May 2017 Issue 543 www.cardsinternational.com

HOW WILL BREXIT AFFECT THE UK’S CARD MARKET?

• PRODUCTS: Prepaid in Canada • ANALYSIS: Social Finance • GUEST COMMENT: FICO, PPRO Group and allpay • COUNTRY SURVEYS: Thailand, the UK & Italy

CI 543 May.indd 1 13/06/2017 11:08:28 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 PRODUCTS: PREPAID IN CANADA Poll shocker: Lloyds ranks top Two Vancouver-based fintechs, Koho and Mogo Finance Technology, have for trust launched mobile-enabled prepaid cards targeting Canadian millennial consumers looking to avoid high bank charges and expensive credit cards. Robin Arnfield assesses the ell here is a turn up. A UK retail • Only 8% of people are happy for banks to market’s promise and headwinds banking consumer survey asks con- have their personal data regardless of wheth- 8 ANALYSIS: SOCIAL FINANCE sumers which bank they trust most er they have received good or bad customer After acquiring multi-currency – and the most popular answer was service from them. digital bank Zenbanx, US online W not First Direct, Metro Bank or Nationwide. lender Social Finance (SoFi) plans to apply for an industrial bank charter Nor was it TSB, which the writer might have Surprisingly, the report finds that older people so it can offer bank accounts and expected to score highly. seem to understand personalisation best. 63% of credit cards. Robin Arnfield speaks to industry analysts to find out more Nope-the top answer was Lloyds. Not a mis- 55-64 year olds state that personalisation means print: it is Lloyds. Lloyds Banking Group (LBG) companies tailoring communications to their pref- 10 RESEARCH: GLOBALDATA comes out rather well in the survey with sub- erences and actions, whereas only 38% of 25-34 Canadians are less keen than their brands Halifax/Bank of Scotland ranking second, year olds took the same view. US peers on mobile payments, India leads the e-wallet charge in ahead of Barclays in third place. The report concludes that trust is a much bigger Asia-Pacific, interest rates in the US Santander, fourth and First Direct in an unac- factor than either liking or being an existing cus- cause concern, and a discrepancy in Singapore between card penetration customed fifth place round off the top five. tomer, when it comes to whether people are happy and transaction volumes is striking Cue an immediate check to see just who spon- for banks to hold their personal data. sored the report and what was the sample size, While LBG will no doubt welcome the report, 12 GUEST COMMENT: FICO given Lloyds and Barclays lack of obvious suc- work remains to be done across the sector. Lev- Which works better for modelling credit risk: traditional scorecards or cess in the quarterly account switching rankings, els of trust with banks have remained relatively AI and machine learning? The best generally dominated by Nationwide, Santander, static in the last 12 months with only 11% of the approach is to use them together, writes FICO’s Scott Zoldi Metro Bank and admittedly, Halifax. consumers surveyed saying they trusted their bank The report ‘Personalisation in Retail Banking’ more than last year. 13 GUEST COMMENT: ALLPAY was not actually sponsored by LBG (the survey So there you have it: people can like a bank and Outsourcing payment processing can was commissioned by Webhelp) but it was a rela- be a customer without actually trusting them, free up time, and allow businesses to focus on customer service, client tively small survey of 500 UK-based adults. although in turn this is likely to limit the level of relations and lasting growth, writes Key takeaways include: personal data that they are willing to provide. allpay’s Ross Macmillan As for positives: well only 30% of those Web- 14 COUNTRY SURVEY: THAILAND • Just 55% of respondents have heard of per- help surveyed said they are not influenced by 16 COUNTRY SURVEY: THE UK sonalisation and understand what it means, personalised communications with another one with the figures dropping to only 38% for third saying that they feel it is helpful to receive 18 COUNTRY SURVEY: ITALY people aged between 24 and 35; offers and communications that are personalised 20 GUEST COMMENT: PPRO GROUP • 49% of people are happy with a bank hav- to them. From Jack trading a cow for magic ing their data if they trust that bank This shows that a significant opportunity exists beans to tapping plastic against an NFC reader, how we have paid for • 39% of respondents do not want banks to for banks to engage with their customers in a more goods has taken many unexpected hold their personal data regardless of wheth- personalised way, but only on the proviso that turns, writes Ralf Ohlhausen er they trust them or not; they are able to tailor their approach effectively. • 35% of people are happy to have their personal data kept by a bank that has given Douglas Blakey them good customer service, and [email protected]

Editor: Douglas Blakey Group Publisher: Ameet Phadnis For more information on Verdict, visit our Tel: +44 (0)20 7406 6523 Tel: +44 (0)20 7406 6561 website at www.verdict.co.uk. Email: [email protected] Email: [email protected] As a subscriber, you are automatically Financial News Publishing, 2012 entitled to online to Cards Deputy Editor: Anna Milne Sub-editor: Nick Midgley Registered in the UK No 6931627 International. For more information, please Tel: +44 (0)20 7406 6701 telephone +44 (0)20 7406 6536 or email Subscription Enquiries & ISSN 0956-5558 Email: [email protected] [email protected]. Customer Services: Unauthorised photocopying is illegal. The Senior Reporter: Patrick Brusnahan Tel: +44 (0) 20 3096 2636 contents of this publication, either in whole or London Office Tel: +44 (0)20 7406 6526 71-73 Carter Lane part, may not be reproduced, stored in a data or +44 (0)20 3096 2603 Email: [email protected] London retrieval system or transmitted by any form or Email: [email protected] EC4V 5EQ means, electronic, mechanical, photocopying, recording or otherwise, without the prior Asia Office permission of the publishers 1 Finlayson Green, #09-01 Singapore 049246 Tel: +65 6383 4688 Fax: +65 6383 5433 Email: [email protected]

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CI 543 May.indd 1 12/06/2017 15:38:03 NEWS: DIGEST Cards International

DIGITAL Vision Travel, CSI globalVCard directly into Concur, which will help in the “This partnership advances our capabili- to integrate virtual payments automation and streamlining of reservations. ties and gives corporate travel clients highly Once the integration is complete, card secure payments that are customised, con- Canadian travel management firm numbers will become invalid as only trolled and easier to reconcile.” Vision Travel and CSI globalVCard preauthorised purchases will be CSI globalVCard’s senior vice-president of have integrated travel manage- processed. Users will be able to travel, Juliann Pless, said: “Our integration ment software Concur Compleat control use and spending lim- with Concur Compleat allows Vision Travel to their single-use virtual card its in real time with desktop or to offer next-level service by saving time and payments partnership. mobile devices. increasing the security of payments. The partnership will help Vision Travel’s president of “It is exciting to play such a pivotal role Canadian companies to procure Ontario-West, Brian Robertson, in the expansion of virtual travel solutions travel with a virtual card payment said: “Vision Travel is committed to into the Canadian market. We are looking system. Vision Travel will incorporate a personalised and responsive approach forward to this evolving partnership with CSI globalVCard’s virtual card numbers to the business of travel. Vision Travel.” <

PRODUCTS Open launches business or transfer points to the company’s partici- Referring to the card’s headline features, pating airline or hotel loyalty programmes. American Express Global Commercial Pay- American Express Open has introduced a The card will also allow small businesses ments’ senior vice-president of global prod- new Blue Business credit card, that will to better manage cash flow by offering a low ucts, Audrey Hendley, commented: “Blue enable entrepreneurs to earn rewards on introductory APR, helping vendors to access Business Plus is the only no-annual-fee small everyday purchases, and improve cash-flow credit needed to start and grow businesses. business credit card from a major issuer that management. Card members can also spend above their offers double points with no category restric- The no-annual-fee card includes double , and earn points on amounts tions, so small business owners can be con- Membership Rewards points on the first spent above the limit, payment for which will fident they are making the smart for $50,000 spent each calendar year, and a low be due in full each month. their business. introductory APR on purchases and balance Amounts that small business owners can “With so many different ways to redeem transfers for up to 15 months. spend beyond their credit limit vary based Membership Rewards points, purchases with Cardholders can redeem points for travel, on a number of factors unique to each Blue Business Plus can become an investment statement credits, gift cards, or merchandise, cardholder, the company said. toward future growth.” <

PRODUCTS DISTRIBUTION UBS targets mass affluent Mobile solution market with new credit card made available in the UK

Swiss banking giant UBS is targeting HNW South Korean electronics giant Samsung has and UHNW customers with a new credit card. launched its solution, Sam- The new UBS Visa Infinite credit card will sung Pay, in collaboration with MasterCard offer a range of rewards, travel benefits and in the UK. credits, such as exclusive savings when users UBS Wealth Management Americas’ head MasterCard is working with Spanish bank- fly, stay, cruise or drive. of private wealth management and UHNW, ing group Santander and credit card compa- Holders will have access to a US-based con- John Mathews, said: “By putting the UBS ny MBNA to enable MasterCard holders to cierge and client services group, and financial Visa Infinite credit card in our clients’ hands, use Samsung Pay, which will allow users to advisors. They will also receive exclusive trav- we can have a more meaningful impact on make payments at almost any location where el benefits, credits and a rewards programme our clients’ everyday lives and experiences contactless payments are accepted. with flexible redemption options, which may by serving more than their traditional wealth Card details will not be stored on devices exceed $4,000 per year. management needs.” but on a digital ‘token’, which uses Master- Users can earn three points per dollar spent UBS head of cards Fred Jubitz said: “The Card’s Digital Enablement Service to make on commercial air travel, two points per dol- advisor’s ability to service and advocate for payments using industry-standard tokenisa- lar spent on gas and groceries, and one point their clients is just one thing that makes the tion processes. MasterCard said it will gener- per dollar spent on all other eligible purchas- UBS Visa Infinite credit card exceptional.” ate a unique card number that will be specific es. Users can also earn up to 50,000 bonus “Visa has a long and successful history to the cardholder’s device and cannot be used points by spending $3,000 within the first working with UBS to deliver world-class in conjunction with any other device. three months of approval. rewards credit card products serving UBS’s MasterCard’s president of UK and Ireland, UBS said that the latest metal card will high-net-worth clients. Mark Barnett, said: “Every Samsung Pay replace the current UBS Preferred Visa Sig- Visa’s senior vice-president of global prod- transaction made with MasterCard is highly nature credit card, with no changes to the ucts, TS Anil, said: “The UBS Visa Infinite secure – a critical part of this is our ability to $495 annual card fee. All existing UBS Pre- credit card goes beyond rewards to deliver tokenise cardholder details.” ferred Visa Signature credit card users will the total customer experience, including Samsung Pay will be initially available on automatically receive the UBS Visa Infinite comprehensive protection benefits and access the Samsung Galaxy S8, S8+, S7, S7 Edge, S6, credit card. to premium travel and lifestyle benefits.” < and S6 Edge devices. <

