12.18.17 Your morning briefing
The information you need to start your day, from PaymentsSource and around the Web:
Thales 'wins' Gemalto to build an IoT security power: Thales has already spent more than $1 billion over the past three years to expand digital security and centralize hardware monitoring, and will spend $5.4 billion more to acquire Gemalto. Thales hopes the acquisition will enable it to sell a broad range of digital security to protect mobile, cloud and "Internet of Things" deployments to corporate and government clients. Gemalto is much more open to Thales' potential ownership than Atos, which last week offered $5 billion for Gemalto. Gemalto turned down Atos' bid, contending Atos was undervaluing Gemalto and did not present a plan that was more beneficial for Gemalto than if it had remained a standalone company. Gemalto's board has decided to unanimously support Thales' bid, and Patrice Caine, Thales CEO, suggests Thales and Gemalto were already working on a deal. "We have been investigating the merits of Gemalto for 12 months, there is a real opportunity for a combination," Caine said during a conference call on Monday morning in Europe. "Talks started a few months ago. This offer is friendly." Thales plans to roll Gemalto's technology into a broad-based service to protect what Thales calls digital decision chains, or the path data travels from the time it is created at "sensors" to real-time decision making. That would include transactions executed by mobile devices and connected devices, putting the Thales/Gemalto combination in a position to sell to enterprises that are in the midst of planning a transition to a mobile/cloud model environment for authentication, transaction execution and analysis. Thales previously acquired Sysgo, Vormetric and Guavus over the past three years for a total of about $1 billion to build a range of connectivity, cybersecurity, data analytics and artificial intelligence, a strategy that will accelerate due to its Gemalto purchase. "We have addressed some of these technologies, and more recently launched a dedicated structure to address key initiatives in the group," Caine said. Gemalto sells EMV and SIM cards, but it also sells access control technology such as biometrics, security and monetization services for IoT deployments, boosting Thales' addressable markets for these services. "Gemalto has expertise in smart card payments with expertise in biometrics, this is very powerful to serve customers in a more digital world," Caine said. "Gemalto is ideally positioned to serve Internet of Things." Thales' acquisition would also accelerate a move beyond EMV chip cards for Gemalto, which has struggled over the past year as EMV sales wane. "We will combine Gemalto with our security assets," Caine said. "This new business unit will serve the fast-growing digital security markets. This transition is very positive for Gemalto." The acquisition is expected to close in the second half of 2018, and Thales will have the chance to respond to any other offer Gemalto may receive.
Citi turns to the blockchain for speed: Citigroup has already adopted blockchain technology to improve securities payments and is now looking to diversify the transactions that can add speed via distributed ledgers. Citi and CMO clearing have deployed a real-time distributed ledger from Baton Systems, a payments technology company. Banks can use the technology to view collateral in ledgers in real-time, send cash or securities to a clearing house with a single click and receive immediate acknowledgement of the payment regardless of the technology they are using, according to a release from Baton. The companies hope to reduce the cost of back-office work and "manual touchpoints" involved in settlement and payment processing--if banks do not have to set aside capital as they wait for settlement, it would free up more cash, according to the partners."Its beauty is its simplicity, leveraging the most useful elements of blockchain, while introducing interoperability and extensibility to easily fit with existing technology 'rails' and business processes," said Arjun Jayaram, CEO of Baton Systems, in the release.
Cryptocurrency snow job: While blockchain provides security for cryptocurrencies, the model is not without security risk. The North Korean cybercrime group Lazarus has launched a spear-phishing attack that uses the lure of a fake C-suite job at a European cryptocurrency company to nab victims, reports Reuters. Instead of a job application, people who clicked on the link were infected by code from an attachment in the email that installed software to take control of the victim's device to download malware or steal data. The latest attacks came at the end of October, according to Reuters, though there's some signs of activity from Lazarus against cryptocurrencies since 2016. There's also evidence North Korea has been interested in infiltrating cryptocurrencies since 2013, after bitcoin research was traced to North Korean IP addresses.
Cross-border bulls: As large financial institutions such as Citigroup and JPMorgan Chase invest in international payments technology, Australia's Airwallex has drawn a new $8 million investment from Square Peg Capital, joining Tencent, Sequoia and Mastercard among Airwallex's investors. The Australian Financial Review reports Square Peg will be a strategic investor in Airwallex, which targets businesses that process large amounts of small-value international payments, a market that's getting larger as e-commerce marketplaces expand. Airwallex launched in May and is on pace to earn about $20 million in revenue for 2017. Tencent plans to embed Airwallex into WeChat Pay to serve Chinese travelers.
Free transfers: ANZ has been aggressively pushing new digital payment technology, recently adding support for Internet of Things payments and pushing digital international transfers by reducing fees. The bank has reduced rates for U.S. dollars, Euros, New Zealand dollars, Pounds, Hong Kong dollars, Yen, Philippine Pesos and Indian Rupees. ANZ has waived all fees for internet transfers above AUD $10,002, with fees below that level reduced to AUD $12 from AUD $18. The bank's reducing fees to encourage electronic payment methods, contending Australia is one of the world's most digitally active nations.
From the Web
The Creator of Signal Has a Plan to Fix Cryptocurrency
Wired | Fri Dec 15, 2017 - Cryptocurrency remains confusing and challenging for the average person to acquire and manage, much less sell. And the protocols that underlie bitcoin and other mainstream cryptocurrencies like ethereum suffer significant scalability and transaction bottleneck issues. Visa currently processes about 3,674 transactions per second; the best bitcoin network might be able to process seven per second. But now the creator of the dead simple end-to-end encrypted messaging app Signal, Moxie Marlinspike, is on a mission to overcome those limitations, and to create a streamlined digital currency that's private, easy-to-use, and allows for quick transactions from any device.
Bitcoin: New Financial System or Same Old Boys' Club?
Fortune | Fri Dec 15, 2017 - As the price of Bitcoin soared to record highs this week—$10,000, $15,000, then $17,000—the meteoric rise that turned early investors into paper billionaires fueled talk of how the cryptocurrency and its underlying technology, blockchain, could wholly remake the banking system. As MIT researchers argued in a Harvard Business Review article earlier this year: “Blockchain will do to the banking system what the Internet did to media.” Among the many questions about the future of Bitcoin and its peers—Is it a bubble? Will it pop?—is whether the cryptocurrency industry, like its traditional predecessor, will be molded mainly by men.
Tencent Teams Up With JD.com to Take on Alibaba
The Wall Street Journal | Mon Dec 18, 2017 - In an escalating battle between China’s dominant internet giants, Tencent Holdings Ltd. has teamed up with JD.com Inc., Alibaba Group Holding Ltd.’s main e-commerce competitor, to buy a stake in the No. 3 online retail player. The two firms said they would pay $863 million for a 12.5% stake in Vipshop Holdings Ltd., whose website sells discounted fashion, accessories and cosmetics from global brands such as Lacoste and Columbia, a move that directly challenges Alibaba’s chokehold on the e-commerce industry.
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