www.cardsinternational.com Issue 554 / april 2018

POLE POSITION

POLAND STRIDES FORWARD IN INNOVATION AND FINANCIAL INCLUSION

DISTRIBUTION INSIGHT PRODUCTS

Taiwan’s CTBC Bank turns Do Not Honour: what it Mastercard Canada sees the humble ATM network really means, and how strong expansion in into a profit centre merchants can avoid it electronic

CI April 2018 554.indd 1 28/03/2018 14:29:35 contents this month

COVER STORY NEWS 05 / EDITOR’S LETTER 06 / DIGEST • NatWest launches ClearSpend to track company card spending • UniCredit brings to cardholders in Italy • Saudi Arabia’s mada taps Mastercard • Atom and Tranwall launch tool for cards in India • RCBC Bankard and JCB introduce platinum card • myPOS to open bricks-and-mortar stores in Europe • BofA allows PayPal account links • Revolut introduces disposable virtual cards • Malaysian central bank prohibits additional charges for card payments • UnionPay partners with ACI Worldwide to grow acceptance POLAND FOCUS 16 • Xinja introduces prepaid card • BBVA trials biometric payments • Mastercard draws up five-year Editor: Douglas Blakey Group Editorial Director: Director of Events: Ray Giddings roadmap +44 (0)20 7406 6523 Ana Gyorkos +44 (0)20 3096 2585 [email protected] +44 (0)20 7406 6707 [email protected] • Barclaycard launches contactless [email protected] timepieces Senior Reporter: Head of Subscriptions: Patrick Brusnahan Sub-editor: Nick Midgley Alex Aubrey +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Junior Reporter: Briony Richter Publishing Assistant: Sales Executive: Jamie Baker +44 (0)20 7406 6701 Joe Pickard +44 203 096 2622 [email protected] +44 (0)20 7406 6592 [email protected] [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected] Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0956-5558 09 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online access to Cards International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London Office: 71-73 Carter Lane, London, EC4V 5EQ Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow CI on twitter @Payments_News

2 | April 2018 | Cards International

CI April 2018 554.indd 2 28/03/2018 14:29:49 contents april 2018

s to talk about cracking China, disrupting SWIFT,COUNTRY and leveraging SNAPSHOTS WeCha 16 / POLAND 11 Poland is one of the most advanced and innovative markets in Europe, offering consumers broad access to the latest technology in electronic payments. Nevertheless, cash remains very popular 18 / DENMARK Denmark’s cards and payments industry is well developed, and its consumers are prolific users of payment cards. The country has the highest frequency of use in the world, with 210 transactions per card in 2017 20 / NETHERLANDS The Dutch payment cards market is mature, with a high penetration rate of 1.9 cards per inhabitant. The market is dominated by debit cards, which users perceive to be secure, cost- effective and consumer-friendly

20 SECURITY FEATURES INDUSTRY INSIGHT 10 / SMARTMETRIC 11 / MASTERCARD CANADA 15 / Biometric EMV card manufacturer Mastercard Canada is seeing strong expansion 05: Do Not Honour is one of the most common SmartMetric is getting ready for the in electronic payments. Iain McLean, senior reasons from issuers for declined commercialisation of its technology. Robin VP of market development, gives Robin e-commerce payments, representing 10-60% Arnfield talks to the US-based business’s Arnfield a review of the highlights of 2017, of refused transactions, depending on the president and CEO, Chaya Hendrick and discusses what is in the pipeline for 2018 market. Chris Laumans writes 18 14 / CTBC BANK 22 / FICO Taiwan’s CTBC Bank was a deserved winner A decade on from the 2008 financial crisis, of best ATM innovation at the annual Asia levels of consumer credit delinquency are rising Trailblazer Awards in March in Singapore. As worldwide. This should not be a surprise, given Douglas Blakey reports, its investment has that global debt is also soaring, writes Matt transformed the ATM into a profit centre Cox, senior director at FICO

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CI April 2018 554.indd 3 28/03/2018 14:29:53 Motor Finance Europe 2018 26th April 2018 l Adlon Kempinski Hotel, Berlin, Germany

The 4th annual Motor Finance: Europe Conference and Awards leverages insight and expertise from across the industry to deliver a programme that offers you the latest innovations, strategies and technologies driving the industry forward. We will bring together the industry’s thought leaders, experts and challengers to discuss the key factors leading market growth and how to adapt to the ever changing marketplace.

The highlights include:

l The impact of digitalisation on the automotive industry l Complying with regulatory requirements l Understanding your customer and adapting in real time l Preparing to meet the requirements of the GDPR l Disruptive innovations in car financing l Captives of the future: Old world vs new world l A car retailer’s perspective on the challenges the dealer world faces l Embracing the digital world and innovative distribution models

Headline Sponsor: Gold Sponsors: Silver Sponsors: Brand Sponsors:

Exhibitor: Panel Hosts: Table Hosts: Supported by:

For more details please contact Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 editor’s letter

UK credit card debt back in the political spotlight

Douglas Blakey, Editor

hen even the Financial Times is guilty of While the new regulations have been welcomed by UK sensationalist and arguably misleading Finance, the banking sector lobby group, a number of debt W headlines on consumer debt, there is reason to charities remain concerned that the new rules do not go far look at the actual figures with extra care. enough. In particular, charities such as StepChange argue that UK credit card debt rises 10% in January screamed the the rules do not address the continuing risk that credit card headline in the FT on 1 March. The headline remains online, issuers will allow new profitable customers to accumulate debt uncorrected as CI goes to print. For the record, credit card debt for a long period, “only to inflict unattractive compulsory action rose by 9.6% in the year to January, an altogether different on them further down the ”. increase compared to the scaremongering headline. And now Labour MP Stella Creasy is on the case of the The same article did at least acknowledge that growth in credit card sector. An eloquent operator, Creasy was one of credit card lending has slowed in recent months as a result the leading campaigners against the high rates of interest and of the Bank of England and FCA voicing concerns about UK charges levied by payday lenders. Her campaign resulted in a consumer debt. A quick check of other credit card stats to hand cap on the payday sector – and now she is going after high- does, however, give ammunition to those arguing that credit cost credit cards. card debt is rising too fast. Credit card spend in the UK rose by Creasy is one of a number of MPs lobbying the government 8.3% in the year to February, its fastest rate since 2006. Credit to cap credit card costs – the very measure ruled out as card transactions rose by 3.3% year on year to 220 million recently as last year by the FCA. In particular, she wants issuers transactions in February. to be banned from charging credit cardholders more in interest The FCA has been rather more proactive than a number of and fees than the sum borrowed. vocal and high-profile politicians care to recognise in taking We have been here before. As recently as last September, steps to tackle problem credit card debt. According to the FCA, the UK opposition finance minister John McDonnell proposed more than three million UK credit card holders are in what it what he termed a total cost cap on credit cards of 100% of the terms “persistent credit card debt” – defined as cardholders original sum borrowed. paying more in interest and fees than they repay of their There is certainly an argument that can be made that it is outstanding debt. Such cardholders typically pay interest unseemly for credit card issuers to be lending to customers charges of about £2.50 ($3.50) for every £1 of debt that they who are so likely to be unable to repay, so eye-watering repay. A higher figure, about 8.3 million people, is given by the rates of 60%+ are charged to make the credit card product Money Advice Service for those lumbered with problem debt. profitable. For this writer, by instinct on the centre-right and New rules kicked in on 1 March forcing credit card issuers to wary of political meddling with the free market, there is also take a series of steps to help credit cardholders with persistent the argument that it is not for politicians to attempt to regulate debt. Card issuers are obliged to engage with customers that the terms and conditions of bank products. have been in persistent debt for 18 months; the issuer is What the latest lobbying still fails to recognise is the limited required to explain the benefits of increasing their payments, number of credit cardholders their proposals would actually and tell them about where to get debt help and advice. help in reality, not to mention the inevitable unintended After 27 months, card issuers must again contact the consequences. To name just a few: credit card account customer if it looks as if the debt situation is unlikely to cancellations, sudden demands for repayment of the full debt improve, and give a warning that the card may be suspended and customers with poor credit histories turning to doorstep if they do not change their repayment behaviour. After 36 lenders or loan sharks. months, the issuer has to offer the cardholder a way to repay The FCA rule changes do not fully come into force until the outstanding balance over a reasonable period of say, three September – they deserve a chance to work. If they do not, the to four years. This may involve the offer of a personal loan at credit card sector can expect the Creasy and co. campaign to an interest rate way below the credit card interest rate. intensify and support for her argument to grow. <

