 Good afternoon guys, um, I know everybody in here is a developer and a coder and We've heard a lot of stuff on everything from PCI compliance to gateways and you know Processing and and all that's really important and that's a huge foundation of what our industry is as payment engineers but um, I'm I myself I like history and And I think it's really important to know how we got to where we are today You know, how do we end up with you know, the plastic that's in our wallets or the idea of doing a transaction on a mobile phone? or just the idea of a credit card vault and tokenization We are really in the midst of a huge transition From where we're carrying around a wallet and a phone to where we're probably just gonna be carrying around a phone And that's literally happening right now So this presentation really is not going to get to him death on the technology of that But really the history of how we got there in the first place So just a quick background on me before we get started. I'm a co-founder and CMO of a company down in Charleston called Rad tab We integrate with the top 16 point-of-sale companies in the US and We use freely as our credit card vault and there's about 20 other companies That are getting into the hospitality payments for bars and restaurants The big reason why there's a lot of innovation needs to happen there And part of the reason why is a bar in a restaurant really operates the same way to 10 years ago Most of the p.s. Machines is hardware or really no different than what they were five years ago There's a back of the house pretty much running like a windows 7 terminals that are connected to it They have a EDC that's running batch credit card files And then they have a payment processor such as world pay or first data So really to kind of separate ourselves from the competition and really kind of offer more value to the bars We said hey instead of us actually processing the payment on stripe or brain tree and a CH and that through a stripe connected account Or whatever to the venues. Let's just process it on their EDC Let's get the payment right into the bank account where it's just like a normal payment So anyway, what's kind of dive in here So when we think about transactions, we really kind of separate them into two categories at space foundation The first is the card not present transaction So these are all are pretty self-explanatory Obviously it makes sense that a card not present transaction is any transaction where the physical card is not being given at the time of a sale Right they get things such as over the phone on the internet mobile apps like uber or whiffed Airbnb and then a card present transaction is any time that you actually are physically giving the car where it's being swiped Maybe actually being inserted through the EMV was the chip card or even the contactless payments Those all are considered card present transactions and those have really been what we've been using for the longest time Really since the 70s when credit cards got big and everybody had one That's what we've been used to and the idea of a card not present transaction was there's a little sketchy at first And why does that matter? Well, there's two reasons why is the input method with print payment processors is affected as far as how much they charge as a Processing fee and also the chargeback liability is the biggest thing and we're seeing a lot of that with the EMV stuff for merchants I've not switched yet So let's break it down a little bit further Some of these I kind of already talked about as far as card not present transactions things such as online shopping like Amazon jet com You're reoccurring Netflix description and any orders taken over the phone And it's more recent the popular apps such as like the Domino's app and Starbucks And most of these are using probably like a prep, you know a payment process such as like brain tree owned by PayPal Card present would be any transaction where your card is swiped on a POS terminal contactless enable terminals or even a square reader And I think it's safe to bet that everybody in here has some for credit or debit card on them right now And we both use both payment ways to pay But how do we actually get to the card present type of currency? How do we go from where we have like this gold standard and we had these coins and shells how do we end up to where we are today and When I said I was going to give some history I really didn't mean we were going to go pretty far back and really from the beginning of time So money at the beginning really was all about the exchange of goods and services You know various historians say that sometime around 9,000 BC Bartering started with livestock plants and common goods that held value to the person that needed them I mean some of these were really just literally needed for survival And then through the centuries currency took some pretty interesting shapes from cowrie shells to stones to the first ever currency Which was created by king elates in witty, which is now part of turkey so that's the coin on the far right and This coin actually is one of the first known struck minted coins And that's a big deal because that really kind of started the standardization of some type of currency or money That was should be the same So These coins Were based for money as well as for trade and then in the 11th century We started seeing the emergence of baked notes the first known as pictured to the right is known as just the zoo I probably pronounced that wrong, but I think it's just a printed by the Song dynasty, which is now in present-day China What happened was the central government at the time saw a huge economic advantage to printing money and been able