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CI 543 May.indd 2 12/06/2017 15:38:05 Cards International NEWS: DIGEST

PRODUCTS DISTRIBUTION BrilliantTS launches new allow cardholders to track the last known Samsung Pay debuts in Taiwan, integrated smartcard card location, as well as remotely wipe all with extensive support card information. BrilliantTS, a South Korean manufacturer of The smartcard is available in two options: South Korean electronics giant Samsung has smart hardware and software solutions, has Fuze M and Fuze A. Fuze M is a non-EMV launched mobile payment solution Samsung launched the Fuze Card, a new smartcard model aimed at those looking to use the card Pay in Taiwan, with support from seven that incorporates all cards into a single unit. for gift, membership or loyalty cards. Fuze A financial institutions. The new offering, which is compatible is an EMV chip model, and can be used for The solution will be supported by Cathay with magnetic-stripe, near-field communi- all situations. United Bank, Citi Bank, E.Sun Commer- cation, EMV and Bluetooth, works with BrilliantTS CEO Jaehun Bae said: “Our cial Bank, Standard Chartered Bank, Taipei iPhone and Android phones. journey began in the early 2000s when I Fubon Bank, Taishin Bank and Union Bank With the latest card, users can combine co-founded CrucialTec, which was the only of Taiwan. credit, debit, membership and loyalty cards. company to successfully miniaturise optical Samsung’s head of Taiwan, Li Dai Hua, Fuze can store information from up to 30 mouse tech into a small module as big as said: “We are excited to introduce Samsung cards in a single encrypted chip. your fingernail. Pay to Taiwan, and are thrilled to lead the It will also offer a flexible display, a 30-day “We further developed that technology to innovation of mobile commerce, in order to rechargeable battery and advanced security develop Fuze Card, which packs so much provide consumers with safer, smarter and features. Fuze’s in-app tracking feature will tech into a 0.03-inch-thick card.” < better mobile wallets through offering more valuable services.” DISTRIBUTION Mastercard’s head of Taiwan, Eva Chen, UnionPay adds said: “Together with Samsung, we are excited at around 20,000 POS terminals in Sogo, to drive greater usage of mobile payments in support in Hong Kong 7-Eleven, Mannings and Tsui Wah Restau- Taiwan. To help encourage everyday usage, UnionPay International has partnered with rant locations. we have also partnered Carrefour to give Bank of China (Hong Kong) and Standard When customers add a credit or Mastercard cardholders the hottest discounts Chartered Bank (Hong Kong) to allow its to Apple Pay, the actual card number is not in Taiwan.” < debit cardholders to make payments through be stored on the device, nor on Apple serv- Apple Pay. ers. A unique Device Account Number is STRATEGY The partnership will allow holders to assigned, encrypted and securely stored in JCB International partners with make purchases with Apple Pay at more than a dedicated chip called the secure element. Sberbank in Russia 10 million POS terminals supporting mobile Each transaction is authorised with a one- QuickPass in Mainland China, Hong Kong, time unique dynamic security code. Taiwan, Singapore and Australia. Apple Pay currently works with the iPhone Earlier, UnionPay added Apple Pay sup- SE, iPhone 6 and later models, and the Apple port to credit card users of Bank of China Watch. When paying in apps, the solution (Hong Kong) and Bank of East Asia. works with the iPhone SE, iPhone 6 and later UnionPay believes the collaboration models, the fifth-generation iPad, the iPad will make the QuickPass service available Pro, the iPad Air 2, and the iPad mini 3. <

PRODUCTS CreditBank, Gemalto and Unilux launch combined card has provided the necessary insight, expertise and technology to achieve another premiere Lebanese lender CreditBank has launched a in the market.” JCB International, a wholly owned subsidi- combined credit and debit card in collabora- Commenting on the launch, Unilux Cards ary of JCB, has signed an agreement with tion with Dutch digital security firm Gemalto MD Ronald Nacouzi said: “We are proud Russian lender Sberbank to enhance its card and Unilux Cards. to help Creditbank be the first to launch this acceptance in Russia. The new EMV card will allow bank cus- innovative solution, just after being the first Sberbank will accept JCB cards on its tomers to access their choice of account when to introduce the contactless sticker, a great countrywide POS terminal network in 2018. making a transaction with a single card. step towards the future of mobile payment.” According to JCB, the lender has the largest The card, which features chip-and-PIN Gemalto’s senior vice-president of bank- POS terminal network in the country, and the security, will allow users to choose a single ing and payment for the Middle East, partnership aims to increase its brand pres- PIN for both accounts. The card’s dual inter- Nassir Ghrous, said: “Competition in the ence in the market. face capability will also allow users to make Middle East banking sector has never been JCBI president and COO Kimihisa Imada contactless payments. fiercer, in particular with millennial custom- said: “We are sure this arrangement will sup- Creditbank assistant general manager ers demanding higher standards of service port our objective as a very active player in Hanadi Saad said: “The launch of this card and innovation. the payment industry in Russia. reflects Creditbank’s commitment to innova- “With the support of Unilux Cards and “We believe our collaboration will con- tive products and services to improve end- Gemalto, Creditbank has provided the mar- tribute to the growth of card payments and user experience. ket with a unique offer which provide greater convenience to JCB card “Our partnership with Gemalto and Uni- attracts new business and reinforces brand members both in Russia and from all over the lux Cards goes back over a decade, and it loyalty,” Ghrous added. < world, ” Imada added. <

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CI 543 May.indd 3 12/06/2017 15:38:06 NEWS: DIGEST Cards International

MOBILE DISTRIBUTION Zain and MasterCard launch tures that make it easier for them to complete UnionPay partners with HBL to mobile wallet in Jordan their daily transactions. issue chip cards in Pakistan “This partnership is part of our efforts to Telecoms service provider Zain has partnered boost the electronic payments system in Jor- UnionPay International, a subsidiary of with MasterCard to develop its digital pay- dan, and expand the Zain Cash services to China UnionPay, has partnered with Paki- ment services in Jordan through the Zain enrich the subscriber experience and provide stan-based lender HBL to issue UnionPay Cash mobile wallet. them with an unprecedented, easy and secure chip cards on a large scale. The partnership The partnership aims to extend the ben- way to pay by mobile in the kingdom. will enable the bank to issue UnionPay chip efits of the Zain Cash service to the “Our customers have always been at cards for the first time. telco’s subscriber base, and enhance the forefront of the most advanced According to UnionPay, almost all POS the overall user experience. technologies in the world, so terminals and nearly 80% of ATMs in Paki- Zain has received a license our strategic partnership with stan accept UnionPay cards. Ten local banks from the Central Bank of Jordan MasterCard will contribute to have issued more than 4.1 million UnionPay to issue MasterCard prepaid the goal behind Zain Cash, and cards, with around 90% of transactions cards linked to the Zain Cash to provide e-payment solutions made by the cards occurring in Pakistan. mobile wallet, that will allow to all citizens.” UnionPay International CEO Cai Jianbo subscribers to utilise the card both MasterCard’s general manager of said: “We are giving full play to our advan- locally and globally. Saudi Arabia and Levant Cluster, Basel tages in chip card products, standards and Zain customers will be able to use the card Eltell, said: “Our collaboration with Zain is global chip card acceptance networks to through a network of over 50 million POS an important strategic step aimed at enhanc- promote the largest commercial bank in terminals at MasterCard-accepting loca- ing the e-payment sector in the kingdom. Pakistan to issue UnionPay chip cards on a tions. The partnership will also allow users “We are pleased to sign this agreement large scale. to shop online. with a prominent company such as Zain, “Thus, we are able to realise the migration Zain CEO Ahmad Al Hanandeh com - which comes as part of our relentless efforts from to chip card, joint- mented: “We are very pleased to sign this to deliver innovative financial solutions for ly supporting the upgrade of the local pay- strategic partnership with a leading technol- mobile payments while also reflecting our ment industry. Next, we will carry out the ogy company such as MasterCard, as we vision of paving the way for all segments of chip migration of our acceptance network, continue to deliver the latest and world-class the society to have access to financial servic- to lay a solid foundation for the issuance of services to our subscribers and provide fea- es,” Eltell added. < mobile QuickPass-enabled UnionPay chip cards, to enable local residents to conveni- MARKETING ently tap their cards to pay.” < Netspend, United Airlines launch Visa prepaid card in US DIGITAL Monaco Technology launches Netspend, the prepaid card company owned cryptocurrency card and app by Total System Services, has partnered with United Airlines to launch its first prepaid Monaco Technology has introduced a new card, the MileagePlus Go Visa prepaid card, cryptocurrency card, Monaco Visa Card, in the US. and app that can be funded with Bitcoin, The new offering, which will be avail - Ethereum and other ERC20 tokens. able from summer 2017, will allow US con- The new offering, which will allow users sumers to directly earn miles for qualifying to spend and transfer funds globally at inter- purchases made with a prepaid card. It will bank exchange rates, will work on the Visa also enable cardholders to redeem award network wherever it is accepted. miles through the airline’s MileagePlus the US offers the ability to directly earn miles Monaco App will allow users to make loyalty programme. through a major airline.” transfers in 23 currencies to 120 countries, The card will be issued by Republic Bank, United’s vice-president of loyalty, Praveen and free and instant transfers between and will be FDIC-insured on a pass-through Sharma, said: “With the MileagePlus Go Monaco users. The funds will be immedi- basis. It will also offer electronic anytime Visa Prepaid Card, we are providing another ately available to the recipient and accessible alerts to help cardholders monitor spending. avenue for customers to earn MileagePlus with the card. Netspend president Chuck Harris said: miles. Through MileagePlus, we offer cus- Commenting on the launch, Monaco “Our new MileagePlus Go Visa Prepaid tomers a variety of ways to both earn and use Technology founder Kris Marszalek said: Card will attract frequent flyers who may not their miles – from flights in United’s global “The team worked incredibly hard over the know much about prepaid cards but have an network to once-in-a-lifetime experiences.” last year to bring the Monaco Visa card and affinity to United’s MileagePlus programme Visa’s head of North American debit and app to the market. It is a beautifully simple and are looking for new ways to earn miles. prepaid solutions, David Josephs, said: “By product that allows users to avoid all the “We are also eager to offer the opportunity partnering with United and Netspend, Visa charges that banks and currency exchanges to earn airline miles to consumers who are is helping broaden access to payments for impose on them. looking for new financial solutions to help more customers. “It brings amazing value, transparency them manage their money. “Together, we are continuing to innovate and peace of mind. You’ll never have to “Several of our prepaid cards offer a loy- and develop new payment products that worry about exchange rates again, always alty component, but no other prepaid card in meet evolving customer needs.” < getting the best deal physically possible.” <