Get in touch with the editor at: [email protected]

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CI April 2018 554.indd 5 28/03/2018 14:29:56 News | Digest

news digest

NatWest launches ClearSpend to Saudi Arabia’s mada track company card spending taps Mastercard UK-based NatWest, a subsidiary of Royal fective and time consuming, as customers Bank of Scotland, has developed a new do not always have access to the up-to-date mobile application in collaboration with US- information businesses need, and customers based startup SpendLabs to allow real-time are often required to call a helpdesk to make monitoring of spending on company cards. simple account changes. ClearSpend aims to The ClearSpend app will now allow solve that problem.” NatWest Commercial Cards network clients The ClearSpend app was pilot-tested last to manage expenses digitally by directly year and improvements have been made connecting to the card processor. based on the feedback received to improve The app will provide transaction up- the customer experience. dates on real-time balance and credit limit Rose added: “We will continue to develop information. Users can also use the app the app as we go to make sure it is support- for account-management activities such as ing businesses in the best possible way and setting credit limits and merchant category helping them to operate safely and securely.” Saudi Arabian domestic payment network blocking. In the coming months, NatWest plans to mada has announced a joint partnership NatWest’s CEO of commercial and private make the app available for members of Royal initiative to facilitate online payments banking, Alison Rose, said: “Administering Bank of Scotland, RBS International, Coutts for cardholders and domestic merchants a commercial card programme can be inef- and Ulster Bank Commercial Cards. < through Mastercard’s Payment Gateway Services technology. The initiative will also enable all online UniCredit brings Samsung Pay merchants to accept mada cards as a primary mode of payment. mada’s payment network in Saudi Arabia to cardholders in Italy facilitates all financial transactions, and prepaid and debit cards will now be able to links those from ATM and POS terminals use the Samsung Pay app to make fast and to merchants’ and card issuers’ banks. safe in-store transactions. The Saudi Arabian Monetary Authority’s The payment application is compatible general director of payment systems, with contactless-enabled POS terminals, as Department Ziad Al Yousef, said: “mada well as magnetic strip cards without NFC represents the innovative generation technology. Transactions require biometric of electronic payments in Saudi Arabia, authorisation using methods such as and one of the fastest-growing payment fingerprint, iris or PIN. systems in the world. UniCredit general manager Gianni Franco “Utilising Mastercard’s technology to Papa said: “We are living in a world that facilitate online payments via the network is increasingly digital, characterised by a will enable Saudi businesses to significantly speed of change like we have never seen increase their e-commerce sales by before and where people are constantly offering consumers more flexibility and looking for personalised and instant convenience, and diversify their available services to meet their needs, any time and payment options.” anywhere. Mastercard Middle East and North “For this reason, we are committed to Africa division president Khalid Elgibali the development of innovative products added: “We are delighted to partner with Italy-based banking and financial services and services, both leveraging our internal the kingdom’s domestic payment network, company UniCredit has formed a new platform as part of the Transform 2019 mada, and use our partnership to launch Samsung’s payment plan through IT investment of €2.4bn Services technology to make payments service for its cardholders. ($2.9bn), and collaborating with external safe, simple, and smart in Saudi Arabia, Users of Samsung devices with UniCredit partners to expand our offer with the best as we work towards our vision of a world credit cards, and MyPay and MyOne solutions on the market.” < beyond cash.” <

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CI April 2018 554.indd 6 28/03/2018 14:30:00 News | digest

Atom and Tranwall launch BofA allows PayPal tool for cards in India account card links India-based payments solutions provider (AI)-powered services activated by both Atom Technologies and Australian voice and chat. technology business Tranwall have Cardholders can also use the collaborated to introduce a new tool to choose preferred real-time software tool, e-shield, to turn transactions, check balances and debit and credit cards on and off. request status updates on cards The technology is expected and accounts. to help cardholders to avoid Smartphone users will be able to or reduce fraud by providing real- use the advanced transaction-control time transaction control, and preventing service via their bank’s mobile app, while duplication of card details. non-smartphone users can activate the The ability to switch cards on or off service using SMS or USSD. applies to both local and international According to Atom Technologies CEO payment card transactions using ATM, Dewang Neralla, in addition to providing e-commerce and POS terminals. control for customers, e-shield will help e-shield can be used through a banks to reduce costs incurred for security smartphone app or artificial intelligence and protection of liability. < RCBC Bankard and JCB introduce platinum card

Rizal Commercial Banking (RCBC) has Bankard JCB Platinum card will definitely partnered with JCB International to launch appeal to accomplished individuals who the RCBC Bankard JCB Platinum card frequently travel abroad for both business through its card servicing division, RCBC and pleasure.” Bank of America (BofA) has enabled an Bankard Services. “The partnership with JCB enhances option on its mobile app that allows The new product features benefits the privileges even more since they offer customers to directly link credit and debit such as a free airport lounge service, worldwide benefits to the JCB cardbase cards to a PayPal account. discounts on car rentals, 24-hour access to which our cardholders can take advantage The move is part of a partnership a concierge desk, and access to JCB Plaza of,” Calasanz added. agreement signed between the bank and Lounges in selected cities. Cardholders will JCB Cards are currently available in 23 PayPal in July 2017 to facilitate optimised also receive non-expiring reward points, countries and regions, with more than 110 in-store payments and account linking with cash rebates or air miles. They can also million card members. The latest launch BofA cards. Over the coming months, the earn double rewards on spending in Japan. bolsters the business’s alliance with RCBC partners intend to enable the addition of RCBC Bankard president and CEO Simon Bankard, which began issuing Classic and cards within PayPal. Calasanz said: “The launch of the RCBC Gold JCB Cards in 1997. < BofA’s head of enterprise payments, Mark Monaco, said: “It’s all about providing our customers the most convenient and myPOS to open bricks-and- secure payments experience possible. “As the face of money continues to mortar stores in Europe become more digital, Bank of America myPOS has announced plans to open phys- myPOS founder Christo Georgiev said: remains committed to giving our customers ical flagship stores in Europe to offer card “myPOS is committed to creating value for the ability to use any major wallet or payment acceptance devices for small and its customers by offering innovation and payment method they choose, including mid-sized businesses. operational freedom, and this is reflected in PayPal.” Launched in 2014, the company operates everything we do. As well as tokenisation of cards to a network of promoters in most European “Having locations in London, Amsterdam enable in-store payments through PayPal markets, and its own e-commerce store. and other major cities will facilitate a face- and account linking, the agreement is set In an aim to bring its service “closer” to to-face experience with our solutions, help to provide digital representation of cards customers, myPOS opened a flagship store us connect with our customers and better within the PayPal account. at 36 Knightsbridge, London, in February. understand their needs.” The companies also plan to use The business has plans for further expansion The company offers a package of POS tokenisation technology, data, analytics over the coming months, which include the devices and free myPOS accounts to manage and fraud tools to ensure a secure and opening of a physical store in Amsterdam on and transfer funds. The account is accompa- convenient shopping experience in stores, 5 April. nied by the myPOS Business Visa card. < online and within the app. <

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CI April 2018 554.indd 7 28/03/2018 14:30:09 News | Digest

