IS PLASTIC DISAPPEARING? the Cards International Prepaid Summit

November 2015 Issue 525 www.cardsinternational.com

IS PLASTIC DISAPPEARING? The Cards International Prepaid Summit

• ANALYSIS: Card Fraud • INTERVIEW: ITRS • GUEST COMMENT: Peter Pop • COUNTRY REPORTS: Malaysia, China & Egypt

CI Nov 525.indd 1 04/12/2015 14:40:17 Multichannel digital solutions for ﬁ nancial services providers

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IE RBI final design.indd 1 17/09/2015 11:21:32 Cards International EDITOR’S LETTER

CONTENTS EDITOR’S LETTER 3S: NEW DIGEST 6 FEATURE: CARDS INTERNATIONAL Well done the banks, card issuers, PREPAID SUMMIT EUROPE The annual Cards International payment processors et al Prepaid Summit Europe conference and awards, title sponsored by Visa Europe at the Principe di Savoia lack Friday is out of the way for another Competition between the two leading schemes is hotel, Milan. hosted a wealth of industry experts to discuss the pre- year without any mishap. fierce, with very little difference between Visa and paid market in Europe, followed by Just imagine the PR nightmare if the MasterCard in terms of card numbers. awards. Anna Milne writes weight of traffic had caused even a momen- With regard to payment value, however, Visa is 10 INTERVIEW: ITRS B by far the larger scheme, and gained a percentage tary blip on the busiest shopping day of the year. Anna Milne speaks to Guy Warren, CEO of ITRS, about monitoring in the E-commerce grew strongly in November despite point of value share in 2014, while MasterCard financial sector and the caution that modest overall spending during the month. lost a percentage point. companies must take to stay safe. In the UK, Household spending continued to Are firms doing enough? increase in November, according to the latest Visa Visa and MasterCard have almost the same share 11 ANALYSIS: CARD FRAUD Europe Consumer Spending Index data though of card numbers In the words of John Marsden, the annual rate of growth slowed from +2.1% in With 42.9% of payment cards in issue in Europe, identity and fraud expert at Equifax, ‘fraudsters always think of a way’. So October to a 21-month low of +1.1%. Visa is slightly ahead of MasterCard (42.6%). how can financial institutions stay According to Visa, channel data indicated a MasterCard’s share rose from 41.9% in 2013, as one step ahead? Patrick Brusnahan robust rise in e-commerce spending in November a result of a strong performance in a number of investigates (+4.1% on the year), as has been the case for just markets including Russia and Ukraine, as well as 12 REPORT: THE RISE OF CONTACTLESS over two years. Meanwhile, face-to-face spending the Nordic and Baltic countries, while Visa’s share Patrick Brusnahan reports on the fell modestly in November (-1.5%), after a slight remained largely unchanged. exponential rise of contactless payments in the United Kingdom. increase in October (+1.0%). RBR’s figures show that Visa is the larg - Can the solution keep up its Kevin Jenkins, UK & Ireland Managing Direc- est scheme in 19 countries in the region, while immense increase in usage? It tor Visa Europe said: “All eyes were on Black MasterCard is the largest in the remaining 14. certainly looks like that Friday but spending for November as a whole The other international schemes (American 13 ANALYSIS: EMV IN THE USA confirms the trends we saw at the tail end of the Express, Discover, JCB and UnionPay), account Agreed by the US card networks, month. Online spending surged, driven by dou- for less than 2% of the regional card base, the EMV liability shift began to be enforced on October 1, 2015. Who ble digit spend increases on the big weekend amid unchanged since 2013. wins thanks to this change in pace? continued appetite for mobile, laptop and tablet A significant, though declining, proportion of Is it the merchants, the consuemrs shopping.” cards are domestic bank card schemes or private or the card issuers? Are there any winners? Patrick Brusnahan writes Meantime, as CI goes to print, interesting stats label cards. come to hand courtesy of RBR. Visa accounts for 54% of card expenditure, 14 COUNTRY SURVEY: MALAYSIA MasterCard and Visa now account for 86% and holds a greater lead over MasterCard than 16 COUNTRY SURVEY: CHINA of all payment cards in Europe, as domestic and for card numbers. 18 COUNTRY SURVEY: EGYPT private label schemes continue their decline. RBR Payment cards are used frequently in several of 20 GUEST COMMENT: PETER POP reports that €9 out of €10 spent using a payment the markets where Visa cards are predominant, for Peter Pop looks at that constant topic of debate, Big Data. Is it still card in Europe was made on a Visa or Master- example France and the UK. something to be discussed or is it Card-branded card – the highest share of any Furthermore, Visa has a high share of debit now commonplace? region. cards in the region, which typically receive greater There were 1.5 billion payment cards in circu- usage than pay-later cards. lation in Europe at the end of 2014 which were Douglas Blakey used for payments worth €2.9trn during the year. [email protected]

Editor: Douglas Blakey Sub-editor: Tom Langfield For more information on Timetric, visit Tel: +44 (0)20 7406 6523 our website at www.timetric.com. As a Director of Events: Ray Giddings Email: [email protected] subscriber, you are automatically entitled to Tel: +44 (0)203 096 2585 online access to Cards International. For more Financial News Publishing, 2012 Senior Reporter: Anna Milne Email: [email protected] information, please telephone +44 (0)20 Registered in the UK No 6931627 Tel: +44 (0)20 7406 6701 7406 6536 or email customer.services@ ISSN 0956-5558 Email: [email protected] Head of Subscriptions: Sharon Howley timetric.com Tel: +44 (0)20 3096 2636 London Office Unauthorised photocopying is illegal. The Reporter: Patrick Brusnahan Email: [email protected] 5th Floor, contents of this publication, either in whole or Tel: +44 (0)20 7406 6526 Farringdon Place, part, may not be reproduced, stored in a data Email: [email protected] Sales Executive: Alexander Koidis 20 Farringdon Road, retrieval system or transmitted by any form or Tel: +44 (0) 203 096 2586 London, EC1M 3AP means, electronic, mechanical, photocopying, Asia Editorial: Xiao Ann Lim Email: [email protected] recording or otherwise, without the prior Tel: +65 6383 4688 Asia Office permission of the publishers Email: ann.lim @timetric.com.sg 1 Finlayson Green, #09-01 Customer Services: Singapore 049246 Group Publisher: Ameet Phadnis Tel: +44 (0) 20 3096 2636 Tel: +65 6383 4688 Tel: +44 (0)20 7406 6561 or +44 (0)20 3096 2622 Fax: +65 6383 5433 Email: [email protected] Email: [email protected] Email: [email protected]

www.cardsinternational.com November 2015 y 1

CI Nov 525.indd 1 04/12/2015 14:40:19 NEWS: COMMENT Cards International

Don’t write cash off just yet Calm down with all this digital currency talk and don’t make the mistake of writing off cash just yet, it’s still got plenty of fight in it.Alexander Atkins writes ecently I went for a haircut in a nice establishment that in the financial world. I had almost come to believe that cash was was very professional and well decorated with an upmar - already extinct. ket look. After a satisfying trim, I went to pay and upon Yet whilst I was standing there, handing over my crisp note, I pulling out my card, was told that they only accept cash. thought about paper currency’s supposedly fast diminishing role in R our society. To be honest, I was a little shocked. The impressive looking salon appeared the very place to have a card machine. Yes, I Not only do I recognise why many still use cash, but I understand made an assumption based on looks but most professional, up why cash is still a better option, be you a big or small business. It’s market services and retailers will have a card machine these simple, easy and, most importantly, it’s tangible. Concrete. Unlike days. card payments or even cheques (which feel almost obsolete them- It then hit me that I had not drawn cash in over two weeks! When I selves), its visible earnings. Cold, hard cash. had needed to pay, it had been in nice bars or in big chain supermar- From a customer point of view it’s easy to keep track of your spend- kets where you are guaranteed to be able to make your purchase by ing’s. The plastic option means there’s so much card slapping and pin card. I hadn’t seen old ‘Lizzies face in days, be it on paper or metal. punching that it’s difficult to remember how much you’ve spent. With Then I realised that the hairdresser’s lack of a like for plastic should cash, you know what was in your wallet at the beginning of the day come of no surprise. and what’s in it at the end. Of course there are still thousands of places where you can only Yes, maybe it is more of a security concern, but with so much worry pay cash, from street vendors to small businesses, even various infor- over online security, what’s the difference between a mugging in the mal jobs such as handy man work or gardening. It’s not like they can street and an online hack into your bank account? At least on the whip out a wireless card machine after mowing the lawn for a tenner, street they can’t take ALL your money. or whilst you’re buying a single orange from a rickety stall that will So I’ve change my mind. I’m not writing cash off just yet. I’ve read be in another part of London by lunchtime. so much recently about the new card readers, wireless payments, tap Besides many of them don’t need or want plastic payment or digital & go, wearables, keychains, fobs and much more that are supposedly money. Card machines can cost anywhere from ten pounds to 200 taking Europe by storm. pounds, and for the small business man trying to keep afloat, it’s just But they’ve got an uphill battle and I’m pleased, not only because not a necessity. In the case of my hairdressers, the answer to my ‘why I’ve realised how important cash still is to many, but also because it’s no card?’ was as simple as ‘what’s the point?’ traditional. As I opened my mouth to respond to this they quickly pointed to It’s been the basis of the financial industry in parts of the world for the ATM 10 metres from their door, which I, in my digital dreamland, easily over 1000 years and I think it’s a long way off from extinction. had completely missed. So my new resolution is to always have some cash on me. Maybe that Maybe it had something to do with not needing it, or maybe it was way, I won’t be having any more calls from the bank telling me I’ve a week’s worth of reading about how fast digitisation is taking over overdrawn on my account again. < Unwanted gifts As we near the holidays, I wonder if certain cards are more of a curse than a gift. Patrick Brusnahan writes

s Christmas approaches, I dread to predict the amount of States. gift cards that I will receive. Described by my father as In 2014, the UK spent £5.4bn ($8.1bn) on gift cards and vouchers an ‘extremely limited form of cash,’ I wonder how much (according to the UK Gift Card & Voucher Association). This was an A store credit I will get for H&M, Waterstones or HMV’s 8% increase on the previous year. dwindling branch network. In addition, while increased mobile payment adoption might sug- However, I may be the only person to hold this sense of doom and gest the standard gift card’s days are over, Android Pay and Samsung gloom. Pay both accept gift cards to be used as payment, with Apple Pay set to accept them in due course. ‘Tis the season Call me stubborn, but I probably still won’t become a fan. The According to giftcards.com, over $100bn is spent on gift cards annu- lifecycle of gift cards in my possession is very simple. ally with 93% of American consumers purchasing or receiving at I receive the card, feel disappointed, and then keep them in my least one gift card a year. wallet until a day before expiry, at which point, I begrudgingly buy In addition, consumers spend an average of $213 per year on these something. cards. This time of year is a peak time for this market with consum- Many do not even go that far with the industry suggesting that ers expected to spend nearly $26bn on gift cards this holiday season. £250m is wasted through unused cards every year. This is particularly good news for retailers. According to the site’s Call me The Grinch if you will, but gift cards just are not for me, statistics, 72% of customers will actually spend more than the value but I will do the polite thing as I do every Christmas, smile and say : of their card, an average of 20% more than the gift card’s value. “Thank you, I love going to WHSmith.” This level of consumption is not limited to the giant of the United It’s the holidays after all, there’s no need to be rude. <

