www.cardsinternational.com Issue 546 / AUGUST 2017

CROSSING THE BARRIERS

AUSTRALIA’S NEW PUSH FOR REAL-TIME PAYMENTS AND OPEN BANKING

COUNTRY SNAPSHOTS FEATURE INSIGHT

The card payment scenes in Cards launch the fightback New regulation to tackle , Mexico and the against cash in the Middle consumer affordability and Czech Republic East and Africa persistent debt

CI August 546.indd 1 31/08/2017 17:49:08 contents this month

NEWS COVER STORY 05 / EDITOR’S LETTER REAL-TIME PAYMENTS 06 / DIGEST • HDFC launches prepaid card for students travelling abroad AND OPEN BANKING IN • Mobile contactless spending surges • UK’s eMerchantPay receives licence • DPO completes acquisition AUSTRALIA • VTB Bank, Mastercard to issue new contactless card in Armenia • Wirecard extends support for Singtel • ICICI Bank debuts instant • US fraud loss rates fall 28% in 2016 after EMV launch • Commonwealth Bank to refund $8m • UnionPay partners with VTB24 • Central Payment, CardFlight to provide SwipeSimple mPOS • Worldpay sold to Vantiv for $10.4bn 10 • Australian up 78%

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] Deputy Editor: Anna Milne Head of Subscriptions: +44 (0)20 7406 6701 Sub-editor: Nick Midgley Alex Aubrey [email protected] +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] Senior Reporter: Patrick Brusnahan Publishing Assistant: Sales Executive: Jamie Baker +44 (0)20 7406 6526 Joe Pickard +44 203 096 2622 [email protected] +44 (0)20 7406 6592 [email protected] [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected]

Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0956-5558 06 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online to Cards International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London Office: 71-73 Carter Lane, London, EC4V 5EQ Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow CI on twitter @Payments_News

2 | August 2017 | Cards International

CI August 546.indd 2 31/08/2017 17:49:26 contents august 2017 13 18

s to talk about cracking China, disrupting SWIFT,COUNTRY and leveraging SNAPSHOTS WeCha 16 / ARGENTINA Cash remains the predominant payment instrument in Argentina, mainly for day-to- day and low-value transactions. Overall, cash accounted for 78.5% of the total payment transaction volume in 2016 18 / MEXICO Cash remains the preferred form of consumer payment, especially among the rural FEATURE population, primarily as a result of limited 16 knowledge of payment cards or poor access to 10 / AUSTRALIA banking infrastructure Australia is characterised by high contactless 20 / THE CZECH REPUBLIC card usage, debit card dominance over credit The Czech economy has registered robust cards, and stringent regulatory control. Robin growth since 2014, supported by a decline in Arnfield reports on the main trends and two oil prices, increased investment activity, and key programmes: the real-time New Payments government policy to encourage exports and Platform, and the open banking initiative domestic demand 13 / THE MIDDLE EAST ANALYSIS AND AFRICA Cash dominates the consumer payments 22 / PERSISTENT DEBT market across large chunks of the Middle East In light of the FCA’s latest plan for the cards and Africa. However, cards are starting their industry, Callcredit Information Group’s fightback.Patrick Brusnahan looks into Eamonn Tierney looks at how organisations Saudi Arabia, Nigeria, Israel and Egypt with can be better prepared to deal with ever- the help of GlobalData’s research changing requirements to support customers

www.cardsinternational.com | 3

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IE Adverts - 2017 MG Edit.indd 1 27/07/2017 12:46:16 editor’s letter

CardS sector in rude health

Douglas Blakey, Editor

arely a day seems to go by when I am told by In particular, it reported strong growth in key international someone that cards are old hat, dull, dated and markets such as India, Russia, Mexico and Australia. Latest R under threat. quarter earnings from Mastercard were also way ahead of this, real-time payments that, cross-border analyst forecasts with earnings per share up 24% against the payment facilities will represent a huge challenge to the card same quarter last year. schemes. But enough about my teammate who edits sister Visa’s prospects in India alone are hugely exciting. The Indian publication Electronic Payments International. government is committed to cash displacement. Little over Yes, PSD2 – to be implemented from January 2018 – will one-third of Indians hold a credit card, and with more and provide new entrants and non-payments participants with more Indians travelling internationally, Visa is in a great place access to the SEPA Instant Credit Transfer scheme, potentially for future growth in the region. leading to the creation of new payments products and services In Asia-Pacific, the upcoming combined Cards International/ that could threaten card schemes. Electronic Payments International CEPI Awards and Summit on 7 Given that SCT Inst will create a potentially pan-European, September in Singapore, brings home the extent of innovation fast bank-to-bank payment network, it has the capacity to in products and services in the cards sector. A record number disrupt the role of payment cards in both domestic and cross- of submissions have been received for the awards – full details border payments. The scheme represents a new set of ‘rails’ on of the winners in the September issue of Cards International. which payments can be made, facilitating the development of To name but a few – and in no particular order and innovative products that can compete with cards both online without breaking embargoes – Citi, DBS, Maybank, ANZ, and in-store. If such services are cheaper to use and accept Standard Chartered, RCBC, Kasikorn Bank, Taishin Bank, Siam than cards, card schemes could, in theory, find themselves cut Commercial and CTBC are all very strong runners in the awards out of the European payments value chain. stakes. A very grateful thanks to all the participating . The notion that Visa and Mastercard are under threat is Back in the UK, the latest figures show that card spending where I have an issue. Some 85% of all transactions globally is rising at the fastest rate since 2008. The number of card – the figure remains a whopping 40% in a mature market transactions increased by 12.3% over the year to the end of such as the US – are made using cash. The idea that Bitcoin – June. Credit and spending rose by 9.3% in the year however trendy and overpriced it may continue to trade – is an to June, with debit card transactions ahead by 13.2%. alternative is bunkum. One of the more amusing recent after- The one potential negative: Outstanding work trips I recall was a trip to hip Shoreditch with a fellow rose to £68.5bn at the end of June, up almost £1bn from the editor – I decline to name and shame – and watching him try to end of the first quarter. buy a round of drinks using Bitcoin. Not so long ago I seem to recall being told by younger On the other hand, Visa and Mastercard are masters at teammates how Apple Pay was going to revolutionise the driving cash displacement. In quarter three, Visa again beat market in China, among other places; they seem to have at market forecasts with a strong set of results. least gone quiet on that argument. <

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

www.cardsinternational.com | 5

CI August 546.indd 5 31/08/2017 17:49:32 News | Digest

news digest

HDFC Bank launches prepaid card for Mobile contactless students travelling abroad spending surges in UK