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CI 543 May.indd 4 12/06/2017 15:38:08 Cards International NEWS: DIGEST

DIGITAL STRATEGY Comdata unveils new virtual are a technology company first and fore- Android Pay, PayPal partner to credit card tool most. And when it comes to accounts payable allow online payments automation, we focus our development on Tennessee-based B2B payment solution easy administration and vendor enrolment, provider Comdata has unveiled new virtual because we believe those are the two biggest credit card technology that will allow cus- drivers of a successful program. tomers to automate vendor-management “A lot of firms and banks sell virtual credit functions. cards, but our mission is to help clients build a The new Spend Escalator technology will world-class e-payables program. Spend Esca- allow virtual credit card – or e-payables – lator is our latest innovation in support of clients to eliminate the manual effort associ- that mission.” ated with enrolling and managing vendors in Comdata’s vice-president of product and their programmes. strategy, Meitra Aycock, said: “We already The tool will support merchants enrolment integrate our virtual credit card system to each and convert spend volumes at nearly double client’s ERP or accounting system, to make the the average rate of other Comdata clients. payment and reconciliation process seamless. It will also help reduce costs by minimising Spend Escalator expands this integration to cheque payments. not only automate payments, but also reduce Comdata’s senior vice-president of product the effort of managing and enrolling vendors and strategy, Vijay Ramnathan, said: “We to accept card payments.” <

MOBILE Android Pay arrives in Russia Pay button to enable a card in Android Pay Search engine giant Google has launched the without re-entering card information. Android Pay mobile payment service in Rus- Android Pay users can make payments at sia, supported by 15 financial institutions. outlets such as Magnit, Perekrestok, Star- Android Pay has expanded its partnership The launch makes Russia the 11th country bucks, KFC and Rosneft. The app can also with payment giant PayPal to streamline the where Google has launched the solution. It be used to shop online through support - online payment experience at merchants that is supported by Mastercard credit or debit ing applications including Lamoda, OneT- accept PayPal. cards issued by AK Bars, Alfa-Bank, B&N woTrip, or Rambler-Kassa. With the extended partnership, Android Bank, MTS Bank, Otkritie, Promsvyazbank, Google first launched Android Pay in the Pay users on Chrome mobile web will be able Raiffeisen Bank, Rocketbank, Russian US in September 2015, followed by eight to pay at online merchants using a PayPal Standard Bank, Russian Agricultural Bank, additional countries – the UK, Singapore, account and fingerprint. Users will not need Sberbank, Tinkoff Bank, Tochka, VTB24 Australia, Hong Kong, Poland, New Zea- to enter a username or password when shop- and Yandex.Money. land, Ireland and Japan – in 2016. ping with a phone running Android version Users of the Raiffeisen Bank, Sberbank and In a blog post, Google said: “We’re thrilled 4.4 or higher, including KitKat, Lollipop, Tinkoff Bank mobile apps can also enable to name Russia as our 11th country to adopt Marshmallow and Nougat. Android Pay within the banks’ apps, with- Android Pay, and we hope it’ll make your In a blog post, PayPal said merchants on out having to download Android Pay sepa- everyday purchases faster, easier, and a little the latest versions of PayPal Checkout do rately. Users simply tap the Add to Android more fun.” < not need to carry out any integration to use the new features. ONLINE Google payment products vice-president WEX Australia launches new same of type of experience at work that they Pali Bhat said: “Mobile checkout remains online service centre get in their personal or ‘real’ life, similar to one of the biggest sources of friction in the what they do with their major banks. commerce experience, and we’re excited to WEX Australia, a subsidiary of corporate “We collaborated with the best and bright- collaborate with PayPal on enabling stream- payment solutions provider WEX, has est and engaged Sapient Nitro/Razorfish to lined checkout experiences for all Android launched a new online service centre for its help with the strategy and important design Pay and PayPal users.” WEX Motorpass card business, to meet elements. This enabled us to have an output PayPal COO Bill Ready said: “This new rising customer demand. we could be proud of while building up the seamless way to make a purchase with The new platform will enable custom - capability of our internal resources. Building PayPal on Chrome mobile web with an ers to easily view all transactions made to our digital skill set has been central to the Android device is just one way we’re work- an account, request a receipt if the original growth in our innovation capability.” ing to simplify the checkout experience. has been lost, and set product controls on WEX Australia’s head of information “PayPal’s One Touch is another way, and all cards on an account. Customers can also technology, Jim Madytianos, said: “While enables consumers to securely check out change their PIN statuses, set new PINs on clearly I am thrilled with what has been across platforms and devices without hav- all cards, and set up annual and quarterly delivered and the step change in our digital ing to type in any payment information once activity reports. capability, at the heart of the growth is the logged in.” WEX’s director of product and marketing relationship between the WEX and Sapi- In April 2017, PayPal collaborated with Asia-Pacific, Susan Nicholson, said: “Busi- ent Nitro/Razorfish teams to get such a Google to allow the use of PayPal as a pay- ness customers are increasingly expecting the terrific outcome.” < ment method on Android Pay in the US. <

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CI 543 May.indd 5 12/06/2017 15:38:10 PRODUCTS: PREPAID IN CANADA Cards International

Fintechs enter Canada’s prepaid card market

Two Vancouver-based fintechs, Koho and Mogo Finance Technology, have launched mobile-enabled prepaid cards targeting Canadian millennial consumers looking to avoid the country’s notoriously high bank charges and expensive credit cards. Robin Arnfieldassesses the market’s promise and headwinds

oho’s prepaid Visa card is linked to card. The company says most transactions On its Roadmap website, Koho lists sup- a mobile personal financial man - are free, with the exception of out-of-net- port for Apple Pay and Android Pay in the agement (PFM) app, and is issued work ATM withdrawals. near term, plus photo cheque deposits. by Vancouver-based Peoples Trust. Customers fund their Koho accounts K through salary direct deposits and transfers Mogo’s prepaid Visa card is issued by Customer experience Home Trust, a subsidiary of Canadian from their bank accounts. Including transac- “Not being a deposit-taking bank and being mortgage lender Home Capital which in tions during its beta trial, Koho had handled a pure technology play, we’re able to build April 2017 saw an exodus of savers after the C$2m worth of transactions on its prepaid a rich, elegant customer experience tethered Ontario Securities Commission alleged it had cards up to April 2017. to a prepaid card,” says Eberhard. “From a misled investors in its handling of a scandal “The average Koho user is about 30 and pre- customer usage perspective, prepaid cards involving falsified mortgage applications. dominantly male, but we’re trying to change make a lot of sense.” On 1 May, Home Capital said Home Trust that,” says Koho CEO Daniel Eberhard. Koho’s customers can set up had drawn down C$1bn ($731m) from its “Their average income is about C$74,000. e-transfers from the account linked to their C$2bn credit provided by a facility led Our goal is to get 100,000 customers, and prepaid card and also perform Koho-to- by the Healthcare of Ontario Pension Plan. we’re only interested in social media plat- Koho transfers. Interac e-transfers are P2P forms that can scale in terms of promotions. payments using Canadian debit scheme Cash-in We’ve done 100-120 customer-acquisition Interac’s infrastructure. The two startups hope to cash in on young experiments through major digital channels.” “Our Smart Spending Account is a PFM Canadians’ dislike of high bank fees and “The way we view the Canadian prepaid tool that lets customers set control categories desire for mobile-friendly banking services. card market is that prepaid is virtually identi- for their spending,” says Eberhard. CBC cites Statistics Canada as saying Cana- cal in terms of core feature set to any other “We look at a lot of the data sets traditional dians paid “an average of C$216 annually in primary bank account Canadians use,” says PFMs don’t examine because they just scrape bank service fees in 2015”. Eberhard. your bank account. For example, we look at Whereas in the US, prepaid has been most- “What we did was map out the function- merchant categorisation codes and several ly stuck in the sub-prime lending market, in ality people expect from a primary account other variables to give consumers real-time Canada the key driver for prepaid adoption – such as bill payments and money transfers insight into their spending behaviour to pro- is the concept of spending accounts to avoid – then layer this functionality around a pre- vide the context for their financial life. excessively high banking fees and high-inter- paid card and offer a much richer feature set.” “We’re accurate 99% of the time in terms est credit cards. Currently, Koho does not offer mobile of budget categories, and let consumers Vancouver-based Koho has received payments or cheques. “There is a low ROI break down their supermarket spending, for C$2.6m in backing from Canada’s Power in giving people the ability to write cheques example, into sub-categories like groceries Financial Corp., and other investors includ- from their prepaid account, although we and lifestyle/health. It’s very easy to either ing the founders of social media tech com- might offer that at some point,” explains permanently or temporarily change these pany Hootsuite, and e-commerce business Eberhard. categories.” Shopify. In April 2017, Koho launched its “We plan to offer NFC payments on smart- Eberhard says it takes three minutes to get Smart Spending Account and linked prepaid phones in quarter three of 2017.” a Koho account on a smartphone, and the

