Future of Payments

INDEPENDENT PUBLICATION BY raconteur.net #0478 03 / 10 / 2017 FUTURE OF PAYMENTS

PAYMENTS SHAKE-UP IS CASH IN NOTES AND SMILE IF YOU WANT 04 COINS FOR DIGITAL 15 YOUR CHICKEN… 03 A BREXIT FAREWELL Electronic payments march on, but A Smile to Pay facial recognition Europewide regulation is set to transform payment services could we ever do without some cash? system is among the first of its kind RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 03

OPEN BANKING FUTURE OF PAYMENTS Payments shake-up DISTRIBUTED IN is a Brexit farewell EVENT PARTNERS Europewide regulation is set to transform payment services, promising consumers a new deal

RACONTEUR Ge Drossaert, chief commercial SAM SHAW officer at challenger bank and fin-

PUBLISHING MANAGER PRODUCTION MANAGER tech provider Fidor, says while tier-1 Flavia Brown Antonia Bolcas ith the proliferation banks have the firepower to evolve of payment services into open banks, he expects to see PRODUCTION EDITOR DIGITAL CONTENT EXECUTIVE since the financial more tier-2 banks partnering. Benjamin Chiou Elise Ngobi crisis and a hitherto “We are seeing this in France and MANAGING EDITOR DESIGN Wstranglehold on competition by the the Netherlands, in order to future-

Peter Archer Samuele Motta major banks, it’s no surprise the reg- Walker/Shutterstock Lee Tommy proof their businesses,” he says. “I Grant Chapman ulators have stepped in. see PSD2 as a trigger for co-operat- Kellie Jerrard At present, gathering informa- ing with fintechs rather than seeing tion to share with another party them as a threat.” usually requires “screen scraping” Across Europe there are “pockets of unstructured data and refor- of activity”, says Ms Harwood, such CONTRIBUTORS matting into structured data com- as the Berlin Group and various patible with Excel or a database so French organisations starting to it can be read. point towards common standards. 1 JON CARD CATH EVERETT But from January 13, 2018, the Yet she firmly believes the UK is Freelance journalist, he Freelance journalist specialises in business, specialising in European Commission’s Revised blazing the global trail. “The US and enterprise, media and workplace and Payment Services Directive (PSD2) Canada are looking to the UK as they technology, and writes employment issues, she will mandate all European Union develop their own approaches,” says regularly for The Times, also writes on the impact member states, including the UK, Ms Harwood. “While the US banks The Daily Telegraph and of technology on society and the European Economic Area have been using APIs for some time, The Guardian. and culture. to use open application program- the standardisation being devel- ming interfaces (APIs), allowing fi- oped across the UK is unparalleled.” OLIVIA GAGAN CLARE GASCOIGNE nancial transaction information to Mr Drossaert adds: “We have seen Senior reporter at Formerly on the staff be shared with explicit permission the National Payment Platform IJGlobal, she writes for of the Financial Times, PSD2 is set to disrupt the Euromoney Institutional she is now a freelance from the account holder. payments industry across Europe, launching in Australia and recently Investor, and was journalist specialising Its intentions are improved com- but are banks ready? the banking sector in Japan is being formerly with Drapers in City and financial petition, cost-effectiveness and a called on to pin their colours to a and Infrastructure features. more level playing field across the mast – are they open banks or not?” Journal. payments industry, while increas- The big four banks, Lloyds, RBS, API specifications, advance alerts As the use of third-party APIs is ing customer protection. PSD2 Barclays and HSBC, collectively ac- and grace periods if account holders now standard in much of day-to-day JAMES HURLEY OLIVER PICKUP serves to expand the reach of the counting for more than 70 per cent inadvertently went overdrawn, as life, from eBay in the retail space to Enterprise editor at Award-winning first directive in 2009. of UK personal current accounts, well as monthly maximum charges Uber, which integrates with Google The Times and award- journalist, ghostwriter winning journalist, he and media consultant, According to David Song, Europe- and the stickiness of their assets, and more transparent comparisons Maps’ API for location and PayPal’s was formerly enterprise he specialises in an developments manager at UK Fi- together losing less than 5 per cent to encourage account switching. API for payment, the use of open editor with the technology, business, nance, two main areas to be affect- of market share since 2005, gave the So with little time to go before APIs for payments seems a no-brain- Telegraph Media Group. sport and culture. ed are payment initiation services, Competition and Markets Authority the January deadline, is the in- er, yet not without risks. which reflect the market growth of (CMA) sufficient cause for concern. dustry ready? According to the Open Data Insti- SAM SHAW SHARON e-commerce and mobile payments, Publishing its final report on the “It is a considerable endeavour tute, fraud currently costs the UK Formerly an editor at THIRUCHELVAM and account information services, retail banking market last August, and the timeframes are rightly am- economy more than £570 million FT Business, she is Writer specialising in showing the growing trend towards the CMA concluded: “Older and bitious,” says Esme Harwood, vice a year and it suggests that by pull- now a freelance writer culture and innovation, consumers using multiple provid- larger banks do not have to compete president of public policy at Barclays. ing in data from multiple sources, on a range of topics, she contributes to The ers that increasingly need to talk to hard enough for customers’ busi- “We feel confident we will be ready.” third-party fraud detectors could including business, Independent, i-D, Vice one another. ness, and smaller and newer banks API specifications were confirmed aggregate data “to spot patterns finance, marketing and and Forbes. technology. While in the UK card payments find it difficult to grow. This means in July, putting the industry in a that a single product provider are fairly commonplace, the Conti- that many people are paying more “good place” to hit the deadline, wouldn’t see”. nent is more inclined towards bank than they should and are not bene- says Ms Harwood, but she warns Concerns also exist around exces- transfers. Around 60 per cent of the fiting from new services.” that a lack of clarification of other sive choice. Where consumers are EU population does not have a cred- The report set “open banking” PSD2 technical specifications may used to dealing with a handful of it card, according to the European remedies such as standardised open be cause for concern. payment providers, the sweeping Commission, and as such restric- changes bring other threats to light. Although this publication is funded through advertising and tions exist; many cards simply won’t Guillaume Pousaz, chief executive sponsorship, all editorial is without bias and sponsored features and founder at payment provider are clearly labelled. For an upcoming schedule, partnership work in other countries. inquiries or feedback, please call +44 (0)20 3877 3800 or e-mail According to Experian, services Checkout.com, says: “Transparen- [email protected] such as iDEAL in the Netherlands, cy over the number of legal entities Raconteur is a leading publisher of special-interest content MobilePay in Denmark, Sofort in the that have access to sensitive finan- and research. Its publications and articles cover a wide range wider EU and Pingit in the UK con- cial data will cause the consumer a of topics, including business, finance, sustainability, healthcare, tinue to drive down costs, especial- great deal of confusion. lifestyle and technology. Raconteur special reports are published ly for lower-value payments due to “Keeping track of who has access exclusively in The Times and The Sunday Times as well as online the lower overheads for merchants to your financial data is going to at raconteur.net of being able to accept credit card be difficult as companies inevita- The information contained in this publication has been obtained 70% 95% 60% payments. Gone are the days of Visa bly weave in terms and conditions from sources the Proprietors believe to be correct. However, no market share of UK of all card payments of people in the legal liability can be accepted for any errors. No part of this and Mastercard being the dominant personal accounts in Europe are European Union without the consumers’ full under- publication may be reproduced without the prior consent of the twin schemes. is held by the big affected by do not have a standing.” Publisher. © Raconteur Media PSD2 also waves goodbye to card four banks - Lloyds, surcharging, which credit card This, in a world where absent- payment surcharging, affecting RBS, Barclays and will cease post-PSD2 mindedly clicking “I Agree” to un- HSBC roughly 95 per cent of card pay- read Ts&Cs is the norm, swiftly be- @raconteur /raconteur.net @raconteur_london ments in Europe, saving consumers comes an area on which to keep a approximately €730 million a year. watchful eye. /future-payments-2017 RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 03

OPEN BANKING FUTURE OF PAYMENTS Payments shake-up DISTRIBUTED IN is a Brexit farewell EVENT PARTNERS Europewide regulation is set to transform payment services, promising consumers a new deal

RACONTEUR Ge Drossaert, chief commercial SAM SHAW officer at challenger bank and fin-

COMMERCIAL FEATURE CASHLESS SOCIETY Current accounts get upgrade as challenger Cash is still popular in an electronic world Progression towards executive at PPRO, an electronic money specialist. USE OF PAYMENT METHODS banks shake up electronic payments In the UK, however, about 25 per WHEN UK ADULTS LAST USED THE FOLLOWING PAYMENT METHODS, IF AT ALL cent of people don’t have smart- continues, but could phones and broadband access can Within the last three months More than three months ago/never be patchy, especially in some rural we ever do without areas. That combination can make everyday payments Cash 93% 7% some cash? mobile payments difficult, leading to financial as well as digital exclusion. Mr Black says: “This is a massive Debit card Traditional banks are missing a trick by undervaluing 82% 18% change in behaviour that we’re going (chip and PIN) everyday payments and short-changing customer Images Getty via Edwards Caiaimage/Sam through; there will be bumps along Direct debit/ the way. It’s a gradual transition and 79% 21% interaction, fuelling the rise of digitally native challengers the way to protect people who are standing order resistant to change is to make sure there isn’t a cliff edge where sudden- Bank transfer 60% 40% ly you can’t pay with cash.”

Five years ago there was a lot of re- Credit card sistance to the tap-and-pay idea; it (chip and PIN) 53% 48% CLARE GASCOIGNE took time for everything to fall into obile has transformed the place, from the issuing of new cards Contactless way customers manage he cash machine celebrated to the upgrading of retailers’ card debit card 49% 51% their day-to-day financ- its 50th birthday this year; machines. Now contactless pay- es and spend money, re- it was 1967 when Barclays ments are the norm for many of us. Contactless Msulting in them interacting with their opened its first ATM in En- One country that stands out in credit card 45% 55% banks far more frequently through Tfield. More than 80 per cent of cash the cashless revolution is Sweden, apps and other online services. The withdrawn from banks is obtained where the use of cash has fallen by UK will be home to more than 43.6 through cash machines, but it is cash 40 per cent since 2009. Bills and Cheque 31% 69% million smartphone users by the itself that could be on the way out. coins now represent a mere 2 per end of 2017, m-commerce sales are After all, it is two years since the cent of Sweden’s economy. Last Contactless using now worth billions and payments UK passed the tipping point of more year the central bank, the Riks- a smartphone 13% 87% are increasingly integrating with electronic than cash payments. bank, began an investigation, due social media applications such as And by next year, more than 20 per to be completed at the end of 2019, Contactless WhatsApp and Facebook. cent of online transactions are like- into whether to issue an e-krona. wearable 9% 91% Through multiple mobile touch- ly to be made through mobile devic- According to deputy governor Ce- points, consumers are giving more of es, according to PwC. cilia Skingsley: “The Riksbank will Percentages may not equal 100 due to rounding Mintel 2017 themselves to their banks than ever Nor is the UK alone. Governments continue issuing banknotes and before. But traditional banks are fail- across the world are pushing the ing to translate this unprecedented drive towards a cashless society, ments, a technology company: lose your cash, but lose your pass- coins as long as there is demand for difference in terms of the conveni- wave of interactions into a more en- hoping to reduce issues such as “People expect to make payments word to a cyber criminal and you them in society.” But she adds: “If ence of these options. The fact that gaging customer experience due to Starling users can receive real-time overnight. Creating a mobile-only fraud or funding for terrorism, de- easily and securely, at a time which might lose your life savings. the market can make use of the new contactless smartphone payments a reluctance to invest in current ac- mobile notifications for income and current account from scratch means crease the black economy and im- This is a massive is convenient and via a channel of But does the absence of a bank technology to launch new and popu- don’t offer added convenience over counts, an area they consider com- outgoings, making them instantly we have completely different ambi- prove tax revenues. Last November, their choice. Cash is becoming an account and the decline of cash al- The fact that lar payment services, why shouldn’t contactless card payments will re- plex and a drag on profitability. aware of their finances. Spending tions when it comes to technology for example, the Indian govern- change in increasingly expensive commodity ways mean the poorer half of society the Riksbank be able to do the same?” main a significant barrier to uptake.” “For many banks, everyday pay- is automatically categorised and and providing the best service for ment abolished 500 and 1,000 ru- behaviour that to manage, for all parties involved. misses out? Not necessarily. Look at contactless The appetite for e-krona appears Cash still has its uses and for ments are far from their core focus portioned with percentage values our customers.” pee notes overnight in a bid to stem we’re going In fact, today, half of Britain’s pop- the rise and rise of the mobile pay- smartphone to be limited. One survey, from Tie- some countries, including the UK, because current accounts have been allocated to individual merchants. Starling isn’t just shaking up con- fake currencies and corruption. through; there will ulation keeps less than £5 on their ments industry. M-Pesa, a mobile payments don’t offer to, a Swedish digital payments firm, is an indispensable part of life. considered loss-making products,” Daily spending can be checked at sumer payments, but also the busi- “Government plays a big part in be- person at any one time.” phone money transfer service, has found that only a tenth of those Others, regardless of the level of says Anne Boden, chief executive a glance and payments can be set ness-to-business payments indus- coming cashless,” says Senthil Ravin- be bumps along But not everyone is so happy. revolutionised payments in coun- added convenience polled were in favour. economic development, are happy at Starling Bank, an app-only bank up in an app with the option to add try with Starling Payment Services, dran, head of the fintech lab for bank- the way According to a recent report from tries such as Kenya and Tanzania. over contactless So it seems there is no one-way to dispense with it. The replace- founded three years ago. “They’ve images to keep track of them visual- the only sponsor bank offering re- ing and financial services at Virtusa, Mintel, a market research company, Services such as Pingit and Paym card payments street for payment systems. “De- ment for cash may be plastic, but been more interested in the prod- ly. Meanwhile, in-app security means al-time faster payments access. Its a technology company. “It is easier only a third of consumers would be in the UK are side-stepping not only will remain a spite widespread ownership of both there again may be mobile phones. ucts they can cross-sell or up-sell like users can instantly lock their card if on-boarding time from initial inquiry for a government to tax a salary go- fits, from automatic reckoning to a comfortable with a cashless society. cash, but plastic as well. smartphones and cards, many peo- The advent of virtual currencies mortgages, loans and ISAs. So while lost, unlock it again if found and con- to sending the first payment using its ing through a bank; digital payments greater knowledge of the customer. There are about two million people “The cashless revolution has three significant barrier ple continue to show a preference may add an extra element to the people are engaging so much more published application programming help a government collect tax.” For the consumer, it is convenience in Britain without a bank account, interconnected elements – e-com- to uptake for cash,” says Patrick Ross, senior debate. But in the end, the conven- with banks, banks are not responding.” interfaces or APIs is under 12 weeks, Financial institutions are just and speed that are the draw. according to the Financial Inclu- merce, digital cash and smart- financial services analyst at Mintel. ience and reliability of cash makes Current accounts are people’s day- We are helping including extended due diligence, as keen as the traceability of elec- According to Andrew Stenton, sion Centre. Such individuals can- phones,” says Simon Black, chief “It’s clear there isn’t all that much it hard to give up. to-day banking centres and repre- risk committees and contracts. tronic payments brings huge bene- managing director at Civica Pay- not access the cheaper costs that sent the central part of their financial people to manage their The bank is also building a network come with direct debits or online lives. But providing an exceptional of other fintech products and startups shopping and as a result on average money in a modern, CASE STUDY user experience requires significant that can integrate with its APIs through pay an extra £1,300 a year. efficient and secure way, CONSUMER ATTITUDES TOWARDS CASH SINGAPORE investment in a nimble and resilient the Starling Marketplace, Europe’s first SURVEY OF UK ADULTS In India, according to a report from infrastructure. It’s hard for traditional all from their mobiles fully regulated connective platform. the World Bank, as much as 97 per It is three years since the city-state of credit card companies and banks to banks to do this because of the in- This will make Starling the gateway to I am comfortable with the cent of transactions involve cash, a Singapore launched the Smart Nation process electronic payments. Add in a frastructure and processes already financial products offered by other -fin idea of a cashless society factor that could account for the push- initiative, designed to bring technology high proportion of small business and in place, and starting a new bank trol where it can be used, online, of- techs, startups, payment service pro- back that greeted the demonetisation. into every aspect of people’s lives. But sole traders, and it’s easy to see why was previously too complex and fline or at ATMs. viders and corporates. There are, of course, certain jobs according to prime minister Lee Hsien Singaporeans still prefer cash. expensive. Nearly two-thirds of UK “We’ve built our own systems from “Very soon, payments will be syn- that rely heavily on cash. Any sector Loong’s annual National Rally Day Compared with China, Singapore’s adults now bank via mobile, but 43 scratch, and with the resilience and in- onymous with the way we live our where tipping is a common practice speech in August, six in ten financial payments system looks outdated; 43

