October 2016 Issue 536 www.cardsinternational.com

AUSTRALIA’S SHINING CARDS MARKET

• STRATEGY: Digital Wallets • ACQUIRING: Latin America • GUEST COMMENTS: Verizon and The PPRO Group • COUNTRY SURVEYS: Oman & Pakistan

CI 536.indd 1 12/10/2016 16:54:58 Multichannel digital solutions for fi nancial services providers

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IE RBI final design.indd 1 05/05/2016 10:36:41 Cards International EDITOR’S LETTER

CONTENTS EDITOR’S LETTER 2S: NEW DIGEST 6 GUEST COMMENT: VERIZON Mobile payments soar but UK not Jeffrey Granvold of Verizon writes on the need for proper even in European top 10: Visa infrastructures in the age of the of Things

7 STRATEGY: DIGITAL WALLETS he number of European consumers card user vs 32% non-contactless card user), Aite Group has published an regularly using a mobile device – smart- shopping via a retailer app (49% vs 31%) or using in-depth report on the strategies phone, tablet or wearable – to make pay- a mobile device to pay for a meal (50% vs 30%). that providers need to ments has tripled in the past year. adopt in Europe and the pitfalls that T they need to avoid. Robin Arnfield But according to research from Visa - the survey Prepaid’s future has never looked so bright speaks to Ron van Wezel about its covered more than 36,000 online consumers in 19 There is no better venue – Italy – for the annual key points European countries – the UK is punching below its Prepaid Summit Europe and awards. 10: EVENT ANNUAL PREPAID EUROPE weight and is not even in the top 10 markets for Timetric research finds that the number of pre- SUMMIT AND AWARDS mobile payments use. paid cards in circulation in Italy increased at a October means the Principe di In the UK, nearly three-quarters (74%) of the CAGR of 18.13% from 12.4 million in 2010 to Savoia, Milan and the annual Prepaid Summit Europe – again sponsored by people surveyed are mobile payments users, com- 24.1 million in 2014, and is expected to grow fur- Visa. CI previews the Prepaid Europe pared with the leading markets: Turkey (91%), ther to reach 32.4m by 2019. Award nominees Denmark (89%) Norway and Israel both at 87% Growth in the prepaid card market can be 11 ACQUIRING: LATIN AMERICA and Sweden (86%). attributed to improved infrastructure of POS ter- There are still opportunities for US Poland and Romania (both 79%), Ireland minals, security features and promotional offers acquirers active in Latin America, (78%), Finland (77%) and Belgium (75%) round by card issuers. despite economic turmoil in the region. Which countries have a great off the top 10. Consumer payment needs are changing and pre- number of opportunities? Robin The study highlights how consumer adoption paid is the payment platform that best serves this Arnfield writes of digital payments across Europe has shifted evolution. 14 COUNTRY SURVEY: AUSTRALIA dramatically in the last 12 months. One year ago, Prepaid is evolving from a simple, secure and 16 COUNTRY SURVEY: OMAN 38% of people surveyed said they had never used reliable payment tool to a new way to connect 18 COUNTRY SURVEY: PAKISTAN a mobile device to make payments and had no banks with new customers and segments. It is a 20 GUEST COMMENT: PPRO GROUP plans to do so. Today, that number has dropped delivery platform to enable any type of transac- Ralf Ohlhausen of the PPRO Group to 12%. tional behaviour. discusses the value of chatbots when There is a clear correlation with contactless as Prepaid is building new payment ecosystems applied to the payments sector the increase in engagement with digital payments and core solutions to open new markets leveraging coincides with greater adoption of contactless new channels to communicate with clients and technology. According to Visa, the research indi- offer content. The future of prepaid in Europe in cates that, across all age groups, contactless pay- general, and Italy in particular, has never been so ments are now the norm. In the UK, more than bright. half the people surveyed (58%) used contactless Short term, the strength of prepaid is reflected cards this year, up from 20% in 2015. in Awards shortlists. Europe-wide, contactless users are also consist- Full details of who won what and why will be ently more open to embracing newer payment online at www.cardsinternational.com from 28 methods than those who don’t use contactless October, and will appear in the November issue cards. The study highlights that contactless card of CI. users are more interested in using a mobile device Douglas Blakey as a payment method in a shop (52% contactless [email protected]

Editor: Douglas Blakey Sub-editor: Nick Midgley For more information on Timetric, visit our Tel: +44 (0)20 7406 6523 website at www.timetric.com. Director of Events: Ray Giddings Email: [email protected] As a subscriber, you are automatically Tel: +44 (0)20 3096 2585 entitled to online to Cards Email: [email protected] Financial News Publishing, 2012 Deputy Editor: Anna Milne International. For more information, please Registered in the UK No 6931627 Tel: +44 (0)20 7406 6701 telephone +44 (0)20 7406 6536 or email Email: [email protected] Head of Subscriptions: Sharon Howley [email protected] ISSN 0956-5558 Tel: +44 (0)20 3096 2636 Unauthorised photocopying is illegal. The Senior Reporter: Patrick Brusnahan Email: [email protected] London Office contents of this publication, either in whole or Tel: +44 (0)20 7406 6526 71-73 Carter Lane part, may not be reproduced, stored in a data Email: [email protected] Sales Executive: Harry Hooker London retrieval system or transmitted by any form or Tel: +44 (0)20 3096 2586 EC4V 5EQ Asia Editorial: Xiou Ann Lim means, electronic, mechanical, photocopying, Email: [email protected] recording or otherwise, without the prior Tel: +65 6383 4688 Asia Office permission of the publishers Email: [email protected] 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 October 2016 y 1

CI 536.indd 1 12/10/2016 16:55:01 NEWS: DIGEST Cards International

M&A Worldline acquires majority stake in KB’s processing business Worldline, a provider of payments and trans- for the sale of Cataps on 23 February 2016. banka, a renowned market leader in the actional services, has acquired an 80% stake Under the terms of the agreement, World- Czech Republic, which will bring the best in Cataps, a subsidiary of the Czech lender and KB have signed an additional assets of the two partners to the retailer com- Komercni banka (KB). 10-year commercial alliance for the develop- munity, adding our rich payment and digital According to Worldline, the takeover will ment and the growth of these activities in the retail product portfolio and scalable process- enable the company to further develop prod- Czech Republic. ing systems to the wide distribution network uct and services for Czech merchants. Worldline general manager Marc-Hen- of Komercni banka, in order to satisfy the KB operates as a subsidiary of the Société ri Desportes said: “Komercni banka and fast-growing demand of Czech merchants for Générale group. After formation in 2014, Worldline have both been providing payment electronic payments equipment and associ- Cataps assumed KB’s activities in credit services and innovative solutions to the Euro- ated services.” and payment processing services, pean market over several decades. From 1 October 2016, Cataps will be inte- including merchant acquiring. “At Worldline, we are now delighted to grated with the merchant services and termi- KB signed an agreement with Worldline welcome this new alliance with Komercni nals division of Worldline. <

SECURITY Card industry delays slow US chip card transition

Delays by card companies in installing equip- it. Around 60% of retailers said they had blessing. We wish they cared as much about ment for retailers to accept new chip-based been waiting for six months or longer. security as we do. cards have slowed chip card transition in the NRF senior vice-president and general “This is frustrating for retailers and con- US, according to the National Retail Federa- counsel Mallory Duncan said: “Most major fusing for consumers. Worst of all, the new tion (NRF). retailers have done their part, but the card cards provide just a fraction of the security A recent NRF survey revealed that 86% industry continues to drop the ball. they could because they are only chip-and- of US retailers plan to have new EMV chip “Retailers have spent billions of dollars to signature rather than the chip-and-PIN used card technology completely implemented by install the new equipment, but card compa- throughout the rest of the industrialised the end of 2016. nies have failed to sign off on the installations world. Of those who do not yet have EMV in in a timely manner. “Without a secret PIN, virtually any illeg- use, 57% said they had already installed the “Many retailers have had new chip card ible scrawl of a signature is good enough for equipment but were waiting for certification readers sitting next to their cash registers a criminal to use an innocent person’s credit by the card industry so they could start using for a year waiting for the card companies’ card with or without a chip.” <

PRODUCTS Green Dot launches Visa-branded Green Dot has introduced a Visa-branded tomer security deposit held at Green Dot Credit Card is just another way Green Dot credit card in the US, specifically designed Bank, enabling anyone to apply and be Bank is helping to open the door to financial to help people with no prior credit history approved for the card. inclusion for millions of low- and moderate- or poor credit scores build a positive credit Clients’ payment performance will be income Americans.” history. reported to the three major credit bureaus, Using cash, Green Dot Platinum Visa The Green Dot Platinum Visa secured helping cardholders to build a favourable Secured credit cardholders can fund collat- credit card is available to all, and does not credit history over time. eral security deposits and make monthly pay- require a bank account. Green Dot Bank president Lew Goodwin ments at any of Green Dot’s nearly 100,000 The card’s credit line is backed by a cus- said: “The Green Dot Platinum Visa Secured retail locations. <

PRODUCTS First introduces three credit cards First Commonwealth Bank, a subsidiary of chips, which will encrypt information for friends and neighbours – build financial First Commonwealth Financial, has intro- increased data security for transactions at confidence, and we’re excited to launch our duced three MasterCard-branded credit terminals or ATMs that are chip-enabled. credit card products because we’re doing it in cards: Rewards, Student and Secured. Additionally, customers can sign up for a way that will benefit our customers. Rewards and Student cardholders will MasterCard’s SecureCode that will provide “Our Rewards and Student cards will receive 1% back as a statement credit at the an additional layer of online shopping secu- allow cardholders the opportunity to receive end of each quarter, while the Secured card is rity. credit for future purchases, while our Secured designed for individuals who have not estab- First Commonwealth Bank executive vice- card can help build or improve credit. lished credit or have a credit score that pro- president and business integration group “An added convenience is that our cards hibits them from obtaining credit. manager Norm Montgomery said: “We launched with , and The new cards are equipped with EMV strive to help our customers – our families, Android Pay capability.” <

2 y October 2016 www. cardsinternational.com

CI 536.indd 2 12/10/2016 16:55:01 Cards International NEWS: DIGEST

SECURITY Entrust Datacard launches solution

Entrust Datacard has launched its Datacard The issuance core solution enables users to Entrust Datacard vice-president for bureau Adaptive Issuance Suite that allows users to optimise their printer’s efficiency and drive solutions Dan Good commented on the safely issue credentials and payment cards issuance operations based on the individual launch: “Our new Adaptive Issuance Suite across any existing platform or printer in any personalisation device. allows us to provide customers with a solu- industry or market. The application enables the tion that not only gives them the secure issu- The Adaptive Issuance Suite includes issu- preparation of data for the personalisation ance they have come to expect from Entrust ance solutions in four categories, including of integrated smart cards. The applications Datacard, but also the ability to easily deploy issuance management, issuance core, smart include formats for EMV, and a number of the solutions across their production fleet card application and key management. additional smart card formats. with ease and flexibility. Issuance management offers advanced and Key management enables users to improve “This modular solution will allow our flexible capabilities to central manage issu- overall security and securely manage keys at customers to create an issuance environment ance devices from an intelligent command each step of the issuance process, and pro- that best meets their needs today, knowing centre. It is provided by using Datacard vides users with the flexibility to effectively that should those needs change in the future, Adaptive Issuance Remote Monitoring and manage multiple keys by using the Datacard their issuance products will adapt with Management Software. Adaptive Issuance Key Manager Software. them.” <

