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Kevin Eksterowicz is a Talent Acquisition Leader at Vantiv. I asked him about the new hiring approach that Vantiv rolled out this year (and that my team has used to great success). Here's what he had to say:

 

One of the most impactful exercises a company executes is its selection of new employees.  And when you’re growing as rapidly as Vantiv, the stakes are especially high.  In 2016 alone, we filled almost 1,400 jobs! 

 

However, when we scanned the organization late last year, a few things stuck out like a sore thumb:

  • Our interview and selection process lacked consistency and structure.
  • Interview training and tools were not on any of our curriculum.
  • Feedback on candidate experience was often lackluster at best.
  • Turnover within the first 12 months of hire was 23%, 75% of which took place within the first six months. 

 

We stopped in our tracks and realized that we had a huge opportunity in front of us to deliver value and impact to this growing organization.

 

After months of planning, developing and piloting, we launched Vantiv’s SELECT! program on July 31st. SELECT! is an approach to interviewing and selection that embraces a set structure and strategy for all roles in the organization, ideally with just one on-site visit limited to four interview sessions.  These sessions are tied directly to Vantiv’s leadership model and evaluate a candidate not just on experience and job titles, but through deep focus on the competencies required for success. 

 

We call these sessions our interview focus areas: 

 

  • Role Fit
  • Business Impact
  • Leadership/Self-Leadership
  • Culture & Values. 

 

Focus areas remain consistent across all levels of the organization, yet the competencies and suggested interview questions vary by level.  The outcome is a well-rounded candidate evaluation and a candidate experience that feels robust, streamlined and smooth. 

SELECT with text.png

 

Our Talent Management and Talent Acquisition teams worked hand-in-hand to develop this program complete with:

  • Interactive, online, level-based interview guides with recommended behavior-based interview questions
  • An interactive feedback mechanism to capture candidate-specific scores and notes for each focus area
  • Mandatory comprehensive eLearning courses:  one for people leaders, one for individual contributor interview panelists
  • Half-day classroom training
  • People Leader and Interviewer job aids
  • An Interview Checklist
  • Custom approaches for nuanced groups:  sales (remote), executive, front-line operations

 

Just three months in, almost every people leader (740+) and over 300 interviewers have completed the eLearning. New hire Michael Rose was one of the first candidates to go through the new hiring process. He said, "As I interviewed with potential new employers, Vantiv’s interview process stood out above the pack. Vantiv sent a clear message to me during the interview process… a well-organized and focused approach to finding the best candidate while providing an excellent candidate experience for me. The detailed/thoughtful interview process was a large factor for me choosing Vantiv!  Even the follow-up call from my new Leader after I had accepted the offer reassured me I had definitely made the right choice.”

 

Early feedback on the SELECT! process is very positive and by this time next year, we target marked improvement in early attrition, candidate experience feedback, time to fill metrics and hiring manager satisfaction feedback. Hiring Manager Shannon Reichart said of SELECT!, “this team approach has not only helped me as a hiring manager to make an informed decision regarding new hires, but I believe that it is creating a positive experience for our candidates, providing them with greater insights into Vantiv from other perspectives. Select will give us the foundation that we need as a leadership team to recruit, develop, and retain great people here at Vantiv!”

Apple will launch Face ID with their Apple X (pronounced Ten) to be released in November. Along with its many new features, it will introduce a new biometric-based technology for customers to authenticate themselves when using Apple Pay, the mobile payment and digital wallet service that lets users make payments using an eligible Apple device. With the introduction of Face ID comes the removal the home button that’s been traditionally used for Apple’s
Touch ID, the forensic fingerprinting technology to unlock the phone and process Apple Pay transactions. Apple reports the new Face ID technology creates more unpredictability than the legacy Touch ID technology, utilizing
millions of data points to recognize facial expressions and changes to hair color, grow facial hear, glasses, and outerwear using machine learning. Prior studies reported the chance a random person could use a fingerprint to unlock an iPhone is about 1 in 50, 000 whereas studies have shown the probability to unlock Face ID is closer one and a million.

 

Is Smart Tech Good Enough?

Additional compensating controls have been implemented to detect spoofing and misuse, using an alert detection to ensure the owner’s eyes are open.  To counter, equally elegant spoofing technologies will be developed and implemented, especially with the social media and facial images over the open internet could present an obstacle to prevent against attacks, such as an attacker who can use the same machine learning recognition can identify photos of your face, family or friends who have posted pictures on Facebook or Twitter.  As with any new technology
introduced into the market, its largest obstacle to success is to achieve consumer credibility. Juniper Research has released the results of a new survey that finds that over 40 percent of iOS users in the U.S. are unlikely to use Face ID as payment security technology, and would rather use voice recognition or fingerprint scanning for mobile payments authentication measures. Given Face ID’s unproven credibility in the market, its adopters will tread cautiously as stolen stored credentials, whether they are stored on the device or hosted in the cloud, has a tendency for customers to be skeptical with its use. While Apple systems have never been breached, Apple customers can be at risk of having their devices attacked if they use the same passwords across multiple sites including their iCloud password.

 

The Market Will Tell

Apple has an enormous obstacle to tackle – increasing the security of payments without scaring away customers through the unnerving process of pointing a device at their face, which could prove to be awkward in public places. Through all its initial reservations, if Face ID is proven to reduce the payment processing friction without introducing other impacts, and lives up to its value proposition to its customers that its faster and simpler, it will gain adoption in the market over prior consumer authentication measures.

 

Would you use Face ID for payments?

Would you be willing to use the new facial recognition technology for payment acceptance or would you be resistance to new and unproven technologies? Would you have privacy concerns with facial recognition due to a lack of trust with solution providers? Do you think it may take too long to authenticate a transaction or would the experience be awkward?

 

 

Let us know your thoughts in the comments!

I don’t like to start arguments, but I'll go toe-to-toe when I feel it's necessary. I did that recently during a discussion about resellers and software developers in the POS channel. “They have to change,” my colleague said, to which I quickly responded, “No, they don't. You're allowed to become irrelevant. You're allowed to lose money and close your doors. They don’t have to do anything.”

 

Obviously, I want all Vantiv’s partners in the point of sale channel to adapt and thrive. For them I strongly recommend Dual Transformation, one of the most powerful business strategy books I’ve ever read. I heard about the book while listening to a Harvard Business Review podcast recently and bought it immediately because it addresses what I think is the biggest challenge facing our channel and our individual businesses.

 

Dual Transformation talks about disruption and how to reposition your company for the future. Being part of the IT and publishing industries since 1993, I’ve seen my share of transformations, and the authors are spot-on about how to identify disruption and how to lead the transformation of your business. When you read “The 7 Warning Signs of Industry Disruption” with the POS channel in mind, you’ll be nodding your head in agreement – guaranteed.

 

I’ll share some of my favorite quotes and concepts below, but I strongly encourage you to buy the book and use it as a guide to transform your ISV business.