2 y November 2015 www. cardsinternational.com

CI Nov 525.indd 2 04/12/2015 14:40:19 Cards International NEWS: DIGEST

PRODUCTS Stonegate Bank offers Debit MasterCard for use in Cuba

US-based lender Stonegate Bank has joined they are travelling under one of the 12 cat- their cards on the island was left to the forces with MasterCard to offer US-issued egories authorised by US regulations, such as respective bank, according to federal rules. debit cards for use in Cuba. religious and professional purposes. Stonegate Bank president and CEO Dave The Debit MasterCard can be used in any The bank intends to eventually expand the Seleski said: "This is the first step in relieving the 10,000 hotels, restaurants and other card- use of the cards to ATMs in 2016. burden of US travellers carrying cash when trav- accepting merchants across Cuba. Users of MasterCard eliminated its network block elling to Cuba and another step in normalising the new card will initially have to sign for all on US-issued cards being used in Cuba in commercial relations between the two countries. Debit MasterCard purchases. March 2015. "Hopefully more issuing banks will help In addition, prior to visiting Cuba, the Since then, the decision on whether a this process by approving credit and debit bank's cardholders will have to ensure that bank's cardholders will be allowed to use cards as well."<

STRATEGY DISTRIBUTION BBVA Compass allows credit card users to Apple Pay introduced redeem rewards in real time in Australia for AmEx BBVA Compass has enabled its credit card Imagine buying a new TV and finding out, cardholders clients to receive real-time redemption of via an alert, that you can offset the amount rewards earned on qualified purchases made of the purchase using your cash rewards Tech giant Apple’s payments platform Apple at any retailer. before you even leave the store." Pay has been launched in Australia for The patent-pending service has been intro- The added feature in BBVA Wallet will American Express (AmEx) cardholders. duced with the launch of the bank's mobile allow the bank's cardholders to access With this move, AmEx becomes Austral- wallet BBVA Wallet, which offers clients an details, individual credit and debit card ia’s only credit card company in Australia to up-to-the-minute view of purchases, transaction details, set up credit and enable Apple Pay. reward balances among other ben- debit card transaction alerts, efits. redeem credit card rewards in BBVA Wallet purchase noti- real-time, change the nickname fications, sent to clients imme- assigned to a credit or debit diately after their use of BBVA card, as well as activate a credit Compass credit cards, now card. offer cash rewards balances. The In addition, the feature will rewards balances can be redeemed allow cardholders to temporarily for an account credit by responding block credit card activity by turn- The platform will currently not work to the alert. ing card on or off, permanently block and with any other bank-issued cards, and will Cardholders can redeem cash rewards to request reissue of a credit card, and change a be available only to customers with a card offset a portion or all of a purchase, based credit card's PIN. issued directly by AmEx. on the amount of rewards available, while "Every time our clients use their BBVA The service will be supported on iPhones replying to a BBVA Wallet notification. Compass credit cards, they're going to be and Apple Watches as well as iPads. BBVA Compass chief digital banking offic- reminded of how much we value their busi- Apple Pay has already been rolled out in er Jeff Dennes said: "Our clients are getting ness. It's the first service of its kind that the US, the UK and recently Canada, with instant cash-back gratification regardless of doesn't place onerous restrictions on how plans on for expanding the service to Spain, how or where they use their credit cards. rewards can be redeemed," Dennes added. < Singapore and Hong Kong next year. <

PRODUCTS Barclaycard launches unlimited cash rewards credit card

Barclaycard, the payments arm of Barclays credit statement or gift cards. has changed, as well as identity theft helpline has introduced an unlimited cash rewards The cash rewards do not expire as long as the that offers access to a certified resolution spe- credit card. account is open, active and in good standing. cialist. Dubbed Barclaycard CashForward World The card does not have any rotating catego- Barclaycard US head of branded cards MasterCard, the new offering helps cardholders ries, quarterly sign-ups and does not charge any Rachana Bhatt said: “Barclaycard CashFor- earn unlimited 1.5% cash rewards on every pur- annual fee. ward is the card for people who want unlimited chase along with a 5% redemption bonus to use Among the various built-in features of the cash rewards without the hassle of managing toward their next redemption every time they card include $0 fraud liability protection that complicated card benefit programs. There’s no redeem. implies that cardholders are not responsible need to choose categories or worry about which Users of the chip-technology-enabled card for unauthorised charges, free online access to card to use because card members get the same have three options to redeem cash rewards FICO Credit Score that helps cardholders moni- great cash rewards every time and place they including a deposit into any bank account, a tor their credit and get alerts when their score shop.”<

www.cardsinternational.com November 2015 y 3

CI Nov 525.indd 3 04/12/2015 14:40:28 NEWS: DIGEST Cards International

SECURITY MOBILE Visa Europe collaborates with Sthaler and Westpac enables card WorldPay to trial biometric payment solution activation via mobile Visa Europe's international innovation hub Hundreds of Europe Visa Collab employees Westpac has enabled customers to acti- Visa Europe Collab is working with UK- are also testing the technology internally. vate a new debit or credit card through based biometrics startup Sthaler and pay- The aim is to test the feasibility and value their smartphone camera, becoming the ments firm WorldPay to test the feasibility of Sthaler's Fingopay as a payment solution first bank in Australia to do so. and value of Fingopay, Sthaler's in a high volume transaction Customers of the bank can now make finger vein technology (FVT) retail environment. use of optical character recognition technol- payment solution. "This is important as ogy to switch on their new card in a flash Originally pioneered by we assess the commercial through the Westpac Mobile Banking app on Hitachi as a means of iden- potential for new ideas in their iPhone or Android smartphone. tification, Sthaler has taken the payments ecosystem finger vein technology and and, most importantly, applied it to the payments how consumers respond. arena with their 'FingoPay' We'll be sharing more infor- solution. mation on what we find out Worldpay staffs are taking part in a three- over the coming weeks so watch this space week proof of concept at a restaurant locat- for more," Visa Europe said in a state - ed at WorldPay's London headquarters. ment.< Customers can activate the card in three steps by scanning their card, confirming the card details captured are correct, and tap- STRATEGY ping to activate. Vodafone adds MasterCard cardholders to The new feature will be available for Visa, MasterCard and American Express credit contactless payments cards and debit MasterCard cards from November 2015. Vodafone has enabled users of its wallet app Users can make payments by tapping the Westpac Group Consumer Bank chief to make contactless payments through their smartphone on a contactless point-of-sale information officer Mike Wood said: "We MasterCard cards. terminal, and can also check balance and want to make mobile banking as easy and At present, the operator offers Vodafone transactions using the smartphone's app. convenient as possible for our customers and Wallet in six markets including Germany, The new service is expected to be rolled that's why we have launched card activation Spain, the UK, Italy, the Netherlands as well out to consumers across European markets by smartphone camera. as Hungary. within weeks. "The new feature is a timesaver for our Users can make contactless card pay - Vodafone Group m-commerce head Mark customers who can activate their card when ments through Vodafone Wallet by using a Ritzmann said: "We are delighted to enable and where it suits them without the need to Vodafone NFC SIM. The feature is support- MasterCard cards to be used contactlessly call customer service, visit a local branch or ed on over 60 Android smartphones. with Vodafone Wallet. manually type in card numbers. Customers can activate the new service "Following our announcement earlier "With over two million debit and credit by inputting their MasterCard card number in 2015, MasterCard customers will also cards activated by our customers in the past into the Vodafone Wallet, where it is protect- be able to add their cards and pay within year alone, we are delighted to be the first ed by the SIM and MasterCard SecureCode. minutes using our fast, secure and simple financial institution to offer customers a sim- Higher value payments are protected with a contactless payment system when it rolls out ple solution that is safe and secure via the user-defined four-digit PIN. in the coming weeks."< Westpac Mobile Banking app." <

PRODUCTS GoldMoney unveils gold balance funded prepaid card

GoldMoney, a full-reserve and gold-based customers in the future. and now we are making it accessible and use- financial service and technology group, has The new programme is intended at offer- ful through today's payment technologies. introduced gold balance funded prepaid card ing platform clients a payment method that is "With the launch of this prepaid card we through its wholly owned BitGold platform. accepted by over 35 million merchants across now embark on the second phase of our plat- The GoldMoney prepaid card is free to the globe, and will offer access and payment form evolution into payments thereby increas- request and can be used by qualified users on utility to fully-reserved and gold-based sav- ing the utility of our network. the platform having a one gram or more set- ings. "We also unveil an important second busi- tled gold balance and a valid ID and utility GoldMoney CEO Roy Sebag said: "Gold is ness line that will generate recurring revenue bill. the world's best performing money for savings and contribute to increased velocity, allowing Plans are also on to make the card pro- when measured objectively against global cur- us to match internal liquidity and earn trans- gramme accessible to GoldMoney platform rencies over the average human savings cycle, action spreads devoid of processing costs."<

4 y November 2015 www. cardsinternational.com

CI Nov 525.indd 4 04/12/2015 14:40:33 Cards International NEWS: DIGEST

STRATEGY MasterCard announces global zero liability promise MasterCard has announced plans to create reasonable care in protecting their card from The updated rule was first made avail - one global zero liability promise for consum- risk or loss. Moreover, on being aware of able to MasterCard cardholders in the US ers in order to offer a multilayered approach such loss, cardholders need to contact the in October 2014. Plans are on to extend the to safety and security. bank that issued or provided the payment rule to all regions by early second quarter of The programme, touted as an industry card. 2016. first, will allow consumer and small business The revised rule applies to transactions, MasterCard Enterprise Security Solutions cardholders receive added protection from such as PIN-based transactions at the point chief payment system integrity officer Nancy unauthorised transactions. of sale, ATM withdrawals and online or O'Malley said: "Over the past few years, Developed in consultation with issuers and mobile transactions on MasterCard, Maestro consumers have grown increasingly con- regulators, the zero liability promise has been and Cirrus-branded transactions. cerned about the security of their data and designed to enhance the minimum standard The rule also applies to transactions account information, and liability for unau- for consumer protection against unauthor- made using a consumer credit, debit, small thorised transactions. ised transactions, complying with and sub- business or prepaid cards registered to a "With this new global program, we, ject to applicable local laws. consumer, and co-badged cards provided together with our issuers, are providing our Zero liability can protect consumers from MasterCard is the brand of choice at time cardholders with additional peace of mind unauthorised transactions if they exercise of purchase. regardless of where they live or travel." <