per cent believe products no longer frastructure necessary to provide both lives. There will be no physical, vis- will find its economics changed by Images Vision/Getty Digital transactions still involve cash or cheques. per cent of Singaporeans use cash most fit their lifestyle. a great service for customers as well ible objects attached to activities, Don’t the use of purely electronic payments, So what’s been the problem? After all, often, compared with only 25 per cent However, changes in regulations as a means of engaging with them including banking,” says Ms Boden. know where it can be hard to ensure the gra- Singapore is a digitally literate society in China, according to a recent report have allowed more companies to not through the process,” says Ms Boden. “We’ll be paying for purchases with- tuity goes to the right person. with a global financial reputation. from PayPal. But the government has 17% only break into the payments industry, “We are helping people to manage out having to check out at tills and More alarmingly for some, reli- With many payment options, plans to change the use of cash. In July, but disrupt it with a fresh and innova- their money in a modern, efficient and we’ll travel without taking out a card, ance on electronic payments brings consumers have to carry several the Monetary Authority of Singapore tive approach. The biggest winners secure way, all from their mobiles. using technology such as Apple Pay Yes 33% a lack of privacy, both for good or cards. Also retailers have to operate launched PayNow, a peer-to-peer of these developments are custom- “Banks have existed for decades and Android Pay to make payments.” for ill, and a potentially dangerous several payment terminals, and are funds transfer service operated with ers because new challengers such as with legacy technology built on top No 51% reliance on technology which has, charged high transaction fees by a mobile phone. Starling have everyday payments built of other legacy technology, so natu- For more information please visit after all, been known to go wrong. into the heart of their operations. rally they are not going to transform www.starlingbank.com Mintel 2017 Lose your wallet to a thief and you 04 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 05

COMMERCIAL FEATURE

Bitcoin moves towards the mainstream

From the unknown to the undeniable, cryptocurrencies are rapidly transforming

the financial system and are set to alter The numbers speak for them- He says: “Firstly, both parties our everyday existence, according to selves; in the three years since require their own bank account Wirex’s inception, the company has and this might be problematic, or leading blockchain personal finance accumulated more than 800,000 indeed impossible for some people customers across 130 countries and or in some more remote parts of the platform Wirex recently celebrated transacting $1 world. Secondly, individuals must billion of business. contend with high transfer fees. “The implications of cryptocur- “Bitcoin has the power to pro - rencies are huge,” says Mr Matveev. vide financial services to hard-to- “Financial experts are agreed that reach communities and democra- their evolution has set in motion tise financial services for all, in a huge changes for the financial ex - way traditional currencies cannot. change system and we are seeing We believe that geographical limi- increasing numbers of people de- tations in finance should be a thing PAVEL MATVEEV CHIEF EXECUTIVE t was not so long ago that the You only need to look at the diz - manding the option to use digital of the past.” WIREX realms of cryptocurrency were zying heights bitcoin has reached currencies alongside traditional Such is its growing attraction firmly the reserve of online en - since its debut in 2009 to see that payment methods.” that in April Japan became the thusiasts, relegated to the this trend shows no signs of slow - While the lack of regulation sur- first country to recognise bitcoin Its popularity stems from its Ideepest corners of the web. Fast ing. From an unchartered concept, rounding cryptocurrency has posed as an official payment method. Its ability to provide better for- forward to 2017 and rapid ad - bitcoin is poised to become part of one of its greatest challenges to decision to do so placed it firmly eign exchange rates, faster KYC vances in digital technology are consumers’ everyday existence. date, it has also been its biggest at the head of the pack and has (know-your-customer) verification changing the face of financial ser - Unsurprisingly, it has been hailed asset. Bitcoin operates on a dis- set in motion what could well be a and far quicker delivery times from vices, with digital currencies at the the new gold among investors, tributed ledger, with every creation global trend. card printing facilities located very heart of the transformation. with its safe haven appeal amid or transfer archived for maximum In June, the International Mon- around the world. Bitcoin, the most famous crypto- growing geopolitical tensions transparency, but unlike fiat curren- etary Fund released a report in Mr Matveev says: “In recent currency, and its peers have seen and lacklustre markets, sending cies, bitcoin and its comperes are which it found that “boundaries years, consumers have been dealt their popularity soar amid growing prices rocketing. While it may not free of government manipulation. are blurring” and recognised the a series of shocks from the reces - demand from consumers for a fi - have a physical form, the rewards In an era of recession, quantitative ability of fintech to innovate the sion to Brexit, of which the latter’s nancial solution that is not at the for those who have invested are easing and experimental monetary financial system. consequences are still unknown. mercy of national governments. very real. For most of 2010, bitcoin policy, it is easy to see why this is “Japan’s decision marked a tri - Cryptocurrencies ensure land bor- traded at 6 cents; today the cur- particularly appealing. umph for cryptocurrencies,” notes ders have no impact on consum - rency sits comfortably around the What’s more, it is devoid of the ties Mr Matveev. “It has helped to in - er’s financial freedom. While banks $4,000 mark, having quadrupled in that come with traditional banking still confidence in businesses to make their services complicated or value this year alone. It is a phe - methods. The beauty of bitcoin pay- incorporate bitcoin into their of- difficult, the use of digital wallets 130+ nomenon that the world can no ments is that they are peer to peer; ferings, and provided consumers and cards makes global payment countries longer afford to ignore. individuals can transfer money di- with greater flexibility and choice. technology simple.” For Pavel Matveev, chief execu- rectly to one another at a faster rate We believe that everyone should According to Worldcoinindex, tive of the world’s biggest block- and international payments are con- be part of the financial revolution; there are now more than 500 cryp- chain personal finance platform siderably cheaper, especially so for it’s time to combine cryptocurren- tocurrencies in existence and ear- Wirex, we are only at the beginning lower sums of money. In an increas- cy with traditional currencies in our lier this year bitcoin’s market capi - of the story. ingly globalised world, this more ef- daily finances.” talisation surpassed $50 billion for 800k “The rising demand we are wit- ficient alternative is proving alluring. Wirex has been at the forefront the first time. customers nessing is testament to the grow - According to Mr Matveev, sending of the bitcoin evolution as the first As Warren Buffet once said: ing need for a form of currency money across borders via bitcoin is to combine the speed and flexibil- “Someone is sitting in the shade that reflects the modern world and an improvement on the outdated, ity of blockchain finance with the today because someone planted the technological revolution we expensive and often frustrating fi- acceptance of fiat currency, all in a tree a long time ago.” It’s clear are undergoing,” he says. “Bitcoin, nancial infrastructure of convention- one account. The company offers that enthusiasm, determination and cryptocurrencies in general, al methods. secure digital wallets and pre- and demand will continue to push 1m+ have the potential to change how paid Visa cards used by customers cryptocurrencies to the fore. For customers millions of people around the world around the world to convert quickly Wirex, we are only on the cusp of estimated by conduct their financial situation between bitcoin and national cur- what promises to be an exhilarat- the end of 2017 on a daily basis. We have moved It’s time to combine rencies, including pounds, dollars ing financial revolution. beyond the early-adoption phase cryptocurrency with traditional and euros. It will soon launch the and are rapidly moving towards first contactless plastic cards for For more information please visit the mainstream.” currencies in our daily finances use with a cryptocurrency platform. wirexapp.com 06 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 07

COMMERCIAL FEATURE BLOCKCHAIN

BLOCKCHAIN ADOPTION IN BANKING JON CARD WHEN GLOBAL FINANCIAL SERVICES LEADERS EXPECT TO SEE COMMERCIAL ADOPTION OF BLOCKCHAIN lockchain has been the “next big thing” for payments for some time. The concept of By 2018 33% a dependable and trusted Bsource of data about customers, transactions, ownership of assets and other kinds of payment infor- By 2020 49% mation is not lost on bankers. Also secure, blockchains are not held on any single server, but dis- By 2022 12% tributed across a global network of computers. Every time the information is amended by a user with Bitcoin moves a cryptographic code, the copies of No visibility 6% the blockchain on all systems are updated. This decentralised approach makes them effectively un- Infosys Finacle 2017 towards the hackable and immutable. A recent survey of bankers by In- fosys Finacle found that more than will lose that advantage,” says Tony someone else, without you having to 80 per cent expect to see commer- Craddock, chief executive of the pay any interest on it,” he says. “The mainstream cial adoption of blockchain by 2020, Emerging Payments Association, younger generation could, theoreti- with about half already investing whose organisation represents pay- cally, move into a property owning or planning to invest during 2017. ment providers across the world. 51 per cent, with the balance being Half of the banks surveyed are even “There are lots of incumbents, lega- paid for by investors who just want From the unknown to the undeniable, working directly with fintech com- cies and particular interests that are it for its stored wealth. That could panies on the technology. going to prevent the adoption of the change everything.” cryptocurrencies are rapidly transforming There are clearly many potential new technology.” Jon Matonis, vice president of cor- uses of blockchain technology, in- However, banks are investing in porate strategy at blockchain research the financial system and are set to alter The numbers speak for them- He says: “Firstly, both parties cluding combating identity fraud disruptive fintechs because they company nChain, was also a founder our everyday existence, according to selves; in the three years since require their own bank account and money laundering, improving know technology has upended other of the Bitcoin Foundation. He was an Wirex’s inception, the company has and this might be problematic, or know-your-customer systems, and sectors before and could do the same early backer of blockchain and cryp- leading blockchain personal finance accumulated more than 800,000 indeed impossible for some people speeding up cross-border payments, to them. “That’s the risk. If you’re an tocurrencies, and his enthusiasm is customers across 130 countries and or in some more remote parts of the letters-of-credit processes and the incumbent, the risk of being dis- undimmed. The efficiency savings platform Wirex recently celebrated transacting $1 world. Secondly, individuals must Can banks afford granting of loans. But the financial rupted by new players is very signifi- blockchain offers to payments recon- billion of business. contend with high transfer fees. sector is not yet ready to commit cant. That’s why banks are investing ciliation mean it is too tempting for “The implications of cryptocur- “Bitcoin has the power to pro - fully to this new era. For block- significantly in blockchain because the banks to ignore, he says. rencies are huge,” says Mr Matveev. vide financial services to hard-to- chain technology to be effective, they don’t want to be left out,” Mr “Financial experts are agreed that reach communities and democra- to ignore this? it requires sharing data, while the Craddock explains. their evolution has set in motion tise financial services for all, in a banks’ business models depend on Blockchain startups are coming huge changes for the financial ex - way traditional currencies cannot. storing and utilising it. to the fore, often with the support change system and we are seeing We believe that geographical limi- “Banks still see the data they hold of major banks and investors. Cir- There are lots PAVEL MATVEEV increasing numbers of people de- tations in finance should be a thing about an individual as a source of cle, which enables users to make CHIEF EXECUTIVE The financial sector is investing in blockchain, while of incumbents, t was not so long ago that the You only need to look at the diz - manding the option to use digital of the past.” competitive advantage. They are payments via text message, has re- WIREX realms of cryptocurrency were zying heights bitcoin has reached currencies alongside traditional Such is its growing attraction not fully embracing it, as bankers wait to see if it’s not yet able to sit around a table and ceived $136 million of investment legacies and firmly the reserve of online en - since its debut in 2009 to see that payment methods.” that in April Japan became the share that insight and intelligence from a consortium of backers, in- particular interests thusiasts, relegated to the this trend shows no signs of slow - While the lack of regulation sur- first country to recognise bitcoin Its popularity stems from its really the future of payments with other banks as they think they cluding Goldman Sachs, IDG Capital that are going Ideepest corners of the web. Fast ing. From an unchartered concept, rounding cryptocurrency has posed as an official payment method. Its ability to provide better for- Partners, Breyer Capital and Accel to prevent the forward to 2017 and rapid ad - bitcoin is poised to become part of one of its greatest challenges to decision to do so placed it firmly eign exchange rates, faster KYC Partners. It has also partnered with vances in digital technology are consumers’ everyday existence. date, it has also been its biggest at the head of the pack and has (know-your-customer) verification Barclays Bank in the UK as it doesn’t adoption of the changing the face of financial ser - Unsurprisingly, it has been hailed asset. Bitcoin operates on a dis- set in motion what could well be a and far quicker delivery times from have a licence to hold consumers’ new technology vices, with digital currencies at the the new gold among investors, tributed ledger, with every creation global trend. card printing facilities located money. But the vision of its chief ex- very heart of the transformation. with its safe haven appeal amid or transfer archived for maximum In June, the International Mon- around the world. ecutive Jeremy Allaire is revolution- Bitcoin, the most famous crypto- growing geopolitical tensions transparency, but unlike fiat curren- etary Fund released a report in Mr Matveev says: “In recent ary and highly disruptive – it wants “Prevailing wisdom states that currency, and its peers have seen and lacklustre markets, sending cies, bitcoin and its comperes are which it found that “boundaries years, consumers have been dealt to make all payments free. there is a potential $20 billion in their popularity soar amid growing prices rocketing. While it may not free of government manipulation. are blurring” and recognised the a series of shocks from the reces - “We can share content and make cost-savings to be realised by banks demand from consumers for a fi - have a physical form, the rewards In an era of recession, quantitative ability of fintech to innovate the sion to Brexit, of which the latter’s calls for free with Facebook, Skype via improved blockchain reconcilia- nancial solution that is not at the for those who have invested are easing and experimental monetary financial system. consequences are still unknown. and Google, and we believe, be- tion processes. That is not a revolu- mercy of national governments. very real. For most of 2010, bitcoin policy, it is easy to see why this is “Japan’s decision marked a tri - Cryptocurrencies ensure land bor- cause of blockchain technology and tion in finance – it is a revolution in traded at 6 cents; today the cur- particularly appealing. umph for cryptocurrencies,” notes ders have no impact on consum - AI [artificial intelligence], we can reconciliation,” Mr Matonis says. rency sits comfortably around the What’s more, it is devoid of the ties Mr Matveev. “It has helped to in - er’s financial freedom. While banks provide that kind of experience for But the reputation of the financial $4,000 mark, having quadrupled in that come with traditional banking still confidence in businesses to make their services complicated or payments. We don’t think there’s sector is still recovering following value this year alone. It is a phe - methods. The beauty of bitcoin pay- incorporate bitcoin into their of- difficult, the use of digital wallets going to be a model for charging for the 2008 crash. Could a more vis- 130+ nomenon that the world can no ments is that they are peer to peer; ferings, and provided consumers and cards makes global payment payments in the future – that’s just ible and comprehensible banking countries longer afford to ignore. individuals can transfer money di- with greater flexibility and choice. technology simple.” gone,” he says. system, based on new technology For Pavel Matveev, chief execu- rectly to one another at a faster rate We believe that everyone should According to Worldcoinindex, Some blockchain startups want to such as blockchain, prevent another tive of the world’s biggest block- and international payments are con- be part of the financial revolution; there are now more than 500 cryp- create new kinds of transactions. crisis? Mr Matonis says the stability chain personal finance platform siderably cheaper, especially so for it’s time to combine cryptocurren- tocurrencies in existence and ear- TrustMe, led by chief executive of the financial sector could be im- Wirex, we are only at the beginning lower sums of money. In an increas- cy with traditional currencies in our lier this year bitcoin’s market capi - Antony Abell, is pioneering a new proved, but technology alone won’t of the story. ingly globalised world, this more ef- daily finances.” talisation surpassed $50 billion for form of property investment based prevent a crash. 800k “The rising demand we are wit- ficient alternative is proving alluring. Wirex has been at the forefront the first time. on blockchain. Through a new mar- “Blockchain can drive more accu- customers nessing is testament to the grow - According to Mr Matveev, sending of the bitcoin evolution as the first As Warren Buffet once said: ketplace, due to launch this year, rate accountability, with near re- ing need for a form of currency money across borders via bitcoin is to combine the speed and flexibil- “Someone is sitting in the shade people will be able to buy and sell al-time clearing and settlement, so that reflects the modern world and an improvement on the outdated, ity of blockchain finance with the today because someone planted shares in London property for as potential problems are not hidden the technological revolution we expensive and often frustrating fi- acceptance of fiat currency, all in a tree a long time ago.” It’s clear little as £250. “London property is from market participants and al- are undergoing,” he says. “Bitcoin, nancial infrastructure of convention- one account. The company offers that enthusiasm, determination prohibitively expensive. It needs to lowed to induce catastrophic misal- and cryptocurrencies in general, al methods. secure digital wallets and pre- and demand will continue to push be democratised,” says Mr Abell. location,” he says. 1m+ have the potential to change how paid Visa cards used by customers cryptocurrencies to the fore. For The business is targeting home- However, Mr Matonis says the customers millions of people around the world around the world to convert quickly Wirex, we are only on the cusp of owners in need of equity release. banking sector needs to commit to estimated by conduct their financial situation between bitcoin and national cur- what promises to be an exhilarat- However, Mr Abell says his new mod- using blockchain technologies for the end of 2017 on a daily basis. We have moved It’s time to combine rencies, including pounds, dollars ing financial revolution. el could also make it easier for young the majority of their clearing work beyond the early-adoption phase cryptocurrency with traditional and euros. It will soon launch the people to get on the property ladder. before the safety benefits can be tru- and are rapidly moving towards first contactless plastic cards for For more information please visit “Up to 49 per cent of the property ly realised. “We are a long way from the mainstream.” currencies in our daily finances use with a cryptocurrency platform. wirexapp.com could theoretically be paid for by that state of affairs,” he says. 08 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 09

