www.electronicpaymentsinternational.com Issue 382 / april 2019

STORMED OUT

THE BITCOIN BUBBLE BURSTS, BUT IS IT THE END FOR CRYPTO? FEATURE INSIGHT COUNTRY SURVEYS

After a slick launch, is Apple Payment authentication Analysis and payments Card good enough to gain using biometric technology market data for Brazil, serious market attention? is set to explode worldwide Mexico and Indonesia

EPI April 2019 382.indd 1 01/05/2019 16:02:32 contents this month

COVER STORY NEWS 14 05 / EDITOR’S LETTER 06 / DIGEST • Raisin savings platform collaborates with Commerzbank • UK consumer appetite for digital banking surges • NatWest launches biometric business payment approval • PixelPin raises £1.5m in funding round • Nordic Capital acquires Signicat • EvoNexus fintech incubator launches in collaboration with RBC • Cash vs card: which payment method wins in the UK in 2019? • Online spending soars as kids give up the high street CRYPTOCURRENCY 06

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2 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 2 01/05/2019 16:02:52 contents april 2019

COUNTRY SNAPSHOTS 19 / BRAZIL 10 With government and bank initiatives, and growing consumer awareness and confidence in digital payments, Brazilian consumers are gradually shifting away from cash towards electronic methods of payment 20 / MEXICO The Mexican banking and payments system operates a very different model from its peers, with banks and financial institutions frequently partnering with convenience stores such as Oxxo and 7-Eleven to provide services 21 / INDONESIA Cash remains the predominant payment instrument in Indonesia, mainly due to the high unbanked population, inadequate banking infrastructure, limited public awareness and low merchant acceptance 21

FEATURES TECHNOLOGY INDUSTRY INSIGHT 10 / APPLE CARD 12 / HPS 13 / STRIPE Apple has finally announced the release of The payments industry is undergoing Europe is bracing itself for a big shake-up in the Apple Card. However, with plenty of unprecedented change. Briony Richter speaks how we pay for things online. This is going to credit cards in the market, is it too late to gain to Sebastien Slim, Europe and Americas have significant consequences for businesses market share? And is it innovative enough to director at HPS, about the business’s strategy across the region, writes Iain McDougall, UK get any attention? Patrick Brusnahan writes and how it aims to stay ahead of the curve and Ireland country manager at Stripe 14 / CRYPTOCURRENCY 18 / IDEX BIOMETRICS The shrinking of digital assets continues, with 22 The PIN will soon be a thing of the past. cryptocurrencies losing up to 50% of their Thanks to advances in biometric technology, value in the past year. While volatility is not the ability to authenticate a payment with a unusual, the market is far from the highs it touch of the finger is set to explode, writes once experienced. Briony Richter reports Idex Biometrics CEO Stan Swearingen 16 / SWIFT 22 / MARQETA Following a cyberattack on Bangladesh Bank Terms like fintech, digital banking and mobile in 2016, SWIFT launched its Customer payments are so familiar to all of us now Security Programme to drive collaboration that it is difficult to imagine a time when the against cyberthreats. Three years on, how has banking sector was seen as staid and a little it fared? Patrick Brusnahan writes boring, writes Ian Johnson

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0519_Timetric_MF_Ad.inddMF January 170.indd 4 1 11/12/201807/12/2018 16:37:33 10:10 editor’s letter

Mastercard Q1 2019: a blindingly good quarter

Douglas Blakey, Editor

ith growing payment and transaction Then there is the M&A activity. Mastercard is investing volumes, expanding margins, consensus- £300m ($392m) as a cornerstone investor in Network W beating revenues and tight cost International. Another deal is the £50m invested in African management, it has been a blinding first quarter for online retailer Jumia, and it has taken a stake in startup Mastercard. bill.com. And you can add in further geographic expansion into But it is the acquisition of Vyze that perhaps merits under-penetrated markets, and the accelerating rise of P2P. most attention in Mastercard’s first-quarter activity. This is Just on margins, Mastercard’s operating margins a platform that connects merchants with multiple lenders, improved by a healthy 266 basis points. This all helped opening up a wide range of financing options, including Mastercard to report revenues up by 13% year on year. instalments to consumers online and in store. As a result, Earnings per share rose by 24% year on year. Some 24 billion transactions were processed, up 18% it complements MasterCard’s existing card and ACH base year on year. In the US, the rise was 8.4%; in Europe, it solutions. Instalment lending through a bank is in no way a was a whopping 29%. Operating income rose by 20%, and novelty, but the idea that a consumer is enabled to opt in net income was up 21%. Switch transaction growth was at POS to an instalment loan is new for Mastercard. 20%, up three percentage points. In cross-border, volumes Perfect lead sponsor rose by 17%. Mastercard subsidiary Vocalink was the perfect lead Ordinarily, quarterly results and investor presentations sponsor for sister title Retail Banker International’s 34th flag up a number of negative metrics, no matter how annual global conference this week in London. positive the profit growth. Not so with the Mastercard results: it is hard to play devil’s advocate and pick holes in Jim Wadsworth, who is leading the development of the numbers. Mastercard’s Open Banking offering, delivered a perfectly judged keynote. He was correct to say that Open Banking Mastercard share price: a record high is potentially the most important thing to hit our industry The market agrees. The Mastercard share price has risen in a decade. But he was also spot on with his note of to record levels. caution – specifically, that despite early attempts at Mastercard’s continued share price growth has also accounts aggregation and payment initiation, many issues helped the writer save a little face with an ex-director could get messy if not addressed. of our owner. At the start of 2017, he asked me to draw Fragmentation of API standards means service providers on all my teens of years covering cards, banking and trying to create a regional solution will have to invest payments to tip up one share. Having failed to duck the question, I requested two resources to work across these different standards. APIs tips and opted for Barclays and ABN Amro. A year later, I also evolve over time, requiring resources and effort for was cross-examined on what went wrong: Barclays was FIs and third parties to stay current. Then there is what to down 8% in 2017; it cut little ice that ABN Amro was up a do when things go wrong: it is unclear, for example, how healthy 22%. disputes between parties should be resolved. Nonetheless, I was asked for a recommendation for Mastercard is currently working on a number of 2018, and Mastercard seemed the safe selection. By the solutions to address these problems. These include end of 2018, I was pleased to write that its share price a connectivity proposition to enable third parties to was ahead by 38%. For the year to date, the share price is integrate with banks through a single Mastercard API. up by 34%. In addition there is a dispute-resolution service. From In the past four years, Mastercard’s share price has the bank side, Mastercard will also leverage Vocalink’s trebled. Not many banks come close to such figures. analytics services to support fraud detection. A busy quarter for M&A Here, Mastercard can really push its Financial Crime Beyond the crude short-term metric of share price, in Products suite. It is perhaps a perfect example of how just the past few weeks Mastercard has agreed a number AI transaction monitoring can detect money laundering. of deals. Specifically, it is working with Token to power David Divitt, financial crime VP at Vocalink, summed it up: the connectivity layer of its Open Banking Hub. It is also “It is a great example of an AI use case that enables FIs to partnering with Konsentus for third-party identity and reach a scale of action and breadth of insight that cannot regulatory-checking solutions for Open Banking. be matched by traditional methods.” <