to control it And although although gold and silver has been the most economic advantage to printing money. I'm able to control it We actually had bank notes in the US right around the 19th century. There was over $5,000 different bank notes that were issued So there was a huge problem where you didn't know if this bank note could be accepted here If this note could be accepted in this town and right around then that's when the US mint decided that hey We need to have one currency One dollar bill and that really happened right after the silver war So the National Banking Act in in 1863 is where all of those bonds and currencies all had to be standardized And then the dollar became the sole currency of the United States remains so today So the concept of a value is instruments represent banking transaction states back 5,000 years When ancient civilizations used to use clay tablets to conduct trade with other civilizations During Western expansion merchants would use charge coins and charge plates to extend credit to local farmers and ranchers Aligned them to forgo paying their bills until their harvested crops were able to be sold and cattle was able to be traded around the 1900s some department stores used charge coins for frequent customers which visited and purchased items often almost like VIPs But the first credit card is credit to the diners club card and all those purchases were made on credit Diner club was technically a charge card meaning the bill had to be paid in full at the end of the month But by 1951 diner club had 20,000 cargo orders This was followed by American Express the company which originally started in 1850 as as a competitor to the U.S. Postal Service began issuing money orders in the 1880s And then watch the first true plastic card in 1958 This was followed by major banks producing their own card such as the Bank of America card Which gave you the ability to have evolving credit and allowing their monthly balance to continue for a small interest change Credit cards then exploded in the 1970s Introduced the but all this introduced potential fraud and the first real technical security innovation happened in 1960 When IBM added the magnetic strip that we still find in most cars today And really from that point forward we start to see the standardization of every aspect from the car Which is controlled by the international organization for standardization and the international Electro-technical Commission for starters the size of the card is known as the 7810 ID one standard All cards have printed or emboss bank numbers Which is the sequence of digits at the beginning of the number that determine the bank to which a credit card belongs to This is the first six digits from mastercard and visa cards The next nine digits are individual account number and the final digit is a valid a check code Credit card numbers were originally embossed to allow the transfer number to charge the slips With a decline of paper slips some credit cards are no longer embossed And in fact the card number is no longer on the front in some instances But the biggest change is happening now in the shift to EMV EMV which stands for Europe a mastercard visa is a standard for card security, but although it's really not that new The EMV standard was originally written in 1993 and 1994 The benefit of EMV all boils down to improve security against fraud by not just relying on the magnetic strip But crypto current algorithms such as triple DS RSA and SHA To provide all the authentication of the card to the processing terminal in the cards issuers whole system This standard is known as the 78163 Defines the transmission protocol between chip cards and readers and using this protocol data is exchange and application protocol data units APD use This comprises sending a command to a card at the card processing it and sending a response And we could do a whole separate presentation on the steps of EMV Authentication the processing and how that goes, but let's move on So the US really has been the last major market to adopt EMV The major car brands definitely saw this happening slowly and what they did was they needed to kind of speed up the process So back in 2011 the car brand companies issued decrease that would then shift the liability for charge backs and fraud Transactions from the card issuers to the merchants who chose not to be prepared to accept EMV enabled transactions By the deadline of October 2015. Well, we saw how that went So when you hear anyone talk about EMV liability test of 15 shift all that really means is who's liable Let's say you and me we go to a restaurant, right and we have a hundred-hour tab At the end of the night if we close out all that's good If they actually we have a chip card and they actually swiped our card with the magnetic strip We actually even though they have a signed receipt Even though they have cameras even though the owner even knows us we could actually call our bank up and they would have to Reissue the payment to us so So if you use a chip reader fraud liability stays with the processor of the bank and us paying form estimates that 855 million chip cards have been issued of August 2017 But which is great That's only about 85% of active credit cards according to the CPI card group But not all merchant locations are EMV ready Most figures say around only 58.5% are ready to process chip payment cards And what we've seen is most of these are the big box retail such as Walmart and large chain stores and not surprisingly They made to the EMV jump first In some instances merchants have bought the equipment and have it installed But the credit card companies have not certified the equipment so it cannot be used and there are 