DIGITAL MOBILE American Express Canada upgrades its app Walgreens becomes

American Express Canada has made vari- Besides, the app still enables users to keep first retailer to ous usability enhancements to its American track of their account, make a payment, and support loyalty Express App. view their membership rewards balance. The app now includes Touch ID American Express Canada, rewards programme log in that helps cardholders get consumer acquisition and man- within Apple Pay quick access to their Ameri- agement, vice president Suat can Express Account with the Alaybeyoglu said: "Mobile touch of a finger on supported has become the preferred ser- US-based retailer Walgreens has integrated iPhone 5s and above devices, vice channel for some of our its Balance Rewards loyalty programme running iOS8 or higher. card members and we want to with Apple Pay contactless payments, the In addition, the upgraded make sure we can offer them first retailer in the nation to do so. app helps cardholders view a seamless and integrated The collaboration will help Apple Pay recent transaction details, pend- experience with the American users link their Balance Rewards card with ing transactions, and transactions Express App. the mobile payments service in order to using Apple Pay, view activity timeline and "These recent changes are another step in receive and redeem loyalty points without account balance, as well as manage multiple that direction and we will continue to invest having to scan their physical Walgreens card accounts. and innovate in this area." < card. For using the service, users need to add DIGITAL the Balance Rewards digital card to the Wallet app in iOS 9. U.S. Bank unveils online payment Following activation, users will be able to authorise their transaction with a fin - management tool for small businesses gerprint scan on the iPhone 6 or iPhone 6s series. The service can also be accessed by U.S. Bank has launched a new online pay- and gas purchases. Apple Watch owners who need to double- ment management tool, called ScoreBoard, ScoreBoard, which is available to the click the side button, pick their Rewards for small business consumers. bank's cardholders who use credit, debit card, and then hold their watch face up to The expense reporting tool provides trend- cards and credit lines, can be accessed the reader. ing and reporting data that allows consumers through internet banking. Walgreens president of digital and chief to monitor their own credit and debit trans- Using the tool, U.S. Bank cardholders can marketing officer Sona Chawla said: actions and compare that spending to trends also download reports as HTML, Excel or "We're excited to be the first to provide in the general population. PDF files for their specific financial needs. our customers with increased ease of The tool also helps consumers make smart- U.S. Bank Payment Services senior vice access to their Balance Rewards account er decisions about their personal finances. president Cliff Cook said: "ScoreBoard is and information when using Apple Pay. The free application comprises easy-to-read unique because it gives our customers the "This offering supports our commit - charts and graphs that provide a monthly ability to monitor their own spending and ment to removing friction and enabling a snapshot of credit-card purchases and pay- gain insight into how their spending trends simple and convenient customer experi - ments, such as travel, home improvement compare to previous years." < ence." <

www.cardsinternational.com November 2015 y 5

CI Nov 525.indd 5 04/12/2015 14:40:36 FEATURE: CARDS INTERNATIONAL PREPAID SUMMIT EUROPE Cards International

Exploit plastic while you still can- you’ve ten years left Dine out on prepaid via luncheon vouchers and transport ticketing and move towards digital or be out of the game. This is what delegates were told at the annual Cards International Prepaid Summit Europe conference and awards, title sponsored by Visa Europe at the Principe di Savoia hotel, Milan

e have ten years to enjoy, explore and exploit plastic, we are already in a “Wdigital world. No-one will escape digital transformation- who - ever ignores it will be out of business,” said Joao Matos, commercial director, CaixaBank Electric Money EDE. And indeed, the digital prepaid solution was to the fore throughout the conference.

Dine out on prepaid while transport is a vehicle for education Luncheon vouchers benefit 2.2 million people in Italy; 3.3 million in France. The average ticket is small but the fre - L to R Scott Frisby, Andrea Fiorentino, Monica Carlesso, Flavio Mastrangelo, Antonella Verzini quency high and therefore the potential great. The value is €5.5bn in France for life easier for them and especially, if it is enhancing the digital space. instance; €2.8bn in Italy, Bertrand Sava, means going from unbanked to banked it “Prepaid is completely fitting to that regional managing director, Southern is oftentimes even more welcome. Many space and is giving, to the bankers, to Europe, Visa Europe told the conference loyalty programmes are still run with the banks, the ability to deal with these in his keynote address. paper and at this point, people are pre- trends and to capture some opportunities The second is transportation. Trans - pared to make the switch from paper. that are still there.” portation represents one of the industries Cash still represents 70% of transac- With all the different products: third with the highest number of small ticket tions in Europe in terms of amount, Sava party, closed loop, open loop, home transactions. It’s a market of €175bn in stated, adding that cards are “stead - brand, skin brand, prepaid debit cards, a Europe. We have some big markets like ily growing around 7-8% year on year lot is happening. Merchants have begun the UK, Germany, France, Italy, Spain to aggressively issue prepaid cards and and Poland. And in this sector, we are Visa Europe prepaid stats have tried to combine the prepaid prod- really looking at using prepaid cards in uct with the analytic programme. Star- In the US prepaid has grown around 8% pa in the general, using the NFC technology which bucks, as an example, is a closed group last five years fits completely in that space. Europe 40% growth in prepaid in the last five that’s completely mobile that combines “I think that Transport for London years the payment solution with its analytic (TfL) is the main example. In one year Prepaid market share in Italy is 10% with expected programme so you can pay with your TFL reached 180 million transactions, growth of around 20% in the next five years Starbucks card, get your points, you have and now 600,000 transactions per day, discounts, you have your free coffee and one million taps per day. I would say it’s since the last ten years. In particular, this is a product that has had great suc- a way to educate the customer how to online transaction growth has doubled, cess, especially in the US. use contactless on a mobile app, in order at around 40%. This obviously is a chal- to pay,” Sava said. lenge and is growing the most, and some How are customers using prepaid today? However, there is still a fair way to go. consultants think that the projection by Travel, including airlines, general retailer Prepaid is an easy platform onto which 2017 is around 500 billion.” and high street, leisure, gambling and to switch millions of loyalty programme Regulation and multi-channel conver- betting. customers, panellists discussed. It is easy sion present major challenges to retailers “If I were to give one sector, it would because with prepaid accounts there is but their willingness to go omni-channel, be airlines, and one channel would be no credit score, there is often not even and to give an experience covering all online, and as a consequence interna - a traditional banking relationship in the the channels to the customer is crucial in tional transactions,” said Sava. background, from which to coax custom- staying ahead and maintaining and grow- Giving more detail, Sava explained ‘air- ers away, so those customers are easy to ing a healthy business. line’ represents 19% of total transactions serve in this way- open to innovation In terms of regulation, newcomers in followed by travel, general retailer/high because they welcome whatever makes the market are being encouraged and this street, leisure, especially in gambling and

6 y November 2015 www.cardsinternational.com

CI Nov 525.indd 6 04/12/2015 14:40:36 Cards International FEATURE: CARDS INTERNATIONAL PREPAID SUMMIT EUROPE

Ugo Bechis, UBI Banca Antonella Verzini, Banco Popolare

betting. Given the fact that the customers use their card online, 50% of the trans- Prepaid Europe Award Winners actions are international which is huge given credit card transactions are around Best Mobile Wallet/Alternative/Emerging set and manage card limits and usage via flexible 14% and debit around 7%. Prepaid solution – Barclaycard admin controls. Barclaycard’s bPay offering, combining a “So do we see the same long term Prepaid Marketing Campaign of the Year - Banco mobile app, and prepaid account, and wearable growth path beyond these use cases? The Popolare technology, launched to take advantage of the answer is definitely yes, the customer has Chat & Cash- based on years of research into booming urban shopper market. With a key fob, found how and where they want to use consumer behaviour analysing the convergence sticker and wristband (as well as gloves and a the prepaid card,” Sava added. of different needs and requirements and online jacket) utilising NFC technology, this is truly an interaction, this solution succeeded in breaking Panel members discussed how remit- innovative offering. tances represent more than €150bn in the barrier to access for mobile solutions around Europe and 90% of this volume is sent Remittances/Government/Financial Inclusion payments. Producing a highly original bank in cash through MoneyGram or Western - Post Italiane agnostic product, it combines the community Union so this is a huge space where pre- Since May 2014, 1.2 million students aged 14 aspect of a social media platform with a paid can find its place. Also to the fore received IoStudio Postepay. The company says by convenient payment solution. 2016, 3 million students aged in between 14 and was the potential of loyalty programmes, Industry Partner/Vendor of the Year - Centre of 19 will have access to the card and its benefits. the majority being still run with paper, Financial Technologies Poste Italiane is forecasting to deliver six hundred and Starbucks’ programme being the The prepaid cards developed by the Center of thousand cards per year to new students; an Financial Technologies are unique on the Russian example, repeated a few times through- incredible scale of success. out the sessions, as proof that successful and CIS markets and the project provides clear loyalty programmes fit completely with Corporate/Travel Card Programme - Smart benefits for all participants. Consumers receive the product. Concepts an opportunity to get multiple financial services The future is in fitting the customer Booking.com wanted to give their employees via a single prepaid card distributed at any of the experience and being as much as possi- a VISA prepaid card for their individual and retailer’s POS. ble customer centric. Customers are much collective achievements made in the year 2014. The project was successfully launched and A VISA prepaid card that could not be used for has been well received. The project has been more prepared than before, much more usual expenditure like household, clothes, etc., successfully implemented in Euroset-Retail informed than before, they know every- but a card that could only be used for a lifetime OJSC, the largest Russian retail network. Over thing, they know what they want, they experience. Smart Concepts helped deliver this. 1.0 million loans and 0.2 million deposits have know they are right, and this is some - been distributed via the platform in the past 12 Gift/Incentive Open & Closed Loop Programme thing we must take into account. months. – Epipoli Key trends Combining physical, virtual and mobile and Technology Initiative of the Year – Amilon The first one is the new retail model leveraging the profit margin on gift cards given What gave them the edge in this category was where there is a subtle convergence they don’t take up expensive retail space- Epipoli a skilful combination of gifting and employee between the in-store physical interac - worked with retailers to maximise their spaces and reward options as part of a secure and simple displays. Credit due for originality and pushing solution, with impressive personalisation tion and the in app interaction. And the barriers to create new prepaid products such as options. A result of tenacious research into mobile phone is a fundamental part of insurance gift cards. consumer behaviour, they delivered a seamless this new model, to attract, to retain, and and economic solution that works for merchants, Prepaid Innovation of the Year – Ixaris to sell. employers and consumers alike. “The real goal of the retailer is to close Ixaris Payments Server technology (IPS) offers and sell, And this is no trivial point. customers a virtual card platform solution that is Prepaid Personality of the Year - Kevin Kelson Abandonment of e-commerce purchases is up and running swiftly and with zero effort from Kevin is responsible for FIS prepaid and debit no joke at 30-40%. Adhering to the one- IT departments. With IPS, businesses can issue processing business in the EMEA Region. click ideal, three maximum, is the golden virtual cards via API or via console, on demand,

www.cardsinternational.com November 2015 y 7

CI Nov 525.indd 7 04/12/2015 14:40:39 FEATURE: CARDS INTERNATIONAL PREPAID SUMMIT EUROPE Cards International