identity cards for students. They are endorsed by UNESCO and offer benefits in over 125 countries at more than 150,000 locations. The new card enables students to make convenient and secure payments during studies abroad. Users can load US dollars, sterling or euros onto the card as required. It can also be used to withdraw money from ATMs. ISIC has partnered with various Mobile tap-and-pay spending has recorded merchants and institutions to offer substantial growth in the UK, driven by the exclusive deals and offers to cardholders. growing popularity of contactless payments at Benefits include protection against foreign the POS, according to new transaction data exchange fluctuation and complimentary from payments processor Worldpay. enhanced air accident insurance of Mobile contactless transactions topped INR2.5m ($39,000). £370m ($476m) in the first six months of HDFC Bank’s country head for card 2017, a 336% year-on-year rise in spending. payment products, merchant acquiring After the launch of Apple Pay in 2015, use services and marketing, Parag Rao, said: of mobile devices to make in-store payments “At HDFC Bank, enhancing customer has grown steadily. The tap-and-pay trend was convenience lies at the heart of all our further fuelled by the launch of Android Pay new initiatives. We are delighted to offer in 2016 and Samsung Pay in 2017. our co-branded HDFC Bank ISIC Student According to the report, spending on all India-based private sector lender HDFC ForexPlus Card to students travelling forms of contactless systems now accounts for Bank has launched a new co-branded abroad for studies. 38% of all non-cash transactions in the UK. prepaid card for students travelling abroad “The prepaid card meets their evolving Total contactless spend in 2017 reached for studies or leisure. needs and gives them great value in the £9bn up to June, compared to £10bn The new HDFC Bank ISIC (International form of wider acceptance, discounts, and throughout the whole of 2016. Student Identity Card) Student ForexPlus convenience of card payments. Supermarkets and grocery stores continue prepaid card will also serve as a valid “We are confident that our co-branded to dominate the mobile tap-and-pay market, global student ID. ISIC cards are the only ForexPlus Card will be a valuable addition accounting for 55% of the total spend so far internationally recognised and accepted to our growing portfolio of products.” < in 2017. Londoners still spend the most on their mobiles; however, the proportion of UK’s eMerchantPay receives licence transactions concentrated around the capital has reduced from 32% at the end of 2016, UK-based payments service provider based trade association that advocates to 28% in 2017, as adoption becomes more eMerchantPay has received an e-money globally for the prepaid industry. widespread across the UK. licence from the Financial Conduct eMerchantPay CEO Jonas Reynisson Worldpay’s CMO for the UK, James Frost, Authority. said: “The EMI license allows for the said: “Mobile spending has shaken off the The company, which already offers a opportunity to develop new payments novelty tag, and is breaking its own spending number of online, mobile and POS payment capabilities for our merchants, who in records virtually every month. services to e-commerce businesses, turn will benefit from additional revenue “Granted there is still some way to go will now also be able to issue payouts, streams. We continue to invest in our before we start cutting up our cards and e-wallets and prepaid cards. payments technology and look forward chucking away our wallets, but it is easy to see eMerchantPay has also joined the to working closely with PIF, providing a why everyone from startups to tech giants is Prepaid International Forum (PIF), a UK- unified voice for the prepaid sector.” < eager to have a stake in the technology.” <

6 | August 2017 | Cards International

CI August 546.indd 6 31/08/2017 17:49:35 News | digest

Direct Pay Online wraps up acquisition of Virtual Card Services South Africa ICICI Bank Direct Pay Online Group (DPO), a provider credit, debit and processing debuts instant of e-commerce and online shopping services, systems for major card issuers in South Africa. has concluded its acquisition of Virtual Card DPO group CEO Eran Feinstein said: “We Services (VCS) South Africa. are excited to finally have VCS South Africa credit card The latest transaction marks the completion on board. By merging VCS and PayThru of DPO’s acquisition of VCS Group. DPO South Africa with PayGate, we will be able to has already acquired VCS Namibia and VCS position ourselves as the largest PSP in Africa Botswana. DPO believes the acquisition will serving over 20,000 merchants. also strengthen its presence in South Africa, “With every acquisition we make, our following its acquisitions of PayThru and merchants across the continent benefit by PayGate. DPO also plans to merge VCS and receiving an unparalleled offering of services PayThru with PayGate to establish a leading and geographical exposure. payments service provider in South Africa. “I believe we are well on our way to Established in 1996, VCS has over 20 years’ providing one payment solution across experience in developing and implementing Africa,” Feinstein added. < Indian private sector lender ICICI Bank has launched an instant credit card service, VTB Bank, Mastercard to issue new allowing the bank’s customers to receive credit cards instantly. The new service will enable customers contactless card in Armenia to receive credit card numbers and other VTB Bank (Armenia) has launched the cardholder completely controls the required details online, through which they Mastercard PayPass payment process, which helps to protect can shop online without having to wait cards in Armenia. card data and prevent the risk of possible for the physical card to arrive. Based on Card members can tap contactless fraud. Mastercard PayPass contactless pre-checked bureau scores, customers can cards on POS terminals equipped with payment cards will be accepted at all stores access a card with a of up to contactless technology to complete a and at service points where the PayPass INR400,000 ($6,254). transaction. One-touch payments can also logo is displayed. An additional level of authentication has be made instantly at the POS-terminal In a statement, VTB Bank commented: been included to make the offering secure, without entering a PIN for payments less “The unique technology of PayPass is one and customers receive physical credit cards than AMD10. of the most modern, fast, affordable and within a few working days. Customers The card does not need to be given reliable ways of making card payments can currently use the facility through the to the cashier to pay for a purchase, as around the world.” < bank’s internet banking platform. It will be made available on the bank’s mobile banking app, iMobile, at a later date. Wirecard extends support for ICICI Bank executive director Anup Bagchi said: “At ICICI Bank, our philosophy Singtel launch in Singapore is ‘ready for you, ready for tomorrow’. “We are committed to offering German payment technology company Wirecard executive vice-president of innovative products and services to our Wirecard has teamed up with Singtel to global financial services Grigoriy Kuznetsov customers at the fastest possible speed support the recent launch of Singapore’s said: “Singtel can now process mobile and with the highest level of convenience. first Visa-branded virtual card for Singtel’s virtual Visa payments with Wirecard as a The introduction of instant credit cards is mobile wallet, Dash. Bank Identification Number [BIN] sponsor. an outcome of this vision. Promoted as Singapore’s most widely This further reinforces our position as “With the festive season just around accepted all-in-one digital wallet, Singtel a leading global prepaid issuer and BIN the corner, there will be many interesting Dash allows customers to shop, pay sponsor. It also demonstrates our state-of- offers with online partners in various transport fares and remit money using a the-art card processing capabilities.” categories like shopping, travel and smartphone. Singtel’s head of Singapore consumer entertainment, among others. Following the launch of the Visa virtual m-commerce, Gilbert Chuah, commented: “We believe that this unique proposition account in July this year, Singtel Dash’s “Singtel Dash has gained more traction as a – which is first of its kind in the industry – over 500,000 customers have been using payment option of . will empower our customers to instantly mobile phones to make payments at over “With the adoption of Wirecard’s card get the credit card online in a few steps 50,000 PayWave-enabled merchants processing solution, our customers can and immediately start transacting on across Singapore, and at Singapore-based now make hassle-free mobile virtual Visa e-commerce sites to take advantage of the e-commerce stores. payments.” < offers,” Bagchi added. <

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CI August 546.indd 7 31/08/2017 17:49:39 News | Digest

US debit card fraud loss rates fall Commonwealth 28% in 2016 after EMV launch Bank to refund $8m

80% in 2016. Three out of four issuers now support debit cards being loaded onto at least one mobile wallet. Despite this growth, use of debit cards in mobile wallets remains low. Apple Pay, Android Pay and Samsung Pay combined only account for around a quarter of 1% of US debit transactions. The total number of debit transactions continued to increase, rising by an average of 7% year on year in 2016 for the issuers Commonwealth Bank has been ordered by in the study. the Australian Securities and Investments The number of debit transactions per Commission (ASIC) to reimburse around active consumer card reached a record A$10m ($7.87m) to more than 65,000 high of 23.6 transactions per month, which customers after selling them unsuitable marks a 6% increase over the results consumer credit insurance (CCI). reported in the 2016 study. CCI is a type of add-on insurance offered Pulse’s vice-president of fraud and to borrowers who take out credit cards risk management, Jim Lerdal, said: “The and personal, home and car loans. In the financial services industry has taken a event of sickness, injury or involuntarily US debit card fraud loss rates have number of measures that likely impacted unemployment, repayments are fulfilled declined by about 28% in 2016 compared the reduction in fraud losses for debit card through CCI. to 2015 levels, according to a report issued issuers. During its investigation, ASIC found by debit/ATM network operator Pulse. “Among them are the conversions to chip that CommBank sold CreditCard , The 2017 Debit Issuer Study report stated debit cards, greater use of tokenisation insurance for credit card repayments to that after the fraud liability shift for most in mobile commerce, and continued 65,000 customers such as students and debit transactions took effect in 2015, investment in fraud-mitigation solutions. the unemployed, who were unlikely to an estimated 80% of US debit cards have “The more financial institutions meet the employment criteria and would migrated to chip cards. tighten fraud-tolerance limits, the more therefore be unable to claim the insurance. However, despite the growing adoption they risk negatively impacting the The regulator said customers were often of EMV standards, fraud continues to cardholder experience. It is a balancing act unaware that they had signed up and paid challenge debit card issuers, with US because declining potentially fraudulent for the cover, which could be included in financial institutions losing an estimated transactions could lead to ‘false positive’ the fine print of loan documentation. $900m to debit card fraud in 2016. fraud identification, which can frustrate The Australian bank has also The study also revealed that enrolment account holders and potentially drive them agreed to repay nearly A$586,000 in of debit cards onto Apple Pay increased by to other methods of payment.” < premiums to around 10,000 customers after overinsuring them for Home Loan Protection CCI taken out with a UnionPay partners with VTB24 to boost Commonwealth Bank home loan, resulting in the overcharging of premiums. card acceptance in Russia ASIC deputy chair Peter Kell said it was UnionPay International, a wholly owned UnionPay payments will also be available at unacceptable that customers were sold subsidiary of China UnionPay, has extended over 80% of local merchants and ATMs in insurance that did not meet their needs. its co-operation with Russia-based bank Russia by the end of 2017. “One of ASIC’s priorities is addressing VTB24 to enable 120,000 POS terminals in According to UnionPay, the latest poor consumer outcomes associated the country to accept UnionPay cards. collaboration will provide Chinese tourists with add-on insurance, including CCI. Most of VTB24’s POS terminals will also with convenient payment service, while Consumers should not be sold products support mobile QuickPass, UnionPay’s new encouraging more local residents to sign up that provide little or no benefit, and banks mobile payment technology that allows users for and use UnionPay cards. should have processes in place that ensure to transact using a smartphone. The bank UnionPay cards can be used online and this,” Kell commented. has already enabled all its ATMs to accept offline. Over 500,000 POS terminals and CommBank will contact applicable UnionPay cards. 90,000 ATMs accept UnionPay cards, CreditCard Plus customers who were sold With the latest collaboration, the top four and some merchants also support mobile the product between 2011 and 2015, who banks in Russia now accept UnionPay cards. QuickPass in Russia. < were either unemployed or students. <

8 | August 2017 | Cards International

CI August 546.indd 8 31/08/2017 17:49:43 News | digest

Central Payment, CardFlight to provide Australian online SwipeSimple mobile POS to merchants credit card fraud Mobile POS (mPOS) technology provider Merchants will also have access to CardFlight and merchant service provider smart analytics, with SwipeSimple’s up 78% in 2016 Central Payment (CPay) have entered into comprehensive reporting enabling Card-not-present fraud rose to A$417.6m a partnership through which CPay will offer merchants to make better decisions. ($330.8m), accounting for 78% of total CardFlight’s SwipeSimple mPOS solution to CPay vice-president of operations card fraud in 2016, according to a report merchants. Tommy Chang said: “Providing our published by industry body the Australian The new mPOS solution will allow merchants with a secure, advanced, Payments Network. merchants to accept EMV chip card EMV-enabled mobile payments solution With increased transition to online payments from mobile devices. is key to helping them run their business platforms, online payment fraud has more The SwipeSimple solution includes successfully. than doubled in the country in the past an EMV chip card reader, mobile app “CardFlight has proven themselves as six years. In 2016, Australians transacted for iOS and Android, and a back-office a leader in the mobile POS space, and we a record A$714.5bn on cards, of which web dashboard for merchants to accept are excited to offer SwipeSimple to our fraud accounted for A$534m, representing payments and manage their business. merchants and partners.” 0.074% of the total. The report highlights With the new solution, merchants can CPay is an affiliate and part of a joint that card and cheque fraud was under manage inventories in real time through venture with TSYS, a provider of secure 0.03% of the A$1.86trn total transacted. SwipeSimple’s cloud-based inventory and and payment solutions with operations in According to the 2016 Australian item-tracking facility. They can also adjust over 80 countries, including local offices Payments Fraud Data Report, there was a tip and tax levels through an easy-to-use in the Americas, Europe, the Middle East, 13% increase in card-skimming fraud from tip and tax option interface. Africa and Asia-Pacific. < A$22.9m in 2015 to A$25.8m in 2016. Many of these fraudulent transactions were executed through ‘ghost terminals’, which are false terminals made to look like Worldpay sold to Vantiv for $10.4bn real card readers but are not connected to the payments network. For every A$1,000 spent on credit cards, fraud accounted for A$0.747, up from A$0.669 in 2015 and A$0.438 in 2012. The report predicts that only one-fifth of transactions will involve the input of card details through internet browsers by 2020, as a result of the growth of mobile wallets and increasing sophistication of online shopping carts. US payment processing business Vantiv has “The potential merger creates a scale Australian Payments Network CEO struck a deal to acquire UK rival Worldpay world-class payments group in a dynamic Leila Fourie said: “Card-not-present fraud in a deal worth £8bn ($10.4bn). market, with deep payments capabilities, continues to grow as perpetrators follow Vantiv will pay £3.97 for each share product and vertical expertise and strong increased payments activity online. in Worldpay, representing a premium of distribution channels to serve merchants “Australia compares favourably to the around 22.7% on Worldpay’s closing price around the world in the global e-commerce UK and US when it comes to fraud rates per share of £3.20 on 3 July 2017. market, and in-store and online in the UK – and the industry is continuing its efforts On completion of the deal, Vantiv and US markets,” the statement added. to provide fraud-prevention strategies that shareholders will own 57% of the The two companies have decided to adapt to changing payments trends. combined entity, while Worldpay maintain the group’s headquarters in “Australia is well advanced in fraud shareholders will own the remaining 43%. Cincinnati, but will run its international prevention technology, thanks to the The combined entity will have a pro forma operations from London. industry’s leading investment in EMV enterprise value of approximately £22.2bn. Vantiv chief Charles Drucker will become chips, tokenisation and online customer RBS sold off Worldpay as part of its executive chair and co-CEO of the new authentication tools,” Fourie continued. bailout conditions in 2010, retaining a 20% company, while Worldpay boss Philip “Over the next year our focus is to stake; the remaining 20% was sold in 2013. Jansen will report to Drucker and act as co- continue to educate businesses about In a statement, Worldpay said: “The CEO. Stephanie Ferris will be CFO. online fraud prevention and support boards of Worldpay and Vantiv see The new entity will process nearly the roll-out of risk-based customer compelling strategic, commercial and $1.5trn in payments and 40bn transactions authentication, including investigations financial rationale for combining Worldpay through more than 300 payment methods into how biometrics, geolocation and social and Vantiv’s complementary businesses. in 146 countries and 126 currencies. < media enable this.” <

www.cardsinternational.com | 9

CI August 546.indd 9 31/08/2017 17:49:46 Feature | AUSTRALIA

playing catch-up in real-time payments and open banking $

Australia’s cards market is characterised by high contactless card usage, debit card dominance over credit cards, and stringent regulatory controls by the . Robin Arnfield reports on the main trends and two key payments industry programmes: the country’s real-time New Payments Platform, and its open banking initiative