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

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EPI April 2019 382.indd 5 01/05/2019 16:03:03 News | Digest

news digest Raisin savings platform collaborates with Commerzbank WeltSparen, the savings platform of European inexpensive investment products. Initially, the fintech marketplace Raisin, is partnering with partnership will feature fixed-term deposits Commerzbank to reach the bank’s corporate from German credit institutions including clients in Germany. Grenke Bank, NIBC Bank and GEFA Bank. The partnership will allow Commerzbank Commerzbank has selected all co-oportating to offer corporate clients access to special banks from over 70 current Raisin bank conditions on fixed-term deposits. As well partners. The fixed-term deposits offered by as Commerzbank’s own products, corporate Commerzbank will be managed centrally via clients can now benefit from three-month to WeltSparen by the respective partner banks. four-year term deposit offers from German Commerzbank will also offer corporate clients partner banks. an additional digital solution for their deposits. The partnership will initially focus on As the collaboration continues, the bank will limited-liability corporations, and will continue to review regular partnership options. gradually expand to include other entities. Founded in 2012, Raisin offers savings Chief client officer at Raisin, Dr Daniel solutions for European consumers. Its Berndt, said: “Just as interest rates have fallen marketplace delivers fee-free access to for retail savings products, rates on corporate guaranteed deposit products from across deposits have also decreased, and in some Europe. Since its launch, Raisin has brokered cases are yielding negative returns. With this €12bn ($13.5bn) for over 170,000 customers collaboration, Commerzbank’s corporate in 31 European countries. clients will be able to invest beyond the bank, This partnership follows ClearScore’s securing rates well above the current market announcement of its collaboration with Raisin level in Germany.” on 12 April 2019, giving over eight million WeltSparen offers access to daily and UK ClearScore users access to the Raisin UK time deposits from across Europe, as well as marketplace. < uk consumer Appetite for digital banking surges It also revealed that 71% of all banking among the big established banks is over. interactions are now digital or online, It’s particularly crucial that mobile is with the majority of these completed on a recognised as the most important part smartphone, tablet or wearable device, at of banks’ customer-facing offering, to 47%, up from 41% in 2018. This compares drive engagement with consumers of all to only 6% of interactions which take place ages through a secure and frictionless in a branch. experience.” Executive vice-president of banking and Other highlights of the PACE survey payments at FIS, Raja Gopalakrishnan, included: said: “It’s now second nature for many • 59% of banked UK consumers have Digital banking solutions have become consumers, who expect instant and used mobile apps to access financial more popular among UK consumers over immediate banking access, to take services; the past year, according to research from advantage of user-friendly apps to manage • Demand for mobile banking is strongest FIS, which revealed that the majority of their finances. Many banks of all types among young millennials, with 40% UK banking customer interactions are now are doing a fantastic job when it comes to choosing a primary bank with a mobile digital. customer experience, and consumers are banking app; The fifth annual PACE study surveyed experimenting and getting more familiar • More than a third (35%) of consumers UK consumers on whether banking with what is on offer. want banks to invest in apps in order providers are meeting their needs, and “However, as new products come onto to replace plastic payment cards in the identified an increasing gap in customer the market following the launch of the coming decade, and satisfaction in favour of direct banks UK’s Open Banking initiative last year, • Almost half (47%) want banks to invest compared to the more established global awareness of the benefits has increased, in digital security technology such as institutions. and the time for and complacency facial recognition. <

6 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 6 01/05/2019 16:03:07 News | Digest

NatWest launches biometric business payment approval NatWest’s biometric payment approval solution is now available for business and commercial banking customers. The launch is a first for the UK, and allows business to make payments of any size through the Bankline Mobile app using Face ID or Touch ID, without the need for a card reader. Businesses can also authorise numerous users to set up payments, after which business owners can approve payments through the app. Customers can make payments once they have completed an enhanced security process. Once a device is registered, customers set up and approve a transaction using secure biometric authentication. Once the user has chosen either Face ID or Touch ID , they enter a six-digit Bankline Mobile Keycode to complete the process. The bank is continuing to invest in providing solutions for businesses. In March 2019, NatWest and Tieto partnered seen as outdated vulnerable to hacking. to offer biometric payments of any size, to launch a new virtual account platform The feature complies fully with PSD2 through our Bankline Mobile app. for SMEs and corporate customers. Using regulations that govern Secure Customer “By offering unprecedented levels the new platform, customers can digitally Authentication, which are due to come of security via three levels of unique self-serve all aspects of their clients’ into effect later this year. authentication, as well as the ability to account-management activity on a single James Holian, COO of commercial and make payments of any size, we feel this centralised platform. private banking at NatWest, said: “We is another important innovation that will Biometric authentication is rapidly know that ease, speed and security are make it easier for our customers to get on becoming a popular means of identity important to our customers, and that’s with doing what they do best: running their validation, with passwords increasingly why we’re excited to be the first UK bank business.” < PixelPin raises £1.5m in funding round PixelPin has announced that it has closed a or PIN, users choose a picture and then select £1.5m ($1.9m) Pre-Series A funding round. four specific points within that picture in As passwords become increasingly sequence to log into online accounts. susceptible to fraud, consumers are switching On average, it takes a user just one minute to more robust solutions such as biometrics. to register and 10 seconds to log in. According UK fintech PixelPin uses image-based to PixelPin, at 92%, the login success rate is authentication to replace passwords. three times higher than the 30% achieved for The PixelPin funding round was led by passwords. SBI Investment. The SBI Holdings subsidiary PixelPin CEO and co-founder Geoff invested £1m from the SBI AI and Blockchain Anderson said: “This latest round of Fund. An additional £500,000 was received investment is a fantastic step forward for from existing angel investors, bringing the PixelPin, and illustrates the level of confidence total to £1.5m. the global investor community has in PixelPin The additional capital will be used to and the UK fintech industry. target new customers in the finance and “We’ve been extremely diligent in our retail sectors, and support PixelPin’s product search for the right investor partners, and are development. It will also be used to establish PixelPin’s cloud-based platform, hosted delighted that SBI Group has chosen to work new offices in Tokyo, which will act as a base on Microsoft Azure, replaces passwords and with us as we look to expand our reach into for the company’s expansion into Japan and PINs with a picture, making it a highly secure Japan and the wider Asian market, where we’re the wider Asian market. PixelPin currently has and user-friendly way of logging into online sure the group’s knowledge and experience will offices in London and Cheltenham. accounts. Instead of remembering a password be a huge asset.” <

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EPI April 2019 382.indd 7 01/05/2019 16:03:12 News | Digest

Nordic Capital acquires Signicat far, Nordic has made 14 technology and payment platform investments, including Bambora, Point and Trustly. The parties in the latest transaction have agreed to not disclose any financial details. Partner at the advisor to the Nordic Capital Funds, Fredrik Näslund, commented: “Born from the most advanced digital identity market in the world, Signicat is a recognised leader in one of the most exciting and fast-growing technology areas globally, acting as a key Nordic Capital has acquired digital identity prominent and experienced investors in enabler for the digital economy. organisation Signicat, in a move that the fintech sector with a long and proven “The company has shown consistent Nordic hopes will strengthen its position track record of growing businesses, high growth since inception. This is driven in the northern European technology and Nordic Capital is the perfect partner to both by a rapidly increasing number of payments sector. support Signicat’s accelerated international customers and strong volume growth Nordic will, with Signicat shareholder expansion strategy.” among existing customers. Viking Venture, accelerate Signicat’s Nordseth added: “We live in a digital “Signicat’s highly experienced international expansion and strengthen society where interactions between management team is well positioned its position and unique product offering. consumers and institutions are to capitalise on enormous growth Signicat currently works with providers predominantly online and mobile-first. opportunities across geographies, including DNB, Radobank and Santander. Trust is at a premium, and digital identity is customer verticals and products, as the Founded in 2007, Signicat focuses the solution. digital transformation of the economy on creating innovative digital identity “Over the last 12 years, Signicat has built continues.” solutions that aim to reduce fraud risk a digital identity platform with all the tools He continued: “Drawing on Nordic while offering an intuitive user experience. any institution requires to establish mutual Capital’s significant experience across Signicat solutions also enable companies trust with its customers. With the ongoing enterprise software, payment technology, to offer secure and user-friendly online global digital transformation, we are ideally financial services, and from scaling authentication, identification verification placed to address this burgeoning market businesses globally, we are enthusiastic and electronic signature solutions. opportunity.” about the opportunity to help Signicat to Signicat CEO and co-founder Gunnar The acquisition will be Nordic’s ninth further strengthen its market position and Nordseth commented: “As one of the most investment through its latest fund. So customer offering.” < EvoNexus fintech incubator launches in collaboration with RBC The first EvoNexus fintech incubator has underlying technologies, such as 5G, further As founding sponsors of the incubator, launched in Southern California. enabling mobility and digitisation of financial RBC and Franklin Templeton have both It is the region’s first fintech incubator to be transactions. committed to long-term partnerships with supported by founding sponsors Royal Bank “The next generation of our fintech EvoNexus. of Canada (RBC) and Franklin Templeton, portfolio companies will be disruptive and AI and machine learning will continue to and will serve as the main Southern beneficial for developing infrastructure for significantly impact both cost reduction and Californian centre for fintech innovation. new banking and investment models that deep data capture, which will enable more The start-ups will focus their strategies will rely on unique technology and data. informed business decisions. on technology that will positively impact Leveraging EvoNexus’s deep corporate Eddy Ortiz, vice-president of solution financial organisations and customers. alliances to open the region’s first purpose- acceleration and innovation at RBC, Technologies that the EvoNexus fintech built fintech incubator is important for commented: “Fintech is an important incubator will look into include AI, machine reshaping and building sustainability in the sector for us at RBC. Leveraging the time- learning, payment technology, mobile SoCal technology innovation ecosystem.” tested incubation platform that EvoNexus payments, capital markets, blockchain and EvoNexus said it will seek out and launch has perfected since 2010 will allow us to insurtech. high-quality start-ups in its emerging fintech complement our commitment to invest in the EvoNexus CEO and co-founder Rory company portfolio. The incubator will also best emerging technologies. Moore commented: “Together with RBC take advantage of the region’s business schools “We operate several RBC Innovation and Franklin Templeton, our vision is to and resources, leverage EvoNexus’s domain Labs around the globe, and this partnership establish SoCal’s premier fintech incubator as expertise and operational experience, and also augments what we’re doing to incubate digital the driving force behind innovations between allow strategic partners to prepare portfolio capabilities and drive innovation that creates financial services and the next wave of companies to go to market. value for our clients.” <

