The transaction between Worldline and Ingenico, alongside Atos which is owned by Worldline, comes to together to create Europe’s largest payments company, and the fourth largest in the world.

Reports indicate the overall implied equity value of the buyout deal is EUR 7.8 billion (£6.6 billion), a 16% premium on the existing market capitalisation of Ingenico of around EUR 6.7 billion. The deal also serves to boost earnings per share in either firm and save the new firm around EUR 250 million by 2024.

Still awaiting regulatory approval, the transaction has not come as a surprise in the payments sector, and it should be expected to be finalised by the third quarter of 2020, by which Worldline shareholders will own a 65% majority stake in the new firm, and Ingenico shareholders would take away 35%.

Current Chairman and CEO of Worldline Gilles Grapinet will become solely the new company’s CEO, as Ingenico’s current Chairman Bernard Bourigeaud becomes the new entity’s non-executive chairman.

It is almost inconceivable for a business operating in today's non-cash society not to offer its customers the opportunity to pay with a credit card. Every company needs an electronic payment solution, which means that every company must enter into some arrangement with one or more credit card processors to effect credit card sales. Typically, under these arrangements, a merchant will agree to accept credit from its customers (cardholders) who properly present a credit card at the point of sale, subject to certain conditions, with payment to the merchant to be made by the credit card processor after the credit card processor's receipt of payment from the cardholder. Generally, all the payments by the credit card processor are indeed conditional and subject to chargebacks, fees and fines. In some instances, the credit card processor may, in its own discretion, suspend payment of any funds if an event of default has occurred (under either the processor's agreement with the merchant or the cardholder), or if the credit card processor has reason to believe that there may be fraudulent activity relating to transactions submitted to it by the merchant. Chargebacks to the merchant can result from, among other things: (a) a cardholder disputing the validity of a transaction; (b) a cardholder disputing the quality or receipt of goods or services; and (c) a copy of the sales draft was not provided upon request. It is important to recognise that these chargebacks can occur under the processing agreement even if there may be no or little evidence to support a dispute, the result of which is that the merchant's receipt of payment for credit card sales may be further delayed pending resolution of any dispute. Making matters worse, in some instances, the merchant now is left with no alternative but to expend the time and resources necessary to recover on these chargeback transactions, which in essence represent accounts not purchased by the credit card processor.

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Further complicating matters, credit card processing agreements typically authorise the processor to establish a Reserve Account “in an amount to be set up” by the credit card processor in its sole discretion, based upon, among other things, processing history and the potential risk of loss that the processor may determine from time to time. If the amount in the Merchant Account is less than the required reserves in the Reserve Account, the merchant will be obligated to pay the shortfall. The Reserve Account may also be funded from funds otherwise going to the Merchant Account without notice. In some instances, this Reserve Account can be held for the greater of 270 days after termination of the credit card processing agreement or for such longer period of time as may be consistent with the processor’s liability for credit card transactions. The processor can also unilaterally require an inspection of a merchant’s business at the merchant’s cost and expense.

Credit card sales do not always result in actual cash revenues to a merchant, and even when the merchant is paid, payment may occur significantly later than the actual underlying sale.

In short, credit card sales do not always result in actual cash revenues to a merchant, and even when the merchant is paid, payment may occur significantly later than the actual underlying sale. Here are five recommendations that a merchant should consider when trying to effectively manage credit card transactions for its business, given the necessity of credit card sales and the complexity involved:

1. Read and Understand the Processing Agreement.

 This may seem obvious, but the importance of a merchant really knowing the terms of its credit card processing agreement is crucial. For example, most credit card processing agreements provide for a maximum "Combined Estimated Monthly Volume" and "Estimated Highest Ticket/Sales Amounts" associated with every credit card facility—if the merchant exceeds these amounts, the credit card processor may hold the merchant funds pending further activity. As a result, a merchant should ensure that these terms are consistent with its projected sales; if a merchant senses that its projected credit card sales for a given month are over $100,000, for example, it should not agree to a Combined Estimated Monthly Volume of $70,000. So too, a merchant with large ticket items should ensure that the Estimated Highest Ticket/Sales Amounts work for its business sales. In addition, credit card processors impose a lien on credit card accounts; a merchant needs to make sure that the imposition of this lien does not conflict with other loan documents and lending arrangements.

2. Establish Internal Coordination.

 Successful merchants do everything that they can to stay within the "four corners" of their processing agreements to maximise the opportunity for collections (and in so doing, minimising potential chargeback claims). Establish processes and procedures associated with credit card sales consistent with the terms of processing agreements in place to maximise the recovery on all sales and provide for efficient and effective resolution of any potential dispute.

3. Be Proactive and Plan Ahead.

 Successful merchants, with knowledge of their credit card processing agreements, tend to carefully review and promptly challenge, as appropriate, (a) the imposition of fees and costs that are not otherwise provided for under the agreements, (b) the imposition of chargebacks, (c) the holdback of additional amounts in the Reserve Accounts, and (d) the timing of holdbacks within Reserve Accounts to avoid unnecessary delays in payment. In addition, successful merchants develop meaningful cash flow projections which will typically include some "reserve" for credit card sales based on prior experiences. Recognising that some sales do not result in immediate cash receipts can help a merchant effectively manage its cash flows.

