: Jumbo Acquirer Pricing Advantage Dissipating

Pricing advantages once held by super-large acquirers—those whose merchants process more than 3 million monthly credit and debit transactions—appear to have retreated, according to the Merchant Processing Pricing Benchmark Study recently issued by The Strawhecker Group.

These jumbo acquirers had, on average, the lowest amounts for their processing and authorization fees says Robert Schmitz, senior associate at the Omaha, Neb.-based payments consultancy. The Strawhecker report did not include the actual pricing averages for the jumbo or smaller groups of acquirers, defined as small for those with up to 250,000 in monthly transactions; medium, 250,001 to 1 million; and large, between 1,000,001 and 3 million.

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May 2016

TSG in Yahoo! Finance - Those Chip Cards Have a Long Way to Go

Statistics cited by card companies paint an optimistic picture of chip adoption since the Oct. 1 “liability shift” that held merchants liable for counterfeit-card transactions if they hadn’t updated their terminals for EMV.

A recent Visa (V) infographic, for instance, boasts that with 265 million Visa chip cards in circulation, the U.S. leads every other country, and that the volume of chip payments soared to $18.4 billion in March.

Problem is, Visa’s total U.S. payment volume in the three months ending March 31 was $823 billion. Visa doesn’t break down that total on a shorter timeframe, but the math is bad for EMV (named after the “Europay, MasterCard and Visa” parents of this system) in any plausible division of it.

In the same way, boasts about how many U.S. stores take “EMV” cards, like last month’s report by MasterCard (MA) of chip-compatible locations increasing by 121% to 1.2 million, understate the work remaining. A mid-February survey by the Strawhecker Group, a payments-focused consulting firm, found that only 37% of U.S. merchant locations were ready for EMV.

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May 2016

Now Available - The U.S. Merchant Category Encyclopedia

Today, TSG is releasing another new eReport – The U.S. Merchant Category Encyclopedia! Focused on 37 major U.S. merchant categories, the report serves as a directory in understanding the dynamics of each category, the payments players that focus on each category, and an analysis on the attractiveness of the category from an industry and acquiring perspective.

The first half of the report is a briefing on the U.S. macroeconomic landscape which identifies key government economic indicators and the implications for merchants through 2016. This part of the report also provides a snapshot of the concentration makeup of the U.S. merchant landscape and breaks down U.S. merchant categories by region, industry type and merchant size.

The latter half of the report identifies 37 major U.S. merchant NAICS categories and provides detailed information on each category such as dollar volume growth, transaction growth, market share by payment tool, growth in establishments, sales per establishment, establishment concentration, by state, sales concentration by state, total industry sales estimate, producer price index, employment and a look at the top payments players that focus on that specific merchant category. Each category receives an industry attractiveness ranking and an acquiring attractiveness ranking.

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May 2016

Now Available - Merchant Processing Pricing Benchmark Study - 8th Edition

The Strawhecker Group recently surveyed the merchant acquiring industry to determine the prevailing line item pricing rates for the cost of third-party processing in the U.S. market.  The study included merchant acquirers who use third-party providers for front-end authorization and back-end settlement services.

In total, information was gathered from 83 front-end authorization portfolios and 78 back-end settlement relationships. The chart that follows shows the distribution of data across the volume bands, along with the aggregate monthly transactions for each category.

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Apr 2016

TSG In Huffington Post - Slow EMV Credit Card Payments Could Get Faster

Most of the new EMV card readers are also designed to accept mobile wallets, such as Apple Pay, Samsung Pay and, my personal preference, Android Pay. These payment methods are speedier than card-based EMV payments and just as secure.

They are slowly becoming mainstream: About 28% of smartphone owners surveyed said they had used mobile payments in the 12 months prior to the survey, according to a 2015 study from the Federal Reserve. Digital marketing firm eMarketer projected the value of mobile payment transactions to increase by 210% in 2016.

“There’s somewhat of a perfect storm brewing,” says Jared Drieling, a manager at The Strawhecker Group. “I think with the EMV process of having a consumer insert or dip that card, and the whole process taking a little longer, it essentially lowers the bar now for mobile wallets to take off.”

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Apr 2016

TRANSACT 16 Special Report: U.S. Economic Indicators

The Electronic Transactions Association, in partnership with The Strawhecker Group, is pleased to release this special report on the U.S. economy, focused within the context of the electronic payments ecosystem. This report is a member benefit provided to the ETA's 500+ worldwide member companies.

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Report Highlights:

  • The electronic payments industry is strong:
    • U.S. consumer spending via electronic payments methods continues to be very strong at a 9% CAGR, driven by organic growth of the economy as well as consumer usage and merchant acceptance of credit and debit cards
    • Payments companies continually outperform ‘the market’ with a 22% CAGR versus 8.7% for the S&P 500  
  • The electronic payments industry is attractive:
    • Nearly $100 billion was invested into the payments ecosystem globally in 2015; certain payments sub-categories are receiving more attention from investors than others including mobile payments, eCommerce, and security & data analytics
    • The payments industry is a highly active M&A marketplace, especially for merchant acquiring companies, with the average net revenue multiple being 3.9 times annual net revenue. However, the data also shows that multiples drastically vary based on company characteristics.

Apr 2016

The Strawhecker Group Celebrates Ten Year Milestone

“I wanted to own my own business, and I saw a need in the market,” said Kurt Strawhecker, Founder and Partner at The Strawhecker Group (TSG). This was in 2006, when he and Jamie Savant launched TSG, a consulting firm focused on the global payments industry. Ten years later, their business has grown and the industry has evolved, however their core principles have remained the same.

“Being a boutique consulting firm with such a specific offering provides us, and in turn our clients, an advantage,” said Jamie Savant, Co-Founder and Partner. “Our team is made up of payments experts averaging over 20 years of experience, so we are more efficient and higher value than a big five consulting firm, because we have seen so much of it before.”

TSG Turns Ten: 10 Quick Facts

1. TSG has completed thousands of projects for over 550 companies, from fintech startups to Fortune 500 companies

2. The average TSG Associate has 23 years of payments industry experience

3. TSG has advised on 27 successful acquisitions and investment transactions

4. TSG has completed over 170 financial valuations of payments companies

5. Clients of TSG have often experienced ROIs on their TSG consulting investment of over 50:1

6. TSG was honored as Business Partner of the Year by the Electronic Transactions Association in 2010

7. TSG’s unique analytics data warehouse contains over 3.5 million merchants representing more than 40% of all merchants in the US processing nearly $1 Trillion in annualized credit and debit card volume

8. TSG often speaks on industry trends and has been quoted recently in national media, such as: The New York Times, The Wall Street Journal, USA Today, Yahoo! Finance, CNBC, and Forbes

9. TSG has produced over 150 payments industry specific eReports (whitepapers) and analyses

10. NewsFilter, TSG’s weekly payments industry digest, celebrated its 500th edition this month and was distributed to over 40,000 Fintech professionals


Apr 2016

Press Round-Up: EMV Merchant Adoption Slower Than Expected [Updated]

TSG recently released survey results that estimate 37 percent of U.S. merchant locations are EMV-ready four months after the October 1st, 2015 liability shift. See below for a round-up of media coverage from digital and print publications: