www.cardsinternational.com Issue 550 / December 2017
PREVENTION AND CURE
HAS THE DA VINCI CHOICE JUST SOLVED THE CARD FRAUD EPIDEMIC?
COUNTRY SNAPSHOTS FEATURE INSIGHT
Essential insight into card The Digital Banking Club The future of the ATM payments in Poland, Peru debate: PSD2’s challenges and its role in delivering and the UAE and opportunities banking services
CI December 550.indd 1 06/11/2017 12:30:16 contents this month
NEWS COVER STORY 05 / EDITOR’S LETTER CARD FRAUD CURED? 06 / DIGEST • Doha Bank rolls out instant issuance • New York Subway to go contactless • Wirecard to power Aldi gift cards • FirstData, UnionPay expand US partnership • Mastercard, Western Union collaborate on debit card transfers • UK millennials’ P2P payments soar • Transcorp introduces platinum prepaid card • NGC expands API for 500 brands • Mastercard, Yoco partner for South African SMEs • ANZ makes more than 3 million Visa debit cards accessible • HSBC US launches Premier World Elite Mastercard credit card 11 • Citi extends Quick Lock feature
Editor: Douglas Blakey Group Editorial Director: Director of Events: Ray Giddings +44 (0)20 7406 6523 Ana Gyorkos +44 (0)20 3096 2585 [email protected] +44 (0)20 7406 6707 [email protected] [email protected] Senior Reporter: Head of Subscriptions: Patrick Brusnahan Sub-editor: Nick Midgley Alex Aubrey +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]
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2 | December 2017 | Cards International
CI December 550.indd 2 06/11/2017 12:30:48 contents december 2017 20
13 s to talk about cracking China, disrupting SWIFT,ANALYSIS and leveraging WeCha FEATURES 10 / ATM CHARGES 11 / SCRAMCARD The days of free cash withdrawals from Card fraud is rife in the UK. According to ATMs in the UK may be coming to a close Financial Fraud Action, £768.8m ($1bn) was as LINK proposes a drop in interchange fees. lost to fraud in the UK in 2016, with 80% of Patrick Brusnahan looks at the potential this through payment cards. Is there a way to implications of the move prevent this? ScramCard thinks it might have a solution. Patrick Brusnahan reports 13 / DBC DEBATE With the deadline for PDS2 just around the corner, banks and fintechs must be prepared for the challenges it brings as well as the s to talk about cracking China, disrupting opportunities that come with it. Briony SWIFT,COUNTRY and leveraging SNAPSHOTS WeCha Richter reports back from the latest Digital 10 Banking Club debate in London 16 / POLAND Poland is one of the most advanced and innovative markets in Europe, offering 18 consumers broad access to electronic INDUSTRY INSIGHT payments. Cash remains popular, although e-commerce is driving adoption of alternatives 12 / COLLINSON GROUP Most businesses will have considered using 18 / PERU vouchers to increase sales. People once scoured Payment cards are gradually gaining newspapers and magazines to clip vouchers for prominence in Peru, primarily driven by the offers, but the digital age allows no time for government’s financial inclusion programme, that, writes Collinson Group’s Mark Jackson and supported by commercial banks. Credit cards are increasingly being used for purchases 22 / DIEBOLD NIXDORF 20 / THE UAE After 50 years the ATM continues to be an Cash remained the predominant payment important touchpoint in the customer journey, instrument during 2012-2016 accounting but delivery of these services is changing, for 87.3% of the UAE’s payment transaction writes Matt Phillips, VP, sales and systems at volume in 2016. Local consumers generally Diebold Nixdorf UK and Ireland see cash as a quicker and safer payment option
www.cardsinternational.com | 3
CI December 550.indd 3 06/11/2017 12:32:13 Simple, secure and effortless digital solutions for financial services organisations
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CI December 550.indd 4 06/11/2017 12:32:15 editor’s letter
Will the iPhone X be a cards killer?
Douglas Blakey, Editor
ype for the new Apple iPhone X is reaching a Visa, Mastercard go from strength to strength crescendo. We are past the gushing reviews In the meantime, Visa has posted another stellar set of results, H stage. Next came the totally predictable news and as CI goes to press, Mastercard has chipped in with third- that pre-orders for the new handset exhausted supply quarter results boosted by revenue growth of 17% – easily within minutes of going live. That came on 27 October. beating analyst forecasts. Now comes launch day on 3 November. Mastercard enjoyed double-digit volume and transaction By common consent the highest profile aspect of the iPhone growth across most of its markets. It is also bullish about its X is Face ID. And by just about common consent it is simple latest acquisitions, NuData Security and Brighterion, enhancing and intuitive to use. Face ID not only unlocks the handset but its capabilities in the fields of behavioural biometrics and is also used to authorise users for mobile payments. There artificial intelligence. is, says Apple, only a one in a million probability of a random Its partnership with PayPal in the US and Asia-Pacific has person unlocking an iPhone with Face ID. extended to Europe, the Middle East, Africa, Canada and Latin So we may now expect to receive a rush of comments from America – so all in all Mastercard had reason to be upbeat. payments experts commenting on the Apple X potential to Other highlights include its new prepaid programme with ADP, revolutionise payments. The Apple X will remove friction; the largest payroll provider in the US. the biometric technology is so class-leading that consumer Back at Visa, its fourth-quarter earnings witnessed solid concerns about data security will be allayed; the Apple X will transactions growth of 13% globally, and net revenue growth be a key inflection point in driving consumers away from cards of 14%. to mobile as their preferred method of payments. But arguably the most interesting story of the past month, That is how the arguments will go, and no doubt they will ahead of the Apple X launch, comes from Australia. ANZ is come from numerous influential industry thought leaders. And going it alone with Apple while Commonwealth Bank, Westpac, they will of course be premature and over the top. Predictions and National Australia Bank have formed an independently run of the collapse in cards use are about as accurate as the joint venture to develop a mobile wallet and payment system industry experts prophesying that cash is on its last legs. for smartphones on iOS and Android. We do not all live in China, where WeChat and Alipay – with The app, dubbed Beem, will be available to all customers 960 million and 450 million users respectively – continue to – not just those of CBA, Westpac and NAB. Beem will be clean up as the dominant forms of payment. But no matter – released at some stage later this year and will initially be the Apple evangelists have a new toy, albeit at a cost of the targeted at P2P transfers rather than contactless payments at best part of £1,000 or $1,000. merchant terminals. The potential offered by mobile payments will attract So early days, but for Beem to take off, the earlier it includes widespread consumer press interest, and that is all to the good. an ability to make payments at point of sale, the better. <
Get in touch with the editor at: [email protected]
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CI December 550.indd 5 06/11/2017 12:32:30 News | Digest
news digest Doha Bank rolls out instant Wirecard to power issuance card offering German Aldi gift cards Qatar-based Doha Bank is to offer instant “By offering instant issuance, customers card issuance to make the account-opening can receive high-quality, personalised, process more convenient for customers. ready-to-use permanent debit cards while The instant card issuance facility enables opening an account, avoiding any waiting customers to receive personalised debit time for the cards to be produced and cards at selected Doha Bank branches couriered, and allowing customers to make when opening a bank account. It also immediate purchases.” enables customers to have lost or stolen Doha Bank‘s chief retail banking officer, cards replaced immediately in-branch. Gul Khan, said: “Our new instant card Germany-headquartered payment and Doha Bank group CEO Seetharaman issuance will give customers a faster and internet technology company Wirecard has said: “We are very proud to introduce better customer experience. Our main goal expanded its gift card customer roster with these new products and facilities to our at Doha Bank is to offer a great customer the addition of discount retail chains Aldi customers, especially our unique card experience, be it online or in-branch Nord and Aldi Süd. issuance benefit. support, to all our customers. < The company’s gift cards, which can be purchased at the till, can now be used to pay at all Aldi branches in Germany. New York Subway to go contactless The latest software has been linked with bank services to cover a range of gift cards, New York Subway network operator the including e-money cards for both physical Metropolitan Transportation Authority stores and online stores. Previously, customers (MTA) has approved a $573m contract for could buy gift cards for other retailers, a new payment system. including platforms such as Google Play or The MTA’s move marks a significant step prepaid service providers such as Aldi Talk. towards a more modern form of payment Wirecard will manage the whole gift card for passengers riding the New York platform, assuming responsibility for card Subway. Starting in late 2018, New Yorkers issuance and payment processing. will be able to pay fares using a system Wirecard sales consumer goods executive similar to that operated in London, where vice-president Christian Reindl said: “We are passengers can tap mobile phones or credit delighted that Aldi Nord and Aldi Süd – two and debit cards at the turnstiles. of the largest retailers in Germany – have MTA chair Joseph Lhota described the decided to make Wirecard their technology move to phase out the New York Subway’s partner. current proprietary card system, the “With our extensive experience in the field Metrocard, as “transformational”, adding: of e-money cards, Aldi is able to offer its “The move to a truly 21st century method customers throughout Germany added value. of payment represents a critical step in our With our tailored solutions, they will benefit overall efforts at modernising the subway from a seamless shopping experience with a system and improving service for all our flexible omnichannel approach – both online customers.” and at the point of sale.” With the New York Subway system often Aldi Süd’s customer relationship suffering from delays and overcrowding, management communications director, the move to contactless is seen as a Natascha Vrchoticky, added: “More and more potential solution to ease congestion for of our customers have been asking us when passengers getting into and out of stations. we will finally start selling Aldi gift cards in The new system also means passengers addition to those of other brands. will no longer need to top up Metrocards “It seems that a lot of our customers are every month. Metrocards will still be valid fans of the brand. They are really enthusiastic until the new system is fully operational. < and would like to receive a gift card.” <