STRATEGY Caltex renews fleet card processing agreement

WEX, a corporate payment solution pro- programme operator. function of getting fuel to their customers. vider, has renewed a multi-year fuel WEX Australia will continue to pro- “We are delighted to continue our rela- card system processing agreement vide payment processing services to tionship with Caltex and help Caltex run its with Caltex. Caltex fleet card customers and fuel card business efficiently, effectively and WEX Australia will process all Caltex retailers representing over securely.” Caltex fuel card payments for three 1,900 branded retail locations. WEX serves customers and partners years. WEX Australia MD Greg Drumm through operations around the world, with Caltex operates as Australia’s only said: “We provide an industry-leading offices in the US, Australia, New Zealand, Australian Securities Exchange-listed trans- fuel card processing solution to our partners Brazil, the UK, Italy, France, Germany, Nor- port fuel supplier and commercial fuel card to allow them to concentrate on their core way and Singapore.<

M&A Chase extends agreement with Walmart Chase, the consumer and commercial ChaseNet offers fixed-rate pricing for “Walmart is always looking for innovative banking business of JPMorgan Chase, and Chase Visa credit and debit payments for ways to improve the payment experience for Walmart have extended their agreement to the term of the contract. Chase already pro- our customers while also creating competi- process payments on the bank’s closed-loop cesses payments for Walmart’s e-commerce tion in the payments industry. We are excited network ChaseNet. channel. to work with Chase to help our customers Under the agreement, Chase will process Walmart senior vice-president and assis- save time and money.” payments at more than 5,000 Walmart and tant treasurer Mike Cook said: “Engaging Chase Commerce Solutions CEO Matt Sam’s Club locations in the US and at Sam’s Chase with a direct processing relationship Kane said: “We are pleased to expand our Club e-commerce. Sam’s Club is a subsidiary has been a priority for Walmart for some relationship to offer consumers a convenient, of Walmart. time. secure payment experience.”<

MOBILE First National Bank upgrades app First National Bank of Pennsylvania, a sub- debit card ‘on’ or ‘off’. When the card is ‘off’, First National Bank director of digital sidiary of FNB Corporation, has launched no transactions will be approved. channels and payments Sam Kirsch said: the latest upgrade to the FNB Direct mobile Clients can also set transaction controls “With CardGuard, we are excited to offer banking app that will offer customers mobile according to location, and establish limits for consumers additional security and conveni- debit card controls. debit card purchases based on the amount of ence with yet another distinct feature of the The upgrade, known as CardGuard, will the transaction. FNB Direct Mobile Banking app. enable FNB customers to control debit card FNB said that its Direct Mobile Banking “This is just the latest example of FNB’s expenses. It will also offer improved protec- with CardGuard can be used by consumers overall corporate vision of investing in tech- tion against fraud and budgeting support. and small businesses with the FNB Direct nology to improve the banking experience With CardGuard, customers can turn their mobile banking app, available online. for our customers.”<

www.cardsinternational.com October 2016 y 3

CI 536.indd 3 12/10/2016 16:55:02 NEWS: DIGEST Cards International

MOBILE MasterCard launches new platform for building next- generation payment apps MasterCard has launched a new application virtual reality and the Internet of Things. a format they can more easily connect to and programming interface (API) developer plat- MasterCard senior vice-president for APIs integrate with. form, MasterCard Developers, which allows Oran Cummins said: “We see MasterCard Additionally, a new API has been devel- developers to create next-generation com- Developers as empowering our customers, oped to maximise financial inclusion efforts. merce solutions. partners and their developers in their efforts Even in the absence of telecommunications The platform will feature a New and to innovate and grow their own businesses. infrastructure, the MasterCard Aid Network Experimental API category, allowing part- “The new platform will serve as a key way enables to streamline aid distribution while ners to test new technologies and applica- to integrate MasterCard technology and ser- offering more transparency to humanitarian tions. vices into their digital solutions in an easy organisations and non-profits. Developed at the company’s eight R&D and cost-effective way. And, consumers will MasterCard explained that the new labs around the world, the experimental APIs benefit from the simpler, faster and safer MasterCard Developers platform offers a will help partners build, scale and enable experiences driven by these efforts.” smooth experience and clear, developer- payments on new platforms. MasterCard said partners now have friendly documentation with APIs supported Simultaneously, they will provide a foun- access to more than 25 MasterCard APIs – by software development kits, developer dation to enable payment integration into including key services like Masterpass and tools and sample code for the top six pro- new categories such as augmented reality, MasterCard Digital Enablement Services – in gramming languages.<

STRATEGY UnionPay partners with Socredo Bank in French Polynesia UnionPay International has reached an ments for Socredo-issued bank cards. accept UnionPay cards. agreement with French Polynesia-based In collaboration with UnionPay Interna- The bank’s cards will become interna - Socredo Bank to issue the first local Union- tional, Socredo Bank will replace existing tional payment cards which can be used in Pay card from 2017. Socredo bankcards with UnionPay cards. It the UnionPay network in 160 countries and UnionPay will also assist the bank in will also issue new UnionPay cards. The bank regions. The cards can also be used for online upgrading cross-border use and online pay- has enabled all its ATMs and merchants to payments. <

RESEARCH Nearly 68% of Saudi users prefer mobile phones for online payment Around 68% Saudi consumers prefer to Surveying 23,000 consumers in 23 differ- Elgibali said: “The MasterCard Impact of make payments with mobile phones, accord- ent countries in the Middle East, Africa and Innovation Study provides a clear indication ing to MasterCard’s Impact of Innovation Europe, the MasterCard Impact of Innova- that consumers in Saudi Arabia are ready to Study. tion Study was released on the sidelines of embrace digital innovations and are increas- The study highlights that tablets and ID the MasterCard Innovation Forum 2016 in ingly seeking better ways to pay. cards follow at 35% and 26% respectively, Budapest, Hungary. “Mobile phones are becoming the go-to indicating a growing consumer shift toward The survey revealed that 51% of consum- device for consumers for online activities, new payment methods in Saudi Arabia. ers using online banking via a web browser, and this trend will gather further momen- Codes received through SMS are the most while 44% rely on their smartphone app for tum as smartphone penetration and internet common form of authentication for Saudi their banking needs. usage rates in the kingdom keep climbing and consumers, ahead of PIN codes and finger- MasterCard division president for the new technologies and innovations emerge at print scans. Middle East and North Africa Khalid a rapid pace.” <

PRODUCTS Air Canada, CIBC roll out multicurrency prepaid card in Canada Air Canada and Canadian Imperial Bank Canadian and Hong Kong dollars, euros, between currencies. of Commerce (CIBC) have launched a new sterling, Japanese yen, Mexican pesos, Swiss Air Canada vice-president of global sales multicurrency prepaid card for travellers in francs and Turkish lira. Duncan Bureau said: “Air Canada carries Canada. Cardholders can also make POS tap-and- 41 million customers each year to more than The card will allow customers to purchase pay transactions, ATM withdrawals and 200 destinations on six continents. and store multiple currencies for use at retail- online purchases anywhere Visa is accepted, “To make their travels even more conveni- ers worldwide, wherever Visa is accepted. automatically in the local currency. ent, we have partnered with CIBC to create With the new card, consumers can man- The card, which does not charge any a prepaid global currency card. This innova- age up to 10 currencies online or through the additional fees when used at retailers, will tive card gives travellers flexibility and secu- card’s mobile app. allow users to view latest activities and pur- rity when dealing with foreign currencies so The currencies include US, Australian, chases, check card balances, and move funds they can focus on exploring new places.” <

4 y October 2016 www. cardsinternational.com

CI 536.indd 4 12/10/2016 16:55:02 Cards International NEWS: DIGEST

RESEARCH Barclaycard launches new credit card for overseas travellers Barclaycard, part of Barclays Retail and If the users do not pay off their balance in Business Banking, has introduced a new full each month, they will be charged 11.9% credit card for use abroad. representative APR on purchases, and a hefty The new Platinum travel credit card does 27.9% on cash withdrawals. not charge fees until the end of August 2018, Barclaycard said that the people with 21 after which a 2.99% fee will be charged from years of age or with an income of more than cardholders on every transaction. £20,000 per year can apply for the card. <

PRODUCTS QIB launches credit card with flexible payment option Qatar Islamic Bank (QIB) has launched its Cardholders will have the flexibility to pay efits, including purchase protection, extend- latest Visa-branded credit card, which offers anywhere between 5% and 100% of their ed warranties of up to 12 months for items flexible payment options to users. monthly balance with the new card. purchased through the card, and discounts at The new credit card, which is available in Customers with monthly settlements will various retail outlets. three variants – Infinite, Platinum and Gold have amounts deducted automatically from QIB personal banking group general man- – will allow QIB customers to manage cash their accounts. Early payments can also be ager D Anand said: “We are pleased to intro- flows by paying as little as 5% per month on made if required. duce this new credit card with flexible pay- outstanding card balances. The new card also offers attractive reward ment option as part of our overall product The bank is running a launch offer to cus- points based on customers’ spend. Custom- suite. tomers applying for the card before the end ers will also benefit from higher credit limits “Our clients have been asking for a of 2016, in which QIB will not of up to two times their monthly salary. product that offers them the flexibility to issuance fees, cash withdrawal fees or sup- Customers who hold the QIB Visa Plati- carry their balances forward, and we have plementary card fees. num credit card can access additional ben- listened.” <

PAYMENTS Bank of Bhutan to accept JCB cards Japanese credit card issuer JCB International of business cooperation of Bank of Bhutan Bank of Bhutan CEO Pema Nadik said: (JCBI) has signed an agreement with Bank of and JCB in such a historic year. “The introduction of JCB card acceptance Bhutan, following which the bank has start- “South Asia is an emerging market and has been long awaited, given the popular- ed accepting JCB cards in the country. Bhutan is located in the middle of East ity of Bhutan as a destination for Japanese With the latest agreement, JCB Asia, Southeast Asia, and South travellers. cards are accepted at over 480 Asia. “With JCB cards now being accepted locations, covering around 90% “Through the bank’s nationwide in Bhutan through the network of Bank of of POS terminals and ATMs in the merchant network, we can meet Bhutan’s ATM and POS terminals, visitors market. JCB card member demand while holding JCB cards have the option of mak- JCBI deputy president Kimihisa travelling and sightseeing in Bhutan, ing payments securely through this payment Imada said: “This year is the 30th especially card members from neigh- channel.” anniversary of the establishment of diplo- bour countries such as China, Bangladesh, Bank of Bhutan currently manages 82 matic relations between Bhutan and Japan, and Thailand, which have about 13m card ATMs and over 400 POS terminals across and it is my pleasure to announce the launch members.” the country. <