CARD FEES COMMERCIAL FEATURE

INSIGHT BYPASSING THE CARD FIRMS Consumers embrace new ways to pay

Vivan Mehra/The India Today Group/Getty Images Group/Getty Today India Mehra/The Vivan As we rapidly embrace digital payments, businesses need to be flexible if they are to thrive in the changing landscape, says global payments provider Paysafe Sonu Mehta/Hindustan Times via Getty Images Getty via Times Mehta/Hindustan Sonu

Diana Layfield, Google’s vice president of product management, presenting the TEZ Brussels ban app at the launch event in Delhi he growing popularity for The longstanding reign of allows shoppers in India alternative methods of pay- could actually a handful of card industry to pay using their mobile ment is transforming the tra- companies may explain phone, with the cash taken ditional shopping experience. how little the payments straight from their bank TA boom in digitalisation, coupled with system has changed over account. PayPal also offers growing demand for versatile, more ef- put up prices the decades. Membership the ability to make direct ficient payment methods, is spelling a director of the British bank payments. new era for commerce. Independent Retailers In Europe, such schemes Fifty years on from the launch of the Association Robert Jarrett have yet to be widely first ATM, the financial ecosystem is vir- Shoppers love restaurant tabs, with the card indus- person manning the tills could ex- tution. Once the issuer authorises process which have fuelled some notes: “Mastercard and Visa embraced, and a lack of tually unrecognisable. Where coins once try handling billions of transactions plain what the charges represent- the payment, the card scheme will retailers’ arguments that they are in competition to secure clear regulation has made jangled happily in consumer’s pockets, plastic, but paying every year. According to the UK ed, but from January 13, 2018 this pass the payment back to the ac- should be allowed to apply sur- the business of banks, and retailers and customers alike their popularity is on the wane, with card Cards Association, UK businesses will all change. quirer, which in turn finally pays charges to card payments. the companies that process nervous of such offerings. payments surpassing cash payments for by card can accepted 15 billion card payments Under new rules issued by the Eu- the merchant. Principal policy adviser at UK Fi- transactions have their own However, new rules and the first time in 2016. totalling £647 billion in 2016. ropean Commission, retailers will With all these moving parts come nance Briony Krikorian-Slade likens margins to make. The lack support under the European While cash undoubtedly still has its sometimes cost Despite such ubiquity, shoppers be banned from using surcharges fees. Retailers have to pay the ac- this process to the costs of using of competition in the market Commission’s forthcoming role to play, today’s consumer has come can still find themselves charged to pass the cost of card payment quirers a merchant service charge road or rail infrastructure. “Essen- means things don’t change.” Revised Payment Services to expect a multitude of payment op- more, which is extra to pay by card. Well-known processing on to customers. for their work and in turn acquirers tially, retailers are contributing to However, rival companies Directive will allow third tions. From digital wallets, prepaid cards why the European card fee culprits include airlines, While most retailers already ab- must pay an interchange fee set by the costs of running the system, are racing to develop parties such as Google to and cash vouchers to payment apps ticketing websites and government sorb the cost of card processing into the card schemes. Each part of the which benefits all parties,” she says. methods which sidestep the initiate payments directly such as Apple Pay and Samsung Pay, formats of cash in the next two years. Commission is agencies. Their surcharges are of- the overall price of a product, others chain has its own margins to make Retailers who use card surcharg- card system. In September from bank accounts, rather and the advent of cryptocurrencies, Lost in Transaction found that a third As the line between ten confusingly rebranded as “ad- who use surcharges and operate on and it is the costs involved in this es will have to decide whether or 2017 Google launched Tez, than running on the card consumers have a wealth of choice. It’s of people in the UK only visited a cash online and offline blurs, slapping a ban on ministration” or “card-handling” thin margins, such as airlines and a smartphone app which industry’s processes. a trend that businesses must adapt to or machine once a month or less and feel costs and slapped on as a surprise travel agents, may find their bottom risk being left behind. increasingly comfortable paying with merchants need to invest additional fees at the final point of purchase rath- line affected. The series of events CURRENT CREDIT CARD SURCHARGES New research by Paysafe, a leading the “tap and go” method. in emerging technologies er than announced upfront. and players involved in making a SELECTED RETAILERS AND LEISURE COMPANIES global payments provider, has revealed Oscar Nieboer, chief marketing officer at Consumer rights campaigners single card payment goes some way ers are already banned from mak- that more than half of UK, US and Ca- Paysafe, says: “Today, people have more to stay ahead of Which? estimate the cost of pro- to explaining why these retailers ing a profit from surcharges under nadian consumers expect to use digital ways than ever to spend cash online or consumer demand cessing a debit card transaction to feel surcharges are necessary. UK consumer rights legislation offline and this challenges businesses to be no more than 50p, but surcharg- For the customer buying some- enforced in 2012, but as the afore- reimagine the shopping experience to al- tions. Businesses thrive or die on their es often bear little relation to this thing with a card is usually a single Flybe Norwegian mentioned trips to the newsagents low for behaviours and payment models ability to forecast market trends and Hungryhouse Just Eat It is likely that figure. The Treasury’s last estimate action, a tap or a click, over in sec- 3% Air and post office show, such rules can unthinkable a decade ago.” adjust accordingly.” OLIVIA GAGAN 50p* retailers will look of the total value of surcharges in- onds. But what takes place behind (£5 minimum) 2% 50p* be hard to enforce. Mr Black says: 75% The evolution of mobile technology Millennials are at the forefront of the curred on UK debit and credit cards the scenes to enable this involves to pass on the “It is difficult to say with certainty, of 18 to 34 year olds in has undoubtedly triggered this shift, march; for them a cash-free society is not he UK has been a nation was around £473 million a year, a chain of companies in a process cost of accepting but the fact that those [2012] regu- Canada and the US with nearly a quarter of those surveyed tomorrow’s world but today’s. Across the of enthusiastic debit and leading to concerns that surcharges which has remained largely un- payments in other lations have been followed up with said they preferred in the UK now using mobile wallets and UK, US and Canada, those under the age credit card users ever since have been used by some merchants changed for decades. the caps on interchange and now to shop online rather perhaps, more surprisingly, 12 per cent of 34 were most comfortable looking on- their widespread intro- as an additional source of revenue. Whenever a card is used, the re- ways the ban on surcharging for most than going into opting to pay with cryptocurrency. The line while browsing in-store simultaneous- Tduction in the 1960s. The earliest At present, customers must sim- tailer will typically use a company consumer transactions suggests findings echo developments in the Unit- ly, while three quarters of 18 to 34 year olds HM physical stores charge cards debuted a decade ply accept the charge or not buy known as an “acquirer” to process DVLA Revenue & Ryanair they had little effect.” ed States, where almost a third of con- in the US and Canada said they preferred earlier in the United States; they the product. When researching the payment. The acquirer will £2.50 Customs 2% not to adjust their prices in the in- Local trading standards authori- sumers use mobile wallets. shopping online rather than in-store. were made of cardboard and were this piece, one purchase at a post pass the card details to the card 0.6% coming surcharge-free era. Law ties will be responsible for enforc- Unsurprisingly, the introduction of con- Daniel Kornitzer, chief product officer designed to allow diners to settle office and another in a corner shop scheme, such as Mastercard or firm Hogan Lovells’ Emily Reid and ing the ban, and Which? finance * tactless in 2007 paved the way for this at Paysafe, says: “It’s our younger gen- their restaurant bills at the end of incurred extra card charges of 70p Visa. The card scheme then passes James Black specialise in consum- expert Gareth Shaw says these 85%+ demand, with three out of five consum- erations forging the path to a cash- the month. and 60p respectively, both rep- this information on again to the is- er finance. They say the surcharge enforcers will need to keep a close ers now preferring to tap and go, and it’s free society. As the line between online of 18 to 34 year Today, of course, our plastic-hewn resenting well over 20 per cent of suer of the customer’s funds, which *Restaurants pay the fee in some cases ban “looks like good news for con- eye on how the new rules play out not difficult to see why. In an age where and offline blurs, merchants need to olds expect to use cards do more than merely settle the total transaction cost. Neither is usually a bank or financial insti- BBC research, July 2017 sumers, but it is likely that retailers online and shop floors next year. “It a mobile wallet most things can be found at the click of invest in emerging technologies to stay will look to pass on the cost of ac- is crucial that the regulator closely more over the a finger, a payments environment where ahead of consumer demand.” cepting payments in other ways”. monitors the charges that payment next two years, cash is merging with digital formats is According to Paysafe, a business’s suc- Ms Reid and Mr Black suggest this schemes impose on retailers, so representing a redefining the shopping experience. Its cess relies on them understanding and could play out in increases in the that consumers don’t pay over the generational shift appeal is not limited to British shores ei- adopting the emerging payment technol- headline price of goods, higher un- odds and this new law serves its ther, with 71 per cent of Canadians pre- ogies their customers prefer and this rings related charges, charging more for purpose,” says Mr Shaw. ferring contactless methods of payment especially true for smaller companies. delivery for instance, or introduc- But retailers must accept that card and 49 per cent of Americans also citing Mr Nieboer adds: “Being able to pro- ing new charges altogether. fees or no card fees, as a nation, we * it as more convenient, despite it not yet vide similar payment and security ca- However, the ban is part of a series now favour plastic over cash. Ac- 46% being introduced in the US. pabilities as their larger competitors can of EU measures intended to make cording to the UK Cards Associa- are dual-browsing While the sheer speed of develop- help level the playing field for smaller the cost of card payments cheaper tion, cards were used to pay for 76.4 – looking for ments can undoubtedly pose a chal- companies. It will be those merchants and more transparent. Brussels has per cent of all UK retail spending in better deals on lenge for businesses, those who fail to seizing the opportunities before them also placed a cap on interchange 2016, a figure Ms Krikorian-Slade their mobile while stay on top of this changing landscape who will be best placed to capitalise on fees to reduce costs for acquirers, says is expected to rise in 2017. If re- browsing in a risk becoming obsolete. their customer journey.” physical shop which in turn should reduce fees tailers want to remain competitive Mr Nieboer explains: “In order for for retailers. in this landscape, they will need to businesses to succeed, they must Exactly how the surcharge ban find ways to absorb the cost of the offer choice, convenience, reach For more information visit will be enforced is unclear. Retail- UK’s surcharge-free future. *UK, US and Canadian consumers and flexibility in their payment solu- www.paysafe.com 08 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 09