8 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 8 01/05/2019 16:03:14 News | Digest

Cash vs card: which payment method wins in the UK in 2019? In 2019, the battle of cash versus card in to UK Finance, there were 118.9 million payments rose by 237% in the first six the UK continues. So, with the fall of the contactless cards in circulation in the months of the new limit’s introduction. high street lurking in the background, as country as of December 2017, up from Contactless cards are also accepted on well as e-commerce going from stride to 58.7 million in 2014. many forms of public transport, especially stride, how are UK consumers choosing to The number of contactless payments in London, which further encourages their make their payments? made in the UK rose by 97% during 2017 adoption and acceptance. In the UK, the overall value of card to 5.6 billion, consisting of 4.9 billion debit Use of cash is now largely limited to transactions in 2018 reached $1trn. card payments and 0.7 billion credit card low-value payments. Furthermore, the According to GlobalData, this came with an payments. share of cash transactions within the average spend per card of nearly $6,000. In September 2018, Mastercard revealed overall national transaction volume fell Card penetration is also high, with 2.5 that almost one in two in-store card between 2014 and 2018 as card payments cards per inhabitant; this comes as little transactions in the UK are contactless, took over. Cash accounted for 28.5% of surprise, as 99.5% of the UK population is with the technology representing 46% of the overall transaction volume in the UK banked. all transactions every month. in 2018, while cards were responsible for Card payments in the UK have been The UK raised its contactless payment 48.9%. heavily boosted by the emergence of limit from £20 to £30 in September 2015, With increasing use of digital payment contactless, and acceptance of NFC- with payments giant Visa estimating technology – especially by younger enabled and contactless payments that this move boosted consumer use; generations – use of cash in the UK is across the UK is widespread. According its analysis revealed that contactless forecast to decline further. < online spending soars as kids give up the high street Online spending now accounts for almost 90% of young people’s transactions as children increasingly give up shopping on the high street. E-commerce now accounts for 89% of all 8-18-year-olds’ transactions, up by 17 percentage points in a year, according to figures released by nimbl, a prepaid and smartphone app designed exclusively for this age group. Online transactions have grown significantly, despite 50% of children claiming to prefer the experience of high street shopping. Almost 60% say it is more fun than online purchasing, with 50% seeing it as a social event. Ultimately, however, it is convenience (47%) and variety (39%) that mean kids’ online spending is soaring. to 27% of children. Only 3% of parents influencers in purchasing decisions and nimbl says 67% of children and 66% of would remain loyal to a brand because brand selection represents a seismic shift in parents consider themselves to be brand of an influencer; behaviour for retailers. loyal. As an indication of the power of • Parents support local. Parents are “Convenience and price also factor social media, 29% of children stay loyal to more likely to shop in-store to support highly in the influencing factors. In spite brands because of influencers, while 47% local shops and businesses (38%) than of children and teens preferring the social base their loyalty on brand kudos among children (6%), and experience high street shopping affords, friends. For parents, however, loyalty is • Children are more forgiving. Only 3% of convenience of online is winning out.” based less on status and more on practical children would swap brands after a poor Wilson continued: “Today’s young concerns, with 68% citing price and 61% experience, compared to 14% of adults. spenders are as au fait spending online citing quality as the main determinants of as they are in shops. They are growing up their behaviour. nimbl founder Clint Wilson said: in a cashless society where money is an Other findings of the report include: “Generation Z has significant buying increasingly abstract concept. • Parents are not influenced by their power, and is making a significant and “It is therefore essential that we instil in friends. Just 2% of parents would be rapidly growing contribution to the them financial literacy and good money- prepared to swap brands following a consumer economy. This is a switched-on management skills to best equip them for friend’s recommendation, compared demographic whose reliance on peers and real-world spending.” <

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EPI April 2019 382.indd 9 01/05/2019 16:03:17 feature | apple card

is apple card really the greatest innovation in 50 years?

Technology behemoth Apple has finally announced the release of the long-rumoured Apple Card. However, with plenty of credit cards in the market, is it too late to gain decent market share? And is it even innovative enough to get any attention? Patrick Brusnahan writes

he Apple Card, powered by “So moving into financial services can only around a card product. It looks to me that Goldman Sachs and Mastercard, is be seen as a natural next step – over 0.5 billion Apple’s view is that it is the user experience Tboth a virtual and physical card. people on the planet have an Apple account, around the relationship with credit that it is The physical card offers 1% cashback; on which means they already have a colossal looking to fix. What does this mean if you are a smartphone it offers 2%; when used to ready-made marketing base to provide these an existing lender of credit – i.e. a bank? In purchase Apple products, the consumer gains new services to.” short, I think it should make them sit up!” 3% cashback. Motie Bring, general manager – EMEA, In addition, there are no late fees or penalty global enterprise e-commerce at Worldpay, rates. Cards can be frozen in case of theft comments: “Apple has always been at the or fraud, and replacements of the physical forefront of driving change in consumer titanium card are free. behaviour, offering new services to cater to shifting tastes, from how we consume music EXCITEMENT moving into and content to how we pay. While digital wallets may have been around for years, the Apple CEO Tim Cook believes the Apple financial services introduction of the Apple Card brings a new Card will be “the most significant change in evolution in their development. the credit card experience in 50 years”. can only be seen as “Recent Worldpay research found that He certainly is not the only person excited whilst over 60% of consumers believe by this product. Michael Rolph, CEO of Yoyo a natural next step smartphones will replace physical wallets Wallet, believes it could shake up the industry. within the next five years, barriers to adoption He says: “For a tech company of its mammoth still lie in consumer perceptions around size, Apple has been very quiet in this space security and tangible benefits. The additional until now, having launched Apple Pay more Rolph continues: “Also remember: Apple features and functionality offered by Apple than four years ago. So the first question to doesn’t do product in the way that most other Card could address these concerns.” ask is: why now? companies historically have done product. Bring continues: “By seamlessly linking “Well, first and foremost, if you are Apple, Apple does experiences that happen to have digital payments with rewards and loyalty, the you’ll recognise that the hardware you’ve been product features. tech giant is answering consumer demand for providing over the years has effectively run “While we’ve yet to see the Apple Card in more universal and integrated ways to spend to the end of its growth cycle. Nowadays, real action, Apple’s demo revealed, for the first and save, with analytics and insights through everyone has smartphones and laptops. time, a beautiful user-designed experience optimised data to help with budgeting.

