Why the business of payments is changing rapidly
2
From mobile apps to cloud computing, digital technologies are opening up new sales
channels and transforming business operations. Indeed, digital business is increasingly
business as usual and that is creating a new set of challenges. As companies struggle
to meet customers’ expectations for faster, more personalized, and more secure digital
experiences, they are discovering that their existing payment infrastructure is falling
short. While the most commonly used payment methods — credit and debit payment
cards and Automated Clearing House (ACH) messages — are by definition “digital,”
they’re also outdated. Instead, digital-first companies are building payment solutions
on modern card issuing and processing platforms. Accessible via open APIs, these
platforms offer payment infrastructure as a service on a global scale, allowing
for flexible solutions that scale and evolve as businesses grow and change.
Fraud is a forcing function
for payment innovation
On August 11, 1994, the shopping website NetMarket made history by processing the
first online secured credit card payment. The company’s CEO, Dan Kohn, boasted
to the New York Times that “even if the NSA was listening in, they couldn’t get
[the] credit card number.” It’s unlikely Kohn, let alone hundreds of thousands
of businesses that followed his lead, anticipated how distinctly determined
cybercriminals would be in overcoming online security measures.1
Card-not-present (CNP) fraud, which
accounts for all digital credit card
payments, now makes up the largest
portion of payment-associated fraud.
The consequence of cybercriminals’ diligence is a vast increase in fraud targeting online
businesses. By some projections, retailers are set to lose $130 billion between 2018 and
2023 from CNP fraud.2
» ARTICLE
Why the business
of payments is
changing rapidly
From mobile apps to cloud computing, digital technologies are opening up new sales
channels and transforming business operations. Indeed, digital business is increasingly
business as usual and that is creating a new set of challenges. As companies struggle
to meet customers’ expectations for faster, more personalized, and more secure digital
experiences, they are discovering that their existing payment infrastructure is falling
short. While the most commonly used payment methods — credit and debit payment
cards and Automated Clearing House (ACH) messages — are by definition “digital,”
they’re also outdated. Instead, digital-first companies are building payment solutions
on modern card issuing and processing platforms. Accessible via open APIs, these
platforms offer payment infrastructure as a service on a global scale, allowing
for flexible solutions that scale and evolve as businesses grow and change.
Fraud is a forcing function
for payment innovation
On August 11, 1994, the shopping website NetMarket made history by processing the
first online secured credit card payment. The company’s CEO, Dan Kohn, boasted
to the New York Times that “even if the NSA was listening in, they couldn’t get
[the] credit card number.” It’s unlikely Kohn, let alone hundreds of thousands
of businesses that followed his lead, anticipated how distinctly determined
cybercriminals would be in overcoming online security measures.1
Card-not-present (CNP) fraud, which
accounts for all digital credit card
payments, now makes up the largest
portion of payment-associated fraud.
The consequence of cybercriminals’ diligence is a vast increase in fraud targeting online
businesses. By some projections, retailers are set to lose $130 billion between 2018 and
2023 from CNP fraud.2
» ARTICLE
Why the business
of payments is
changing rapidly
4marqeta.com 3Why the business of payments is changing rapidly
Rate of fraud
In-person credit card payments .18% .15%
In-person debit card payments .08% .05%
Remote credit card payments .15% .19%
Remote debit card payments .15% .18%
Source: Federal Reserve
2015 2016
Rate of fraud grows for
remote payments
There are many reasons why remote card-not-present fraud is increasing. The transition to more secure EMV
chip cards for in-person payments, which intensified in 2015 when new network rules went into effect, has
thwarted many in-person scams. However, the weaknesses in commonly used digital payment infrastructure also
share a large part of the blame. Payment system controls are far more robust and comprehensive than in years
past, but these controls are often ill-suited to prevent fraud once static card information is stolen.
Higher demand for on-demand
Prior to the rapid growth of the digital economy, everyone — from businesses to customers to employees —
expected long wait times between when a payment was made and the time it was successfully processed
and settled. Checks could take two or more days to clear. ACH added security and speed to transfers but
still took several business days to complete. Even traditional credit card payments were not instantaneous.