he Australian credit card industry lending totalled A$1.5trn. “The RBA’s ‘reforms’ of the credit card market is dominated by the country’s “So that’s where the banks are focusing have not encouraged new competition or new Tfour largest banks: ANZ, their efforts and ignoring credit cards and entrants,” he argues. Commonwealth Bank of Australia (CBA), unsecured lending,” he notes. “Debit is Westpac, and National and Australia Bank growing at 9.2% a year in Australia, which is PAYMENTS SURVEY (NAB). three times the year-on-year rate of credit card In November 2016, Citi became a major sales growth.” In 2017, the RBA released the results of player when it acquired Australian retailer In 2016, Australian credit card purchases, its triennial survey on payments methods Coles Group’s Mastercard-branded credit card excluding cash advances, rose by 3% year on by Australian consumers. Its report, How portfolio, which had receivables in the region year to A$302.7bn, while total credit card Australians Pay: Evidence from the 2016 of A$880m ($694m). transactions excluding cash advances rose by Consumer Payments Survey, said Australians’ Due to downward pressure on interchange 9% to 2.5bn, according to the RBA. enthusiasm for contactless payments helped by the Reserve Bank of Australia (RBA), high Debit card purchases rose from A$228bn in card payments to overtake cash payments in debit card usage and relatively low credit card 2015 to A$249bn in 2016, while debit card Australia for the first time in 2016. balances, the Australian credit card market has transactions increased by 13.8% to 4.84bn. Cards were the most frequently used means not grown as rapidly as in other countries. Credit card balances incurring interest of payment in the 2016 survey, accounting declined by 3% from A$32.9bn in December for 52% of total transactions (30% debit and MORTGAGES A PRIORITY 2015 to A$31.9bn in December 2016, 22% credit/charge cards), compared to 37% continuing the trend of consumers not for cash. In 2013, cash was used in 47% of “The big banks have been concentrating on revolving. payments, compared to 43% for cards (24% the mortgage market rather than the credit “The revolve rate is now 60%, an all- debit and 19% credit/charge cards). card market,” Grant Halverson, CEO of time low which has serious implications “The increased use of cards for lower-value Australian payments consultancy McLean for portfolio profitably,” Halverson says. payments since 2013 has been facilitated Roche, tells CI. “The trend of consumers using credit cards by the adoption of contactless ‘tap and go’ “The average Australian credit card balance to purchase items and not ‘revolve’ also functionality by consumers and merchants at is just over A$1,000, which puts Australia on signals the growth of lower-value contactless the point of sale,” the RBA report says. a par with Malaysia and the Philippines, while payments, which have an A$100 limit, with “Around one-third of all point-of-sale the average UK balance is A$6,200 and the the average transaction declining to A$121.” transactions were conducted using contactless average US balance is A$9,300.” The Australian credit card market is cards in 2016, which is three-and-a-half times While Australian credit card receivables showing little growth and a lack of genuine the share reported by the participants in the totalled A$32bn in December 2016, competition outside the four banks, which 2013 survey. Halverson says, citing RBA data, home dominate the bank issuers, Halverson notes. “As a share of card payments only, nearly

10 | August 2017 | Cards International

CI August 546.indd 10 31/08/2017 17:49:50 Feature | AUSTRALIA

two-thirds of all point-of-sale payments were domestic debit scheme – debit interchange, prevention and any terminal costs. The contactless in 2016.” and removed Visa’s ‘honour all cards’ rule. RBA indicated, as a guide, that the costs to CI understands that over two-thirds of Mastercard voluntarily agreed to remove its merchants of accepting payments by debit POS payments at the major supermarket ‘honour all cards’ rule and to accept the same cards is in the order of 0.5%, by credit card chains are now contactless, and that mobile cap on debit interchange as Visa. Amex and 1-1.5%, and for Amex cards 2-3%. Some POS payments are still very small. Because of Diners voluntarily agreed to accept the RBA’s merchants’ costs might be higher than these Apple’s control of its app store, proprietary ban on no-steering rules. indicative figures.” bank-owned mobile wallets are only available For Visa and Mastercard debit cards, the From July 2017, the RBA imposed a cap on the Android platform. RBA set the cap on interchange at A$0.12 on four-party credit card interchange fees of a “Apple Pay has been unsuccessful in per transaction. For EFTPOS bilateral weighted average of 0.50% of the transaction Australia in terms of payments volumes, and interchange, the cap was set at A$0.05 per value and a maximum of 0.80%. The cap was Android Pay has also failed to gain adoption,” purchase-only transaction, and for multilateral needed because, under the previous regulatory says Halverson. “What has killed the mobile interchange at A$0.12. regime, credit card interchange fees were wallets is the continuing popularity of measured over a period of three years, which contactless card payments in Australia. Every REVIEW led to weighted average benchmarks rising age group has got used to contactless, which is during these periods. so well entrenched that mobile will find it very In May 2016, the RBA published its review of There is now a quarterly requirement for difficult to get any traction.” its payment card regulations and introduced compliance reporting for interchange rates, ANZ and Amex are currently the only new rules. These latest regulatory reforms are instead of the previous triennial regime. major issuers to offer Apple Pay in Australia. evolutionary in comparison with the RBA’s The RBA has capped debit card interchange The other big banks have refused to pay the revolutionary regulations in 2003. fees at a weighted average of A$0.08 and additional fee required by Apple to accept From September 2016, for large merchants at a maximum of A$0.12 or 0.20% of the Apple Pay transactions, on the grounds that and from September 2017 for other transaction value. interchange is so low in Australia, Halverson merchants, surcharges are restricted to the Another reform is that the RBA now explains. average percentage cost of acceptance in a regulates interchange for companion Amex Cuscal, a payments processor for smaller surcharging merchant’s annual statement for cards, although standalone Amex cards are not Australian financial institutions (FIs), signed that card type. The rule is enforceable by the regulated. an agreement to accept Apple Pay in 2016 on ACCC. Australian banks have been issuing behalf of 31 of its members. CI understands that only 3% of Australian companion Amex cards to their Visa and In March 2017, the Australian Competition merchants – typically those receiving large Mastercard cardholders on a single card and Consumer Commission (ACCC) refused numbers of platinum and corporate card account. From July 2017, these companion an application by CBA, NAB, Westpac, and transactions – have opted to surcharge and cards are subject to the same interchange Bendigo and Adelaide Bank for the right to that surcharging merchants have fallen in line regulations as Visa and Mastercard. collectively bargain with Apple over adding voluntarily with the new regulations. The Prepaid debit cards are now subject to the their proprietary digital wallets to iPhones and airlines, for example, have now moved from a same interchange regulations as standard collectively to boycott Apple Pay. fixed dollar surcharge to a charge of 1.3% of debit cards. However, due to high banking These banks had argued to the ACCC that the transaction value. penetration, the Australian prepaid debit card Apple had prevented them from developing “If merchants wish to surcharge, the fee market is not as large as in the US, and the their own integrated digital wallets for they pass on to consumers must be more majority of Australian prepaid cards are issued iPhones, which was anti-competitive. closely aligned to the fee they pay their FI by airlines. for accepting that payment method,” says Dr 2003 CARDS REFORMS Leila Fourie, CEO of Australian Payments NEW PAYMENT PLATFORM Network – formerly the Australian Payments In 2003, the RBA sent shockwaves around the Clearing Network – the self-regulatory body While Australia has been a leader in regulating global credit card industry by cutting Visa and for the country’s payments industry. cards interchange, it has lagged other countries Mastercard credit card interchange rates from “It can also include the cost of fraud in migrating to faster or real-time payments. a weighted average of 0.94% to 0.50%. One of the most significant effects of the cut was the reduced use of rewards credit cards by Australians, due to ensuing higher rewards membership fees, as well as increased use of debit cards. If merchants wish to surcharge, the fee The RBA removed the ‘no surcharge’ rule established by Visa and Mastercard, they pass on to consumers must be more and eliminated rules banning merchants from steering customers to lower- closely aligned to the fee they pay their cost card transactions. It introduced a cap on FI for accepting that payment method interchange and on EFTPOS – Australia’s