10 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 10 01/05/2019 16:03:25 feature | apple card

Apple CEO Tim Cook Apple Pay allows contactless payments by phone “The use of biometrics should offer greater there are a multitude of companies – Radiius and a tad too late; however, it’s a step in the peace of mind when it comes to security. By and paywithbee.com, which survived Coin right direction. keeping Apple Card and Pay on the phone, and similar companies come to mind – that “Like Curve, we believe Apple will try and the company is ticking off what shoppers can do the same for the other banks with build an OS for money; a platform that will value most: ease of payments, security of which Apple does not have a tie-up with.” move banking to the cloud. What prevented details, and usability of digital wallets.” Krishnan adds: “The announcement – of Apple from being able to move banking as more details are awaited – seems to give the we know it to the cloud was the relatively low APPLE INNOVATION Apple Card a distinct advantage, as other frequency of use of Apple Pay.”

Apple has obviously made entries into the payments sector before with its Apple Pay It was fascinating to see the impact that product, which allows consumers to make contactless payments with their Apple Apple Card and Marcus can have on the smartphone. According to GlobalData, it had 253 consumer community, especially in the us million users as of August 2018. In addition, 20 million merchants globally – including 4.5 million in the US – accept the solution. As a users give away part of their fee to be on the Bialick continues: “The Apple Card, result, it had recorded more than one billion Apple Pay Wallet. although nothing special, accompanied with transactions by the end of the third quarter of “I suspect it is not as free as the brilliant the strength of the Apple brand, allows Apple 2018. Nevertheless, the US saw 114 billion visual suggests, but hopefully the consumers to increase frequency of use, and with it, take total card transactions in 2018; Apple Pay win. Either way you have to commend the it a step closer to joining the new category clearly still has a lot of catching up to do. quality of the launch and the fact that the Curve is building – an OS for money.” So, is the Apple Card actually that good Apple stock price does not possibly consider Lu Zurawski, payments practice lead at a product? Its interest rates are predicted the fees from the card business.” ACI Worldwide, adds: “The Apple Card to be between 13% and 24%, which is not may provide genuine excitement for those particularly low in the US where many ENJOYING THE NEW? of us who see the need to move away from banks offer credit cards with 14% interest. traditional cards, toward more secure In addition, credit unions have an average Apple products, even if they are not totally mechanisms, with in-built security to support interest rate of 11.71% according to the innovative, do succeed in getting the stronger authentication, privacy and more National Credit Union Administration. Price consumer’s attention. The Apple brand is personalised consumer experiences – and is not, it would seem, a key differentiator for too strong for them to launch with merely a the switch from plastic to titanium is a nice the Apple Card. whimper. According to Interbrand, it was the touch. Sankar Krishnan, executive vice-president world’s most valuable brand in 2018, worth “The steer from card to app/mobile is of banking at Capgemini, comments: “It $214bn, a 16% rise from the previous year. where the real action will be found, and as was fascinating to see the impact that Apple Curve founder and CEO Shachar Bialick consumers continue to familiarise themselves Card and Marcus can have on the consumer says: “Apple’s introduction of the Apple with mobile-initiated payments options, community, especially in the US. As you Card was long anticipated. It has copied the it will not be a surprise to see alternative recover from the brilliance of the strategy, the challenger banks’ playbook, with no fees, and payment methods emerging that keep mind pauses to take note of the following: slick card design. It may be too small a step consumers, banks and retailers happy.” <

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EPI April 2019 382.indd 11 01/05/2019 16:03:34 technology | hps

hps: powering payments for the future

The payments industry is undergoing unprecedented change. Briony Richter speaks to Sebastien Slim, Europe and Americas director at HPS, about the business’ strategy and how it aims to stay ahead of the curve

ounded in 1995, HPS aims to deliver He continues: “Two years ago we spoke innovative and future-thinking a lot about the digitisation of banks; that’s Fsolutions that will transform the with us now, so it’s about taking it to the next entire payments value chain. As of today, level. This year we discussed a lot about the HPS works with over 400 clients in 90 capabilities of APIs; now we have to look at countries. how APIs can power that digitisation. We By using HPS’s software, organisations need to partner and work together across can rapidly improve their infrastructure banks and fintechs.” and product development, making it easier Regulatory changes have fully kicked off in to scale and deliver to the market with Europe with PSD2 and GDPR. That trend maximum efficiency. HPS currently provides Sebastien Slim, HPS of change is now spreading around the world, payment solutions to businesses including puts substantial levels of energy and passion with more countries bringing about their own acquirers, card processors, issuers, retailers and into its client relationships. unique regulations to drive transparency and financial organisations. innovation. Facilitating innovation in the payments CHANGE AND EVOLUTION Slim notes that fintechs and banks have sphere is a constant challenge, and keeping very different needs in terms of scalability. up with regulatory changes and consumer To keep up with the pace of change, HPS Fintechs need a secure and integrated demands can put significant strains on constantly evolves its software and expands its platform from which to expand, while banks organisations; this is where HPS steps in. reach to clients all over the globe. often have legacy systems that hold them Speaking to EPI, Sebastien Slim discusses In February 2019, Société Générale back. HPS’s role, therefore, is to deliver more his role and what HPS delivers. “I joined selected HPS to transform the bank’s forward-thinking technology that allows HPS about eight years ago, and currently payment-processing activities for 10 African banks to prepare for the changes they face. I work across two areas. On one hand I’m subsidiaries. It will use HPS’s PowerCARD Looking to the future, Slim believes that head of marketing and innovation, but since suite in a software-as-a-service model, HPS’s key skill is its ability to listen to clients July last year I took on another position: I’m covering the entire payment value chain and and understand their needs. now responsible for Europe and the Americas all international and domestic schemes. This “We are going to continue to evolve in terms of sales and delivery,” he explains. is just one of many examples of banks and and change as demands change,” he “At HPS, we provide software that is pretty financial organisations migrating over to concludes. “We will optimise our delivery unique. We have been developing that for 25 benefit from a single integrated platform that and offer transparent access to our software. years.” can streamline the overall payment process. Tokenisation is definitely a priority, but we The software that HPS is continually At this year’s PowerCARD Users meeting, are also looking at AI and machine learning, developing and improving was built solely by spokespeople including Slim spoke about and have initiatives on blockchain.” the company. Slim notes that not only does what HPS will be focusing on, and how it For over 20 years, HPS has moved with the this make its offering more personalised to its will deliver to its clients. “We put a strong times and evolved its software to harmonise clients, but it also builds brand trust. emphasis on customer relationships for with the current payments landscape. The company’s founders are still massively today and tomorrow,” Slim highlights. “It’s Working with both partners and clients, involved in the development process, and important that we achieve that intimacy with HPS’s priority is to continue to enable Slim is keen to highlight that the HPS team our customers to build trust.” innovation in payments. <

12 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 12 01/05/2019 16:03:38 industry insight | stripe

experience, so the most relevant SCA- compliant payment method is available. Secondly, adapt to the variations within thought gdpr was complex? SCA. It will not apply to every online transaction: there are exemptions for recurring identical payments and purchases under €30, for example. Customers can also white-list now is the time to businesses with their issuing bank, so they do not need to authenticate themselves for any future purchases. This is particularly important for businesses prepare for sca! built on repeat custom. Unfortunately, exemptions ultimately depend on the customer’s bank. For a business operating Europe is bracing itself for a big shake-up in how in multiple European markets, managing exemptions themselves means working we pay for things online, and the changes are going directly with local banks – and there are more to have significant consequences for businesses than 6,000 banks in Europe. across the region, writes Iain McDougall, UK and Businesses will have to decide whether this is the best course of action, or whether they Ireland country manager at Stripe want to find a strategic partner to help them deal with SCA.