DIGITAL Payza introduces direct card processing to online merchants

Payza, a UK-based payment platform, has Payza will also provide business account Payza global executive vice-president launched direct credit card processing to holders with easy-to-use tools and UX-opti- Firoz Patel said: “Our new low-rate direct online businesses and merchants in Europe. mised payment flows to ensure that their cli- merchant processing account is first being E-commerce merchants will be eligible for ents benefit from a seamless shopping expe- launched to European merchants because the no-monthly-fee Payza business account rience. they face some of the most complex everyday to process Visa and MasterCard payments The Payza business account will provide barriers to running their businesses, like the for rates starting at 2.9%. vendors with a simple checkout process, easy costs of cross-border disputes, restrictions to Approved Payza business account holders payment button and shopping cart integra- selling cross-border within and outside of the can also accept direct Payza e-wallet, Bitcoin tion, and multiple payment options. EU, delivery costs, and taxation rules. and Canadian debit card network It will also offer advanced security and “Our direct merchant business account Online payments at low cost, without no intelligent fraud prevention to protect mer- will provide Europeans a simpler, faster and monthly account or setup fees. chants’ transactions. more affordable way to do business.”<

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CI 536.indd 5 12/10/2016 16:55:07 GUEST COMMENT: VERIZON Cards International

How changes in network architecture are ushering in the IoT era The continued proliferation of workloads will have a dramatic effect on networks; the need for a software- defined wide area network is therefore increasingly apparent, writesJeffrey Granvold, vertical lead and manager of executive consulting partners in the financial services at Verizon

ver the last several years, IT depart- We’ll call this hypothetical app BankFit. ligence in the SD-WAN manages the entire ments have experienced a dramatic The app lets the user create fitness and per- process seamlessly – including aspects like change in how they support the sonal finance goals and tracks activity, nutri- security and encryption, which are core to increasing demands placed on their tion, spending, saving, etc. The user can also IoT adoption. O make purchases and conduct banking While standards on the cross section of IoT wide-area network (WAN). This change came not as a pass- transactions from this app. and SDN/NFV are currently being defined, it ing trend in network manage- Users set up and complete is clear that banks should be concerned about ment; but rather, it was driven milestones on a weekly/ the privacy and security considerations. by the rise of the Internet of monthly basis and receive Banks will need to work with standards Things (IoT). banking rewards (checking bodies to establish a trust framework for Today, workloads associ- to transfers), IoT that ensures the user is in control of their ated with smart cards, ATMs special offers geared towards privacy and complies with international IoT and branch kiosks, along with both health and fitness, etc. security standards for global interoperability. potential workload from weara- This is a pretty standard IoT And actually IoT – specifically wearable bles, retail loyalty programs and example. devices – can provide security and encryption data mining, are ushering in the era of Now here’s where the SD-WAN picks in a new way for financial services companies IoT in the financial services industry. up. The BankFit interface sends sensory data and others. In fact, IDC estimates that between 2014 from the users’ body, their movements, GPS Consider the benefit of human uniqueness. and 2017, IoT workloads will grow 750%. data, etc. to the Gateway – the point of data By establishing the user as the security device This continued proliferation of workloads collection for all BankFit interfaces. with credentials embedded, they themselves will have a dramatic effect on network The Gateway seamlessly collects and per- become their own IP address. architecture – creating the perfect fit for the forms data analytic functions. This workload This allows for access to banking systems software-defined WAN (SD-WAN). traffic will then be assigned a specific net- with less system intervention, and in turn SD-WAN moves both control and moni- work via the SD-WAN centralised network provides a much higher security posture than toring from physical devices (routers and policy. exists today. firewalls) to an intelligent software overlay SD-WAN impacts the application layer as IoT in financial services is growing at an that routes workloads across both public and well as the network. The application layer exponential rate, as more companies figure private networks. has one of the most complex tasks in the IoT out how to best leverage IoT technology to This overlay allows for increased flexibil- journey. It involves ingesting and processing better serve customers. ity, and greater intelligence to automate and all of the information collected from a con- Moreover, the flood of IoT transactions prioritise traffic based on various network nected device in real time. is placing such significant demands on data types (4G, LTE, DSL, MPLS). Not all information that comes from a centres and remote sites now that the costs of The intelligence found within the SD- connected device is going to cross over the meeting the demands with traditional WAN WAN solution chooses the best network same network path (internet, 4G, MPLS) or topologies are impossible to sustain. path for the particular workload. It provides end up in the same data centre. Keep in mind SD-WAN, as part of the evolution in auto- greater efficiency in workload management that the world of IoT is a hierarchical system mated network intelligence and dynamic and creates a new way of thinking about how of data and information. control, provides the flexibility that is essen- to deliver products and services to financial In the example of BankFit, specific data tial for achieving market leadership, espe- customers. such as the calorie goals, tasks, healthy activ- cially as the market itself is changing. It also provides the proper foundation for ities, heart rate data, etc. will be processed It is recognised that retail banks will need IoT solutions. For example, the bank net- via one application while banking informa- to work with trust frameworks to ensure work team can create an IoT policy based tion, requests, transfers, will function within privacy policies are established and main- network path using SD-WAN that can deliv- the banking systems process. tained. These frameworks also establish IoT er encrypted workloads to network paths In order to make this one seamless transac- as a benefit for more banking automation where the IoT applications reside. tion, the applications will be sending/receiv- through wearable devices based on security Here’s a hypothetical example of how SD- ing information asynchronously via different control established by human uniqueness. WAN and IoT collide in a financial services network paths. These paths can be based on If your financial institution is not thinking setting: latency or the security needs of the transac- of these things – IoT for banking supported Picture a personal health and financial tion. by SD-WAN – you will have to play catch-up assistant app found on the latest wearable This is precisely where the investment in to your competitors. Where will your net- device that combines fitness with banking. SD-WAN will pay off. The built-in intel - work be in 2017? <

6 y October 2016 www. cardsinternational.com

CI 536.indd 6 12/10/2016 16:55:08 Cards International STRATEGY: DIGITAL WALLETS

Strategies for success in the European digital wallet market Aite Group has published a report on the strategies that digital wallet providers need to adopt in the increasingly competitive European market. Robin Arnfield investigates and speaks to the report’s author, senior analyst Ron van Wezel, on its key points and takeaways for the industry

he Digital Wallets: Provider Strate- Market trends become ubiquitous in the near future,” the gies to Meet Customer Requirements The report predicts that European B2C report says. report says that, in recent years, e-commerce sales will reach €510bn “The European market is ready for digital T Europe has seen a multitude of digital ($574bn) in 2016, growing at around 12% wallet initiatives that leverage the NFC infra- wallet initiatives by banks, tech companies, per annum. Online sales on mobile devices structure, although the business case (for mobile card networks (Visa Checkout and Master- are the driving factor for the fast growth in proximity payments) is still unclear.” Card’s MasterPass), mobile network - B2C e-commerce. In 2015, 23% of European The report says that the real driver for tors (MNOs), and merchants. online retail sales took place on mobile devic- consumers to use proximity digital wallets is In addition, global providers such as es, the report says. integrated loyalty programs allowing them to PayPal and ’s and offer Online sales could have been even higher. redeem rewards points, offers and coupons at cross-border digital wallets in Europe. “E-merchants currently see a checkout aban- checkout. However, seamless integration of loy- With the arrival of the ‘Pays’ – Apple Pay, donment rate of up to 70% on PCs, partly alty with payments is challenging, particularly Android Pay and Samsung Pay – in Europe, driven by the friction customers experience in for more complex digital wallet applications. incumbent digital wallet providers, especially having to type in sensitive credit card data, sign banks, face a further challenge. up for an account they will use only once, or Alternative payments “As these wallets come to Europe as part of provide shipping-address details,” the study For proximity POS payments, cards are their global rollout, they will redefine the com- says. virtually the only non-cash payment instru- petitive landscape,” the report says. “For mobile, the situation is even worse ment currently available in Europe. But (86% on smartphones and 77% on tablets), for e-commerce, alternative payments are Definition driven by the challenge of filling out form fields becoming a significant factor in Europe, the The study, by Aite Group senior analyst Ron on smaller screens.” report notes. van Wezel, is based on interviews with 27 There’s a strong customer requirement for Compared to card payments, alterna - executives from European banks, tech com- a convenient and secure checkout experience tive payments offer merchants lower costs, panies, merchants, and industry organisa- (‘click and pay’), van Wezel says. reduced risk, and faster availabil- tions. It defines ‘digital wallet’ as an applica- “Customer requirement for uniform, inte- ity of funds. tion with the following basic functionality: grated payment experience across all channels “When alternative payment methods are • Secure user enrolment (application down- will drive demand for digital wallets that sup- integrated into digital wallets, existing card load, identity check) and secure provisioning port such experiences, in particular on mobile models may be challenged,” the report says. of credentials (user ID/password) for wallet device, he writes. “Global (digital wallet) providers already access; One example is the Pay with Amazon wallet, support over 100 different payment methods • The ability to securely provision and store which enables payment with just one click for to fund their digital wallet accounts, providing customers’ identity information (email customer acceptance, since all data is provided customers with the option to pay with the local address, personal data), payment informa- from the wallet. payment methods they are used to. tion (card data), and shipping address. The “For alternative payments, there is a clear user can (pre-)select a payment method NFC value proposition for the merchant, but not within the wallet (i.e. pay merchants online, According to the study, NFC-based much for the consumer. This could inhibit in app, or in store), and acceptance is reaching growth of alternative payments, unless the • Payment funding from a debit, credit or pre- critical mass in Europe, with digital wallets value proposition for consumers is enhanced.” paid card, bank or e-money account, virtual on smartphones or wearables being enabled Alternative payment examples include online currency, or any other stored value which the to offer proximity payments via NFC. banking-based e-payment schemes such as the wallet accepts. Visa reported in May 2016 that one in five Netherlands’ iDeal, which has a 60% domes- Digital wallets may offer other features such in-person Visa-processed card payments is now tic market share; schemes as P2P payments, ATM cash-out, multicurrency contactless in Europe. MasterCard and Visa such as Poland’s that work directly from support, non-card-based alternative payments have set compliance dates for all POS terminals the customer’s bank account; Italy’s Jiffy real- from bank accounts or other sources, balance- to accept contactless payments by January 2020 time mobile P2P transfer service; and Zapp/ inquiry and reporting functions, and loyalty at the latest. Pay by Bank, a UK-based mobile payments programs such as rewards or coupons. In the UK, over 400,000 POS terminals (25% service owned by payments network operator Mobile wallets and e-wallets are specific digi- of the installed base) are already NFC-enabled. . In July 2016, MasterCard agreed to tal wallet implementations for the mobile device “As two in three (European) (smart)phones buy a 92.4% stake in VocaLink. and the desktop/browser environments respec- will be NFC-enabled by 2018, this means that In September 2016, Italian payment service tively, the report says. acceptance of mobile proximity payments will provider SIA said Jiffy is currently offered by