 

  1. The series Game of Thrones has a saying: winter is coming. It isn't winter that's coming to your boardroom. It is disruption. Disruption is coming. And it is coming at an unprecedented pace and scale.
  2. Creating a new business from scratch is hard, but executives of incumbents have the dual challenge of creating new businesses while simultaneously staving off never-ending attacks on existing operations.
  3. The time when leaders need to be most prepared for a change is right at the moment when they feel they're at the very top of their game.
  4. We call the process a dual transformation because it requires two transformations and not one. In response to a disruptive shock, executives must simultaneously reposition their traditional core organization while leading a separate and focused team on a separate and distinct march up a new hill. It's the greatest opportunity a leadership team will ever face.
  5. Four key leadership mindsets you need to succeed:
    1. The courage to choose before your platform burns.
    2. The clarity to focus on a select few moonshots.
    3. The curiosity to explore even if the probable outcome is failure.
    4. The conviction to persevere in the face of predictable crises.
  6. Companies that successfully execute dual transformation can own the future instead of being disrupted by it.
  7. Answer these five questions:
    1. Why have people historically bought from us?
    2. What do we provide that they really care about?
    3. What is the disruptive shift in our market?
    4. What used to matter to them but doesn't really anymore?
    5. What do they wish we could do that we don’t?
  8. As the world changes, what is critical to the customer also changes.
  9. In a quickly changing world, playing an old game better is insufficient.
  10. The simplest way to understand whether you're truly transforming your core business is to ask, “How have our metrics changed?”
  11. History teaches us, again and again, that disruption is the greatest growth opportunity a company will ever see.
  12. It is critical to discover this path by action and not by analysis. Every idea to create new growth is partially right and partially wrong. The problem is that you don't know which part is which.
  13. No business plan survives first contact with the marketplace.
  14. Successful innovators smartly manage risk through disciplined experimentation. Before the Wright Brothers built a plane, they flew a kite.
  15. DEFT: Document, Evaluate, Focus, and Test.
  16. Seek a stepping-stone strategy: look for a starting point where you can keep a foot in today's world as you venture into a new space.
  17. “Running a start-up is like being punched in the face repeatedly, but working for a large company is like being waterboarded.”
  18. It's never been easier to start a business, but that means it also has never been easier to replicate one.
  19. The more significant the new project and the shift is, the more the CEO should be driving it.
  20. The fundamental challenge for leaders is that the data showing disruption underway is always opaque. By the time it is crystal clear, it is too late to do anything about the disruption.
  21. Decisions can't be guided purely by historical data, because if data drives you, you can only go backwards.
  22. The 7 Warning Signs of Industry Disruption
    1. Decreases in customer loyalty, driven by overshooting. Overshooting: Providing a given market tier performance it can't use. An entrant can gain traction with a simpler, cheaper solution.
    2. Significant and lasting investments by venture capitalists.
    3. Policy changes open the door to new entrants. When governments change the rules, it can accelerate the pace of industry change.
    4. Entrants emerge at the low end or market fringes with inferior-seeming solutions. The innovator uses this foothold to improve the product and service so that it meets the needs of broader customer groups. When upstarts following this game-changing strategy begin to emerge, it's time to stand up and take notice.
    5. Customer habits and preferences show signs of shifting.
    6. A viable competitor fine-tunes a disruptive business model.
    7. Slowing revenue growth is coupled with increased profit margins as leaders exit volume tiers and cut costs. When incumbents begin to feel the pain from disruption, it doesn't always feel very painful. The slowing growth feels like the natural result of an industry maturing. Emerging disruptors grow in a seemingly disconnected market, and, if they pick off customers, often they are ones the incumbent doesn't care much about anyway.
  23. Anything that is growing rapidly bears attention.
  24. Involve outsiders. It can be hard to identify your own problems.
  25. Most companies do a fairly good job of monitoring their direct competitors, but they underinvest in monitoring and interpreting telltale signs of future threats from substitutes and existing or yet-to-be-born disruptors.
  26. You are under no legal requirement to hold to your initial goals and boundaries. As the world changes and you see what works and what doesn't work, you can and should go back and revise the rules of the game.
  27. Adopt a “future-back” mindset. Companies tend to follow “present-forward” approaches to strategy. They start by detailing today's business, then project what next year will look like, then look at the year after that, and so on.
  28. Be willing to wave goodbye to the past.
  29. Your strategy isn't what you say you do; it is what you actually do.
  30. “What is possible?” can't be answered purely by gathering data and building intricate spreadsheets. Instead, it requires intuition and judgment.
  31. If you demand that every idea succeed, you will be consigned to work on incremental improvements within the confines of your current business.
  32. Exposing half-baked ideas early generates useful, usable feedback. It also has positive spillover effects as people in other corners of the organization can take fragments of an idea in new directions.
  33. Whenever you innovate, two good things can happen. Of course, you can create value. But you also can learn something that opens future avenues to create value.
  34. “A desk is a dangerous place from which to view the world.” – John le Carre
  35. The great sucking sounds of yesterday can subtly but importantly pull an organization back to what it was trying to get away from.
  36. Failing to build systems around the new organization creates dependency on a small number of individuals, which doesn't scale and creates conditions for failure.
  37. Defining and reinforcing a shared sense of mission become central functions for senior leaders driving a dual transformation.
  38. Transforming a company is indeed a journey, one that is both unpredictable and perpetual.
  39. Leaders who catch the disruptive changes early and respond appropriately will have the ability to thrive in the years to come. Those who don't, well, Darwin has a way of taking care of them.

 

If you’d like to talk more about Dual Transformation and how to improve your ISV business, please reach out to me. My job as a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services is to work with Vantiv partners to help them with hiring right, developing staff professional development programs, improving customer service, and more.

 

 

For more On the Edge content, please visit the Vantiv Partner Advantage website.

 

Jim Roddy is a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services. He has been active in the POS channel since 1998, including 11 years as the President of Business Solutions Magazine, six years as a Retail Solutions Providers Association (RSPA) board member, and one term as RSPA Chairman of the Board. Jim is regularly requested to speak at industry conferences and he is author of the book Hire Like You Just Beat Cancer.

 

daniperea

3 Blogs Coders Love

Posted by daniperea Oct 5, 2017

If you're looking to level up in your developer knowledge or to commiserate with other coders, we recommend giving one of these blogs a read. Do you have a favorite coder blog? Let us know in the comments!

 

1) CSS-Tricks

CSS-Tricks is a blog on all things web design and development, and true to their roots, it also provides many helpful tips and tricks on Cascading Style Sheets. It's run and written by Chris Coyier and a merry team of CSS enthusiasts.  I love it because of its readability, the sense of play in every post and because of the copious walkthroughs with code examples.  Plus it's so frequently updated, there's often new content a few times a day.