ust as GDPR affected the way millions What should internet businesses do How could this shape internet of organisations handle personal data, to prepare? commerce in Europe? JStrong Customer Authentication (SCA) Get prepared early. With just 25% of Where there is risk, there is opportunity. will have profound implications for how European merchants aware of SCA, there may Seamless checkout experiences and intelligent businesses accept online transactions – and be a last-minute rush as we get closer to the exemptions can be a competitive advantage how we pay online – when it is introduced deadline, similar to the dash ahead of GDPR for internet businesses. on 14 September. last year. This is especially true for tech-forward SCA requires an extra layer of SCA is no less complex than GDPR. It is businesses, which live and die by optimising authentication for online payments. Where interpreted differently by national regulators, user experience – as compared with legacy a card number and address once sufficed, card networks and issuing banks, each with businesses that are still making the transition customers will now need to include at from the offline world. least two of the following three factors to SCA may spur a wave of innovation in do anything as simple as ordering a taxi: biometric security tools and mobile payment something they know, something they own, technology as entrepreneurs spot gaps in the and something they are. market for more secure and user-friendly SCA may spur a authentication experiences. Why is this happening? It is not the first time that Europe has The rules are designed to protect European wave of innovation pioneered new standards in payments that consumers from billions of euros’ worth of marry security and convenience. Rolling attempted online fraud. European internet in biometric out EMV standards over a decade ago made commerce is expected to grow to $1trn by chip-and-PIN more or less ubiquitous on 2022, and online fraud will grow with it. security tools the continent, while the US is, to this day, The European Central Bank now estimates playing catch-up. around €1.3 bn ($1.45bn) in online fraud on History may repeat itself with SCA. In any European cards each year. case, wherever Europe goes, the world will At Stripe, we see and prevent over €3.5bn their own rules and policies, but there are likely follow; Australia and other markets are in fraud globally per year. Along with the 6 some overarching principles for businesses expected to introduce similar legislation soon. million Europeans who make their living in getting ready for SCA. Ultimately, making the internet economy internet commerce, we welcome any attempt Firstly, ensure you have minimised friction more secure is important for its long-term to thwart fraudsters. in the checkout for all relevant payment growth. As consumer trust increases, so But SCA could cost European online methods. Different payment methods will be does spending. So, while SCA poses a businesses, with additional friction cutting more suitable for certain business models – significant challenge in the short term, it conversion rates. Similar regulation in India whether that is biometric security in mobile could significantly boost online commerce in in 2014 saw an overnight conversion drop for wallets or 3D Secure 2 – and customer Europe, fulfil the Digital Single Market, and some firms of over 25%; the same in Europe preferences will vary. So, internet businesses raise the GDP of the internet. And that is just would cost the online economy €150bn. need to build choice into their checkout what we aim to achieve at Stripe. <

www.electronicpaymentsinternational.com | 13

EPI April 2019 382.indd 13 01/05/2019 16:03:39 feature | cryptocurrency

the state of crypto: the bubble bursts, but is it over?

The shrinking of digital assets continues to plague the industry, with cryptocurrencies losing up to 50% of their value in the past year. While volatility is not unusual across the sector, the market is far from the highs it once experienced. Briony Richter reports

hether an advocate or critic, low, Parliament has been reviewing card is linked to users’ Coinbase account there is no denying the impact whether crypto-assets should be regulated. crypto balances, allowing them to pay in-store W that cryptocurrency has had A Commons Select Committee recently and online using Bitcoin, Ethereum and around the world. Some governments highlighted that if the UK develops a solid Litecoin, among others. have positively responded to its growing regulatory environment for crypto-assets, the Customers can use the card at multiple popularity, while others have exclusively country could be well placed to become a locations worldwide, making payments fought against it. through contactless or chip and PIN, as well One of the most significant factors in the as ATM cash withdrawals. market’s recent decline is the refusal of US Zeeshan Feroz, UK CEO at Coinbase, regulators to approve a number of exchange- comments: “Making crypto easier to use traded funds based on Bitcoin. This is and spend is central to our mission to create primarily a result of rising concerns over the Making crypto a more open financial system. Thanks to security and stability of cryptocurrencies and the launch of the new Coinbase Card, in how they are stored. easier to use and partnership with Paysafe, customers now However for some experts, the Bitcoin have greater flexibility and control over how bubble was always a fad – and one that has, spend is central they spend their crypto, and the ability to inevitably, finally burst. realise its value to buy tangible things or to our mission experiences.” CRYPTO IN THE UK Coinbase is currently only available in the UK; however, the company plans to support The UK’s approach to cryptocurrencies other European countries in the coming regulation has been fairly restrictive. There global centre for this type of activity, but the months. are no set guidelines or laws surrounding ecosystem has yet to develop. Cryptocurrency debit cards allow customers their use; however, none are considered legal With the undeniable growth in popularity, to spend cryptocurrencies at merchants tender. In the UK, cryptocurrency exchanges a number of different of fintechs have and retailers. However, the most significant must be registered with the FCA, although attempted to bring crypto cards to the difference between cryptocurrency cards some may opt to obtain an e-licence instead. mainstream. In April 2019, Coinbase and normal debit cards is that payments While the popularity of cryptocurrency launched its crypto debit card, enabling UK are automatically and instantly directed to among UK consumers is still relatively consumers to spend crypto effortlessly. The partner cryptocurrency exchanges, and then

14 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 14 01/05/2019 16:03:46 feature | cryptocurrency

bitcoin volatility

Value of Bitcoin in US dollars since July 2016 15,000

12,000

9,000

6,000

3,000

0

Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Apr 2019

Source: eToro debited from users’ cryptocurrency balances. their crypto assets. There are several types $500m was stolen from Japanese exchanges, A major benefit of using these cards, and of wallet, ranging from mobile to web and forcing the government to intervene into the what Coinbase is offering, is the avoidance desktop. future of cryptocurrency. of typically high currency exchange rates for Crypto exchanges are a relatively One of the biggest attacks in Japan was on international transactions. This is especially straightforward place to keep cryptocurrency cryptocurrency exchange Zaif in September popular for consumers travelling abroad and when trading. Cash-out fees accrue less 2018. Of the $60m stolen, around $19.6m needing to use a card to pay in local currency. quickly, with transactions and trades taking belonged to the exchange and the rest was However, much as the exchange perk is place much faster than having to move assets client money. Users can no longer withdraw useful, it is highly unlikely that these cards from wallet to wallet. or make deposits as Zaif rebuilds its system; will take over normal debit cards distributed However, storing crypto does not come the exchange is still unable to say when these by banks and challengers. While cards such without its own risks. In 2018, more than will resume. as the one offered by Coinbase familiarise In December 2018, the cryptocurrency consumers with cryptocurrency, the instability world was hit by another unexpected hurdle. of digital assets means it is not yet viewed in Gerald Cotton, founder of crypto exchange the UK as a viable means of payment. QuadrigaCX, died suddenly in India. He was Indeed, it is not just Bitcoin that is falling the only person who knew the password to in value; others, such as Litecoin, are also the exchange’s cold-storage system, meaning it rapidly dropping, further calling into question may never be able to repay close to $190m in the sustainability of cryptocurrency. client holdings. As of 31 January 2019, there were around SAFE STORAGE 115,000 users with balances signed up on the exchange, with C$470m ($348m) in fiat and Storage has always been a critical element of C$180 in cryptocurrency. conserving assets. As money slips into the These hacks and general lack of digital world, organisations need to find ways predictability come at a time when regulators to digitally secure alternative assets such as worldwide are concerned about security in the crypto and ICOs, and if the past few months crypto-exchange market. have taught us anything, it is that managing Cryptocurrencies are largely thought cryptocurrency is not an easy thing to do. to have the potential to emerge as a Crypto-assets can be moved around using transformative payment innovation. Until private keys – strings of numbers and letters their instability and extreme price swings that are unique to each asset in a wallet. They are brought under control, however, both then generate public keys, which produce the regulators and investors have cause for public addresses a user will receive to access concern. <

www.electronicpaymentsinternational.com | 15

EPI April 2019 382.indd 15 01/05/2019 16:03:49 feature | swift

cybersecurity: learning from the past to secure the future

In February 2016, Bangladesh Bank was the victim of a widely publicised cyberattack on its infrastructure, which was connected to SWIFT. Following the attack, SWIFT launched its Customer Security Programme to drive collaboration in the industry against cyberthreats. Three years on, how has it fared?Patrick Brusnahan writes

he quest for collaboration in “It is encouraging that detection rates of strengthen and diversify its defences, cybersecurity continues. At the start attempted attacks are increasing, but we need investigate incidents and share information.” Tof 2018, SWIFT aimed to increase to be mindful that malicious actors adapt Brett Lancaster, head of customer security its collaboration with key industry experts rapidly. The industry must continuously at SWIFT, added: “These cases show how such as anti-virus vendors and incident- response teams. locations and curencies SWIFT claims that these efforts resulted in the quick identification of financial Locations of beneficiary accounts used in Currencies used in fraudulent institutions targeted by cybercriminals. fraudulent transactions since July 2018 transactions since 2016 Perhaps more significantly, it managed to do this before fraudulent transactions were sent. North Middle In its report Three years on from Bangladesh: America East 3% Tackling the adversaries, SWIFT examines 4% Other 9% trends observed between 2018 and 2019. Europe These include tell-tale signs and how they 10% become crucial in detecting and responding Euros 21% to attempted attacks. Dries Watteyne, head of the cybersecurity US dollars incident-response team at SWIFT, wrote: Asia-Pacific 83% “SWIFT’s threat intelligence sharing has 83% highlighted the changes to cybercriminals’ tactics, techniques and procedures used in attempted attacks, enabling industry participants to understand, and respond to, the increasingly sophisticated nature of cyberthreats. Source: SWIFT