Revolut introduces UnionPay partners disposable virtual cards with ACI Worldwide London-based digital banking alternative order to build trust and confidence with to grow acceptance Revolut has launched a disposable virtual consumers. card in a bid to tackle fraud and increase “Instead of matching what the larger customer confidence in online payments. institutions are doing, we are changing the Users will be able to set up disposable game entirely by introducing disposable virtual cards in seconds, with details that virtual cards and promoting existing are destroyed after every transaction features such as location-based security and new ones automatically regenerated, and the ability to freeze or unfreeze cards. adding an extra layer of security to the “It will take approximately 800 years UnionPay International has entered into platform. before we begin to run out of 16-digit a strategic alliance with payment services The disposable virtual cards will work card numbers, so we view disposable provider ACI Worldwide to expand its alongside Revolut’s security features, which virtual cards as a sustainable, long-term global card acceptance and issuance. include location-based security and the solution to tackling online card fraud. And The partners plan to sign up merchants ability to freeze and unfreeze cards. by automating this process, the customer in the finance, aviation, hotel, e-commerce, The technology aims to prevent online experience is instant and stress-free,” he retail and supermarket sectors to accept scammers from copying card details, and added. transactions using UnionPay Online eradicate the risk that card details could be The disposable virtual cards are only Payment (UPOP). stolen from online databases. available to premium customers. Initially, ACI will adopt UnionPay cards Vlad Yatsenco, CTO and co-founder of The disposable virtual card will work and the UPOP solutions into its payment Revolut, stated: “While fintechs generally for up to five payments per day, with each service, which currently services 5,100 offer a better service than traditional premium user permitted to create one card organisations, making them available to banks, they still have a long way to go in per account. < numerous e-merchants. In the future, the companies intend to co-promote other UnionPay services Malaysian central bank prohibits such as UnionPay QR code and in-app payments, and cross-border marketing additional charges for card payments platform U Plan. In Malaysia, surcharges for payments us- UnionPay International CEO Cai ing debit cards are barred under the Payment Jianbo said: “This c-operation is of great Card Reform Framework introduced by significance: previously, we needed to push BNM; a similar prohibition applies to credit our partner institutions and retailers one card payments under the rules of interna- by one to modify their systems in order to tional schemes such as Visa and Mastercard. roll out UnionPay payment services. BNM added that one reason for imposing “Now, with the technological strength a transaction fee is to recover costs incurred of ACI, we are able to respond faster by retailers during acceptance of card pay- to the needs of our partners, which will ments, where they are required to pay the substantially enhance the efficiency of our merchant discount rate (MDR). business expansion.” The Malaysian bank launched measures UnionPay’s card-acceptance network such as the Payment Card Reform Frame- currently overs 168 international markets, work and the Interoperable Credit Transfer and the cards are accepted by more than Bank Negara Malaysia (BNM), the country’s Framework to reduce the costs to retailers of 10 million e-merchants in more than 200 central bank, has prohibited retailers from accepting electronic payments. The moves countries and regions. imposing surcharges on debit and credit card are expected to lower the pressure on retail- ACI Worldwide group president Dan payments. ers to impose charges on customers. Frate said: “UnionPay’s growth opportunity “Consumers who encounter merchants A statement from the bank read: “To ben- is considerable, with Chinese consumers who impose such surcharges are advised efit from lower operational costs, retailers now making more than 80 million trips to lodge a complaint with their respective are encouraged to accept more cost-effective outside Greater China annually – with this banks or payment card issuers,” the central payment methods, i.e. debit cards and mo- number expected to increase substantially. bank said. bile payments (instant fund transfers). “Supported by our reach and our strong BNM made the statement in response to “Retailers who cannot afford to pay the customer base of merchants and financial an article titled ‘Consumer body: Abolish higher MDR for credit cards are encouraged institutions, UnionPay can serve the surcharges on credit cards’ published in Free to liaise with their respective acquiring bank needs and payment preferences of these < Malaysia Today. to accept only debit card payments.” < consumers.”

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CI April 2018 554.indd 8 28/03/2018 14:30:24 News | Digest

Xinja introduces prepaid card Mastercard draws up Australian digital bank Xinja has launched a Initially, the card will be available for con- five-year roadmap new prepaid card and mobile app to facilitate sumers who have already signed up to Xinja, Mastercard has published a roadmap for everyday spending. with plans for expansion in the future. delivering consistent contactless payments The card, which features contactless Xinja CEO and founder Eric Wilson said: in the coming five years, for consumers, capability, can be reloaded through a direct “The prepaid card offers users a chance merchants and governments globally. transfer from the user’s bank account, but to help bring a revolution to Australian A new initiative by the business will can be managed only through the new app. banking, to load their disposable income on see upgrades to cards and terminals The app allows tracking of spending, a tap-and-go card, track their spending, and beginning later this year in the Middle East, instant card blocking in he event of loss, and submit ideas for the app as we develop.” Africa, Europe, Latin America and Asia- division of transactions into different spend The bank intends to utilise user feedback, Pacific to facilitate secure and convenient categories. requests and ideas to add new features and contactless payments. The card does not charge ATM fees for capabilities to its products. Xinja said it is While contactless transactions have local and international terminals, and does also planning a complete suite of banking been enabled in more than eight million not charge international transaction fees for services, including transaction accounts and locations in 111 countries, the Middle East purchases outside Australia. home loans. < and Africa experienced a 27-fold increase in such payments in 2017 alone. Mastercard chief security solutions BBVA trials biometrics-based payments officer Ajay Bhalla said: “Our vision is a world where everyone can simply and safely tap their card or device when paying in a store, and quickly be on their way. “This marks a significant step towards greater consistency, security and speed for everyday payments while laying the groundwork for future innovation.” To meet rising demand for contactless transactions, Mastercard is set to install only EMV chip and contactless-enabled acceptance terminals in the Middle East, Africa, Europe, Latin America and Asia- Pacific after October 2018. The same capabilities will be applied to cards issued after April 2019, while all merchant terminals will be upgraded by April 2023. < Barclaycard launches Spanish banking group BBVA is testing a card details in the app only once, and bill contactless timepieces new payment system based on biometric amounts are automatically deducted each technology at its in-house cafeteria, in time they visit cafeterias and restaurants at bPay, Barclaycard’s wearable technology arm, has partnered with seven designer an aim to make checkouts and payments Ciudad BBVA. watch brands to introduce wearable “invisible”. The system uses machine learning payments. The new Timex, Guess, The new mobile app uses a facial algorithms to identify both the faces of Mondaine, Kronaby, Suunto, Adexe recognition system to automatically charge users and products on the tray, and charges and LBS products are set to launch at users’ credit cards. the card associated with the customer’s Baselworld on 22-27 March. Designed to promote frictionless profile. It also allows sharing of payments According to Barclaycard, spending via payments, the app has been developed with other users, and provides an option to bPay jumped 129% in the UK in 2017. It in collaboration with BBVA’s restaurant reserve tables to cut waiting times. has already launched a line of contactless partner Sodexo Iberia, while facial BBVA’s head of global payments, Ignacio wearable payment devices, including recognition is based on a technology by Bañón, commented: “With this project, jewellery, phone cases and keychains, as Veridas, a joint venture between the bank we’re eliminating the friction points for well as Timex watches. and Das-Nano. customers when they make a purchase in Adam Herson, business development The app eliminates the need for a store. director, Barclays Mobile Payments, checkout and manual bill payment. “They avoid lines, and have a more digital said: “Consumer appetite for wearable Customers register and enter their credit experience with better information.” < payments is reaching critical mass.” <

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CI April 2018 554.indd 9 28/03/2018 14:30:31 security | smartmetric