15 million locations Estimated that need to be updated for chip card and we find a majority is our bars restaurants night clubs And most of these are owned not by some large companies, but are actually family owned. They're owned by private owners So what they've been doing is they've really been outweighing the possible annual cost of charge backs against the hardware upgrades It's very expensive the total combined cost for these upgrades for these locations estimated to be 6.75 billion dollars So despite the reduction in fraud EMV has left shoppers with a bitter experience with EMV Not knowing whether to swipe the card or insert it and many people also complain about the charging time Which they were getting it down to about 2.5 seconds now But really at the beginning it's like around 5 which doesn't seem like a lot, but when you're staying in line So what's next So obviously we we won't see credit crisis appearing anytime soon And for quite some time we've heard the term of the smart card And you know a perfect example is a credit card like master card release last year that uses a fingerprint sensor in the Car so using you actually would use your fingerprint instead of the signature or the pen and There's a company out there called secure touch has taken this even further with behavioral analytics So for example behavior by a metrics can analyze how someone uses their phone learning the patterns to evolve the security Finger pressure finger size touch coordinates to angle to even hold the advice There's actually a hundred different physical attributes that they're actually that are being measured Um So there's also the idea of not having one static number for your credit card Imagine if your pan number could actually rotate or change if let's say you felt like your card may be You know somebody may have actually got the number or wrote it down You could actually just change it on a fly and Credit card issue a final is trying to solve the problem by allowing carders to generate as many one-time user merchant Walked card numbers as they want. There's also going to be done for a card security code There's a the uber Todd technologies, which makes a majority of the chip cards in the US Has this thing what it's called a motion code So these cards have a mini screen on the back that changes the card verification value as often as 70 times per day Or what about wearable items such as the ring or bracelet or key chain that can contain a chip to purchase items? Many experts seem to think that the next step and where and weaning customers away from the physical plastic cards is Innovation and mobile based payments and using our phones as a mean of purchasing power But what's first checked about the novelty type internet transactions in the early 90s that really got us to the idea I've been able to purchase a Starbucks on your phone But you know unfortunately the you know the history of card not present transactions is kind of sketchy You know, it's not that it's not that pretty And when you talk to various historians a lot of people you know kind of you know One was the very first, you know card not present transaction where a credit card was used and really around the 1970s Is when we started to see this idea of like mail orders, right people ordering from purchase catalogs and and maybe over the phone And that really was a big standard up until the 1990s So back then, you know you visa a mastercard you would you'd give your numbers and then through the or through the phone and All those had to be manually entered by an operator, right? so whenever anything is manually entered there's a chance for error and At the time the only way to really tell if a card was stolen or was invalid was they literally have like these phone books And they would issue them once a week And there's like a subscription type plan and and all the numbers were in numerical order And what they would do is literally before they entered the card number They would flip through this book and make sure that card is not on the do not charge list So, yeah And that pretty much went unchanged for years Until really the rise of the e-commerce transaction and and obviously all possible with worldwide web Especially when it became, you know available for commercial use in 1991 and then in 1994 we saw the very first financial institution the Stanford Federal Credit Union Which offered online internet banking services, but you know However, these first online systems weren't user-friendly and required specialized knowledge of encryption and data transfer protocol And as far as the first purchase made online, this is there's a really actually big debate about this and I've heard varying accounts But pizza hut swears that the very first item ever ordered online was in 1994 of a guy ordering a large cheese and mushroom pizza over the internet and But from what I have heard more so is that the actual first Transaction was through a thing called net market, which was kind of like a very very early Amazon and a founder His good buddy actually purchased a sting CD from that and that's actually believed to be the very first e-commerce transaction with a credit card for public use But you know there was you know, these are all novelty type transactions And you know, it really wasn't even that convenient honestly And there was still a really big problem and that was the merchant banks did not see much value in the internet And they did a little to help its growth So obtaining a merchant account for the purpose of actually selling things on the air. It was almost nearly impossible And that's pretty much true and really to the up to the middle of the 1990s and then thankfully 1995 Netflix communication created