As much as two days could lapse between the time a credit card purchase was made and the moment it
posted to an account.
These several-day
turnaround rates have
become untenable
for all participants in
the high-speed digital
economy, and especially
for workers.
Employees increasingly demand immediate access to
their earnings. Companies that offer it can strengthen
employee satisfaction and boost retention, while
also reducing some employees’ reliance on predatory
payday loans.3
Additionally, many digital-only start-ups, such as Uber,
Instacart, and DoorDash, are dependent on workforces
which expect to receive immediate payments for their
services. That type of flexibility and efficiency is only
possible through real-time payment systems and is
impossible for ACH and paper checks to achieve.
Rate of fraud
In-person credit card payments .18% .15%
In-person debit card payments .08% .05%
Remote credit card payments .15% .19%
Remote debit card payments .15% .18%
Source: Federal Reserve
2015 2016
Rate of fraud grows for
remote payments
There are many reasons why remote card-not-present fraud is increasing. The transition to more secure EMV
chip cards for in-person payments, which intensified in 2015 when new network rules went into effect, has
thwarted many in-person scams. However, the weaknesses in commonly used digital payment infrastructure also
share a large part of the blame. Payment system controls are far more robust and comprehensive than in years
past, but these controls are often ill-suited to prevent fraud once static card information is stolen.
Higher demand for on-demand
Prior to the rapid growth of the digital economy, everyone — from businesses to customers to employees —
expected long wait times between when a payment was made and the time it was successfully processed
and settled. Checks could take two or more days to clear. ACH added security and speed to transfers but
still took several business days to complete. Even traditional credit card payments were not instantaneous.
As much as two days could lapse between the time a credit card purchase was made and the moment it
posted to an account.
These several-day
turnaround rates have
become untenable
for all participants in
the high-speed digital
economy, and especially
for workers.
Employees increasingly demand immediate access to
their earnings. Companies that offer it can strengthen
employee satisfaction and boost retention, while
also reducing some employees’ reliance on predatory
payday loans.3
Additionally, many digital-only start-ups, such as Uber,
Instacart, and DoorDash, are dependent on workforces
which expect to receive immediate payments for their
services. That type of flexibility and efficiency is only
possible through real-time payment systems and is
impossible for ACH and paper checks to achieve.
CHART HERE
77marqeta.com 5Why the business of payments is changing rapidly 6
Rich usage data and advanced
security improve the customer
experience
Open API platforms can aid organizations that wish to customize and issue physical cards with high
transaction transparency. Organizations can also access a deeper level of usage data by activating real-
time notifications at every stage — issuing, processing, and authorization.
There are myriad ways that the additional data can be used to improve the customer experience.
When inclement weather strands travelers at an airport, an online travel agency will now have both
the information and infrastructure needed to offer relief, including sending push-to-card payments or
hotel vouchers directly to the digital wallet on a customer’s mobile device. Online food delivery agencies
can automatically notify a hungry customer the minute their food order is fulfilled at their favorite
restaurant. Insurance claims can be disbursed to an approved contractor, and the policyholder can be
simultaneously notified at the time of the transaction.
Richer data contributes to better fraud detection at the same
time that the advanced security provided by modern card
issuing and processing reduces the risk that a cardholder’s
personal information will be fraudulently obtained or
misused. Features like dynamic spend controls restrict
where, when, and how cards are used. By tokenizing cards
and provisioning them directly to a digital wallet, card
program owners protect cardholders from ever exposing
their primary account number (PAN) to a would-be fraudster.
Businesses that opt
for open API payment
platforms can
customize and deploy
cards with just a few
clicks that are tailored
to their unique needs.
Secure, flexible, and fast payments
are possible with open APIs
Digital businesses need fully digital solutions. They need the flexibility to make and receive payments instantly
and at scale, with a highly reduced risk of fraud and the ability to dynamically adjust spend controls as needed.