www.cardsinternational.com | 11

CI August 546.indd 11 31/08/2017 17:49:50 Feature | interchange

If all goes according to plan, the Australian asking for feedback on implementation banking industry will launch the New timing, regulatory structure, and other Payment Platform (NPP) by late 2017 or early technical details. Comments on the 2018. The NPP offers: consultation paper are due by 22 September • Speed: The ability to make real-time 2017, and the review is due to be finalised by payments, with close to immediate funds the end of 2017.” availability to the recipient; “The [open banking] regime should • 24/7 availability: The ability to make and give customers ‘a comprehensive right’ to receive low-value payments 24/7 outside access their own data,” says van Wezel. normal banking hours; “The independent review will recommend a • Data-enriched: The ability to send more framework for open banking – for example complete remittance information with what data will be shared, whom it would payments, and be shared with, timeframes and regulatory • Simple Addressing: The PayID system structures – with a report due by the end of will enable users to address payments to 2017, for implementation by 2018. any recipient using their phone number, “This means Australia will likely see an email address, Australian Business Number open-banking initiative similar to that in the (ABN), or organisational identifier. • Use of account number proxies, such as UK, giving fintech companies and other third mobile number and email address; parties access to bank account data. The access “The industry is in the middle of a • Request payment service – a payee can will be read-only; unlike in Europe, there is no thorough testing programme,” says Adrian request multiple payers to pay with a single mandate to provide third-party access to the Lovney, CEO of New Payments Platform, the message, and payment account for transaction initiation.” company owned by the 13 FIs, including the • Based on global SWIFT/ISO 20022 In March 2017, in a separate initiative to RBA, participating in the NPP. standards the open banking project, the government’s “All participants are actively engaged Productivity Commission finalised its Data and progressing through this critical phase. “Based on this late-mover advantage, the Availability and Use enquiry, which examined Collectively, there is still more to complete, NPP has the potential to scale more quickly issues such as the benefits and costs of making but we are on track for a ramp-up of the than other instant payment schemes [in other public and private datasets more available, and central infrastructure commencing in countries],” says van Wezel. options for the collection, sharing and release November 2017.” of data. It is envisaged that a number of new OPEN BANKING The commission’s final report recommended payment services will be overlaid on the that the government adopt an economy-wide NPP. Osko, a P2P and consumer-to-business Australia’s Treasurer, Scott Morrison MP, data-sharing and release mandate, including fund transfer service offered by Australian announced in May 2017 that the government a Data Sharing and Release Act, a National online bill payment service BPAY, is the first intends to introduce an open-banking regime Data Custodian to monitor new data access overlay service developed for the NPP, and in Australia. and use arrangements, and a comprehensive will be offered to consumers via the platform’s “Over the course of the last year, two right for individuals and SMEs to enjoy active participants. Owned by the big four banks, separate Australian Government inquiries have use of their own data. BPAY is offered by virtually all Australian FIs. examined open banking and data availability,” “The government has not yet The first version of Osko will be restricted says Fourie. “A review of the banking sector published a response to the (data sharing) to P2P transfers, which will take place 24/7 in by (Australia’s) House of Representatives recommendations,” says Fourie. near-real time. But Osko will evolve to include Economics Committee recommended the “A cross-agency taskforce is currently co- payments with documents and the ability to introduction of an open banking regime. ordinating the development of the response, send requests for payment, Lovney says. “In May 2017, the government announced which is due to be finalised by the end of “The NPP is a later arrival on the scene that it would adopt most of the report’s 2017,” she adds. of instant [near-real-time] payment systems recommendations, and asked Treasury “The subject matter of the two work globally,” says Aite Group senior analyst Ron to conduct an independent review into streams – open banking and data availability – van Wezel, author of the Payments Down implementation of open banking. In August is closely related, and we understand that the Under: Australia’s Leading Examples report. 2017, Treasury released a consultation paper two enquiries are working closely together.” < “The Australian payments industry had the chance to study the existing instant payment RBA CREDIT CARD DATA 2016 systems and design a new system combining: • Service ubiquity, since, right from the start, 2016 2015 Change all major banks are participating; Sales/purchases (exc. cash advances) A$302.7bn A$292.0bn 3% • 24/7/365 availability; Transactions (exc. cash advances) 2,485m 2,261m 9% • Real-time settlement through the RBA’s Sales, December 2016 A$27.6bn A$27.4bn 0.072% new Fast Settlement Service (FSS); • End-to-end clearing of payments within 10 Card balances incurring interest, December 2016 A$31.9bn A$32.9bn -3% seconds; Source: McLean Roche based on RBA data

12 | August 2017 | Cards International

CI August 546.indd 12 31/08/2017 17:49:51 Feature | the middle east and africa

payment cards and the fight against cash in the middle east and africa

Cash dominates consumer payments across large chunks of the Middle East and Africa. However, cards are commencing their fightback. Patrick Brusnahan looks into Saudi Arabia, Nigeria, Israel and Egypt with the help of GlobalData’s research

audi Arabia uses a staggering amount of cash. According to CARDS INSTEAD OF CASH GlobalData, 92.4% of consumer payments, and most low- Svalue transactions, are carried out with cash. Israeli customers still have an inclination towards cash, despite the Usage of payment cards is rising, but this is mainly for cash withdrawals abundance of cards. As a result, the Bank of Israel has made several at ATMs. regulatory interventions to boost electronic payments and reduce The average annual spend per card in Saudi Arabia stood at $2,478 dependence on cash, such as introducing a cap on cash transactions. in 2016, much lower than in neighbouring Israel ($8.025). Nigeria is In addition, new types of banking, such as mobile-only, are starting in a similar position: payment card penetration is startlingly low, at 0.2 to be allowed into the market, such Bank Leumi’s Pepper. cards per inhabitant. Pay later cards have a greater market presence than debit cards in Cash accounted for 95.7% of Egypt’s overall payments volume in Israel. To combat this, the Israeli government requires banks to offer 2016. Card penetration is also low in Egypt, with only 22.6 cards debit cards free of charge to new and existing accounts. In addition, it per 100 individuals. In contrast, Israel is one of the most developed has reduced interchange fees on debit card transactions and abolished payment card markets in the Middle East. bank fees for debit card transactions. In 2016, there were 155.4 transactions per card, compared to 99 in A number of moves have also been made in Saudi Arabia to promote Saudi Arabia, 62 in Iran, 54.9 in Kuwait, and the UAE with 49.8. debit cards. The Wages Protection System, introduced in June 2013

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CI August 546.indd 13 31/08/2017 17:49:52 Feature | the middle east and africa

BENCHMARKING PAYMENT CARDS qualification criteria and high merchant acceptance, it looks set to give the market a boost. Avg. no of monthly avg. annual spend CArd penetration Faring slightly better in Egypt, credit cards have a penetration of 3.5 card transactions per card cards per 100 inhabitants. However, religious reasons are hindering Saudi Arabia 0.87 1.89 2,478 its progress, as is the ongoing issue of generally low acceptance among Israel 1.06 11.88 8,025 Egyptian merchants. Nigeria 0.33 0.23 99 Israel’s credit card market is largely composed of the three main Egypt 0.23 0.2 86 credit card issuers, which are owned by the country’s main banking