CARD FEES COMMERCIAL FEATURE

INSIGHT BYPASSING THE CARD FIRMS Consumers embrace new ways to pay

Diana Layfield, Google’s vice president of product management, presenting the TEZ Brussels ban app at the launch event in Delhi he growing popularity for The longstanding reign of allows shoppers in India alternative methods of pay- could actually a handful of card industry to pay using their mobile ment is transforming the tra- companies may explain phone, with the cash taken ditional shopping experience. how little the payments straight from their bank TA boom in digitalisation, coupled with system has changed over account. PayPal also offers growing demand for versatile, more ef- put up prices the decades. Membership the ability to make direct ficient payment methods, is spelling a director of the British bank payments. new era for commerce. Independent Retailers In Europe, such schemes Fifty years on from the launch of the Association Robert Jarrett have yet to be widely first ATM, the financial ecosystem is vir- Shoppers love restaurant tabs, with the card indus- person manning the tills could ex- tution. Once the issuer authorises process which have fuelled some notes: “Mastercard and Visa embraced, and a lack of tually unrecognisable. Where coins once try handling billions of transactions plain what the charges represent- the payment, the card scheme will retailers’ arguments that they are in competition to secure clear regulation has made jangled happily in consumer’s pockets, plastic, but paying every year. According to the UK ed, but from January 13, 2018 this pass the payment back to the ac- should be allowed to apply sur- the business of banks, and retailers and customers alike their popularity is on the wane, with card Cards Association, UK businesses will all change. quirer, which in turn finally pays charges to card payments. the companies that process nervous of such offerings. payments surpassing cash payments for by card can accepted 15 billion card payments Under new rules issued by the Eu- the merchant. Principal policy adviser at UK Fi- transactions have their own However, new rules and the first time in 2016. totalling £647 billion in 2016. ropean Commission, retailers will With all these moving parts come nance Briony Krikorian-Slade likens margins to make. The lack support under the European While cash undoubtedly still has its sometimes cost Despite such ubiquity, shoppers be banned from using surcharges fees. Retailers have to pay the ac- this process to the costs of using of competition in the market Commission’s forthcoming role to play, today’s consumer has come can still find themselves charged to pass the cost of card payment quirers a merchant service charge road or rail infrastructure. “Essen- means things don’t change.” Revised Payment Services to expect a multitude of payment op- more, which is extra to pay by card. Well-known processing on to customers. for their work and in turn acquirers tially, retailers are contributing to However, rival companies Directive will allow third tions. From digital wallets, prepaid cards why the European card fee culprits include airlines, While most retailers already ab- must pay an interchange fee set by the costs of running the system, are racing to develop parties such as Google to and cash vouchers to payment apps ticketing websites and government sorb the cost of card processing into the card schemes. Each part of the which benefits all parties,” she says. methods which sidestep the initiate payments directly such as Apple Pay and Samsung Pay, formats of cash in the next two years. Commission is agencies. Their surcharges are of- the overall price of a product, others chain has its own margins to make Retailers who use card surcharg- card system. In September from bank accounts, rather and the advent of cryptocurrencies, Lost in Transaction found that a third As the line between ten confusingly rebranded as “ad- who use surcharges and operate on and it is the costs involved in this es will have to decide whether or 2017 Google launched Tez, than running on the card consumers have a wealth of choice. It’s of people in the UK only visited a cash online and offline blurs, slapping a ban on ministration” or “card-handling” thin margins, such as airlines and a smartphone app which industry’s processes. a trend that businesses must adapt to or machine once a month or less and feel costs and slapped on as a surprise travel agents, may find their bottom risk being left behind. increasingly comfortable paying with merchants need to invest additional fees at the final point of purchase rath- line affected. The series of events CURRENT CREDIT CARD SURCHARGES New research by Paysafe, a leading the “tap and go” method. in emerging technologies er than announced upfront. and players involved in making a SELECTED RETAILERS AND LEISURE COMPANIES global payments provider, has revealed Oscar Nieboer, chief marketing officer at Consumer rights campaigners single card payment goes some way ers are already banned from mak- that more than half of UK, US and Ca- Paysafe, says: “Today, people have more to stay ahead of Which? estimate the cost of pro- to explaining why these retailers ing a profit from surcharges under nadian consumers expect to use digital ways than ever to spend cash online or consumer demand cessing a debit card transaction to feel surcharges are necessary. UK consumer rights legislation offline and this challenges businesses to be no more than 50p, but surcharg- For the customer buying some- enforced in 2012, but as the afore- reimagine the shopping experience to al- tions. Businesses thrive or die on their es often bear little relation to this thing with a card is usually a single Flybe Norwegian mentioned trips to the newsagents low for behaviours and payment models ability to forecast market trends and Hungryhouse Just Eat It is likely that figure. The Treasury’s last estimate action, a tap or a click, over in sec- 3% Air and post office show, such rules can unthinkable a decade ago.” adjust accordingly.” OLIVIA GAGAN 50p* retailers will look of the total value of surcharges in- onds. But what takes place behind (£5 minimum) 2% 50p* be hard to enforce. Mr Black says: 75% The evolution of mobile technology Millennials are at the forefront of the curred on UK debit and credit cards the scenes to enable this involves to pass on the “It is difficult to say with certainty, of 18 to 34 year olds in has undoubtedly triggered this shift, march; for them a cash-free society is not he UK has been a nation was around £473 million a year, a chain of companies in a process cost of accepting but the fact that those [2012] regu- Canada and the US with nearly a quarter of those surveyed tomorrow’s world but today’s. Across the of enthusiastic debit and leading to concerns that surcharges which has remained largely un- payments in other lations have been followed up with said they preferred in the UK now using mobile wallets and UK, US and Canada, those under the age credit card users ever since have been used by some merchants changed for decades. the caps on interchange and now to shop online rather perhaps, more surprisingly, 12 per cent of 34 were most comfortable looking on- their widespread intro- as an additional source of revenue. Whenever a card is used, the re- ways the ban on surcharging for most than going into opting to pay with cryptocurrency. The line while browsing in-store simultaneous- Tduction in the 1960s. The earliest At present, customers must sim- tailer will typically use a company consumer transactions suggests findings echo developments in the Unit- ly, while three quarters of 18 to 34 year olds HM physical stores charge cards debuted a decade ply accept the charge or not buy known as an “acquirer” to process DVLA Revenue & Ryanair they had little effect.” ed States, where almost a third of con- in the US and Canada said they preferred earlier in the United States; they the product. When researching the payment. The acquirer will £2.50 Customs 2% not to adjust their prices in the in- Local trading standards authori- sumers use mobile wallets. shopping online rather than in-store. were made of cardboard and were this piece, one purchase at a post pass the card details to the card 0.6% coming surcharge-free era. Law ties will be responsible for enforc- Unsurprisingly, the introduction of con- Daniel Kornitzer, chief product officer designed to allow diners to settle office and another in a corner shop scheme, such as Mastercard or firm Hogan Lovells’ Emily Reid and ing the ban, and Which? finance * tactless in 2007 paved the way for this at Paysafe, says: “It’s our younger gen- their restaurant bills at the end of incurred extra card charges of 70p Visa. The card scheme then passes James Black specialise in consum- expert Gareth Shaw says these 85%+ demand, with three out of five consum- erations forging the path to a cash- the month. and 60p respectively, both rep- this information on again to the is- er finance. They say the surcharge enforcers will need to keep a close ers now preferring to tap and go, and it’s free society. As the line between online of 18 to 34 year Today, of course, our plastic-hewn resenting well over 20 per cent of suer of the customer’s funds, which *Restaurants pay the fee in some cases ban “looks like good news for con- eye on how the new rules play out not difficult to see why. In an age where and offline blurs, merchants need to olds expect to use cards do more than merely settle the total transaction cost. Neither is usually a bank or financial insti- BBC research, July 2017 sumers, but it is likely that retailers online and shop floors next year. “It a mobile wallet most things can be found at the click of invest in emerging technologies to stay will look to pass on the cost of ac- is crucial that the regulator closely more over the a finger, a payments environment where ahead of consumer demand.” cepting payments in other ways”. monitors the charges that payment next two years, cash is merging with digital formats is According to Paysafe, a business’s suc- Ms Reid and Mr Black suggest this schemes impose on retailers, so representing a redefining the shopping experience. Its cess relies on them understanding and could play out in increases in the that consumers don’t pay over the generational shift appeal is not limited to British shores ei- adopting the emerging payment technol- headline price of goods, higher un- odds and this new law serves its ther, with 71 per cent of Canadians pre- ogies their customers prefer and this rings related charges, charging more for purpose,” says Mr Shaw. ferring contactless methods of payment especially true for smaller companies. delivery for instance, or introduc- But retailers must accept that card and 49 per cent of Americans also citing Mr Nieboer adds: “Being able to pro- ing new charges altogether. fees or no card fees, as a nation, we * it as more convenient, despite it not yet vide similar payment and security ca- However, the ban is part of a series now favour plastic over cash. Ac- 46% being introduced in the US. pabilities as their larger competitors can of EU measures intended to make cording to the UK Cards Associa- are dual-browsing While the sheer speed of develop- help level the playing field for smaller the cost of card payments cheaper tion, cards were used to pay for 76.4 – looking for ments can undoubtedly pose a chal- companies. It will be those merchants and more transparent. Brussels has per cent of all UK retail spending in better deals on lenge for businesses, those who fail to seizing the opportunities before them also placed a cap on interchange 2016, a figure Ms Krikorian-Slade their mobile while stay on top of this changing landscape who will be best placed to capitalise on fees to reduce costs for acquirers, says is expected to rise in 2017. If re- browsing in a risk becoming obsolete. their customer journey.” physical shop which in turn should reduce fees tailers want to remain competitive Mr Nieboer explains: “In order for for retailers. in this landscape, they will need to businesses to succeed, they must Exactly how the surcharge ban find ways to absorb the cost of the offer choice, convenience, reach For more information visit will be enforced is unclear. Retail- UK’s surcharge-free future. *UK, US and Canadian consumers and flexibility in their payment solu- www.paysafe.com 10 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 11

MERCHANT FRAUD PREVENTION Do you have a common set of fraud prevention capabilities FIGHTING FRAUD ONLINE across all channels? As the value and volume spent online continues to surge, payment fraud is an escalating problem for merchants and CONSUMER IMPACT card issuers worldwide. According to Juniper Research, card-not-present transactions account for 60 to 70 per cent of all card fraud in many developed countries and, without appropriate preventative measures in place, can result in billions of

dollars-worth of lost revenues each year 8% 53% Unsure Yes 78%

FRAUDULENT ONLINE TRANSACTIONS BY MERCHANT SECTOR 39% No of online shoppers believe they need more protection 48% 16% 13% 5% 10% Airlines Money transfer Computers/electronics Clothing Others Do you have a common set of payment security capabilities across all channels? 56% 9% 1% General retail Travel shop less and cut back RSA Security 2016 on card usage following a 9% 49% fraudulent transaction USE OF FRAUD PREVENTION TOOLS BY CARD ISSUERS Unsure Yes

25% Tender Armor 2016 Currently using Plan to use in the future

20% 42%

30% Transaction screening Artificial Intelligence No A (software driven) G

B Rule-based alerts H None ACI Universal Payments 2016 C Analytics (predictive, 15% pattern matching) 35%

Transaction screening CARD FRAUD WORLDWIDE D (manual) Global losses to card-based payment fraud Cents lost to fraud per every $100 spent on cards E Real-time fraud scoring

4.5¢ 5.1¢ 5.2¢ 5.5¢ 6.2¢ 7¢ 7. 2 ¢ 7. 2 ¢ 7.3¢ 6.9¢ 6.5¢ F Neural networks

10% 40%

Includes

fraud losses $32.82bn

from counterfeit $31.67bn cards, card-not- $31.26bn present transactions, lost and stolen cards, and chargeback $27.69bn fraud $24.71bn

5% $21.84bn 45% $18.11bn $13.70bn $11.27bn $9.84bn $7.60bn

0% 50% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

A B C D E F G H Cognizant 2016 Nilson Report 2016 10 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 11

dollars-worth of lost revenues each year 8% 53% Unsure Yes 78%

25% Tender Armor 2016 Currently using Plan to use in the future

20% 42%

30% Transaction screening Artificial Intelligence No A (software driven) G

B Rule-based alerts H None ACI Universal Payments 2016 C Analytics (predictive, 15% pattern matching) 35%

Transaction screening CARD FRAUD WORLDWIDE D (manual) Global losses to card-based payment fraud Cents lost to fraud per every $100 spent on cards E Real-time fraud scoring

4.5¢ 5.1¢ 5.2¢ 5.5¢ 6.2¢ 7¢ 7. 2 ¢ 7. 2 ¢ 7.3¢ 6.9¢ 6.5¢ F Neural networks

10% 40%

Includes

fraud losses $32.82bn

from counterfeit $31.67bn cards, card-not- $31.26bn present transactions, lost and stolen cards, and chargeback $27.69bn fraud $24.71bn

5% $21.84bn 45% $18.11bn $13.70bn $11.27bn $9.84bn $7.60bn

0% 50% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

A B C D E F G H Cognizant 2016 Nilson Report 2016 12 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 13

COMMERCIAL FEATURE PEER-TO-PEER PAYMENTS

ZELLE Zelle While the P2P app Venmo was becoming a household name in the US, you’d be forgiven for wondering if American banks were ignoring the fintech revolution entirely. Behind the scenes, however, consultations had been on- going since 2011 and finally came to fruition with the launch of Zelle in 2017, a new P2P payments app that has the backing of more than 30 US banks, including Bank of America, Wells Fargo and J.P. Morgan Chase. Usable by anyone with a Visa or Mastercard debit card account, regardless of their financial service provider, the move demonstrates how banks are taking mobile more which usually take at least a day to Zelle has already achieved impres- seriously. Zelle offers crucial advan- complete transfers to a bank account. sive numbers and looks set to bring tages over the P2P market incum- “Banks realise that if they are not P2P payments into the US main- bents, most notably speed. Money offering a P2P service themselves stream. In the first half of 2017, it ena- transferred through the network will they will start losing visibility among bled 100 million transactions, worth be available to the recipient imme- their customers who use these apps $33.6 billion, more than double Ven- diately, in contrast to most services frequently,” says Ms L’Hostis. So far mo’s value over the same timeframe. and payments through the same in- the expense of traditional payment terface or app. methods, card schemes and banks Instant payments give While 89 per cent of consumers are will continue to invest in providing unaware of how PSD2 will affect them, faster solutions and new payment one in five surveyed by Intelligent Envi- options to keep up with the market. APPLE ronments said they think it will be more Consumers in underdeveloped consumers the experience convenient than ever to manage their countries that lack traditional infra- Apple is harnessing its customer base money and that they’re looking for- structures will jump straight to the to provide a message-based payment ward to being able to manage multi- latest innovations, but more mature Who will win service that cuts out apps entirely. As ple bank accounts from a single app. countries will have to go through a part of a forthcoming update to its they’ve longed for “By forcing existing banks to open technology development cycle to mobile operating system iOS11, the their platforms to third-party pay- migrate to the new landscape. new feature enables users to send ment providers, PSD2 will allow more “While the West dawdles its way to battle for P2P and receive from within its iMessage fintech companies to connect to a payments evolution, countries such app or tell Siri to pay someone, using