Q&A: Cards International Prepaid Summit Europe Bertrand Sava, regional managing director, which we cannot confirm. It is clearly a very, of banked people, they will just need a NFC- Southern Europe, Visa Europe and Andrea very interesting product. capable smartphone. Fiorentino, head of European go to market BS: I would also mention contactless adoption CI: You spoke about huge success in Sweden mobile propositions, Visa Europe discuss across Europe is making great progress and in displacing cash, and you said your main with Douglas Blakey and Anna Milne what in Italy, the footprint we are achieving in target is to displace cash. Do you think lies ahead for Visa Europe in light of the the native space is progressing well and we this can be done by rewarding customer Visa Inc acquisition will give more numbers at the beginning of behaviour? 2016. To give you an idea, there were 250,000 BS: It’s about customer centricity and CI: What does the Visa Inc. acquisition terminals contactless-enabled in the US in providing the right product. As an example, mean? From your perspective in Southern 2014. There were 2.6 million in Europe. Spain when the Greek government put controls on Europe, what will it mean? was 500,000. So the infrastructure exists in cash withdrawals, consumers turned quickly BS: It is perfect timing to become one global Europe. It’s now about educating both sides- to cards. The number of active Visa debit business. It will give us a fresh new scale, merchant and consumer. cards in Greece more than doubled in July, speed to markets- especially in innovation, AF: 2016 will simply confirm the trend that compared with the previous three months’ and financial strength. Mobile, regulation, mobile is here to stay. It will permeate many average. In the two weeks immediately increased competition, new players and countries in Europe in 2016. We will also following the introduction of controls, we customer needs, all these things are going see a culture shift. The POS is now a piece of saw a 135% increase in card transactions quicker and therefore it makes a lot of sense consumer electronics exactly like a tablet compared to the fortnight before. Four to be global. We will still have a special focus therefore it must evolve faster. It is this trend months on, the shift to card payments has on countries as we are doing presently in and evolution which has enabled us to create remained. Card transactions in the last Europe. the foundation for moving everything into quarter were up 128% (year-on-year), AF: I work in innovation and the people on mobile. compared to just 9% in the quarter before my team consider themselves lucky at the controls were introduced. The lesson is that moment to be working in such an amazing shifting from a cash economy to e-payments market. is not a difficult or painful change. In fact, CI: Do you think we’ll see the US bringing Greece highlights the benefit of getting there some of their branding, the Visa checkout fast, rather than a slow transition. replacing V.me, is that a prime example that CI: Are you seeing some strategy that we might see? providers are using that is really paying off BS: We are already working with Visa checkout in terms of boosting mobile wallet adoption but not because of the acquisition, we rates? started working on it months ago. As e- and AF: I think the mobile wallet at the moment m-commerce volumes continue to grow, is too segregated, there are too many there are huge opportunities for retailers options and too much choice is not good for and issuers to provide their customers with a the consumer. Apple Pay is a consolidated choice of fast, convenient and secure ways to experience in which you can make in-app make a purchase, be it by card, digital wallet or in-store purchases. The risk of course is or other service. Visa continues to examine that digital giants will play a very big role in a wide range of options to deliver the best mobile wallets, simply because users don’t solutions to consumers and stakeholders in Andrea Fiorentino, Visa Europe want to bother downloading four different this space. applications. The trend shows that consumers CI: Can you give us two or three examples of CI: There are areas in consumer finance don’t want retailer-centric mobile wallets- at what you think has gone very well this year, where Spain is world class leading, for Visa we think that the one who wins is going and some of your highlights? example some of the innovation from La to be the easiest to use at checkout. AF: From my side, the launch of Apple Pay Caixa. It’s not just the best of Europe; they CI: How does a major multinational has been the most amazing launch I’ve ever are leading in global mobile. organisation engender a culture of experienced in my almost twenty years of AF: It is very interesting because Spain has innovation when there are so many layers of career in payments. I’ve never seen anything been always considered a market where we management and bureaucracy? like that. dedicated less to innovation. During the BS: Earlier in the year we launched the It was exciting because for us it was a economic crisis certain banks realised it was Visa Europe Collab, so now we have three challenge. Enabling tokenisation is making a about time to refresh all their systems. BBVA, different innovation hubs, in London, Tel change in our systems similar to open heart thanks to its management, with a very top Aviv and Berlin. Visa Europe Collab works surgery. Working with Apple showed us how down approach, took the opportunity to start independently and its objective is to create important was the ease of enrolment for the investing in new technologies. Now thanks a pipeline of innovative propositions for Visa consumer, something we didn’t focus on to players like BBVA Spain is at the top of the Europe and its members. Visa Europe Collab is enough in the past. mobilisation innovation worldwide. currently working on 100+ proofs of concepts. In the past we had several mobile programmes Usually, people look to the banks in northern AF: I can tell you that my experience on the launched by leading UK Issuers with modest Europe but in Spain there is a higher Bank’s side has been surprisingly good, as interest from consumers, for Apple we percentage of mobile phone users and I’ve been working very closely in the Apple experienced people’s excitement and interest smartphones, even higher than Italy. For Pay implementations. It was launched by the simply in trying to make sure they could do it a example on my mobile I have two cloud-based largest banks in the UK, which are not known few hours before the official launch. payment applications from Spain, one from for their promptness to market, due to their CI: Are you pleased at the adoption rates La Caixa and one from BBVA. In particular size. In just seven months, they were able then? The uptake? the one from La Caixa is going to be offered to turn their systems upside down. If they AF: We are very pleased with the adoption to Spanish consumers by four more banks put their minds to it, they can achieve such rate; of course these are confidential data in the next coming weeks, reaching 30-40% transformation.

8 y November 2015 www.cardsinternational.com

CI Nov 525.indd 8 04/12/2015 14:40:40 Cards International FEATURE: CARDS INTERNATIONAL PREPAID SUMMIT EUROPE

Monica Carlesso, Barclaycard

rule,” said Ugo Bechis, SEPA Delegate, and this is growing. But also UBI Banca. they can sell their gift cards Which trend do you think is shaping our industry Mobile powered conversion interaction from their website, digi - the most? Pick just one! is where the customer is attracted by tally. Or they can sell their 11% 11% 1. Mobile wallets revisited (tokenization) 0% accreditation, via beacons. And to emu- gift cards as a gift through 11% 2. New form factors 0% 22% late in the in-app, the physical app. channels, like for instance 3. WhichMobile Commerce trend do growth you think is shaping our industry the Giftiamo.” 4. Ecommerce explosion most? Pick just one!44% Innovative payment models 5. Reduced banking profits “I think a very interesting one is PayPal. Why digital? 6. Payment Services Directive in force 1 2 3 4 5 6 7 Completely changed since February this “Digital is real time and 8 9 year, Dan Schonan, the CEO, was very real time is engagement clear and said ‘PayPal is going to evolve and engagement is very 0:10 from a payment instrument to an open important and let me say platform even like a label.’ Via some digital is easy to man - acquisitions, eg Braintree, PayPal can age. It’s easy to manage host functions such as tablet payments. for merchants because Venmo, another company in PayPal’s gift card activation is In the last months we are seeing a continuous flow of new technologies entering the payment arena (for ex. HCE, options, hosts mobile P2P payment ini- simple, delivery is sim - Apple Pay, tokenization, etc.). Do you consider this: tiation for youngsters, similar to texting ple and it’s also safer,” a message. It enables them to share what said Verri. they do, what they buy and to bill-split. Other, perhaps obvious 1. An opportunity to grow 40% Panellists also agreed there was a per- benefits discussed were 2. Challenge to your business 60% tinent lesson to be learned from Amazon, that digital is econom - which discontinued its mobile wallet, not ic because it removes because it didn’t work but because people printing expenses, both 1 2 don’t want to be too tied to any retailer in terms of paper and and want choice instead. Retailer’s loy- plastic and the product 0:30 alty programmes can be easily matched can be easily custom - with different wallets so they may no ised. Cards, materials, market well due to its lack of risk longer need to worry about promoting messages can all be changed in two and its speed. “As long as you pro - one payment instrument over another. seconds. vide digital issuing, there is flex - ibility in tailoring the wallet to the Gift cards Prepaid growth in Italy- what is the needs of the retailer and the payer. Speaking about gift cards, Andrea Verri, potential? Flexibility and capacity to adapt are co-founder and CEO of Amilon, said “Cash is still our only competitor in key because a retailer may want to Italian mobile phone penetration was Southern Europe. But there is also incentivise a key product or to pro - encouraging, at around 85%, the smart a lot of innovation in these coun - pose a certain loyalty programme, phone penetration is growing and is tries and interest from other mar - associated with one payment card about 50% and tablet ownership in kets such as America, China, Russia because the costs are lower, etc. households is around 26%. and other countries in Europe,” said Digital prepaid is the ideal instru- “After 8 years merchants now under- Sava. ment to match all our needs. stand the potential of gift cards. Obvi - Prepaid, according to Ugo Bechis, Gaetano Giannetto, CEO, Epipoli, ously they can sell their gift cards in store will serve the growing e-commerce “totally agreed”. <

www.cardsinternational.com November 2015 y 9

CI Nov 525.indd 9 04/12/2015 14:40:45 INTERVIEW: ITRS Cards International

Monitoring the careful and cautious Payments teams are some of the most risk averse people in banking- they have to be the most careful that they don’t cause a problem. That’s why the RBS problem recently was so extraordinary that it hit the headlines in such a big way. Anna Milne interviews Guy Warren of ITRS on this side of finance