4. Properly Evaluate Payment History With Various Processors.

 Monitor performance. Review chargeback and payment history with various credit card processors. Distinguish between those credit card processors that offer poor terms versus those that offer more favourable terms, and, within this analysis, how each of the credit card processors performs on its agreements. In some instances, despite tough deal terms, a credit card processor will not seek to hold back the maximum amount permitted but choose instead to hold back a reasonable amount consistent with the financial risk involved. Develop a means of evaluating reasonable behaviour amongst the processors.

5. Shop For The Best Deal.

 Negotiate the best terms possible, paying particular attention to the time in which the credit card processor may holdback money in the Reserve Account for potential chargebacks. In addition, pay attention to a credit card processor's past behaviour—sometimes it makes the most sense to work with a processor under less friendly terms that has a history of only taking holdbacks in the Reserve Account for actual credit risks (as opposed to general business risk). Credit card processing is a highly competitive industry—take advantage of the competition to cut your best deal. Of course, pay attention to the best rates as well!

Credit card sales represent a vital source of working capital for today's merchants. The ultimate choice of a credit card arrangement depends on finding a processor that both provides for reasonable terms and conditions and then demonstrates a consistent willingness to work with its merchants. Look for the right credit card processor for your company. Simply locking in the best rate may not be enough!

Integrated M&A Transaction Management focuses on the target-orientated implementation of business objectives in a specific M&A event, combining best-practice project management methods with the specifics of M&A transactions. Through this combined approach, the speed, cost-efficiency and probability of implementation of M&A transactions can be sustainably optimised. With M&A 4.0, digitisation has also entered the various areas of transaction management. Integrated control tools, project management tools and market intelligence provide the technical foundation for integrated transaction management 4.0. Using trustworthy cloud solutions, the optimal cooperation of all project participants can be ensured - even beyond company borders.

The starting point of integrated M&A Transaction Management is the established M&A Maturity Model, which specifies the organisational framework and corresponding transaction phases. Within this framework, integrated transaction management is based on four pillars.

  Pillar 1 - M&A Governance Structure. This pillar establishes the basic rules and conditions for an M&A project, since it defines the organisation, the committees, processes and responsibilities in the respective transaction. Reporting, decision-making and escalation matrixes must be defined in order to enable quick and clear management of the transaction. It is important to clearly communicate this to the entire project team. Cloud-based solutions offer efficient ways of documenting and distributing this information. Equally important is M&A Knowledge Management, as it governs the reuse of know-how, templates and tools and thus contributes significantly to the cost-effectiveness of the transaction. Finally, M&A Performance Management provides feedback on the success of past transactions and identifies potential improvements for future transactions.

Pillar 2 - Scoping and Planning. In order to enable target-oriented control of transactions, it must be clearly defined at the outset which goals should be achieved by the respective transaction and in which framework conditions the transaction should be realised. The success of the transaction is dependent on the definition of a clear goal. This essential step should be given the highest attention from the initiation phase onwards. The SMART approach clarifies transaction objectives through its five criteria. In addition to the setting of the objectives, the timing of the transaction and the required resources must be determined. Starting with a general roadmap, a specification can be made by a detailed project plan in each phase of the project. In terms of integrated transaction management, all relevant teams (e.g. legal, tax) and stakeholders must be included in the planning in order to obtain a holistic view of the key topics and necessary tasks. Especially with mid-market and large-cap transactions, the corresponding ramp-up of the required team and infrastructure must also be precisely planned.

Pillar 3 – Communication and Reporting. In addition to the transaction having a clear objective, the creation of a project organisation with a transparent reporting and communication structure is important. With a top-down approach, forming an appropriate meeting structure enables overall transaction control and operative control of individual workstreams. However, the related reporting should report project progress bottom-up, aggregating a condensed view of overall project management. It is recommended that the M&A 4.0 reporting and communication structure is implemented by cloud-based standardised tools, enabling cost and time efficiencies. With (online) dashboards, the entire team has visibility over the overall project status and the progress of individual transaction phases. The use of dashboards also offers the advantage that reporting can be edited depending on the target user. The use of Harvey Balls as a dashboard communication tool prepares and exhibits statuses briefly and concisely. Thus, standardised and transparent summaries for C-level management are immediately available.

Pillar 4 - Task Management.  In addition to the reporting and communication structure, the clear allocation and management of activities is of crucial importance. In transaction phases in which several parties are involved (e.g. due diligence), the task of controlling progress management is of essential importance. Ideally, proven and reproducible M&A playbooks for each transaction can be used in the sense of M&A knowledge management. M&A 4.0 can be leveraged through the utilisation of modern project management tools such as kanban boards for traditional task control. A kanban board is an agile project management tool designed to help visualise work and maximise efficiency flows. Kanban boards use cards, columns, and continuous improvements to help transaction teams commit to and finalise their work. A kanban board helps ensure work visibility throughout the whole transaction team. Additionally, from a project management perspective, it is possible to trace which tasks are not yet assigned and which tasks are overdue.