6 | December 2017 | Cards International
CI December 550.indd 6 06/11/2017 12:33:08 News | digest
FirstData, UnionPay expand US partnership UnionPay has teamed up with First Data to merchant locations that First Data serves UnionPay’s innovative products based on expand its card acceptance offering across in the US. chip cards in the US.” the US. Both businesses will target online First Data’s executive vice-president of The agreement will enable visitors to retailers in the travel and entertainment global business solutions, Dan Charron, the US from China to use UnionPay credit industries, including airlines, cruise lines, added: “As the world becomes increasingly and debit cards at First Data’s US-based and entertainment theme parks. borderless, First Data is dedicated to merchant clients. By 2021 it is expected UnionPay International general manager supporting merchant clients with flexible that there will be up to 23 million Chinese June Chen said: “We are very glad to payment options for their customers, visitors to the US. strengthen our partnership with First Data. wherever and however they shop. The partners will complete the chip We believe this new partnership will not “We are extremely proud to work migration of First Data’s payment platforms only offer safer payment services to our with an innovative partner like UnionPay and then extend the acceptance of cardholders visiting the US, but also lay a International to expand their card UnionPay credit cards to the 4 million solid foundation for the future rollout of acceptance throughout the US.” < Mastercard, Western Union UK Millennials’ p2P collaborate on debit card transfers payments soar: Visa
Technologically aware millennials in the UK are abandoning traditional forms of banking in favour of mobile banking, and mobile payments specifically. Visa’s third annual Digital Payments study reports that the percentage of people that have made a P2P payment stands at 34%, with millennials surging ahead at 59%. Millennials are also showing a growing preference for biometric technology when authenticating a payment. For digital payments, 35% of 18-34-year-olds would rather use biometric authentication, compared with a national average of 30%. Visa surveyed more than 42,000 Europeans, including more than 2,000 Mastercard and Western Union have “Today’s consumer is busier than ever, UK respondents. It revealed that 69% of agreed to integrate Mastercard Send into and any option to make everyday tasks UK consumers aged 18-34 use a mobile the Western Union Money Transfer service, like money transfer more convenient is banking app, with 53% using it regularly. facilitating direct fund transfers to debit hugely important. Western Union is giving Although the results revealed an increased card holders. consumers one more option to make the appetite among millennials for digital The partnership will enable US service work for their needs.” payment methods, 31% of millennials consumers to send money via Western Western Union’s chief strategy product surveyed stated they had never used one. Union to debit cards, including non- and marketing officer, Libby Chambers, Jonathan Vaux, executive director of Mastercard-branded cards. The new added: “Western Union is synonymous innovation partnerships at Visa, stated: service will initially offer digital funds with fast, reliable global money transfer “Mobile technology has revolutionised transfers within the US via the Western and payments. the retail banking industry. Until relatively Union website and mobile app, enabling “We’re offering customers more choice recently, simple transactions such as senders to use US debit, credit and bank and convenience when they send and transferring money between accounts accounts to fund the payment. A 16-digit receive money. meant visiting a bank branch in person. debit card number is required to complete “This new capability we have developed “We are now seeing banks embrace the the transfer. with Mastercard means customers will flexibility offered by apps to reduce the Mastercard enterprise partnerships be able to send funds directly to their pain points for customers and allowing senior vice-president Leigh Amaro said: receivers’ debit cards, with speed and them to stay on top of their finances while “With Mastercard Send, Western Union ease,” Chambers added. on the move,” Vaux continued. customers now have a powerful new way The new money transfer and payment “In essence, anyone with a smartphone to send funds directly to the debit cards of service is expected to be available for use or tablet is now able to take their bank millions of Americans. in early 2018. < branch with them wherever they go.” <
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CI December 550.indd 7 06/11/2017 12:33:37 News | Digest
Transcorp introduces platinum prepaid card Mastercard, Yoco transactions and eventually become a ‘less- cash society.’ The card enables transactions in partner for South stores and ATMs across the country, allowing organisations to pay wages and salaries to African SMEs employees who do not have a bank account. Mastercard has teamed up with smart The cards can be co-branded with an technology payments company Yoco organisation’s logo and certain merchant to provide 15,000 mobile point of sale categories, and ATM withdrawals can be (mPOS) devices to South African SMEs by restricted in accordance with the client the end of the year. organisation’s requirements. Business owners using the service will The platinum card also reduces the risk of be able to connect Android or iOS devices fraud as customers can restrict amounts loaded to a Yoco card reader to accept payments. onto the card, and bank account details are The hardware is paired with an mPOS not revealed. The maximum amount that can application and business intelligence portal be loaded is INR10,000 ($154) for non- to give SMEs real-time access to sales know-your-customer (KYC)-compliant cards, insights and analytics to boost revenue and INR100,000 for KYC-compliant cards. through informed decision-making. Transcorp chair Hemant Kaul said: “These “Small and medium-sized merchants cards can replace cash payment for all value that have never accepted card payments transactions up to INR100,000. Being very are turning to mPOS solutions to expand convenient, this card gives the cardholder their customer base and increase sales,” freedom to use it wherever and whenever Mastercard said in a statement. needed, including online. Yoco’s pay-per-use transaction pricing “The cardholder can limit or control the model with no fixed monthly fees benefits balance in the card and conveniently use it for smaller merchants, compared to more all their payment needs. costly traditional card terminals. Transcorp International, a provider of foreign “Corporations, institutions and other Yoco CEO Katlego Maphai said: “Small exchange and inward remittance solutions, organisations which need to disburse wages, and medium businesses employ over has launched a platinum prepaid card in salaries, incentives and such other recurring 60% of the labour force in South Africa, association with India’s Yes Bank and the payments to their employees or beneficiaries yet they lack the basic tools necessary to National Payments Corporation of India- can seamlessly do so with ease.” accept electronic payments and run their powered Rupay. The card will be available at 40 Transcorp businesses effectively. The move is in line with the Indian branches across the nation, and at most of the “Through this partnership, we will government’s aim to promote cashless 7,500-plus Transcorp franchises. < empower even more small businesses that previously did not accept card payments, while growing the market and make a NGC expands API for over 500 brands contribution to our economy.” National Gift Card (NGC), a provider of Target, Amazon, Visa, Kohl’s, Best Buy Mastercard Southern Africa division B2B digital and physical gift card solutions and Starbucks, as well as numerous other president Mark Elliott added: “While the and fulfilment services, has upgraded the brands. number of South Africans with access technology, content and customisation NGC president Eric Thiegs commented: to formal banking products has grown of its gift card application programming “Gift card API services are the path of substantially over the last few years, the interface (API) for over 500 brands in the the future in the incentive industry, number of card acceptance locations – US, Canada, the UK and Europe. and our updated platform and API gift especially at small businesses – has not The gift gift card API processes and card catalogue offers a new standard on grown in parallel. delivers digital gift card orders in real time security, speed, quality and choice for B2B “Solutions like Yoco enable small as users redeem points, miles or cashback. buyers looking for a digital reward service and medium businesses to respond to It also accepts orders for physical gift cards provider for their programs. customers’ increasing desire to pay for in real time, processing them within 48 “We have a commitment to deliver the goods and services with payment cards hours. The API provides fraud protection best in gift card sourcing and fulfilment rather than cash, which is higher risk, using measures such as IP-based security technology in a way that focuses on the without large upfront investments in threshold access limits, intrusion detection foundation of security, quality and speed.” infrastructure or high transaction costs.” and event logging for suspicious activity. It Companies looking for single API Yoco launched its mobile card- supports specific dollar increment reward integration to send both digital and acceptance offering in 2015. Since then levels for brands in the US starting at $1. physical gift card orders can integrate it has grown its base to over 14,500 NGC offers a global catalogue of gift NGC API as their gift card sourcing and merchants, and is now adding over 1,200 and e-gift cards for iTunes, Walmart, fulfilment engine within a few days. < new merchants every month. <