Source: GlobalData groups. Isracard, Leumi Card and ICC Cal have all gone unchallenged, mainly due to the barriers to entry for foreign issuers. As foreign firms and implemented in phases, mandated that employee salaries were lack the wide branch networks and distribution points of domestic paid directly into bank accounts. From November 2015, it became issuers, it has become hard to compete. mandatory for companies with 100 or more employees to transfer To crack down on the duopoly of Bank Leumi and , salaries into bank accounts. both have been required to separate ownership of their credit card Mada, a new modified electronic payment system, was launched by companies. Standalone credit card units are being encouraged to the Saudi Arabian Monetary Agency in September 2015. All cards are become banks through incentives such as lower capital requirements. issued by local banks and can be used at all ATMs and POS terminals This is expected to increase competition in the space. operated by local banks in the country. The Central Bank of Egypt has also attempted to promote ALTERNATIVES payments cards. In 2011, a project was launched to pay the salaries of 5m government employees directly into their bank accounts. New Egypt’s e-commerce market is starting to flourish. Despite limited government departments are being added to the project every year. This financial literacy and payment infrastructure, Egypt’s e-commerce has successfully led to an increase in the number of debit cards and market grew from $1.2bn in 2012 to £3.1bn in 2016. GlobalData bank accounts in Egypt. expects this to reach $6.6bn by 2020. Cash on delivery remains the preferred mode of payment for COMPLIANT CREDIT e-commerce transactions, accounting for 62% of the total e-commerce transaction value in 2016. Payment cards took 20.3% of that value. As in many Middle Eastern countries, credit card usage in Saudi Arabia Digital wallets are gaining prominence, with 6.7% of the total is low for religious reasons. Islam forbids the receipt or payment of e-commerce transaction value in 2016. CIB, Banque Misr and NBE are interest. As a result, banks have started to offer a wider range of Sharia- just a few of the prominent providers. compliant credit cards. Close to all leading credit card issuers now have Israel saw Mastercard’s Masterpass launch in November 2015, with this option. PayPal, ICC Cal and mobile carrier service provider Pelephone also Promotional offers are also in place to encourage credit card use, having active presences in the market. mainly through gifts, reward points, travel privileges and insurance. The e-commerce transaction value has grown rapidly in Saudi Arabia, Credit cards accounted for a minor 4.6% of the total payment from $1bn in 2012 to $3.5bn in 2016. This has been attributed to the cards transaction value in 2016. However, between 2012 and 2016, rise in internet penetration in the country, and improved regulation. the market recorded growths in CAGR for both transaction value and The Ministry of Commerce and Investment introduced the first draft of volume, at 17.23% and 21.03% respectively. the E-Commerce Law in February 2015 to increase the competitiveness of the e-commerce market, and to enhance customer trust in online retail. In addition, laws issued in 2015 required online merchants to list all terms and conditions, product information, addition charges, and as in many Middle Eastern countries, delivery dates. Non-compliant companies are charged SAR1m ($266,628). credit card usage in Saudi Arabia is low for Contactless technology is also slowly gaining prominence in Saudi Arabia with religious reasons. Islam forbids the the help of government initiatives. In September 2015, Riyad Bank launched receipt or payment of interest the first contactless cards in the country. SAMA launched a contactless payment service, called Mada Atheer, in November 2016 and other banks and card issuers are Credit cards are not faring well in Nigeria either. They totalled 2.8% expected to follow the trend. of Nigeria’s payment cards transaction value in 2016. Penetration is Nigeria is also embracing contactless. United Bank of Africa (UBA) very low at 0.6 cards per 100 inhabitants. launched its first contactless debit cards in November 2015. This It can be said, however, that this is a massive opportunity for credit followed an agreement between UBA, Access Bank, FirstBank, Zenith card issuers. O3 Capital Nigeria launched the country’s first non-bank Bank, Skye Bank, and Diamond Bank to launch PayAttitude in May credit card in September 2014. With its chip-and-PIN security, relaxed 2015, an NFC-enabled tag-based mobile payment solution.

14 | August 2017 | Cards International

CI August 546.indd 14 31/08/2017 17:49:52 Feature | the middle east and africa

payment instrument shares by transaction volume

nigeria egypt

Clockwise from top: 0.8% Clockwise from top: 3.3% 1.0%

Payment cards 9.4% Cash Cheques Payment cards

Credit transfers 36.3% Cheques (Data for cash 1.0% not available) 2.5% 2.1%

61.3% 96.8%

89.3% 95.7%

Inner ring: 2012 Inner ring: 2012 Outer ring: 2016 Outer ring: 2016 Source: GlobalData Source: GlobalData

israel saudi arabia

Clockwise from top: Clockwise from top: Payment cards 7.6% Cash 7.3% Direct debit 8.3% Payment cards Credit transfers 10.9%

Cheques 11.2% 3.9% (Data for cash 13.4% 8.9% not available) 66.8% 95.9%

72.9% 92.4%

Inner ring: 2012 Inner ring: 2012 Outer ring: 2016 Outer ring: 2016

Source: BIS, GlobalData Source: GlobalData

DRIVERS Egypt’s population is set to reach nearly 100m by 2020, according to the Central Agency for Public Mobilisation and Statistics. With According to the General Authority of Statistics, immigrants accounted 62.6% of the population being economically active, this offers a for 10.9m of Saudi Arabia’s total population of 32.2m in 2016. significant opportunity for financial products. In addition, a third of Migrant workers often use banking products, such as current accounts the population have internet access, which can generate growth in card and payment cards to conduct financial transactions and remit funds to payments. their home countries. Outward remittances rose from $29.5bn in 2012 POS terminals in the country recorded a CAGR of 11.9% between to $37.2bn in 2016. 2012 and 2016, growing from 42,544 to 66,781. GlobalData forecasts Internet penetration reached 69.6% in 2015, which can also aid them to reach 96,792 by 2020. online payments over the next five years. Smartphone penetration is Bank branches have also increased to 3,903 in 2016 from 3,610 in not far behind at 65%. Banks such as Al Rajhi Bank, Samba Financial 2012. This has made cards and banking more accessible to consumers. Group and NCB have partnered with merchants and online retailers to Smartphone and internet penetration were fairly high in Israel, at provide secure payment facilities for mobile phones and online. 78.9% and 59% respectively. Israel’s position as one of the world’s most Nigeria’s economically active population, aged 15-64 years, made up technologically advanced countries will aid the growth of electronic 54% of its 185.3m-strong population. This offers scope for banking payments. and card payment services. While the Africa and the Middle East are still very much cash The government introduced the Nigerian Broadband Plan (2013- economies, that will not be the case for much longer. With aid from 2018) to provide internet access to the large population, with an their respective regulators and governments, cards and alternative ambitious aim to increase internet penetration fivefold. This is set to payments are receiving a much-needed boost. greatly increase e-commerce and m-commerce, in turn benefiting the Will cards displace cash? Not in the short term, but they will local cards market. definitely grasp a decent market share. <

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CI August 546.indd 15 31/08/2017 17:49:54 country snapshot | argentina

country snapshot: argentina

ARGENTINA

Cash remains the predominant payment instrument in Argentina, mainly for day-to-day and low-value transactions. Overall, cash accounted for 78.5% of the total payment transaction volume in 2016

igh interchange fees on debit electronic payments. In 2016, the average One initiative was the implementation and credit cards are discouraging number of monthly card transactions in of a mandatory wage account regulation Hretailers from accepting electronic Argentina stood at 2.36 – higher than by the Central Bank of Argentina. The payments. The average interchange fees on peer countries including Chile (2.32), Brazil regulation requires payroll funds to be debit and pay later cards stood at 1.50% (2.24), Peru (1.13), and Colombia (1.02). directly credited into wage accounts, to and 2.17%, respectively. The government has been encouraging encourage cashless transactions. The Government financial inclusion initiatives the use of debit and credit cards by offering regulation was first introduced in 1997 and improvements to commercial bank tax benefits and by strongly promoting the and came into force in 2001. The account infrastructure have led to a gradual rise in use of payroll cards in the country. is also used for the disbursement of social

value of credit tRanSfers value of cheque payments value of payment cards

$bn 60 $bn $bn 300 100

50 250 80

40 200 60

30 150

40 20 100

20 10 50

0 0 0

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

(estimated) (estimated) (estimated) Source: Central Bank of Argentina, GlobalData Source: Central Bank of Argentina, GlobalData Source: GlobalData

16 | August 2017 | Cards International

CI August 546.indd 16 31/08/2017 17:50:01 country snapshot | argentina

benefits such as retirement, pensions, and Debit card shares by issuer Debit card shares by scheme social welfare funds. Cabal 4.3% In line with these objectives, in 2016 the central bank introduced guidelines for convenient account opening and switching Banco de la Nacion between banks, with the aim of promoting 17.1% competition. Banco Provincia Mastercard 9.9% 34.4% Others 64.7% Visa DEBIT CARDS DOMINATE Banco 61.3% Galicia 8.3% Debit cards remain the preferred payment card type, accounting for 66.3% of the total payment cards transaction value in 2016. In Argentina, debit cards are offered as complimentary products with savings or