Favorite Post: Turning Text into a Tweetstorm

 

2) Women Who Code

Women who Code is a nonprofit with over 100,000 members who are tech professionals. You don't have to be a member to access their awesome blog, which is full of profiles of women developers and organizations advancing opportunities for women in tech; hackathon invites and meet-ups; career tips from advocating for your rights at work to becoming a better public speaker; conference recaps; and of course, coding advice. Their team of writers is fantastic and this might be one of the few places on the internet where reading the comments is a worthwhile endeavor. Come for the content, stay for the community.

Favorite Post: Protecting Your Rights at Work (this is actually a series: here's part 1 and part 3.)

 

3) Coding Horror

Coding Horror is both extremely hilarious and highly informative look at both code and coders.  The half-personal/half tech blog is written by Stack Overflow co-founder Jeff Atwood. With 13 years of posts accumulated on the blog, you'll find everything from well-researched and pithy posts on programming, to tips for both newbies and experts, to personal musings. One downside: Jeff is so busy, that months can go by without an update.

Favorite Post:  Password Rules are [Horse Puckey]

 

kevin eksterowicz.png

Kevin Eksterowicz is a Talent Acquisition Leader here at Vantiv. I asked him what he loves about his job, and what advice he has for college students and recent graduates entering the job market.

 

How did you get into HR?

Like a lot of people, I actually sort of “fell” into HR. I majored in Marketing in college and I had my heart set on working for a huge NYC ad agency. The first opportunity they could offer me was as a Recruiting Coordinator serving the creative department and I jumped at the chance. A year later, I got the opportunity to work in a true advertising role. Sure enough, after a few years in an ad exec role, I realized that I missed HR and actively sought to return to Recruiting.

 

What do you love about your job?

What’s especially nice about the world of Talent Acquisition is that you’re helping people and you get the gratification of feeling needed. You have hiring managers with teams who are feeling the pain of a vacant position and you’ve got candidates who are actively seeking to make a change. You get to ease the pain of the internal client while helping someone gain the opportunity to take their career to the next level. It’s a win-win! The icing on the cake: you get to build relationships every day and no two days are the same.

 

What's the best job-seeking advice for college students or recent graduates you've heard?

It probably sounds like common sense but, “do your homework on the companies you’re applying to,” is easy, low-hanging fruit with big impact. If I call a candidate and they can’t remember the role they’ve applied to or what the company does, it’s a huge strike against you. Apply to roles and companies that really intrigue you and that you would be excited to interview for. A recruiter and a hiring manager can usually see right through a superficial interest level. I’d add that with the world of social media, it’s vital that things like your Facebook page and LinkedIn profile only paint you in a positive, mature, responsible light.

 

What's the worst job-seeking advice for college students or recent graduates you've heard?

“Cast a wide net by applying to lots of jobs that look exciting to you at a company.” 

As a recruiter, if I see a candidate who had applied to a wide variety of jobs, I’m likely to perceive them as unfocused and possibly desperate – just eager to get a foot in the door but not invested in something specific and therefore more likely to leave the role/company early.

 

Do you have any tips for college students or recent grads on making their resume stand out?

Yes! So many tips, but I’ll focus on the big ones.

  • Tweak your resume so that you highlight your skills and experiences that relate well to what the employer is looking for as stated in the job description. Don’t assume that they’ll just connect the dots – help them get there and make those highlights your leading bullet points under a specific job or internship.
  • There’s really no reason for your resume to be more than 1 page unless you’re coming from a graduate program and are already deep into your career. That said, limit your bullet points to the most important contributions you’ve made.
  • Quantify wherever you can! Example: “Increased customer service scores by 28% as a result of…”
  • Skip the objective section that so many people include at the top of their resume. The objective is to land the job you’ve just applied for and we already know that.
  • Have a second set of eyes review your resume. Typos can be deadly as first impressions go!
  • Do you have any tips for college students or recent grads on making the most of an internship?
  • Perform as if your entire internship is an interview because that’s really what it is. Come to work every day as if you’re fighting the competition to keep your foot in the door with the company. 

 

 

Want to know when Vantiv will be recruiting at your college or university? Click here for a list of our upcoming career fairs.

gjsissons

Pay with Google

Posted by gjsissons Sep 19, 2017

Google easy checkout easy revenue photo tw.png

An opportunity for increased sales and conversions


Mobile wallets have been in the news recently, with much of the focus on the relatively slow adoption of mobile wallets in North America. When looking at statistics though, the answer we get often depends on the question we ask. Rather focus on a few mobile wallets, we might instead ask, “What percentage of online purchases are made using stored credentials?”


According to Mckinsey, the answer to this question is a much bigger number - already around 50 percent. Every time we purchase an app or movie in the Play Store, buy something on Amazon Prime, or shop at our favorite web store, the chances are good that we’re using digitally-stored credentials. Mobile wallets represent just a slice of a broader set of digital payment options already accessible from mobile devices.


For online shoppers, convenience is king


Few customers have the patience to key in payment card and address details on a small screen device like a phone. Unlike the point of sale, where mobile wallets provide only minimal added convenience, for online purchases the difference in convenience is huge. For online merchants, providing access to stored credentials is essential. Consumers purchasing online would much prefer to authenticate themselves with a thumbprint or password than key in a hundred or more characters. This consumer behavior explains why according to the same Mckinsey study, total U.S. digital wallet transactions (broader than just mobile wallets) is forecast to grow to $1.2 trillion by 2020, representing approximately 18-20 percent of retail spending. For wallets, online commerce is where the action is.

 

About Pay with Google


Pay with Google is a new service offered by Google, implemented using the new Google Payment API.  Google is one of the world’s most recognized brands and Google users across the globe have hundreds of millions of credit and debit cards saved to various Google accounts. These users make purchases on Google properties like the Google Play, YouTube, Chrome and more.


With the new Google Payment API, merchants can reach these same customers by letting them use their cards on file with Google to make quick, easy purchases from mobile apps and websites when they’re shopping from mobile devices or using the Chrome browser.

 

pay_with_google.PNG

For mobile users, this offers a new level of convenience. Even if I’ve never visited a merchant before, as a consumer, I can select “Pay with Google” as an alternative to keying in payment card details. Google will look up any payment cards I have on file, present them to me, and allow me to choose the credential to use as shown above.


Pay with Google extends Android Pay functionality, however unlike Android Pay which can be used at the point of sale (tapping your phone in a store or restaurant) Pay with Google is designed for online purchases only. Consumers that have already activated their Android Pay wallet can continue to use their Android Pay credentials, providing a seamless transition for users and merchants already supporting Android Pay. The main difference when users Pay with Google is that they can access any payment card on file with Google, even if they’ve never activated a mobile wallet.

 

Lowering the barriers to online commerce


For merchants, Pay with Google is an important innovation. Juniper Research estimates approximately 24 million Android Pay users in 2017, and Google already has hundreds of millions of cards on file across its various platforms. By removing the need for consumers to pre-load a payment card into a wallet, merchants can benefit from faster checkouts, more conversions, and increased sales.