8 | December 2017 | Cards International
CI December 550.indd 8 06/11/2017 12:34:28 News | digest
ANZ makes more than 3 million Visa debit cards accessible ANZ has introduced specially designed The new cards work with ANZ’s mobile of some sort, so it’s really important we Visa debit cards, through which it aims to payment options including Apple Pay, develop products all our customers can use make everyday banking tasks easier for Android pay, Samsung Pay and Fitbit conveniently. customers with a disability. Pay. They also feature Visa PayWave, so “We have a commitment to inclusive A total of 3.4 million Visa debit cards will customers can make contactless payments design and accessibility standards in all now have tactile indicators, larger fonts, wherever they are accepted. aspects of our product development, so and high-visibility leading edges to help ANZ’s senior manager of everyday the extension of these features to a further customers identify their cards and which banking, Steve Price, said: “We know that 3.4 million cards is a significant part of way to insert them into terminals. one in five Australians lives with a disability delivering on that.” < HSBC US launches Premier World Citi extends Quick Elite Mastercard credit card Lock feature Citibank debit card customers can now use the Quick Lock facility to temporarily lock and unlock their cards, either online or via Citi’s mobile app, to prevent unauthorised transactions. The functionality was made available to credit card members last year, and has now been extended to debit card customers. More than 1.6 million locks and unlocks have been completed by credit card holders since it went live. Since the extension to debit cards in September, debit card customers have used it at an average rate of 900 requests per day. The Quick Lock for debit cards joins a suite of new mobile app features, such as ATM and debit card PIN reset, activation of new or replacement cards, mobile cheque deposit with increased limits, and other user experience enhancements. Other HSBC has launched the HSBC Premier The new credit card, which is available features include personalised contact World Elite Mastercard credit card – a to HSBC Premier clients, has an $85 information for Citigold relationship luxury credit card HSBC says will provide application fee. The main cardholder managers and Citi personal wealth best-in-class travel benefits and privileges benefits include: management advisers, enabling users to for cardholders. • 50,000 Rewards Programme bonus request appointments from the app. Pablo Sanchez, head of retail banking points after spending $4,000 or more in Citibank digital, client experience, and wealth management for HSBC in the the first three months; marketing and analytics head Elyse Lesley US and Canada, said: “We listened to what • Triple points on travel worldwide, said: “Citi is constantly looking for ways our customers wanted in a premium credit double points on dining purchases to make banking more convenient by card and built a product that provides the worldwide, and points on all other connecting with our customers when and ultimate support for their lifestyle. purchases; how they want to be served, especially “Our new HSBC Premier World • $100 annual air travel statement credit with respect to security and protection. Elite Mastercard credit card is a highly as reimbursement for flights, baggage “Since our customers are increasingly competitive offering and represents the fees, upgrades or air travel purchases; active on mobile or online, we’re giving most valuable collection of features and • Unlimited Boingo Wi-Fi at over 1 million them another tool to control their account benefits ever offered in an HSBC credit hotspots worldwide; activity across the bank.” card.” • Up to $100 annual statement credits for Citi has reported that the number of The card offers worldwide rewards rides with Uber and Lyft , and active digital customers in the North on a broad list of travel purchases from • 50% more value than cash when American Consumer Bank rose 13% year traditional airfares, hotels and trains to cardholders redeem points for air travel on year in the third quarter of 2017, ride-sharing apps through credits with through the HSBC Travel Rewards while the number of active mobile users Uber and Lyft. website. < increased by 22%. <
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CI December 550.indd 9 06/11/2017 12:34:55 analysis | ATM charges
analysis:
ATM charges comment: simon black, CEO, PPRO group on the cards? ATM trade body LINK has warned that thousands of free-to-use cash machines could be axed from UK high The days of free ATMs in the UK may be coming streets, due to plans to cut the fees to a close as LINK proposes a drop in interchange they receive, further indicating that Britain is well on course to becoming a fees. Patrick Brusnahan looks at the implications cashless society. It was the 50th anniversary of the world’s first ATM this year, but we may well lead to a vast reduction in free access predict this will be the last major to cash for British citizens and businesses. milestone ATMs see in the UK. In Any money saved by a tiny number of banks, fact, our latest research shows that, which some estimates put at tens of millions given the option, 26% of us would of pounds each year, will effectively be at the never choose to pay cash when buying expense of already hard-pressed consumers. an item in a shop, and more than a This at a time when ATM costs in the UK are quarter of us (26.35%) find it irritating already amongst the lowest in the world. when we have to pay by cash rather “We already have thousands of bank- than by card. branch deserts in the UK. The proposals for interchange reduction are likely to create These findings are mirrored by the ATM deserts, where communities will wither fact that 38 million transactions were because there is no local, convenient access to made in 2016 using mobile payments, cash and other financial services. accounting for £288m spent using INK, the UK’s largest ATM network “The regulators and the government need mobile phones, an astonishing 247% with around 70,000 machines – to step in immediately to stop a potentially increase on the year before. Pubs, bars 55,000 of which are free – in the catastrophic situation developing.” and restaurants made up for 20% of all L mobile payments processed, and ‘meal market, has proposed a 20% reduction in The views of LINK members and the LINK interchange rates over the next four years, Consumer Council are being sought by 30 deal’ hotspots for workers buying from 25p to 20p. November 2017. It is expected that the board’s lunch – such as supermarkets and According to LINK, this is to “give ATM final decision will be published by 31 January grocery stores – accounted for 54%, operators the opportunity to reduce their 2018, and implemented by 1 April 2018. < further emphasising the decreasing costs through efficiencies and minimise any demand for physical cash. reduction in ATM numbers”. ATM NUMBERS IN THE UK This announcement indicates that LINK’s CEO John Howells comments: it is unlikely that the ATM will reach “LINK is committed to maintaining an 2005 58,286 its 60th anniversary, and with 44% extensive network of free-to-use cash 2006 60,468 of us stating that we rarely use them machines. Free access to cash is vital for UK 2007 63,476 to remove cash from our accounts consumers, and LINK intends to maintain anymore, it will not be long until ATMs 2008 63,916 this for many years to come.” are consigned to the history books. 2009 62,192 However, this may not be the case as a The ATM was groundbreaking in its 2010 63,137 lower interchange fee could cause free ATMs initial purpose to reduce the need to become unprofitable, bringing forward a 2011 64,369 for people to go into a bank branch case to shutter them. 2012 66,134 to withdraw money, but the rapid The ATM Industry Association believes this 2013 67,963 adoption of digital payments means could have the opposite effect and put free 2014 69,000 the core function of an ATM – ATMs in jeopardy. Ron Delnevo, executive distributing cash – is fast becoming 2015 70,270 director Europe at the ATM Industry redundant. In the digital age, cashless 2016 70,020 Association, says: “Make no mistake, the payment methods are king. < proposed reductions in LINK Interchange Source: Cards International
10 | December 2017 | Cards International
CI December 550.indd 10 06/11/2017 12:35:26 feature | scramcard
a fraudproof card: too good To be true?