16 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 16 01/05/2019 16:03:54 feature | swift

SWIFT Customer Security Controls Framework The security of the SWIFT community requires everyone’s Attesting compliance with the controls is an essential participation, and starts with each individual organisation’s step for customers towards securing their SWIFT-related own security. To help with this, in March 2017 SWIFT infrastructure. published the Customer Security Controls Framework As part of the change-management process for the CSCF, (CSCF). control updates are usually announced mid-year, with The CSCF is a set of security controls – both mandatory and attestation and compliance against the mandatory controls advisory – that set a security baseline for all SWIFT users. of any new version required between July and December the The controls were developed in conjunction with industry following year. This is intended to allow sufficient time – up experts and designed to be in line with existing information to 18 months – for customers to budget, plan and implement security industry standards PCI-DSS, ISO 27002 and NIST. any required updates. <

SWIFT solutions, including our Daily insert the fraudulent transaction. As a result, CURRENCIES Validation Reports tool, our Payment instructions would not have been present in Controls Service and the gpi Stop and Recall payment back-office applications. Therefore, US dollars account for the majority of facility, can all have real, positive impact. They it would have been detectable through the cross-border traffic; as a result, this was the also evidence the importance of implementing verification of end-of-day or start-of-day currency most used in investigated incidents, security controls, and of understanding and statement-reconciliation messages. accounting for close to 70% of fraudulent mitigating against cyber-risks presented by messages created since the Bangladesh Bank counterparties. This is why more and more AMOUNTS attack. customers are turning to SWIFT’s KYC- However, since the incident, there has been Security Attestation utility to consume that Fraudsters are constantly performing a increased use of European currencies such information.” balancing act: the larger the fraudulent as sterling and euros. In addition, a small transaction attempted, the greater the reward, number of Asia-Pacific currencies – mainly TARGETS but also the greater chance that detection the yen and Hong Kong and Australian systems are triggered. Since the Bangladesh dollars – accounted for around 5%. SWIFT does not reveal who the main targets Bank incident, SWIFT believes the amounts Most beneficiaries of fraudulent of cyberattacks are, but has narrowed it down sent in individual fraudulent transactions have transactions – some 83%, according to to a few themes: in most cases, the financial “evolved”. SWIFT – were based in Asia-Pacific. The institutions targeted are based in countries Its report states: “Up until early 2018, we remaining 17% was split between Europe, the with a very high risk level on the Basel AML typically saw per transaction amounts of ten Middle East and North America. Country Corruption List. or tens of millions US dollars; however, since The report concludes: “The industry Over the last 15 months, a large chunk of then, attackers have significantly reduced should continuously increase the strength the attacks have targeted businesses in Africa, average per transaction amounts to between and diversity of its defences, and ensure Central Asia, South East Asia and Latin $0.25m and $2m – presumably to help avoid it understands the nature of the changing America. In every case, however, the targets detection.” threat. This means being proactive in limiting were smaller banks in terms of daily cross- However, fraudulent transaction amounts criminal opportunities linked to systems and border transactions. tended to be significantly higher than the business practices. It means ensuring proper In the vast majority of cases investigated, “average” amounts sent in the prior 24 preparedness and understanding counterparty the graphical user interface was used to months. cyber-risk.” < SWIFT unveils standard for ‘Pay Later’ APIs In January 2019, SWIFT launched a standard for ‘Pay Later’ SWIFT’s head of standards, Stephen Lindsay, said: “SWIFT APIs in an effort to accelerate the adoption of the new has long been at the forefront of banking standardisation payment model by merchants and banks. and is continuing this work in the API world. Our work on Pay Later is a good example of how standardisation plays a Pay Later enables users to access traditional bank loan vital role in ensuring the industry can take every advantage financing to pay for online purchases. Using Pay Later, of technological innovation.” customers can access loans from their banks at the point of purchase, and have funds immediately credited to The new standard was developed by a working group merchants. It also increases merchants’ ability to appeal to comprising banks, merchants and technology providers. diverse consumer bases and offer more purchase options. “The aim is to create the conditions for a broad ecosystem of According to SWIFT, the new standard will enable merchants the Pay Later platform to provide optionality to customers, to deploy the Pay Later option and avoid multiple expensive to give merchants a greater ability to sell their goods, and to implementations. ensure a wide reach for banks,” SWIFT noted. <

www.electronicpaymentsinternational.com | 17

EPI April 2019 382.indd 17 01/05/2019 16:03:54 industry insight | idex biometrics

quick route to market. In some use cases, and depending on the technical capability of fingerprint biometrics: the card integrator, further technical support from the sensor manufacturer is required to meet certification standards. From a card manufacturer’s point of view, how asia is the fingerprint biometric payment smart card must pass a series of tests to determine its robustness, including severe bending and the application of varied pressure to the card’s leading the way surface. From a biometrics perspective, the card will be tested in terms of false accept rate (FAR) and false reject rate (FRR). A card that The PIN will soon be a thing of the past. Thanks to regularly rejects the correct fingerprint would advances in biometric technology, the ability to authenticate be incredibly inconvenient and not acceptable a payment with a touch of the finger is set to explode across for day-to-day use; on the other hand, a card with a high FAR would compromise security the globe, writes IDEX Biometrics CEO Stan Swearingen and leave consumers vulnerable to fraud. For mass market adoption to be possible, hile some countries remain USABILITY, AVAILABILITY card issuers and sensor providers must work conservative in terms of together to strike the correct balance between W adopting the technology, Having already witnessed a higher penetration security and convenience by ensuring FARs Asia is one region driving the charge for rate of contactless payments than other and FRRs are kept to a minimum. Being able biometric fingerprint payment cards. regions, Asia is already well accustomed to to respond quickly to challenges throughout Countries such as India and China have contactless spending. Therefore, minimal the testing process will be key to building already welcomed fingerprint biometric changes to consumer behaviour or payment momentum across the globe. smart cards into their everyday lives. infrastructures have been required to adopt While Asia currently leads the way for In its race to become the next Silicon fingerprint biometric payment smart cards. fingerprint biometric payment smart card Valley, Asia has positioned itself as a world India and Singapore also have national innovation, global adoption is imminent. leader in digital wallet usage via mobile and digital identity databases in place, and this has Pilots in the Middle East, South Africa and smart devices. Driven by demand for quick helped consumers become familiar with the the UK have highlighted consumer demand and seamless transactions, the emergence of concept of using digital technology to prove for fingerprint biometrics within payments, mobile payment giants such as WeChat and identity. The amalgamation of contactless and thanks to the use of fingerprint scanning Alipay has put Asian countries like China payments with digital identity has meant Asia within smartphones and tablets, consumers light-years ahead of the rest of the globe in is already primed to implement fingerprint are already comfortable with the concept. terms of payment innovation. biometrics into everyday payments. According to research conducted by IDEX But the innovation has not stopped Cost and reduced fraud are the two key Biometrics, 60% of UK consumers surveyed there. The need for convenient and secure differentiating factors to adoption by financial had heard of fingerprint biometric methods payment methods has increased demand service providers in the region. As a region of authentication, and more than half stated for fingerprint biometrics in Asia’s payment with some of the highest contactless spending they would trust the use of their fingerprint to ecosystem. Following successful trials of the limits – currently £136 ($176) in Japan and authenticate payments more than their PIN. biometric fingerprint payment smart card, a £112 in China – the need for a higher level number of leading card issuers and payment of security continues to be a top priority, and NEXT STOP: THE WORLD networks within the region, such as Hengbao, fingerprint biometrics is being increasingly Chutian Dragon and China Union Pay, are seen as the solution. While the future for fingerprint biometrics working with sensor manufacturers to bring While the usability of fingerprint biometric is looking bright, to make regions beyond biometric fingerprint-authenticated payments payment smart cards in Asia’s existing Asia embrace biometric payment smart cards, to the Asian market. In fact, according to payment ecosystem has been pivotal to its fintech leaders and card issuers must debunk ABI Research, the total volume of shipped success in the region, cost of implementation the security myths that currently surround payment smart cards in Asia in 2017 reached has also been a key factor. Card issuers and this technology. 1.3 billion, and the annual volume is expected producers of fingerprint sensors have had Education will be pivotal. Consumers must to increase to 1.8 billion by 2022. to work together to reach a price point that be assured that biometric fingerprint data is Underpinned by a culture of acceptance allows biometric fingerprint technology to be not stored on central databases anywhere, and willingness to embrace new technology, available and affordable to the mass market. and rather securely stored on the card itself – Asia’s pragmatic approach has helped the The need for rigorous testing due to strict therefore limiting potential exposure and risk. public embrace fingerprint biometric payment certification requirements in Asia’s payment Continued education around fingerprint smart cards. But what is it about Asia that has ecosystem has highlighted the need for card biometrics, for both consumers and payments made the adoption of fingerprint biometrics integrators and sensor manufacturers to operators, will only help to build momentum so successful in the region? work as one to achieve a streamlined and and clear the route to global adoption. <