In recent years, some ATM vendors have begun to offer ATMs equipped with smartmetric offers biometric readers. In addition, the advent of TouchID on iPhones and similar biometric identification on Android smartphones means consumers have the opportunity to biometric card authenticate themselves when making mobile payments either at the POS or remotely. Hendrick says retrofitting ATMs with biometric readers or replacing existing ATMs authentication with biometric-enabled ATMs would be hugely costly. “There’s also the problem of ensuring cross-platform and cross-network Biometric EMV card manufacturer SmartMetric biometric authentication,” Hendrick says. is getting ready for the commercialisation of its “We need to deploy biometrics across multiple platforms and across banks. Putting technology. Robin Arnfieldtalks to the US-based biometric readers into ATMs isn’t going to business’s president and CEO, Chaya Hendrick happen on a massive scale because of the infrastructure cost. I think ATM vendors will ounded 15 years ago, Las Vegas- developed a card that not only does the offer ATMs with biometric readers mainly headquartered SmartMetric has filed fingerprint scanning itself but is also self- for PR purposes. Similarly, adding biometric Fpatents on technology that allows it powered,” Hendrick tells CI. “Inside our card readers to POS terminals isn’t going to to embed a biometric fingerprint scanner is a rechargeable battery that recharges as you happen. Mom-n-pop stores aren’t going to into an EMV card. use the card in a POS terminal or ATM.” want to spend the money on the technology.” SmartMetric has also developed a “Another card manufacturer has developed Also, despite the card networks’ enthusiasm biometric-enabled ID card offering physical a biometric-enabled card where the cardholder for mobile payments, Hendrick is not access to buildings and doorways, and places their finger on the card to authenticate convinced that the majority of consumers are cybersecurity for network log-on. The themselves, but its card doesn’t have an going to leave their cards at home in favour multifunction credit card-sized device uses internal power sub-system. It has to get its of smartphones any time soon. “Consumer a Federal Information Processing Standards- power from a POS terminal and doesn’t work behaviour just doesn’t change that fast,” approved contact smart card chip with in the majority of ATMs,” Hendrick adds. Hendrick says. “People aren’t going to stop MiFare secure radio-frequency identification “The feedback we’re getting from banks is using plastic cards.” transmission. that they aren’t interested in issuing biometric “We have appointed two accredited Visa SmartMetric has also developed a cards that can’t be used in ATMs. Even if and Mastercard secure card lamination small, low-cost smart card reader that can their cardholders use ATMs infrequently, their and personalisation manufacturers as our be connected via USB to a computer or cards still need to work in ATMs.” representatives respectively in the US and smartphone, and can be bundled with its South America,” Hendrick continues. cards for secure card-not-present transactions INTERNAL POWER SOURCE “These two firms have decades of and for remote network access. relationships with card-issuing banks in “Our biggest development hurdle was to get A SmartMetric news release explains that, the US and South America, and they are electronic components that are thin enough as its card has an internal power source, presenting our product to banks across to be implanted inside a credit or debit card,” cardholders authenticate themselves by North and South America respectively.” The says Hendrick. “We needed a two-layer tapping their finger on the card before distributors are Colombia-based Hogier sophisticated motherboard that would allow inserting it into a POS or ATM terminal. Gartner for South America and Protec Secure the mounting of the components and remain Wherever the card is used, it will be able to Card, based in New Jersey, for North America. in the tolerance needed for an ISO-compliant both authenticate a transaction and receive a SmartMetric’s secure manufacturing plant is payment card.” recharge inside the reader. accredited by Mastercard, Visa and UnionPay Hendrick says almost 50% of the battle was “We’re working closely with a global for the initial lamination of payment cards, about the size of the components. “The other payments network,” Hendrick says. “But we’re Hendrick says. “The final-stage lamination 50% was about developing our own operating under non-disclosure agreements, so can’t say and personalisation is done by our two system and power management system,” which of the four top global cards networks is distributors, Protec and Hogier Gartner, or by Hendrick explains. “We had to put over 150 our partner.” Hendrick did, however, say the a bank’s existing bank card personalisation and adaptive components onto the motherboard. partner is not Mastercard, so CI assumes it lamination supplier,” Hendrick condludes. The lamination process and assembly were must be either Amex, Visa or UnionPay. “We don’t license cards. We actually sell the other issues we had to deal with to ensure a “We’ve been appointed as the technology cards, as we manufacture them ourselves. It’s super-thin board electronic assembly.” partner for the payments network’s biometrics so complex to manufacture our cards that a Hendrick claims SmartMetric is the only division, which deals both with biometrics conventional manufacturer couldn’t produce card manufacturer to have succeeded in for cards and biometrics for smartphones,” them – they would need to be an electronic this. “We’re the only manufacturer to have Hendrick says. shop, like we are.”<

10 | April 2018 | Cards International

CI April 2018 554.indd 10 28/03/2018 14:30:32 Feature | canada

mastercard reports double-digit growth in canada

Mastercard is seeing strong expansion in electronic payments in Canada. Iain McLean, senior VP of market development at Mastercard Canada, gives Robin Arnfielda review of the highlights of 2017, and discusses the new developments in the pipeline for 2018

n the year to 31 December 2017, active in the transit field in Canada. During readers on buses in the Quebec city of Laval. Mastercard posted a 13% year-on-year 2018, a number of Canadian public transit “Three other verticals we’re working in are Iincrease in US gross dollar volume systems will move from closed loop to open B2B payments, card payments for property (GDV) on Mastercard-branded cards in loop. For every Canadian transit scheme, open rentals, and P2P payments,” McLean says. Canada. loop is a big focus.” “During 2017, Canadian banks started to This was twice the US GDV growth rate adopt the Mastercard Send platform to better of 6% that Mastercard reported in Canada in enable their customers to send money to 2016; these figures excluded volume generated people abroad.” by Maestro and Cirrus cards. “While unable to share specific numbers, we can say that Canada has never been in MOBILE/CONTACTLESS canada has never a better position than it is now to support mobile payments growth,” a Mastercard McLean says Mastercard Canada has enjoyed been in a better Canada spokesperson tells CI. “It has the right significant growth in contactless credit card infrastructure, the latest technologies, and a transactions. position than now consumer base that is looking for what’s next “We’re seeing continual displacement of when it comes to the retail experience.” cash by cards, and also seeing double-digit to support mobile growth in the number of Canadian merchants HIGHLIGHTS accepting cards,” he says. “Compared to other payments growth markets, we’re seeing good uptake of mobile In 2017, highlights included the Canadian payments in Canada, because of the high implementation of Mastercard’s global numbers of contactless readers.” agreement with PayPal, a partnership with To accelerate adoption of mobile point-of- In April 2017, Quebec-based co-operative Canadian prepaid card issuer Stack, and the sale (mPOS) payments, Mastercard Canada financial institution Desjardins launched March 2017 acquisition of Vancouver-based works with vendors such as Mobeewave, Canada’s first pilot of contactless Visa NuData Security. Dream Payments, and Square alongside its and Mastercard credit card payments on In June 2017, Mastercard Canada Canadian acquirers, McLean tells CI. public transit buses. The pilot, operated in opened a Labs as a Service (LaaS) division “This year will see further activity in mPOS conjunction with Société de Transport de at its headquarters in Toronto. The division in the Canadian market,” he says. “We’re also Laval, involved deploying contactless card provides innovation consulting services and

www.cardsinternational.com | 11

CI April 2018 554.indd 11 28/03/2018 14:30:37 Feature | mastercard canada

MASTERCARD-BRANDED CARD GROSS DOLLAR VOLUMES MASTERCARD CREDIT, CHARGE, DEBIT AND PREPAID CARDS FY2016 FY2017 FY2016 FY2017 GDV transactions by region for Mastercard-branded cards ($bn) Mastercard credit and charge programmes ($bn) Asia-Pacific, Middle East and Africa 1,480 1,613 Rest of the world 1,810 1,958 Canada 140 157 US 724 780 Europe 1,344 1,476 Worldwide 2,534 2,738 Latin America 326 383 Mastercard debit and prepaid programmes ($bn) Rest of the world total 3,290 3,629 Rest of the world 1,479 1,671 US 1,533 1,613 US 809 833 Worldwide 4,823 5,242 Worldwide 2,288 2,504 Source: Mastercard Source: Mastercard

helps Mastercard’s Canadian clients to expand closely with our acquiring bank partners default payment option to facilitate checkout. their businesses. It combines two areas of on 3D Secure to introduce risk-based In addition, leveraging Mastercard’s Mastercard: the Labs R&D arm and the authentication of payment cards based on tokenisation services, PayPal will have the Advisors professional service arm. what is known about cardholders. opportunity to expand its presence at the In 2017, Mastercard rolled out its “During 2018, 3D Secure will be targeted point of sale, the firms say. The collaboration Masterpass at Costco.ca and at mobile users, and so-called ‘selfie payments’ will enable consumers to use their tokenised other online Canadian merchants such as Air involving facial recognition will become Mastercard in their PayPal Wallet to make in- Canada. available in Canada this year.” store purchases at contactless card-accepting Mastercard Canada will also introduce locations. Also, PayPal will allow consumers to NUDATA end-to-end tokenisation for merchants and cash out funds held in their PayPal accounts to cardholders based on its Mastercard Digital a Mastercard debit card. Vancouver-based NuData provides biometric Enablement Service (MDES) platform. “The expansion in the partnership between behavioural authentication to help businesses “This means that the PAN will never be PayPal and Mastercard creates opportunities prevent online and mobile fraud. It analyses exposed to the merchant,” McLean says. for both companies,” McLean explains. “It will transaction session and biometric indicators “Another benefit of our tokenisation platform now be easier for customers to use Mastercard within the PayPal digital environment. “We’re working with PayPal Canada to roll out the PayPal mobile app at the point of sale The expansion in the partnership across our Canadian contactless reader estate.” between PayPal and Mastercard creates SMALL BUSINESSES

