Legal Seminar, Denver, CO

071018 Discussion Draft

b. Adyen’s innovation happens at the level of dealing with merchants and processing their payments. As the WSJ explains, “Bigger, traditional payments companies have to reengineer multiple existing systems to [accept payments from multiple sources and on different platforms]. Adyen has a single system that does this more cheaply and can add extra payment volumes anywhere in the world at a vanishingly small marginal cost.” Id. c. Cheaper? Perhaps. But an examination of their cost structure still indicates rather steep discounts. See https://www.adyen.com/pricing/full-list . Innovations such as converting declined cards into approval may generate additional revenue for large volume users. https://www.adyen.com/our- solution/revenue-optimization d. Will this change what consumers do? Unlikely. Instead, it is designed to help merchants adapt. Firms like these may also provide data analytics and other services to help control costs. B. Mobile Payments. Mobile payments can also be viewed as a source for innovation by allowing people to use traditional payment methods through mobile devices, such as their phones. For a comprehensive discussion, see Erin Fonte, Mobile Wallets/Mobile Payments and Peer-to- Peer Payments 77-122 in E LECTRONIC P AYMENT S YSTEMS (2018). Some relevant considerations affecting two of the most popular applications, Apple Pay and Google Pay, are discussed below. (Peer-to-peer payment systems like Zelle, Dwolla, and Venmo can also be considered mobile payments technology, but they are covered in part A, above. Likewise, some forms of embedded payments in websites can be considered forms of mobile payments when accessed via smart phone. These are discussed in part C, below.) 1. Technology overview. Mobile wallets essentially enable payment at a retail point of sale using a smartphone app. That app essentially converts and stores account credential from other sources, such as a payment card or debit card, and allows that information to be communicated to a POS terminal using some kind of wireless transmission technology, such as NFC. Tokenization is generally a part of the transmission technology, so that full card data is not transmitted to the merchant. 2. Convenience. These devices deliver speed and convenience. Based on my own observations, they seem to be faster at checkout than the EMV chip card reader. Plus it is fine not to have to get out a card and insert it, etc. 3. Costs. Will these devices reduce network costs or decrease fraud losses? They might. See Fonte, supra, at 85-86. a. A card can be stolen, and often ID is not checked by the merchant because of the desire to speed payment processing. A phone can also be stolen, but either

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