ayments teams do not make changes oped all the time...instant payments infra- tem will calculate whether all the payments lightly- they are very conservative structures... will make the deadline or not and whether in their buying and in their imple - “And the credit card infrastructure- intervention is necessary before it’s too late. mentation and in their testing. they’ve been trying to leverage that, for A lot of banks have SLAs with clients, par- P example with contactless. Generally they are ITRS monitors applications. Guy Warren, ticularly on the corporate side- agreeing to CEO, breaks the monitoring of payments trying to leverage the investment that others clear payments within a certain timeframe. If schemes into five levels. have already made. this SLA is going to be breached, a bank will Level 1- infrastructure- is the hardware There is no reason why the infrastructure want to inform the client in advance.” running? Is the network OK? Level 2- basic that moves money from and to a credit card For corporates especially, timely payments application- what processes are running, are account can’t be leveraged for mobile pay- are crucial to liquidity management. Treas- they using all the CPU? Are they hung/using ments, contactless payments, etc, etc. Track- ury departments of most large corporates too much memory? Level 3- knowing what ing where money got hung up if it doesn’t go have to manage that. Knock-on effects can that application is, eg a trading platform or through is a nightmare for the banks because be substantial. If they have a significant fail- payments system and reading all the data we there are far too many different systems.” ure rate in high value payments internation- can. Level 4- watching transactions move ally- they’ll move to a bank with a higher through the system from one app to anoth- Is there a lack of communication between STP rate. er- looking at volumes, volumes per second, different departments within banks- what is “A lot of the problem is incremental- new counterparties, latency. Level 5 is analytics- the problem managing all this? method is invented and there is an expecta- hoovering all that data up, preferably in real “Part of it is the legacy IT systems. It tion to implement it, eg organisations now time. doesn’t make sense to have a payments team needing to support Apple Pay. And it seems ITRS specialises mainly in levels 3 and 4. who only look after retail payments. You’ve the new methods are coming faster than the This is used in trading and investment bank- set the system up for CHAPS and for BACS, time needed to sort out historical payments ing and in high value payments or payments why wouldn’t the corporate and wholesale people.” systems in general. team who are selling to businesses leverage “We don’t really have a natural competitor this?” Would a blockchain-based payment sys- in what we do- level 3/4 monitoring markets- tem render a monitoring system redundant? almost all the investment banks use us- not OK, so, better quality of information at “We have had no exposure of monitoring just on trading side but settlement side where point of origination, validation at point of blockchain yet but in theory, if it runs soft- payments are part of the flow of monies to origination. What are the rates like for pay- ware, we can monitor it, yes. It is much more the settler trade. ments to go through, problem-free? difficult to manage the routing on block - “Knowing what route your payment is “STP- straight through processing rates chain, which is one of its strengths as well taking is not always easily traced due to this vary between banks- 88-92% is a pretty good as one of its weaknesses. A lot of banks are shared infrastructure. If it does not clear, due scores. Between 8-12% of payments need talking about it and it will come in. to an error in data, it gets held in a queue.” some form of intervention to go through. It “STP rates for high value payments- tend could be something easily rectified such as to go through SWIFT or CHAPS- the expec- Is one solution not to have a single set of a missing IBAN or SWIFT code but when a tation is that it is cleared the same day. Low rails for all types of payments- domestic, human has to intervene, it becomes expen- value payments typically go through the international, etc? sive, they charge €25 ($27) to make an inter- BACS system and are unreported. I suspect “The issue is shutting down the old ones. national payment and if they have to inter- a high number of BACS payments fail but CHAPS was the original system. BACS was vene it costs them €50 so they have to reduce because these have two or three days to clear then set up as the scheme to allow members the number of interventions as much as pos- funds it doesn’t have quite the same conno- to transfer money between each other and sible. The majority go through but even 8% tations. then Faster Payments was set up but they of high value payments having interventions, never shut down the old ones- too much is incredibly high.” What changes in the payment systems money was already going through them and landscape do you anticipate in the next five to start re-routing everything through a new So what is your advice to banks? to ten years? infrastructure was too much. This is the big “Monitoring system helps locate problems, “There is a growing proliferation of pay- problem globally- there must be six, seven, eg volumes of payments waiting to go out ments systems that doesn’t seem to be going eight ways of moving money around. on the same gateway by a certain deadline away. Monitoring is key to sanity and mak- (16.00 and 16.01 are two different days as ing sure it’s all working and if you have a And yet more payments are being devel- far as a bank is concerned), a monitoring sys- problem and need intervention."<

10 y November 2015 www. cardsinternational.com

CI Nov 525.indd 10 04/12/2015 14:40:45 Cards International ANALYSIS: CARD FRAUD

There’s nobody craftier than a fraudster As security companies attempt to orevent fraud in the financial sector, fraudsters constantly remain one step ahead of the curve. With the rise of contactless payments, the EMV liability shift in the US, and payments slowly moving onto mobile devices, where is the latest weakest link? Patrick Brusnahan writes

hile security in the banking in the US. MasterCard, in collaboration with Zwipe, world constantly improves, as Marsden added: “Will [fraud] migrate is planning a launch of the world’s first it should, people tend to for - back? Well, we still have enough fraud over contactless payment card with an integrated get that fraudsters are devel - here and we still have to manage fraud losses fingerprint sensor. W On this concept, Marsden said: “Biomet- oping their methods at a similar speed. anyway and I think it’s being managed really In the words of John Marsden, identity well. We’re still losing a load, but card issuers rics adds that extra security factor. But then, and fraud expert at Equifax, ‘fraudsters are now footing that bill, so the merchants you’ve stored your card details in the cloud. always think of a way’. are largely insured. The large merchants real- Is that secure enough? I don’t know. Fraud is a disturbingly frequent topic for ly have this locked down and I think the rea- “Biometrics is good but false positives are discussion, especially as the holiday season son the US fraudsters won’t come back over an issue. Fingerprints get a lot of false posi- draws nearer. Research by ACI Worldwide here is because those defences are in place. tives and probably at the weaker end with iris stated that attempts to steal payment card “There’s nobody craftier than a fraudster, identification at the top end. Facial recogni- information to commit online fraud are set but then again, I’m seeing the card issuers tion is somewhere in the middle, but difficult. to increase. improve because they’re holding a lot of Some voice recognition is fraught with false Fraud attempt rates in the US by volume liability now. They are a lot faster now at positives and hasn’t really been deployed in for transactions that do not involve physi- intervening. They will allow the first, test earnest. What has been deployed and has cally swiping a card increased in 2015, from transaction and deny all the rest. They’ve been useful is blacklisting fraudsters’ voices. one out of every 114 transactions in 2014 to caught it at real time at the point of applica- That has been really effective.” one out of every 86. tion. That was never the case before. The This is expected to increase by 28% during use of technology has helped them spot that Making security foolproof the holiday season as a result of chip-cards faster.” While technology can be updated, improved being deployed within stores and as retail- or replaced, this cannot be achieved with ers do not require consumers to re-run cards The risks behind contactless consumers. Often referred to as the weakest when they pick up products ordered online A report from Which? stated that using link in the security chain, a key struggle is in store. contactless cards could be opening up con- making consumers aware of the dangers of This situation is slightly different in the sumers’ bank accounts to fraudsters. After fraud and how to prevent them. UK, but not hugely. While EMV was imple- testing 10 different credit and debit cards Marsden said: “What can you do if the mented in the US in October of this year, it and were able to read crucial data that consumer does something stupid? What can has been rolled out in the UK for close to a was meant to be hidden. They researchers we do to help those consumers? There’s very decade now. grabbed enough details to allow them to go little you can do overall. The ones that take On the differences between the nations, on an ‘internet shopping spree’. precautions are the ones that are savvy in the Marsden said: “There’s some key differ- This can become a real risk considering first place, they’re not the risk. ence between our approach in the UK and the rate of growth in contactless payments in “What do you do? You’ve got all the Cyber the US approach. Obviously, EMV for us is the UK. Barclaycard stated that contactless Streetwise (a UK education campaign set up Chip-and-Pin and the US only have pin, so spending amongst its customer triple in the to educate consumers of cyber security) stuff God only knows what they’re going to get twelve months up to August. going on, but the people who read it are the with that. Even fundamentally, that system The UK Cards Association claimed that ones who are already cyber streetwise. How is designed to be broken. more contactless transactions took place do you get the message through?” “The trust is laid down on the chip itself. during 2014 than in the previous six years A possible solution is making customers That chip is gold dust. Point-of-sale (POS) combined. In addition, more than £2.5bn more culpable for their errors. isn’t really where [fraud’s] at, everything has was spent using contactless cards in the first With a liability shift, Marsden believed migrated to online. You’ll still get the migra- half of this year. consumers would take better care. If the tion online in the US, which we’ve already Marsden commented: “I love my banks feel the client is at fault for the fraud, had over here.” contactless card, I love paying with it. I don’t they would not reimburse their customer see any security on it at all. It’s a license for and, therefore, he or she would be more care- Migration fraud, but what the card schemes are trying ful in the future. With EMV finally taking root in the US, to do is replace cash. You have to have a lot He concluded: “I don’t know what the some claim that fraudsters will shift their of freedom to replace cash.” answer is because the consumer is the weak- focus back to the UK. According to a recent One possible solution is adding the bio- est link. I think the liability shift is the biggest report from analytics company FICO stated metric factor. Apple Pay requires a finger- thing banks can do. It’s a reputational risk, that 47% of UK fraud actually takes place print scan to use it as a payment option and but you’re seeing it happen.” <

www.cardsinternational.com November 2015 y 11

CI Nov 525.indd 11 04/12/2015 14:40:45 REPORT: THE RISE OF CONTACTLESS Cards International

Can anything stop contactless’ rise in the UK? One of the most talked about success stories in financial services is the rapid rise of contactless payments in the United Kingdom. This uptake has shown no signs of slowing, but speeding up. According to new research from Timetric, contactless card payments in the UK trebled in 2014. Patrick Brusnahan reports

ince 2013, the UK payment cards Oyster cards are the most popular contactless n market has adopted contactless prepaid card in the UK and until September GEOGRAPHIC BREAKDOWN OF CONTACTLESS TRANSACTIONS, APRIL 2015 with aplomb. According to the 2014, this was the only contactless payment S UK Cards Association, contactless option in the UK and only available to travel- card transactions increased from 1.7 mil- lers on London’s transport network. Only past lion in 2010 to 319.2 million in 2014. September 2014 were Visa, MasterCard and In addition, the number of contactless American Express branded contactless cards Others 16% card transactions rose by 220.5% year- accepted. on-year in September 2015. This rise has One in seven of all contactless transactions in Supermarkets been aided by close to all major card issu- the UK take place on London’s transport net- & other food retailers Bars, coffee shops ers offer contactless cards. work. TfL has actually become the fastest grow- 46% The introduction of contactless to London’s ing contactless merchant in Europe. According & take aways 38% transport network has been a great boon. In to TfL, more than 180 million journeys were 2014, there were 17 million contactless pay- made using contactless payments on its net- ments in bus journeys and 14 million in rail trips. work during the year ending September 2015. The UK Cards Association expects this trend Around 375,000 contactless journeys are made Source: Worldpay to continue as the contactless spending limit on Tube and Rail services and 250,000 on Lon- recently rose to £30 ($45) and the popularity of don buses every day. mobile and wearable NFC payments takes off. In March 2015, Verifone discovered, through n GEOGRAPHIC BREAKDOWN OF CONTACTLESS While the report stated that ‘cashless pay- a survey, that 38% of London’s consumers are TRANSACTIONS, APRIL 2015 ments have overtaken the use of notes and either ‘somewhat familiar’ or ‘very familiar’ coins’, cash is still preferred for low-value with contactless technology. Furthermore, transactions. This is primarily concentrated a survey by Barclaycard found that 64% of within categories such as vending machines, contactless card holders in the UK are men and supermarkets, fast-food, pubs, and the Post the average age of these customers in 43 years Others London Office. old. 31% 38% In order to avoid costs incurred in cash han- Bristol and London registered the highest dling, as well as to offer convenience to custom- growths in contactless transaction in 2014, ers, more merchants are anticipated to facilitate 150% and 130% respectively. shift from cash to contactless. In September 2015, the UK had 288,246 East SE contactless POS terminals, a 45.7% year-on- Southern Anglia England Surging year increase. This is set to increase to 315,000 England 10% 12% 9% Contactless cards volume increased by 41%, by the end of the year. year on year, in September 2015. The overall MasterCard recently announced that Source: Worldpay number of contactless cards is expected to hit 78 European merchants must be equipped with million by the end of 2015, equivalent to 42.5% contactless terminals by 2020 to be able to of all UK payment cards. accept MasterCard and Maestro cards. New n TOTAL VS CONTACTLESS TERMINALS, 2015E In 2014, the total annual contactless fraud POS terminals are required to adhere to the loss was £153,000. At 0.007% of spend on new standard upon deployment while existing Contactless POS Terminals 18.1% contactless in 2014, the fraud was 10 times terminals need to be replaced by the beginning Total 100.00% lower than that on all payment cards. of 2020. < Source: UK Cards Association