Consumer demands for instant gratification, coupled with a PHILIPPE HUGUEN / Staff / Getty Images bank data and applications,” says as China and Indonesia are having the credit and debit cards they al- rapid pace of innovation and new regulations, are transforming Mr Vanpraet. “The result will be a a revolution with a raft of new solu- ready have saved in Apple Wallet. more comprehensive, efficient and tions that work without banks,” says payments? Users will receive money in a new the global payments landscape, leaving traditional financial consumer-friendly environment, Mr Vanpraet. “Whether it’s WeChat’s Apple Pay Cash account, and that dig- which will foster the usage of instant payment solution that includes peer- ital money can be used for purchases institutions playing catch-up payments even more.” to- peer payments, LINE in other using Apple Pay in stores, apps and Fast and secure instant payment parts of Asia or Indonesia’s Go-Jek on the web, or transferred to someone like direct bank transfers and direct wallet, which can be used to pay for Competition to dominate person-to- else or transferred from Apple Pay debit, as well as cashless on-the- rides, shopping, food delivery and Cash to their bank account. go devices, such as wearables and even a massage, underdeveloped person payments is hotting up, but three Apple is endeavouring to keep up mobile wallets, are set to take off countries are the ones pushing the with PayPal, as both are eyeing a full he ubiquity of smart devices card details in the public domain,” the evolving consumer attitudes have massively in the next three years. envelope because the need is so contenders are making a strong claim bank-like payment service, which combined with fintech inno- says Koen Vanpraet, chief executive triggered substantial investments in Usage of these payment methods much bigger.” analysts consider to be the natural vation has driven a dramat- at PaySec, whose parent company functionality, coverage, security and won’t necessarily slow the use of Payments need to be fast, secure, next step for payment companies. ic behavioural shift in how Sappaya owns an ecosystem of ser- customer experience by the fintech traditional credit cards, but they will cheap, easy and instantaneous, and The Apple Pay Cash card that will be Tconsumers wish to make payments. vice providers that specialise in in- industry. Alternative payments are certainly grow much faster. the future will be defined by a huge delivered with prepaid payment card With an ever-increasing number stant payments. Sappaya’s payment disrupting the market and ensuring The payments industry has increase in customer choice. Con- company Green Dot will only work of payment options available, and gateways, including PaySec and credit cards are not the only option changed more in the last decade sumers will spend how they want, muscle in on the scene, where hith- across its own devices, which could the smooth digital experiences that Pago, aggregate the best payment for consumers and merchants, while than it did in the whole previous when they want and won’t have to SHARON THIRUCHELVAM erto nimble P2P startups have had be a potential drawback. consumers have become accus- solutions for a given territory, while its pressuring legacy financial institu- century and it’s on an exponential pay for the privilege. They will start competitive advantage. tomed to, there is now a much higher cashless payments solution, tappit, is tions and banks into embracing the curve. The industry is very fractured turning away if the payment process hether splitting the The focus for providers will be expectation for speed and ease of changing the way events and enter- new world of commerce. and that trend will continue, espe- is not what they want, so ecosystems bill at the restaurant, monetising the service, especially use for payments. tainment venues accept cash. Meanwhile, regulatory bodies and cially in light of PSD2 and the rise of like Sappaya will be critical in provid- reimbursing a friend, as the space grows crowded. In the In a world where people crave in- existing card schemes are step- cryptocurrencies. This revolution is ing the products and much-needed sending remittances past, companies operated mobile WHATSAPP stant gratification, it’s clear consum- ping up their efforts to deploy new happening in every country around support for merchants in meeting Wor paying for goods and services on P2P for free, but at a loss, as the ser- ers don’t want to wait for a credit Payments need laws and industry standards that the world, not just Europe, so it will these expectations. the resale market, peer-to-peer (P2P) vice offered a low-friction way to There was a time when US tech com- card payment to clear or for a bank better protect clients, and foster take a long time for real patterns to payments made informally from one onboard consumers, according to panies would accuse Chinese coun- transfer to complete. Transferring to be fast, secure, more partnership and industry-wide emerge, and providers and technol- For more information visit person to another are a long-stand- BI Intelligence research. However, terparts of copycatting their designs money through traditional methods cheap, easy and collaboration. PSD2, the European ogies to win out. www.paysec.com ing feature of the payments industry. as subscribers grow and the service and innovations. But today, especial- simply takes too long for today’s al- Union’s Revised Payment Services As the relative share of instant pay- www.pagoglobal.com Whereas once we paid by cheque, starts to eat into firms’ traditional ly in mobile payments and platform

instantaneous, and the Images O/Getty La De Mina ways-connected culture, signalling Directive, provides larger and safer ments rises in the coming years at www.justtappit.com cash or bank transfer, today we pay revenue streams, finding ways to diversification, US tech giants look to significant growth in solutions that future will be defined access to a broader set of payment by app, message or phone. monetise will become crucial. China and the likes of WeChat, owned enable instant payments. by a huge increase in options and functionality. It will en- The value of mobile per- “P2P payments is a razor-thin by Tencent, and Alipay, a subsidiary Two thirds of UK consumers have hance the creation of open stand - son-to-person payments is set to in- margin business. It’s not some- of Alibaba, for their future cues. CONSUMERS NOW REGULARLY USE THEIR SMARTPHONE TO PAY made a contactless payment since customer choice ards and a set of technology prod- crease 40 per cent globally to $540 thing you make a lot of money with Following WeChat’s lead, the technology was introduced ten ucts that will be more user friendly, billion by the end of 2017, according unless you have huge scale,” says WhatsApp is preparing to intro- years ago, according to Visa, while “Instant payments are also far less integrated and comprehensive. to Juniper Research. In the United Aurélie L’Hostis, analyst at For- duce payments to its messaging benchmark data from ACI Worldwide costly than card transactions, avoid The new directive will further in- States alone, the total transaction rester Research. app, making it the latest service to and Aite shows that 14 per cent of UK the risk of chargebacks for the mer- crease competition in the payments value of mobile P2P payments will For consumers, the context will be let users transfer money to one an- consumers now regularly use their chants and are also facilitating new industry as it breaks open bank- UK Europe Asia grow 55 per cent to $120.38 billion, a crucial. “It’s a question of conveni- other with a text. Based on the ob- smartphone to pay. This grows to 25 trends such as cashless NFC [near- ing and allows other players into figure that is expected to double by ence and education,” says Ms L’Hos- servation that you are more likely to per cent in other parts of Europe and field communication],” Mr Vanpraet what was previously something of 2021, says eMarketer. tis, who argues that those compa- send frequent payments to people be taking place – a messaging app. ability to transfer money through 56 per cent in Asia. But this is just the adds. “Improved technology gives a closed shop for high street banks. The race is now on for companies that eventually come out on you frequently have contact with, WhatsApp, which has more than the app. Social media payments are tip of the instant payment iceberg. consumers what they have long This will lead to more choice for the nies to extend their geographic top are likely to offer an ecosystem social media payments enable a a billion users a day, is trialling the set to proliferate across Europe soon “Most instant payments are 100 per been demanding – a simple and consumer and further localised reg- and demographic reach, and mop of integrated services, among which frictionless service in the same immediate bank-to-bank transfer thanks to the recent relaxation of Eu- cent secure, providing reassurance quick way to complete transactions.” ulation. Consumers will be able to 14% 25% 56% up numbers. In 2017, bigwigs from payments is a complementary addi- context where conversations about service in India, which would give ropean Union laws that govern who for those who are reluctant to put This rise in instant payments and handle more financial transactions banking and tech will attempt to tion to the others. those payments will most likely approximately 200 million users the can offer digital payment services. 12 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 13

COMMERCIAL FEATURE PEER-TO-PEER PAYMENTS

instantaneous, and the Images O/Getty La De Mina ways-connected culture, signalling Directive, provides larger and safer ments rises in the coming years at www.justtappit.com cash or bank transfer, today we pay revenue streams, finding ways to diversification, US tech giants look to significant growth in solutions that future will be defined access to a broader set of payment by app, message or phone. monetise will become crucial. China and the likes of WeChat, owned enable instant payments. by a huge increase in options and functionality. It will en- The value of mobile per- “P2P payments is a razor-thin by Tencent, and Alipay, a subsidiary Two thirds of UK consumers have hance the creation of open stand - son-to-person payments is set to in- margin business. It’s not some- of Alibaba, for their future cues. CONSUMERS NOW REGULARLY USE THEIR SMARTPHONE TO PAY made a contactless payment since customer choice ards and a set of technology prod- crease 40 per cent globally to $540 thing you make a lot of money with Following WeChat’s lead, the technology was introduced ten ucts that will be more user friendly, billion by the end of 2017, according unless you have huge scale,” says WhatsApp is preparing to intro- years ago, according to Visa, while “Instant payments are also far less integrated and comprehensive. to Juniper Research. In the United Aurélie L’Hostis, analyst at For- duce payments to its messaging benchmark data from ACI Worldwide costly than card transactions, avoid The new directive will further in- States alone, the total transaction rester Research. app, making it the latest service to and Aite shows that 14 per cent of UK the risk of chargebacks for the mer- crease competition in the payments value of mobile P2P payments will For consumers, the context will be let users transfer money to one an- consumers now regularly use their chants and are also facilitating new industry as it breaks open bank- UK Europe Asia grow 55 per cent to $120.38 billion, a crucial. “It’s a question of conveni- other with a text. Based on the ob- smartphone to pay. This grows to 25 trends such as cashless NFC [near- ing and allows other players into figure that is expected to double by ence and education,” says Ms L’Hos- servation that you are more likely to per cent in other parts of Europe and field communication],” Mr Vanpraet what was previously something of 2021, says eMarketer. tis, who argues that those compa- send frequent payments to people be taking place – a messaging app. ability to transfer money through 56 per cent in Asia. But this is just the adds. “Improved technology gives a closed shop for high street banks. The race is now on for companies that eventually come out on you frequently have contact with, WhatsApp, which has more than the app. Social media payments are tip of the instant payment iceberg. consumers what they have long This will lead to more choice for the nies to extend their geographic top are likely to offer an ecosystem social media payments enable a a billion users a day, is trialling the set to proliferate across Europe soon “Most instant payments are 100 per been demanding – a simple and consumer and further localised reg- and demographic reach, and mop of integrated services, among which frictionless service in the same immediate bank-to-bank transfer thanks to the recent relaxation of Eu- cent secure, providing reassurance quick way to complete transactions.” ulation. Consumers will be able to 14% 25% 56% up numbers. In 2017, bigwigs from payments is a complementary addi- context where conversations about service in India, which would give ropean Union laws that govern who for those who are reluctant to put This rise in instant payments and handle more financial transactions banking and tech will attempt to tion to the others. those payments will most likely approximately 200 million users the can offer digital payment services. 14 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 15