18 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 18 01/05/2019 16:03:55 country snapshot | brazil

country snapshot: BRAZIL brazil

Consumer awareness grows as infrastructure broadens

razil remains a cash-driven economy, Debit card penetration is high in Brazil, 10,000 in March 2016 to 80,000 in with cash accounting for 77% of with the average Brazilian holding at December 2016. Btotal transaction volume in 2018. least one debit card. This is supported by The debit card payments transaction With government and bank initiatives, growth in the country’s banked population, volume is also rising, recording a significant and growing consumer awareness and with the government and banks striving CAGR of 12.3% between 2014 and 2018. confidence in digital payments, Brazilians to provide access to financial services The cap on debit card interchange fees in are gradually shifting towards electronic nationwide. October 2018 will encourage debit card payment methods. In an effort to increase financial transactions in the coming years. The government has taken steps to inclusion, the government passed Despite low penetration, pay-later cards increase financial inclusion and promote Resolution 4,480 in April 2016, requiring are the preferred type, accounting for electronic payments, including expanding banks to allow consumers to open 60.3% of the total card payments value in the rural banking infrastructure, appointing checking, time and savings deposit 2018. Pay-later payment frequency stood banking correspondents, and introducing accounts using electronic channels. The at 46 times per card per year in 2018, in regulation to allow consumers to open law removed the need for physical IDs comparison to 27 for debit cards. bank accounts through digital channels. or proof of address, easing the account- Banks offer reward programmes and With the necessary infrastructure in opening process. Banco Inter was one cashback to encourage card use. Growth place – including a wide ATM network and of the first four banks to introduce the is also supported by the availability of the highest proportion of POS terminals measure; its account numbers rose from instalment facilities for big-ticket credit among its regional peers – consumers are card purchases. A decrease in credit card gradually becoming more aware of the PAYMENT CARDS BY TYPE (MILLION) interest rates charged by leading banks will benefits of payment cards. Debit Pay later also aid growth in this space. The frequency of card payments rose The e-commerce market grew from 2014 313.2 160.0 from 23.2 times per card per year in BRL39.5bn ($11.92bn) in 2014 to 2017 323.7 150.2 2014 to 33.4 in 2018. Over the next five $19.23bn in 2018. Improvements in years, developments in e-commerce and 2018e 327.0 152.3 technology and online and mobile contactless technology will help drive 2022f 344.1 165.4 penetration have enhanced consumer growth in the card market. Source: GlobalData confidence in online transactions. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2014 356.1 292.7 2014 3,529.1 10,986.5 2014 184.4 5,044.6 2015 393.5 320.7 2015 3,629.0 11,822.9 2015 182.4 5,237.2 2016 395.4 340.0 2016 3,449.0 12,782.6 2016 180.2 4,922.6 2017 411.8 378.1 2017 4,440.0 14,435.4 2017 175.6 4,739.1 2018e 427.0 409.5 2018e 4,736.6 15,990.7 2018e 172.1 4,634.9 2019f 440.6 435.4 2019f 4,860.5 17,378.9 2019f 168.6 4,576.6 2020f 451.5 464.3 2020f 4,989.5 18,486.5 2020f 167.7 4,745.0 2021f 458.6 494.1 2021f 5,134.0 19,730.4 2021f 166.8 4,899.1 2022f 463.3 523.9 2022f 5,274.0 20,950.8 2022f 166.0 5,017.7

Source: Central Bank of Brazil, GlobalData Source: Central Bank of Brazil, GlobalData Source: Central Bank of Brazil, GlobalData

www.electronicpaymentsinternational.com | 19

EPI April 2019 382.indd 19 01/05/2019 16:04:07 country snapshot | mexico

country snapshot: MEXICO mexico

Convenience stores key to banking and card penetration

ash dominates the Mexican Inclusion Project between 2012 and 2017. largest convenience chain in Mexico, to payments landscape, accounting The project provided financial education supply its co-branded Saldazo debit cards Cfor 89.5% of the overall transaction initiatives to 1.8 million individuals and through 14,000 stores. As of December volume in 2018. encouraged Mexicans to open new deposit 2017, over nine million Saldazo debit cards With government and central bank accounts – with a total of 9.5 million were issued through Oxxo stores. Similarly, initiatives, growing consumer awareness, members insured by deposit insurance in in October 2017 Amazon introduced a and a gradual rise in card acceptance, 2017, compared to 6.1 million in 2011. cash payment service, enabling Mexicans Mexicans are gradually shifting towards The number of service points for to load Amazon account balances at electronic payments. The central bank and members of social bank Bansefi tripled 7-Eleven stores. financial institutions have taken steps to from 1,800 in October 2011 to 5,600 Mexico has the largest e-commerce raise financial inclusion, such as offering in July 2017. Meanwhile, the number of market in Latin America, which recorded insurance cover on deposit accounts, banking agents increased from just 95 in significant growth between 2014 and and making basic and payroll accounts 2011 to 2,496 in July 2017. 2018, supported by rises in internet available. The Mexican banking and payments and smartphone penetration, consumer To increase merchant acceptance, the system operates a very different model confidence and the number of retailers central bank has capped interchange fees from its peers, with convenience stores entering the online space. on debit and credit card transactions, while forming an integral component. For Online retailers are also offering cards banks are cutting merchant discount rates. instance, Banamex partners with Oxxo, the for shopping purposes. In March 2018, Debit cards have higher penetration, but Amazon introduced a Mastercard-branded are mostly used to withdraw cash; pay- PAYMENT CARDS BY TYPE (MILLION) Amazon Rechargeable prepaid card, later cards are more frequently used for Debit Pay later which enables users to load money at payments. Contactless cards and mobile convenience stores such as 7-Eleven, and 2014 134.6 28.5 proximity payments are not widely used in can be used for Amazon purchases. 2017 144.3 32.7 Mexico, although major banks have made The prepaid card market, though attempts to increase their adoption. 2018e 151.1 34.2 nascent, has grown at a moderate pace in The government ran the Savings and 2022f 169.9 40.6 the last five years, at a CAGR of 6.6% in Credit Sector Consolidation and Financial Source: GlobalData terms of transaction value. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2014 135.7 62.8 2014 1,594.1 1,973.4 2014 43.0 765.2 2015 147.4 77.4 2015 1,653.9 2,279.8 2015 45.9 864.7 2016 161.3 88.4 2016 1,750.7 2,572.4 2016 48.1 895.4 2017 170.6 101.9 2017 1,768.8 2,963.4 2017 51.4 961.9 2018e 182.8 114.7 2018e 1,823.9 3,309.3 2018e 54.5 1,025.3 2019f 195.8 130.0 2019f 1,891.0 3,663.1 2019f 57.3 1,080.3 2020f 209.9 143.4 2020f 1,968.7 3,990.8 2020f 60.3 1,151.1 2021f 223.8 158.5 2021f 2,040.2 4,362.8 2021f 63.2 1,219.1 2022f 237.8 174.3 2022f 2,108.7 4,742.9 2022f 66.5 1,287.6