6 y May 2017 www.cardsinternational.com

CI 543 May.indd 6 12/06/2017 15:38:13 Cards International PRODUCTS: PREPAID IN CANADA

account can be totally managed via mobile rience. Also, they want to know how much to be placed in prepaid Visa accounts,” devices. they are spending via our PFM tool. B – they Smythe continues. “Its primary business is Koho is regulated by the Financial Trans- don’t want a primary account that is going to instalment loans and personal line-of-credit actions and Reports Analysis Centre of Can- charge them fees. C – they want to have their accounts. ada (Fintrac), a Canadian government anti- account run by an institution that they trust “Mogo is also a mortgage broker, and this money-laundering/anti-terrorist-financing and relate to and which isn’t going to sell line of business may be facing greater scru- agency. them things they don’t need, or overly com- tiny from lenders which are becoming more “We do full KYC and terrorist watchlist- plicate things to make greater profits. There cautious as a result of Home Capital’s prob- screening, and part of the intellectual prop- is a mistrust of banks among younger people. lems. Mogo has been in operation for many erty we’ve built is the decisioning on account “Our ethos is to build a great product and years and is still facing operations losses. Its applications,” explains Eberhard. not profit from confusion or complexity. staff complement seems to be high, based on People know exactly what they are going to the business being generated,” notes Smythe. Roadmap get, and that message resonates with them. “Koho is a recent start-up, whose primary “We’re feature-equal to or better than tradi- Our revenue comes from card interchange source of revenue is interchange fees and tional bank accounts,” says Eberhard. “Over and interest on deposits,” Eberhard explains. income from funds on deposits in its prepaid the next 18 months, we’ll accelerate in terms “We think that our clients might link their card accounts. of technology development and continue to Koho account to a with “It identifies its target clients as people tired do unique things with our account. [Canadian digital banks] Tangerine or EQ of bank charges. In consumer surveys con- “Ultimately, what we want is to create Bank. ducted by IDC Canada, we didn’t see bank value throughout the entire financial life of “One of the things that causes a lot of pain fees to be a major concern. Desirable clients the client. At the moment, we own the spend- for consumers is that they have difficulty usually have balances large enough to elimi- ing of a lot of our users and a meaningful in getting a holistic understanding of their nate fee charges. percentage of them use Koho as their pri - financial life. So we’re laying some of the Smythe adds: “Koho is trying to convince mary account. We’re extending the customer functionality of [Canadian digital account- clients to have their salaries deposited into relationship by adding account aggregation scraper PFM tool] Mint into our PFM tool.” their prepaid account. It suggests anywhere so that, with Koho, you’ll see what’s going Mogo’s Platinum Prepaid Visa Card is from a third to 100% of income so deposits on with all your accounts at any time. linked to the digital Mogo Spending Account, can then be used to fund on-going purchases. “We’ll also be adding credit facilities such which consumers can transfer funds to from I doubt Koho will have much success in con- as an overdraft – but it won’t be unsecured most Canadian bank accounts. Each time vincing people to deposit their hard-earned lending at 21% APR.” they add money to their Spending Account, money with anyone but a stable bank. IDC Koho plans to offer a loyalty programme they are prompted to set a spending goal. Canada surveys also show that consumers and a referrals reward programme. “We The Mogo app provides instant transac- are very satisfied with their banks and the think that using our app for P2P transfers tion alerts with each purchase along with services they provide. will be important,” says Eberhard. “Some of updated real-time balances. There are no “Koho has some positives going for it, and the UK prepaid card issuers like Monzo and monthly charges for the account, and Mogo has also been discovered by Power Financial Loot that are further ahead of us and have prepaid customers have access to Mogo’s as well as several other investors. It seems similar models, see 80% of their customer other products including free monthly Equi- to have a reasonable staff complement and acquisitions come through referrals.” fax credit scores, mortgages and a range of adequate initial funding. It also has an inter- “Koho’s management team takes a different different personal loans. esting array of services that enables payments approach, as we aren’t bankers,” Eberhard In April 2017, Mogo said it had surpassed while providing real-time information on continues. “We’re technology entrepreneurs, 400,000 members, up 52,000 from the how funds are spent. and our team comes from Silicon Valley and 348,000 members reported as at 31 Decem- “The major challenge Koho faces is the from firms such as Alibaba and PayPal. I co- ber 2016. assumption that there are many bank clients founded a wind farm technology company, Mogo’s Level Up Program for its Mogo- wanting to to a solution that provides so I’m basically an entrepreneur. Money loans rewards borrowers for making lower fees,” Smythe says. “I don’t think there “The prepaid card model is doing very payments on time by giving them a lower are too many people in this category. It will well in Europe. There has been a lot of noise interest rate. also be difficult to provide core bank services in the US prepaid market, but there hasn’t based on prepaid debit cards. really been a breakout, maybe because of Future promise – substantial headwinds “This may be why Koho’s projected growth the fragmentation in the US market. But I “I think Koho has future promise, while targets are very low. These need to be understand that the Green Dot/Walmart Mogo faces some substantial headwinds,” increased substantially to make the company MoneyCard prepaid card is doing very well says IDC Canada associate Robert Smythe. viable and to make it a potential acquisition in the US.” “Mogo could be affected by the problems target. Koho’s target market is Canadian millen- facing Home Capital, parent of Mogo’s issu- “On the positive side, Koho provides inno- nials, or people who want to run their finan- er Home Trust. With the problems Home vative payment reporting and management cial life on their smartphone. Capital is facing, it may be more difficult for services that are currently only offered by TD Asked why they would get a prepaid card Mogo to get clients to place funds in a Visa as a result of its partnership with Moven.” account, Eberhard says: “Everyone in Cana- account managed by Home Trust. The plus Smythe concludes: “Koho needs to target da can get bank accounts, and there’s a very factor may be that most people won’t make being the Canadian equivalent to Moven, small percentage of underbanked people the connection between the Mogo prepaid which involves selling its software solutions here. People using Koho fall into three cat- Visa card and Home Trust/Home Capital. to banks globally. This will involve abandon- egories: A – they want the technology and “The other positive for Mogo is that its ing trying to be a bank and focusing on being the simplicity and intuitiveness of the expe- main source of revenue isn’t collecting funds a fintech software vendor.” <

www.cardsinternational.com May 2017 y 7

CI 543 May.indd 7 12/06/2017 15:38:14 ANALYSIS: SOCIAL FINANCE Cards International

Social Finance to apply for industrial bank charter in US

After acquiring multi-currency digital bank Zenbanx, US online lender Social Finance (SoFi) plans to apply for an industrial bank charter so it can offer bank accounts and credit cards. However, whether it will be successful in its attempt is far from certain. Robin Arnfieldspeaks to industry analysts to find out more

oFi CEO Mike Cagney told US lished banks to fintechs being granted trial loan company. As outlined earlier, the magazine TechCrunch in May banking licences. If SoFi’s ILC application FDIC continues its efforts to provide inter- 2017 that SoFi plans to apply for is approved, it would be the first firm to be ested organising groups with a clear path to an industrial loan company (ILC) granted an ILC charter in a decade in the US. forming a new insured depository institu- S ILCs differ from standard banks as they tion, regardless of the type of charter pur - banking charter within the next month. A SoFi spokesperson confirmed to CI that are not owned by a bank holding company, sued by an organising group.” the TechCrunch story is accurate, but but by a commercial venture such as a car declined to provide details. manufacturer. Currently, seven US states Rush of new entrants Cagney said Zenbanx’s technology pro- including Utah, California and Nevada, “If SoFi’s application for an industrial lend- vides the infrastructure for SoFi’s move offer ILC charters. If its ILC application ing licence is successful, this could really into banking and that, by combining bank- is unsuccessful, SoFi could conceivably start a rush of new fintech entrants applying ing services with its lending products, SoFi partner with Wilmington, Delaware-based for similar licenses,” says Greer. could offer discounted rates to members WSFS Bank which provides banking servic- “My feeling is that it won’t be easy for who set up auto-pay between their accounts. es for Zenbanx in the US. SoFi to get an industrial lending licence. Cagney admitted that FDIC approval for its According to the Utah Department of Also, there are implications about being an ILC application cannot be taken for granted Financial Institutions: “An industrial bank industrial bank as opposed to a traditional “SoFi’s plan to apply for an ILC charter is is a state-chartered depository institution chartered bank, namely that industrial banks’ Don’t have online account details? a progression step on its part,” says Joseph that is eligible for FDIC insurance, exempt- holding companies aren’t subject to oversight Walent, associate director, customer interac- ed from the technical definition of a bank by the Federal Reserve. It’ll be interesting to tion advisory service, at Mercator Advisory for the purposes of the Bank Holding Com- see if fintechs go this route, or try to take You and your associates may be entitled to online Group. “By becoming an industrial bank, pany Act of 1956, and otherwise generally advantage of the OCC’s fintech charter. SoFi will be able to build its banking func- subject to the same banking laws and regu- However, this won’t include deposit insur- login credentials. The benefits of full online tionality from the ground up and take total lations as other bank charter types.” ance, so it’s unclear what the value will be.” access are as follows: control of the financial institution.” Industrial banks are subject to FDIC regu- Launched in 2011, SoFi initially refi - The topic of fintech regulation is contro- lation. Following the 2008 financial crisis, nanced student loans, and then expanded versial in the US. In December 2016, the US the Dodd-Frank Wall Street Reform and into personal loans, mortgages, wealth man- • Timely daily news updates Office of the Comptroller of the Currency Consumer Protection Act set a three-year agement and life insurance. On its website, (OCC) proposed that fintechs such as online moratorium on FDIC approval of ILC appli- SoFi states: “We look behind just credit • Access the latest analysis lenders be offered special charters, allowing cations for deposit insurance after Novem- scores and debt-to-income ratios to consider • Monthly editions sent directly to your inbox them to offer banking services nationwide. ber 2009. factors like estimated cashflow, career, and New York State’s banking regulator, the In a July 2016 speech to the US House of education. While other leaders charge high- • News alerts direct to your inbox New York Department of Financial Services, Representatives’ Committee on Oversight er rates to account for the possibility that filed a lawsuit in May 2017, arguing that the and Government Reform, FDIC chair Mar- borrowers won’t pay back their loans, our • Comments from key industry influencers and leaders plan to offer national charters was “lawless, tin Gruenberg said: “The current economic unique underwriting process helps ensure • Search for specific, relevant content ill-conceived and destabilising of financial environment with narrow net interest mar- our members have a high likelihood of mak- markets” which are best regulated by the gins and modest overall economic growth ing their payments.” • Access the archive state, Reuters said. In April 2017, the Con- remains challenging for US banks and the In 2016, SoFi originated $8bn in loans, up ference of State Banking Supervisors filed a establishment of de novo institutions. from $5bn in 2015, and expanded its mem- similar lawsuit against the OCC. “The FDIC is committed to working with, ber base to 225,000 from 100,000 over the To create or activate your account please contact: Celent banking analyst Stephen Greer and providing support to, groups with an same period. At the end of 2016, the com- says there is strong opposition from estab- interest in organising a bank or an indus - pany had 750 total staff. [email protected]

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CI 543 May.indd 8 12/06/2017 15:38:20 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 Cards International ANALYSIS: SOCIAL FINANCE

