How a banker became the voice of the merchants
Mark Horwedel, the outgoing Merchant Advisory Group CEO, wasn't always on the merchants' side.
Through much of the 1970s through 1990s, he held various roles with Caterpillar Tractor Credit Union, Money Network and its merger with Magic Line, and the payments division at U.S. Bank and as a community bank president.
In those roles, Horwedel noticed a fairly dramatic change in how banks and merchants interacted. For the longest time, he said, banks could be counted on to be in the merchants' corners on most any interaction with the card networks.
That zealous defense of the merchants faded as most banks sold their merchant portfolios to third-party payment processors, which triggered a bank migration to the issuer side of the equation.
"It was a lot more balanced in the past," Horwedel said. "Banks were staunch advocates of the merchants they serviced with the card business."
This culminated in one of his later roles, as an executive at Walmart, which has long been an outspoken adversary of the card networks' policies — the retailer was a catalyst for the now-defunct Merchant Customer Exchange, a mobile wallet venture which at its roots sought to control payment costs and customer data. An issue with card fees two years ago resulted in Walmart temporarily halting acceptance of Visa cards in its Canadian stores.
"I certainly got a close-up view of what merchants were concerned about regarding the payments industry when working there," Horwedel said.
And that perspective won't be leaving when Horwedel steps down. John Drechny, a Walmart executive and the chairman of the MAG board, will become the organization's CEO on Jan. 1, 2019. Horwedel plans to stay on in an unspecified part-time role.
The retail empire strikes back
Horwedel has had a profound effect on MAG's growth as an industry voice, said Maria Arminio, president of Avenue B Consulting Inc., a Redondo Beach, Calif.-based payments management consulting firm.
"Mark has had a take-no-prisoners effect when it comes to lobbying to regulators," said Arminio, who has worked with MAG on various projects in the past. "As an organization they have decided they are no longer going to allow the merchant community to just be dictated to without a voice."
During Horwedel's tenure, MAG has grown from a group of 36 merchants to one with more than 140 members. MAG has been pushing the payments industry toward open standards and providing everyone has a seat at the table during vital discussions, Arminio added.
"If we have to, we will advocate in Washington, D.C., but typically our messages are aimed at regulators rather than policy makers," Horwedel said. "They are also aimed at educating the traditional merchant trades on the nuances of payments issues and help them identify new ones as they emerge."
It's not difficult to track MAG's viewpoints or stances on any number of payments developments. With Horwedel at the forefront, the organization was adamant that PIN be included in the conversion to EMV chip cards, and it has backed open standards for PIN on glass, tokenization and payments routing. It was also an early proponent of Near Field Communication being the underlying technology for loyalty programs and redemption of special offers – a decision that would give merchants more bang for their buck if the networks were going to push contactless technology to be part of the EMV conversion.
The MAG's view of Payment Card Industry data security standard compliance has encompassed a wide range of concerns from the problems in applying standards, keeping up with rapid technology change, and assuring merchants had an equitable voice in standards development as well as on the PCI executive committee.
Most recently, it has encouraged common standards for the use of payment buttons on e-commerce sites to avoid the probability that merchants would have no routing choices through the buttons, thus ultimately paying higher fees.
"Mark is really the thought leader behind their expectations," Arminio said.
Friend or foe?
Merchants felt fraud was a significant problem in payments and that the networks and banks weren't doing everything they could to control it.
"I would suggest to this day that billions of dollars have been lost to fraud by financial institutions and merchants and it translates to higher costs to consumers," Horwedel said. "It could have been avoided if we simply adopted PIN like most other industrialized countries."
Instead, the networks made it as easy as possible for the banks to move to EMV in the U.S. by not developing PIN on credit card purchases at all, Horwedel added.
"Because the networks and banks have the real choices as to how they authenticate their card products, our role was mainly to let our perspective be known within the industry," Horwedel said.
And the card networks give credit where it is due.
"Mark’s leadership on the MAG has been integral to driving industry collaboration and advancement of important topics facing the payments ecosystem," said Linda Kirkpatrick, executive vice president of merchants and acceptance at Mastercard. "We’ve been fortunate to work closely with him to make significant progress with our merchant customers in driving safety, security and innovation in payments."
Mastercard has viewed Horwedel as "a force for positive change" and the network has been grateful for his partnership, Kilpatrick added.
Visa echoed those sentiments.
“Merchants are critical partners to Visa and we are committed to providing them with effective and seamless payments services to help them grow their business," said Kirk Stuart, senior vice president for North America merchants at Visa.
"We look forward to our continued collaboration with the MAG under their new leadership,” Stuart added.
Horwedel also looks forward to working with the new MAG leadership in his reduced role.
"This business is really intriguing and there is so much going on," he said. "I still feel like I have a lot to offer, particularly for businesses wanting to know the background on both the bank and merchant side."