In order to implement state-of-the-art integrated transaction management, only a few steps are necessary. In addition to the clear commitment of management to this approach, choosing the right tools and establishing the approach is crucial. Irrespective of individual implementation concerns, the following principles can contribute to successful project management:

1. Clearly define general and specific goals for the company and M&A project teams.
2. Placing the M&A project teams with a clear governance structure.
3. Providing sufficient resources to plan upcoming projects and to complete the ramp-up phase.
4. Staffing the project with experienced managers and utilising their experience and know-how.
5. Use of established, standardised tools and processes that function across the enterprise and are beta-tested.
6. Establish decision-making structures, reporting and efficient transparent communication mechanisms.
7. Including sponsors and experts to reach business decisions and overcome groupthink.
8. Efficient proactive risk management.
9. Ranked decision-making matrixes based on (ex-ante defined) information.
10. Use of proven (IT) tools for efficient project design.

Integrated Transaction Management 4.0 bundles all the necessary topics for a successful transaction and, with the associated M&A 4.0 solutions, provides the prerequisites for an efficient process. ARTEMIS Group supports the implementation of an integrated transaction management system tailored to its client’s needs. This trusted approach ensures the wise use of resources and high stakeholder awareness regarding project status.  ARTEMIS M&A 4.0 oriented platforms and tools increase process and cost-efficiency. Additionally, ARTEMIS Group provides operational support for the transaction manager as a central point of intersection between the company, external consultants and targets.

Contact details:

ARTEMIS Group, Maximiliansplatz 12, 80333 Munich, Germany

Email: tadam@artemis-group.com

Tel: +49 89 74 50 170

Web: www.artemis-group.com

If mobile payment apps became as popular in the US as they are in China, banks would lose a projected $43 billion in revenue annually. Bloomberg QuickTake explains how cheap and easy payments by phone are threatening one of the banking industry's most profitable businesses.

We are seeing an unprecedented shift in consumer spending habits. But this rapid growth is introducing new challenges. Fraud is rising, yet merchants are under pressure to deliver the seamless payment experiences that consumers increasingly demand.

Network tokenization is one of many technologies that online merchants are turning to in a bid to strike the right balance between high security and a frictionless buying experience.

But according to Andre Stoorvogel, Director of Product Marketing at Rambus Payments, we should not think of network tokenization as an optional add-on. Rather, it is a foundational technology enabling secure, simple digital commerce.

What is network tokenization?

With network tokenization, the payment networks replace a primary account number (PAN) with a unique payment token that is restricted in its usage, for example, to a specific device, merchant, transaction type or channel.

The question is, how is network tokenization different to existing third-party proprietary tokens?

The main (and crucial) difference is that network tokenization ensures that card details are protected throughout the entire transaction lifecycle. Non-network tokens don’t offer this end-to-end security, introducing weaknesses at various points for fraudsters to exploit.

Network tokenization also introduces improved credential lifecycle management to keep card details current, whereas proprietary tokens do not always have issuer permission to access and manage the underlying account data.

Finally, network tokenization opens opportunities for new, enhanced buying experiences across existing and emerging channels.

What are the benefits of network tokenization for online commerce?

To fully appreciate the unique value that network tokens bring to the payments ecosystem, we need to understand how they can address the key pain points for e-commerce merchants.

• Reducing the cost of fraud

We can’t get away from it. Online commerce has a fraud problem.

E-commerce fraud is growing twice as fast as e-commerce sales, with retailers set to lose $130 billion between 2018 and 2023.

We should not be surprised that one in two US merchants see fraud prevention as ‘an increasingly challenging task’. They are already spending $3.48 to combat every dollar of fraud (and this is set to rise with the global cost of fraud prevention increasing by 4% year-on-year).

And yet, the fraud rates keep on climbing. In a hyper-competitive industry where every cent counts, blindly throwing money at a problem is not a sustainable strategy.

The end-to-end security proposition of network tokenization significantly reduces the risk, and mitigates the impact, of malware, phishing attacks and data breaches. Put simply, tokenized card data is useless if stolen and for this reason, network tokenization should be the foundation on which a layered fraud management approach is built.

• Combatting false declines

Given the scale of the fraud challenge, merchants and issuers are understandably adopting a cautious approach. Transaction approval rates for digital transactions stand at around 85%, compared to 97% for in-store transactions.

This leads to a high prevalence of ‘false declines’, where a valid transaction from an authorized cardholder is rejected by the merchant. Often the cause is something simple, such as an outdated billing address, but the results can be incredibly damaging.

Globally, false declines cost merchants $331 billion. 66% of consumers stop shopping with a retailer after a false decline. Unnecessary declines outstrip actual fraud 13 times over. Most tellingly, US e-commerce merchants are losing a total of $8.6 billion to declines, compared to the $6.5 billion of fraud they are actually preventing.

Network tokens can increase approval rates to reduce instances of false declines. This is because card details are automatically updated and refreshed, making it less likely for an erroneous data point to raise a red flag. Also, tokenized transactions are inherently more secure so less likely to be viewed as risky.