While Pay with Google is significant for all merchants, it may be especially important for small merchants competing with larger online retailers. Pay with Google helps level the playing field, providing all merchants with the opportunity to offer the same streamlined purchase experience that users expect from tier-one retailers. Consumers can enjoy a seamless checkout experience even if they’re visiting a merchant’s website for the first time making it easier to attract new customers.

 

Pay with Google and Vantiv


Vantiv is presently one of just a few payment providers able to offer Pay with Google functionality for merchants. Vantiv’s Pay with Google integration utilizes an existing server-to-server connection between Vantiv and Google that facilitates the secure and efficient transfer of payment credentials and provides developers and merchants with a straightforward integration experience.


Whether merchants are already using Android Pay with Vantiv, or are just getting started with digital wallets, Vantiv can help merchants get up and running quickly.


Developer resources for Pay with Google will be available at Vantiv’s developer portal, Vantiv O.N.E., in the Mobile & Digital Wallets section once Google officially unveils the Google Payment API. Extensive documentation and code examples on Vantiv O.N.E explain how developers can add Pay with Google functionality to their Android App or their website.


Effortless checkout is what customers want. Register today for our Oct 5th webinar to learn how to implement Pay with Google for your business.


If you have questions or comments about Pay with Google or any other digital wallet, I’d love to get your thoughts and comments.

gjsissons

Understanding Interchange

Posted by gjsissons Sep 6, 2017

A Primer on Card Processing Fees for Developers

For developers who have worked mostly with eCommerce gateways, coding to a payment processor can be a different experience. The interfaces can feel a little more complicated because they expose additional fields and capabilities including support for various types of card present transactions. It turns out that understanding topics like interchange fees, assessments, and discount rates are worth a developer’s time.  By keeping processing fees in mind when building payment applications, developers can code in a fashion that can potentially help merchants avoid fees or reduce chargebacks.

 

Types of credit card fees

 

Interchange and assessment rates and fees

Certain fees are usually non-negotiable, including interchange and assessments.  Interchange and assessment fees are determined by the card associations and are charged to payment processors, who then collect the fees from their merchant clients.  Interchange goes to the authorization network (the banks that issue credit cards) to pay for the verification and routing of funds, and assessments go to the card brands (Visa, MasterCard, etc.) for the privilege of using their cards. The interchange rates are based on how a transaction is conducted—whether it’s swiped, dipped, keyed, conducted online, and well as the merchant’s business type, size, and many other variables.

 

Acquirer fees

In addition to collecting interchange and assessment fees for the card brands and networks, credit card processing companies also known as “acquirers” also assess fees to cover the costs of the services they provide to merchants.  Unlike interchange and assessment fees, this type of fee can vary by processor and can sometimes be negotiated.

Fees in this category pay for services such as equipment rental, payment gateway access, PCI compliance programs, minimum processing amount, online reporting, and many other value-added services that make payment processing convenient and reliable for merchants.

Sometimes credit card processor fees are listed separately from interchange and assessment fees, but some processors bundle them into one rate.  It’s important to talk to your credit card processor about their particular fees including what they are for, how they are collected, and whether you need the particular service associated with the fee.

 

Popular pricing structures

Pricing structures can vary widely and are complex by nature.  It’s important to note that one pricing model isn’t inherently better than another. It all depends on your business and the variables noted above regarding business type, processing volume, acceptance methods and so on. Let’s take a look at some of the popular pricing strategies used by processors.

 

Flat rate pricing

Flat rate pricing consists of one monthly fee that covers all the processing services a business needs and is commonly offered by payment facilitators (PayFacs) that don’t require a merchant account.

This type of pricing is non-negotiable and doesn’t fluctuate with transaction volume.  Every transaction receives the same rate.  This appeals to businesses that value simplicity and don’t have large transaction volume or high average ticket values.

 

Bundled or tiered pricing

In a bundled or tiered pricing model, transactions are categorized into different pricing tiers—qualified, mid-qualified, and non-qualified—based on their risk factors like whether the card is present, whether it was swiped or key entered, and whether PIN or signature is captured.  Qualified transactions are the safest and therefore have the lowest rate whereas non-qualified transactions are the riskiest and have the highest rate.

This type of pricing generally requires a merchant account and can save money in the long run for larger, more complex businesses due to their processing volume and card acceptance variables.

 

How does this impact the developer?

 

How you code payment transactions matters because decisions you make can affect Interchange fees.  Following card brand rules is essential to not only minimizing fees but instances of fraud and chargebacks as well. As examples:

 

  • For card not present transactions using AVS to deter fraud, the accuracy of the address match (returned in response to an Authorization) will impact interchange rates – the better the match, the lower the rate.
  • Providing detailed metadata in payment transactions (like industry types, terminal types, electronic indicator codes and commercial card IDs) can also help merchants obtain more favorable interchange rates. If this information is not included in an Authorization request, card brands may err on the side of caution, defaulting to higher rates.
  • For B2B applications, collecting and passing data fields required for Level II or Level III transactions can help reduce interchange rates further.

 

For developers, to minimize merchant costs, it is important that their payment SDK or API provides the ability to accept and pass on as much of this supplementary metadata as possible. Vantiv’s triPOS and Express APIs for card present transactions are good examples of APIs that do this. Both allow for extensive metadata collection including things like freight, duty, taxes, ship-from and destination zip codes, and a variety of other items that can affect interchange fees.

 

To learn more about Vantiv APIs for point of sale developers including the triPOS and Express platforms described above, visit our Point of Sale Integration resources.

 

For similar resources for card not present and mobile payment integrations, visit our developer eCommerce resources.

One of my takeaways from this year’s Retail IT VAR of the Future Conference was to read The Toilet Paper Entrepreneur by Mike Michalowicz. The book was recommended to me by Erick Wilson, the President/CEO of TEC Works, a growing managed services provider in Florida. When I asked Erick what was the key to the success of his business, he said this book turned everything around for him.

 

The Toilet Paper Entrepreneur is one half inspirational, one half practical on how to build and grow your business on a shoestring budget. It’s also filled with all sorts of cringe-worthy bathroom humor, but I’ve spared you of that in my notes below. 

