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Paymark TransTrack Report

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Thank you for using the Paymark TransTrack Transaction Reporting email service.

Please find attached your requested transaction report.

The report is in PDF format, suitable for importing into a variety of finance and spreadsheet applications such as Xero, MYOB and Microsoft Excel.

The attached report is in a zip-formatted compressed file so you will need to extract it before viewing it.

If you experience any difficulties or would like more information about Paymark TransTrack please visit paymark.co.nz/info-hub/transtrack

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Source: https://www.linkedin.com/pulse/xero-paper-mark-drew-broadley

Xero and Paymark have announced their partnership towards a paperless receipt system.

Background: I once straddled a start-up called PAPERKUT. During that period, I was in commercial negotiations with Paymark for over a year (yes, it had an anniversary and I bought a cake for myself) to forge an agreement to gain access to payment data. I also worked with other payment providers, telcos, banks, accounting software companies, retailers and consumers. In came a perfect storm; an acquisition gone wrong, a business partner fall out including a court case then the cherry on top of a patent troll. It was time to wrap up PAPERKUT. After this, I was offered a well paid consulting job to help make this a reality under another companies wings but without true skin in the game, I turned that down to focus onCommon Ledger.

Upon hearing the announcement, I was inspired to analyse this in my own way. I want to provide facts on the situation and not use the word “I” or “me”. The aim is not to be opinionated.

To start, what are paperless receipts and where does the opportunity lie. Paperless receipts is the change from having that paper in your hand to have it saved to a safe location you can recall them whenever you need, for up to seven or more years down the track.

We can do this in New Zealand, because we have the highest use of digital payments in the world, last figure stated around 67% [source: year 2011] of all transactions were made with issued cards (credit, and debit cards). We need this to launch initiatives like paperless receipts because without an identifiable method of payment, there is no way to connect that receipt to you.

The nature of using identifiable payment methods such as issued cards over the EFTPOS system requires a token to be created. This token is a unique to the card and can be reproduced to the same value each time the same card information is tokenised (the process of making the card information unidentifiable). This means for paperless receipts to work, there is an immediate reliance on payment gateways and processors such as Paymark.

Paymark states it processes 75% of the payment transactions in New Zealand, this is correct though not technically true. Paymark is a proxy for payment providers who use the Paymark system and the data of players in the market such as Smart Pay pass through Paymark in an encrypted way. This means Paymark processes the payment, but does not see the detail of the information relating to that payment. This even includes debit/credit card processing which gets routed overseas to Mastercard and Visa, where Paymark may have no position to use or access this data.

So immediately becomes a requirement to partner with at least two payment gateways to obtain access to all of Paymark’s 75% of data. There aren't just commercial hurdles, there are issues with tokens too. Paymark and SmartPay both tokenise their cards with their own methods which are each of their own IP. If paperless receipts are to work, there is a need to remember both of these tokens and the card they relate back to.

There is need for even payment processors launching paperless receipt systems to partner with other payment providers to obtain access to the payment data, and will require yet another commercial agreement between competitors.

For the sake of keeping this simple, lets imagine all payment providers create the same token for each card, and work together.

Payment data is now available, and identifiable to consumers who register their card with Paymark. Can IRD acceptable paperless receipts be produced with this? Only low information quality receipts that are of no use to an accounting software. This is a situation of amount, date but no line items (the listing of each item you purchase). Immediately basket analysis is unachievable as the only data available now is data which is already widely available prior to launching any paperless receipt initiative.

The partnership of Paymark and Xero has no value at this point to anyone. What is required to make the value in the partnership to then offer value to accountants and companies using Xero? As mentioned before, it’s in the line items.

This is the biggest value add, and also the largest hurdle to overcome. To gain line items, it is now required to integrate with Point of Sale systems. These, like accounting software vary wildly with online, hybrid, cloud and custom approaches. To gain critical mass of integrations would be impossible and would require strategic partnerships between Paymark and retailers who produce the larger percentages of transactions over the payment network.

This is where the top 10 customers of Paymark come into play. Paymark are not known for their strength in adopting and selling new products as they use partnership models to achieve this. So for Paymark to make this viable will need to rely on their top tier customers. These tend to be merchants such as supermarkets, hardware stores and petroleum stations which there are “sticky” relations where Paymark will be able to leverage their account managers. This will be a large part of keeping Paymark customers happy, while also positioning updated agreements with these customers to create the ability for Paymark to use their transactional data for paperless receipts.