opportunities for both companies In February 2017, Mastercard signed an agreement with the Canadian Federation of Independent Businesses (CFIB) to include behavioural attributes such as typing will be that card numbers held on file will help expand card acceptance among small cadence, the angle a device is held, and how automatically be updated on expiry through a businesses. the user navigates across a website or mobile lifecycle management feature. The deal involved Mastercard holding application. McLean adds: “MDES enables a connected seminars with the CFIB to educate small “NuData is designed to prevent account device –smartphone, tablet, etc. – to be a safe merchants on the benefits of card acceptance takeover and eliminate false positives,” says and secure payment form factor, just like a and the need to deploy effective security McLean. physical card. MDES is the foundation for to prevent card fraud. “The CFIB helps us NuData’s NuDetect system differentiates secure digital transactions using a Mastercard to reach the small business segment,” says authentic users from potential fraudsters based account for Masterpass, Android Pay, Apple McLean. on their online, mobile app, and smartphone Pay and Samsung Pay. With the acquisition of The CFIB agreement also involved interactions, flagging those representing NuData, Mastercard is building on its layered Mastercard offering the association’s members the highest risk. The technology assesses, approach to keep transactions secure in a a better deal on credit card interchange. scores and learns from each online or mobile digitally connected world.” “Recognising the combined buying power transaction to enable merchants and issuers to of CFIB’s 109,000 members who generate make near-real-time authorisation decisions. PAYPAL over C$3bn ($2.3bn) annually in Mastercard sales, Mastercard has agreed to match its top 3D SECURE Under Mastercard’s October 2017 deal with tier rates for CFIB members,” the CFIB says PayPal, Mastercard will be presented as a on its website. “This is a 12.5% saving over “3D Secure is a big focus for Mastercard clear, equal payment option within the PayPal Mastercard’s electronic rate for core cards, and Canada,” says McLean. “We’ve been working Wallet. Users can select Mastercard as their 22% on some premium cards.”

12 | April 2018 | Cards International

CI April 2018 554.indd 12 28/03/2018 14:30:38 Feature | mastercard canada

PURCHASE TRANSACTIONS BY REGION TOTAL BRANDED CARDS BY REGION FY2016 FY2017 FY2016 FY2017 All Mastercard credit, debit and prepaid programmes (millions) All Mastercard credit, debit and prepaid programmes (millions) Asia-Pacific, Middle East and Africa 14,754 18,063 Asia-Pacific, Middle East and Africa 615 707 Canada 2,027 2,254 Canada 48 53 Europe 20,012 23,057 Europe 432 478 Latin America 6,426 7,565 Latin America 165 176 Rest of the world total 43,219 50,939 Rest of the world total 1,260 1,413 US 24,004 24,859 US 391 412 Worldwide 67,223 75,798 Worldwide 1,651 1,825 Source: Mastercard Source: Mastercard

PRE-TAX CHARGE McLean says Mastercard has seen little integrates them with the customer’s digital adoption of surcharging by Canadian banking app. Mastercard’s Canadian business was impacted merchants since the June 2017 agreement. in 2017 by a pre-tax charge of $15m ($10m Under the Canadian Code of Conduct PREPAID CARDS after tax) in provision for litigation settlements for the Credit and Debit Card Industry, expense relating to a 2011 class action lawsuit merchants are allowed to discount for lower- Mastercard Canada sees prepaid cards as a by Canadian merchants. cost payment methods such as debit cards major opportunity for growth. It partnered Mastercard and Visa Canada each agreed or cash. “We don’t see discounting being with federally charted trust company Peoples in June 2017 to pay C$19.5m pre-tax and widely adopted in the Canadian market,” adds Trust, prepaid card programme manager to modify their No Surcharge Rule to allow McLean. Payment Source, and Canada Post in February Canadian merchants to impose checkout fees 2017 to launch the Cash prepaid on credit cards, subject to conditions designed FINTECH PARTNERSHIPS Mastercard. to protect cardholders. Using Payment Source’s LoadHub network Mastercard stated that the conditions In February 2018, Mastercard announced a at Canadian post offices, consumers can load include a surcharge cap, a requirement for global partnership with Toronto-based Dream up to seven different currencies onto their merchants to disclose their surcharging Payments, which provides a cloud-based Cash Passport card. practices, and provisions to ensure a level payment platform for merchants and banks. In September 2017, Mastercard Canada playing field with cardholders of competing The two companies will work together to announced a partnership with Canadian payment networks. “This agreement includes speed up payments of insurance claims to prepaid card issuer and program manager important safeguards around the disclosure any payment card or account. Northbridge Stack. The Toronto-based business offers and level of surcharge to protect consumers,” it noted. “All business and rule practice changes will occur after court approval of the settlement, Stack is targeting millennials who are most likely in late 2018,” a Mastercard Canada spokesperson tells CI. looking for new types of banking offering. The CFIB applauded Mastercard and Visa’s decision. “For several years, CFIB called on it’s been in beta phase, and will ramp up the credit card industry to allow merchants to surcharge some or certain types of credit cards, such as premium cards, in order to provide Financial will be the first Canadian insurance a prepaid Mastercard along with a mobile merchants additional powers to address their provider to use the Mastercard Send platform app, and what it claims is instant access to rising costs,” it said in a statement. through the Dream Payments Hub to send multi-currency and cryptocurrency mobile “The ability to add a small surcharge to claims to policyholders’ debit cards. wallets. Stack members are able to make POS accept a credit card payment – particularly Mastercard says two Canadian fintech purchases by tapping their smartphones linked for higher-cost premium credit cards – is an startups are participating in its Start Path to a Stack digital money account. important power to have, but it’s not expected program which is designed to encourage “Stack is targeting millennials who are to be widely used by smaller merchants,” said the development of fintechs. The Canadian looking for new types of banking offering,” CFIB president Dan Kelly. participants are Mobeewave and Sensibill. says McLean. “It’s been in beta phase, and will While expecting limited use, CFIB believes Mobeewave’s technology enables small ramp up in 2018.” that the ability to surcharge will be helpful and micro-merchants to accept payment on The gig economy is another important focus in safeguarding against future increases in a smartphone from customers’ contactless for Mastercard Canada, McLean notes. “In credit card fees, as merchants could decide to cards or mobile wallets without the need Canada, we’re working with a prepaid issuer take collective action in the face of larger fee for external hardware. Sensibill’s platform and programme manager called PayFare,” he increases. captures and categorises purchase receipts and says. “It is early days for that programme.” <

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CI April 2018 554.indd 13 28/03/2018 14:30:38 Feature | ctbc bank

CTBC’s solution has been to launch a foreign currency exchange machine within a 7-Eleven store in Ximending. ctbc bank: Users need only scan their ID card or passport. The foreign currency ATM provides two-way currency exchange as well as offering cash withdrawals in US dollars, Japanese the atm network yen and Chinese renminbi, with trilingual language translation in Chinese, English and Japanese. as a profit centre INTEGRATED MARKETING

CTBC has also successfully linked ATM Taiwan’s CTBC Bank was a deserved winner of best ATM transactions to the bank’s loyalty programme to reward customers as an integral part of the innovation at the ninth annual Asia Trailblazer Awards in bank’s marketing strategy. March in Singapore. As Douglas Blakey reports, CTBC’s CTBC has run a number of marketing investment in its network has transformed the humble ATM campaigns, including campaigns on Facebook, to promote the message: “The ATM is not just from a basic financial service to a profit centre a machine; it’s a great partner to satisfy your daily financial needs.” The bank offers a number of loyalty TBC Bank has been on a mission smartphone. Its latest cardless drive is the rewards for what it terms “normal” users, for a number of years to optimise launch of ATM deposits and money transfer and additional rewards for heavy ATM users. Ccustomer service via the ATM via fingerprint at all CTBC branches and at Redemption rewards on offer include movie channel. selected ATMs within 7-Eleven stores. tickets and partner retailer discounts. CTBC’s self-service innovations are not Other ATM innovations include the facility In terms of ATM market share, CTBC only helping to reshape the image of the to open accounts via VTMs within CTBC’s leads with a share of around 35% in 2017 – ATM: they are now paying off in terms of first digital branch at DongHu. up from 31% in 2013, putting it ahead of improved customer satisfaction scores and Taishin and the Post Office with 13% and 9% helping to boost the bank’s bottom line. FX INNOVATION respectively. In CTBC’s home market of Taiwan, In terms of customer feedback, the bank’s cash remains a major payment tool, As Taiwan is a foreign exchange-controlled self-service investments are paying off, with notwithstanding the accelerating trend country, there is a challenge for consumers to an ATM customer satisfaction rate of 93% in towards cash displacement. change money. 2017. To meet the challenges of changes in In the past, tourists and locals have had to CTBC is also enjoying a return on its ATM consumers’ behaviour and rising service visit banks or authorised agents – hotels or investment via increased fees revenue from expectations, combined with the growing department stores, for example – to exchange growing third-party interchange fee income influence of novel fintech innovations, CTBC foreign currency. However, such institutions and new revenue streams from electronic came up with what it terms the community only provide the service during office hours. ticket sales. < ATM centre. To expand its self-service footprint, CTBC installed community ATM taiwan atm market shares atm revenue growth centres with its strategic alliance partner, % Average CTBC ATM inter-bank 7-Eleven, the biggest convenience store chain 50 2013 2017 transfers per day per ATM in Taiwan. 30 Self-service innovations in 2017 include 40 multi-currency ATMs, video teller machines VTMs), and electronic ticket purchase. The 30 ATM service enhancements complemented 25 other firsts in the local market, including 20 fingerprint biometric cash withdrawal and coin deposit machines. 20 CTBC has blazed a trail in promoting 10 cardless withdrawal in Taiwan. It was the first – and remains the only – bank in Taiwan 0 15