Source: Central Bank of Mexico, GlobalData Source: Central Bank of Mexico, GlobalData Source: Central Bank of Mexico, GlobalData

20 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 20 01/05/2019 16:04:11 country snapshot | indonesia

country snapshot: INDONESIA indonesia

Cash remains dominant, but cards record robust growth

ash remains the predominant POS infrastructure and the proliferation of Pay-later cards account for a small payment instrument in Indonesia new payment solutions will further push proportion of the payment card market, C– especially among the rural electronic payments. with overall penetration at just 6.6 population – accounting for 98.3% of the Debit cards remain the preferred card cards per 100 individuals in 2018. Strict total transaction volume in 2018. type among Indonesian consumers. The government regulations on credit card This is mainly due to the high unbanked government and commercial banks have eligibility remain a key reason for the low population, inadequate banking taken initiatives to bring people into the penetration. infrastructure, limited public awareness of formal banking system, resulting in the The minimum monthly income to apply electronic payments, and low acceptance banked population rising from 36.1% in for a credit card in Indonesia is IDR3m of payment cards at merchant outlets. 2014 to 52% in 2018. ($221.05). The number of credit cards However, the government has taken Debit card use is mostly restricted to held and the credit limit depend on the initiatives including a National Strategy ATM cash withdrawals, with frequency of individual having a monthly income for Financial Inclusion, the appointment use six times higher than that of payments. of between $221.05 and $736.82. In of banking correspondents in rural areas, This is primarily because both consumers December 2017 the central bank required the migration of payment cards to EMV and merchants still prefer cash; however, all credit card issuers to submit transaction standards, compulsory use of electronic as the government improves the card- details to the Tax Office. payments for toll road payments, and the acceptance infrastructure, debit card E-commerce in Indonesia posted a launch of a National Payment Gateway. payments are gaining ground. significant CAGR of 47.5%, rising from Consequently, the number of payment $2.95bn in 2014 to $13.95bn in 2018. cards in circulation, transaction volume, PAYMENT CARDS BY TYPE (MILLION) Improvements in mobile penetration, and transaction value recorded robust Debit Pay later consumer confidence in online transactions CAGRs between 2014 and 2018 – a trend and foreign investment, and the presence 2014 98.6 16.0 that will continue over the next five years. of secure online gateways have driven 2017 155.7 17.2 The emergence of contactless growth in the Indonesian e-commerce technology and growth in e-commerce 2018e 177.5 17.5 market, as has the presence of alternative are also expected to support payment 2022f 269.1 19.2 solutions such as PayPal, Doku Wallet, card market growth. Rising investment in Source: GlobalData iPayMu, and BBM Money. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2014 132.5 31.7 2014 2,471.7 542.6 2014 90.7 842.7 2015 146.1 35.6 2015 2,733.2 623.5 2015 99.3 1,005.2 2016 163.6 38.7 2016 3,061.9 722.0 2016 103.4 1,050.2 2017 177.1 42.4 2017 3,283.1 820.5 2017 106.7 1,237.3 2018e 192.2 45.2 2018e 3,508.9 918.1 2018e 108.8 1,335.4 2019f 206.9 49.0 2019f 3,751.9 1,013.7 2019f 110.8 1,459.3 2020f 224.2 53.5 2020f 3,987.7 1,113.0 2020f 112.6 1,590.9 2021f 242.8 58.3 2021f 4,242.6 1,215.2 2021f 114.2 1,760.8 2022f 262.9 63.3 2022f 4,493.1 1,317.5 2022f 115.8 1,908.1

Source: Bank of Indonesia, GlobalData Source: Bank of Indonesia, GlobalData Source: Bank of Indonesia, GlobalData

www.electronicpaymentsinternational.com | 21

EPI April 2019 382.indd 21 01/05/2019 16:04:16 industry insight | marqeta

virtual cards: creating real benefits for enterprise payments

The words ‘innovation’ and ‘finance’ no longer draw mocking derision from the average person on the street. Terms like fintech, digital banking and mobile payments are so familiar to all of us now that it is difficult to imagine a time when the banking sector was seen as staid and a little boring, writes Ian Johnson, head of European growth at Marqeta

ith the rise of digital banks This is an urgent problem, to which virtual such as Monzo, Starling Bank cards provide a solution. By allowing end- W and N26, consumers have to-end tracking of payments in real time, benefited from instant access to payment virtual cards give businesses tighter controls of data and an easy-to-use mobile app for payments. managing finances. Consider a large business with numerous Consequently, there is a growing awareness supplier contracts and an extensive pool of that consumer financial health is improving physical company credit cards. Co-ordinating, significantly. It is unsurprising, then, that validating and tracking payments to these Apple has recently joined the payments world, suppliers across various company cards offering not only a physical titanium card but requires a whole team of finance managers also virtual options to use this card via tools and an awful lot of manual labour. With a like Face or Touch ID. virtual card platform, that business can set But if consumers are taking advantage of rules about when payments can be made. digital payments technology, allowing them This means that when a transaction is being a better payment experience and the ability Ian Johnson, Marqueta made, Visa, Mastercard or another payment to use their financial data to make better of around £75trn ($97trn), the scope for network can contact the payment processor decisions, why should businesses not? Clearly improvement is huge. for authorisation. The processor could accept some already are, but so many more are not. Why this sudden growth? The reasons are or decline the payment automatically based As a case in point, UK Finance forecasts very similar to those that caused the boom in on existing rules without the need for human that as many as 147 million cheques will be consumers’ embrace of digital finance. From intervention, or the business could set up a used to make payments in 2027, many of having the capability to instantly issue a single system allowing them to do this themselves which will be made by businesses. Cheque or multiple use virtual card via a mobile app, in real time. These additional layers of payments, often sent by post, are no longer fit which can automatically connect to a digital authentication act against fraud, but they also for the digital age. In fact, cheque payments wallet like Apple or Google Pay, to easily help to reduce errors in company spending. are a large part of the late payments culture matching card payments to a specific order So, just as consumers find when they sign that is hampering the growth of UK SMEs. digitally rather than manually, or automating up to digital banking, the ease of use and the This need not be the case. Virtual cards payments without the need for any human benefits of digital financial management is are one among many innovations that allow interaction, the business benefits of virtual becoming a reality in the business sector. The businesses to see real benefits from digital card platforms are numerous. act of making and receiving a payment should technology. In March, Juniper Research be as frictionless in a modern business as it is published a report in the UK suggesting AN URGENT PROBLEM for the average consumer in a store. Virtual that the value of payments on virtual cards card technology is making that possible. by businesses will grow 90% over the next Perhaps the biggest benefit right now, though, For businesses, this faster, simpler payment four years. That means virtual card payments is in the battle against payments fraud – a method could lead to greater worker will exceed $1trn by 2022, up from $568m contest that the majority of UK businesses satisfaction and loyalty, but it could also lead in 2019. It sounds like a lot, but when we believe they are losing to fraudsters. In the to greater profit margins. Digital technology consider that, in 2017, payments systems first half of 2018 alone, fraud losses on is no longer a nice-to-have in business, it is a processed 22 billion transactions, with a value physical cards payments totalled £281.2m. must-have. <

22 | April 2019 | Electronic Payments International

EPI April 2019 382.indd 22 01/05/2019 16:04:17 HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.

Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy

Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

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