www.cardsinternational.com October 2016 y 7

CI 536.indd 7 12/10/2016 16:55:08 STRATEGY: DIGITAL WALLETS Cards International

n FUNCTIONAL COMPARISON OF SELECTED DIGITAL WALLETS IN EUROPE Product Payment Method Platform Merchant Payment Channel Other Payment Use Cases Value-Added Services Buyer protection, seller Pay with Amazon Card Browser Web, in app Recurring payments protection Android Pay In store (NFC), in app, mobile Loyalty points, online offers Card Android N/A (Google) web and gift cards IOS; browser (Safari); watchOS, In store (NFC), in app; web Apple Pay Card macOS with iPhone or Apple (Safari only) planned for fall N/A Reward cards Watch as approving device 2016 BKM Express Card Browser; Android, iOS In app, web, in store (QR) P2P N/A (BKM Turkey) Masterpass Browser; Android, iOS (second Card Web, in app, in store (NFC) N/A Loyalty cards (MasterCard) half 2016) In store (NFC, Bluetooth low MobilePay Loyalty program, reward cards, Card, bank account Android, iOS, Windows Phone energy, QR via proprietary box), P2P, e-invoicing (Danske Bank) receipts management in app, web P2P, recurring payments, Buyer and seller protection, Card, bank account, Web, in app PayPal Browser; Android, iOS remittance, bill payments, rewards, consumer and e-money Starting with in-store initiatives mobile POS merchant credit Loyalty, payment guarantee, Paysafe (Skrill, Card, bank account, P2P, recurring payments, Browser; Android, iOS Web, in app chargeback protection, and Neteller wallets) e-money, bitcoin remittance more Android on Samsung mobile In store (NFC, magnetic secure Samsung Pay Card N/A Loyalty cards devices transmission) Bank account (via Loyalty programs, offers and Seqr (Seamless) Android, iOS, Windows Phone In store (QR, NFC), in app, web P2P, remittance SEPA Direct Debit) coupons, cashback Web, in app; in store via Card Android, iOS, Windows Phone Bluetooth low energy on P2P N/A roadmap 2016 Visa Checkout Card Browser Web, in app N/A N/A Source: Aite Group, Digital Wallets: Provider Strategies to Meet Customer Requirements 23 Italian bank groups and has over 400,000 30% of all individuals in the EU purchased significant factors to reduce CNP fraud. In registered users. goods or services via the internet from sellers the POS space, digital wallets provide EMV SIA has launched a pilot of in-store payments in other EU countries, while 18% bought from security. But any security relies on consumer using Jiffy in Milan and Bergamo at merchants countries outside the EU. diligence, which is an issue. People root their which are customers of UBI Banca, one of the For cross-border e-merchants dealing with phones, install apps not vetted by their phone banks supporting Jiffy. multiple country-specific requirements, the abil- provider’s app store, accept phishing emails, ity to accept digital wallets that support multi- and share their IDs. Banks and payment ser- Strategies ple payment methods and currencies will add vice providers will have to implement addi- “Successful digital wallet providers will be significant value, the report says. tional security measures, for example moni- those that offer consumers ease of use, peace The report argues that, for the majority of toring fraudulent activity in their back-end of mind (regarding security), and the abil- merchants, the best strategy is to focus on the systems, to mitigate those risks.” ity to transact anytime and anywhere,” the shopping experience instead of developing a ‘Rooting’ refers to removing limitations set report says. proprietary wallet, and select the right third- by a smartphone manufacturer in its operat- The borders between online and in-store party wallets. ing system and running third-party apps that (offline) commerce are becoming increasingly Van Wezel advises new entrants to the digital have not been approved by the manufacturer, blurred as merchants seek to offer integrated wallet market to choose the right killer app for thereby breaking the phone’s default security. shopping experiences. their wallet, and look beyond proximity pay- “Customers will expect their digital wallet to ments. MNO wallets work cross-channel, providing an omnichannel “Many digital wallet providers (including European MNOs have found it difficult to digital experience,” the report says. new entrants) have launched with mobile prox- meet consumer digital wallet requirements “They can check out and pay in store with imity payments, but the added value of this ser- such as a good customer experience, trust the digital wallet but have the goods delivered vice for consumers isn’t clear,” the report says. and ubiquity. at home; they can order goods online and pick “Other use cases such as P2P payments have “Signing up for an MNO wallet requires them up at a store by showing a QR code stored proven to fulfil a need in many markets and can an NFC-enabled universal integrated circuit in the digital wallet, or they can use their loyalty be easily built out into a merchant proposition.” card (UICC) chip to be issued to the custom- programs in the digital wallet to work across all er,” the report says. channels. Security “But the use case for proximity m-pay- “This convergence will become a main driver “Digital wallets enhance security compared ments is not good enough to convince cus- for digital wallet innovation and acceptance.” to traditional ‘card on file’ merchant applica- tomers to sign up, even when the new UICC The report says that cross-border e-commerce tions,” van Wezel tells CI. chip is free of charge. is growing rapidly. “Tokenisation, biometric authentication, “Although many MNOs possess a well- It cites Eurostat data showing that, in 2015, and secure storage of user credentials are known brand, customer loyalty in their highly

8 y October 2016 www. cardsinternational.com

CI 536.indd 8 12/10/2016 16:55:09 Cards International STRATEGY: DIGITAL WALLETS

n OVERVIEW OF WALLET STRATEGIES TO CREATE CUSTOMER VALUE Value to Customer Physical Commerce Domestic E-commerce Cross-Border E-commerce Optimise payment experience: fast, easy, tap Epitomise payment experience to reduce friction Optimise payment experience and reduce Consumer and go to a minimum, one-click payment as part of the complexity due to different languages, currencies, experience Provide extras integrated with payment: overall shopping experience payment conditions, etc. e-receipts, rewards Marketing via trusted brand Marketing via trusted brand Trust Marketing via merchant brand with loyal customer Marketing via trusted brand Marketing via merchant brand with loyal customer (by Consumer) base Provide buyer-protection services base Provide buyer-protection services Use NFC to leverage contactless card Ubiquity of Service infrastructure Sign up largest merchants to reach critical mass Sign up global merchants (to Consumer) Offer connected wallet (online/cloud) Use NFC to leverage contactless card Market Coverage infrastructure Distribute via consumer market leader(s) with Manage digital wallet as a core business (for Merchant) Distribute via consumer market leader(s) with high domestic market share high domestic market share Offer support of local and international payment Product Capability Offer loyalty services integrated with payment methods, multicountry and multicurrency Offer loyalty services integrated with payment (for Merchant) Offer payment guarantee capability, etc. Offer payment guarantee Source: Aite Group, Digital Wallets: Provider Strategies to Meet Customer Requirements competitive markets is low,” the report says. a white-labelled solution from a third-party payments with the ‘Pays,’ and bank branding “Adding mobile payments to the proposition provider, or offer a combination of the two, will almost disappear as just another ‘Visa or will not change this competitive dynamic in any the report says. MasterCard’ in the customer’s digital wallet. significant way. Also, ubiquity is limited, as only “Major banks should develop their own wal- “The ‘Pays’ are claiming the online and in- customers of the MNO can use the wallet.” lets to keep the relationship with their custom- app channels as well, building on the brand “Most MNO wallets in the US and European ers,” Van Wezel tells CI. awareness they created in the physical world markets don’t offer a value proposition,” van “They can do this on their own, or partner of POS payments.” Wezel tells CI. with the card schemes.” “Why would a consumer go through the has- For example, in the US Visa recently launched Pay by Bank sle of requesting an NFC-enabled UICC chip for its Visa Digital Commerce App as a white- Zapp, will launch its Pay by Bank app before their smartphone just to be able to make NFC labelled solution. the end of 2016. The service will integrate mobile payments with that specific MNO? It said in a statement: “With the app, issu- with UK banks’ mobile banking apps to ena- “In contrast, MNO wallets have been suc- ers provide their branding and select the spe- ble users to pay merchants from their bank cessful in emerging markets, for example cific features to deploy, including tokenised accounts online, via an app or in-store. M-Pesa in Kenya, offering a payment service to contactless payments, fingerprint authentica- Pay by Bank, which will be offered at launch unbanked people where none existed before.” tion, card controls, alerts, account balance, by Bank of Scotland, Barclays, Halifax and The report says MNO wallets will struggle transaction history and more.” Lloyds Bank, will use VocaLink’s Faster Pay- to provide sufficient value for customers if they ments real-time settlement system. continue to focus on proximity payments. The “Pays” Transactions will be based on secure digital “The ‘Pays’ success will aggravate the situ- “The initial response by banks/issuers in any tokens, ensuring customers never reveal their ation, and MNOs should find new ways to market to Apple Pay would be something bank account details to merchants. create value in the payments space or pull out like ‘why would we relinquish our brand “Pay by Bank offers value to merchants, as altogether,” it says. visibility and control over customer relation- they will receive the money instantly into their ships, and pay for the privilege?’” van Wezel account with finality and no ,” van PayPal tells CI. Wezel tells CI. PayPal’s importance in the European and UK “When Apple Pay launched in the UK, “I have no insight into pricing yet, but that digital wallet markets depends on the specific some of the major banks, Barclays for should be attractive compared to card pay- market, says van Wezel. instance, didn’t participate. ments. “In the UK and Germany, PayPal has a mar- However, the competitive pressure eventu- “The key lies, as usual, with consumer adop- ket share of about 10%,” he tells CI. ally drove all the UK banks into Apple’s lap.” tion. If the Pay by Bank app works easily and is “In Italy, PayPal’s market share is above “Some banks argue that the ‘Pays’ are a frictionless, and banks/merchants promote this 20%. In markets where bank-led digital pay- good thing, as they pave the way for mobile way of payment, take-up could be fast. ment alternatives are available, PayPal’s market proximity payments and will drive credit “In the Netherlands for instance, iDeal share is much lower. For example, its share in card payments for issuers,” says van Wezel. acquired an online payments market share of Poland is 2%, and in the Netherlands 4%.” “In Spain, Samsung Pay convinced banks, 60% in just a few years.” as the user experience (with Samsung Pay) “In my view, alternative payments are The banks was better than the banks’ own (mobile pay- becoming really important in Europe, and the Banks can choose to develop their own ment) applications. success or failure of Pay by Bank will be a valid digital wallets using Host Card Emulation, “But the threat of disintermediation is a test of that opinion in a card-dominated market which is restricted to Android devices, deploy valid one. Consumers will associate mobile like the UK,” says van Wezel. <

www.cardsinternational.com October 2016 y 9

CI 536.indd 9 12/10/2016 16:55:09 EVENT: ANNUAL PREPAID EUROPE SUMMIT AND AWARDS Cards International

Preview: the Annual Prepaid Awards It’s that time of the year again: October means the Principe di Savoia, Milan and the annual Prepaid Summit Europe – again sponsored by Visa, not to mention the annual Prepaid Europe Awards. With grateful thanks to the sponsors, judges and all entrants, CI presents a sneak preview of the 2016 award nominees

The 2016 Prepaid Europe Awards nominees Prepaid Innovation of the Year Best Corporate/Payroll Prepaid Card and Gov- Prepaid Service Provider of the Year Barclaycard ● MoneytoPay in collaboration with ernment Digital Prepaid Initiative of the Year Amilon ● IDT Financial Services ● Card BPI ● Tuxedo Money Solutions ● VFX Financial Contis Group and Suits Me ● PFS Solutions ● PFS ● Saxo Wirecard for the Curve product Prepaid Mobile App of the Year Best Prepaid Travel Card Prepaid Marketing Campaign of the Year Amilon ● SIA EasyPay in conjunction with Euronet Worldwide (Wizz Prepaid Travel Card) Amilon ● Epipoli ● Realex FinAppsParty Saxo Raphael’s Bank ● VFX Financial ● Tuxedo Money Solutions Payments Banking ● UBI Banca Mobile Wallet of the Year Best Basic Bank Account with Prepaid Card Best New Loyalty/Reward Prepaid Card Barclaycard ● Poste Italiane ● Tuxedo Money So- Ffrees ● Monese abnd Contis - Branchless, CaixaBank Electronic Money ● EDE Euronet lutions for Liveload ● Vodafone Wallet – Loyalty Mobile Banking ● TEB24 Worldwide (Wizz Prepaid Travel Card) ● Epipoli & Offers ● Wirecard – Orange Cash Best Contactless/Proximity Payment Solution ● Vodafone Wallet Prepaid Security/Anti-Fraud Programme of Barclaycard ● BZW Santander Poland Financial Inclusion Programme of the Year the Year ● Vodafone and Orange Wallet Solutions CaixaBank Electronic Money ● EDE ● Contis Cybertonica ●Paysafe’s company Skrill’s Rapid Best New Payments Startup Group Ltd & Monese ● Go Henry ● Prepaid Transfer ● Safran Identity & Security ● W2 Cybertonica ● Monzo Issued by Wirecard Card Financial Services (PFS) ● Suits Me Global Data Solutions Solutions