OPINION COLUMN BIOMETRICS

SUPER POWER YOUR BUSINESS WITH OPEN BANKING ‘Access is life-changing CATH EVERETT KFC store in the eastern Smile to Pay is smart Chinese city of Hangzhou because, not only is – we’re denying access hit international head- it great marketing, lines when it introduced to payments accounts to Aa new way for customers to pay for but it also makes their food – a Smile to Pay facial customers move recognition system, which is among their faces so you those we should support’ the first of its kind in the world. The demand for invisible, information-rich The system, which is the brainchild know it’s not just of Chinese e-commerce company a photo payments has never been greater Alibaba’s Ant Financial affiliate, is targeted at young people, who are TONY CRADDOCK expected to account for most of the Director general Emerging Payments Association country’s anticipated growth in con- in two years, every bank that mat- Valitor and Token are delivering a sumption over the next decade. ters will use some form of biomet- To use Smile to Pay, customers rics and, increasingly, there’ll be simple, fast and secure payments need to have signed up to the Al- passive biometrics in there as the The UK’s payments The UK’s fintech com- ipay app first. A 3D camera is sit- Images Getty via VCG/VCG technology significantly increases experience for businesses industry leads the panies can provide uated at the point of sale to scan accuracy,” he says. world. We were first the answers. But customers’ faces to verify their By combining traditional and and their customers with real-time clear- the banks tend not identity and the system also in- behavioural biometrics, a Spanish ing of payments to know what to cludes a so-called “liveness detec- Customer using client last year slashed the fraud with Faster Pay- do with their solution” algorithm. an Alipay facial rate for mobile banking by a huge recognition portal ments, near-ubiq- tions. The Revised Jeremy Light, managing director 90 per cent, Mr Light says. at KFC’s K PRO Together, we help businesses uitous contactless Payment Services of Accenture Payment Services in restaurant in Although single biometrics may payments nationwide Directive or PSD2 is Europe, Africa and Latin America, Hangzhou, China be quicker to use, the problem is perform better by seamlessly and a 21st-century pay- designed to force banks explains the algorithm’s benefits: they can lead to false positives, ment systems strategy in- to adopt open banking by “One of the weaknesses of facial incorrectly accepting a match be- connecting to banks using volving the whole community. allowing third parties access and voice recognition software is tween the stored biometric tem- But if you are unemployed due to to customer data via secure applica- that it can be spoofed, so you have plate and a third party, and it is new open banking APIs sickness for example, you can’t open tion programming interfaces. It also to ensure people are in a live envi- this inaccuracy that is currently a bank account easily. If you’re one sets out to reduce the influence of ronment. But Smile to Pay is smart the single biggest inhibitor to the of the 500,000 UK startups that set the payment schemes. However, the because, not only is it great mar- Smile if you want technology’s adoption, says Mr up each year, where the entrepreneur legislation is in danger of reinforcing keting, but it also makes custom- Light, although he does acknowl- may not have funding yet, accessing the dominant role banks play with ers move their faces so you know edge that things are improving. banking services is near impossible. consumers because they are still at it’s not just a photo.” But Mr Lewis is not convinced And if you’re a regulated payments the core of the transaction. Although using biometrics tech- your chicken… that biometrics will be the silver company launching a new service for The Emerging Payments Associa- nology to enable secure payment information security bullet that small and medium-sized enterprises tion (EPA) is dedicated to overcom- in retail stores is far from common some hope for. (SMEs), you can’t open an account to ing access challenges. We’ve already practice today, Mr Light does ex- Metrics related to human characteristics to “I think we’ll see a bit of a bell curve. hold client funds easily via any major influenced the Bank of England to pect it to become widespread over Initially it should help to combat a lot UK bank. open its real-time gross settlement the next few years, spurred on by authenticate identity and payment may take a little of fraud as it’s not as straightforward Because while the UK has a support- accounts to non-banks. the growing use of mobile technol- to fake biometrics as is to find out ive regulator, outstanding paytech We’re also developing a way for ogy as the primary way in which more time to measure up to expectations someone’s password. But over time talent and risk-friendly investors, payments firms to demonstrate they consumers interact with the world. criminal gangs will find ways of at- world-class payments is not accessi- are financially inclusive, through an Since Apple first introduced fin- tacking systems because there’s so SMART DIGITAL ble to three main constituents. accreditation kitemark supported gerprint recognition on its iPhone much money in it and they’re highly Firstly, it’s shocking that many con- by BACS. in 2013, the use of biometrics in the motivated,” he says. sumers don’t have access to financial We’ve lobbied government to ap- mobile apps space has leapt mainly gy, which is considered more secure and Bulgaria, which enables card- slower in this area due to the added The biggest concern here is, once TRANSACTIONS services to make their lives better. point a minister for financial inclu- due to the technology’s convenience, than using traditional PIN num- holders to use their thumbprint regulatory hurdles.” such deeply personal information READY TO IMPROVE YOUR BUSINESS Banks are closing branches nation- sion. In July, MP Guy Opperman which means people no longer have bers. It also reduces the need for rather than a PIN to authorise an Mr Light, on the other hand, is stolen, it is impossible to change wide. The Financial Inclusion Com- was appointed as the first minister to remember multiple passwords. creating costly one-time passwords in-store payment. believes that the real future lies or revoke. But because such a situ- mittee discovered that the annual for pensions and financial inclusion. On the back of this situation, Ed- and is seen as a useful means of But Matt Lewis, research director not in any single form of biome- ation is “so disastrous for the user”, poverty premium paid by those who And we are exporting our experience die Grobler, executive vice presi- complying with increasingly strin- at information security consultan- trics software, but in a KFC-style Mr Lewis believes the fear factor are financially excluded is £1,300. to parts of the world where financial dent of ACH (automated clearing gent payment regulation. cy NCC Group, believes it will take mix of flavours. This approach in- could likewise inhibit take-up. Over a lifetime of 80 years, that’s and economic exclusion is currently house) systems and integration at As a result, providers such as time before biometrics software is volves combining traditional bi- Mr Light has a positive outlook. more than a £100,000 penalty for be- a massive economic drag on socie- Mastercard’s Vocalink, expects the 15% Mastercard are jumping on the as ubiquitous in retail as it is in the ometrics technology such as face “In future, biometrics will being poor. And the Financial Inclusion ty. Three new EPA communities, in use of biometrics software to be- of European bandwagon. Although not rolled mobile arena. recognition with newer artificial come the payment authentication Monitoring Report 2015 highlighted Africa, Eastern Europe and China, come mainstream within the next consumers prefer out by any UK banks as yet, its “People haven’t necessarily intelligence-based behavioural method of choice. It’s the goal of that 1.5 million adults in the UK don’t are launching shortly. This will ena- three to four years and to increas- facial recognition Identity Check Mobile system will thought through the logistics, but biometrics. This software works banks to get rid of passwords and have a bank account. ble us to show leadership in moving ingly “converge into the payment as a biometric enable cardholders to authenticate you need to implement complex passively in the background to get away from having 50 per cent payment method; online payments or access bank back-end infrastructure to store bi Secondly, the UK’s five million money efficiently for everyone. space” in the process. 53 per cent - recognise, for example, how you of transactions challenged, which SMEs are not able to access the latest But more needs to be done. We Another significant factor likely prefer fingerprint services using a selfie, eye scan, ometrics data, and in the UK there hold your phone or key in your means that people simply use oth- technology, often because they don’t need to give consumers access to a to spur adoption, meanwhile, is the scanning voice or fingerprint. are a lot of regulations around data PIN, to prevent spoofing. er cards. So it’s definitely the way Contact us today to learn more about how your business can know an alternative is available or be- quick-and-easy payment sign-up fact that both banks and payment The vendor has likewise trialled protection and privacy,” he says. “The market is maturing and forward – in fact, it’s inevitable,” cause the banks do not allow access. process for all. Accounts should service providers like the technolo- Visa 2016 a biometric card in South Africa “So adoption is likely to be much there’s still a way to go. But with- he concludes. benefit from smarter digital transactions through open banking Finally, there are flaws in the tra- have jam-jarring and segregation of ditional system. Despite being reg- funds, simple and transparent fees, ulated entities, for example, most and lower costs. payments companies must do their We need to give businesses access www.valitor.com/token banking with another bank. The oth- to flexible, cost-effective payment er bank is not set up to do this flexibly accounts that allow them to trade or cheaply and is often competing globally, use customer data and directly. This channel conflict isn’t remove the financial management conducive to a mutually beneficial burden. And we need to give regu- relationship or to having the best lated payments companies access products designed to meet the needs from banks that want to service of customers. them enthusiastically rather than Many regulated payments compa- reluctantly. nies don’t fit with the risk profiles of In tomorrow’s world of payments, token.io: © 2017 Token, Inc. All rights reserved. Token, the Token logo, and the Maze Design are trademarks of Token, Inc. the big banks, so services are being enabling access is everything. With token.io, ltd is registered in England and Wales (#10143662) Registered office: 10 John Street, London, WC1N 2EB, UK. withdrawn with little or no notice. the government’s support and co-or- Valitor is headquartered in Iceland at Dalshraun 3, Hafnarfjördur and is in the UK at 1 Fore Street Avenue, London EC2Y 9DT This derisking threatens companies dinated action across the communi- and countries. ty, the UK can lead the world. 14 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 15

OPINION COLUMN BIOMETRICS

SUPER POWER YOUR BUSINESS WITH OPEN BANKING ‘Access is life-changing CATH EVERETT KFC store in the eastern Smile to Pay is smart Chinese city of Hangzhou because, not only is – we’re denying access hit international head- it great marketing, lines when it introduced to payments accounts to Aa new way for customers to pay for but it also makes their food – a Smile to Pay facial customers move recognition system, which is among their faces so you those we should support’ the first of its kind in the world. The demand for invisible, information-rich The system, which is the brainchild know it’s not just of Chinese e-commerce company a photo payments has never been greater Alibaba’s Ant Financial affiliate, is targeted at young people, who are TONY CRADDOCK expected to account for most of the Director general Emerging Payments Association country’s anticipated growth in con- in two years, every bank that mat- Valitor and Token are delivering a sumption over the next decade. ters will use some form of biomet- To use Smile to Pay, customers rics and, increasingly, there’ll be simple, fast and secure payments need to have signed up to the Al- passive biometrics in there as the The UK’s payments The UK’s fintech com- ipay app first. A 3D camera is sit- Images Getty via VCG/VCG technology significantly increases experience for businesses industry leads the panies can provide uated at the point of sale to scan accuracy,” he says. world. We were first the answers. But customers’ faces to verify their By combining traditional and and their customers with real-time clear- the banks tend not identity and the system also in- behavioural biometrics, a Spanish ing of payments to know what to cludes a so-called “liveness detec- Customer using client last year slashed the fraud with Faster Pay- do with their solution” algorithm. an Alipay facial rate for mobile banking by a huge recognition portal ments, near-ubiq- tions. The Revised Jeremy Light, managing director 90 per cent, Mr Light says. at KFC’s K PRO Together, we help businesses uitous contactless Payment Services of Accenture Payment Services in restaurant in Although single biometrics may payments nationwide Directive or PSD2 is Europe, Africa and Latin America, Hangzhou, China be quicker to use, the problem is perform better by seamlessly and a 21st-century pay- designed to force banks explains the algorithm’s benefits: they can lead to false positives, ment systems strategy in- to adopt open banking by “One of the weaknesses of facial incorrectly accepting a match be- connecting to banks using volving the whole community. allowing third parties access and voice recognition software is tween the stored biometric tem- But if you are unemployed due to to customer data via secure applica- that it can be spoofed, so you have plate and a third party, and it is new open banking APIs sickness for example, you can’t open tion programming interfaces. It also to ensure people are in a live envi- this inaccuracy that is currently a bank account easily. If you’re one sets out to reduce the influence of ronment. But Smile to Pay is smart the single biggest inhibitor to the of the 500,000 UK startups that set the payment schemes. However, the because, not only is it great mar- Smile if you want technology’s adoption, says Mr up each year, where the entrepreneur legislation is in danger of reinforcing keting, but it also makes custom- Light, although he does acknowl- may not have funding yet, accessing the dominant role banks play with ers move their faces so you know edge that things are improving. banking services is near impossible. consumers because they are still at it’s not just a photo.” But Mr Lewis is not convinced And if you’re a regulated payments the core of the transaction. Although using biometrics tech- your chicken… that biometrics will be the silver company launching a new service for The Emerging Payments Associa- nology to enable secure payment information security bullet that small and medium-sized enterprises tion (EPA) is dedicated to overcom- in retail stores is far from common some hope for. (SMEs), you can’t open an account to ing access challenges. We’ve already practice today, Mr Light does ex- Metrics related to human characteristics to “I think we’ll see a bit of a bell curve. hold client funds easily via any major influenced the Bank of England to pect it to become widespread over Initially it should help to combat a lot UK bank. open its real-time gross settlement the next few years, spurred on by authenticate identity and payment may take a little of fraud as it’s not as straightforward Because while the UK has a support- accounts to non-banks. the growing use of mobile technol- to fake biometrics as is to find out ive regulator, outstanding paytech We’re also developing a way for ogy as the primary way in which more time to measure up to expectations someone’s password. But over time talent and risk-friendly investors, payments firms to demonstrate they consumers interact with the world. criminal gangs will find ways of at- world-class payments is not accessi- are financially inclusive, through an Since Apple first introduced fin- tacking systems because there’s so SMART DIGITAL ble to three main constituents. accreditation kitemark supported gerprint recognition on its iPhone much money in it and they’re highly Firstly, it’s shocking that many con- by BACS. in 2013, the use of biometrics in the motivated,” he says. sumers don’t have access to financial We’ve lobbied government to ap- mobile apps space has leapt mainly gy, which is considered more secure and Bulgaria, which enables card- slower in this area due to the added The biggest concern here is, once TRANSACTIONS services to make their lives better. point a minister for financial inclu- due to the technology’s convenience, than using traditional PIN num- holders to use their thumbprint regulatory hurdles.” such deeply personal information READY TO IMPROVE YOUR BUSINESS Banks are closing branches nation- sion. In July, MP Guy Opperman which means people no longer have bers. It also reduces the need for rather than a PIN to authorise an Mr Light, on the other hand, is stolen, it is impossible to change wide. The Financial Inclusion Com- was appointed as the first minister to remember multiple passwords. creating costly one-time passwords in-store payment. believes that the real future lies or revoke. But because such a situ- mittee discovered that the annual for pensions and financial inclusion. On the back of this situation, Ed- and is seen as a useful means of But Matt Lewis, research director not in any single form of biome- ation is “so disastrous for the user”, poverty premium paid by those who And we are exporting our experience die Grobler, executive vice presi- complying with increasingly strin- at information security consultan- trics software, but in a KFC-style Mr Lewis believes the fear factor are financially excluded is £1,300. to parts of the world where financial dent of ACH (automated clearing gent payment regulation. cy NCC Group, believes it will take mix of flavours. This approach in- could likewise inhibit take-up. Over a lifetime of 80 years, that’s and economic exclusion is currently house) systems and integration at As a result, providers such as time before biometrics software is volves combining traditional bi- Mr Light has a positive outlook. more than a £100,000 penalty for be- a massive economic drag on socie- Mastercard’s Vocalink, expects the 15% Mastercard are jumping on the as ubiquitous in retail as it is in the ometrics technology such as face “In future, biometrics will being poor. And the Financial Inclusion ty. Three new EPA communities, in use of biometrics software to be- of European bandwagon. Although not rolled mobile arena. recognition with newer artificial come the payment authentication Monitoring Report 2015 highlighted Africa, Eastern Europe and China, come mainstream within the next consumers prefer out by any UK banks as yet, its “People haven’t necessarily intelligence-based behavioural method of choice. It’s the goal of that 1.5 million adults in the UK don’t are launching shortly. This will ena- three to four years and to increas- facial recognition Identity Check Mobile system will thought through the logistics, but biometrics. This software works banks to get rid of passwords and have a bank account. ble us to show leadership in moving ingly “converge into the payment as a biometric enable cardholders to authenticate you need to implement complex passively in the background to get away from having 50 per cent payment method; online payments or access bank back-end infrastructure to store bi Secondly, the UK’s five million money efficiently for everyone. space” in the process. 53 per cent - recognise, for example, how you of transactions challenged, which SMEs are not able to access the latest But more needs to be done. We Another significant factor likely prefer fingerprint services using a selfie, eye scan, ometrics data, and in the UK there hold your phone or key in your means that people simply use oth- technology, often because they don’t need to give consumers access to a to spur adoption, meanwhile, is the scanning voice or fingerprint. are a lot of regulations around data PIN, to prevent spoofing. er cards. So it’s definitely the way Contact us today to learn more about how your business can know an alternative is available or be- quick-and-easy payment sign-up fact that both banks and payment The vendor has likewise trialled protection and privacy,” he says. “The market is maturing and forward – in fact, it’s inevitable,” cause the banks do not allow access. process for all. Accounts should service providers like the technolo- Visa 2016 a biometric card in South Africa “So adoption is likely to be much there’s still a way to go. But with- he concludes. benefit from smarter digital transactions through open banking Finally, there are flaws in the tra- have jam-jarring and segregation of ditional system. Despite being reg- funds, simple and transparent fees, ulated entities, for example, most and lower costs. payments companies must do their We need to give businesses access www.valitor.com/token banking with another bank. The oth- to flexible, cost-effective payment er bank is not set up to do this flexibly accounts that allow them to trade or cheaply and is often competing globally, use customer data and directly. This channel conflict isn’t remove the financial management conducive to a mutually beneficial burden. And we need to give regu- relationship or to having the best lated payments companies access products designed to meet the needs from banks that want to service of customers. them enthusiastically rather than Many regulated payments compa- reluctantly. nies don’t fit with the risk profiles of In tomorrow’s world of payments, token.io: © 2017 Token, Inc. All rights reserved. Token, the Token logo, and the Maze Design are trademarks of Token, Inc. the big banks, so services are being enabling access is everything. With token.io, ltd is registered in England and Wales (#10143662) Registered office: 10 John Street, London, WC1N 2EB, UK. withdrawn with little or no notice. the government’s support and co-or- Valitor is headquartered in Iceland at Dalshraun 3, Hafnarfjördur and is in the UK at 1 Fore Street Avenue, London EC2Y 9DT This derisking threatens companies dinated action across the communi- and countries. ty, the UK can lead the world. 16 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 17