• Enhancing the checkout experience

Despite the huge challenges posed by rising fraud, it is telling that 91% of merchants identify ‘minimizing the amount of friction introduced into the user experience’ as the main priority when evaluating their approach to securing payments.

Introducing additional friction into the checkout process, then, is a no-go. But as network tokenization reduces the value of the underlying sensitive data, it adds an invisible layer of security.

We must also remember that merchants want to focus on payment innovation, not fraud prevention. Network tokenization is more than just a security play, and can be used to enhance the buying experience.

For example, it enables consumers to see a fully branded card when checking out, rather than a mish-mash of starred credentials and the final four digits. This boosts recognition, familiarity and engagement.

It also enables payment details to be instantly refreshed when a card is lost, stolen or expires. Better still, it can enable consumers to keep track of where and when their payment credentials are being used. For example, card details could easily be push provisioned to merchant apps.

What is the industry roadmap for network tokenization?

Given the clear benefits, we are already seeing strong momentum for network tokenization for card-on-file transactions. And with EMV Secure Remote Commerce poised to debut in 2019, we can expect to see network tokenization extend to ‘guest checkout’ experiences.

There are options available for merchants and payment service providers (PSPs) looking to implement network tokenization solutions. For those with significant strategic resource, time and technical capacity, direct integration with the payment systems is an option.

Alternatively, for those looking to move quickly, qualified technology partners offer a fast-track to the immediate benefits of network tokenization (without the potential integration headaches).

Digital transactions do not end at simple purchases. Cryptocurrency, online betting, and sending cash via the internet have all become popular recently. With the amount of money changing hands online, it is no surprise that hackers see this as an opportunity for identity theft.

Privacy was once the only concern for web browsers, but financial data security has taken a place on the list of essential things to consider when roaming the internet. Digital shopping and online transactions are not going away, so it behooves everyone to learn ways to protect private information.

Seemingly becoming more challenging by the day, internet security is possible. Hackers regularly find new ways to attack their victims but practicing internet safety and putting safeguards in place will help keep your information out of the hands of a cyber-criminal.

1.       Protect Your Privacy Using a VPN

The first thing any mobile device user should do is download a VPN app. While a VPN can be used on other devices like laptops or tablets, it is important to protect mobile devices, too.

People frequently connect to Wi-Fi in public places to conserve data costs, leaving themselves vulnerable. Hackers roam unsecured networks hoping to find an easy target. A VPN can create a more secure environment by encrypting data to and from your device.

2.       Practice Internet Safety

Social media has created an environment ripe for malicious cyber-attacks. Facebook and Twitter alone often provide hackers with all the information they need to infiltrate the privacy of an individual.

Being safe online is more than avoiding “sketchy” web areas. Avoid putting too much personal information on social media sites and keep your profile restricted to those you know. Decline unknown friend requests and think twice about liking every post you come across.

Hackers prefer easy targets, and many users make themselves very vulnerable by providing so much information online. These details can give hackers tips to decoding your passwords or usernames, which opens you up to a world of digital trouble.

3.       Pay Attention When Purchasing

Online transactions are here to stay, and it would be ridiculous to recommend someone avoid digital purchases. However, when buying online, you should pay attention to where you are shopping.

Small online businesses are popping up everywhere, and while they may offer unique and trendy items, it is important to validate their security. Never enter financial information on a site missing the “HTTPS” at the beginning of its URL. The “s” means secure and any site without it should be considered unworthy of your personal information.

Internet security is possible by practicing a little diligence and understanding that your information is valuable. Hackers prefer the easiest targets and creating a few blockades may prevent you from becoming a victim. Practicing safe internet behaviors can help you enjoy your online shopping experience safely.

Merchant account and card payment fee comparison service Merchant Machine have carried out a study to look at the extent of these economic changes to find its true value in the world we live in. The research uncovers the impact cashlessness has had on specific industries, personal spending and how much different countries have adopted the payment method. Some of the key findings are outlined below:

Cashless Countries

Revenue from cashless payments has become hugely significant for a number of nations across Europe, but who is yielding the most in recent years? Below are the EU countries with the highest revenue from card payments.

• Power of the Pound - With an astounding €106.7 trillion revenue in 2017, the United Kingdom are far and away the leading nation for cashless payments across Europe.
• Revenue Generating Germany - Ranking 2nd in our study of cashless revenue is Germany with €55.8 trillion last year alone.
• Frivolous France - Another nation proving themselves to be tech-savvy and spend-happy are the French, who gathered a €27.2 trillion in cashless payments last year.

Big in the Industry

Contactless forms of payment have created a new level of convenience for people around the world, and this has provided a real boost for certain industries. Below are some of the biggest winners:

• Cashless Clothing - Last year, the use of contactless payments to purchase clothing skyrocketed a huge 321% from the year before, topping all other key business types.
• Parking Payments - The inconvenience of having to pay for parking has been improved somewhat by the ease of payment, with 132% more transactions last year than previous.
• Public Transport Perks - Another business reaping the benefits of technology is public transport, where 91% of all payments are contactless.