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10 y October 2016 www. cardsinternational.com www. www.privatebankerinternational.com

CI 536.indd 10 12/10/2016 16:55:11 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 Cards International ACQUIRING: LATIN AMERICA

US acquirers target Latin America US-based acquirers have shown considerable interest in the Latin American cards market in the last 15 years, particularly Brazil and Mexico. Despite recent economic uncertainty and the popularity of cash, there are still opportunities for US acquirers active in the region, reports Robin Arnfield

2B and B2C payments volume in n FIVE-YEAR CARD VOLUME GROWTH needed to support their existing merchants Latin America has shown strong as they moved into multiple markets.” increases over the years, making Market E-Comm Card Face-to-Face “As a way to serve their merchant clients the region a mature and stable mar- Brazil 28% 15% with multi-country, pan-regional and/or “B 49% 9% global operations, acquirers often deploy the ket for growth opportunities,” says Beth Mexico Horowitz Steel, a partner at US consultancy Chile 30% 19% partnership model as a market entry strategy,” Glenbrook Partners. Horowitz Steel adds. According to Janinne Dall’Orto, a senior Colombia 65% 14% “For example, a US acquirer which partners manager specialising in merchant acquiring Source: First Annapolis Consulting analysis with an in-market payment gateway (versus at US consultancy First Annapolis Consult- applying for local licenses and becoming ing, healthy growth rates and recent regula- industry as people do more purchasing. registered in a country or region), can have tory activity by some Latin American govern- “From an economic perspective, Mexico is a immediate access to that market’s payment ments continue to attract acquirer interest in much more attractive market than Brazil, but environment – via one system integration the region. it’s much smaller than Brazil.” with one provider – and have accelerated “E-commerce and face-to-face sales volume access to consumers, businesses and associat- in the region have been growing at impressive Strategies ed bank accounts broadly across that market. rates in the largest markets,” Dall’Orto wrote “The strategy of all incoming acquirers in “Critical capabilities such as FX, local risk in the August 2016 issue of First Annapolis’s Latin America will be to push beyond large management and compliance functions are Navigator newsletter. merchants into the middle of the pyramid, more efficiently accessed by the acquirers’ “However, the markets still exhibit some where there are still plenty of mid-size mer- merchant customer in a shorter period of challenges, such as poor delivery infrastruc- chants operating solely in cash,” says Lindsay time and with less complexity.” ture affecting e-commerce transactions, low Lehr, senior director at US-based Americas Brazil, Chile, Colombia and Mexico are POS penetration in most markets, and a clear Market Intelligence. examples of Latin American countries where preference for cash payments in the region.” “Offering easy-to-use e-commerce solutions, regulators have taken action to promote Dall’Orto tells CI that most Latin Ameri- especially for non-tech savvy merchants, and increased competition in acquiring. can countries are still led by cash transactions partnering with local PSPs (payment service In July 2010, the Banco Central do Brasil and low levels of banking penetration. providers) to this end, should also be a prom- removed the ban on a single acquirer process- Don’t have online account details? “These markets have been growing their inent feature of acquirer strategies in Latin ing both Visa and MasterCard transactions, card sales volume at a very high rate for America.” but left intact acquirers’ exclusive rights to You and your associates may be entitled to online e-commerce and for face-to-face transactions, Lehr says that to compete in e-commerce handle domestic card brands. but it is an uphill battle against cash,” she and the rapidly growing app economy in The ban had resulted in a duopoly, where- login credentials. The benefits of full online says. Latin America, US acquirers will increasingly by Redecard (now called Rede) had exclusive “Also, card acceptance is concentrated in need to forge partnerships with local gate- rights to MasterCard acquiring, and VisaNet access are as follows: the cities, and smaller merchants tend to pre- ways and PSPs to acquire merchants on their (now called Cielo) exclusively acquired fer cash as they don’t want to enter the formal behalf. Visa cards. Redecard is controlled by Itaú • Timely daily news updates economy.” “Small and mid-size companies are opening Unibanco, while Cielo is controlled by Banco Latin America accounted for 7% of the online stores in droves in all markets and it do Brasil and Bradesco. • Access the latest analysis estimated 270 billion global card payments isn’t feasible, or profitable, for acquirers to The two largest domestic card brands • Monthly editions sent directly to your inbox in 2015, and will account for 7% of the fore- serve them directly,” she says. issued in Brazil are and Hipercard. In cast 417 billion global card payments in 2021. “Working with regional PSPs who serve April 2010, Banco do Brasil and Bradesco • News alerts direct to your inbox Danielle Tierney, senior analyst at US- multiple Latin American markets may be a founded Elo as a domestic com- based Aite Group, says Mexico is currently smart strategy to easily springboard from peting with Visa and MasterCard in Brazil. • Comments from key industry influencers and leaders a more attractive market for US banks and one market to the next; so far, no major US Elo, whose cards are also issued by Brazil- • Search for specific, relevant content payments companies than Brazil. acquirers in the region are doing this.” ian government-owned savings bank Caixa “Brazil’s economy has been consistently “Merchants, especially e-merchants, are Econômica Federal, was originally exclusive- • Access the archive poor for the last three to four years,” says seeking secure ways to increase sales and ly acquired by Cielo. Itaú’s Hipercard brand Tierney. reach new customers,” says Horowitz Steel. was originally acquired exclusively by Rede. “The US economic recovery has been good “Additionally, many bricks-and-mortar The exclusivity in domestic card brand To create or activate your account please contact: for Mexico as its domestic economy is cou- merchants themselves moved into new coun- acquiring was lifted in 2014 by Cielo and pled with the US, and Mexico’s economic tries by partnering with another well-known Rede under pressure from the central bank. [email protected] growth has been good for the payments brand in that market. Acquirers, in turn, Despite the deregulation of acquiring, the

www.cardsinternational.com October 2016 y 11 www. www.privatebankerinternational.com

CI 536.indd 11 12/10/2016 16:55:11 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 ACQUIRING: LATIN AMERICA Cards International

Brazilian market is still dominated by Cielo Lima says that anecdotal evidence and of population.” and Rede. According to Brazilian payments Brazilian acquirers’ first- and second-quarter Traditionally, Chile has had only one industry website Pagamentos.me, in Janu- 2016 financial statements suggest that com- acquirer/processor, Transbank, which is ary 2016 Cielo had 53.4% of the Brazilian petitiveness in 2016 is at its highest level yet. owned by the Chilean banks. acquiring market; Rede 34.3%; GetNet, a “Sub-acquirers operating in the mobile and “The regulator has not issued any regula- subsidiary of Banco Santander Brasil, 8.6%; e-commerce arenas are also playing a role in tions, but it has pressured Transbank to Vero, a subsidiary of regional bank Banrisul, the changing market landscape, as they con- behave in a non-monopolistic manner and to 2%; and Elavon do Brasil 1% . solidate ever-increasing volumes and place have competitive pricing with products and The other acquirers – Global Payments, additional pressures on acquirers’ margins,” services that are competitive with acquirers which entered Brazil in 2013 through a part- he says. internationally,” says Dall’Orto. nership with regional bank Banco de Bra- “An interesting trend is that different strate- “This led Transbank to drop prices and be sília; and First Data, which operates the Bin gies are beginning to emerge. Some acquir- more aggressive in developing new products acquiring platform in partnership with Ban- ers such as Stone are seeking a lean, low-cost and services. Also, Chile has a new acquirer. coob (Banco Cooperativo do Brasil) – have model, while incumbents, led by Cielo, are Multicaja recently received a MasterCard minuscule market shares. betting on value-added products and services acquiring licence in Chile and will focus on In April 2016, Citigroup and US Bancorp and brand differentiation.” small merchants, but isn’t fully operational sold their investment in their money-losing “Cielo has been aggressive in its approach yet.” Brazilian acquiring joint venture Elavon do of positioning itself ‘beyond the POS termi- According to Chilean press reports, Multi- Brasil to Stone Pagamentos, whose owners nal’, not just spending millions on branding caja will enter the Chilean acquiring market are Arpex Capital and Banco Pan (formerly campaigns, but also launching new, innova- by the end of 2016 or early 2017, and has PanAmericano). tive products and services,” says Lima. 30,000 merchant clients in its network. US Bancorp, which owns US-based acquir- “These include Lio, a ‘smart POS’ [smart- “In Colombia, the regulator said it was were er Elavon, and Citi had jointly owned Elavon phone-based mobile POS device] with an worried about the level of interchange fees,” do Brasil for five years. Reuters said Elavon open app-development platform that can says Dall’Orto. do Brasil ended 2015 with negative equity host several different retail management solu- “So now the Colombian market has a of BRL200m ($62m), leading regulators to tions.” system to determine the level of local inter- press for a prompt capital injection. “Rede is the company that lost the most change. This was the result of the regulator Stone Pagamentos agreed to replenish Elav- market share since the 2010 break-up, includ- telling the players that interchange wasn’t cal- on’s capital and provide additional funds for ing posting a year-on-year volume loss in the culated fairly. The regulator then introduced growth as part of the transaction, Reuters second quarter of 2016, something unheard a system for fair calculation of interchange.” said. According to Brazilian press reports, of in the Brazilian card market in the past 20 “The Mexican acquiring market is changing Stone Pagamentos entered the Brazilian years,” says Lima. significantly as it is opening up to new play- acquiring market in 2014. “The company is restructuring and is rolling ers,” says Dall’Orto. In September 2013, Global Payments sold out several initiatives, including a bold new “Traditionally, the market was dominated a 50% stake for $2.1m in Comercia Global pricing scheme for small merchants, whose by bank acquirers and there were only two Payments Brazil to Spain’s CaixaBank. In effectiveness remains to be seen.” processors which were also the local switches 2014 Global Payments and CaixaBank each “International acquirers have faced a num- in Mexico: Prosa and E-Global. Recent regu- made an additional investment of $3.9m in ber of challenges to get traction in Brazil,” lations have opened the market to non-bank Comercia Global Payments Brazil. says Lima. acquirers and to additional local switches. The two companies also have an acquiring “The chief is their lack of bank distribution Few companies have submitted applica- joint venture in Spain called Comercia Global networks and ability to build an integrated tions yet, although MasterCard has recently Payments. merchant offer, as the largest banks in the received a domestic license in Mexico. “Global Payments has a very small opera- Brazilian market are the incumbent acquir- “I believe the Mexican acquiring market tion in Brazil, and is trying to make inroads ers’ controlling shareholders and commercial will open up significantly in the next five in e-commerce processing and to differenti- partners. Elavon is a cautionary example of years due to these new regulations.” ate itself by targeting small merchants,” says international entrants’ challenges in Brazil. First Data has operations in eight countries Dall’Orto. “Despite investing in an expensive infra- in the Caribbean and Latin America, serving “GetNet is slowly making progress in the structure, Elavon never get close to achiev- clients in 32 countries in the region. Accord- Brazilian market.” ing the necessary scale to be profitable, and ing to Dall’Orto, First Data was the first US was sold to Stone, which is a company with a acquirer to move aggressively into Latin Competition completely different mindset. America. “Six years after the break-up of the Visa/ “Stone is led by successful fintech entre - “First Data has been very active in Latin MasterCard acquiring exclusivity, finally the preneurs, and funded by the most successful America since the early 2000s,” says Brazilian market is reaching an increased Brazilian financiers [such as billionaire Jorge Dall’Orto. “It has alliances with Scotiabank level of competitive aggressiveness,” says Paulo Lemann], which has been growing by in Puerto Rico and other Caribbean islands Guilherme Lima, founder of Brazilian consul- exploring the incumbents’ blind spots, and and also in Mexico. Scotiabank refers mer- tancy Ponto Futuro Consultoria Estratégica. has a distinctive, aggressive cost-conscious chants to First Data for processing and gets a “The chief reason is the break-up of the culture.” share of the revenues. remaining exclusivity agreements by the “Chile is a market that might open up in the “In Argentina, First Data bought Argencard, central bank – Elo and Amex for Cielo, and future to foreign acquirers,” says Dall’Orto. the MasterCard acquirer/processor, in 2006 – Hipercard for Rede. The maturity and ramp- “It has a small population but it’s one of the it only processes MasterCard in Argentina, as up of operations like GetNet, Stone and First most developed countries in Latin America in Visa Argentina processes Visa cards through Data’s Bin have also played a major role.” terms of card payments volumes for the size Visanet.”