Similar to the cloud computing revolution that took hold in the wake of the creation of Amazon Web Services
(AWS), the next wave of digital business transformation is happening in payment infrastructure. Just as AWS
gave organizations access to modern computing infrastructure via open APIs, modern card
issuing and processing platforms now allow organizations to build digital payment solutions on modern
payment infrastructure.
Businesses that opt for open API payment platforms can customize and deploy cards with just a few clicks that
are tailored to their unique needs. For example, they can programmatically create any number of single-use
virtual cards. These cards are extremely difficult to misuse since they expire after an authorized payment is
made. If desired, businesses can make multi-use virtual cards designed to work only during certain time periods
and for certain purchases or vendors, reducing the opportunity for fraud.
77marqeta.com 5Why the business of payments is changing rapidly 6
Rich usage data and advanced
security improve the customer
experience
Open API platforms can aid organizations that wish to customize and issue physical cards with high
transaction transparency. Organizations can also access a deeper level of usage data by activating real-
time notifications at every stage — issuing, processing, and authorization.
There are myriad ways that the additional data can be used to improve the customer experience.
When inclement weather strands travelers at an airport, an online travel agency will now have both
the information and infrastructure needed to offer relief, including sending push-to-card payments or
hotel vouchers directly to the digital wallet on a customer’s mobile device. Online food delivery agencies
can automatically notify a hungry customer the minute their food order is fulfilled at their favorite
restaurant. Insurance claims can be disbursed to an approved contractor, and the policyholder can be
simultaneously notified at the time of the transaction.
Richer data contributes to better fraud detection at the same
time that the advanced security provided by modern card
issuing and processing reduces the risk that a cardholder’s
personal information will be fraudulently obtained or
misused. Features like dynamic spend controls restrict
where, when, and how cards are used. By tokenizing cards
and provisioning them directly to a digital wallet, card
program owners protect cardholders from ever exposing
their primary account number (PAN) to a would-be fraudster.
Businesses that opt
for open API payment
platforms can
customize and deploy
cards with just a few
clicks that are tailored
to their unique needs.
Secure, flexible, and fast payments
are possible with open APIs
Digital businesses need fully digital solutions. They need the flexibility to make and receive payments instantly
and at scale, with a highly reduced risk of fraud and the ability to dynamically adjust spend controls as needed.
Similar to the cloud computing revolution that took hold in the wake of the creation of Amazon Web Services
(AWS), the next wave of digital business transformation is happening in payment infrastructure. Just as AWS
gave organizations access to modern computing infrastructure via open APIs, modern card
issuing and processing platforms now allow organizations to build digital payment solutions on modern
payment infrastructure.
Businesses that opt for open API payment platforms can customize and deploy cards with just a few clicks that
are tailored to their unique needs. For example, they can programmatically create any number of single-use
virtual cards. These cards are extremely difficult to misuse since they expire after an authorized payment is
made. If desired, businesses can make multi-use virtual cards designed to work only during certain time periods
and for certain purchases or vendors, reducing the opportunity for fraud.
marqeta.com facebook.com/marqetainc linkedin.com/company/marqeta-inc twitter.com/marqetamarqeta.com 7Why the business of payments is changing rapidly
From novel to necessary
The rise of modern card issuing is changing how businesses think about how they pay workers
and vendors. Since transactions moved online, fraud has been an ever-present reality. Every
increase in security was met by an even more sophisticated attack. But new, more restrictive
modern cards and increased use of tokenization are finally putting the fraudsters out of business.
At the same time, payment cards created on modern payment infrastructure offer the
possibility of instant payments and real-time visibility into transactions as they occur. Innovative
new business models are emerging to take advantage of these new capabilities. Just as
e-commerce evolved in response to the advent of HTML, and the customer experience was
transformed by advances in mobile, so are business strategies morphing to take advantage of
new, faster, and more secure custom payment experiences.