 

Following are 21 insightful quotes from the book that can be applied to ISV organizations:

 

  1. Have you ever been doing your business with your pants hugging your ankles and, when you are ready to wrap things up, noticed that you are extremely low on toilet paper? The best option is to manage with what you've got.
  2. When we literally have no option to just get up and walk away, we find a way to get the job done.
  3. It's awe-inspiring how careful, thoughtful, and innovative we are when our supplies are scarce.
  4. The real deal of successful entrepreneurship is bloated with failures, drenched with progress, marred with mistakes, and peppered with major achievements.
  5. Always bet on the individual who is serving his calling, not the guy who is doing it for the money.
  6. Passion begets persistence.
  7. Excuses are a great mechanism to apply logic to our fears.
  8. Early entrepreneurial success is defined by surviving, not thriving.
  9. Once you define your values, document them in a way that sings with your soul.
  10. Starting a company is all about serving your needs, your beliefs, and your values first.
  11. Know your prospects better than any of your competitors and you will have an easier time finding them. Recognize that by knowing one group so well, you will not know other groups at all.
  12. You have a “super strength” that no one else will ever match: you care more about your business than anyone else.
  13. Area of innovation: What is the area where you just can't be touched? What specifically do customers rave about when they talk about you? This is your area of innovation, and you must commit to leading in this area for the life of your business.
  14. The familiarity of repeating past actions, albeit unsuccessful ones, can seem much safer than moving decisively down an unexplored path.
  15. Entrepreneurs who adhere to life principles and constantly adapt to elusive business dynamics experience enormous, lasting success.
  16. Properly executing a process is all about doing it first, then planning for it. The first time through is often best served with less planning and more doing.
  17. The devil is in the details, but you will have a devil of a time getting anything done the first go around if you fixate on them.
  18. The more mistakes you make, the more progress you're making. Just don't repeat the same mistakes.
  19. Mistakes are good, successes are great, and idleness is a sin.
  20. A lack of resources forces you to use ingenuity, a skill that will help you stay ahead of the pack for your entire run.
  21. Ideas don't make money; effort does.

 

If you’d like to talk more about The Toilet Paper Entrepreneur and how to improve your ISV business, please reach out to me. My job as a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services is to work with Vantiv partners to help them with hiring right, developing staff professional development programs, improving customer service, and more.

 

 

For more On the Edge content, please visit the Vantiv Partner Advantage website.

 

Jim Roddy is a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services. He has been active in the POS channel since 1998, including 11 years as the President of Business Solutions Magazine, six years as a Retail Solutions Providers Association (RSPA) board member, and one term as RSPA Chairman of the Board. Jim is regularly requested to speak at industry conferences and he is author of the book Hire Like You Just Beat Cancer.

 

audrey inniger 400px.png

Audrey Inniger is a campaign recruiting program specialist here at Vantiv. As college career fair season is about to kick off, I asked her what she loves about her job, and what advice she has for college students approaching recruiting tables at their college's job fair.

 

What’s your favorite thing about your job?

I love the variety; truly no day is the same! I experience the most variation in regards to the different groups with which I work. From current students to University career services to the business functions I support, there is a wide range of partners I encounter on a daily basis, who I am always learning from.

 

Also, I love the opportunity for growth throughout campus recruiting initiatives at Vantiv. As our campus recruiting programs are fairly young when compared to other organizations, this leaves room to experiment with new ideas in order to attract talent.

 

I know, I know – This is two favorites, but there is a lot to like about my role!

 

How did you get into HR?

Funny enough, I started my college career at Miami University (Go Redhawks!) believing I wanted to be a Speech Pathologist. After realizing the years of school required and the amount of tuition debt I’d accumulate, I stumbled upon an internship within Human Resources, as a Generalist. After my internship, I changed my major to Business Management & Leadership, with a focus in Human Resources. As I had several mentors from my first internship through Miami University, my mentors advised me to begin my Human Resources career within Talent Acquisition. I took their advice and began my fulltime career hiring in-house talent for a small PR and Marketing software company. Through this position, I was asked to build a campus recruiting program, which I enjoyed immensely.  In February 2016, I joined Vantiv and the rest is history!

 

What are some tips for college students or recent graduates looking to stand out at a job fair?

Showcase what makes you, YOU. The best and most memorable conversations I have are those in which the student talks about their passions, interests, and quirks. Enjoy skydiving? Have a passion for cooking international fare? Rap music enthusiast? Tell me about it! Highlighting those characteristics will make you most memorable at the career fair and will spark a more natural relaxed conversation.

 

Do you have any advice for college students or recent graduates on acing their first interview?

Do your homework, which includes homework on the company, on the people you are interviewing with, on the city where the role is located. LinkedIn should be your best friend!

 

Once you’ve done your homework, prepare thoughtful questions to ask the recruiter or hiring manager in which you are interviewing.

 

Can you do a little “myth-busting” on any career advice you’ve heard dispensed that is flat-out wrong?

“Accept the highest paying job offer.”

 

Money doesn’t buy happiness. Although salary is one factor to consider, also consider the company culture, your team (especially your direct manager), as well as career advancement opportunities.

 

Want to know when Vantiv will be recruiting at your college or university? Click here for a list of our upcoming career fairs.

To say that application architectures are evolving quickly is an understatement. In the age of cloud, mobile apps and back-end services can simply never go down.  Developers are increasingly turning to scalable, resilient micro-service architectures based on Docker containers as a preferred way of building applications.

 

Stats from the last DockerCon 2017 event in Austin shine a light on the pace of change.  Today there are more than 14M Docker hosts and more than 900K Docker apps.  In just the last three years there has been a 77,000% increase in Docker job listings and a 390,000% increase in Docker image pulls.  Payments are often a feature of cloud-delivered application services including mobile apps, online gaming, and new types of interactive voice-activated services.  As a result, developers of payment-enabled applications are getting swept up in this enormous shift.

 

The Case for containerized applications

Among the reasons that developers favor containers is that they promote modular design, code reuse, unit testing and lend predictability to application deployments.  If my application needs a database, key-value store, and a web-tier, rather than deploy hardware or a VM, I can simply pull Docker images of MariaDB, Redis or NGINX, add my application logic and publish my own derived Docker containers to my favorite registry. I can rapidly wire together these containers into an application comprised of multiple service tiers using a lightweight YAML (yet-another markup language) specification and publish a complex, multi-tier application to a containerized orchestration environment in seconds.  The explosion of interest Docker and containers has ushered in a revolution in how applications are built and deployed. Today there are dozens of container management platforms supporting these types of applications including Kubernetes, Docker Swarm, Amazon ECS, Azure Container Service, Google Container Engine, Mesos Marathon and more.

 

Payment applications pose unique challenges

In this brave new world, containerized services are ephemeral, can scale up and down dynamically, and are placed on Docker hosts based on run-time conditioners by sophisticated schedulers.  Application administrators often lack visibility to what VMs their services are executing on not to mention the cloud or physical host.  These environments pose unique challenges for both Docker users and assessors when it comes to PCI DSS compliance.  A discussion of securing Dockerized applications is too big a topic to address here, but a challenge that developers invariably face is how to securely make secrets like payment API credentials available to application logic inside a Docker container.

 

Enter Secret Management

This challenge of managing secrets is not unique to payments. Secret Management solutions have existed for years for Software Configuration Management (SCM) tools like Puppet, Chef, and Ansible.  What makes Secret Management challenging for containerized applications are issues of scale, the breadth of public cloud providers and the sheer rapidity with applications evolve.