Home and Away

In years gone by, using a card on foreign shores would be a frightening prospect for many, but in 2018, it appears that is no longer the case. Our study has traced the value of cashless payments back to 2006, and show how people have started to adopt card payments abroad and on home soil.

• Global Spenders - In 2006, the revenue from international cashless transactions was estimated at around £4.9 billion, and has increased eightfold and now sits at £40.4 billion
• Card Happy - The average monthly spend on card for individuals was £422 last year, a 78% increase from 2006.
• Foreign Transactions - Until 2011, the average international monthly spend on card was under £10, but now stands at £34

Ian Wright from Merchant Machine stated that: “The popularity and preference towards cashless payments appears evergrowing. While so many are aware of the decline of cash usage and increase in card transactions, but this study helps to break down where these changes are most felt.”

(Source: Merchant Machine)

As global business and cross-border transactions have proliferated, there are significant implications for commercial customers who rely on banks and payments providers to provide a flawless service faster than ever. So how do can the financial services sector put value back into the process? Below Abhijit Deb, Head of Banking & Financial Services, UK & Ireland, Cognizant, explains for Finance Monthly.

Consumers now expect easy and immediate payment services, no matter where they are or what they are buying, whatever the payment method. It may be symptomatic of the ‘age of instant gratification,’ but it also demonstrates how people value financial agility. This was highlighted by a recent system failure with the UK’s Faster Payments System that caused mass inconvenience and frustration among consumers. Whether paying a friend back for last night’s dinner or sending emergency funds to family travelling overseas, the offerings of digital banks such as Monzo and Starling are testament to the industry’s efforts to keep up with rapidly evolving consumer expectations. This trend has now also filtered into the business world.

The technological saturation of the financial services industry has been met with an increasing affinity for risk amongst business customers. Churn has never been easier. If one bank cannot meet their needs, customers can leave, and it has never been easier for them to switch financial providers in a congested market. In essence, the evolution of the payments ecosystem encompasses much more than innovation targeted at consumers.

Understanding the value of payment data

Of course, there are some interesting examples of innovation in consumer payments. Gemalto’s biometric bank card, for example, highlights that the area is steadily advancing, despite scepticism that there will be mass consumer acceptance.

However, the pace of change is accelerating rapidly in terms of offerings. For instance, blockchain is being harnessed by banks and technology vendors as a prime enabler of an instant B2B payments infrastructure. Industry players realise that the methods that can derive benefits today are largely based on a better understanding of the value of payment data.

While such data has mostly been used to create a hyper-personalised customer experience for consumers, it is increasingly being harnessed in services to businesses, even outside the financial services sector with companies such as Google recently purchasing Mastercard credit card information to track users’ spending to create an additional revenue stream.

This evolution of B2B product consumption is emerging as a key theme across the broader financial services market and is increasingly allowing businesses of all sizes to ‘window shop’ for the products and services they want the most. Providers are racing to commercialise the increasing amounts of account information, a trend that has increased in the wake of regulation such as PSD2 (the Second Payment Services Directive). By doing so, they can position themselves as the customer’s ‘digital front door’ to a wider range of services such as financial advice, merging the dimensions of ‘fast money’ (a consumer’s daily spending) and ‘slow money’ (future spending, saving and investment).

Adopting innovations such as automation, means that banks and card providers can help their commercial customers transform payments into a process that can add real value and allow the integration of additional services. By making financial reporting much easier, organisations can glean better insights into data showing purchasing trends among their customer base. The emergence of machine learning and self-learning systems will make this process much more efficient, even incorporating features like automated financial advice or fraud detection to become commonplace.

Consumption models are changing

Therefore, as payments processors and providers realise the opportunities in the business payments ecosystem, innovation accompanied by a commoditisation of payments services is on the increase, characterised by providers trying to add more value in the supply chain. Although currently most relevant to the SME market, companies of all sizes are being targeted with added value payments services such as reporting, to help them make better decisions. For example, retailers working with Barclays have access to add-ons and third party apps via the bank’s SmartBusiness Dashboard, including basic analytics to see what customers are spending their money on. This information can then inform marketing schemes that tailor product promotions to specific customers.

Ultimately, the more choice the customer has and the more informed they feel, the more likely they are to return to the same bank to take out a loan or use other services.

With so many contributors to the payments ecosystem, and an increasing number of organisations using the analysis of payment data as a key differentiator against competitors, it is crucial that banks, regulators and payments processors co-ordinate their efforts and use the best technology available to create an efficient system. And with the Faster Payments Service deal up for renewal, a system that underpins most of the UK’s banks and building societies, perhaps it is time for the government to consider how it can best support a payments infrastructure that works for all.

To hear about tax planning and the things that need to change in the UK tax legislation Finance Monthly speaks with Adele Raiment, Director of the Tax Advisory team that specialises in entrepreneurial and privately owned businesses at Mazars LLP. Adele’s main area of expertise is working with privately owned businesses to develop and implement a succession plan, to ensure that any assets that the shareholders wish to retain are extracted in a tax efficient manner and she also works with all parties to assist in the smooth running of transaction.

What are the typical challenges faced by shareholders of entrepreneurial and privately owned businesses in the UK, in relation to the management of their finance?