current accounts. Source: GlobalData Source: BIS, GlobalData In line with the government’s wage account regulation, banks are increasingly pay later shares by issuer pay later shares by scheme offering payroll accounts. All major banks including Banco Nación, Banco Provincia, and Banco Galicia now offer payroll accounts to their customers. Banco Galicia These accounts are usually preferred 17.2% Others over current accounts as they are exempted 64.7% from government taxes applicable to Santander current account deposits and withdrawals. Others 13.2% Visa 60.0% 54.0% Account holders are also offered a range of benefits such as no annual fees, BBVA Mastercard 9.6% 9.2% preferential interest rates on personal and mortgage loans, and facilities. While debit cards continue to dominate, the use of credit cards is anticipated to rise due to the abolition of the tax on Source: GlobalData Source: GlobalData credit card transactions made in foreign currencies. The rise in Argentina’s middle- class population and increasing household for consumers due to their wide depreciation of the local currency against consumption are anticipated to drive acceptance, they are also hindering the the US dollar. In local currency terms, demand for consumer credit. government’s vision of turning Argentina the transaction value of prepaid cards into a ‘less-cash’ society. registered a CAGR of 16.1% during the THE ‘LESS-CASH’ SOCIETY same period. PREFERENCE FOR PREPAID The unbanked population in Argentina, Payment companies are developing which stood at 42.4% in 2016, remained voucher-based payments to cater to The number of prepaid cards in circulation the key driving factor for prepaid cards the significant unbanked population in recorded a CAGR of 4.6% between 2012 market growth. Prepaid card issuers have Argentina, allowing consumers to make and 2016, rising from 11.2m in 2012 to partnered with government departments payments without the need for a bank 13.4m in 2016. and businesses to extend social benefits to account or payment card. Growth in the prepaid card market consumers without a bank account. Cash-based payments through vouchers can be attributed to improved POS Gift cards are an alternative to cash such as Pago Fácil and Rapipago remain infrastructure, offers and benefits provided and are becoming increasingly popular in the preferred mode of payment among by card issuers, enhanced security Argentina. Banco Galicia offers the free consumers. Pago Fácil users make a features, and the adoption of contactless Galicia Visa Gift card, with different designs purchase, print a voucher, and take it to technology. The number of prepaid cards in for occasions such as birthdays, weddings, a local payment location to make cash circulation is anticipated to record a CAGR and Christmas. payment. Payments can be made at 4,000 of 2.7% over the next few years to reach Card schemes are also capitalising on the Pago Fácil locations across the country. 15m by 2020. growing prepaid cards market in Argentina. Similarly, Rapipago vouchers are accepted The total transaction value of prepaid For instance Visa has collaborated with at 3,000 locations. cards decreased over the last five years, Banco Provincia, Bank Santander Río, BBVA Although voucher-based payments from $2.6bn (ARS11.7bn) in 2012 to Banco Francés, and New Bank of Santa Fe provide a convenient shopping experience $1.4bn in 2016, due to the significant to issue rechargeable Visa cards. <

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CI August 546.indd 17 31/08/2017 17:50:02 country snapshot | mexico

country snapshot: mexico

MEXICO

Cash remains the preferred form of consumer payment, especially among the rural population, primarily due to limited knowledge of payment cards or poor access to banking infrastructure

ash is primarily used to make small- 138.4 per 100 inhabitants, which is lower unbanked population – by expanding value payments at retailers, and for in comparison to its peers Brazil (243.1), banking infrastructure, launching new Cthe payment of utility bills, taxes Chile (196.6), Argentina (178.4), and branches, adopting the agent banking and transport fares. Venezuela (151.5). model, and making efforts to change A significant proportion of the population The low penetration rate is a result of the consumer payment habits – payment cards is engaged in informal activities. These low banked population and the low level have gradually become more accepted, include farmers, street vendors, domestic of financial literacy. As the government with their use consequently growing servants and self-employed workers. and banks have started to provide basic between 2012 and 2016. Card penetration in Mexico stood at financial and banking services to the

value of credit tRanSfers value of cheque payments value of payment cards

$bn $bn 80 $bn 500 15,000 70

400 12,000 60

50 300 9,000 40

6,000 200 30

20 3,000 100 10

0 0 0

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

(estimated) (estimated) (estimated)

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

18 | August 2017 | Cards International

CI August 546.indd 18 31/08/2017 17:50:10 country snapshot | mexico

FINANCIAL INCLUSION Debit card shares by issuer Debit card shares by scheme Carnet The government has identified access 1.5% to financial services as a priority, and BBVA encouraged initiatives that make bank Bancomer accounts essential for every individual. 16.1% The central Banco de México has Mastercard BanCommel 43.0% directed banks to simplify the process of 12.2% opening bank accounts, making access Others Visa 59.7% to basic banking products such as bank Banamex 55.6% Citibank accounts and debit cards easier. 12.1% Debit cards have grown in prominence with the introduction of electronic payroll services, a rise in the banked population, and the government’s distribution of social

welfare funds through cards. Source: GlobalData Source: BIS, GlobalData Mexico’s government is focusing on financial inclusion through three social pay later shares by issuer pay later shares by scheme benefits programmes: Oportunidades, Others Programa para Adultos Mayores, and 3.2% Procampo, disbursing benefits through bank accounts and cards. These BBVA programmes are supervised by the Ministry Bancomer of Social Development. 19.1% Banks have also supported the financial Mastercard Banamex inclusion programmes, resulting in an Others 37.8% Visa Citibank 59.0% increase in the banked population from 54.0% 16.5% 31.5% in 2012 to 46.8% in 2016, which has supported a rise in debit card penetration. BanCommel 10.5% CREDIT CARD SLOWDOWN

Despite its small size, the Mexican credit Source: GlobalData Source: GlobalData card market has recorded robust growth in terms of the number of cards in circulation, as well as transaction value and volume, market anticipated to reach $35.8bn by In November 2014, the Mexican tax supported by high consumer spending. 2020. Payment cards remain the most authority Sistema de Administración However, the market is likely to be popular payment method among online Tributaria (Tax Administration System) and affected by Donald Trump’s victory in the shoppers, accounting for 60.8% of the total the Confederación de Cámaras Nacionales US presidential election. Consequently, e-commerce transaction value in 2016. de Comercio, Servicios y Turismo (National banks are cutting credit card exposure In addition to payment cards, alternative Chambers of Commerce, Services and to counter a potential rise in consumer payments such as PayPal, MercadoPago, Tourism) launched the Tableta Concanaco defaults and the risks of an economic shock DineroMail and SafetyPay are all used scheme to provide micro-enterprises should the new US government restrict extensively for online shopping. and SMEs with mobile POS terminals at trade and business with Mexico. The availability of digital wallet services, subsidised rates. As of February 2015, Banks are therefore reducing credit and the security and convenience they 20,000 mPOS terminals had been issued card spending limits and raising consumer offer, has made them popular among under the scheme. lending standards. consumers. Mobile wallets, digital wallets, The growing payment card market has Banks’ profits would suffer if the US and carrier billing collectively accounted prompted domestic and international government scraps the North American for 10.7% of total e-commerce transaction solutions providers to launch POS Free Trade Agreement or discourages US value in 2016, up from 5.1% in 2012. terminals in the country. For instance, in companies from moving to Mexico. May 2016 Banorte and Planet Payment, an GROWING INFRASTRUCTURE international and multi-currency payment ALTERNATIVE PAYMENTS processor, launched currency conversion The number of POS terminals recorded a POS solution, Pay in Your Currency. The Mexican e-commerce market posted CAGR of 11.1% between 2012 and 2016, The solution allows international a CAGR of 40.8% between 2012 and rising from 621,628 in 2012 to 946,419 customers to pay in the currency of their 2016, growing from $4.1bn (MXN85.7bn) in 2016. The figure is anticipated to reach choice, while Mexican merchants can in 2012 to $16.2bn in 2016, with the 1.3m by 2020. continue to settle in pesos. <

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CI August 546.indd 19 31/08/2017 17:50:12 Country snapshot | the czech republic

country snapshot: the czech republic

CZECH REPUBLIC

The Czech economy has registered robust growth since 2014, supported by a decline in oil prices, increased investment activity, and government policy to encourage exports and domestic demand

conomic growth and disposable Cash remains the preferred method of value transactions. However, its use has incomes are expected to accelerate consumer payment, accounting for 56.2% declined since 2012 due to a growing Eover the next five years, which will of the total transaction volume in 2016. preference for payment cards and an drive investment in the Czech cards and Consumers in the Czech Republic increase in contactless transactions. The payments industry. generally use cash for day-to-day, low- payment cards market grew significantly

value of credit tRanSfers value of cheque payments value of payment cards

$bn $bn $bn 1.5 25 8,000

7,000 1.2 20 6,000

5,000 0.9 15

4,000 0.6 10 3,000

2,000 0.3 5 1,000

0 0.0 0

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

(estimated) (estimated) (estimated) Source: The Bank Source: ECB, GlobalData Source: ECB, GlobalData of Czech Republic, GlobalData

20 | August 2017 | Cards International

CI August 546.indd 20 31/08/2017 17:50:21 Country snapshot | the czech republic

in the Czech Republic between 2012 and Debit card shares by issuer Debit card shares by scheme 2016 as consumers were increasingly spending more with their payment cards. The total number of payment card transactions increased at a CAGR of 15.8%

from 480.6m in 2012 to 865.1m in 2016. Others ČSAS The Czech Republic’s payment card 30.9% 31.3% penetration (cards per inhabitant) was 1.1 Mastercard Visa 49.0% 51.0% in 2016, which is high compared with its peers Slovakia (1.0), Bulgaria (1.0), Hungary Komerční (0.9), Poland (0.9) and Romania (0.8). banka ČSOB 22.3% The high penetration of payment cards 15.5% offers further scope for growth in the country’s cards and payments market.