 

To explain the issue, imagine we have a cloud-resident component in a Docker container that needs to call one of Vantiv’s end points on behalf of a merchant.  The challenge is how to get the credentials to the application securely.  The credentials can’t reside in the Docker image itself, or they would be visible to anyone, and all instances of the application would share the same credentials.  Similarly, they can’t reside in a YAML specification that is accessible to anyone on GitHub. We might have the idea of encrypting the credential and passing it to the container, but then the question becomes how do we distribute and protect the key needed to decrypt the payload holding the credential? If we attempt to pass the key across an encrypted channel, we still have the problem of passing additional keys needed to secure the channel. It’s a challenging problem. Dan Somerfield of ThoughtWorks describes this “bootstrapping” problem generically in his talk titled Turtles All the Way Down.  What’s needed is a secure way to pass payment credentials in a fashion that is cloud provider agnostic.

 

Securing Payment Credentials in Containerized Applications

Because Docker containers are all in the rage in cloud deployments right now, I wanted to look at this problem in the context of Docker.  As with so many areas of technology, there is not a single solution for secret management; there are literally dozens (partial list here).  In the world of container orchestration frameworks, however, industry consolidation is taking place and leaders are starting to emerge. Kubernetes (open-sourced by Google) is enjoying considerable enthusiasm followed by Docker Swarm, followed by the big cloud providers with their container management and secret management solutions. (Google’s GKE uses Kubernetes, formerly known as Google Borg). If you learn the approach used by Kubernetes, the good news is that you can address a large number of container orchestration frameworks and cloud services that use Kubernetes as their foundation (list here).

 

For developers or operations folks who want to get their feet wet with Kubernetes secret management, I’ve developed an end-to-end example showing how secret-management in Kubernetes can be used to pass payment credentials used by Vantiv’s eCommerce platform securely.  You can find this example in our Vantiv Labs area in Vantiv O.N.E.

 

If you’re interested in learning more about securely managing payment credentials in Kubernetes, check out the explanation and example here.  I’d love to get feedback and learn how developers are managing secrets in your applications.

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Lena Rutherford, intern extraordinaire, is a student at Miami University. This summer she interned at Vantiv's Denver office. I chatted with Lena about her internship here and what her plans are for her (bright!) future:

 

What are you studying in school, and what do you hope to do for your career?

I am majoring in Business Analytics and minoring in Arts Entrepreneurship. I love this combination because I am very balanced between my left and right brain. I hope this combination will give me the tools to measure ambiguous things through applying data analytics to value creation in the arts.

 

I want to have several careers, beginning with data analytics (perhaps in the technology consulting field), building into more strategic and creative roles that are infused with data, pivoting into starting my own company (or companies), and ending in venture capital. I hope that the skill sets I continue to develop in data analysis and business strategy will propel me to diverse roles and companies throughout the technology industry and the world.

 

What have you learned during your internship?

Coming from a startup last summer, Vantiv has taught me how corporations function and has given me a new appreciation for how standardization aligns diverse products and people. I have learned about the industry through PI planning, product meetings, and projects.

 

Creating a competitive analysis matrix for PayFac and researching industry verticals and horizontals for a strategy presentation deepened my industry knowledge through hands-on experience. More closely related to my major, I have learned about financial data through conducting a historical analysis of IP equipment data and by reconstructing financial models.

 

My internship has taught me as much about myself as it has about the business world – how I work best, how I form business relationships, and how to achieve work/life balance (despite a 45-minute commute). These are only a few things that I have learned, but there are many more things that I am grateful to my coworkers and this opportunity for teaching me.

 

What will you take with you from Vantiv?

Of course, I will take this experience and the professional relationships I've made with me. The subtle, everyday things I have done here have accumulated into this nebulous term, “experience.” I am thankful for what a rich and positive experience it has been and for how I will be able to build off of my experience wherever my career takes me next.

 

I have also formed great relationships with my coworkers and want to continue these relationships after my internship ends. I have greatly enjoyed getting to know the abundance of friendly people here at Vantiv and will miss seeing everyone daily.

 

We'll miss seeing Lena around the office, but we wish her all the best for this school year and beyond.

Lena and Lydia for web.png

 

Want to intern at Vantiv or just learn more about us? Vantiv will be at recruiting events at several colleges and universities this fall, including Miami University (so we can say hi to Lena). Come see us.

dourada

Seeing the Future of Payments

Posted by dourada Aug 17, 2017

When a new ThoughtWorks Technology Radar hits the press, we are always the first people to dig in and drink from the technology fire hose. If there is anything that could get a technologist to salivate it is the anticipation of new technology trends that the ThoughtWorks team noodles on.

 

However, looking back, we had never performed a deep dive and truly studied the content and ramifications in the radar. Well, that all changed a few months ago when our team wondered....."can we create a payments radar?" And if we could what would it look like? Wonder no more because it's here and is featured in the new release of VantivLabs on VantivONE or click the image below to be linked directly:

 

tech_vitality_radar_image_500.png

 

Instead of completely rebuilding the radar from scratch we leveraged the ThoughtWorks team's categories where appropriate, but removed quite a few of the radar "blips" that did not seem to apply directly to the payments world. Our radar is based on the November 2016 version of the Thoughtworks Radar which you can view here. The result was three out of the four categories the ThoughtWorks team used: Techniques, Tools, and Platforms. We then included a fourth category that fit the payments world like a glove: Fintech. The one category we removed was Languages & Frameworks. Many of those blips are utilized in the payments world but we found the other categories had a much larger impact on teams that develop and deliver payment applications and also wanted to leave a bit of room for our own submissions under Fintech.

 

We also leveraged the fabulous radar open source software created by the ThoughtWorks team located here. There is also an excellent blog post and podcast on the whole concept of building a radar here. If you have not figured it out by now we have a little bit of a technology crush on the ThoughtWorks team and will forever thank them for the infrastructure and insight that pushed us on what we are calling the Tech Vitality path. We hope our version of the radar will help everyone that reads it inject some vitality into their business by looking towards the future of technology. A quick mention: have a read through the 'personal technology radar' in the above-mentioned blog post. It's a great way to think about your technology career path.

 

Our radar is a bit different from the github repo linked above. You can find our modified repository here. It is not much different from the ThoughtWorks repo but we did not want to store our data in a google spreadsheet and instead wanted to serve it up directly via html and javascript. Because we had to pass this content around internally multiple times we leveraged an excel spreadsheet and then utilized a macro to generate the blip javascript content. All of that javascript content was then pasted directly into one of the .js files and served directly from that location. You can read all about it on the readme page in the github repo. If you ever have questions/comments please do not hesitate to contact us. In addition, please feel free to fork our repo and build your own, it's an excellent project to undertake and will take you on a wonderful tour of many different technologies.