12 y October 2016 www. cardsinternational.com

CI 536.indd 12 12/10/2016 16:55:11 Cards International ACQUIRING: LATIN AMERICA

“First Data has pursued a strategy of going n US ACQUIRERS’ LATIN AMERICA MARKET-ENTRY TIMELINE after underserved SMEs in Brazil,” says Lehr. “In 2014, First Data launched Bin in Brazil Year Country Deal in partnership with Bancoob, offering a suite 2002 Costa Rica Evertec expands operations into Costa Rica of products developed for small businesses.” 2003 Mexico First Data enters into an acquiring alliance with Scotiabank Inverlat Bin aims to be more affordable, more user- Caribbean and First Data enters into an agreement with Scotiabank to provide card-processing 2003 friendly, and more accessible than the incum- Central America services to the bank in 19 countries in the Caribbean and Central America. bent Brazilian acquirers, says Lehr. “Brazil is First Data buys Argencard, the MasterCard acquirer in Argentina. The company, now 2006 Argentina a tough market,” she notes. renamed First Data Cono Sur, also serves the Uruguay market. “So far, Bin has only gained 1% market Caribbean and 2006/07 Evertec expands into Aruba, Curaçao, Guatemala and Panama. share, and the recent exit of Elavon from Central America Brazil pays tribute to how hard it is to do 2007 Puerto Rico Nova (now Elavon) enters into an acquiring alliance with Banco Santander. business there. This may be why First Data is 2010 Mexico Elavon enters into an acquiring alliance with Banco Santander. also exploring other markets in Latin Amer- ica, and in July 2016 announced a merchant 2011 Mexico Evertec expands operations into Mexico. acquiring alliance with Colombia’s largest 2013 Brazil Global Payments and CaixaBank form a joint venture in Brazil. bank Bancolombia.” First Data enters into an acquiring alliance with Bancoob, a private bank specialising 2014 Brazil The objective of First Data’s partnership in services for cooperatives. with Bancolombia, which will start in 2017, 2015 Mexico Evo enters into an acquiring alliance with Banamex (owned by Citi). is to target small merchants operating mostly First Data enters into an acquiring alliance with Bancolombia, the largest acquirer in 2016 Colombia in cash, Lehr says. Colombia. “Colombia’s acquiring market is far less Source: First Annapolis Consulting analysis, company websites, and press releases mature and not as competitive as Brazil’s, so First Data may be able to grab more market Dall’Orto says Evertec’s current clients in $20bn of transaction volume across over 400 share in less time than in Brazil, especially via Colombia are mostly on the issuer-processing million transactions.” its partnership with Bancolombia,” she says. side. “Evertec is trying to get into alliances In addition to its alliance with Banamex, “But the challenge will be to figure out a with acquirers in Latin America, but hasn’t Evo Mexico has partnerships with third- fee structure that is acceptable to small mer- had much success yet,” she says. party referral partners including integrated chants with low-value tickets that is still “I think Evertec will eventually start its own software vendors, gateway providers and profitable for the [acquiring] bank. This is acquiring operations in Latin America. merchant aggregators, says Hodges. the major challenge for acquiring small mer- In May 2015, it appointed Mariana Lisch- “Because of the management leadership and chants across the region.” ner de Goldvarg as its president Latin Ameri- experienced personnel who joined Evoas part Since 2010, Elavon, which is owned by US ca to focus on developing acquiring relation- of the Banamex transaction, Evo feels well Bank, has operated an acquiring joint ven- ships in the region.” equipped to pursue further expansion into ture in Mexico with Banco Santander called De Goldvarg was previously President of additional markets within Latin America,” Santander Elavon Merchant Services Mexico. Equifax Latin America. says Hodges. Elavon also has an acquiring partnership with In September 2015, US-based Evo Pay- “We see Latin America as a highly attrac- Santander in Puerto Rico, says Dall’Orto. ments International bought Citigroup’s tive region for additional investment because “It left Brazil as Brazil, which is dominated Mexican acquiring business which had been of the strong organic growth of card usage by Cielo and Rede, is a very difficult market conducted through Citi’s Mexican subsidiary and acceptance. Latin America is a region of for international acquirers. Cielo and Rede Banamex (now called Citibanamex). strategic importance to Evo.” are entrenched and are very well-known As part of the deal, Evo and Citibanamex Hodges says that “Evo’s experience has brands,” she says. entered a 10-year strategic marketing alliance been that card volumes in Mexico have Puerto Rico-based Evertec owns and oper- that includes an exclusive referral arrange- grown in the mid-teens in recent years, with ates the ATH PIN-debit card network in ment covering acquiring and related products significantly higher growth in emerging areas Latin America and provides issuer-processing for Banamex’s merchant clients. like e-commerce. services to financial institutions in 19 Central The business operates under the name Ser- “This development reflects increased card American and Caribbean countries. In 2015, vicios de Pago Banamex operado por (pro- usage among consumers, increased card Evertec’s merchant acquiring business pro- vided by) Evo Payments International. acceptance among merchants, which is being cessed over 330m transactions. Evo says Banamex is the second-largest heavily encouraged by regulators, and basic “Evertec has been expanding aggressively in merchant acquirer in Mexico by transaction growth in the Mexican economy.” Latin America,” says Dall’Orto. volume with nearly 100,000 merchant loca- Hodges notes that the greatest challenge “For example, it has bought businesses in tions. “Evo has been very active in Europe,” in Mexico also represents the greatest oppor- several Caribbean and Central American says Dall’Orto. tunity for acquirers – convincing merchants countries. In March 2016, Evertec acquired “In Latin America, Evo’s only operation is that the cost of acceptance (in terms of both a 65% stake in a small processor in Colombia in Mexico. As Evo’s alliance with Banamex the discount rate and the greater visibility called Processa.” was only set up in 2015 and Evo is still imple- from tax collection agencies) is more than In a September 2016 investor presentation, menting its Mexican operation, it’s very early offset by the potential for increased volume. Evertec identified South America as a future days to know how the operation is doing.” “In Mexico, credit cards per capita lag many expansion opportunity for the company, and By purchasing Banamex’s acquiring opera- other Latin American markets,” he says. said it would ‘seek corporate development tion, EVO established a 25% acquiring mar- “We think this trend will normalise so that initiatives such as M&A, JVs or alliances in ket share in Mexico,” says Kevin Hodges, card volumes will reflect the incredible size of the region’. Evo’s CFO. “Evo Mexico processes over the Mexican economy.” <

www.cardsinternational.com October 2016 y 13

CI 536.indd 13 12/10/2016 16:55:12 COUNTRY SURVEY: AUSTRALIA Cards International

Australia keeping things on track

It has one of the world’s most developed payment card markets, and the average number of monthly card transactions and the average annual spend per card are higher in Australia than in other mature markets such as the US, the UK, Canada and Germany. So what is the great southern land doing right?

ustralia’s payment cards market is In line with its international counterparts, , remove surcharges on card one of the world’s most developed. domestic debit scheme provider Eftpos, sup- transactions, and the ‘honour all cards’ rule In 2015, the Australian payment ported by the central bank, raised $41.3m to allow merchants to accept cards, succeed- cards market accounted for 3.3% (A$40m) via the one cent scheme introduced ed in changing the cost of using debit cards. A for all transactions in 2011, which was uti- of the transaction value, and 7.6% of the This resulted in increased volumes of debit transaction volume in Asia-Pacific. lised to implement contactless technology as cards over the last five years, a trend that is The average number of monthly card well as EMV migration. expected to continue until 2020. transactions and the average annual spend per card are higher in Australia than in other Debit card payments continue to grow Regulatory reforms change market dynamics mature markets such as the US, the UK, Can- Australia’s debit cards market is concen - The central bank has made several reforms ada and Germany. trated in terms of transaction value, with the to the credit card market since 2003, includ- Electronic payments have steadily gained five leading issuers accounting for 65.2% of ing a cut in interchange fees. To compensate popularity in Australia, aided by contactless the market in 2015. Debit cards remained the for revenue loss, banks increased annual fees technology’s rising prominence. Banks such largest in terms of transaction value, with a on credit cards, and made reward points and as the Commonwealth Bank of Australia 56.1% share. other credit card benefits less generous. (CBA), National Australia Bank (NAB) and Payment card product preferences changed Card schemes provided banks with incen- offer payment cards with contactless between 2011 and 2015, with a gradual shift tives to promote cards with higher costs, but functionality. The number of contactless in favour of debit cards. Debit card transac- within the RBA’s rules. Card issuers respond- cards increased five-fold from seven million tion volumes increased from 3.5 billion in ed positively, formulating new strategies in 2011 to 37 million in 2015. 2011 to five billion in 2015. The shift away and turning their attention to high-income A key element in the rapid uptake was the from credit card use can be explained by an consumers. New pricing strategies included introduction of contactless cards by multina- increase in consumer avoidance of debt, and upgrading gold cards to platinum cards, and tional providers Visa and MasterCard to gain RBA initiatives to regulate interchange fees. offering more generous value-added services market share in Australia. The RBA’s intervention to cap the debit or rewards at no additional cost.

n VALUE OF CREDIT TRANSFERS ($TRN) IN n VALUE OF CHEQUE PAYMENTS ($TRN) IN n VALUE OF PAYMENT CARDS ($TRN) IN AUSTRALIA, 2011–2015 AUSTRALIA, 2011–2015 AUSTRALIA, 2011–2015

8 1.5 0.5

7 1.2 0.4 6

5 0.9 0.3

4 0.6 0.2 3

2 0.3 0.1

1 0.0 0.0

0 2011 2015 2011 2012 2013 2014 2015 2012 2013 2014 13 2011 2012 20 2014 2015

Source: Reserve Bank of Australia, Timetric Source: Reserve Bank of Australia, Timetric Source: Reserve Bank of Australia, Timetric