Card fraud is rife in the UK. According to Financial Fraud Action, £768.8m ($1bn) was lost to fraud in the UK in 2016, with 80% of this through payment cards. Is there a way to prevent this? ScramCard thinks it might have a solution. Patrick Brusnahan reports
ccording to UK Finance, £287.3m may look at it as an insurance policy, some realise that we can’t hide the fact that it just was lost to card fraud in the first people may think of it as innovative. There are looks like a card. A half of 2017. Is there a way to limit multiple reasons to buy the product.” “We don’t stick it to a piece of paper; this crime? it comes in a nice box. It’s very much an ScramCard has launched the Da Vinci ‘unboxing an iPhone’ type of experience,” Choice card as a response. It is a electronic Hewitt continues. payment card that generates one-time PIN “What’s fundamental, at the business and security codes for purchases. model, is that it’s all relative. It’s a It is the same size as a standard card, Da Vinci Choice was sophisticated piece of technology. It’ll but includes a display, battery and touch eventually fit into the normal model. We numerical keypad. According to the press definitely aimed know, at the moment, some people won’t find release, it is “fraudproof”. But can anything the price point palatable.” really be fraudproof? at early adopters So why are the banks not producing Speaking to CI, Simon Hewitt, chief something like this? With their resources, executive of ScramCard, says: “Too good to and lovers of surely something more can be done to prevent be true? To an extent, I don’t think there’s card fraud? anything infallible. In terms of having technology Hewitt concludes: “It’s one of the reasons I something a notch above in the hands of the did Da Vinci. You know what banks are like. consumer, that’s actually desirable and does They’re making so much money that there’s a what it says on the tin? That’s long overdue. trade off between doing something and not. “There are solutions out there that do One aspect that might hinder its success is They need something palatable, and to see those things, but nobody likes them and they the cost. While banks hand out free cards with that customers are using something and make only service one particular thing. That was a current account, Da Vinci Choice is £75. them think they’ve got nothing to lose. the intent of this, to embed something that While it can hold eight accounts on its mobile “I don’t think the banks are doing enough, everybody carries and provides a multitude wallet, the price may appear steep. but I don’t think there is a solution out there of capabilities that the banks can choose for Hewitt explains: “The price point is that would allow them to do so, which is why themselves. Too good to be true? I’d like to something, but we’re dipping our toe. What I wanted to give them something that would think not.” we’ve done – and spent a bit of time doing – is give them half a chance.” < On paper, the security seems tight. The usage of one-time codes for every transaction, from contactless to ATM withdrawal, seems to provide a healthy barrier. Even if the card is lost, the Da Vinci app would be needed. In addition, cards can be blocked instantly in case of theft. So who is going to take up the Da Vinci card? “Da Vinci Choice was definitely aimed at early adopters and lovers of technology,” Hewitt explains. “Similarly, those people have maybe been defrauded and have suffered the pain of trying to get their money back. Some
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CI December 550.indd 11 06/11/2017 12:35:54 industry insight | Collinson Group
– revealed that 59% would spend more with a brand if it offered a loyalty programme where it card-linked offers and was easy to earn and redeem rewards. It should not be surprising that CLOs have evolved to become a key element of a loyalty programme, boosting customer engagement the new drive for for retailers, airlines and financial institutions across the globe. CLOs also provide a valuable ability to link a customer’s online and in-store purchase customer loyalty behaviour. They enable a brand to see if an offer made online, through an email or social media for example, was redeemed through a purchase Nearly every business will have considered using vouchers to made in-store or online. increase sales or loyalty. People once scoured newspapers and This attribution plays a vital role measuring and driving online and in-store continuity. It magazines to clip vouchers for offers, but the digital age allows also appeals to customers – Collinson’s research no time for that, writes Collinson Group’s Mark Jackson revealed that 60% of those questioned want to be able to earn loyalty currency both online and in-store. CLOs can play an important role in here have been many attempts at providing credit or debit card information, an meeting this demand in-store, seamlessly and digital vouchers, from customers offer can be loaded directly onto the consumer’s effectively. Tdownloading offers and printing card and then automatically redeemed when Finally, CLOs provide an abundance of out vouchers, to showing a text or QR code they pay. valuable data. Leveraged effectively, brands can on their smartphone at the point of sale. The offer can be paid as loyalty rewards, or use the insights to deliver more personalised But all of these bring their own issues, cashback onto a card statement. For example, offers and experiences for customers – which including customer and till friction, and the an offer of a 10% discount with a retailer will drive loyalty and increase engagement. need for staff training. could be loaded onto a person’s card, then In the US, 78% of internet users said There has not been a method that is effective after making a purchase with that retailer, the personally relevant content from brands for building loyalty and repeat sales – that is customer would automatically receive a 10% increases their purchase intent, according to a until the development of the card-linked offer refund onto the same card once the payment OneSpot/Marketing Insider Group survey. (CLO). has cleared. It is great for both consumer and Through CLOs, the humble voucher has More than just a voucher for the digital age, merchant because it is completely frictionless, entered the modern age, helping businesses CLOs enable organisations to drive loyalty, but which makes a big difference. in highly competitive markets to better also better understand customer behaviour. Collinson Group research into the global understand and reward their customers, as well Having opted into the CLO programme by affluent middle class – the top 10% of earners as increase sales and boost loyalty. < AI to boost the personalised banking experience With the evolution of digital banking, not have to mean a less personalised interactions with their banks. When there are fewer opportunities for face-to- experience for customers, for banks trying we asked how the global mass affluent face customer interactions. Is it therefore to maintain customer loyalty, increase customer likes to bank, 26% said they becoming harder to drive customer Customer Satisfaction and Net Promoter prefer to visit a branch, 24% bank via an devotion, attracting and retaining loyal Scores – it is essential that it does not. app, 29% favour using a website and 21% customers in an era of digital self-service? We examined the banking motivations of showed a preference for the phone. Banks are investing huge amounts in the affluent middle class in Brazil, China, In today’s dynamic and aggressively digital capabilities such as chatbots, India, Italy, Singapore, the UAE, US and competitive environment, financial artificial intelligence (AI) and open APIs. UK. Those who feel loyal to a bank are services brands need to work harder to According to Goldman Sachs, machine 72% more likely to purchase a product understand their customers, to engage learning and AI will enable £26bn-£33bn from it in the future, and 70% would be with them, to reward them appropriately, in annual “cost savings and new revenue prepared to recommend a banking brand and ultimately retain them. opportunities” within the financial to friends and family. Furthermore, if a Through the effective application of sector by 2025. The availability of new customer purchases additional products AI, banks can leverage technology to technologies such as cloud computing through their bank, over half are less offer enhanced products, services, and machine learning algorithms have willing to switch provider. communications and programmes created the perfect conditions for the Although customers are increasingly that achieve the ultimate in customer expanded use of AI in banking. comfortable using digital financial behaviour – devotion to a brand. < However, the increased use of AI does services, some still want face-to-face
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CI December 550.indd 12 06/11/2017 12:35:55 Feature | dbc debate