I think the main concern on the horizon is the potential impact of Brexit on the UK economy and business confidence more widely. For privately owned businesses in the UK, many are still very cautious following the 2008/09 recession, and with the uncertainties surrounding Brexit, it is difficult to plan too far ahead. One of the main priorities of shareholders is ensuring that they have sufficient cash reserves to ride any potential downturn in the economy whilst recognising that they need to invest and innovate to thrive.

What is your approach when helping clients with tax planning?

My approach is to primarily understand the client’s commercial and personal objectives in priority to considering any tax planning. When planning for a transaction, I frequently find that the most tax efficient option isn’t always going to meet the key objectives of the shareholders or the business. It is important to consider the shareholders and the business as one holistic client, and therefore strike the right balance between personal, commercial and tax objectives. In respect of tax specifically, it is important to take all relevant taxes in to consideration whether it be corporate or personal. A good understanding of all taxes is therefore required.

My clients vary from FDs, to engineers, to self made entrepreneurs - all requiring different approaches. I believe that it is fundamental to get to know your client and adapt your approach to ensure that they understand you and what you are trying to achieve.

What are some of the day-to-day challenges of operating within tax planning? How do you overcome them?

As I predominantly work on transactions, I often work very closely with other professionals such as corporate finance professionals, lawyers and other accountants. The key challenge to this is making sure that the whole team is working collaboratively to achieve the best result for our client.

We are also under pressure to keep costs down, whilst ensuring that we provide quality advice. This can be difficult if the team has multiple transactions on the go at the same time and senior resource is constrained or if the project is wide-ranging, requiring several specialists to input in to the advice. The key to this is having a driven and supportive team, where teamwork and openness is pivotal to success. The working environment of my team at Mazars is incredible as we encourage open discussions on a variety of areas but one of the most useful ones is on technical uncertainties, which encourages consultation in times of uncertainty and technical development.

In your opinion, how could UK tax legislation be altered for the better?

Despite an exercise to ‘simplify’ UK tax legislation over more recent time, the legislation has increased in volume. A good example of this is that there are now two separate corporation taxes acts, when previously there was one. Having said this, the majority of the language used in more recent acts has made the legislation more user-friendly. However, there are still pockets of the legislation that seem to have been rushed through parliament and the practical use of the legislation was not considered fully prior to being enacted. This has resulted in several pieces of legislation being amended a year or two down the line. Although there does seem to be an element of consultation between Practice and HMRC prior to some legislation being enacted, I’m not always convinced that HMRC take on board the feedback. I therefore feel that a more rigorous consultation process should become standard to ensure that the commercial and practical elements of legislation are considered prior to enactment.

Contact details:

T: +44 (0) 121 232 9583/ M:+44 (0) 7794 031 399

Website: www.mazars.co.uk

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

To hear about valuations and middle market M&A, Finance Monthly reached out to the experts at IBG Business.

IBG Business exists to bring merger and acquisitions skills, resources and knowledge to middle market business owners selling (or buying) businesses. “The firm is defined by its expertise, character and commitment to delivering exceptional results”, says IBG Oklahoma Managing Partner and Principal John Johnson. “Our team brings extensive background, robust training and deep resources to each deal. Time and again, the precise execution of our refined professional process has yielded maximum value under optimal terms and timing for our clients.”

Owners should seek professional help prior to selling a business or planning an eventual exit. IBG Denver Managing Partner and Principal, John Zayac, explains the complexities sellers face: “Price is often a starting point in the discussion, a common marker for value. However, it is only the tip of the iceberg. Price is predicated on a complex foundation of components including shifting responsibilities for risk, tax treatment and intangible values, all of which may move dramatically as a sale is negotiated”. Regarding the question “What is my business really worth?” Gary Papay, IBG Pennsylvania Managing Partner, also asks “And why?  Knowing the reasons underlying the value of a business can reveal value-enhancing improvements or set up better initial positioning of deal terms.”

Casual opinions of what a business is worth are as abundant as sparrows. Those opining rarely have knowledge of the particulars of the business, the deal terms, an understanding of the sector or any transaction expertise. All are imperative to formulating a competent view on value. Sellers often reach out to valuation specialists for a fair market value opinion, but these regimented, theoretical valuations - while an improvement on sparrows - are better suited to litigation, divorce, or estate planning.

The most useful guidance for prospective sellers will combine sophisticated appraisal techniques with recent ‘boots on the ground’ experience on actual transactions. A market-informed opinion of the value of a business will gauge how potential buyers might respond to its sale. The opinion should provide a range of values, articulate what factors underlie the opinion, and comment on possible impacts of different deal structures. Strategies to minimise obstacles and enhance value may be offered.

Seasoned mergers & acquisitions advisers can also expertly evaluate and manage the nuances and practicalities that arise in the ‘real world’. In any transaction, the buyer and seller have opposing goals: each seeks to best serve their own interests but must ultimately acquiesce in some part to the other while retaining sufficient benefit for themselves. The odds of success in this process dramatically improve when it is proactively managed by a seasoned professional who can keep polarising realities within a cooperative framework. The parties will also be more likely to work well together post-close.

