PayPal, eBay Going Their Own Ways; Becoming Independent, Publicly Traded Companies (Sept. 30, 2014)

eBay Inc.’s board of directors will separate the online auction Website from subsidiary PayPal next year, making two independent, publicly traded companies. The move also has created a shakeup in the executive suite: Dan Schulman, former president of American Express’ Enterprise Growth Group, joins PayPal as president, effectively immediately, and he will become PayPal CEO after the companies are separated; and Devin Wenig, president of eBay Marketplaces, will become CEO of eBay.

“As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities,” said John Donahoe, eBay Inc. president and CEO, in a statement. “And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward.” Donahoe and Bob Swan, eBay Inc. chief financial officer, will oversee the separation and serve on the boards of both companies.

The eBay Inc. board determined that keeping the two entities together beyond next year would be disadvantageous to eBay and PayPal strategically and competitively, with the two companies facing different competitive opportunities and challenges, according to an announcement. The company expects to complete the transaction as a tax-free spinoff in the second half of 2015, and it says the spinoff will deliver sustainable shareholder value.

The split has “got to be catalyzed by the seismic movements in mobile and digital payments in September 2014,” says Todd Ablowitz, president, Double Diamond Group, referring to the launch of Apple Pay. “While [the eBay Inc. board] has been talking about this for some time, it’s a critical moment for PayPal to take its hundreds of millions of accounts on file and put them into use in the world of mobile commerce,” he adds. “You have to believe PayPal as an independent won’t be constrained by what its biggest customer and parent company might want. PayPal is able to be more free and more aggressive in the mobile, digital and omnichannel arenas.”

For months, the eBay board has been discussing the possible spinoff of PayPal, with the lightning rod of the discussions being investor Carl Icahn—a 2 percent owner of eBay—who had been urging PayPal’s spinoff until an armistice was reached last April between eBay and him.

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Card Compliant Granted Patent on Escheat Management, Breakage, Revenue Recognition Platform (Sept. 30, 2014)

Technologies from Card Compliant aim to help prepaid issuers manage the regulatory and compliance challenges presented by accounting standards and escheatment requirements. The Kansas City, Mo.-based compliance specialist has been granted a U.S. patent related to these services, which enables issuers to compute and pay the exact amounts that are subject to escheat under unclaimed property laws of states and other jurisdictions, and forecast future amounts subject to escheat by predicting redemption and breakage rates. The system also enables issuers to employ derecognition, an accounting technique used to reduce the card liability on a company’s balance sheet from unused cards, thus avoiding inflated obligations on the issuer’s financial statements.

The patents relate to the methods, processes and systems architecture underlying the rules-based processing platform. “The patents are timely,” notes Tori Blake, vice president of accounting technologies and operations, Card Compliant. “The Financial Accounting Standards Board and the International Accounting Standards Board recently released a new revenue recognition standard which addressed the recognition of revenue in prepaid card programs. The breakage and revenue recognition platforms comply with the requirements within the new standard,” Blake tells Paybefore.

Card Compliant plans to extend the patented technologies to the mobile space.  “When a company expands its traditional prepaid card program to mobile, it can alter the escheat profile, the breakage, and other attributes of the program,” explains Amanda Culp, JD, assistant general counsel, Card Compliant. “The patented technologies will integrate well and have interesting features for mobile,” Culp adds.

Escheat laws have been a hot-button issue over the past several years, as states have stepped up attempts to capture unredeemed gift card balances to address budget shortfalls. In 2010, New Jersey passed a law requiring unused funds on prepaid cards to escheat to the state after two years of inactivity and mandating the collection of purchasers’ ZIP codes at the time of purchase of a prepaid product. After the ensuing industry outcry, the period of inactivity was pushed to five years and the effective date of the law with respect to ZIP code collection delayed until July 2016. Similar fracases over escheat have broken out in other states.

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InComm Joins MCX Fold (Sept. 30, 2014)

Prepaid product and technology provider InComm has partnered with Merchant Customer Exchange (MCX), the retailer-led consortium that recently unveiled its new mobile payments network, CurrentC. Atlanta-based InComm will add its existing retailer relationships and POS integrations to bolster and expand the CurrentC network, the company said.

The partnership “allows us to greatly expand the number of participating retail locations and represents a great opportunity for retailers to seamlessly improve the loyalty, shopping and payment experience for customers,” noted Andy Shober, chief sales and business development officer, MCX. Currently in a limited pilot phase, CurrentC is set to expand to a full nationwide rollout in 2015, eventually reaching more than 110,000 merchant locations. Users can access the network using the CurrentC mobile app—or merchants’ own mobile apps—to make in-store mobile payments via QR codes, as well as redeem offers and manage loyalty programs. Formed two years ago as a merchant-led effort to develop a mobile payments solution, MCX’s membership roster includes major retailers 7-Eleven, Target Corp., Walmart, ExxonMobil, Rite Aid and Wendy’s, among others.

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Cachet Financial Integrates Ingo Money Check Guarantee Services for Banks, Credit Unions (Sept. 30, 2014)

Minneapolis-based remote deposit capture specialist Cachet Financial Solutions has expanded its partnership with Ingo Money Inc., an electronic funding technology provider, to deliver instant, non-provisional consumer mobile deposit and account funding services on Cachet’s Select Mobile and Select Mobile Prepaid mobile banking platforms, which provide financial institutions with customizable, consumer-facing mobile banking and transaction services for their prepaid and debit customers. The expanded agreement with Ingo Money enables Cachet to offer Select Mobile clients a guaranteed, instant, mobile deposit and account funding capability supported by Ingo Money’s mobile risk decision and validation services. Select Mobile clients can offer bank customers and credit union members the option to pay a fee on approved checks for immediate access to funds, without risk of future reversal, even in the event the check returns unpaid. Cachet Financial raised nearly $6 million in its Initial Public Offering last July when the company sold 4.5 million shares of its common stock to the public at a price of $1.50 per share.

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