14 y October 2016 www. cardsinternational.com

CI 536.indd 14 12/10/2016 16:55:16 Cards International COUNTRY SURVEY: AUSTRALIA

Some banks began offering companion n AUSTRALIA’S DEBIT CARD MARKET SHARES BY n AUSTRALIA’S DEBIT CARD MARKET SHARES BY cards linked to two different credit card net- ISSUER (%), 2015 SCHEME (%), 2015 works, allowing customers to earn the ben- efits of whichever one they choose to use at the purchase point. As a result, credit card products with companion cards attached Master Card have increasingly replaced traditional single- 10.5% card reward programmes in the product lines CBA 22.7% of all major banks. CBA, NAB, ANZ Bank and Westpac offer Others at least one companion card account as part Visa 51.8% 32.6% Eftpos of their premium card accounts. Westpac 56.9% 13.6% Rise in uptake of alternative payments Consumers are increasingly using faster and ANZ more secure payment options, and mobile 11.9% operators, traditional and online retailers, and other service providers are introducing alternative solutions. These include online and mobile pay- Source: Timetric Source: Timetric ments, and are conducted through alterna- tive instruments such as bPay, Paymate, Mas- n AUSTRALIA’S PAY LATER CARD MARKET n AUSTRALIA’S PAY LATER CARD MARKET terPass, Visa Checkout, ANZ Pay, NAB Pay SHARES BY ISSUER (%), 2015 SHARES BY SCHEME (%), 2015 and POLi. The launches of global solutions such as Apple Pay, Android Pay and Samsung Pay are expected to increase uptake of these solu- tions. Others CBA 18.9% 21.5% E-commerce offers scope for card payments Visa Australia’s e-commerce market grew from Others 42.2% $16.9bn in 2011 to $21.3bn in 2015, at a 47.3% NAB CAGR of 5.97%, and is anticipated to reach 12.5% $30.7bn in 2020. MasterCard 38.9% Rapid smartphone adoption, growing Westpac internet penetration, the availability of 18.7% secure online payment mechanisms, reduced delivery times and the popularity of online shopping are key reasons for the growth of Australian e-commerce.

The country’s young and urban Source: Timetric Source: Timetric populations are highly media-literate, giv- ing a platform for e-commerce companies to reach more potential customers. Key online Prepaid cards for retail and corporate users use gift cards as incentives and benefits for retailers include eBay Australia, , The prepaid card market grew rapidly in employees. Demand for gift cards has also Amazon and OzBargain. terms of the number of cards in circulation, risen with the development of electronic Payment cards continue to dominate at a compound annual growth rate of 8.01% forms. For use on smartphones, electronic online shopping, with promotional offers between 2011 and 2015. Anonymity, chang- gift cards can be delivered by text message, and benefits such as discounts, reward points ing consumer attitudes to debt, and bankless email or smartphone app. and cashback offered by card issuers. transactions were the main factors, giving Banks now offer a range of prepaid cards Banks and issuers such as CBA, Westpac, prepaid cards the potential to capture a wide with attractive features. To expand the over- NAB and ANZ Bank offer benefits such as range of consumers, including the unbanked, all target market, banks have created prepaid cashback, reward points, discounts, purchase students and immigrants. cards designed to reflect the needs of teenag- protection insurance, extended warranty, Prepaid gift and travel cards are expected ers, and can improve financial independence zero card fraud liability and flexible repay- to be a major driver of the payment card in that age group. ments to encourage online shopping. market in Australia. Prominent examples of For instance, ANZ Bank offers a campus Emerging payment methods such as digital gift cards in Australia include NAB Visa Gift prepaid card with Sydney University, which and mobile wallets are also gaining promi- Card and Australia Post Visa Gift Card. provides access to university buildings, acts nence, with the availability of solutions such The rising popularity of gift and travel as student identification, and enables pur- as PayPal, MasterPass and Visa Checkout. cards is a result of demand from corporate chases on campus. Online retailers and regulators, however, and individual buyers. Prepaid gift cards are Similarly, the Canvas Visa Prepaid, should concentrate on increasing consumer often given by businesses to reward custom- designed for young individuals, requires no confidence as online card fraud rises. ers for a product purchase, while companies bank account, interest or credit check.<

www.cardsinternational.com October 2016 y 15

CI 536.indd 15 12/10/2016 16:55:19 COUNTRY SURVEY: OMAN Cards International

The immense potential of Oman

Although rising, frequency of payment card use in Oman is lower than in regional neighbours such as Israel and Saudi Arabia, but government initiatives and growing consumer interest in Sharia-compliant products are expected to increase uptake, intensify competition and lead to overall improvements in bank and issuer offerings

ayment card use is gradually rising technology such as contactless and EMV, the To capitalise on this, in December 2015 in Oman, although overall card use introduction of Sharia-compliant cards and Bank Nizwa collaborated with MasterCard in the country is much lower than the government’s push for electronic pay- to launch a range of Sharia-compliant credit P many of its peers. ments. cards. Frequency of use per card in Oman was Similarly, Al Hilal Islamic Banking Services 23.1 in 2015 – lower than regional neigh- Preference for Sharia-compliant banking launched a Sharia-compliant Visa credit card bours Lebanon with 31.6, the UAE with The growth of Islamic banking – or, more in November 2014, available in Signature 47.6, Kuwait with 52.7, Iran with 59.6, accurately, Sharia-compliant banking – has and Platinum variants. Saudi Arabia with 89.4 and Israel with intensified competition in the domestic Cardholders are eligible to receive value- 144.9. financial sector, and led banks to modify and added benefits such as unlimited access to However, initiatives have been taken to improve product offerings. more than 500 airport lounges around the encourage adoption of payment cards in the The number of consumers interested in world, a 24-hour concierge service, up to country, such as the improvement of pay- Sharia-compliant banking and financial 25% discounts at restaurants, and free medi- ment infrastructure, the adoption of new transactions is growing in Oman. cal referrals.

n VALUE OF CREDIT TRANSFERS ($BN) IN OMAN, n VALUE OF CHEQUE PAYMENTS ($BN) IN OMAN, n VALUE OF PAYMENT CARDS ($BN) IN OMAN, 2011–2015 2011–2015 2011–2015

2.5 500 60

50 2.0 400

40 1.5 300 30 1.0 200 20 0.5 100 10

0.0 0 0 2011 2012 2013 2014 2015 2011 2015 2012 2013 2014 2011 2012 2013 2014 2015

Source: Central Bank of Oman, Timetric Source: Central Bank of Oman, Timetric Source: Central Bank of Oman, Timetric

16 y October 2016 www. cardsinternational.com

CI 536.indd 16 12/10/2016 16:55:25 Cards International COUNTRY SURVEY: OMAN

The central bank introduced Islamic bank- n OMAN’S DEBIT CARD MARKET SHARES BY n OMAN’S DEBIT CARD MARKET SHARES BY ing in 2012, granting financial institutions ISSUER (%), 2015 SCHEME (%), 2015 licenses to operate as Islamic banks. This resulted in a robust growth in Islamic financial institutions, which, according to the central bank, are expected to account for Master 10% of the total banking industry by 2018, Card up from 7.5% in 2015. 11.6% By the end of 2015, the combined network of Islamic bank branches was 60, which Others Bank Muscat included two banks and six banking win- 39.5% 38.2% dows in Oman. Visa Convenient, instant services drive growth 88.4% Along with an improved payment infra - Bank NBO Dhofar structure, convenience of banking services 10.8% has emerged as a key driver of the debit card 11.3% market. Instant card issue is a growing trend in Oman. To reduce waiting times for consum- Source: Timetric Source: Timetric ers, Bank Dhofar launched an instant card issue service in September 2013, allowing n OMAN’S PAY LATER CARD MARKET SHARES BY n OMAN’S PAY LATER CARD MARKET SHARES BY customers to collect debit cards instantly ISSUER (%), 2015 SCHEME (%), 2015 when opening a bank account, and start using them immediately. In June 2015, Alizz Islamic Bank launched Others an instant card issue service at all its branch- 5.7% es. The process helps to reduce PIN mailer distribution costs, and enhances customer Others satisfactions. 24.2% Bank Muscat To reduce waiting times, Bank Dhofar 34.9% introduced the Cardless Cash service in Janu- ary 2014. This service allows users to with- MasterCard Visa 39.9% draw cash without a debit card at ATMs. NBO 54.4% 16.7% Users log in to Bank Dhofar’s mobile bank- ing app, select the Cardless Cash option, HSBC Bank Oman 24.1% enter the account to be debited and create a four-digit PIN. The cardholder then receives a confirmation SMS containing a six-digit reference code from the bank. The user then

selects the Cardless Cash option at an ATM Source: Timetric Source: Timetric and use the reference code and four-digit PIN to withdraw cash. and Titanium MasterCard debit card with a offers, free travel insurance and medical Rising preference for premium range of value -added benefits. assistance, and access to airport lounges. Demand for premium payment cards is rising To offer better control and convenience in Gulf Cooperation Council states, includ- Banks eyeing corporate users to expand in managing business expenses, Oman Arab ing Oman. Consumers have become more In addition to retail consumers, banks in Bank partnered with MasterCard to launch sophisticated, and cards are now an essential Oman also serve corporate customers, the MasterCard Corporate credit card in part of their lifestyles. including large businesses and SMEs. May 2016. Consumer demand for high-quality ser- Newly established businesses provide an Companies using the card can track and vices and rewards is also rising, and banks important opportunity for banks to target manage expenses online, and are offered are offering exclusive benefits and rewards to corporate customers. According to the World employee-level, department-level and com- serve the most profitable consumers. Bank, there were 2,730 new businesses regis- pany-level statements to increase efficiency Alizz Islamic Bank partnered with tered in Oman in 2013. in managing expenses. MasterCard in March 2015 to introduce the With the growing number of businesses Oman Arab Bank also partnered with Visa World Elite MasterCard in Oman. This is an in Oman, demand for commercial cards is to launch the Visa Smart Commercial Card, invitation-only card offered to affluent con- expected to rise between 2016 and 2020. which aims to minimise administrative costs sumers, and provides a range of value-added Issuers such as Bank Muscat, Bank Dho- and provide improved capabilities in manag- services such as travel and lifestyle benefits, far, NBO, Bank Sohar and Oman Arab Bank ing business transactions. concierge service and insurance. serve these customers by offering commercial Businesses can set daily, monthly or per- Alizz Islamic Bank also offers the Tita - cards, which provide exclusive dining, shop- transaction spending limits, and the cards nium and Platinum MasterCard credit cards ping, travelling and entertainment-related also include EMV chip technology.<

www.cardsinternational.com October 2016 y 17

CI 536.indd 17 12/10/2016 16:55:28 COUNTRY SURVEY: PAKISTAN Cards International

Cash very much in play in Pakistan

Cash is very much the dominant payment method in Pakistan, from low-value retail purchases to large- scale business transactions. Low financial inclusion levels, merchant reluctance and user surcharges mean card adoption is low, although government initiatives and alternative channels could change the picture