UPTAKE OF CONTACTLESS Source: GlobalData Source: BIS, GlobalData

Contactless cards were first introduced in pay later shares by issuer pay later shares by scheme the Czech Republic by Citibank in 2011. This was followed by other banks, and the majority of domestic banks now allow

their customers to carry out contactless Raiffeisen Others Bank 11.7% payments. 14.4% Visa The number of cards with contactless 51.0% ČSAS functionality was 10.9m in 2016. According 11.8% to data reported by Visa Europe in February Others Komerční 2015, Czechs use contactless payments 64.8% banka Mastercard for 3.3 transactions per month per card 8.9% 80.0% on average – the highest rate in the EU, followed by Poland (2.6) and Slovakia (1.3). According to Visa Europe, the Czech Republic was the third-largest market for Visa contactless cards in Europe with Source: GlobalData Source: GlobalData 13.9m transactions conducted in March 2015. This was preceded by the UK (52.6m) and Poland (49.7m). improve convenience in online shopping. value of transactions via prepaid cards rose In addition, according to a 2015 report For example, UniCredit Bank launched from $3.1m in 2012 to $8.6m in 2016. by Mastercard, nearly 52% of Mastercard the Pay button on its internet banking Banks in the Czech Republic offer a and in-store transactions are platform in December 2015. number of prepaid cards to serve different contactless in the Czech Republic. The bank, in association with online consumer segments. For instance, payment service provider PayU, offers the ČSOB offers the COOL prepaid card in E-COMMERCE GROWTH new payment option when consumers collaboration with Mastercard, which is make payments on e-commerce and price primarily designed for students. The total transaction value of the comparison websites, including Mall.cz and Targeting corporate customers, ČSAS e-commerce market posted a CAGR Heureka.cz. offers the Maestro corporate business of 32.2% over five years, from $2.0bn Similarly, Mastercard launched prepaid card in collaboration with (CZK52.9bn) in 2012 to $6.3bn in 2016. Masterpass in the Czech Republic in Mastercard. The card has a validity period A high mobile penetration rate, consumer November 2014. of three years, and incorporates chip-and- confidence in online transactions, and PIN technology. However, this card can the presence of a secure online gateway DEMAND FOR PREPAID only be used for ATM withdrawals and were responsible for driving this growth. in-store payments. According to Ecommerce Europe, 80.0% Prepaid cards are increasingly gaining Several companies and card service of the Czech population above the age of acceptance among Czechs, as they do not providers collaborate with international 14 years – equivalent to 7.1m individuals require a bank account and are accessible scheme providers to offer prepaid cards. – use the internet, and 3.7m people shop to consumers who do not otherwise qualify For instance, prepaid card issuer FreePay online. for a bank card. collaborated with Mastercard to offer Banks and other card participants are The number of prepaid cards in a reloadable prepaid card that can be introducing innovative payment options circulation rose from 360,559 in 2012 to used worldwide through the Mastercard to encourage electronic payments and 477,552 in 2016, at a CAGR of 7.3%. The network. <

www.cardsinternational.com | 21

CI August 546.indd 21 31/08/2017 17:50:27 industry insight | persistent debt

review their financial situation and see if they can support them – for example, by giving new affordability debt advice through internal or external referrals and suggesting arrangement plans or full debt restructures. By enabling them to identify and reach out to the customer at the right time before they meet the persistent and tackling debt definition, this approach will help lenders meet regulatory requirements such as the FCA’s recent proposal on credit cards. Despite this positive impact, and the persistent debt growing importance of affordability assessments within organisations, some are concerned about the potential impact more In light of the FCA’s latest plan for the cards industry, robust processes would have on the customer Callcredit Information Group’s Eamonn Tierney looks experience. Close to one in five (17%) of respondents disclosed that they have had a at how organisations can be better prepared to deal with customer complain about affordability checks. ever-changing requirements to support customers The technology available today means that lenders should be able to assess all the necessary affordability indicators without arlier this year, the Financial background gives lenders a better view hindering the customer journey. This is Conduct Authority (FCA) of a potential borrower’s ability to make particularly important in a pre-delinquency Eannounced that credit card repayments, helping them take more informed environment, where individuals are not yet in companies will have to not just provide lending decisions. persistent debt, and a wrong approach to their more support to customers in persistent But the need for responsible lending does circumstances could damage the customer debt, but intervene earlier to help them not stop at the initial lending decision, as a relationship and result in a loss of business. avoid getting into financial difficulty in the customer’s circumstances could change at Organisations can use technology and first place. any time. Rather it should be an ongoing data to verify income and expenditure, As this example demonstrates, processes priority in order to avoid individual’s getting often without having to ask consumers to around assessing affordability and treating into financial difficulty throughout the entire provide supporting paperwork or documents. customers fairly continue to evolve at a rapid customer lifecycle. And when specific evidence of income and pace. To better understand the changing expenditure is needed, with the consumer’s attitudes towards affordability over the past ASSESSING AFFORDABILITY permission, a digitalised view of transactional decade, we undertook some independent data from a consumer’s bank account can research amongst risk professionals and Assessing affordability, both at point of be accessed. Using data and technology customer experience managers. application and future sustainability, is key in this way enables lenders to identify The research identified the key concerns to helping consumers not just avoid financial customers heading for financial difficulty facing lenders over affordability checks, as well difficulty but manage their finances more early on, without any manual intervention or as their main business priorities and future effectively. interruption to the customer journey. predictions when it comes to affordability In addition to giving lenders a The need for robust affordability assessments. comprehensive view of their customer as a assessments will only increase further, as both Our research found that lenders are now whole, consistently carrying out affordability regulators and lenders continue to focus on more focused on the customer than ever assessments can help flag when a person’s the wellbeing of their customers. before, and are truly beginning to put them financial situation changes early on, and In order to truly thrive, the future of at the heart of every decision they make. identify those customers who truly need affordability needs to be built on firm A large majority (72%) believe they have a support. These insights can be used to tailor foundations like accurate data and technology social responsibility to prevent customers services and payment plans to better meet that can evolve. This will help lenders from overstretching themselves financially – a customers’ individual needs, and help them meet regulatory requirements, such as the trend the recent FCA proposal will likely only avoid getting into arrears or agreeing to FCA’s recent credit card proposal, limit the accelerate. unsustainable repayment plans. impact on your customers and reduce over Affordability assessments play a central What is more, by being able to easily indebtedness. role in helping lenders achieve this in identify those customers already in financial If organisations want to remain at the practice. Using big data technologies, modern difficulty, lenders can then also take steps to forefront of regulatory and other changes, assessments can provide the most accurate, help them better manage their debt. and truly understand an individual’s ability to real-time view of a customer’s full financial A number of banks currently using afford credit, far from being a static, tick-box situation, including their income, living costs affordability data as an identification trigger exercise, affordability assessments need to be and spending habits. This comprehensive for a pre-delinquency contact, are then an ever-evolving core consideration for the understanding of a customer’s financial proactively trying to engage customers to business. <

22 | August 2017 | Cards International

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