n CONTACTLESS CARD STATISTICS UK

2008 2009 2010 2011 2012 2013 2014 2015E Total Number of Contactless 1.55 6.84 12.8 22.52 31.01 38.12 58.01 78 Cards (million) Value of Contactless Transactions 0.38 1.42 7.38 29.44 165.15 653.38 2,324.35 7,308.30 (GBP million) Number of Contactless 0.15 0.36 1.66 5.51 25.58 100.38 319.23 1,009.09 Transactions (million) Average Transaction Value (GBP) 2.5 3.9 4.4 5.3 6.5 6.5 7.3 7.2 Source: UK Cards Association

12 y November 2015 www. cardsinternational.com

CI Nov 525.indd 12 04/12/2015 14:40:49 Cards International ANALYSIS: EMV IN THE USA

EMV liability changes the US paradigm Agreed by the US card networks, the EMV liability shift began to be enforced on October 1, 2015. The liability shift results in the least secure party in a transaction being liable for costs due to fraud in a non- EMV environment. Merchants are the ones with the least chance of losing. Patrick Brusnahan writes

hile the aim has been EMV migration, mass adoption of EMV Migration Timeline in the US the standard is very unlikely to W come to fruition before 2017. • 2012: Audit fee waiver by MasterCard • 2015: Liability shift for fraudulent A report from Timetric stated: “Experi - and Visa with regards to PCI Data transactions on all major credit card ence from other countries indicated that Security, if more than 75% of transac- networks to least secured party in the it takes 2-3 years from the liability shift tions are EMV. payment value chain to attain 60-70% EMV transactions and 4-5 years to attain over 90% EMV trans- • 2013: Acquirers and processors • EMV-compliant merchants receive actions.” required to support EMV transactions 100% exemption from Account Data The Payments Security Task Force (PST), Compromise from MasterCard for all major credit card networks consisting of card issuers who represent around 50% of the total payment card vol- • Fuel dispensers excluded from liabil- • Liability shift for international Maes- ume in the US, suggests that 30% of their ity shifts on all major card networks tro ATM usage customers had EMV cards in June 2015. Members of the PST predict this percentage • 2016: Liability shift to ATM hosts on to grow to 60% by the end of 2015 and • Merchants with 75% and above EMV MasterCard network reach 98% by the end of 2017. transactions receive 50% exemp - Increased EMV circulation in the US tion on Account Data Compromise • 2017: Fuel dispensers to bear liability will increase interoperability of cards and from MasterCard. PCI audit relief for of fraudulent transactions, if they fail decrease consumer inconvenience while American Express merchants, if more to comply with EMV standards for travelling abroad, where EMV standards than 75% transactions are EMV all major networks. are already implemented. Examples of such markets are Canada and key regions in Asia The majority of top-tier US merchants Evidence has suggested that the adoption Pacific (APAC). will be EMV-capable in 2015. However, of EMV as a standard in the US will lead smaller merchants are likely to be slower in to cybercriminals focusing their attention Terminals adopting the technology and will have trans- on card-not-present fraud. By the end of August 2015, 300,000 mer- formed on a mass scale by the end of 2017. One problem, however, is magnetic chants had EMV-enabled POS terminals at Lower costs for POS terminals are stripes. Payment cards in the US will con- their stores. This is approximately 5% of all expected to aid merchant adoption. EMV tinue to feature magnetic stripes to oper- card accepting merchants in the United States. POS terminals are typically available in the ability at all merchant locations. In addi- Shipment data from Verifone claimed that price range of $100-200 with players such tion, the use of PIN codes is not manda- over 80% of products shipped to the US as Square offering EMV card readers for as tory. Both of these factors provide a wide in the second quarter of 2014 were EMV little as $49. berth for fraud. or NFC-capable. Estimations suggest that Consequently, there is a need for the close to 60% of the POS terminals in the Security market to invest in a few things; end-to- US will be EMV/NFC-compliant by the end According to Visa, chip & PIN cards have end encryption, tokenisation, data sharing of 2015. EMV/NFC-capable POS terminals played their part in reducing card fraud in and analytical tools to detect and prevent only require a software upgrade to accept more than 113 countries, primarily in help- card fraud (both card-present and card-not- chip cards. ing the fight against card-present fraud. present). <

www.cardsinternational.com November 2015 y 13

CI Nov 525.indd 13 04/12/2015 14:40:52 Malaysia starting to make its mark Improving infrastructure, potential global expansion and a fast-growing e-commerce market are making Malaysia an increasingly attractive market in the region. Despite the growth and increasing potential, however, Malaysia is still dominated by cash with cards only slowly garnering some market share

s the government and banks businesses. Consequently, in April 2014, it cards with EMV-compliant cards with began to provide basic finan - announced a reduction in fees for IBG trans- contactless functionality. According to BNM, cial and banking services to the actions and increased check-processing fees. complete migration to EMV standards is A unbanked population, by expand- Other initiatives include the launch of the expected to complete by January 1, 2018. ing banking infrastructure, launching JomPAY service and the ePIF fund in 2015. new branches, promoting agent banking With initiatives such as these, and a shift Rising low-cost POS terminal installations network and making efforts to change towards electronic payments by banks and to increase scope for card payments consumer payment habits, payment cards participating merchants, card-based pay- Several initiatives are being taken by banks gradually became more accepted, with ments grew both in value and volume terms. and telecom companies to increase POS ter- their use consequently growing from minal penetration. In January 2015, May- 2010 to 2014. Debit cards continue to dominate the bank and Maxis Bhd launched the Maybank Concentrated efforts by the government payment cards market mPOS service for SMEs. and emerging investments in e-payment In terms of transaction value, debit cards In December 2014, Telekom Malaysia infrastructure led to a steady increase in the remained the largest with 74.2% of the pay- Bhd announced a cash rebate incentive of banked population. According to the 2014 ment cards market in 2014, and are antici- $229.20 (MYR750) for SMEs which install World Bank Global Findex survey, the per- pated to dominate over the next five years. SurePay POS terminals. By the end of 2020, centage of the Malaysian population aged The rising awareness of the benefits of debit the company plans to target at least 100,000 15 or above with an account at a financial cards, the adoption of security measures by SMEs. In October 2013, CIMB introduced institution increased from 66.2% in 2011 to card issuers and sustained government efforts an EMV-compliant mPOS, Plug n Pay, for 80.7% in 2014. to encourage debt-free payments promoted a one-time fee $76.40. These initiatives are the use of debit cards. anticipated to drive card-based payments. Looking towards the electronic payments Growths in debit card transaction value market and volumes were also supported by advanc- E-commerce to provide scope for card BNM is taking initiatives to encourage cash- es such as contactless technology. In 2014, payments less and electronic payments, and has been the Malaysian Chip Card Specification initia- The value of e-commerce in Malaysia grew striving to reduce the use of checks, expand tive was launched to migrate to EMV stand- significantly from $519.9m in 2010 to merchant acceptance of electronic payments, ards. $1.5bn in 2014, at a CAGR of 30.78%; it and increase the adoption of cashless pay- As a result, from 2015 onwards, banks is expected to grow further to reach $3.9bn ments by the government, consumers and started to gradually replace domestic debit in 2019. The level of growth was driven by a

n VALUE OF CREDIT TRANSFERS (US$ BILLION) n VALUE OF CHECK PAYMENTS (US$ BILLION) n VALUE OF PAYMENT CARDS (US$ BILLION) IN IN MALAYSIA, 2010–2014 IN MALAYSIA, 2010–2014 MALAYSIA, 2010–2014

40 1500 800

700 35 1200 600 30

900 500 25

400 20 600 300 15

200 10 300 100 5

0 0 0 2010 2011 2013 2014 2010 2011 2013 2014 2012 2012 2010 2011 2012 2013 2014

Source: Central Bank of Malaysia and Timetric Source: Central Bank of Malaysia and Timetric Source: Central Bank of Malaysia and Timetric