Pre-sale valuation work and pro-active management of transactions are key, but subtle dynamics and market factors unique to a deal can also be vital determinants of value. IBG Arizona’s Principal and Managing Partner Jim Afinowich and Managing Director Bruce Black recently worked on a deal that perfectly illustrates such market dynamics. The client’s firm, a niche food manufacturer, initially might have had a competent fair market value of around $20M. IBG perceived growing demand in the industry vertical, and thought an opportunity existed with the evolving market dynamics. They advised the client to decline early offers and to continue to build value in the business. Improve it did, but IBG’s “read” on the market and recommendation on timing made a tremendous impact for the client:  a buyer seeking market control and expansion in the vertical ultimately out-bid several competitors to buy the company for the cash price of $120M. While such extreme opportunities are uncommon, the “savvy” of a seasoned dealmaker can radically impact what is already one of the biggest financial events in the lifetime of a business owner.

Business owners must understand optimal timing and valuation complexities prior to any sale. Today, demand remains robust for quality middle market businesses and valuations are still excellent, but a cooling in the market is anticipated. Active mergers and acquisition broker and advisory firms prepared to assess opportunities with a ‘real-time’ read on transaction market remain the most vital resource for owners seeking to sell for top value.

Contact details:

Email: jim@ibgfoxfin.com

Web: www.ibgbusiness.com; www.ibgfoxfin.com

Direct: 480 327-6610

Main: 480 421-9789

Fax: 602-792-3811

The 05: Do Not Honor card declined response is the most common and general ‘decline’ message for transactions that are blocked by the bank that issued the card. This week Finance Monthly hears from Chris Laumans, Adyen Product Owner, on the complexities of this mysterious and vague transaction response.

05: Do Not Honor may be the largest frustration for any merchant that regularly analyses their transactions. Although it frequently accounts for the majority of refusals, it is also the vaguest reason, leaving merchants and their customers at a loss about how to act in response.

Although unfortunately there isn’t an easy, single answer about what this refusal reason means, there are several suggestions as to what could be the cause behind the non-descript message. So what might the 05: Do Not Honor mean? From our experiences analysing authorisation rates and working with issuers and schemes, here are some plausible explanations.

Insufficient funds in disguise

In probably half of the cases, 05: Do Not Honor is likely just an Insufficient Fund refusal in disguise. Reality is that some issuers (or their processors) do a poor job of returning the appropriate refusal reasons back to the merchants. This is both due to the use of legacy systems at the issuer side as well there being no mandates or monitoring by the schemes on this, letting issuers continue to use it as a blanket term.

By looking at the data from various banks, it is easy to see how “Do Not Honor” and Insufficient Funds can often be used interchangeably. Records that show a disproportionately high level of Do Not Honor and a low level of Insufficient Fund refusals would suggest one masquerading as the other. Given that Insufficient Funds is one of the most common refusal reasons, 2^nd maybe only to “Do Not Honor”, it makes sense that “Do Not Honor” by some banks may actually represent Insufficient Funds.

Refusal due to credential mismatches

Although the words “Do Not Honor” aren’t the most revealing, sometimes other data points in the payment response can be clues for the refusal. Obvious things to look at are the CVC response, card expiry date, and, to a lesser extent, the AVS response. For lack of a better reason, issuers will frequently default to using “05: Do Not Honor” as the catch-all bucket for other denials.

Suspicion of fraud

The most appropriate use of “05: Do Not Honor” would be for declining transactions due to suspicious activity on the card. In some cases, although the card is in good standing and has not been reported lost or stolen, an issuer might choose to err on the side of caution due to a combination of characteristics on a given transaction. For example, a high value transaction made at 3am from a foreign based merchant without any extra authentication, likely will trigger a few too many risk checks on the issuer side. These types of refusals will again unfortunately be designated into the “05: Do Not Honor” category, with merchants drawing the short straw. Even though issuers may be able to point to specific reasons why the transaction was refused, issuers have no way to communicate this back to the merchant.

Some astute merchants might point out that issuers should be able to use “59: Suspected fraud” in these cases. Some issuers however remap these 59 refusal reasons to 05 before sending the response to the acquirer to protect store owners in the POS environment and avoid uncomfortable situations with the shopper standing in front of them.

Collateral damage

Finally, the reality is that your likely not the only merchant that a given shopper interacts with. Regardless of how good your business is or how clean your traffic is, a shopper’s recent history with other merchants will influence the issuers decision on your transaction. For lack of a better reason, the catch-all 05: Do Not Honor refusal in some cases be seen as “Collateral damage”. If the shopper coincidentally just made a large purchase on a high-risk website or went on a shopping spree before reaching your store, there is the possibility that the issuer may decline the transaction at that moment in time. In these cases, there is unfortunately very little that can be done, except to ask for another card or to try again later.

Hopefully this helps shed some light on the possible reasons why ‘05: Do Not Honor’ is so dominant in the payment space and that there is no single reason for this response. Adyen’s advice to dealing with these refusals is to look at the data at individual issuer/BIN levels and from there, try to distil patterns particular to those bank’s shoppers.