to offer ATM finger-vein withdrawals using CTBC Taishin Others 2014 2015 2016 2017 Hitachi’s VeinID technology. It has also Post Office Source: CTBC Source: CTBC pioneered cardless ATM withdrawals via

14 | April 2018 | Cards International

CI April 2018 554.indd 14 28/03/2018 14:30:40 industry insight | adyen

more appropriately when a transaction is e-commerce: refused. Suspicion of fraud The most appropriate use of 05: Do Not Honour would be to decline transactions due understanding to suspicious card activity. 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 05: do not honour to a combination of characteristics. For example, a high-value transaction at 05: Do Not Honour is one of the most common responses 3AM from a foreign-based merchant with no received from credit card issuers for declined e-commerce extra authentication may trigger too many issuer risk checks. These types of refusal will, payments. This refusal can represent anywhere from 10% again, be put into the 05: Do Not Honour to 60% of refused transactions, depending on the market. category, with merchants losing out. Chris Laumans, Adyen product owner, writes While issuers may be able to give specific reasons why a transaction was refused, they o Not Honour may be the largest Not Honour and low levels of Insufficient Funds have no way to communicate this to the frustration for any merchant that refusals suggest one masquerading as the merchant and are forced to pick a response Dregularly analyses their payment other. Through identifying these cases, Adyen from the ISO 8583 standard. data, and although it can account for the can help merchants optimise retry strategies. Some astute merchants might point out majority of refusals, it is also the vaguest that issuers should be able to use 59: Suspected reason, leaving merchants and customers at Refusal due to credential mismatches Fraud in these cases. Some issuers may actually a loss about how to act in response. Although the words Do Not Honour are not be using this reason, however merchants While there is no easy, single answer on the most telling, other data points can be and acquirers do not know this as VisaNet what this refusal reason means, there are clues for the refusal. Obvious things are the remaps all 59: Suspected Fraud refusals to 05: several suggestions as to what could cause it. CVC response, card expiry date, and to a Do Not Honour. The reason for this is, again, lesser extent, the AVS response. Issuers will likely legacy – to protect storeowners in the Insufficient funds in disguise frequently default to using 05: Do Not Honour POS environment and avoid uncomfortable In probably half of cases, 05: Do Not Honour as the catch-all bucket for other denials, even situations with the shopper in front of them. is likely just an Insufficient Funds refusal in if a more appropriate reason may be available. disguise. Some issuers or processors do a poor In addition to data points at the transaction Collateral damage job of returning appropriate refusal reasons level, a lot can be learned from looking at You are likely not the only merchant that a to merchants – due both to the use of legacy aggregated data. In some cases, the 05: Do Not given shopper interacts with. Regardless of systems at the issuer side, and there being no Honour refusal received may be particular to, how good your business or how clean your mandates or monitoring by the schemes, letting for example, a merchant’s business line or the traffic, a shopper’s (recent) history with other issuers continue to use it as a blanket term. type of transaction they are trying. merchants will influence the issuer’s decision Looking at data from various banks, it is Adyen’s Inferred Refusal Reason on a transaction. For lack of a better reason, easy to see how Do Not Honour and Insufficient functionality is designed to identify the likely the catch-all 05: Do Not Honour refusal can, in Funds can be used interchangeably. Records reason for a refusal by leveraging its PSP-wide some cases, be seen as collateral damage. that show disproportionately high levels of Do insights. This enables merchants to respond If the shopper, coincidentally, just made a large purchase on a high-risk website or went refusals by market refusals by type on a shopping spree before reaching your store, it is possible the issuer may decline the Percentage of refusals due to Refusals by type for five UK card issuers 05: Do Not Honour by market transaction at that moment. In these cases, again, having again the right billing and retry Do Not Honour Insufficient Funds Other Spain strategy can be crucial to minimising the UK bank 1 number of 05: Do Not Honours received. Australia UK bank 2 05: Do Not Honours represent a large cost to merchants, and anything to reduce their Brazil UK bank 3 number will go a long way to improving

UK UK bank 4 customer satisfaction and revenue streams. A multi-pronged approach is advised: traffic US UK bank 5 should be kept clean to minimise the number 0% 50% 0% 20% 40% 60% 80% 100% of suspicious transactions, and a smart retry strategy should be implemented using all Source: Adyen Source: Adyen information available. <

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CI April 2018 554.indd 15 28/03/2018 14:30:42 country snapshot | poland

POLAND

country snapshot: poland

Government initiatives to displace cash paying off

oland is one of the most advanced transaction volume in 2017. Payment card transactions during the period 2013- and innovative markets in Europe, use is rising as consumers enthusiastically 2017. The figure more than doubled as Poffering consumers broad access embrace new technology, moving from consumers preferred debt-free payments to the latest technology in electronic cash to payment cards to contactless. and avoided unnecessary expenditure. payments. Although cash remains the dominant Government initiatives to promote Nevertheless, cash remains very popular, means of payment in Poland, there was paperless and cashless transactions, and accounting for 61.5% of the total payment huge growth in the volume of debit card the launch of new mobile POS technology will boost the adoption of electronic value of credit tRanSfers value of payment cards payments in the country. The government has also been

bn bn encouraging businesses to open bank 0,000 100 accounts for employees, and salaries are now paid into bank accounts. It is also 0 1,000 focusing on using electronic modes of payment to distribute pensions and other 0 retirement benefits. 10,000 0 DEBIT CARDS DRIVE MARKET ,000 0 The growing banked population has led to rising debit card penetration. 0 0 According to the World Bank, Poland 01 01 01 01e 01f 01 01e 01f has made substantial progress in terms of financial inclusion, with the percentage of Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData the Polish population aged 15 or above