14 y November 2015 www. cardsinternational.com

CI Nov 525.indd 14 04/12/2015 14:40:58 Cards International COUNTRY REPORT: MALAYSIA

n n Touch 'n Go Sdn Bhd was established in MALAYSIA’S DEBIT CARDS MARKET SHARE BY MALAYSIA’S DEBIT CARDS MARKET SHARE BY October 1996 and introduced its services ISSUERS (%), 2014 SCHEMES (%), 2014 in 1997. It was one of the first companies to offer contactless card transactions in the country. The first Touch 'n Go card, introduced in 1997, was designed to pay toll charges. Mastercard Maybank However, it has been expanded to public 21.4% 25.6% transport, parking, theme parks and retail. Others Bankcard 40.7% The card can be reloaded at locations such as (eDebit) customer service centres on highways, petrol Bank 40.7% stations, TNG outlets and ATMs. Simpanan Visa To increase the transaction value of pre- Nasional 13% 37.9% paid cards, banks offer facilities to earn reward or bonus points based on the spend- Hong Leong Public Bank Bank BHD ing amount. Maybank Man of Steel Prepaid 6.1% CIMB 15.5% cardholders can earn one Treatpoint for 7.3% every $0.90 spent. A common strategy adopted by banks to market prepaid cards is to offer complimen- Source: Timetric Source: Timetric tary insurance to card holders. A range of free insurance schemes are a n MALAYSIA’S CREDIT CARDS MARKET SHARE n MALAYSIA’S CREDIT CARDS MARKET SHARE part of this strategy, and include protection BY ISSUERS (%), 2014 BY SCHEMES (%), 2014 against fraudulent use of lost cards to the protection of goods purchased. Others American For example, the prepaid card range 0.7% Express offered by AmBank (Malaysia) Bhd (AmBank 0.8% NexG PrePaid MasterCard, AmBank NexG- Cathay Cineplexes PrePaid MasterCard, Others Maybank Cosway PrePaid MasterCard and Tropicana 25.5% 25.3% PrePaid MasterCard) provides free personal accident insurance to the value of $3,237.50. In July 2012, Maybank, in partnership AMBank Citibank Mastercard with Manchester United, launched its first 10.1% 17.8% Visa 50.1% prepaid cashcard aimed at young individuals CIMB 45.3% who do not qualify for credit cards. The card 13.2% Hong Leong does not require any bank account, and is Bank accepted worldwide on Visa terminals. 10.1% Its reload value ranges from $3.20 to $3,237.50 and is available for customers aged above 18 years. The bank has launched Source: Timetric Source: Timetric it in three limited-edition designs, with the images and signatures of Manchester United players Wayne Rooney, Javier Hernandez number of factors, such as rising mobile and e-commerce in Malaysia is a primary factor and Chris Smalling. internet penetration. responsible for the expansion of the country’s Banks in Malaysia offer co-branded cards The increasing young and urban cards and payments industry. to allow customers to make optimum use of populations have a strong inclination for Payment cards remained the preferred the currency loaded onto their prepaid cards. mobile phones and media use, giving a plat- mode of payments for e-commerce transac- In 2010, PayPal and MOL AccessPortal form for e-commerce companies to reach tions among consumers. Issuers offer pro- Bhd announced a collaboration to provide more potential customers. motions such as discounts, cashback offers, Malaysian consumers with a new prepaid Growth in online shopping is expected to instalment facilities and reward points to card, the MOL PayPal, a digital card for create opportunities for growth in the cards attract consumers. online shopping and gaming. and payments industry over the next five This card is issued by EON Bank and ena- years. The growing prepaid card market bles cardholders to fund a PayPal account The emergence of payment gateways also Malaysia has a high volume of unbanked that can be used for online shopping. supported the growth of e-commerce in citizens, and prepaid platforms have pro- Another example of a co-branded pre- Malaysia. vided a growth opportunity for the industry. paid card in Malaysia is the Tropicana Card Key online payment gateways in Malay- According to World Bank estimates, 19.3% offered by AMBank. sia include iPay88, MOLPay, MasterCard of Malaysians aged 15 years and above did The prepaid card serves as a membership Internet Gateway Service (MiGS), Payment not have accounts at formal financial institu- and loyalty card for patrons of the Tropicana Express and WorldPay. tions in 2014. City Mall and allows the cardholder to earn The growing market for online trade and Touch ‘n Go is a popular prepaid card. reward points. <

www.cardsinternational.com November 2015 y 15

CI Nov 525.indd 15 04/12/2015 14:41:00 Inconsistent card usage in China China was Asia’s largest payment cards market in 2014, in terms of card transaction value and volumes, accounting for 73.2% and 38.6% respectively. Cash was the predominant payment instrument between 2010 and 2014, especially among the rural population which is yet to embrace other forms of payment

his was primarily due to a lack of growing popularity of online shopping, the and MasterCard have a long way to go knowledge of other payment instru- increased acceptance of cards at retail outlets before they can make a dent in CUP’s market ments, such as payment cards, or and the adoption of contactless technology share, as they need to build up infrastructure little or no access to banking infra- supported the growth of payment cards over from scratch. T the last five years. This trend is also antici- structure. As the government and banks began to pated to continue over the next five years. New regulations to impact the thriving provide basic financial and banking services e-commerce market to the unbanked population, by expand - CUP maintains its stranglehold in the China is one of the largest e-commerce mar- ing banking infrastructure, launching new Chinese payment cards market kets in the world, and it is becoming mature. branches and making efforts to change In China, CUP is the sole scheme provider The market increased at a CAGR of 56.99%, consumer payment habits, payment cards of payment cards. According to central bank from $68.7bn (CNY465.1bn) in 2010 to gradually became more accepted, with their regulations, all banks and card issuers oper- $417.3bn in 2014. use consequently growing over the past five ating in the country are required to route The rapid adoption of smartphones, grow- years. their Yuan-based transactions through CUP’s ing internet penetration, availability of secure Furthermore, concentrated efforts by the electronic payment network. online payment mechanisms, reduction in government coupled with emerging invest- However, following a complaint filed by delivery time and growing preference for ments in e-payment infrastructure led to a the US against China via the WTO with online shopping – especially among the rural constant increase in the country’s banked regards to discriminating against foreign population, on account of underdeveloped population. companies in 2012, the WTO directed the brick and mortar shops – led to this growth. According to the World Bank, the percent- Chinese government to open up its payment E-commerce operators such as Alibaba age of the Chinese population aged 15 or cards market to foreign operators. and JD.com are targeting consumers in rural above with a bank account increased from Consequently in October 2014, the Chi- areas. In order to capture the rural market 63.8% in 2011 to 78.9% in 2014. nese government announced its decision to and enhance customer convenience, online To speed up the provision of financial and allow foreign companies to set up their own retailers are investing heavily in improving banking services to the unbanked popula- payment card clearing businesses, effective logistics infrastructure. tion, the CBRC granted a license to the two from June 1, 2015. In June 2015, the Chinese government private banks, WeBank and MYBank, in This move by the Chinese government is permitted foreign 100% ownership of 2014. anticipated to intensify competition in the e-commerce companies, which were previ- These initiatives, along with changing life- Chinese payment cards market, and end CUP ously accessible only to companies within styles, a rise in the economically active popu- dominance as the country’s only authorised free trade zones. lation and per capita disposable income, the card clearing organisation. However, Visa With the change in government policy, the

n VALUE OF CREDIT TRANSFERS (US$ n VALUE OF CHECK PAYMENTS (US$ TRILLION) n VALUE OF PAYMENT CARDS (US$ TRILLION) TRILLION) IN CHINA, 2010–2014 IN CHINA, 2010–2014 IN CHINA, 2010–2014

8 200 50 7 40 150 6

5 30 100 4

20 3

50 2 10 1

0 0 0 2010 2011 2013 2014 2010 2011 2013 2014 2012 2012 2010 2011 2012 2013 2014

Source: Bank for International Settlements and Timetric Source: Bank for International Settlements and Timetric Source: Bank for International Settlements and Timetric

16 y November 2015 www.cardsinternational.com

CI Nov 525.indd 16 04/12/2015 14:41:04 Cards International COUNTRY REPORT: CHINA

n n CHINA’S DEBIT CARDS MARKET SHARE BY CHINA’S DEBIT CARDS MARKET SHARE BY Prepaid card market offers growth ISSUERS (%), 2014 SCHEMES (%), 2014 prospects The prepaid card market has been established in China for 10 years. It is already mature, and there is high con- ABC sumer awareness about prepaid cards and 14.5% their benefits. CCB However, there are a limited number of Others 14.4% prepaid cards that target frequent travellers, 49.5% China UnionPay and the majority of prepaid cards are in the ICBC 100% form of transport cards. 11.1% Prepaid cards are also extensively used by BOC employers to reward their employees, espe- 8.3% cially during the festive seasons. These cards are also preferred by the corporate market, as companies can claim them BoCom as a business expense and not need to report 2.2% them on their taxes as an additional source of income. Source: Timetric Source: Timetric Retail-specific gift cards are the main types of benefit card available in China. n CHINA’S CREDIT CARDS MARKET SHARE BY n CHINA’S CREDIT CARDS MARKET SHARE BY However, in view of the increasing level of ISSUERS (%), 2014 SCHEMES (%), 2014 corruption using prepaid cards, this forced the government to implement stringent regulations and enforce more conditions on prepaid card use. The central bank issued guidelines to regu- ICBC late the prepaid card market in 2011. Others 23.9% The central bank issued e-payment licenses 31.5% to select third-party payment service provid- China UnionPay ers for the first time in May 2011. 100% Without the approval of the central bank, CCB a non-financial institution cannot issue mul- 11.9% tifunctional prepaid cards. ABC To ensure strict implementation of these CMB 10% BOC regulations, the central bank and the Minis- 11.8% 10.9% try of Commerce launched an inspection of all prepaid cards circulating in the country at the end of 2011. Additionally, the regulations stipulate that Source: Timetric Source: Timetric the face-value of prepaid cards with names of their owners inscribed on the cards must not exceed $813.90, while that of prepaid cards e-commerce market presents itself as a profit- Contactless m-payments are starting to get that do not have the owner’s name must be able market for foreign companies. a foothold in China below $162.80. In an attempt to protect consumer interest, NFC-based m-payments are gaining promi- The regulation also stipulated that all non- privacy and limit online transactions with nence in China, as retailers and mobile oper- bank payment service providers are to obtain private third-party payment agents such as ators actively promote NFC technology to a license from the central bank in order to Alipay and Tenpay, the Chinese government improve their business. continue operations beyond September 2011. proposed a new law: ‘Method of Network Consumer preferences for secure payment Retailers in China were also instructed by Payment Service Management for Third services that allow them to purchase prod- the government to register the identities of Party Payment Agents’ in August 2015. ucts are also gaining ground. Companies are the customers that they issue a prepaid card While the new regulations attempt to put also embracing this technology to benefit over the value of $1,627.80. restrictions on private third-party payment from the expansion of the m-payment mar- Furthermore, the validity period of prepaid agents, the government-owned payment ket. cards must be at least three years. agent, CUP will not be subject to the regula- In June 2013, for instance, China Mobile Among other regulations for the Chinese tions. and CUP launched NFC-based mobile wal- prepaid card market, one major qualification Under the proposed draft law, daily and let called CUP Wallet in 14 cities. Similarly, is that prepaid card issuers must have at least annual purchasing amounts through third- in partnership with CUP, Samsung launched $4.9m registered capital, and this registered party payment agents will be dependent on a contactless m-payment service in October capital requirement increases to $16.3m in the online system's own security checking 2014 for Galaxy Note 4, Note 3 and Galaxy case the card issuer operates in more than measures. S4 phone users. one locality. <

www.cardsinternational.com November 2015 y 17

CI Nov 525.indd 17 04/12/2015 14:41:07 Egypt fostering opportunities for cards The Egyptian economy is the second-largest in the Middle East after Saudi Arabia. The economy depends largely on agriculture, tourism and cash remittances from Egyptians working abroad, mainly in Saudi Arabia and Gulf countries, but how is the card market faring in this climate?