consumers about the benefits of open banking and sharing data in a responsible way. “Unless we do this, the customer interface will open banking will be hijacked by the social media companies. If we do this as an industry correctly then we will continue to own the interface. If we do not, it may go to Google, breathe new life Facebook and the rest.” Roberto Ferrari, chief digital and innovation officer at Mediobanca group, said: “Open banking will force banks to use the into the industry? data they have to its full potential.” In agreement with Ferrari was TSB Bank’s digital innovation and transformation director, With the deadline for PDS2 just around the corner, banks Pol Navarro, who argued: “Open banking and and fintechs must be prepared for the challenges it brings as the introduction of PSD2 is pushing banks to become more oriented towards the customer. well as the opportunities that come with it. Briony Richter Customers seek good experiences from their reports from the latest Digital Banking Club debate banks.” Asked if TSB is approaching this from the mindset of an incumbent or challenger, ill open banking really there is a little reservation. Is it really going to Navarro said: “We are a challenger. We at be transformational? The live up to its promises? Do consumers really TSB are making sure that we can take full W latest Digital Banking Club understand it and will they embrace it? It is advantage of the data we receive.” debate of 2017, powered by Intelligent quite a confusing time for a lot of people, and Jenkins argued that data is important, but Environments, discussed just that. it needs to be carried out carefully. customers must always come first. “Data is Hosted at the formidable Law Society in “If customers allow it, licensed AISPs the fuel, but you have to think carefully about London, the debate featured an outstanding [Account Information Service Providers] and the customer experience and what their needs panel to debate the challenges and PISPs [Payment Initiation Service Providers] are. We need that creativeness coming into opportunities posed by the implementation of will enjoy unprecedented access to a platform the industry to give our customers something open banking. on which they can develop entirely new kinds of value. Often, customers are a little anxious of products, services and experiences.” about open banking. Why is it a good time to be discussing Anne Boden, CEO of Starling Bank and “We need to ask ourselves, how are we going open banking? the 2017 Digital Banking Club Power 50 to get customers to trust us with their data as Simon Cadbury, director of strategy and Personality of the Year, added: “It could much as they trust us with their money? innovation at Intelligent Environments, began completely change retail banking forever “We have to answer this together. We have the debate by expressing his thoughts on the – if it happens. There is a huge amount of to think about putting the customer first. introduction of open banking. opportunity out there but implementing it in Some big banks may naturally want to hold He said: “It is the topic on everyone’s lips. traditional banks could prove difficult. onto their customer base, but collaboration The most interesting thing for me is that “The opportunities that PSD2 will open is the way forward. If we do it securely with every article I read and everyone I speak to is up are great; they are good for consumers, APIs then it really could be phenomenal. ” incredibly positive about open banking. but those changes actually attack the heart of The panel were all agreed that open banking “I agree that it is a very exciting time, but banking as it is at the moment.” has great potential – if harnessed with the actually when you scratch beneath the surface Hilda Jenkins, digital experience and right tools. engagement director at Barclays, argued that it is the customer that should be the priority. “The way we go about it has put the customer at the centre of everything. The big banks, the fintechs are all looking to come in and create new ways to excite our customers. If we do that then it can only be a good thing for all of us. “At Barclays we put the trust of our customers first. If data is shared securely and open banking is approached in a mature way by all, then it could work.” Boden emphasised this point: “Customers should come first and they should own their Hilda Jenkins, Barclays data. It is up to the industry to educate Roberto Ferrari, Mediobanca
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CI December 550.indd 13 06/11/2017 12:36:01 Feature | dbc debate
Will open banking live up to expectations? “Traditional banks are in the driving seat, to create different types of data. With these On the topic of whether open banking is more but if they hesitate, technology heavyweights partnerships we can marry the data gained exciting in business than in other sectors, Will like Google, Amazon, Facebook and Apple are from them with the data we already hold.” Beeson, head of operations and innovation well placed to take advantage of PSD2.” Cadbury said: “I hope the challenges are at Civilised Bank, stated: “It is very exciting. Navarro stated: “In the long run it will overcome and there is success, but I do fear There is much broader competition. Banks are really change the banking industry. If you give that the big brands have an advantage at this doing it because of the changing expectations good, trustworthy customer service then the time.” from customers. Also, if you look across customers will continue to come again.” Boden added: “The big banks will be the industry you are seeing fewer and fewer PSD2 follows on from PSD, and could pushed to be more creative and make more standalone banks wanting to own 100% of essentially revolutionise the banking and investments in things that make the customer customer services. payments industry, affecting everything from happy. New entrants will drive innovation “It will be much faster to deliver with the way we pay online to the information and creativity, and hopefully everyone will get collaboration, and there will be more that can be seen when making a payment. a better deal if it works. We must, however, comprehensive services for customers.” Adapting to these new regulations will educate our customers in what all this will Boden reiterated the need for collaboration, need significant levels of investment and mean for them.” saying: “We envisage a world where people commitment from the banking industry. Navarro believed that it will be the like us will provide the business current Boden talked about the differences that customers that will benefit the most from account, and then customers can use APIs to consumers will all see with PSD2. “With PSD open banking. Ferrari agreed, but emphasised get access to other services. We can provide we didn’t have all these new players providing that it is essential to have the right architecture an alternative and different value chain to the people with specialised services. PSD2 is going from the top to the bottom of the bank. traditional banks.” to do that. It has the infrastructure to join up Beeson said the winners will not necessarily Customer expectations are at the heart new services to old services. It is going to link be specific companies or individuals, but those of the debate; they are the main driver for the incumbent and traditional banks in new who are prepared. implementing the changes needed. and interesting ways.” He stated: “Regardless of bank or non- Ferrari argued that the expectations of For consumers who hold more than bank, incumbent or new entrant, the winners customers are clear: They want top service one bank account, the changes will allow will be those that have efficient, scalable, open from their banks. Ferrari stated: “Banks are businesses and providers to show all their architecture. The losers will be the ones that data companies, therefore money and banking account information in one place. Of course, do not. There are so many factors that are is about data. along with these changes come much stronger changing and there will be pressure to make “There are very high expectations from security checks to ensure safe customer changes.” customers. You can see this from the rapid payment. A question from the floor – again the DBC uptake in mobile banking globally. In the end debate played to a full house – referenced it is what you give to them.” Who will be the winners and losers? seven-day switching and why, as customers, As well as customer support, open banking With high expectations for all players across we should switch our accounts for, potentially, will also be beneficial to banks and fintechs. the board, the panel were asked who will be another average experience. What unique Cadbury emphasised how the business banker the ones that stand up to the challenges and experience do the panel have to offer? has more to benefit from in the short term, overcome the hurdles. Beeson began by stating that Civilised but must look to the future in order to secure Jenkins stated: “This is the time to be in Bank’s unique experience would be “delivering customer loyalty. banking. These new laws are exciting for a face-to-face human interface that would be “The open banking component of PSD2 us and our customers. Of course the big the single point of contact for all of the bank’s is nothing less than an invitation to rethink banks will embrace it. We want to keep our resources”. banking. The walled gardens that banks have customers and keep them satisfied. Boden added that when customers come built around their customers’ data will start to “We need to innovate and take hold of the to Starling Bank it is because they want that crumble. The customer loyalty that banks have opportunities opening up. Barclays has been unique experience, and the mobile app it spent fortunes to build could be challenged. opening up to partner with small players provides does just that.