he payment system in Pakistan is its peers, including Indonesia (27.6), Cam- in 2015, accounting for 5% of the world’s dominated by cash, which is used bodia (27.4), the Philippines (23.4), Thailand unbanked population. The percentage of the both for small retail payments such (23.2), Malaysia (20.5) and India (13.6). population aged 15 or above with a bank T as restaurant bills and groceries, account was 8.7% in 2014, according to the and for large business transactions. Government and banks push for inclusion World Bank’s Global Findex survey. Cash accounted for 98.9% of the overall A low rate of financial inclusion remains a To increase financial inclusion, the govern- payment transaction volume in 2015, pri- challenge for the wider adoption of payment ment launched the National Financial Inclu- marily because most banks and merchants cards in Pakistan. Penetration was just 0.151 sion Strategy in May 2015, which aims to have been slow in promoting electronic pay- cards per individual in 2015 – lower than expand financial access to at least 50% of the ments. Merchants are also reluctant to accept China (3.841), Malaysia (1.770), Thailand adult population by 2020. payments via modern POS systems, and (1.450), Vietnam (1.035), India (0.558), the Pakistan has also received support from often discourage card payments by imposing Philippines (0.556) and Indonesia (0.509). the World Bank Group with its Country Part- surcharges. According to the World Bank, the number nership Strategy (2015–2019), which offers Frequency of payment card use in Paki- of adults in Pakistan with no access to for- reforms to improve financial inclusion. stan was 12 in 2015 – lower than many of mal financial services reached 100 million To further support financial inclusion and serve the unbanked population, banks are offering alternative channels such as branch- n VALUE OF CHEQUE PAYMENTS ($BN) IN n VALUE OF PAYMENT CARDS ($BN) IN less and agent banking. PAKISTAN, 2011–2015 PAKISTAN, 2011–2015 HBL offers HBL Express – a branchless banking service allowing users to make fund 1,200 2.0 transfers in more than 183 cities, pay utility bills and recharge mobile phones. 1,000 HBL Express services can be accessed 1.5 through over 10,200 agents, and users are 800 not required to have an account to use the service. 600 1.0 Similarly, UBL offers the Omni branchless banking service in more than 650 locations 400 in Pakistan, allowing consumers to open a 0.5 basic bank account and receive a debit card. 200 Omni can also be used to send and receive money, deposit and withdraw cash, make 0 0.0 utility bill payments and donations, and 2011 2012 2013 2014 2015 recharge mobile phones. 2011 2012 2013 2014 2015 A rise in financial inclusion allows con- sumers to access services such as current and Source: Central Bank of Pakistan, Timetric Source: Central Bank of Pakistan, Timetric savings accounts, and payment cards.

18 y October 2016 www. cardsinternational.com

CI 536.indd 18 12/10/2016 16:55:32 Cards International COUNTRY SURVEY: PAKISTAN

MNOs complement government programmes n PAKISTAN’S DEBIT CARD MARKET SHARES BY n PAKISTAN’S DEBIT CARD MARKET SHARES BY MNOs in Pakistan play a critical role in pro- ISSUER (%),2015 SCHEME (%), 2015 viding financial access to the population not served by the conventional banking system. Others Pakistan and Tameer Microfi - 3.5% nance Bank’s joint venture, , intro- duced Easypay to facilitate multiple payment HBL options for merchants and customers. 18.9% With Easypay, customers can make online and in-store payments using Easypaisa MCB MasterCard mobile accounts. Users make online pay- 7.5% 35.3% ments by selecting Easypay at the checkouts Others Visa of online merchants. In-store payments can 67.1% 61.2% be made via agents at more than 70,000 Easypaisa shops. Consumers can also deposit UBL money to their Easypaisa mobile account at 6.4% these locations. The UK-based Centili offers direct car- rier billing services in Pakistan in collabora- tion with MNOs such as Mobilink, Telenor, Source: Timetric Source: Timetric , Ufone and Warid. Centili can be accessed by 136 million sub- n PAKISTAN’S PAY LATER CARD MARKET SHARES n PAKISTAN’S PAY LATER CARD MARKET SHARES scribers in Pakistan, and is used to make pay- BY ISSUER (%), 2015 BY SCHEME (%), 2015 ments for digital content directly charged to the bill of a mobile device. Similarly, Fortumo partnered with mobile American operator Zong in April 2016 to launch a Express 5.3% direct carrier billing service in Pakistan, Standard allowing 26 million Zong customers to make Chartered payments for digital contents and apps. 9.4% Others 21.7% Remittances drive debit card use MasterCard Remittances play an important role in driv- Bank Alfalah 35.1% Visa ing growth of debit cards in Pakistan. With 57.2% 59.7% a significant number of Pakistanis living and Askari working abroad, remittance debit cards have Bank 11.6% become a key driver of growth in electronic payments. Inward remittances rose from $12.3bn (PKR1.1trn) in 2011 to $17.5bn in 2015, and are expected to reach $20bn in 2018. Source: Timetric Source: Timetric To capitalise on this, banks offer remit- tance accounts and debit cards, allowing According to the Pakistan Telecommuni- websites offer cash-on-delivery options to migrant consumers to transfer money to cation Authority, the number of smartphone customers, negating the obstacle created by beneficiaries in Pakistan. users exceeded nine million in 2015, and the increasing card fraud incidences in Pakistan. HBL offers the HumWatan current or sav- number of smartphones is expected to reach Banks and telecommunications operators ings account, allowing Pakistanis residing in 40 million by the end of 2016. E-commerce are also offering branchless banking services foreign countries to send money to relatives is expected to grow further to reach $218.4m such as Telenor’s Easy Paisa, Zong and Aska- in Pakistan. in 2020. ri Bank’s Timepey, Mobilink’s Mobicash to While account holders are offered a debit To offer payment card processing to provide offline payment options for online card to access funds in the account, their rela- e-commerce merchants, online payment solu- purchases. tives are also offered debit cards to receive tion provider Easypay partnered with MCB The number of branchless banking agents and access the remitted funds. in February 2016. The partnership enables has also increased, making it much more online merchants to serve customers by pro- convenient for merchants to collect payments E-commerce growth to provide scope cessing Visa and MasterCard transactions electronically for online purchases. E-commerce grew significantly from $8.6m online via MasterCard Payment Gateway Moreover, banks are offering internet in 2011 to $61.4m in 2015, at an average Services, and allowing Easypay to manage all banking services allowing consumers to growth rate of 63.57% between the two online payment cards transactions for clients. make electronic fund transfers from accounts years. Easypay also accepts payments from con- to online retailers. The introduction of 3G and LTE technol- sumers who do not have a payment card by The growing modes of online payment ogy, and the proliferation of smartphones generating an Easypay token, which can be allow consumers to choose payment options supported the rise in online shopping in the paid at any of 70,000 Easypaisa locations. that meet their needs, and are expected to country. To increase online shopping, e-commerce expand Pakistan’s e-commerce market.<

www.cardsinternational.com October 2016 y 19

CI 536.indd 19 12/10/2016 16:55:35 GUEST COMMENT: PPRO GROUP Cards International

Paying via Chatbots We already use a great many web services and apps to make our lives easier, yet we want things even easier still. With chatbots soon helping us to shop, this presents the payments industry with both an opportunity and a challenge, writes Ralf Ohlhausen, business development director at PPRO Group

t feels as though each day brings a new chatbot to help them find a venue to watch It would also be possible for chatbots to trend and each week a fresh revolution. their artist of and book the tickets. replace retailer-specific apps, and for these Yet, if we put aside the artificial hype For industry giants like Facebook, Google chatbots themselves to contain payment we realise that real revolutions are not and Microsoft, chatbots are currently a hot functions. After all, who needs yet another I shopping app when you can do everything that frequent. topic, with many internet retailers champ- The last change to genuinely affect multi- ing at the bit to gain access to the messaging via your messaging program? Almost no- tudes of people was the launch of the smart- apps’ huge target audiences. one. phone. But with its multitude of apps, today’s Using chatbots, retailers would simply use smartphones are becoming too complicated, Chatbots today their chatbot to approach their customers with users having to switch between a vari- While currently in their technological infan- and offer them a convenient way to pay. ety of apps in an attempt to optimise their cy, chatbots can show current information on This concept of conversational commerce everyday lives. the weather, or order pizza via text. There are already exists; after all, chatbots are designed Let’s consider how complicated it is to also chatbots which function as interactive to facilitate direct communication between organise something using a smartphone. Say, gaming partners or language trainers. customers and brands, shops and retailers. for example, that you’re interested in going In order to speed up chatbot development, The requirements of payment services are, to a concert with a friend. companies like Facebook are providing therefore, very similar to those of payment First, you decide on an artist via email or appropriate software modules and interfaces. apps. They must be as easy to use as possible, a messaging program. Next, you use your Chatbots need to be self-learning and with one-click models being the most desir- browser to search for concert dates. If there’s capable of retaining current context. This able, and ideally feature a mode of biometric nothing in your hometown, you go to Google means that someone looking for information authentication. Maps to find out how far it is to an event in about an artist, then enquiring about concert a different city. dates, shouldn’t need to mention the artist’s Simple P2P payment Once you’ve collected this information, name twice. For a long time now, the payment industry you go back to your friend to get their input. Just like a human interlocutor, the chatbot has been discussing making peer-to-peer pay- After you’ve chosen the date and location, should remember that its chat partner is still ments via smartphone. There is, however, no you go to the booking website. talking about the same artist. standard app which facilitates direct pay- Here, a variety of problems can arise, ments via smartphone. including sold-out dates or poor seating Payment via chatbots Why would people even want a separate choices. By now, you’ve spent a great deal The more intelligent chatbots become and app when they already use a messaging app of time and used a wide variety of apps and the more services that can be covered by mes- to keep in touch with their friends? A chat- services, and still don’t have concert tickets. saging apps, the more important the subject bot could take over this function and, with a Then, of course, you must continue your of payment becomes. simple ‘Pay Tim £23’, split a restaurant bill. task via a specialist booking or payment app Various models are conceivable: Users can, – all this to achieve a single aim. for example, simply store payment data in Conclusion: exciting and dangerous It is here that chatbots have the potential the messaging platform and then pay with Although chatbots are still in their infancy, to dramatically streamline how we use our any current payment method, like a credit the major technology companies are amass- devices. card or PayPal. This means that users need ing all kinds of tools for equipping them with only share their payment information with a artificial intelligence. Doing it all via messaging apps single provider. Soon users may no longer be able to tell Chatbots hang out exactly where users do: in This method is already in use in the US, whether they are communicating with a real messaging apps. The most popular of which, where Uber, the popular ridesharing service, person or with a chatbot. like WhatsApp and Facebook Messenger, are is fully integrated into Facebook Messenger, Retailers will need to rethink their strate- installed on almost every smartphone. complete with payment functions. gies if their customers begin avoiding store- WhatsApp alone is used by more than a Chatbots themselves could also be specific apps or mobile websites and hanging billion people, while Facebook Messenger designed to receive payments. To do this, the out almost exclusively in messaging applica- has around 800 million users. platform operators would have to build a tions. If, therefore, people are already hanging kind of chatbot app store to enable users to There is, however, no such thing as an ideal out in messaging apps with their friends, find appropriate chatbots. world when it comes to chatbots. instead of switching to a different app, it Payments could then be processed central- Although communication with virtual would be far more convenient for them to ly by the platform operator using payment assistants may sound simple, it must be be able to send a message to a music-themed data. secure if it is to handle personal data.<

20 y October 2016 www. cardsinternational.com

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