Last year, SoFi launched Student Loan an undisclosed sum. It also raised $500m in DUCA Financial Services Credit Union. Kuh- Payoff Refi for home mortgages and student Series F financing in February 2017 led by lmann has taken an executive role leading loans in partnership with Fannie Mae. In private equity firm Silver Lake Partners. The banking products at SoFi, and Zenbanx staff addition to new lending products, SoFi intro- investment, which brings the company’s total have also joined SoFi. duced its SoFi at Work brand for employee funding to $1.9bn, will be used to speed up “With Zenbanx joining SoFi, we’re mov- financial wellness, SoFi Wealth for modern SoFi’s expansion into new product areas and ing one step closer to becoming the centre investment management, and a partnership countries outside the US. of our members’ financial lives by adding with Protective to offer term life insurance. In a SoFi blog, Cagney wrote: “We’ve SoFi deposit, money transfer, and credit SoFi focuses primarily on student lend- never been shy about SoFi’s ambitions to card products to our offerings for members,” ing to clients who are at top universities become the center of our member’s financial Cagney said in February 2017. and have the potential to become HNWIs,” lives. Offering deposits, credit cards, and “The logic behind SoFI’s acquisition of Greer says. “It wants to offer banking ser- payment solutions is key to that ambition, Zenbanx is twofold,” explains Ron Shev- vices on top of loans to these clients. SoFi and we think we can offer something better lin, director of research at US-based Cor- makes money from securitising its loans and than incumbent players with the same kind nerstone Advisors. “SoFi needs deposits to from its refinancing and lending process.” of innovation we’ve brought to other areas fund its lending business, and it wants a bank According to the Wall Street Journal, SoFi of finance, like student loan refinancing, per- offering to become the provider of choice to estimates it will generate $600m in revenue sonal loans, and mortgages. young upwardly mobile consumers. in 2017, after receiving $40m in adjusted Zenbanx, established in 2012 by Arkadi “It isn’t going to scale. Zenbanx has little profit in the first quarter. Kuhlmann, founder of ING Direct Canada name recognition and won’t be much of a In April 2017, SoFi launched an invest- and ING Direct USA, offers mobile banking draw to many SoFi customers who are per- ment fund to give investors access to its accounts that let customers save and send fectly happy with the mobile offerings of loan portfolio, disclosing in a Securities money in multiple currencies domestically their existing banks.” and Exchange Commission filing that it and internationally. Following its purchase of Zenbanx, SoFi raised $105m for its SoFi Prime Income Its mobile app was designed to eliminate plans to launch a range of mobile deposit, Fund. Each investor contributed a minimum the complexities of international banking credit, and payment products to its US mem- of $500,000. for people who bank cross-border. US Zen- bers in 2017, as well as offer its products in In February 2017, SoFi bought Delaware, banx accounts are available through WSFS Australia and Canada by 2017 end, SoFi said California- and Toronto-based Zenbanx for Bank, and in Canada through Toronto-based in a news release. <

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CI 543 May.indd 9 12/06/2017 15:38:25 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 RESEARCH: GLOBALDATA Cards International

Canadians less keen than their US peers on mobile payments The US is unusual in that mobile proximity Canadian banks including RBC, CIBC, that key players in the payments market payments are increasingly popular, despite ATB Financial and Canadian Tire Bank need to put significant effort into driving the absence of a contactless cards market. have also sought to drive growth in the interest in mobile payments. Meanwhile in Canada, consumer interest in Canadian mobile payments market by Only 12% of Canadians carry out mobile proximity payments remains muted. partnering with Apple. m-commerce transactions, compared to According to GlobalData’s Cards and A number of other recent initiatives – 16% of their US peers. However, m-com - Payments Market Drivers, the US had a including the launch of a contactless mobile merce is forecast to record stronger growth 55% smartphone penetration in 2015, payment service for Android by American in Canada than in the US, with a CAGR of compared to 49% in Canada. Express, and Scotiabank’s My Mobile Wal- 26% over 2015-2020, compared to only While the US mobile payments market let – are looking to attract Canadian con - 12% in the US. is highly competitive and features a wide sumers to mobile proximity payments. Mobiles will be increasingly used for range of brands, it is less fragmented than Yet mobile wallet ownership stands at impulse buys and small purchases at home the cards market. Most big brands are 16% in Canada, significantly below the or on the move, as consumers become available to any consumer, regardless of global average of 29% and that of the US increasingly comfortable with the form who they bank with, and Apple Pay in par- at 33%. The majority of Canadian con - factor and with storing their card details ticular has partnerships with almost every sumers do not have a mobile wallet, and on merchant sites or apps to enable retail bank in the country. have no interest in getting one, indicating quick checkouts. < Land of mobile payment opportunities: India leads the charge in Asia-Pacific

The role of mobile payments in e-commerce n USE FOR E-COMMERCE IN ASIA-PACIFIC has become increasingly important in the past few years, and as a growing proportion of global trade goes online, there is a large poten- tial opportunity for digital and mobile wallets. In the five years to the end of 2016, Chi- China nese payments via digital wallets grew from 524% $514.4bn around $98bn in 2012 to over $500bn. These India Hong Kong 2,233% staggering statistics are driven mainly by the 365% $5.5bn $6.1bn proliferation of and WeChat’s Tenpay. Vietnam However, there are several other Asia-Pacific 1,506% markets where the prospects for mobile pay- $588m Thailand ments are equally bright. 584% Malaysia According to GlobalData’s Payment Card $1.9bn 694% Analytics, the most exciting markets for digi- $134m tal wallets are in Asia-Pacific, where even Chi- New Zealand Percentages refer to Australia na’s huge growth rate only ranks in the middle 203% 260% growth in digital wallet use in Singapore $440m of the pack. Digital wallet payments in India e-commerce, 2016-2016 596% $5.2bn grew by over 2,200% in the five years to the $386m Indonesia 1,027% end of 2016, and both Vietnam and Indone- $337m sia are exciting markets that have recorded extraordinary growth in the past five years. In markets such as Vietnam and India, Source: GlobalData where there are large untapped markets with underdeveloped payment infrastructure, the However, the outlook for India is extreme- – enough to focus the world’s attention on environment is right for new digital payment ly positive. Consumers and merchants alike markets other than China. providers, because while growth rates have have already embraced , which offers Most importantly for the significant been impressive, absolute volumes and values QR code-based mobile payments, while underserved population in the developing still have a long way to go. For example, at the India’s government is pushing for a national parts of Asia-Pacific, the proliferation of digi- end of 2016 the value of transactions made QR standard to help bring digital payments tal wallets will reduce dependence on cash by digital wallets in India reached $5.5bn – a to the unbanked. and bring multiple benefits to consumers in low figure given that the country accounts for The market is forecast to record several the region, including accessible and afford- almost 20% of the global population. years of very high mobile payments growth able payments and financial services. <

10 y May 2017 www.cardsinternational.com

CI 543 May.indd 10 12/06/2017 15:38:25 Cards International RESEARCH: GLOBALDATA

Further US interest rate rises may lead to another credit market collapse Despite the strength of the US economy, consumers are increasingly reliant on credit cards to stretch their finances. With debt becoming more expensive, there is a danger of a tipping point being reached in the short- to-medium term, especially as total credit card balances outstanding in the US are fore- cast to rise from 2015 to 2020, according to GlobalData Financial Services. US has been on an upward trend since 2012, though the market has not yet returned to pre-2008 levels, either in terms of overall credit card debt or card debt per consumer. However, the rise in credit card debt has not been accompanied by a corresponding rise in wages, so while US consumers are borrowing more, their ability to repay debt is falling. Compounding the issue, the Federal as many credit cards as people in 2015. Most collectively owe over $600bn more on credit Reserve has been steadily raising interest credit card holders do not pay off the full bal- cards than those in China. rates over the past year, with the rate reach- ance on their cards every month, with only The US is also the most indebted ing 1% in March 2017. Banks have reacted 39% paying off the full balance on their pri- market per capita, and has the high - by raising prime interest rates, making bor- mary credit cards. est percentage of consumers in the top rowing more expensive for consumers. The US is – by a considerable margin – the 10 markets who revolve their credit US consumers hold the world’s heaviest largest global market in terms of overall cred- card balances. credit card debt burden, on average. The it card debt, dwarfing even the other mem- Further interest rate rises – unless they US also has one of the world’s highest credit bers of the top 10 countries in terms of credit follow a period of real wage growth – risk card penetration rates, with just under twice card balances outstanding. US consumers stretching the market to breaking point. < Singapore’s discrepancy between card penetration and transaction volumes One of the world’s most advanced pay - transactions like consumers in New Zea- Singapore, there are currently over 14,000 ments markets, 83% of adults in Singa - land and Australia. If Singapore is going to licensed hawkers in the country. pore hold both a debit and a credit card, achieve its aim of being a cashless society, it This specific retail segment also represents according to GlobalData’s annual consumer needs to bring low-value card payments into the largest cash-based merchant segment in payment survey. consumers’ consciousness, and incentivise the market. If these merchants start accept- The market also has a strong payment merchants to accept them. ing payment cards, the country would have infrastructure. However, card use in the city There are still pockets in Singapore’s retail a much better chance of progressing towards state lags way behind other developed mar- market where cash is the preferred pay - a its goal of being a cashless economy – or at kets in the region. ment tool, and where payment cards are not the very least, significantly boosting payment At 349 payment cards per 100 inhabitants, accepted. According to data from Statistics card use. < consumers in Singapore hold significantly n more payment cards in their wallets than HOW SINGAPORE COMPARES WITH ITS ASIA-PACIFIC PEERS their peers in Australia and New Zealand. Cards per 100 POS per million POS transactions Average POS All three markets have high levels of POS population population per card per year transaction value penetration, but consumers in Singapore use Australia 277 41,930 106 57.4 payment cards at the POS around a third as China 447 19,605 6 232.6 much as their counterparts in Australia and 309 35,368 110 34.7 New Zealand. New Zealand Merchant attitudes towards payments Singapore 349 33,149 33 90.0 cards are also different in Singapore, and Key Best Worst consumers tend to use cards for relatively high-ticket items, rather than for low-value Source: GlobalData

www.cardsinternational.com May 2017 y 11

CI 543 May.indd 11 12/06/2017 15:38:27 GUEST COMMENT: FICO Cards International

Making use of AI and machine learning to build credit risk models Which works better for modelling credit risk: traditional scorecards or artificial intelligence (AI) and machine learning? Given the hype surrounding AI today, this question is inevitable, but it is not an either- or conundrum. The best approach is to figure out how to use them together, writes FICO’sScott Zoldi