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CI December 550.indd 14 06/11/2017 12:36:07 feature | dbc debate
and seeing other banks, retailers or tech companies eat their lunch. “Equally, there is a risk of overestimating the impact of PSD2 and wasting resources on it, to the detriment of some other left-field advance such as machine learning.” Cadbury also highlighted that customers might not want PSD2. “Some customers like to compartmentalise their financial interests, particularly their debts. “For some this is a matter of security or an insurance against fraud, for others it’s simply IE’s Jerry Mulle with Anne Boden because they don’t want their bank to have Jerry Mulle with Will Beeson a full picture of their financial lives. Services “We built all the functions into the mobile built on the back of PSD2 will have to all fits together. If open banking can help in app. We did get an incredible number of overcome this to succeed.” a way that is safe, secure, and does not abuse people switching over in the first couple of Carrying on the importance of educating data, then I think it could be a very powerful weeks. People want something different and consumers, Boden stated: “I believe it comes thing.” unique. I believe the seven-day switch works. down to education again. Using methods that Speaking about the opportunities of “By providing the right infrastructure, are sophisticated will help customers connect GDPR, Jenkins said: “It is a great opportunity delivering interesting products and a number with their data and systems. – how we leverage the trust in our customer of relevant partners, we can gain new “We must educate people that it is safer base and use the enhancement of privacy customers and keep the loyalty of our existing to have all their information stored in one laws that GDPR is bringing. It is important ones,” Boden noted. place, with trusted institutions, and use those to approach it responsibly and expose it to services to log on to other providers.” customers in a way that they can enjoy.” Risks and hurdles Ferrari agreed that it is important to let Cadbury concluded: “Open banking is a Open banking does not come without customers know how their data is being used, revolutionary concept in financial services, conduct risks. In particular, many customers and from where it is being accessed. “We need but not in the technology sector. Open APIs are very concerned about their security and to be much more transparent. The technology are the driving force behind the Internet of data privacy. to prevent fraud and hacking will become Things and an essential feature of almost all Jenkins discussed the importance of much more relevant, and we need to be successful online platforms – from Twitter and guiding consumers through the process of prepared for that.” Expedia to Amazon and Uber. open banking. “We want to embrace open Navarro also emphasised that an important “As banking goes digital, an API-driven banking in the right way, building APIs and part of it is down to communication. future is as inevitable as the internet-driven encouraging customers not to share their log “Security in banks has been good, and it is present that precedes it. in details. Barclays has just launched a major all about the evolution of technology. What “It is the opinion of Intelligent campaign around being digitally safe, and that we do need to do is communicate to our Environments that PSD2 could sustain is to educate consumers that come into our customers that we are secure. We have not entirely new business models, but that bank on the right way to engage in this digital done that well, and so we must sell it better.” regulation needs ultimately to go further – world. encompassing all account types and financial “What has to be understood is that there Killer features data – to make open banking the revolution it are different types of customer, and we have to A question from the audience asked, what will could be.” provide for everyone across the demographics. be the killer feature that attracts customers? The panel all agreed that open banking There are a lot of older customers who are Boden believed it will not come from is incredibly exciting and innovative. There more vulnerable, and a lot of young people the banks. She said: “I don’t think that the are hurdles to overcome, but with the right and millennials that are more savvy but do killer feature will come from the industry amount of collaboration, security and not necessarily think about it on a day-to-day or incumbents. That killer feature will come creativity, open banking can be something to basis, so a bank has to be about protecting all from people who build applications upon our look forward to as the next step in banking of our customers.” infrastructure. Banks cannot fail: If a project is and payments. Cadbury said that open banking does come started it must finish successfully. Following the Digital Banking Club debate, with risks and, when speaking to clients about “With open infrastructure, with the Power 50 winners were invited onto the open banking, the advice given is to start processes and procedures to vet people and the stage to receive their awards, presented by off small and build from there; that way the chance to use APIs with hundreds of people Jerry Mulle, sales and marketing director at customer will not be giving away more data innovating, there will be breakthroughs. Those Intelligent Environments. than is necessary. breakthroughs will come from someone using Categories for the awards were: Personality On the risks, he stated: “Because of its the possibility of putting data together to of the Year, Digital Financial Services Power open-endedness, open banking comes with create good.” 50, Digital Financial Services Rising Stars, substantial risks. There is a risk of banks Cadbury said: “I’m very excited, potentially, Digital Innovation in Collections, and Digital failing to embrace the opportunities of PSD2 to see all my money in one place and where it Innovation in Vehicle Finance. <
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CI December 550.indd 15 06/11/2017 12:36:17 country snapshot | poland
country snapshot: poland
POLAND
Poland is one of the most advanced and innovative markets in Europe, offering consumers broad access to the latest technology in electronic payments. Cash remains very popular, however, although e-commerce is driving consumer adoption of alternative instruments
espite the country’s strong Although cash is very much the dominant According to the World Bank, Poland made electronic payment infrastructure, means of payment, there was huge growth substantial progress in terms of financial Dcash remains very popular in in the volume of debit card transactions in inclusion, with the percentage of the Polish Poland, accounting for 64.1% of the total the four-year period to 2016. This more population aged 15 or above with a bank payment transaction volume in 2016. than doubled between 2012 and 2016 as account increasing from 72.9% in 2012 to Payment card use is rising as consumers consumers’ preferred debt-free payments 81.7% in 2016. enthusiastically embrace new technologies, and avoided unnecessary expenditure. The government has also encouraged moving from cash to payment cards to The growing banked population also businesses to open bank accounts for contactless. led to a rise in debit card penetration. employees, and salaries are now paid into
value of credit tRanSfers value of cheque payments value of payment cards
$bn $bn $bn 0.40 50 15,000 0.35
12,000 40 0.30
0.25 9,000 30 0.20
6,000 0.15 20
0.10 3,000 10 0.05
0 0.00 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
(estimated) (estimated) (estimated)
Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData Source: European Central Bank, GlobalData
16 | December 2017 | Cards International
CI December 550.indd 16 06/11/2017 12:37:54 country snapshot | poland
bank accounts, resulting in an increase in Debit card shares by issuer Debit card shares by scheme the number of debit cards in circulation. Poland is also focusing on electronic modes of payment to distribute pensions and other retirement benefits. In Poland, Bank PKO nearly 65% of senior citizens receive their Polski 22.9% pensions and other retirement benefits Mastercard through a bank account. Others 44.2% 41.6% Visa 58.4% mBank-BRE CREDIT CARD GROWTH Bank 21.9%
Bank The credit card market declined during the Zachodni WBK 2012-2016 period in terms of the number 11.0% of cards in circulation, as Polish consumers prefer to maintain a cautious stance
towards debt. Source: GlobalData Source: GlobalData Growth rates declined at the end of 2010, as non-performing loans rose. The pay later shares by issuer pay later shares by scheme T-Recommendation issued by the Financial Supervisory Commission in Poland took effect in August 2010, restricting consumer Others Bank PKO 6.3% access to bank loans and consumer credit; Polski 13.6% consequently, consumers faced more stringent scrutiny when applying for a Crédit Agricole credit card. Others 11.0% 60.2% Visa The change in regulation imposed Mastercard 50.0% 43.7% additional requirements on banks to check mBank-BRE Bank 12.6% the creditworthiness of new customers. Issuers also deactivated inactive cards, resulting in a decline in the number of credit cards in circulation. However, despite declining card numbers in circulation, usage has risen constantly. Source: GlobalData Source: GlobalData While the recommendations forced banks to adopt a cautious stance towards card issuance, they turned their attention to transactions, accounting for 60.3% of the young population, banks in Poland are increase credit card use. Consequently, total e-commerce transaction value in designing contactless prepaid cards for this reward credit cards have started to 2016. market segment. gain traction, with issuers such as Bank However alternative payments are For instance, PKO Bank Polski offers Pekao, PKO Bank WBK, and ING Bank gaining prominence, with banks, mobile the Mastercard-branded Speeder PKO Śląski offering benefits including flexible network operators and payment providers Junior contactless prepaid card for children repayment options, 56-day interest-free launching new solutions in the market. A aged under 13. Cardholders can also opt credit periods, discounts, reward points, number of alternative payment solutions, for a prepaid contactless sticker. The card and cashback offers. such as PayPal, Blik, Masterpass and can be used for both in-store and online Banks are also offering instalment Fortumo, are present in the country. payments. Funds can be loaded onto the facilities to convert large-value purchases Mobile wallets, digital wallets and carrier card by online transfer or in cash at any of into monthly instalments. billing collectively accounted for 20.5% of the bank’s branches. the total e-commerce transaction value in In view of the growing e-commerce ALTERNATIVES GAIN 2016 – up from 7.5% in 2012. market, banks are also offering prepaid cards targeting online shoppers. For The fast-growing e-commerce market is PREFERENCE FOR PREPAID example, mBank offers a Visa-branded driving growth in Poland’s payment cards prepaid card called Virtual eKarty. market. The prepaid card market recorded a Similarly, ING Bank Śląski offers the Visa E-commerce registered a CAGR of 20.0% review-period CAGR of 15.9% in terms Virtual card. This virtual prepaid card can during 2012–2016, growing from $4.1bn of the number of cards in circulation, and be ordered online and costs $4.80, but for (PLN17.2bn) in 2012 to $8.5bn in 2016. 17.78% in terms of transaction value. This customers with a Direct 18–26 account, Conventional instruments – including trend is expected to continue over the next the card is issued free of charge. Online payment cards – remain the preferred five years. With the growing popularity of transactions are secured by the 3-D Secure mode of payments for e-commerce contactless cards, especially among the code service. <
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CI December 550.indd 17 06/11/2017 12:38:00 country snapshot | peru
country snapshot: peru
PERU
Payment cards are gradually gaining prominence in Peru, primarily driven by the government’s financial inclusion programme, and supported by commercial banks. As more people gain employment in the formal sector, credit cards are increasingly being used for purchases
n terms of transaction value and volume, Mexico (138.4) and Colombia (82.3) in formal banking system. In Peru, the banked Peru’s payment cards market recorded 2016. The low adoption rate is a result population in the age group above 15 years Igrowth rates of CAGR 12.4% and 11.8% of the costs associated with cards, low was just 34.3% in 2016. respectively in the period 2012-2016. consumer financial literacy and limited Furthermore, a significant proportion of At just 69 cards per 100 inhabitants, accessibility, as well as a lack of an the population, including farmers, street card penetration in Peru is the lowest in adequate payment infrastructure, especially vendors, domestic servants, and self- comparison to its regional peers, ranking in remote areas. employed workers, engage in informal behind Brazil (243.1), Chile (196.6), A significant share of the Peruvian activities that mostly fall outside the formal Argentina (178.4), Venezuela (151.5), population does not have access to the tax and benefits system.