And here we enter the merchant proposition. They are the gateway to the information for the consumer identifier, the line item data, and the payment being processed. Now we need to analyse the value to the merchant in two aspects; how can they use this system to improve internal processes (such as stock management, existing loyalty systems and streamlining returns) and how they can use this new medium to advertise to their customers (an evolved model to the advertising on receipts).

This requires the paperless receipts system to evolve into wider use cases and thus creating itself as competition to existing loyalty providers who range from Point of Sale software that create their own loyalty modules, to companies like Loyalty NZ (Fly Buys) whose bread and butter exist from a loyalty programme. Not to mention there are rocky relationships between Paymark and these players.

Again, for simplicity, we will say Paymark is able to produce the commercials and find the ideal agreement which pleases all parties.

Now we look to integrating that Point of Sale data, remembering the focus on the top 10 retailers and the size of their operations. A good assumption would be that they have invested in their own in-house Point of Sale software. Like all good large organisations, they require time and resource commitments and typically aren’t agile to build these integrations within 12 months of signing an agreement. It now becomes a project management role for Paymark to ensure each of these integrations go to plan and situations like the Point of Sale system being able to tally said data and send it to Paymark without causing critical slow downs as they aren't all on the latest and greatest NoSQL, High Availability hardware, let alone the “cloud”. Systems like this typically sync their data once daily overnight, and may be available the next day, but that would delay important things like daily taking reports going to management so may end up in weekly spin cycle. There goes Rod’s idea of that receipt as you leave the taxi.

To keep the stone from gathering moss, we will say Paymark manage to collaborate with each of these 10 retailers and there are integrations that happen where real-time receipts are being correlated and sent to Paymark.

So now, Paymark now have real-time paperless receipts attached to around 40-50% of all transactions that are now identifiable to an individual card holder.

We now have to take on the consideration of data ownership. Who owns the data you say? There will be many opinions on this, but the reality is every player involved; the consumer, the merchant, payment processors and the banks own parts of the data. The Privacy Commissioner will now raise its hand to consult in this matter due to the sensitivity and amount of players involved.

The banks, the part of the equation not yet explored.

Banks are required for the adoption part of paperless receipts. They provide a large amount of users who interact with their financial data on an almost daily occurrence through Internet Banking. What better place to present paperless receipts than beside that transaction, it works within existing behaviours of consumers and business owners, it makes sense as banks are always looking to provide value through their digital initiatives/investments and there’s an opportunity to create a new revenue opportunity in real-time advertising using customer purchasing data to generate relevant offers such as micro insurance to insure that new iPhone you bought or an advert for upgrading that old iPhone you purchased last year.

Paymark has stakeholders of the major banks behind them, allowing them to create these discussions around a commercial agreements. The question that remains here is how strong is the bond between Paymark and its stakeholders to ensure they can work together in a commercial environment under a completely new and untested market.

Now, we get to accounting software.

Accounting software needs to integrate with banks for feeds of daily bank statements which are still only retrieved daily. In an effort to start automating Accounts Receivable and Accounts Payable, MYOB has Smart Bills, Intuit acquired Invitbox and Xero has a few strong add-on players such as Receipt Bank.

Xero’s vision is to create a single source of truth for accounting data, to create more valuable data that you would find in any other accounting software and do things with that data due to the nature of being in the cloud and the data being in a single location.

So what happens when Xero partners with Paymark for paperless receipts, it’s bringing the functionality into the core of its accounting data.

Paperless receipts would create a new value to the data in Xero, particularly if it’s verified and audited while also creating more competition now with the companies already providing services to process receipts and invoices into accounting software.

Utopia has been reached, your receipts are waiting for you in your accounting software.

Like any innovation, it attracts unwanted but relevant attention. There is a patent issued in NZ [source: IPONZ], AU, South Africa, Russia  and a few other countries. The party behind this patent is active and pursuing any activities in this area. Patents can be mitigated with commercial agreements such as royalties, one-off sums, licensing or any other creative manner parties can create to ensure their intellectual property is valued correctly.

The amount of commercial agreements required to ensure this initiative can even launch is staggering. What makes this harder is when an established player such as Paymark who is known to have large revenue and profits approaches a new market opportunity, the entities behind patents that maintain ownership of intellectual property understand they can leverage larger stakes and/or base royalties compared to that of a young cash strapped startup.

To summarise the challenges;

Paymark requires many commercial agreements with payment providers and merchants, which will need to be negotiated on a market value which no one knows the true potential.

Paymark will need to find resolution with patent owner of the paperless receipts intellectual property.

Paymark is yet to be release a working product.

Paymark has not announced partners on the payment processor, merchant or bank side.

Xero is in the position for being a recipient of Paymarks’ hard work.