About Marqeta
Marqeta brings speed and efficiency to card issuing and payment processing with the world’s
first open API platform. Businesses have been limited by slow legacy platforms that did not
allow for flexible new program set up and fraud control. Marqeta’s platform allows customers to
instantly issue cards with much needed flexibility, control, and scale. Our modern platform was
built from the ground up, and our APIs power innovative payment experiences for many of the
apps and services you enjoy daily. Highly configurable, secure, and reliable, Marqeta’s platform
helps B2B and B2B2C companies compete in a constantly changing digital world.
Today Marqeta has 350+ employees and operates globally in the U.S., U.K., E.U., Canada, and
the Asia-Pacific region. We have extensive partnerships with multiple banks and card networks,
including Visa, Mastercard, and Discover. Our customizable solutions are used by innovators in
areas such as expense and supplier management, digital banking, lending, e-commerce, on-
demand services, and disbursements and incentives.
Marqeta is backed by leading global investors including Visa, Iconiq, Goldman Sachs, and Coatue
Management. In May 2019, we raised a Series E of $260 million raising the value of Marqeta to
nearly $2 billion. Investors are excited about Marqeta’s ability to capitalize on the estimated $45
trillion global card issuing opportunity.
SOURCES:
1.
The Washington Post, “Think your credit card is safe in your wallet? Think again,” by Mary Hadar, September 11, 2019
2.
The Federal Reserve, “Changes in U.S. Payments Fraud from 2012 to 2016,” November 2, 2018 and
Juniper Research, “Retailers to Lose $130bn Globally in Card-not-Present Fraud Over the Next 5 Years,” January 2, 2019
3.
Dailypay, “Kwik Chek Food Stores Fuels Employee Retention Through Innovative Partnership With Dailypay,” December 4, 2019
From novel to necessary
The rise of modern card issuing is changing how businesses think about how they pay workers
and vendors. Since transactions moved online, fraud has been an ever-present reality. Every
increase in security was met by an even more sophisticated attack. But new, more restrictive
modern cards and increased use of tokenization are finally putting the fraudsters out of business.
At the same time, payment cards created on modern payment infrastructure offer the
possibility of instant payments and real-time visibility into transactions as they occur. Innovative
new business models are emerging to take advantage of these new capabilities. Just as
e-commerce evolved in response to the advent of HTML, and the customer experience was
transformed by advances in mobile, so are business strategies morphing to take advantage of
new, faster, and more secure custom payment experiences.
About Marqeta
Marqeta brings speed and efficiency to card issuing and payment processing with the world’s
first open API platform. Businesses have been limited by slow legacy platforms that did not
allow for flexible new program set up and fraud control. Marqeta’s platform allows customers to
instantly issue cards with much needed flexibility, control, and scale. Our modern platform was
built from the ground up, and our APIs power innovative payment experiences for many of the
apps and services you enjoy daily. Highly configurable, secure, and reliable, Marqeta’s platform
helps B2B and B2B2C companies compete in a constantly changing digital world.
Today Marqeta has 350+ employees and operates globally in the U.S., U.K., E.U., Canada, and
the Asia-Pacific region. We have extensive partnerships with multiple banks and card networks,
including Visa, Mastercard, and Discover. Our customizable solutions are used by innovators in
areas such as expense and supplier management, digital banking, lending, e-commerce, on-
demand services, and disbursements and incentives.
Marqeta is backed by leading global investors including Visa, Iconiq, Goldman Sachs, and Coatue
Management. In May 2019, we raised a Series E of $260 million raising the value of Marqeta to
nearly $2 billion. Investors are excited about Marqeta’s ability to capitalize on the estimated $45
trillion global card issuing opportunity.
SOURCES:
1.
The Washington Post, “Think your credit card is safe in your wallet? Think again,” by Mary Hadar, September 11, 2019
2.
The Federal Reserve, “Changes in U.S. Payments Fraud from 2012 to 2016,” November 2, 2018 and
Juniper Research, “Retailers to Lose $130bn Globally in Card-not-Present Fraud Over the Next 5 Years,” January 2, 2019
3.
Dailypay, “Kwik Chek Food Stores Fuels Employee Retention Through Innovative Partnership With Dailypay,” December 4, 2019