GLOBAL PAYMENTS COMMERCIAL FEATURE Seize the big opportunities EschCollection/Getty Images EschCollection/Getty of a smaller world Today’s connected world feels smaller than ever and the opportunities for companies that engage with global trade are immense, says Karen Penney, vice president and general manager of American Express Commercial Payments UK

revenues from exports will more than cludes organisations including the UK business, work on new products and tomers know that their partners have double from 21 per cent today to 44 Department for International Trade expand into new areas.” been paid, which is a very big plus.” Sparking a per cent over the next three years.4 and its Exporting is GREAT initiative.8 Larger firms with more complex pay- In this globalised world, trade op- ment arrangements also see benefits Concerns about payments shouldn’t portunities may be bountiful, but Firms large and small can benefit by reducing friction in terms of inter- impede cross-border trading some UK companies are simply not from end-to-end solutions national trading. Marketing technol- Making payments and getting paid remittance getting involved. This is despite a Bristol-based BrizTech9 is one such ogy provider Performance Horizon becomes all the more complex major push by the government, since company seizing the opportunities operates in 215 countries with more when it comes to doing so in differ- 2014, to boost UK exports up to £1 tril- that arise from globalisation. The than 215,000 marketing partners and ent currencies and varying business lion by 2020. The ICAEW found that firm is an international retailer of cus- affiliates on its platform. Effectively it is cultures. However, it’s not something revolution the percentage of UK businesses tom-branded Google Cardboard VR the glue that enables partner and af- that should hold businesses back engaging in international trade has headsets under the brand BrizTech- filiate marketing programmes to suc- when thinking about trading inter- remained stable for three years at 53 VR, selling both to retail and business ceed, for example making sure a hotel nationally and seizing the oppor- KAREN PENNEY per cent since 20145 and of the 47 per customers. The aim is to carve out comparison site is paid for referring a tunities of globalisation. A smaller VICE PRESIDENT AND GENERAL MANAGER banks and traditional foreign ex- using the global banking system. posing longer payment terms for cent of non-exporters, almost none a slice of the booming augmented customer to a hotel brand. world makes it easier to get closer Global business AMERICAN EXPRESS COMMERCIAL change firms, and modernised the The technology links up with each cash-flow reasons, they can still have plans to sell overseas in the next and virtual reality market, worth $3.9 Chris Blaxall, chief financial of- to more potential customers. That’s PAYMENTS UK money transfers service for consumers. party’s accounting platform. do so. In fact, it’s easier for them to 12 months. billion in 2016 and expected to rise to ficer at Performance Horizon, says: the message American Express Even these companies admit it’s Ms Fitzmaurice expects banks manage because they don’t have to an estimated $108 billion by 2021.10 “Our business is global so we need wants to give the UK’s current and have been slow a different story when it comes to Digitisation is to adopt solutions like hers to factor in anything from a few days ncertainty seems to be the Dealing with the complexity of Owen Carter, director at BrizTech, a global payments infrastructure. prospective exporters. Our goal is to digitise and business payments. Stuart Greg- definitely on sell as a “value-add benefit” to to a week for the money to arrive big theme of current times. cross-border payments through in- explains: “We’re a small business We make thousands of payments to reduce the barriers to trade and ory, head of business at Trans- the increase as their corporate clients. once it has been sent.” But behind the headlines novation and everyone has to wear multi- every day with billions of dollars smooth the path to global success have fallen behind ferwise, says: “Banks have been If a remittance revolution is Mr Kapoor is certain that “the about political or mac- Why the hesitancy? Naturally, there ple hats; no one is dedicated solely crossing our platform every year for tiny companies, giant enterprises ripping businesses off on foreign the consumer about to reach businesses, are current model of businesses Uro-economic volatility, positive are challenges to trading success- to payments. We needed a simple and a traditional bank simply can’t and everyone in between. consumer payments currency for decades.” requirement for those companies that like to rely stretching credit terms will con- trends are emerging. International fully in a globalised world, includ - solution like American Express Inter- give us the solution we need.” Business payments have been on the old, cumbersome ways tinue”. However, there are some trade in goods, for instance, is growing regulations, taxes, tariffs and national Payments that required as Performance Horizon also opted instant gratification 1 World Trade Organization, April 2017 slower to digitise simply “because of doing things as an excuse middlemen who are likely to need ing, up 2.4 per cent in value in 2017 language differences. Concerns little admin as possible and helps us for an American Express interna- 2 European Commission Winter Forecast, February 2017 bleeds into businesses 1 it’s harder for technology companies for shoddy payments practices to adjust their business models. from 1.3 per cent in 2016. The econ- around payments also create a settle international payments to our tional payments solution, in part 3 Bloomberg, IMF’s 2017 global growth forecast is 3.5 per to meet business needs than those of about to run out of excuses? “There are whole industries that omies of every state in the European barrier, both for sellers and for cus- suppliers swiftly. It allows a frictionless because of the number of currency cent, April 2017 4 consumers”, Mr Gregory argues. Not necessarily, says Mr Greg- exist right now to deal with delays Union are forecast to grow over the tomers. In fact, payment security transfer between us and our overseas pairs available, and the flexibility of Oxford Economics and American Express, SME Global Pulse, April 2017 “Because of the volumes of mon- well as relatively expensive. It can ory. “For businesses suffering in money moving from A to B in next two years, the first time growth is among the top two barriers to manufacturers, meaning our clients the offering which has adapted to 5 Institute of Chartered Accountants for England and 6 ey involved, more verification pro- take up to a week depending on from late payment of invoices, these sectors,” he says. has been forecast across the whole cross-border trade. Reliable pay- get their orders more quickly. It also meet their needs as the business has Wales, January 2017 cesses are needed and the product the combination of sender, benefi- faster payments at least mean no For most though, the benefits of EU in almost a decade.2 Global- ments are critical to a business helps us take payments from over- grown. Delighted with the outcome 6 Export.gov, Barriers to Cross-Border Trade, November needs to offer more functionality ciary, currency, bank and jurisdic- additional delays once the pay- quicker, cheaper and more effi- ly, economic activity is picking up. and, for exporters, there are sev- seas clients which in turn helps our after three years of dealing with 2016 7 American Express, 2017 such as the ability for multiple tion, he says. ment has been processed,” he cient global payments are due to In April the International Monetary eral vital questions that perennially cash flow. Knowing that American an end-to-end solution, Mr Blaxall 8 Export.great.gov.uk JAMES HURLEY pay-outs to be made at once and When it comes to expense, Mr says. “But if companies are im- far outweigh any downsides. Fund raised its forecast, estimat- need answering: How and when will Express is handling our payments for points out: “We have zero outstand- 9 Briztech.co.uk recurring payments,” he explains. Gregory offers the example of a ing 3.5 per cent growth in 2017, up I be paid? How do I guarantee this us, we’re able to focus on our core ing payments and our brand cus- 10 Digi-Capital, The reality of VR/AR growth, January 2017 racking a global payment Sinead Fitzmaurice, co-founder UK company that needs to pay a from its earlier estimate of 3.1 per payment? How do I pay a supplier? should be as easy for busi- of Transfermate Global Payments, German supplier. He says: “There cent.3 All this signals plentiful op - What about exchange rates? nesses as it is for consum- a company which is aiming to im- is typically an upfront fee for the TOP REASONS FOR PAYMENT DELAYS portunities for businesses in terms The payments landscape was, ers to monitor the progress prove cross-border payments for transaction, plus an extra charge MAIN REASONS FOR PAYMENT DELAYS BY FOREIGN B2B CUSTOMERS IN WESTERN EUROPE of expanding their reach, acquiring until recently, relatively static. Tof a parcel delivery. businesses, says the rapid rise of taken in an exchange rate mark-up. customers and growing revenues. Banks dealt with more than 90 per Anish Kapoor, chief executive of so-called peer-to-peer currency The supplier may also be hit with a Insufficient cent of transactions and 69 per 34.6% Accesspay, a Manchester-based services has naturally focused on fee to receive an international pay- availability of funds Optimism reigns but inaction is rife cent of international transfers were company that is aiming to make consumers first. ment when the money lands in their Businesses seem to sense the improv- electronic.7 This is now changing business payments easier and “Building a true B2B interna- account. That really adds up.” ing economic climate and small and with the emergence of new chal- Complexity of the 30.7% faster, says such a facility would tional solution can be slow and There is, however, agreement that payment procedure medium-sized enterprises (SMEs) in lengers in the form of non-tradi- “transform the way in which both complex, which in a funded indus- things are changing, not least with the UK are a case in point. According tional providers. These additional sender and receiver manage their try can frustrate investors,” Ms the likes of Transferwise, Revolut to the recent American Express SME options give organisations more Buyer using outstanding debts/ 24% cash, and the ability for them to Fitzmaurice says. and Transfermate launching low- invoices as a form of financing Global Pulse, they’re almost twice flexibility, although fragmentation access short-term funding”. “A B2B platform brings a com- er-cost and faster ways of companies as likely to be positive (33 per cent) of the payments landscape is a He says: “Imagine being able to see plete host of other requirements, moving money. about the global economy than neg- challenge in itself. Inefficiencies of the what payments were on their way to such as multiple beneficiaries, “Digitisation is definitely on the in- 20.4% ative (19 per cent). Confidence about Overall, the most problematic issue banking system you, before they had even hit your layered authorisation, the ability crease as the consumer requirement exporting is reflected in turnover pro- with international payments is sheer bank account. Your bank would to plug into and pull from the ac- for instant gratification bleeds into jections. The number of UK SMEs gen- complexity, which doesn’t neces- then be much more willing to loan counting software, and also pro- businesses,” says Mr Kapoor. And Mr Dispute over quality of goods 18.5% erating 50 per cent or more of their sarily need to be the case as com- you funds against these payments viding guidance on the currency Gregory says that alternative global delivered/services provided mercial payments companies such in transit, completely changing the swings, not just ensuring the mon- payment services for businesses are as American Express help to simplify way in which trade finance works.” ey flows from A to B,” she says. “about to rocket”. Goods delivered/services provided 17% processes and remove hurdles with So why, as Mr Kapoor puts it, is there In terms of speed of money trans- With more businesses expecting don’t match the contract seamless, end-to-end solutions. still an unbelievable level of friction fers, the UK already has a local to trade online without friction, We aim to help Based on our long history in busi- when it comes to business-to-busi- fast payments scheme embedded payments are going to have to Incorrect information 14.9% companies gain the ness payments, we are targeting ness (B2B) global payments? across the traditional financial catch up, he says. on invoice exporters with a barrier-free solution. To rub salt in the wound, con- system, through which payments Transfermate’s exporting product, confidence to go out into We aim to help companies gain the sumers who want a better and can be made in less than a minute for example, allows a company to Formal insolvency confidence to go out into the world, 9.9% the world and start trading, cheaper alternative to the usual or two, and other developed coun- send an invoice to their overseas sup- of the buyer secure in the knowledge that any suspects when changing curren- tries are following suit. plier through its platform by “inviting secure in the knowledge complex elements around payments cies are becoming spoilt for choice. However, Alan Chang, head of op- them to pay”. Transfermate then con- Invoice sent to the that any complex elements are taken care of. International pay- 8.7% Venture capital-backed services, erations at Revolut, says cross-bor- trols the transaction end to end, elim- wrong person around payments are ments shouldn’t be a hassle. And we including Revolut and Transfer- der B2B transfers provided by inating the chain of sending and re- are one part of an ecosystem that wise, have dramatically undercut banks can still be painfully slow as ceiving fees that would be taken when Atradius 2017 taken care of exists to support exporters. This in- 16 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 17