16 | April 2018 | Cards International

CI April 2018 554.indd 16 28/03/2018 14:30:55 country snapshot | poland

with a bank account rising from 75.4% in Debit card shares by issuer Debit card shares by scheme 2013 to 83.1% in 2017. The high banked population and consumers’ general aversion to debt have made debit cards the preferred card type K an in Poland. Polish consumers are gradually olsi .% switching from cash to debit cards, and thers used them an average of 117 times for .% Mastercard .1% isa POS transactions in 2017 – almost double .% the amount for pay-later cards. man 1.% The rise in contactless card acceptance an has supported this trend. A number of eao 1.1% banks including PKO Bank Polski, mBank, Bank Zachodni WBK and Bank Pekao offer contactless debit cards. PAY-LATER CARDS Source: GlobalData Source: GlobalData pay later shares by issuer pay later shares by scheme The growth of pay-later cards was halted at the end of 2010, as non-performing loans rose. thers K an .1% The T-Recommendation issued by olsi 1.1% the Financial Supervisory Commission in Poland took effect in August 2010, rdit gricole restricting consumer access to bank 1.% isa Mastercard .% loans and consumer credit; consequently, thers .% .% consumers faced more stringent scrutiny Santander when applying for credit cards. 1.% The change in regulation imposed additional requirements on banks to check the creditworthiness of new customers. Issuers also deactivated inactive cards, resulting in a decline in the number of Source: GlobalData Source: GlobalData credit cards in circulation. As the recommendations forced banks to adopt a cautious stance towards card The relatively low cost of operating and funds can be loaded through online issuance, they turned their attention to is one of the primary reasons attracting transfer or by paying with cash at any of increasing credit card use. Consequently, several foreign e-commerce giants to the bank’s branches. reward credit cards have started to gain Poland. In view of the growing e-commerce traction, with the majority of issuers such With the growing availability of various market, banks are also offering prepaid as Bank Pekao, PKO Bank WBK, and alternative payments such as PayPal, , cards targeting online shoppers. For ING Bank Śląski offering benefits such and Android Pay, and with banks launching example, mBank offers a Visa-branded as flexible repayment options, a 56-day exclusive mobile apps and virtual cards for prepaid card called Virtual eKarty. Similarly, interest-free credit period, discounts, online shopping, e-commerce is expected ING Bank Śląski offers the Visa Virtual card, reward points, and cashback offers. to continue its robust growth over the which can be ordered online and costs Banks are also offering an instalment forecast period. $4.80. For customers with a Direct 18–26 facility to convert large-value purchases account, the card is issued free of charge. into monthly instalments. For example, LOW PREPAID PENETRATION The growth of municipal cards is also Bank Pekao offers a Mastercard-branded expected to drive the prepaid card market. credit card, Flexi, that enables card holders With the growing popularity of contactless Municipal cards are issued by PKO Bank to convert purchases in the range of cards, especially among the young Polski, in partnership with Mastercard. PLN300–5,000 ($71.70–1,194.40) into population, banks in Poland are designing The municipal card is designed to provide three interest-free instalments. contactless prepaid cards for this segment. local governments, universities, and other For instance, PKO Bank Polski offers the institutions with a convenient means of E-COMMERCE GROWTH Mastercard-branded Speeder PKO Junior disbursing benefits. A bank account is not contactless prepaid card for children under required to obtain the card. Beneficiaries The Polish e-commerce market almost 13. Card holders can also opt for a prepaid can also withdraw money from ATMs and doubled between 2013 and 2017, in terms contactless sticker. The card can be used to make payments at any POS that accepts of transaction value. make both in-store and online payments, Mastercard in Poland. <

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CI April 2018 554.indd 17 28/03/2018 14:30:58 country snapshot | denmark

DENMARK

country snapshot: denmark Danish cashless drive on track

he Danish cards and payments Denmark is increasing its efforts to the peer-to-peer (P2P) payment space. industry is well developed, and become a cashless society, backed by With preference for mobile proximity Tits consumers are prolific users of government support for, and promotion of, and contactless payments gradually payment cards. electronic payments. Danish consumers are growing among Danish consumers, there is The country has the highest frequency of typically very comfortable with payment an opportunity for providers to emphasise use in the world, with 210 transactions per cards and mobile phones, with Dankort the their advantages over traditional payment card in 2017, with use of cash continuing most commonly used card scheme in the tools in order to boost interest and increase to decline. country and MobilePay leading the way in overall adoption.

value of credit tRanSfers value of cheque payments value of payment cards

bn bn bn 1,00 10

1,000 100

00 0

00 0

00 0

00 1 0

0 0 0

01 01 01 01 01 01e 01f 01 01e 01f 01e 01f

Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData

18 | April 2018 | Cards International

CI April 2018 554.indd 18 28/03/2018 14:31:07 country snapshot | denmark

DANKORT DOMINANCE Debit card shares by issuer Debit card shares by scheme

Dankort is the national debit card scheme, and accounted for 76% of total debit card isa transaction value in 2017. 11.% anse an Dankort operates under a zero- .% interchange-fee model, and has dominated Mastercard 11.% the market since its introduction in 1983. thers .% However, Mastercard and Visa are also strengthening their presences in ordea anort 1.1% .% the country. To facilitate international Jyse payments using Dankort cards, banks offer an Visa/Dankort co-badged cards, which can 10.% be used as a Dankort card in Denmark and as an international Visa card outside the

country. Source: GlobalData Source: GlobalData

E-COMMERCE pay later shares by issuer pay later shares by scheme

E-commerce posted a CAGR of 17% in the four-year period to 2017 to reach thers DKK115.4bn ($16.33bn) in 2017. .% According to PostNord’s E-Commerce in thers the Nordics report, Denmark has the third- .% anse an highest percentage of online shoppers in .1% the Nordic region, with 63% of consumers shopping online at least once a month in yredit 2016. Payment cards and bank transfers 1.% Mastercard 0.1% remain the preferred payment methods, ordea 1.% accounting for 76.3% of the e-commerce transaction value in 2017. Digital and mobile wallets account for nearly 20%. CONTACTLESS EMBRACED Source: GlobalData Source: GlobalData

Contactless payments are gradually habits due to growing debt, resulting in at a CAGR of -3.3%. However, a forecast growing in Denmark. lower usage of credit cards. Household CAGR for the period 2017-2021 of 1.6% The first contactless Dankort was debt in Denmark was among the highest in will see the total figure climb to 134,707 launched in Denmark in 2015; by the the OECD according to its 2016 Denmark in 2021. end of 2016, more than half of all issued Economic Survey report. The ratio of With a growing preference for Dankort cards had a contactless feature, household debt to GDP in Denmark was contactless payments, the number of POS and contactless payments accounted for 127 – three times higher than disposable terminals is anticipated to rise gradually. more than 15% of all Dankort payments income – with the majority held in The country’s expanding payment card according to the central bank. mortgages. market has attracted new entrants to However, payment providers still need Many Danish consumers have the Danish POS space. For instance, in to educate consumers on the benefits an international credit card such as September 2016 Dagrofa – one of the and advantages of contactless payments, Mastercard or Diners Club, typically as country’s largest grocery stores – replaced stressing the technology’s ease of use and a supplement to a Dankort card, or as a all its terminals with over 2,000 new convenience compared to PIN-based cards. company card. Danes use international terminals that enable consumers credit cards less frequently than other to make contactless card and mobile SUBDUED GROWTH payment cards. In 2016, around four in 10 payments. payments with international credit cards Meanwhile Danish startup Shopbox Overall, Danish consumers are not prolific were made outside of Denmark, according introduced a cloud-based POS solution users of pay-later cards. to the central bank. in April 2016, which provides faster Frequency of use per card per year stood transaction processing at coffee shops, at 33.6 in 2017, while Sweden and Norway CARD INFRASTRUCTURE clubs and sports arenas, where transaction recorded frequencies of 60.7 and 34.1 speed is an essential factor in maximising respectively. Consumers in Denmark have The number of POS terminals fell between footfall. Shopbox’s POS solution runs on become more prudent in their spending 2013 and 2017, from 144,978 to 126,584 both iOS and Windows-based tablets. <

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CI April 2018 554.indd 19 28/03/2018 14:31:11 Country snapshot | netherlands

NETHERLANDS

country snapshot: netherlands Debit cards continue to dominate Dutch market

he Dutch payment cards market is Pay-later card payments are not payment channels, especially local brand mature, with a high penetration rate popular due to a cultural aversion iDEAL, which is backed by wide acceptance Tof 1.9 cards per inhabitant. towards debt. Dutch consumers are very and a convenient user experience. The market is dominated by debit cards, comfortable both with using debit cards Growth in the payment cards which users perceive to be secure, cost- – they accounted for 90% of the overall market is supported by well-developed effective and consumer-friendly. transaction value in 2017 – and online infrastructure, with one POS terminal per

value of credit tRanSfers value of cheque payments value of payment cards

bn bn bn ,000 .0 00

0,000 1. 10

1,000

1.0 100

10,000

0. 0 ,000

0 0.0 0

01 01 01 01 01 01e 01f 01 01e 01f 01e 01f

Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData

20 | April 2018 | Cards International

CI April 2018 554.indd 20 28/03/2018 14:31:22 Country snapshot | netherlands

34 individuals. Growth in the e-commerce Debit card shares by issuer Debit card shares by scheme market is attributed to high levels of isa 1.% internet and smartphone penetration. In spite of a high level of consumer thers comfort with established payment .% instruments, recent developments in mobile proximity payments and contactless mro .% technology by ING, Rabobank and ABN .% Amro will see these payment options gain

traction among Dutch consumers. Mastercard .% aboban DEBIT CARDS OLD FIRM 1.%

Debit cards remained the most widely used payment card in the Netherlands,

accounting for 90% of the total payment Source: GlobalData Source: GlobalData cards transaction value in 2017. The migration of low-value cash pay later shares by issuer pay later shares by scheme transactions to debit cards was a key trend, merican and according to the Dutch Payments press .% Association, the number of debit card transactions valued at under €10 ($12.45) thers .% increased by 17.2% in 2016. Banks and other financial service isa institutions signed the Nadere aboban mro 1.% .% .% Overeenkomst II agreement in September Mastercard 2014 to reduce cash usage by 2018, by .% converting cash transactions to debit transactions. .1% CONTACTLESS PROMINENCE