ith the government and banks in the e-commerce, and retail sectors sup- installed, at an annual growth rate of 23%, striving to offer basic financial ported industry growth. to reach 1,535 ATMs as of September, 2014. services to the unbanked pop - In 2010, the Central Bank of Egypt (CBE) W ulation and banks expanding Fostering the cards and payments selected GiroNil to co-develop the national their presence in rural areas, the Egyp - industries Automated Clearing House (ACH) system tian cards and payments industry regis - The number of ATMs increased at a CAGR in Egypt. tered positive growth between 2010 and of 10.89%, from 4,821 in 2010 to 7,290 in The electronic network, built by the EBC 2014. 2014, and is anticipated to increase further and GiroNil Egypt, was launched in June The government’s financial inclusion from 8,107 in 2015 to 10,878 in 2019, at a 2010 when the CBE and all 38 banks oper- program, supported by improved bank - CAGR of 7.63%. ating in the market were successfully inter- ing infrastructure, new product develop- Banks are expanding their ATM networks linked. ments, and a growing awareness surround- to provide banking convenience to their cus- The ACH system is designed to handle ing e-payments were the main drivers of tomer base as well as tapping existing ones small-value retail payments and increase growth. in the market. the use of cash substitutes, particularly The adoption of EMV standards, growth The NBE increased the number of ATMs payment cards.

n VALUE OF CREDIT TRANSFERS (US$ BILLION) n VALUE OF CHECK PAYMENTS (US$ BILLION) n VALUE OF PAYMENT CARDS (US$ BILLION) IN IN EGYPT, 2010–2014 IN EGYPT, 2010–2014 EGYPT, 2010–2014

4.0 3500 150 3.5 3000 120 3.0 2500 2.5 2000 90 2.0 1500 60 1.5 1000 1.0 30 500 0.5

0 0 0.0 2014 2010 2011 2012 2013 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Source: Central Bank of Egypt and Timetric Source: Central Bank of Egypt and Timetric Source: Central Bank of Egyptand Timetric

18 y November 2015 www.cardsinternational.com

CI Nov 525.indd 18 04/12/2015 14:41:12 Cards International COUNTRY REPORT: EGYPT

n n EGYPT’S DEBIT CARDS MARKET SHARE BY EGYPT’S DEBIT CARDS MARKET SHARE BY E-commerce offers growth prospects ISSUERS (%), 2014 SCHEMES (%), 2014 for card payments In general, e-commerce has been tough market in Egypt due to poor levels of online literacy, inadequate telecom infrastructure and a large rural popu - lation. Despite this, Egypt has emerged Others NBE Visa as a key market for e-commerce 27.1% 36.4% 123 25.8% in the Middle East. Rising internet Network CIB 41% and smartphone penetration coupled Egypt with an increasing number of opera - 5.1% Banque tors providing online sales of books, Misr MasterCard 18.4% electronics, fashion products, games AAIB 33.2% 5.8% and other retail products fuelled the growth of e-commerce. QNB E-commerce grew from $745.2m Egypt 7.2% (EGP4.2bn) in 2010 to $1.3bn in 2014, at a CAGR of 14.21%, due to rising online and mobile penetration, Source: Timetric Source: Timetric increasing consumer confidence for online transactions and the presence n EGYPT’S CREDIT CARDS MARKET SHARE BY n EGYPT’S CREDIT CARDS MARKET SHARE BY of online gateways. The growth in ISSUERS (%), 2014 SCHEMES (%), 2014 online shopping is expected to create Visa opportunities for growth in the cards Others25.8% and payments industry for the foresee - 2.5% able future. The value of e-commerce is expected to record a CAGR of NBE 22.5% 6.56%, to reach $1.8bn in 2019. Others The steady growth of online shop - 34.9% ping indicates the priorities of tech - Banque nology aware consumers who enjoy Misr the convenience, speed, value and 15.2% MasterCard Visa safety of online shopping transac- CIB 41.6% 55.9% Egypt tions. In 2012, Visa and NBE began 10.8% to offer the Verified by Visa service, HSBC aimed at providing customers with a Egypt secure, convenient and reliable online Barclays 6% payment tool. Bank 10.6% Growth prospects in the prepaid card Source: Timetric Source: Timetric market According to the World Bank, Egypt is the highest recipient of remittances The number of POS terminals in Egypt Debit cards continue to dominate in the Middle East and sixth-highest recorded a CAGR of 10.66%, rising from To decrease cash transactions, the Egyptian in the world. However, only 1% of 33,884 in 2010 to 50,808 in 2014. With government launched ‘Salary Project’ in recipients have bank accounts. Target - the increased number of POS terminals 2011, under which the salaries of five million ing the unbanked population, banks installations at retail outlets, the potential government employees were paid directly such as Banque Misr are offering the of card-based payments in Egypt is also into bank accounts; employees could with- Hewalty MasterCard Prepaid Card, expected to grow. draw their salaries using debit cards. which enables unbanked consumers in Similarly, banks are also installing POS Following the project’s successful implemen- Egypt to instantly receive funds from terminals, as merchants are gradually tation, new government divisions are being family and friends living abroad. accepting payment cards. As of September, added to the project. Other banks such as the NBE are 2014, NBE had installed 9,169 POS termi- Such initiatives are anticipated to further targeting young consumers with the nals across Egypt. increase the volume of debit cards in circula- NBE Youth MasterCard and cashU Similarly, in October 2013, CIB became tion over the next five years. prepaid cards. Organised retailers and an exclusive provider of POS terminals for Similarly, global scheme providers such vendors also began to accept prepaid Ikea stores in Cairo. as MasterCard are striving to increase debit cards with no processing fee. These The growing payment infrastructure, card use. In 2014, MasterCard launched a retailers have approached banks to with the CBE’s initiation led to the growth Cashless Campaign in association with NBE, provide them with in-store POS termi - in industry share of payment cards over the the United Bank, Emirates NBD, Housing nals to attract consumers and increase ;ast five years. and Development Bank and CIB. sale volumes. <

www.cardsinternational.com November 2015 y 19

CI Nov 525.indd 19 04/12/2015 14:41:16 GUEST COMMENT: PETER POP Cards International

Big Data Starts to Mature in Financial Services Big Data was the phrase on the lips of many business leaders last year, with the concept already moving past the Peak of Inflated Expectations in Gartner’s Hype Cycle. The current Big Data landscape is one of increasing maturity and could soon be a big part of financial services, but is the sector prepared for this change?

e are seeing some benefits being customers with products that were more rel- vertently lead to it being more vulnerable to accrued by early adopters, while evant to their individual requirements. The a data breach. others look to lay firm founda - take up rate from these targeted campaigns As a result, financial services firms will tions by reigning in control of is significantly higher than the typical scat- need to pay careful attention to the data they W ter gun approach used without applying data their data sprawl to create a central data are using in analytics projects and ensure lake, opening up access and insight. analytics. it has the appropriate security measures in Business drivers are now pushing banks to place to protect it at all stages. Insurance leads the way adopt Big Data in increasing numbers too, We are now seeing banks turning towards In the financial services sector, insurers have but what barriers are they battling to over- Big Data technologies in increasing numbers been leading the way when it comes to Big come? as many of these initial barriers are being Data. Many of them are already using it By far the most significant reason for the overcome. throughout their businesses, from making slow uptake of Big Data projects in banks is Cost optimisation is now very much the sure the appropriate product is offered to the siloed nature of data held in their exist- name of the game; as such many banks are customers, mitigating risk through predictive ing legacy systems and data repositories. This looking at the likes of Hadoop as their Big modelling and reserving through to identify- often means that data is not shared across Data platform of choice, as it offers them ing potentially fraudulent claims. the enterprise, and when it is, it often only greater flexibility at a significantly lower cost Many insurers are also becoming increas- covers some areas; limiting the field of vision of other platforms on the market. ingly innovative when it comes to captur- and making it difficult to gain a 360-degree Big Data is also no longer the sole domain ing and using customer data. For example, customer view. of data scientists, as the latest reporting and Aviva’s in-car app monitors the driving style dashboard tools such as Tableau are putting of its customers, offering a 20% discount on New skills required digestible data directly into the hands of busi- car insurance for careful drivers. A lack of internal skillsets is also proving to ness users. While in contrast, the banking sector has be a challenge for financial services firms. The ability to present data to users in a been much slower to get on board with Big Data management is a brand new skillset way that anybody in the business can under- Data, we are now increasingly seeing banks beyond what already exists in the sector, with stand should not be underestimated, as it embark on a Big Data journey to support expertise required in statistics, mathematics really starts to unlock the huge potential of their back-office operations. and programming to make it a success. On Big Data within banking and to enable self- To a large extent insurers are seeing Big the other side of the coin, people must also be service Business Intelligence. Data as a means to overcoming their historic trained to interpret this data, or it is pointless Change won’t happen overnight. Imple- problems with customer visibility and then producing it in the first place. menting and migrating data to new platforms using this improved customer transparency As a new discipline, it is hardly surprising takes time; a number of years as opposed to to drive their business forward without the that there is a significant shortage of people months. need for lengthy MDM initiatives or signifi- with the right skillsets to be able to success- At first glance that could seem overwhelm- cant legacy transformation. fully implement Big Data projects and drive ing, but bringing in the right support and There are three main drivers for banks to benefits for the organisation. expertise will lead to long-term benefits. adopt analytics of customer data: customer Another thing to take into consideration is Making an up-front investment of time will retention, increasing market share and cap- the fact that a lot of time is required to ana- ensure that banks are set up to effectively turing a larger share of the customer’s wallet. lyse large amounts of data. It also requires manage and organise both existing and new By using customer data, banks can analyse huge amounts of processing power and data in the future. the probability that a customer will take its storage, which cost significant amounts of Understandably, banks have so far con- business to a competitor. money, meaning Big Data must be a prior- centrated their Big Data efforts on their Early intervention can reduce this loss. ity within a business in order for it to be a back-office functions. However, there is a There are success stories where banks have success. great opportunity for banks to drive deeper been able to significantly increase customer At the start the cost of Big Data projects engagement with customers than they ever acquisition through careful analysis of exist- outweighed the benefits, but now this isn’t have before. ing customer behaviour, from both on-line the case as the technology and its applica- A number of banks are already investing in and off-line sources. This data is then used tion has matured. Of course, there remains innovation labs as they look to capitalise on to feed into a CRM solution, giving the call the potential risk that customer data could the Big Data opportunity. Ultimately, banks centre more targeted leads. be breached as a result of Big Data analytics must be able to walk before they can run – it The data can be fed back into the teams activity. is vital they take the time to lay the firm inter- building the customer touch points like For example, if sensitive data sets that have nal foundations so that the cost savings and mobile and web applications to improve the previously sat in isolated, high-security siloes improved customer experience will follow. < customer experience and personalisation are transferred into less secure databases for when using these channels. Customer data cross-referencing with other, less sensitive Peter Pop, SVP Financial Services, HCL analytics has been successfully used to target data at rest in a data lake, this could inad- Technologies

20 y Novem ber 2015 www. cardsinternational.com

CI Nov 525.indd 20 04/12/2015 14:41:16

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