 

What did we find most interesting and what were our reactions:

 

  • Wow, the amount of content is huge...and we only published one. The ThoughtWorks team appears to publish multiple versions of this over many years. It's truly incredible.
  • Software fundamentals are still the same in product delivery but the whole continuous delivery paradigm has changed the world in a profound way. This is especially intriguing in the payments world where delivering value quickly is of the utmost importance.
  • IndiaStack is one of the most interesting concepts and reminds us that at times we need to pull ourselves out of the places we live and look around at what the rest of the world is doing. Collaboration is such a wonderful thing and often as technologists, we get so focused on the problems at hand that we miss the forest for the trees.
  • The Physical Web -- this is also an intriguing subject that we hope to explore in more detail soon. While not targeted specifically at the payment industry, there is so much overlap it beckons us.
  • Slight Embarrassment -- how have we not heard of some of these technologies? Tempered with the truth that it is incredibly difficult to know everything. What an incredible world we live in that allows us to immediately communicate with one another, transact in multiple currencies, pay for an item with a phone, and then write about it and share it with all of our Vantiv friends and partners. An incredible world indeed!

 

Please feel free to contact us and/or provide comments directly within the Tech Vitality site.  We welcome your feedback and would enjoy collaborating on future versions of the Tech Vitality site.

I just returned from RetailNOW 2017, held Aug. 6-9 at Paris Las Vegas, and one of the words being thrown around the expo floor was “disruption.” Traditional point of sale resellers and ISVs are concerned about cloud POS, payment security requirements, and new entrants disrupting their current business model. With that as a background, I think it’s timely to review the lessons shared by author/serial entrepreneur Jay Samit in his book Disrupt You!

 

Before we dive into specific quotes, let’s look at the book’s subtitle: “Seize Opportunity and Thrive in the Era of Endless Innovation.” Disrupt You! turns around the concept of disruption, imploring business leaders to play offense and use disruption to reshape their business before the world morphs into a place where your value proposition is irrelevant.

 

I mentioned Disrupt You! during my RetailNOW presentation “18 Ways Leading POS Resellers Provide Superior Value To Their Merchants” because endless innovation is the key to offering superior value. Following are 36 insightful quotes from the book that can be applied to ISV organizations:

 

  1. To stay relevant, you must keep your career in permanent beta. That means committing to a lifetime of learning and professional growth, a lifetime of strategic adaptation.
  2. Every successful disruptor must be willing to destroy their concepts and pivot their energies before the market can render their business obsolete.
  3. A technology or product is disruptive when it creates an entirely new market, consumer base, or user and destroys or displaces the market for the technology it replaced. Email disrupted postal mail, Wikipedia disrupted the traditional multivolume bound encyclopedia.
  4. Being successful as a disruptor is about applying your unique experience and viewpoint to find opportunity.
  5. This success was not the result of my having invented a new technology. Instead, I used an existing technology to disrupt a different business.
  6. An “intrapreneur” disrupts from within the corporation, rather than waiting for the company to be attacked by external forces.
  7. Incremental innovation is like walking on quicksand: it will keep you very busy but won’t get you very far.
  8. Self-disruption is akin to undergoing major surgery, but you are the one holding the scalpel.
  9. By visualizing each step of your journey, you’re actually getting your mind prepared to handle the opportunity.
  10. Our lives and careers are determined by our acceptance or rejection of our perceived limitations.
  11. The most successful people have the same 24 hours in a day that you do. The only difference is that they take control of their time. What daily indulgences might you be willing to give up in pursuit of your dreams? 
  12. So much of self-disruption is making deliberate choices in your life instead of running on autopilot.
  13. “It’s always your fault, because if you wanted to change, you’re the one who has got to change.”
  14. “Map out your future – but do it in pencil.”
  15. You can’t achieve dreams you don’t have.
  16. The adage that the master appears when the student is ready to learn is true only if you make the effort to seek out advice.
  17. Great big dinosaurs will always be too busy competing against other big dinosaurs to pay attention to the disruptor.
  18. You don’t have to know where the road ends to start on your journey. You just have to know the direction in which you want to travel.
  19. The customer will always find a way to get what he wants, even if the traditional supplier won’t comply.
  20. Be fearless when you know survival is at stake. Anything less is corporate suicide. Disrupt or be disrupted. There is no middle ground.
  21. It is not incumbent on the world to conform to your vision of change. It is up to you to explain the future in terms that those living in the past and present can follow.
  22. The faster you can kill the bad ideas, the quicker you can pivot to the successful one. When you finally find the one idea that can’t be killed, go with it.
  23. Disruptors are simply problem solvers.
  24. Problems are just businesses waiting for the right entrepreneur to unlock the value.
  25. Test, verify, and adjust is the only way to stay on course. Data has no ego and makes an excellent copilot.
  26. Pivoting before going broke is the cardinal rule for startup survival.
  27. Data is the most rational and productive member of any startup team. Invite data to as many planning meetings as you can. Data may disappoint, but it never lies.
  28. Just as Jesus had his apostles, you need to find a dozen consumers who are in your target demographic and bounce your ideas off them.
  29. Most startup failures result from entrepreneurs who are better at making excuses than products.
  30. Disruptors don’t have to discover something new; they just have to discover a practical use for new discoveries.
  31. No amount of capital can buy a long-term competitive advantage. “The only sustainable competitive advantage is an organization’s ability to learn faster than the competition.”
  32. Customer service should be thought of as marketing, because it influences how customers feel about your company.
  33. My theory was that by having all of our team in the position of speaking directly with our customers, we would build better software.
  34. “True disruption means threatening your existing product line and your past investments. Breakthrough products disrupt current lines of businesses.”
  35. History doesn’t remember those who maintained the status quo.
  36. No obstacle is so big that one person with determination can’t make a difference.

 

If you’d like to talk more about Disrupt You! and how to improve your ISV business, please reach out to me. My job as a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services is to work with Vantiv partners to help them with hiring right, developing staff professional development programs, improving customer service, and more.

 

 

For more On the Edge content, please visit the Vantiv Partner Advantage website.

 

Jim Roddy is a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services. He has been active in the POS channel since 1998, including 11 years as the President of Business Solutions Magazine, six years as a Retail Solutions Providers Association (RSPA) board member, and one term as RSPA Chairman of the Board. Jim is regularly requested to speak at industry conferences and he is author of the book Hire Like You Just Beat Cancer.

Small and mid-size merchants have some big decisions to make with EMV that will have an immediate impact on their business. It is imperative that we help them get it right the first time. Simply put, EMV is not just another payment method, it is a driving demand for better security features within the POS, opening up more avenues for technology and forcing habits to be broken.

 

Security is knocking at the door

Security seems to be leading the conversations around EMV, but EMV alone does not solve the infestation of criminal activity. Sixty percent of small businesses go out of business within 6 months after a data breach, and 71% of data breaches target small business (National Cyber Security Alliance, August 2014). As a trusted partner to our merchants, we need to help close the gap in all areas around data theft. It is well known that EMV technology has been around for more than a decade, but criminals have not stopped, instead they target other vulnerabilities.

 

How we can we help you become more secure?