The Netherlands has recorded an uptake Source: GlobalData Source: GlobalData in contactless payments. According to the Dutch Payments Association, the number of contactless payments in 2016 increased SMALL PAY-LATER MARKET and reached 0.59% in 2016; it is expected by almost five times to 630 million to remain stable at 0.59% over the four- payments, compared to 135 million in Pay-later cards form a relatively small year period to 2021. 2015. In December 2016, 24% of all debit market, accounting for only 9.9% of the With the implementation of the EU card payments were contactless. total payment cards transaction value in interchange fee cap from June 2015, use of ABN Amro replaced all its payment cards 2017, primarily due a consumer preference credit cards at merchant outlets is expected with contactless functionality in December for debt-free payments. Although banks to rise. 2015. Similarly, ING Bank and Rabobank started issuing credit cards in the early are replacing older cards with contactless- 1980s, the market’s growth has remained MODERATE POS GROWTH enabled payment cards. low in comparison to debit cards. In many cases, overdraft facilities have The Netherlands continues to report THE IDEAL ALTERNATIVE reduced the need for credit cards. ING impressive growth in its POS network, with Bank offers an overdraft facility of between the number of POS terminals recording a iDEAL remains a market leader of Dutch $526.10 and $2,104.50 quarterly; and CAGR of 19.1% between 2013 and 2017. third-party payment services. The company between $2,631.70 and $26,306.40 on a Dutch retailers are increasingly installing currently serves 10 million customers continuous basis. Similarly, De Volksbank mPOS terminals. mPOS solution provider through 100,000 merchants. The service is offers an overdraft facility of $2,630.60 for iZettle launched the iZettle app card reader offered by 10 issuing and seven acquiring current account holders. in the Netherlands in November 2014. banks as well as 59 collecting payment Relatively high transaction costs for The company also introduced the iZettle service providers. merchants previously prohibited retailers Card Reader Lite in February 2015, which In total, 283 million payments worth from accepting credit card payments; the enables retail businesses to process chip- €23.7bn were successfully processed average merchant service charge was and-PIN card transactions. The business through iDEAL in 2016. The average 2.2% per transaction during 2010-2012. launched a mobile contactless card reader transaction amount in 2016 was €81.40. However, it started to decline from 2013 in February 2016. <

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survey respondents reported a 25-50% uncollectable: increase in card testing, where criminals test the fraud rules of banks to find out what limits and purchase categories will result in a blocking of a card. An analytic technique that is gaining favour is your bad debt as the fraud environment shifts to one of data breaches and identity theft is the identification of the common point of purchase for compromised cards. Here, analytics is used to A fraud problem? link fraudulent transactions and pinpoint the sources of leaked card information. A decade on from the 2008 financial crisis, levels of consumer credit delinquency are rising worldwide. This should not be 3. Develop your understanding of customers a surprise, given that global debt is also soaring. Matt Cox, Identity-proofing should not stop when an senior director – fraud, cyber and compliance at FICO, offers applicant becomes a customer. Financial four top tips to combat fraud and reduce bad debts institutions need to constantly iterate across their customer base to understand how each ccording to a report in the • Synthetic identity fraud: The making of customer’s identity risk changes over time Financial Times, debt is currently new identities by blending elements from given the introduction of new data – how A at a record high in the US, multiple individuals. Fraudsters will apply they transact, what devices they use to log into persistently high in Europe, growing in for accounts using these fake identities their account, and what new applicants they Asia, and rapidly increasing across broader to build validity for their new personas. share information with. emerging markets. A survey of attendees at the recent FICO By continuously gathering information Americans now collectively owe $1trn in APAC Fraud Forum revealed that between across each customer lifecycle, financial credit card debt, and the average Briton owes six and ten banks in the region are institutions will gain new intelligence that £8,000 ($11,310), excluding mortgage debt. experiencing synthetic identity fraud. they might be able to use or act upon in the Although this development has stemmed future, for example, to improve the detection from a combination of factors – including All these figures point to the escalating of transactional fraud, account takeover shrinking real wages, poor spending habits scale and severity of application fraud. As (ATO), and payments fraud. and a lack of savings, one has not been given prevention techniques have improved to stop enough attention: fraud. activities such as card skimming and card- 4. Share intelligence bilaterally Collection techniques sometimes fail present fraud, criminals are having to change At present, many financial institutions look because they have been applied on fraudulent their tactics to get credit cards. at different fraud types in silos, which helps accounts misclassified as bad debt. Without They are helped by the general availability fraudsters take advantage of weaknesses at a fail-proof way of separating fraud from of profile information on social media, which any point. By looking at fraud in a more genuine inability to pay, financial institutions they are supplementing by penetrating poorly holistic manner across the entire enterprise, must be aware of the latest fraud trends, such defended mobile apps that collect and store institutions can be better prepared to stop as the recent surge in application fraud, to stay personal information. Furthermore, due to fraud at all stages of the customer and ahead of the criminals. the increase in data breaches over the past payment lifecycles. For example, knowledge An umbrella term for identity-based fraud, year, millions of individual email addresses, on transactional fraud detection and ATO application fraud includes: passwords, financial data, health history and root cause analysis can also inform application • Identity theft: The practice of using more are now for sale on the Dark Web. fraud controls. another person’s name and personal data What should financial institutions be doing to obtain credit, loans and other financial to combat fraud and lessen their pile of bad With both bad debt and application fraud services; debt? Here are four top tips: on a meteoric rise, financial institutions must • First-party fraud: First-party fraudsters take full advantage of the tools and data are applying for credit in their own names, 1. Get agile at their disposal. Although it is difficult to but without any intent of payment. FICO Choose an agile fraud solution that is also determine whether an outstanding payment is research has shown that first-party fraud able to address weaknesses such as application bad debt or application fraud, implementing losses can reach up to ten times the size fraud. This will ensure that you meet customer more measures to combat the latter could of third-party fraud (fraud using someone expectations for speed and convenience while reduce instances of the former. else’s stolen card details). Depending on securing payment transactions and loan Critical to such a strategy is a unified data factors including region, a bank’s risk approvals. hub that brings together the key information appetite, channels, target market, maturity from all data sources. This will form the of fraud control measures and portfolio 2. Deploy behavioural analytics foundation upon which a layered and size, first-party fraud can comprise Fraud rings are gaining in sophistication. For integrated approach to fraud prevention can between 10% and 35% of all bad debt; example, half of our APAC Fraud Forum be built. <

22 | April 2018 | Cards International

CI April 2018 554.indd 22 28/03/2018 14:31:25 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF PRIVATE BANKING Private Banking and Wealth Management Germany 2018 24th April 2018 ∤ Villa Kennedy, Frankfurt Our launch Private Banking & Wealth Management: Germany 2018 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.

Key Issues

∤ How is the regulation change set to challenge industry practices? ∤ What is the future of Europe without Britain? ∤ How can the private banking industry in Germany rival its neighbours? ∤ Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? ∤ How can robo-advisors present opportunity to traditional wealth managers? ∤ How are FinTech start-ups rivalling the market? ∤ How can firms remain cyber safe and raise their security profile? ∤ Can collaboration between incumbents and FinTechs be the next big thing? ∤ Discovering Germany’s best kept investment secrets ∤ How can banks leverage technology to strengthen the human relationship? ∤ An insight into the next generation and how they are shaping the industry

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Page 3 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF RETAIL BANKING Retail Banking: London 2018 10th May 2018 ∤ London

Retail Banking: London 2018 brings together high-street banks, new market entrants, financial professionals and industry disruptors in an active discussion of the key issues facing the industry: new regulation, digitalisation and tech innovations that are shaping the future of retail banking.

Key issues:

∤ Open Banking and the main results of the ∤ Digital security and cyber crime first stage implementation ∤ RegTech - Leveraging technology ∤ How Millennials are shaping the future innovation to comply with regulation of payments ∤ Optimising customer experience ∤ Artificial intelligence and machine learning in today’s competitive environment Technophiles v Technophobes - ∤ Innovation in branch transformation ∤ meeting the needs of different customers

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Page 7 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580