a way to ensure that shopping systems online protocols and Certificates we're going to be able to make things safer, right? We've all heard of the SSL certificate and that really just to all ensure the secure data transfer So this really paved the way for giants like Amazon and eBay which opened literally in the same year and then payment giant PayPal It's founded in 1998 So you really almost can say that you know Amazon and eBay were just they were right there at the perfect time Right, if you if if Jeff basis and try doing this in 93 It wasn't going to happen But the fact that they were right there in that SSL certificate really version two of the SSL certificate because version one that really was Didn't really do anything That's that was huge So around the same time of like when PayPal was getting released in 98 We were really starting to see the cell phones becoming quite popular And we started to see some really early emergence of mobile technology being used And one of the really first kind of mobile payments was using different types of texting services like ma ma dem An early example is in 1997 coca-cola introduced a few vending machines in larger cities Where the customer can make a mobile purchase by texting a number to that vending machine and entering in their payment information Ericson and teleno mobile also developed mobile funds with the special ability to purchase movie tickets You know and for both of these you really had a meant enter the payment information for each transaction And like I said, it's more of a novelty than it was convenience and really the technology with mobile phones was really not there yet And there was no NFC. There was no mobile wallets But everything really changed in 2007. We saw the release of the iOS and Android operating systems You know, but more importantly the emergence of mobile apps And we started moving away from commerce payments to apps with dedicated credit card vaults that took a nice information And you know, we could quickly make a transaction when called upon You know, this is also, you know, you know, thanks for the you know, the pool, you know, the full stack payment things like, you know, brain Tree and stripe and you know by payment, you know payment gateways where, you know, for instance, like speedly, you know I can do a hundred different payment gateways on multiple types of systems so This was this really caused an explosion of payment apps And really the the market has really hit rapid growth just in the last three years It's been a hundred and eighty billion dollars processed through mobile payments. That's been tripling year on year So what does the future mobile payments look like? Well, you know for some time now we've began to see a trend that people are embracing a cashless society And you know, according according to a study conducted by business insider 40 percent of millennials surveyed would give up cash entirely if possible And Europe is really making the biggest push through this Countries like Sweden expect to be cashless within the next five years and Denmark has a pledge to get rid of cash entirely by 2030 Some countries like India are estimating that by 2020 that they are going to completely go cardless but one thing for certain is they're going nowhere soon and But you know neither are our smartphones and you know, 95 95% of all Americans own a smartphone and about 77% of those are a Or a phone that's two years from New York We've seen payment integrations in nearly every app category from social networks like snapchat and Facebook to emerging digital It's like Venmo and the cash app and even the gas station payment apps such as the Exxon speedy pass and although Contactless payments in retail stores have estimated to rise around 90 million by 2020 payments by apps will go will amount to a huge 318.8 billion for the same time period You know in that red tab we that's where we really see the huge opportunity Is there's been multiple companies trying to get into the paint the mobile payments for restaurants And we see that a lot with all these fast food chains right like to Chick-fil-a app or the McDonald's or Wendy's You know for the big chain stores where they've kind of created a white label product just for that exact store But really the idea is is creating a product that can work for numerous types of bars restaurants nightclubs lounges, what have you um and What's important about that is going back to the EMV thing. You know the problem with EMV It's not that nobody want nobody wants to actually insert their card, you know vertically into the system It's just that you don't even know which place is actually it's being used that I mean you literally don't know until you're actually checking out and You know, that's a hardware issue and I think really for innovation We have to actually kind of get back it kind of get past that you know How can we actually continue the innovation of payments without actually switching up too much of the existing hardware that's already in place? I mean we saw how expensive that was where you know just 6.8 billion to actually upgrade Just the POS systems to have the chip reader. That's not actually upgrading their software That's not actually upgrading the terminals. That's literally just upgrading a small chip reader for the for that So that really just wraps up for me. I hope you guys like history and learn a little bit of something and You know really about where mobile payments need commerce is headed in the future, you know I encourage everybody to add me on LinkedIn Ask me about rad tab. I can show you guys the app. I love any unfiltered feedback and I really appreciate Spreely having me and thanks a bunch. Appreciate it