The digital revolution has not been kind to independent sales organizations and others in the merchant acquiring market, which has seen its long-standing business model upended by the mobile point of sale and other new technologies.
But a world away, developers in Singapore see an opportunity in that technology deficit, and a chance to hasten their own introduction to Western markets through a Wells Fargo program that spots and facilities investment in startups.
"The number one dilemma plaguing [payment service providers] and ISOs today is the friction, restrictions and colossal expense that banks and merchants face when attempting to update their legacy platforms by integrating these new services and solutions," said Ronan McDonnell, marketing coordinator for Alpha Payments Cloud, the developer of the AlphaHub.
AlphaHub enables banks, merchants, payment service providers and ISOs to access different payment types and technology systems globally, then customize these systems to the transaction layer using conditional logic. The AlphaHub introduces vendor ubiquity and interoperability without disrupting current technological frameworks, McDonnell said.
Alpha Payments Cloud, a Singapore-based company with operations in Europe and the U.S., is one of two participants in the Wells Fargo Startup Accelerator, a six-month program for early stage companies, including direct investment, advocacy and access to Wells Fargo mentors.
The other company, Jewel Paymentech, is also based in Singapore. It is a financial risk management company that helps acquirers and payment facilitators conduct merchant due diligence and transaction fraud risk using predictive analytics.
The Wells Fargo Accelerator looks at cyber security, big data, mobile, robotics, wearables, payments and infrastructure. It's a signal of how fiercely competitive the financial and payments technology arms race has become, as large incumbent companies scour the market to find new ideas to gain an edge. On June 21, for example, MasterCard announced the latest participants in one of its outreach programs, Start Path, which is also designed to locate early stage companies that show promise.
PayPal has also run developer programs, and Visa recently opened its technology tools to outside developers for the first time. Banks such as Citigroup have also diversified how new technology ideas become actionable products.
Diverse sourcing is one of the goals. The Wells Fargo Accelerator has reached beyond traditional sources, both geographically in the case of AlphaHub and Jewel Paymentech, and outside financial technology, as is the case with past accelerator participants.
"It's one way for people to come in and access a network of subject matter experts," said Braden More, head of payment strategy for Wells Fargo.
In the banking industry, familiarity can be helpful, according to More, who said technology vendors often have a better chance of finding investors or clients if the potential vendors or investors have a sense of how the early stage company can work with a large financial institution. A company that may not have worked in financial services or payments, or a company that operates mostly outside of the U.S. or Europe, may have a harder time selling to established Western financial companies.
As payment channels evolve, so does the complexity of how risks need to be managed, said Wooi Siang Lee, co-founder and COO of Jewel Paymentech. "The acquiring business has traditionally been known as the 'poor cousin' of the payments world - where legacy non-real time risk management tools are the norm," Lee said.
Jewel Paymentech performs real-time checks on merchants at the point of onboarding and afterward. It's products examine the collection of all data at the point of on boarding about the merchant and use machine learning to predict and assess the likelihood of it being a bad merchant. It also analyzes content and transactional information, giving controls to payment acquirers to reject high risk transactions or hold deposits where anomalies are detected.
"Compounding this challenge is the advancement of fraud syndicates. The use of money mules and sophisticated scams against acquirers make it increasingly difficult to manage without advanced tools," Lee said.
Technology startups are advancing quickly in Singapore, which is developing a reputation as a technology hub, though less well known to established Western companies. A program such an accelerator can change that, More said.
"These companies get a sense of what it takes to be a vendor for Wells Fargo," More said. "The most typical situation is we would like to buy a product but we have to explore it and get comfortable with it. Or a company in Asia may be helpful in the States, and the accelerator is a way to bridge that gap."