learning with a much larger set of features relating to event-specific recent occurrences and frequencies. These predictive improvements in turn “AI presents a host of can translate into substantial portfolio profit exciting opportunities gains and a much more precisely targeted for the finance industry. retention strategy. However, above all, it is In a project to build home equity risk mod- els with limited data, the lack of enough poor important to ensure they performing loans in our sample was causing are managed in a way lower-performant traditional scorecard mod- that produces reliable, els. By building a machine learning model, we were able to confirm that we were losing explainable results that a significant amount of signal by relying on drive better outcomes a traditional scorecard which required great for customers.” amounts of bad coverage. Machine learning led us to change the model performance outcome from a binary outcome to a continuous outcome. By com- bining this machine learning model insight with scorecard technology, we created a n traditional risk modelling, customer and find new relationships among input fea- strong, robust solution and saw a 20% segmentation is based on ‘hard’ lines tures which can produce a stronger model. improvement in model performance over the and broad categories, such as new For example, utilisation is always an traditional scorecard model alone. customer versus existing customer. important feature in a credit model, as is I delinquency, but a non-linear combination of In contrast, you can use AI and machine A smarter way to use AI learning algorithms to discover a better way these can produce more optimal results in a As a data scientist who has spent his career to segment the scorecards. This allows you to machine learning model. You can then drive developing business-ready AI applications – apply AI to improving risk prediction with- these new inputs into a traditional scorecard I have 38 granted patents in this space and out creating ‘black box’ models that do not model to ensure they are easily explainable. 41 pending patent applications – I under- give risk managers, customers and regulators The same techniques are essential when con- stand the power of AI and machine learning. the required insights into why individuals sidering non-traditional data sources where Today, though, I see a lot of naivety regard- score the way they do. the most predictive combinations of inputs ing how it can be used. Our data scientists are now starting to use are yet to be discovered. You do not want to throw in a lot of new techniques such as collaborative profiling to data sources – many of which may not be reveal entity segmentation based on customer Improving results permissible in credit decision-making, and behaviours. We can then group customers into The following examples illustrate how you might be easily manipulated, like social micro-segments based on shared behaviours, can achieve better performance and clar- media data – into an AI model that comes instead of typical segmentation approaches ity by combining the machine learning and up with a score that may not be explainable. that rely on hard business attributes. scorecard-based approaches. Lenders in many markets need to be able Incorporating these subtle behaviours When developing a credit card churn to explain how a customer was scored, and into credit risk modelling provides the best model, FICO data scientists used machine it is important regardless of regulators to of both worlds for customers. It uses the learning to identify a powerful interaction understand what relationships are being traditional, time-tested analytic models and between the frequency of card usage, and learned from this data, and if these relation- scorecards, but enhances them with AI to how recently it has been used. Including this ships really matter to the business. drive better segments and feature creation in interaction as a non-linear input feature in an It is unquestionable that AI presents a models, resulting in more predictive score- interpretable scorecard led to a substantial host of exciting opportunities for the finance card models. improvement of approximately 10% in pre- industry. However, above all, it is important Another approach is to use AI and machine dicting credit card attrition. to ensure they are managed in a way that learning to build new types of credit risk In addition, another 15% improvement in produces reliable, explainable results that model to capture maximum predictive power, performance was found by applying machine drive better outcomes for customers. <

12 y May 2017 www.cardsinternational.com

CI 543 May.indd 12 12/06/2017 15:38:27 Cards International GUEST COMMENT: ALLPAY

Make time for success: the advantages of outsourcing online SME payments If UK SMEs are to succeed in a post-Brexit world, they will need as much time and as many resources as possible. Outsourcing payment processing can free up time, and allow businesses to focus on customer service, client relations and lasting growth, writes Ross Macmillan, head of research and intelligence at allpay

ccording to research carried out by the American Express Global SME Pulse, SMEs in the UK, and A globally, are confident about their future business performance and optimis- tic about the economy, with 50% of UK SMEs anticipating revenue growth of at least 4% over the next 12 months. In today’s society, and in order to see con- tinued success, processing online payments is a must for SMEs, as it allows customers to pay online or set up a direct debit for regu- lar, automated payments. Whether targeting consumers or other businesses, organisations of all sizes will need to deal with the transfer or collection of payments at some point. But should SMEs Industry Data Security Standard (PCI DSS). Outsourcing the process of payments can outsource or look to process payments As security breaches become increasingly also result in a more user-friendly experi - directly? That is the question. common, it is critical for organisations of all ence for both SMEs and their customers. There are lots of advantages to outsourcing sizes to prove and maintain PCI DSS compli- Some suppliers can provide multiple pay - this responsibility – particularly when pay- ance. If it was discovered that an organisa- ment channels across online, phone, mobile ment processing comes with a certain degree tion involved in the processing, transmitting and text to ensure ease and reduce the num- of risk and, as such, can be time-consuming. or storing of cardholder data had caused a ber of missed payments. For any business that wishes to process card breach, the organisation in question This service can come with the added card payments of any kind for its custom- could face severe fines for either not being security benefit of 3-D Secure authentica- ers, it will need to obtain a Merchant ID compliant or not maintaining compliance. tion on every transaction, which allows the (MID) from its bank. This allows the busi- However, becoming PCI DSS-compliant customer to confirm the transaction with ness to be identified by the banks and credit takes time, money and ongoing resource, the use of a password, reducing the risk of card institutions in order to accept credit three things that are often in short supply successful . card payments. for a smaller organisation. PCI DSS assess- For direct debits, a third party can pro- This means taking on additional risk and ments for level 1 Payment Service Providers vide an online scheduler which makes set-up administration to manage that risk. The have to take place on site, and it can take easier for customers, allowing them to set up lengthy approval process, which includes weeks or even months before compliance is mandates online or over the phone with the credit checks, can put a lot of strain on a determined, depending on what is in scope ability to automate administration tasks for small team. For direct debits, a Service User and the complexity of the cardholder data the organisation, including the submissions Number (SUN) is required from the bank environment. to Bacs and correspondence to customers which can be particularly time consuming The threat of cyberattacks should not be through email. as a bond is required. On some occasions, ignored and organisations should ensure In conclusion, if SMEs in the UK are to suc- the bank will even decline a request from a their chosen suppliers meet high standards cessfully navigate the challenges and succeed small business. for cyber security through government- in a post-Brexit world, they will need as much If a company decides to outsource the pro- backed accreditations like Cyber Essentials. time and as many resources as possible. cessing of its payments instead to a specialist Processing payments directly can be time Outsourcing certain tasks, including pay- payment services provider, the right supplier -onsuming for other reasons, particularly ment processing, can free up the team’s time will be able to supply the MID and SUN, around ensuring the offering and interface and enable them to focus on other areas that thus taking on the risk and minimising the is attractive to customers. Third parties are more likely to contribute to better cus- amount handled internally. can help businesses to offer their custom - tomer service, client relations and lasting A supplier that is able to handle the risk ers greater flexibility on collection dates business growth. surrounding the authorisation of an MID and frequencies – and provide an auto - It also ensures that you and your custom- will also be able to help manage other forms mated re-presentment facility on any failed ers benefit from the latest technology and of risk for its clients. An example is the payments – helping to boost take-up and features without having to invest in your challenge of adhering to the Payment Card reduce arrears. own IT resources and development. <

www.cardsinternational.com May 2017 y 13

CI 543 May.indd 13 12/06/2017 15:38:29 COUNTRY SURVEY: THAILAND Cards International

Thailand stepping up & getting results

Initiatives by the government, the central bank and various commercial banks are expected to gradually make some headway into cash’s dominance of Thailand’s payment system in the coming few years. Prepaid cards are growing in popularity, and public transport is helping to beat a path towards wider acceptance

ash continues to be the preferred Financial inclusion programmes According to the World Bank, Thailand consumer payment instrument in The Thai government and several commer- has made substantial progress in terms of Thailand, accounting for 96.5% of cial banks have been taking initiatives to financial inclusion, with the percentage of C the total payment transaction vol - bring a greater proportion of the population the Thai population aged 15 or above with a ume. This is a result of a lack of adequate into the formal banking system. bank account rising from 74.6% in 2012 to banking infrastructure, limited con - To create financial awareness, the Bank of 81.9% in 2016. Increased bank penetration sumer awareness of electronic payments, Thailand introduced the Financial Consumer has led to a rise in demand for products such and generally low levels of acceptance Protection Centre on January 13, 2012. The as current accounts and debit cards. at retailers. centre serves a dual purpose of improving cit- However, use of cash is forecast to decline izens’ financial knowledge and understand- Stringent regulation to curb debt gradually over the next five years, primarily ing, and providing solutions for grievances Household debt remained high in Thailand as a result of initiatives by the central bank and complaints relating to financial products between 2012 and 2016, reaching a peak to promote electronic payments. The Thai and services. Adding to the central bank’s in 2013, with household debt equivalent to government has also launched two develop- efforts, in 2014 the Citi Foundation and the 82.3% of total GDP. ment plans to stimulate overall growth: the Kenan Institute Asia together introduced the As a result, the central bank enforced strin- Financial Sector Master Plan Phase III, and Literacy Improvement for Better Finance in gent regulations in 2013, requiring all banks the Payment Systems Roadmap. Thailand project. to cap annual interest rates at 20%, and all

n VALUE OF CREDIT TRANSFERS ($BN) IN n VALUE OF CHEQUE PAYMENTS ($BN) IN n VALUE OF PAYMENT CARDS ($BN) IN THAILAND, 2012–2016 THAILAND, 2012–2016 THAILAND, 2012–2016

500 40 2,500 35 400 2,000 30

25 300 1,500 20

200 1,000 15

10 100 500 5

0 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

(estimated) (estimated) (estimated)

Source: Central Bank of Thailand, GlobalData Source: Central Bank of Thailand, GlobalData Source: Central Bank of Thailand, GlobalData