revenues from exports will more than cludes organisations including the UK business, work on new products and tomers know that their partners have double from 21 per cent today to 44 Department for International Trade expand into new areas.” been paid, which is a very big plus.” Sparking a per cent over the next three years.4 and its Exporting is GREAT initiative.8 Larger firms with more complex pay- In this globalised world, trade op- ment arrangements also see benefits Concerns about payments shouldn’t portunities may be bountiful, but Firms large and small can benefit by reducing friction in terms of inter- impede cross-border trading some UK companies are simply not from end-to-end solutions national trading. Marketing technol- Making payments and getting paid remittance getting involved. This is despite a Bristol-based BrizTech9 is one such ogy provider Performance Horizon becomes all the more complex major push by the government, since company seizing the opportunities operates in 215 countries with more when it comes to doing so in differ- 2014, to boost UK exports up to £1 tril- that arise from globalisation. The than 215,000 marketing partners and ent currencies and varying business lion by 2020. The ICAEW found that firm is an international retailer of cus- affiliates on its platform. Effectively it is cultures. However, it’s not something revolution the percentage of UK businesses tom-branded Google Cardboard VR the glue that enables partner and af- that should hold businesses back engaging in international trade has headsets under the brand BrizTech- filiate marketing programmes to suc- when thinking about trading inter- remained stable for three years at 53 VR, selling both to retail and business ceed, for example making sure a hotel nationally and seizing the oppor- KAREN PENNEY per cent since 20145 and of the 47 per customers. The aim is to carve out comparison site is paid for referring a tunities of globalisation. A smaller VICE PRESIDENT AND GENERAL MANAGER banks and traditional foreign ex- using the global banking system. posing longer payment terms for cent of non-exporters, almost none a slice of the booming augmented customer to a hotel brand. world makes it easier to get closer Global business AMERICAN EXPRESS COMMERCIAL change firms, and modernised the The technology links up with each cash-flow reasons, they can still have plans to sell overseas in the next and virtual reality market, worth $3.9 Chris Blaxall, chief financial of- to more potential customers. That’s PAYMENTS UK money transfers service for consumers. party’s accounting platform. do so. In fact, it’s easier for them to 12 months. billion in 2016 and expected to rise to ficer at Performance Horizon, says: the message American Express Even these companies admit it’s Ms Fitzmaurice expects banks manage because they don’t have to an estimated $108 billion by 2021.10 “Our business is global so we need wants to give the UK’s current and have been slow a different story when it comes to Digitisation is to adopt solutions like hers to factor in anything from a few days ncertainty seems to be the Dealing with the complexity of Owen Carter, director at BrizTech, a global payments infrastructure. prospective exporters. Our goal is to digitise and business payments. Stuart Greg- definitely on sell as a “value-add benefit” to to a week for the money to arrive big theme of current times. cross-border payments through in- explains: “We’re a small business We make thousands of payments to reduce the barriers to trade and ory, head of business at Trans- the increase as their corporate clients. once it has been sent.” But behind the headlines novation and everyone has to wear multi- every day with billions of dollars smooth the path to global success have fallen behind ferwise, says: “Banks have been If a remittance revolution is Mr Kapoor is certain that “the about political or mac- Why the hesitancy? Naturally, there ple hats; no one is dedicated solely crossing our platform every year for tiny companies, giant enterprises ripping businesses off on foreign the consumer about to reach businesses, are current model of businesses Uro-economic volatility, positive are challenges to trading success- to payments. We needed a simple and a traditional bank simply can’t and everyone in between. consumer payments currency for decades.” requirement for those companies that like to rely stretching credit terms will con- trends are emerging. International fully in a globalised world, includ - solution like American Express Inter- give us the solution we need.” Business payments have been on the old, cumbersome ways tinue”. However, there are some trade in goods, for instance, is growing regulations, taxes, tariffs and national Payments that required as Performance Horizon also opted instant gratification 1 World Trade Organization, April 2017 slower to digitise simply “because of doing things as an excuse middlemen who are likely to need ing, up 2.4 per cent in value in 2017 language differences. Concerns little admin as possible and helps us for an American Express interna- 2 European Commission Winter Forecast, February 2017 bleeds into businesses 1 it’s harder for technology companies for shoddy payments practices to adjust their business models. from 1.3 per cent in 2016. The econ- around payments also create a settle international payments to our tional payments solution, in part 3 Bloomberg, IMF’s 2017 global growth forecast is 3.5 per to meet business needs than those of about to run out of excuses? “There are whole industries that omies of every state in the European barrier, both for sellers and for cus- suppliers swiftly. It allows a frictionless because of the number of currency cent, April 2017 4 consumers”, Mr Gregory argues. Not necessarily, says Mr Greg- exist right now to deal with delays Union are forecast to grow over the tomers. In fact, payment security transfer between us and our overseas pairs available, and the flexibility of Oxford Economics and American Express, SME Global Pulse, April 2017 “Because of the volumes of mon- well as relatively expensive. It can ory. “For businesses suffering in money moving from A to B in next two years, the first time growth is among the top two barriers to manufacturers, meaning our clients the offering which has adapted to 5 Institute of Chartered Accountants for England and 6 ey involved, more verification pro- take up to a week depending on from late payment of invoices, these sectors,” he says. has been forecast across the whole cross-border trade. Reliable pay- get their orders more quickly. It also meet their needs as the business has Wales, January 2017 cesses are needed and the product the combination of sender, benefi- faster payments at least mean no For most though, the benefits of EU in almost a decade.2 Global- ments are critical to a business helps us take payments from over- grown. Delighted with the outcome 6 Export.gov, Barriers to Cross-Border Trade, November needs to offer more functionality ciary, currency, bank and jurisdic- additional delays once the pay- quicker, cheaper and more effi- ly, economic activity is picking up. and, for exporters, there are sev- seas clients which in turn helps our after three years of dealing with 2016 7 American Express, 2017 such as the ability for multiple tion, he says. ment has been processed,” he cient global payments are due to In April the International Monetary eral vital questions that perennially cash flow. Knowing that American an end-to-end solution, Mr Blaxall 8 Export.great.gov.uk JAMES HURLEY pay-outs to be made at once and When it comes to expense, Mr says. “But if companies are im- far outweigh any downsides. Fund raised its forecast, estimat- need answering: How and when will Express is handling our payments for points out: “We have zero outstand- 9 Briztech.co.uk recurring payments,” he explains. Gregory offers the example of a ing 3.5 per cent growth in 2017, up I be paid? How do I guarantee this us, we’re able to focus on our core ing payments and our brand cus- 10 Digi-Capital, The reality of VR/AR growth, January 2017 racking a global payment Sinead Fitzmaurice, co-founder UK company that needs to pay a from its earlier estimate of 3.1 per payment? How do I pay a supplier? should be as easy for busi- of Transfermate Global Payments, German supplier. He says: “There cent.3 All this signals plentiful op - What about exchange rates? nesses as it is for consum- a company which is aiming to im- is typically an upfront fee for the TOP REASONS FOR PAYMENT DELAYS portunities for businesses in terms The payments landscape was, ers to monitor the progress prove cross-border payments for transaction, plus an extra charge MAIN REASONS FOR PAYMENT DELAYS BY FOREIGN B2B CUSTOMERS IN WESTERN EUROPE of expanding their reach, acquiring until recently, relatively static. Tof a parcel delivery. businesses, says the rapid rise of taken in an exchange rate mark-up. customers and growing revenues. Banks dealt with more than 90 per Anish Kapoor, chief executive of so-called peer-to-peer currency The supplier may also be hit with a Insufficient cent of transactions and 69 per 34.6% Accesspay, a Manchester-based services has naturally focused on fee to receive an international pay- availability of funds Optimism reigns but inaction is rife cent of international transfers were company that is aiming to make consumers first. ment when the money lands in their Businesses seem to sense the improv- electronic.7 This is now changing business payments easier and “Building a true B2B interna- account. That really adds up.” ing economic climate and small and with the emergence of new chal- Complexity of the 30.7% faster, says such a facility would tional solution can be slow and There is, however, agreement that payment procedure medium-sized enterprises (SMEs) in lengers in the form of non-tradi- “transform the way in which both complex, which in a funded indus- things are changing, not least with the UK are a case in point. According tional providers. These additional sender and receiver manage their try can frustrate investors,” Ms the likes of Transferwise, Revolut to the recent American Express SME options give organisations more Buyer using outstanding debts/ 24% cash, and the ability for them to Fitzmaurice says. and Transfermate launching low- invoices as a form of financing Global Pulse, they’re almost twice flexibility, although fragmentation access short-term funding”. “A B2B platform brings a com- er-cost and faster ways of companies as likely to be positive (33 per cent) of the payments landscape is a He says: “Imagine being able to see plete host of other requirements, moving money. about the global economy than neg- challenge in itself. Inefficiencies of the what payments were on their way to such as multiple beneficiaries, “Digitisation is definitely on the in- 20.4% ative (19 per cent). Confidence about Overall, the most problematic issue banking system you, before they had even hit your layered authorisation, the ability crease as the consumer requirement exporting is reflected in turnover pro- with international payments is sheer bank account. Your bank would to plug into and pull from the ac- for instant gratification bleeds into jections. The number of UK SMEs gen- complexity, which doesn’t neces- then be much more willing to loan counting software, and also pro- businesses,” says Mr Kapoor. And Mr Dispute over quality of goods 18.5% erating 50 per cent or more of their sarily need to be the case as com- you funds against these payments viding guidance on the currency Gregory says that alternative global delivered/services provided mercial payments companies such in transit, completely changing the swings, not just ensuring the mon- payment services for businesses are as American Express help to simplify way in which trade finance works.” ey flows from A to B,” she says. “about to rocket”. Goods delivered/services provided 17% processes and remove hurdles with So why, as Mr Kapoor puts it, is there In terms of speed of money trans- With more businesses expecting don’t match the contract seamless, end-to-end solutions. still an unbelievable level of friction fers, the UK already has a local to trade online without friction, We aim to help Based on our long history in busi- when it comes to business-to-busi- fast payments scheme embedded payments are going to have to Incorrect information 14.9% companies gain the ness payments, we are targeting ness (B2B) global payments? across the traditional financial catch up, he says. on invoice exporters with a barrier-free solution. To rub salt in the wound, con- system, through which payments Transfermate’s exporting product, confidence to go out into We aim to help companies gain the sumers who want a better and can be made in less than a minute for example, allows a company to Formal insolvency confidence to go out into the world, 9.9% the world and start trading, cheaper alternative to the usual or two, and other developed coun- send an invoice to their overseas sup- of the buyer secure in the knowledge that any suspects when changing curren- tries are following suit. plier through its platform by “inviting secure in the knowledge complex elements around payments cies are becoming spoilt for choice. However, Alan Chang, head of op- them to pay”. Transfermate then con- Invoice sent to the that any complex elements are taken care of. International pay- 8.7% Venture capital-backed services, erations at Revolut, says cross-bor- trols the transaction end to end, elim- wrong person around payments are ments shouldn’t be a hassle. And we including Revolut and Transfer- der B2B transfers provided by inating the chain of sending and re- are one part of an ecosystem that wise, have dramatically undercut banks can still be painfully slow as ceiving fees that would be taken when Atradius 2017 taken care of exists to support exporters. This in- 18 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 19

DEVELOPING WORLD

AFRICAN BANKS HAVE A MAJOR OPPORTUNITY Mobilising Hugh Mitton / Alamy Stock Photo Stock Alamy / Mitton Hugh money for 70% 73% 80% of African retail never use never use banking customers mobile internet never use mobile payments banking the poor banking

Survey of 33,000 retail banking customers across 18 African markets, KPMG 2016

count. It was a game-changer in the demonetisation was announced, developing world and hugely popu- daily e-wallet transactions had shot lar. In less than two years, M-Pesa up from 700,000 to 6.3 million and had attracted 6.5 million Kenyan the RuPay card business had ex- subscribers and by year five that panded by 316 per cent. number had swollen to 17 million. “Given that by the end of this The mass-scale adoption of M-Pe- decade, 63 per cent of people in sa spawned a multitude of unfore- developing countries are predict- seen benefits. Digitalising money ed to have access to smartphones, transfers reduced crime in previ- it’s a compelling business oppor- ously cash-based societies, for in- tunity for banks and an area that stance, and in 2014, largely because demands attention to ensure a of mobile money activities, which better financial future for peo- were previously in the informal ple in these markets,” says Simon cash-based sector, Kenya revised Paris, deputy chief executive of its GDP upwards by 25 per cent. fintech leaders Finastra, whose Little wonder M-Pesa has extend- organisation is working with the ed its network to include Afghani- World Trade Board to determine stan, South Africa, India, and more how to help extend financial in- recently in Romania and Albania, clusion through innovation. but there is still plenty of room for “There are some great use-cases innovation and potential for mobile for mobile payments now where money growth, in both the devel- governments are marrying mo- oped and developing worlds. bile infrastructure with the pains “Mobile money has enabled an of the unbanked, disconnected or ecosystem of immediacy, rele- most in need. This includes helping vance, and accessibility in pay- pregnant women in remote areas to ments and financial services across access state subsidies digitally to Africa,” says Rachel Balsham, co- reduce the risk of infant mortality chief executive at MFS Africa. “But and reducing the time it takes for the African markets are highly social security payments to arrive fragmented; there are 54 countries, for farmers in remote villages.” with up to four mobile operators in Michael Tomlins, chief executive each one. Interacting with mobile of Infomedia, points to the huge wallets across networks and coun- growth of mobile payment ecosys- tries can require dozens of complex tems in Japan and China, and the and time-consuming integration rise of WeChat, Alipay and direct projects. The next step is cross-bor- carrier billing (DCB). der interoperability.” “In China, mobile payments are This is where MFS Africa is shin- now worth $5.5 trillion, roughly 50 ing as one of the most innovative times the size of mobile payment companies in Africa as it has 170 market in the US,” he says. “In Japan, million mobile wallets connected DCB – charging digital and physical to its network, though there are purchases direct to a consumer’s other examples. London-headquar- phone bill – now accounts for 50 per tered online remittance service cent of all online purchases. These Mobile money has transformed the lives bankables is as high as 95 per cent. payment landscape across the de- Shop assistants tries, where few people have bank Azimo (derived from the Swahili innovations in China and Japan There is no need for alarm about veloping world has been reshaped selling mobile accounts but many possess smart- word for help) can “transfer money show that mobile-first payments are their supposed financial exclusion, because of mobile money and the phones in phones, that interdependence was to over 190 countries at the click of the future for countries without a leg- of millions in developing nations and is Kawangware, however, for the mobile money revo- traditional banking behemoths Nairobi, Kenya; not required and mobile operators a button”, says chief executive Mi- acy card infrastructure.” kickstarting poorer economies, particularly lution, which has gathered pace over have been bypassed. the proliferation have led the way.” chael Kent. “Because we only work Mr Kent of Azimo adds: “By 2030 the last decade, has prevented the Dr Pinar Ozcan, associate proof smartphones One of the biggest success stories online, our transfers are up to 90 nearly all the two billion people in Africa and the Middle East alienation of poorer communities. fessor of strategic management across Africa is is mobile phone-based financial per cent cheaper than traditional who don’t have a bank account to- preventing the In a pleasing paradox, made possi- at Warwick Business School, has alienation of poorer service M-Pesa, launched ten years providers and around 20 times fast- day will be storing money and mak- ble thanks to fintech advancements, studied the emergence of mobile communities ago by Vodafone for Safaricom, the er, so we save people huge amounts ing payments with their phones. As those millions of unbankables now payments across the globe and con- without access largest network operator in Kenya of money and time.” they become financially ‘on grid’ have at the swipe of a finger on a cludes that the industry is thriving to banking (pesa means money in Swahili). In India, too, mobile money is they can spend, save and do things smartphone a faster, safer, cheaper in spite, not because, of cross-sec- Suddenly, for a small fee, mem- revolutionising the way people live that most of us take for granted. OLIVER PICKUP and more convenient way to send tor commercial partnerships. “It bers could transfer money between and boosting the economy, but it is “As other products get built on and receive cash when compared is a perfect example of titans from mobile phones without a bank ac- a work in progress. On November mobile money platforms – think in- he unbankables” may Indeed, the database’s findings to most developed countries. They different industries clashing over 8 last year the government, con- surance, credit, saving and wealth sound like a gawp-in- suggest that the Middle East and have been able to leapfrog top-tier how to deliver a new concept, rath- cerned that 40 per cent of its 1.3 bil- management – users in developing ducing television pro- North Africa, where four out of economic nations, who are lum- er than working together,” she says. lion population is unbanked, took countries will be put back in con- gramme. It is, in fact, the every five grown-ups are without an bered with financial legacy systems. “For mobile payments to work, action by demonetising 86 per cent trol. They will be able to improve “Tname given to adults who do not have a account at a formal financial insti- Digital payments have drastical- the banking giants and network op- The payment landscape of the country’s total currency. the management of their financial bank account. There are two billion un- tution, are lowest in the rankings; ly reduced costs and, by recording erators needed one another. Their across the developing world has The move, partly designed to resources, and ultimately their bankables in the world, according to the Sub-Saharan Africa and South Asia transactions in previously infor- inability to agree caused the com- been reshaped because of mobile crack down on the use of illicit and lives and those of their families.” most recent figures, published byGlob - are only a little higher. mal, cash-based societies, they mercialisation of mobile payments counterfeit cash to fund illegal ac- Perhaps “The unbankables” al Findex in 2015, and the vast majority Under closer inspection, in several have spurred economic growth in to be stalled in developed countries money and the traditional banking tivity and terrorism, has been vin- would make a decent TV proof them live in developing countries. individual countries the level of un- areas that desperately need it. The for 15 years. In developing coun- behemoths have been bypassed dicated. Exactly a month after the gramme, after all? 18 FUTURE OF PAYMENTS 03 / 10 / 2017 RACONTEUR.NET RACONTEUR.NET 03 / 10 / 2017 FUTURE OF PAYMENTS 19

DEVELOPING WORLD

Survey of 33,000 retail banking customers across 18 African markets, KPMG 2016