Below Graeme Dillane, manager, financial services, InterSystems, offers insight into best practices in the financial services industry, highlighting where current weaknesses lie and how they can overcome.

Increasing trade volumes and periods of high market volatility create technology challenges for financial services firms. This is especially true for sell-side firms, which can experience extremely high transaction volumes, since they partition already high volumes of incoming orders into an even greater number of smaller orders for execution. At the same time, they must support a high number of concurrent analytic queries to provide order status, risk management, surveillance and other information for clients.

This requirement for multi-workload processing at high scale, coupled with the highest levels of performance and reliability, has historically been difficult to satisfy. Compounding the challenge, transaction volumes grow not only incrementally and within expectations, but can also spike due to unexpected world events.

A critical component of a sell-side firm’s technology infrastructure is its transaction management and analytics platform. The platform must be reliable and highly available. A failure, or even a slowdown of the platform, can have severe consequences as it can take many hours to rebuild order state and resume normal operations after a failure. In the meantime, the firm’s ability to process additional trades and provide order status is compromised and financial losses mount.

To successfully handle growth and volatility without performance or availability issues, the platform must balance transactional workloads with the concurrent analytic demands of downstream applications at scale. Financial services organisations, particularly sell-side firms, must process millions of messages per second, while simultaneously supporting thousands of analytic queries from hundreds of systems that must report on the state of orders while performing other queries.

Currently, in-memory databases are widely used, primarily due to their ability to support high-performance data-insert operations and analytic workload processing. However, in-memory databases alone are not an ideal platform for transaction management and analytics for several reasons:

• Limited ability to concurrently process transactional and analytic workloads at scale. In-memory databases are not designed to support multi-workload processing at high scale. As a result, as volumes increase, at some point both the transaction processing and the analytic queries will slow or stall.
• Scale limitations - Since the data in an in-memory database is stored in main memory, the working data set is limited by the available amount of memory. This creates risk when transaction volumes spike, compromising the ability to process new orders once the available RAM is filled.
• High costs - Since servers have hard memory limits, scaling in-memory databases beyond these limits requires purchasing and procuring additional nodes – to sustain normal operations plus headroom for unexpected volatility - increasing overall costs.
• System downtime - Since the data is stored in-memory, if the database server fails, the data that is resident in-memory on that server is lost.

Finding a Solution

So, given these challenges, how can financial services organisations find a solution that enables them to simultaneously process transactional and analytic workloads at high scale?

The answer comes in the form of the Hybrid Transaction/Analytical Processing (HTAP) database.

Traditionally, online transaction processing (OLTP) and online analytical processing (OLAP) workloads have been handled independently, by separate databases. However, operating separate databases creates complexity and latency because data must be moved from the OLTP environment to the OLAP environment for analysis. This has led to the development of a new kind of database which can process both OLTP and OLAP workloads in a single environment without having to copy the transactional data for analysis. HTAP databases are being used in multiple industries for their ability to uncover new insights, create new revenue opportunities and improve situational awareness and overall business agility for organisations.

The best HTAP database platforms deliver the performance of an in-memory database with the persistence and reliability of a traditional operational database. They are optimised to accommodate high transactional workloads and a high volume of analytic queries on the transactional data concurrently, without incident or performance degradation, even during periods of market volatility.

They have a comprehensive, multi-model database management system (DBMS) that delivers fast transactional and analytic performance without sacrificing scalability, reliability or security. They can handle relational, object-oriented, document, key-value, hierarchical, and multi-dimensional data objects in a common, persistent storage tier.

Moreover, the best of these embody features that make them attractive for mission-critical, high-performance transaction management and analytics applications. These include:

High-performance for transactional workloads with built-in persistence – The ideal scenario is to find a data platform that includes a high-performance database that provides transactional performance equal to, or greater than, in-memory databases along with built-in persistence at scale.

Data is not lost when a machine is turned off, eliminating the need for database recovery or re-building efforts. By using an efficient, multi-dimensional data model with sparse storage techniques, data access and updates are accomplished faster, using fewer resources and less disk capacity.

High-performance for analytic workloads – Seek out solutions that provide a range of analytic capabilities, including full SQL support, enabling you to use their existing SQL-based applications with few or no changes. Since the database stores data in efficient multidimensional structures, SQL applications achieve better performance than traditional relational databases.

Consistent high-performance for concurrent transactional and analytic workloads at scale - Ideally, solutions should provide the highest levels of performance for both transactional and analytic workloads concurrently, at high scale, without compromising performance for either type of workload. Since rising order volumes increase both the transactional and analytic workloads on the system, a data platform must scale to handle such workloads without experiencing performance or availability issues.

Positive Prospects

This article has highlighted that many financial services organisations are, for a variety of reasons, currently crying out for ways in which they can simultaneously process transactional and analytic workloads at high scale. Fortunately, help is now at hand. Thanks to the latest breed of data platforms for high-performance transaction management and analytics applications, both transaction processing and analytic queries are supported concurrently, at very high scale, with built-in durability and with the highest levels of reliability – and at a low total cost of ownership.