14 y May 2017 www.cardsinternational.com

CI 543 May.indd 14 12/06/2017 15:38:33 Cards International COUNTRY SURVEY: THAILAND

cardholders to pay a minimum of 10% of n THAI DEBIT CARD MARKET SHARES BY ISSUER, n THAI DEBIT CARD MARKET SHARES BY outstanding balances each month. 2016 (ESTIMATED) SCHEME, 2016 (ESTIMATED) The measures helped issuers to identify creditworthy customers, and reduce defaults. They also reduced annual growth in credit card circulation from 10.5% in 2013 to 7.0% in 2016 – a trend that is expected to continue over the next five years. Mastercard 16.4% Credit card use, however, is expected to Others 30.2% Bangkok Bank rise until 2021, as a result of rising household 32.2% spending, recovery in the automobile market, and increased consumer confidence. Siam Visa Alternatives and e-commerce gain ground Commercial Kasikorn Bank 83.6% Thailand’s e-commerce market in Thai - Bank 17.6% 20.1% land grew significantly from $8.3bn (THB259.4bn) in 2012 to $20.7bn in 2016, at a CAGR of 25.43%, due to rising mobile and online penetration, the growing presence

of online retailers, and increased consumer Source: GlobalData Source: GlobalData confidence in online transactions. The mar- ket is forecast to reach $63.3bn in 2021. n THAI PAY LATER CARD MARKET SHARES BY n THAI PAY LATER CARD MARKET SHARES BY Conventional instruments – including pay- ISSUER, 2016 (ESTIMATED) SCHEME, 2016 (ESTIMATED) ment cards and credit transfers – remain the preferred modes of payment for e-commerce, collectively accounting for 68.9% of the total e-commerce transaction value in 2016. How- Others ever, emerging methods such as mobile and 7.1% digital wallets, and carrier billing are gain- Kasikorn Bank ing prominence, collectively accounting for 19.6% 9.4% of the total e-commerce transaction value in 2016 – up from 4.5% in 2012. Others 48.7% Mastercard Visa International payment solutions such Krungsri Bank 38.8% 54.1% 18.2% as PayPal, MasterPass and Fortumo have entered Thailand’s e-commerce market, complemented by domestic operators such Siam Commercial as mPay, True Money and AirPay. Bank 13.5% Growing payment infrastructure The number of POS terminals rose from

264,236 in 2012 to 380,540 in 2016, and is Source: GlobalData Source: GlobalData expected to reach 541,886 by 2021. With the rising number of POS terminal installations at retail outlets, the potential Rising preference for prepaid In addition to open-loop prepaid cards, for card-based payments is also expected Prepaid cards are increasingly gaining accept- closed-loop cards are also available in Thai- to grow. To add to the growing POS termi- ance, primarily as a result of a general ten- land. In 2012, for instance, the Rabbit card nal network, Bangkok Bank partnered with dency among Thai consumers not to spend was launched by BTS for all BTS, MRT and Hong Kong-based solution provider Pax beyond their means. BRT passengers. Technology in 2016, to provide Pax’s S58 Prepaid cards are also easily accessible to Rabbit is a rechargeable contactless stored and S80 countertop models, as well as the individuals who do not qualify for a debit card that is available in a number of different 3G-enabled S90 mPOS terminal. In Decem- or credit card, as the unbanked population variants, similar to the standard and corpo- ber 2014, Krungsri Bank and Mastercard accounted for 18.1% of Thailand’s total rate Rabbit cards. The cards can also be used together launched contactless POS terminals. population in 2016. The number of prepaid to make payments at participating stores and In addition to conventional POS terminals, cards grew from 20.2 million in 2012 to 35.3 restaurants, and are reloadable with a mini- mPOS terminals are also used for in-store million in 2016, at a CAGR of 14.91%. mum of $2.80. payments in Thailand. In 2012, Visa Inter- Prepaid gift cards are gaining popularity In addition, the Thai government is pre- national Thailand launched a new mPOS in Thailand. TMB Bank provides a prepaid paring to introduce the Mangmoom, or Spi- device that works as a card reader, and can fleet gift card that is valid for a year after der, prepaid card in June 2017. The card can be plugged into any smartphone or tablet, purchase, and can be used to pay for fuel at be used to pay various public transport fares; allowing merchants to accept Visa payment participating gas stations. Similarly, Bangkok supported routes include BTS, MRT, Airport cards. Cardholders’ electronic signatures are Bank provides the Shell prepaid card, which Link and MRT Purple Line. Mangmoom required, ensuring that all transactions are can also be used as a gift card, and can be cards can also be used to pay for products well secured. used to buy fuel at Shell gas stations. and services at shops. <

www.cardsinternational.com May 2017 y 15

CI 543 May.indd 15 12/06/2017 15:38:34 COUNTRY SURVEY: THE UK Cards International

UK’s cards grow despite Brexit concerns

The UK has one of Europe’s most well-developed – and competitive – payments markets, with widespread consumer adoption of cashless and contactless transactions. While uncertainties about the country’s post- Brexit future remain, the payments market continues to grow as new operators and solutions are launched he UK has one of Europe’s most New banks such as Atom Bank, Fidor Brexit’s impact on UK payments mature, highly competitive and Bank, Tandem Bank and Starling Bank are The UK’s decision to leave the EU is likely to attractive payment markets. attempting to differentiate themselves in the impact the payments industry over the next T Pay later and debit card penetra- UK market by launching either online- or five years. tion rates per inhabitant stood at 1.0 and 1.7 mobile-only operations. There will be no immediate effect on pay- respectively in 2016. In terms of transaction With cashless transactions surpassing cash ments policy and regulation – current pay- value, the market accounted for 19.7% of in 2014, the emergence of challenger banks ments regulation deriving from the EU will Europe’s total, while in terms of volume it such as these is likely to accelerate the UK’s remain until the UK’s position in terms of EU accounted for 19.2%. shift away from cash. trade and legislation is renegotiated.

n VALUE OF CREDIT TRANSFERS ($BN) IN THE n VALUE OF CHEQUE PAYMENTS ($BN) IN THE n VALUE OF PAYMENT CARDS ($BN) IN THE UK, UK, 2012–2016 UK, 2012–2016 2012–2016

1,200 120,000 1,500

1,000 100,000 1,200

80,000 800 900

60,000 600 600 40,000 400

300 20,000 200

0 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

(estimated) (estimated) (estimated)

Source: ECB, Payments UK, GlobalData Source: ECB, Payments UK, GlobalData Source: ECB, Payments UK, GlobalData

16 y May 2017 www.cardsinternational.com

CI 543 May.indd 16 12/06/2017 15:38:35 Cards International COUNTRY SURVEY: THE UK

The political and economic impacts on n UK DEBIT CARD MARKET SHARES BY ISSUER, n UK DEBIT CARD MARKET SHARES BY SCHEME, GDP and the financial markets are likely 2016 (ESTIMATED) 2016 (ESTIMATED) to spread to consumer lending and retail spending, leading to a decline in revenue in Mastercard Others the payments industry. While from 2017 the 3.0% 1.0% prospects for the industry will depend on the success of EU negotiations, growth in card Lloyds transactions will continue, largely driven by Banking the shift from cash to contactless payments. Group 25.3% Others Government efforts to serve the unbanked 45.1% The UK government is developing programs to better serve the unbanked population. Barclays 15.7% Visa One initiative is an agreement between the 96.0% government and the UK banking industry to RBS 13.9% offer basic bank accounts free of charge. Initiated in January 2016, basic accounts can be obtained by individuals who do not have a bank account, are ineligible for a standard current account, or who cannot use Source: GlobalData Source: GlobalData their existing account due to financial limi- tations. Banks must also provide standard services to account holders. n UK PAY LATER CARD MARKET SHARES BY n UK PAY LATER CARD MARKET SHARES BY ISSUER, 2016 (ESTIMATED) SCHEME, 2016 (ESTIMATED) Increasing adoption of contactless Contactless cards were first issued in the Others UK in 2003, and numbered 102.4 million 5.9% in 2016. In line with their growth, the vol- ume of contactless transactions rose from 25.6m million in 2012 to 1.1 billion in the Barclays first half of 2016. The number of contactless 21.7% card transactions rose by 194.2% annually Visa in August 2016. Others 32.3% 51.1% HSBC A key driver of contactless payments has 13.8% Mastercard been their rising use on public transport 61.8% systems. The UK Cards Association expects Lloyds Banking transaction volumes and values to contin- Group ue to rise, as a result of an increase in the 13.5% contactless spending limit. The emerging mobile and wearable NFC payment markets are anticipated to further support growth. The ease of making low-value payments Source: GlobalData Source: GlobalData using contactless cards has made consum- ers and retailers more open to technology. 2016, Google launched Android Pay with lar following the Brexit vote. To further encourage these payments, the support from Bank of Scotland, First Direct, A contributing factor in the growth of UK Cards Association increased the spend- Halifax, HSBC, Lloyds, M&S Bank, MBNA, e-commerce was an increased focus by retail- ing limit from $31.50 (£20) to $47.90 (£30), Nationwide Building Society, NatWest, RBS, ers on customer-retention tactics, which with effect from September 2015. Santander UK, TSB, and Ulster Bank. included customised emails based on con- Apple launched Apple Pay in July 2015, sumers’ buying patterns, displaying adverts Alternative payments gain prominence and the expected launch of Samsung Pay about products and services on social net- A growing preference for secure electronic later in 2017 will generate competition in working pages based on previous purchases, payments, growth in the young population, the market. and on-site personalisation features offering and deeper smartphone penetration have an enhanced shopping experience. Such ini- seen banks, payment service providers and Growing e-commerce market tiatives have developed customer trust and telecoms companies launch new solutions to The UK is Europe’s leading e-commerce encouraged repeat purchases. gain market share. market. The e-commerce market posted a The e-commerce market is acting as an Sweden-based mobile payment solution CAGR of 7.89% between 2012 and 2016, overall growth driver in the payment cards provider Seamless launched its Seqr mobile increasing in value from $123.9bn in 2012 to market, and in 2016 payment cards account- app in the UK in October 2016, in associa- $167.9bn in 2016, and is anticipated to value ed for 78.5% of the total e-commerce trans- tion with GoCardless. Tesco Bank launched $233.4bn in 2021. action value. Digital and mobile wallets and its PayQwiq m-payment solution in Novem- There was a decrease in the 2016 carrier billing collectively accounted for ber 2016, allowing users to make in-store e-commerce transaction value as a result of 17.3% of the total e-commerce transaction payments by scanning a QR code. In May the pound’s depreciation against the US dol- value in 2016, up from 12.5% in 2012. <

www.cardsinternational.com May 2017 y 17

CI 543 May.indd 17 12/06/2017 15:38:36 COUNTRY SURVEY: ITALY Cards International

Italy’s cards market in need of a boost

Despite being one of Western Europe’s most prominent economies, Italian uptake of card and electronic payments is relatively low, with cash accounting for much of the overall transaction volume. However, government initiatives and growing adoption of contactless could change the picture in the coming years espite being the fourth-largest 82.4% of the country’s total payment trans- The government’s push for electronic pay- economy in Europe in terms of action volume in 2016. ments through a cap on cash transactions, nominal GDP, Italian consumers Frequency of card use stood at 39.8 trans- and the implementation of D have, in general, remained relative- actions per card in 2016, which is low when regulations have led to a gradual rise in ly slow adopters of electronic payments. compared to other developed economies payment card transaction volumes over the This is primarily a result of a strong incli- such as Germany (44.2), Spain (56.5), the past five years. Payment cards accounted for nation towards cash, which is used for the US (77.4), the UK (103.0), Canada (110.6) 8.8% of total payment transaction volume in majority of transactions and accounted for and France (147.5). 2016, up from 5.5% in 2012.