I will outline a proactive approach to help our customers. The first objective is to remove sensitive data from the payment application entirely. Vantiv offers both point-to-point encryption and tokenization. Enabling these features within your payment application renders data unusable from the point it is accepted to the time it rests. Next is training and not just at the merchant level, but security training awareness for merchants, Value added resellers and Point of sale developers. A simple program that reviews the basics and teaches employees what to look out for goes a long way in protecting everyone’s best interest (protecting card data). Finally, ensure checks and balances are in place. We all make mistakes, but sometimes they can be costly. Placing two or more people in charge of security helps reduce mistakes and keeps unintended or intended consequences from arising.

 

EMV...paving a path for the future

As I mentioned earlier, EMV is having a spiral effect on the industry. Most merchants are planning on updating to EMV capable solutions. But it shouldn’t stop with EMV. Payment applications need to be built for the future. The mobile frenzy has already launched, but the adoption is just starting to make its presence and enabling your payment application to support features like Apple Pay and Android Pay help drive long term success. With more adoption in the mobile market, merchants will be looking to capitalize on every opportunity. One challenge Vantiv has solved for is linking eCommerce with other channels to provide the ultimate OmniCommerce experience. According to recent Vantiv/Mercator Insight Series research, mobile devices are not only opening new channels for consumer interactions, but they are also changing the way that consumers behave in all channels.

 

Change is unavoidable

There is no doubt about it, EMV will force new habits and retire the old. Americans have become accustomed to doing things quickly, fast food restaurants, 10 minute abs, self-checkout and more. Restaurants will most likely see the greatest changes to their environment. EMV is designed to keep the card in the consumer’s hand. Integrating with Vantiv will enable payment applications to utilize tokenization to add gratuities, eliminating that awkward moment when the consumer has to add the tip in front of the server. What about bar tabs? EMV requires the consumer to confirm the amount during the authorization, eliminating a convenience we are all use to. For EMV to be gracefully accepted, we need it to be successful both at the consumer and merchant level. Providing a merchant with just an EMV solution will not work in today’s fast environment. Enabling NFC technology, Omnicommerce and tokenization are three tools that Vantiv provides creating a balance for both the consumer and merchant.

 

 

  1. https://aerissecure.com/blog/smb-data-breach-fallout/

With all this talk of bitcoin scaling, the August 1st bitcoin network fork, segwit, segwit2x, BCC, BTC and other general craziness going on in the bitcoin space... and the competing incentives between bitcoin miners and bitcoin users, I've been looking under the hood to get a better understanding of what is really going on.

bitcoin splitting into 2.png

TLDR; Bitcoin is splitting into two coins (BTC & BCC) because of competing incentive structures pitting one group of miners against core developers. The miners fork called BCC (Bitcoin Cash) will have 8 MB block sizes allowing for more transaction throughput, but will not enable off-network payment channels. Core developers fork is based on SegWit2x, which will increase throughput and also enable the lightning network payment channel that lays the ground work for very low cost off-chain transactions. The community at large seems to be behind BTC/SegWit and many people have suggested BCC will not get enough miners on their side to survive, but only time will tell.

bitcoin miners and users.png

One way to think about bitcoin that is helpful in understanding the current affairs is this: bitcoin is a collection of individuals who have all decided to have the computers that they control run the same code (network protocol) that keeps track of who owns which bitcoins. There are miners who do work to process each transaction and cryptographically secure the network and get paid fees and block rewards for doing this work. There are users (represented by the bitcoin core developers) who execute transactions on the network. Each computer (miner and user) that participates in the network has it's own copy of all the transactions that have ever happened, this is why the technology can generally be referred to as decentralized ledger technology (DLT).

bitcoin growing pains.png

This copy of all transactions that have ever happened is called the bitcoin-blockchain. The code/network protocol that each of the computers run has a set of rules that everyone agrees upon that decide how new transactions are written to the bitcoin-blockchain. As long as the network agrees that a transaction is valid, then, the transaction is written to the bitcoin-blockchain, distributed to each node, and is forever held as a true/non-contestable transaction, this feature is called transaction immutability. Due to the growing popularity of bitcoin, the technology has been having growing pains and the network protocol needs to be updated in order to handle more transaction throughput and reduce transaction fees.

40 billion in bitcoin.png

The competing ideas for how to scale the network illuminate the careful balance of incentives that the original implementation of bitcoin created that has enabled the bitcoin network to continue to grow and become a stable and secure place to store value. At the time of this writing, there is around $40 billion dollars of value stored in bitcoin. For miners, they would like to have the solution based upon larger block sizes - BCC will fork bitcoin and start mining 8 MB blocks on August 1st. That means that each new block in the BCC blockchain is able to hold more transactions, thereby increasing transaction throughput. Because miners make money by writing transactions into blocks, this direction to scale the network is preferred by these miners because they are able to continue to collect transaction fees because all transactions will be written to a block. For users, and the bitcoin core developers, they are moving towards what is called SegWit2x. This is a combination of a proposal called Segregated Witness with the promise to increase block size to 2 MB in the near future.

bitcoin lightning network.png

What is interesting about the segregated witness solution is that it enables payment channels, specifically in bitcoin, called the lightning network. Payment channels allow for the creation of off-chain transactions that can be very low to zero-cost. This has the potential to allow for online micro-transactions and small transactions which could lead to broader interest by merchants to accept this as a form of payment because of the lower transaction fees. Payment channels are very promising and there is a lot of research and development going into building out use-cases.

 

Payment channels reduce fees because the only time a transaction is written to the blockchain is when you open and close a payment channel. A payment channel can be opened between 2 or more parties by having at least one of those parties lock funds into the channel. Once the payment channel is open, the parties conduct transactions with those locked funds among themselves that are instantaneous and have zero transaction fees. One very interesting aspect of payment channels is that they can be networked together to form a chain of transactions between parties that do not directly have a channel open between them, but are connected via a network of open payment channels. For example, if I have a payment channel open with Dan, and Dan has a payment channel open with Josh, Josh and I can transact with each other by using Dan as an intermediary payment channel even though Josh and I do not have a payment channel open between us. Payment channels are a very promising area of research for crypto-currencies and this may be the path that we see being followed that will allow for low cost transactions, online micro-payments, and low dollar amount retail transactions between parties whether they be P2P, B2B, B2C, or C2B. Once a payment channel is closed, the value of all transactions conducted within that channel is settled on the blockchain.

 

For a really good technical deep-dive on how payment channels work, I highly recommend these videos.

 

Jackson Palmer runs it down in 15 minutes: what are payment channels? (eg. the lightning network) - YouTube

Technical deep dive on the lighting network: SF Bitcoin Devs Seminar: Scaling Bitcoin to Billions of Transactions Per Day - YouTube

 

Lightning network white paper: https://lightning.network/lightning-network-paper.pdf

For more information on the bitcoin payment channel lightning network: Lightning Network

Payment channels on the Ethereum network: Raiden Network

 

Thank you for taking the time to read this post, please leave any questions or comments below!