value of credit tRanSfers value of cheque payments value of payment cards
$bn $bn $bn 200 120 20
100 150 15 80
100 60 10
40 50 5 20
0 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
(estimated) (estimated) (estimated)
Source: Central Reserve Bank of Peru, GlobalData Source: Central Reserve Bank of Peru, GlobalData Source: Central Reserve Bank of Peru, GlobalData
18 | December 2017 | Cards International
CI December 550.indd 18 06/11/2017 12:39:04 country snapshot | peru
INCLUSION INITIATIVES Debit card shares by issuer Debit card shares by scheme
Financial inclusion has become a priority for the Peruvian government, resulting in the development of the National Financial Others Inclusion Strategy in July 2015. It aims to 24.2% Mastercard provide access to a formal financial account 28.8% Banco de Crédito for at least 50% of the adult population by del Perú 37.6% 2018, and 75% by 2021. Scotiabank Perú Visa 13.3% The main objectives of this programme 71.2% are improving access to, and use of, quality BBVA Continental financial services, promoting electronic 24.9% payments, and development of the country’s banking infrastructure. With a high mobile penetration rate of
111.9, the Peruvian Banker’s Association Source: GlobalData Source: GlobalData developed the national mobile payments system, Modelo Peru to create a mobile pay later shares by issuer pay later shares by scheme payment ecosystem for financial inclusion. Modelo Peru launched Bim mobile money, a fully interoperable payments platform, in February 2016. Through this, Others 8.7% Modelo Peru aims to provide much of the Banco Falabella Perú 19.8% unbanked and underbanked population with access to digital financial services. It enables Peruvian residents with a Others Mastercard 49.3% Banco Ripley Visa 47.5% mobile phone to open a bank account, 17.3% 46.8% transfer funds and make utility payments, Banco de and can be accessed via any basic mobile Crédito del Perú phone. Modelo Peru plans to have more 13.6% than 2 million active Bim mobile money users by 2020. The agent banking model is also being Source: GlobalData Source: GlobalData used to provide financial access in remote areas. It was first introduced in Peru in 2005 with a change in regulations that terms of the number of citizens growing POS INSTALLATIONS allows banks to use third-party agents to their income from below the poverty line provide financial services to consumers. into the middle-class bracket in the period The number of POS terminals recorded a Agents provide a low-cost channel for between 2000 and 2012 CAGR of 8.0% between 2012 and 2016, accessing financial services, as neither Falling unemployment and rising rising from 120,025 in 2012 to reach banks nor agents charge consumers for minimum wages and pensions have also 163,514 in 2016. agent banking services. The number fueled growth in the credit card market. With the increase in the number of of agents providing banking services While wages have grown at a minimum POS terminal installations at retail outlets, increased from 9,204 in 2010 to 38,000 annual rate of 6%, the percentage of the country’s potential for consumer in 2015. The rapid growth of agent the population surviving on less than $2 card-based payments is also expected to networks in Peru has allowed banks to (PEN6.3) a day halved to 28% between improve. expand services into areas where the costs 2005 and 2014. To increase the uptake of mPOS of setting up a traditional bank branch Credit card growth has been driven solutions, Procesos de Medios de Pago, would be high. Rising bank penetration is by the growing economy, which has the acquirer for Mastercard payment cards expected to drive demand for products increased the number of jobs in the formal in Peru, started providing EMV-enabled such as bank accounts and debit cards. sector. Formally employed citizens are mPOS terminals in 2014. The mPOS the main potential users of credit cards, terminal can be used by merchants to MIDDLE-CLASS POPULATION and often use cards to purchase services, accept chip-and-PIN card payments from and consumer goods such as TVs, cars, consumers around the world. The expanding middle-class population and furniture and clothes. The rising uptake of mPOS solutions has higher consumer spending are expected to As more middle-income consumers allowed merchants to extend their payment increase credit card use in Peru. gain access to financial services, banks are acceptance channels, and is anticipated to Peru has seen large-scale growth – and offering products specifically tailored to drive the growth of payment cards in the the highest rate in Latin America – in consumers’ needs and incomes. period to 2020. <
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CI December 550.indd 19 06/11/2017 12:39:12 Country snapshot | the uae
country snapshot: the uae
THE UAE
Cash remained the predominant payment instrument during 2012-2016 accounting for 87.3% of the country’s payment transaction volume in 2016. This was primarily because consumers in the UAE see cash as a quicker and safer payment option, over which they have more control
espite cash’s dominance, programmes, promotional campaigns run The frequency of use of payment cards in card payments are gradually by financial institutions, and the growing the UAE stood at 49.8 in 2016, higher than Dincreasing in the UAE, supported consumer adoption of EMV and contactless regional peers Lebanon (30.9), Oman (22.4), by government financial inclusion technology. and Bahrain (18.1).
value of cheque payments value of payment cards FINANCIAL INCLUSION
$bn $bn Improving financial inclusion has driven the 60 500 adoption of debit cards in the UAE.