n VALUE OF CREDIT TRANSFERS ($BN) IN ITALY, n VALUE OF CHEQUE PAYMENTS ($BN) IN ITALY, n VALUE OF PAYMENT CARDS ($BN) IN ITALY, 2012–2016 2012–2016 2012–2016

12,000 200 1,000

10,000 800 150 8,000 600 6,000 100

400 4,000 50 200 2,000

0 0 0 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2012 2013 2014 2015 2016

(estimated) (estimated) (estimated)

Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData

18 y May 2017 www.cardsinternational.com

CI 543 May.indd 18 12/06/2017 15:38:37 Cards International COUNTRY SURVEY: ITALY

EU regulations capping interchange fees n ITALIAN DEBIT CARD MARKET SHARES BY n ITALIAN DEBIT CARD MARKET SHARES BY for credit and debit cards at 0.3% and 0.2% ISSUER, 2016 (ESTIMATED) SCHEME, 2016 (ESTIMATED) respectively were implemented in Decem- ber 2014. While merchants benefited from lower transaction costs, banks saw revenues on payment cards fall, affecting their profit- ability. With the new EU interchange fee in Poste Mastercard place, payment card transaction volumes and Italiane 15.4% values are anticipated to grow. 20.4% Others cards maintain dominance 44.0% 16.5% High banking penetration, the debt-averse UniCredit Bancomat nature of Italian consumers, and the com- 18.8% 68.0% bined efforts of banks and government bod- Intesa ies to promote electronic payments have led Sanpaolo to the adoption of debit cards. 16.7% Debit cards accounted for 83.1% of the total payment card transaction value in 2016. The gradual migration of low-value

cash payments to debit cards, and the rising Source: GlobalData Source: GlobalData adoption of contactless technology in debit cards have led to increased use of debit cards n ITALIAN PAY LATER CARD MARKET SHARES BY n ITALIAN PAY LATER CARD MARKET SHARES BY at POS terminals. ISSUER, 2016 (ESTIMATED) SCHEME, 2016 (ESTIMATED) Government financial inclusion initiatives have also supported debit card growth. In Others addition to local residents, the government is 5.2% focusing on bringing the immigrant popula- tion into the formal banking system. Accord- ing to the Italian Banking Association, there Cartasi were 2.5 million current accounts held by 22.7% immigrants as of December 2015. Mastercard Others Intesa 37.1% Growing adoption of contactless 56.1% Visa Sanpaolo 57.7% Contactless cards are gradually gain - 11.9% ing prominence in Italy. The number of contactless cards rose from 3.1 million in 2012 to 20.1 million in 2016, and will post a CAGR of 19.24% between 2017 and 2021 Deutsche to reach 53.2 million by 2021. Bank 9.3% According to Mastercard, the number of contactless POS terminals that accept Mas- Source: GlobalData Source: GlobalData tercard increased by 225% in 2015 com - pared to 2014. Mastercard’s contactless transactions grew by 360% between January ments, including mobile and digital wallets installing mPOS terminals. iZettle, Ingenico, and July 2016 compared to the same peri- and carrier billing, are also gaining promi- Verifone, Payleven and have presences od in 2015. All major banks in Italy offer nence, accounting for 21% in 2016 – up in Italy. contactless cards. from 18.1% in 2012. According to Ingenico, as of March 2015, 45,000 merchants had adopted Ingenico’s Alternative payments gain prominence Growing payment infrastructure mPOS solution, accounting for 1m Italian e-commerce is one of the fastest-grow- The number of POS terminals Italian transactions. iZettle expanded ing markets in Western Europe. In terms of grew from 1.5 million in 2012 e-commerce is its mobile payment service into transaction value, e-commerce registered an to 2.1 million in 2016, and one of the fastest- Italy by launching a mobile annual growth of 22.3% to reach $22.4bn is anticipated to register a growing markets card reader, iZettle Lite, and (€20bn) in 2016. CAGR of 5.39% over the wireless Consumers in Italy mostly use payment next five years, to reach 2.8 in Western Europe, acceptance device, iZettle cards to make online purchases, and pay- million by 2021. growing by 22.3% to Pro Contactless, in Novem- ment cards accounted for 74% of the total With the gradual increase reach $22.4bn in ber 2015. e-commerce transaction value in 2016. in the number of POS terminal In February 2016, VeriFone The uptake of alternative payments among installations at retail outlets, the 2016. launched the VeriFone e265 Italian consumers is steadily gaining traction, potential for card-based payments is mPOS terminal, which is compatible as a result of the increased availability of expected to grow further. with any smartphone. As of December 2015, solutions such as PayPal, MySi, Paysafecard, Mobile POS (mPOS) is gradually gaining Mercury Payment Services had installed over JiffyPay and MasterPass. Emerging pay - traction in Italy, with retailers increasingly 53,000 mPOS terminals in Italy. <

www.cardsinternational.com May 2017 y 19

CI 543 May.indd 19 12/06/2017 15:38:38 GUEST COMMENT: PPRO GROUP Cards International

From magic beans to e-wallets – a short history of alternative payments From Jack trading a cow for some magic beans to tapping a rectangular piece of plastic against a reader, how we have paid for goods has taken many unexpected turns over the years. We’ve swapped, signed, scanned and chip-and-PINned, writes Ralf Ohlhausen, business development director at PPRO Group

he UK has a somewhat unique pay- online retail sites due to long campaign dura- comes to payments in the UK. This has led to ment culture in relation to the rest tions and daily discounting deals spreading an increasing amount of alternative payment of Europe. Here, cash is no longer the spend over a longer period than previous companies chancing their arms too. T king – indeed, numerous experts years. This has led some commentators to Despite the high penetration of debit and have predicted the use of cash may be predict that some £7bn could be spent online credit cards here in the UK, prepaid cards phased out in as little as 20 years. during the week of Black Friday this year. and alternative payment methods (APMs) While this is still open to conjecture, what are beginning to gain the nation’s attention. is clear is that in the UK, payments generally Paper houses These include the Pay by Bank app, a bank orbit the plastic in our wallet. Once a payments stalwart, use of transfer payment method support- paper cheques in the UK has ed by most UK banks, which Flexible friend declined over the past decade has attracted unprecedented Paying with plastic was first popularised in or so. Most recent statis- attention. UK culture by the famous ‘flexible friend’ TV tics from the Cheque and Through Pay by Bank, adverts in the 1980s. This was a paradigm Credit Clearing Com - consumers can track shift that has yet to occur in many European pany show that £455bn spending in real time via countries. From Aberdeen to Eastbourne, by of cheque payments were the mobile app and view far the most common payment method in the cleared in Britain in 2015. spending by category, UK is with a credit or debit card. In compari- The interesting thing is thus linking perfectly son, the likes of e-wallets and prepaid cards that with an average value with the debit card-credit have yet to take off in the UK. per item of £1,125, it shows account ideal. Although overall bank account penetra- that cheques continue to play Pay by Bank may be the first tion is an almost-completely-saturated 99%, an important role in the high-value APM to take off in the UK, but it certain groups – for instance, recent immi- payments landscape, despite all the alterna- will be far from the last. Indeed, as APM grants and very low earners – are still vulner- tive payments now available. options become cheaper and faster from a able to exclusion. With cheques in decline, the Royal Mint merchant’s standpoint, we predict that we It is not just current accounts that are undertook its last flip of the coin and intro- will see a decrease in traditional card pay- popular, due to perhaps overly lackadaisical duced an updated £1 coin into circulation at ments over the coming years. entry requirements, credit card penetration the end of March. The new £1 coin has the For example, in mainland Europe, APMs (at 62%) in the UK is exceptionally high same shape as the old 12-sided three pence are more popular than card payments, and in compared to the continent. piece, or ‘threepenny bit’. Its makers claim it some instances – such as iDEAL in the Neth- will be the most secure coin in the world. The erlands – have the majority market share in A connected consumer £1 coin it replaces has been in circulation for the payment split. It is likely this trend will The mobile phone is increasingly at the cen- over 30 years and is deemed to be vulnerable have a knock-on effect across the rest of the tre of our world in the UK. At 74% smart- to ever-more-sophisticated counterfeiters. world, particularly here in the UK, and we phone penetration, the UK is one of the most can expect to see APMs dominate 55% of mobile-orientated online shopping markets Looking to the future worldwide online transactions. in Europe. Coupled with this, 91.6% of the Recent research shows that £288m was spent Open Banking is a standard brought population has internet access at home. through mobile contactless payments in the into the UK to encourage financial institu- Combined, this has led to an online shop- UK in 2016, as 38m transactions were car- tions to share data openly with third parties ping culture with sales figures seeing a 10% ried out across the year. This was a 247% using Application Programme Interfaces to year-on-year growth and continuing to rise. increase on the year before, with the most improve the way consumers transact, save, The UK is, by far, Western Europe’s largest notable lift being from payments made via borrow, lend and invest their hard-earned e-commerce market, representing 30% of all Android Pay. money. Such insight can then be harnessed the region’s online sales. Now, up to 95% ‘Meal deal’ hotspots for workers buying to build applications and resources for con- of the UK population has shopped online at lunch – such as supermarkets and grocery sumers to benefit from improved efficiency some point. stores – accounted for 54% of all mobile and innovation in the sector. Once an US-only reserve, total spend contactless payments processed. Pubs, bars Such readily available data will further online on Black Friday last year in the UK and restaurants made up a further 20%. encourage new players to develop at a faster reached some £1.23bn ($1.59bn), a 12.2% The popularity of mobile and contactless pace within an already competitive market, increase on 2015. In fact, for the entire week, payments has demonstrated, more than pushing the UK ever closer towards becom- an estimated £6.45bn was spent on UK anything, the acceptance of change when it ing a cashless society. <

20 y May 2017 www.cardsinternational.com

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