50 The government introduced the Wage 400 Protection System (WPS) in January 2009, 40 requiring all wage payments to be made 300 through a bank, bureau de change or other 30 authorised financial institution. 200 20 All institutions registered with the Ministry of Labour come under the purview 100 10 of the WPS. As of October 2015 there were 4.6 million foreign workers registered 0 0 with the Ministry of Labour, of which 3.5 2012 2013 2015 2016 2012 2016 2014 2013 2014 2015 million were enrolled in the WPS. (estimated) (estimated) In a similar initiative, the Emirates Source: GlobalData Source: GlobalData Identity Authority collaborated with Al
20 | December 2017 | Cards International
CI December 550.indd 20 06/11/2017 12:41:06 Country snapshot | the uae
Hilal Bank in September 2014 to allow Debit card shares by issuer Debit card shares by scheme Emirati residents to use national ID cards to withdraw cash from ATMs. These initiatives brought a large proportion of unbanked consumers into Emirates NBD the mainstream financial system during the 24.5% Mastercard four-year period to 2016. 32.1% The percentage of the population aged Others 52.7% 15 or above with a bank account rose Dubai Islamic Visa Bank 14.0% 67.9% from 69.0% in 2012 to 90.2% in 2016. Increasing banking penetration largely Abu Dhabi Islamic supported the growth of the debit card Bank 8.8% market in the UAE. CREDIT CARD UPTAKE Source: GlobalData Source: GlobalData Pay-later card penetration in the UAE stood at 45.5 cards per 100 individuals in pay later shares by issuer pay later shares by scheme 2016, a figure that was higher than those recorded in Kuwait (19.6), Lebanon (16.5), Bahrain (13.8), Saudi Arabia (11.5), Oman Others (8.9) and Iran (2.1). Israel had the region’s 6.5% highest penetration, at 95.4. Emirates NBD 24.5% Despite reluctance towards credit card use in the region, banks continue to Mastercard Abu Dhabi 32.9% Others promote credit cards. Sharia-compliant Commercial Visa 53.5% Bank 15.0% cards, reward programmes, value-added 60.6% services and promotional campaigns have Mashreq all been employed to encourage credit card Bank 13.3% use among consumers. The UAE’s credit card market has been driven by a rise in leisure spending among consumers. According to Network Source: GlobalData Source: GlobalData International, credit card expenditure by Emirati consumers in restaurants and cafes increased by 23% year on year in 2015. The government’s WPS has resulted in The variety of products and services Similarly, credit card expenditure at hotels a number of companies in the UAE using and the convenience of online shopping rose by 10%. prepaid cards for payroll purposes. have driven Emirati consumers to adopt In addition, credit card spending in the In May 2013, Emirates NBD subsidiary e-commerce, while the development of country was highest among consumers Network International launched prepaid technology has enabled merchants to sell with UAE-issued cards, followed by cards to enable companies to pay wages products online. travellers from the US, Saudi Arabia, to blue-collar workers. In February 2016 Conventional instruments such as Kuwait, and Qatar. UnionPay International collaborated with payment cards and cash on delivery banks in the UAE to issue a prepaid salary are widely used payment methods for IMMIGRANT POPULATION card. These cards are compliant with the e-commerce transactions in the UAE. WPS and enable banks in the UAE to offer Payment cards remain the most popular The UAE’s prepaid card market grew at wage payments to workers. method among online buyers, accounting a CAGR of 9.7% in the four-year period for 61.4% of total e-commerce transaction to 2016 in terms of the number of cards ALTERNATIVES BUILD value in 2016. in circulation, and 14.5% in terms of However, alternative payments such transaction value, a trend that is expected E-commerce has registered significant as PayPal, CashU, and Masterpass are to continue in the period 2016-2020. growth, with its value increasing from all gaining in popularity for the purposes The UAE’s immigrant population $2.6bn (AED9.7bn) in 2012 to $6.3bn in of online shopping. The availability of accounted for 88.4% of the resident 2016, at a CAGR of 24.2%. digital wallet services, and the security population in 2015 according to the This growth was mainly supported by the and convenience they offer, has made International Organisation for Migration use of smartphones and tablets, improving consumers gradually accept them. IOM. Many expatriate workers use prepaid internet connectivity, and government Digital wallets accounted for 16.5% of cards to remit funds back to their home initiatives aimed at encouraging a digital the total e-commerce transaction value in countries. lifestyle in the UAE. 2016, up from 12.0% in 2012. <
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CI December 550.indd 21 06/11/2017 12:41:16 industry insight | diebold nixdorf
that we are seeing trends which combine mobile technology with new ATM services. the evolution of a new For example, smartphones and wearables such as smartwatches can be used to withdraw cash through NFC-based mobile payments services. Self-service machines enable access to user accounts through the device, effectively customer-centric abolishing the need for a debit card. Another area that has made great strides is biometrics, particularly in the UK. An FT study earlier this year found that UK banking future consumers were the most open of 11 countries surveyed to replace traditional passwords with After 50 years the ATM continues to be an important iris identification. Biometric authentication touchpoint in the customer journey, but delivery of banking integrates technological advances such as facial recognition, iris scanning and fingerprint services is changing, writes Diebold Nixdorf’s Matt Phillips sensors with the self-service channel, leading to enhanced security and an improved consumer t is the year 2027 and you need cash. banking transactions are combined with new experience. You go to the closest ATM but you do features, such as 24-hour access to remote Advanced ATM technology enables banks Inot need to look around for your bank tellers via a video connection, and enhanced to deliver quicker, more streamlined services card. All you need is yourself, because this security and authentication. in locations where customers demand them. machine can look you in the eye. With sleek, modern designs and user Diebold research shows that consumers are It scans your irises for a match before a 3D, interfaces, software-driven interactions embracing self-service technology because of its augmented reality-generated ‘robo-banker’ pops can power the intuitive functionality that convenience and ease of use – 79% of people up on the screen, giving you access to a wide consumers expect from interactive systems. agree that technology will play an increasingly range of banking services. This gives a taste of important role in bank branches in the future, what we can expect banking services to look CUSTOMER EXPECTATIONS and 57% think improved technology in banks like within the next decade. means they will spend less time queuing. The global ATM market is growing at a This valuable functionality has not gone As we look to the future, developments in significant pace, along with the evolution of unnoticed among consumers, and our latest technologies such as artificial intelligence will ATM technology itself. There are currently research into the expectations of banking continue to influence the delivery of banking over 3.1 million ATMs in operation around customers across the UK shows that 57% services, with enhanced customer experience the world, and this is set to surpass 4 million value using self-service technology to complete the ultimate objective. The 2017 Accenture by 2020. This growth is underpinned by wide multiple tasks in one go. Banking Technology Vision report reveals acceptance among financial institutions that Accenture’s 2016 ATM Benchmarking that 80% of bankers believe that artificial ATMs continue to be vital as a secure, trusted Study concludes that the “ATM will retain its intelligence will play a significant role in self-service channel for consumers. As a result, importance for banks and consumers in the accelerating the adoption of digital technology more financial institutions are embarking on foreseeable future, but also that the untapped at the branch, giving employees the tools and programmes to update their networks and potential for cost optimisation and revenue resources to better serve consumers. associated legacy platforms. generation will lead, in the medium term, to an AI-enabled tools will help banks identify With changing customer expectations evolution of ATM operating models.” consumer preferences, and we are already driving new approaches to services, to what With ATMs increasingly able to perform seeing many large brands, including financial extent can we expect changes in the self-service more transactions than ever before, there is institutions, integrating bots and AI into their channel to impact the delivery of banking a window of opportunity to turn customer digital and customer-care strategies, alongside journeys in the next few years? interaction with ATMs from transactional their human agents. AI and machine learning As more consumers turn to digital or self- to an engagement tool for new products and are also used to develop the analytical ability of service channels to complete everyday tasks services. This then gives branch staff more banks to spot non-standard behaviour patterns and transactions, financial institutions are freedom to focus on customer services, building and fraudulent transactions. transforming their branch networks to reshape relationships and strengthening brand loyalty. The financial services industry is undergoing the customer experience. Bank formats are Connected channel integration is the vision unprecedented change, and more innovations becoming tailored to meet customer demands for future banking services, offering a seamless are on the way. New technologies are helping at individual locations. As part of this trend, experience between channels and allowing banks to identify consumer preferences, some branches are becoming smaller and consumers to start a transaction on one device enabling them to respond with services that smarter, and ATMs are critically important to and finish it on another. develop meaningful and personalised consumer the branch-modernisation process within this As a million more ATMs are predicted relationships. The challenge will be how quickly connected banking environment. to roll out across the globe, they will service financial services can create and implement new Flexible technology can serve an increasingly populations that have adopted mobile devices customer journeys, delivering the service that diverse range of purposes. Everyday consumer as part of daily life. Therefore, it is no surprise consumers have come to expect. <
22 | December 2017 | Cards International
CI December 550.indd 22 06/11/2017 12:41:16 Intelligent Environments, the international provider of digital financial services solutions in association with Retail Banker International, Cards International, Electronic Payments International, Private Banker International, and Motor Finance publications
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CI December 550.indd 24 06/11/2017 12:41:34 Private Banking Swiss_2017_ad.indd 2 13/06/2017 11:38