February 2017 Issue 540 www.cardsinternational.com

WHO CAN BENEFIT FROM THE BANKS’ BREXIT?

• ANALYSIS: Contactless UK • MOBILE: BIM • GUEST COMMENTS: PPRO Group & Aprimo • COUNTRY SURVEYS: Bahrain, Lithuania & Portugal

CI 540 new.indd 1 03/02/2017 14:11:46 Simple, secure and effortless digital solutions for fi nancial services organisations

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IE Adverts - 2017.indd 1 21/12/2016 11:53:12 Cards International EDITOR’S LETTER

CONTENTS 6 ANALYSIS: UK CONTACTLESS Contactless technology in payments has taken the UK by storm, EDITOR’S LETTER particularly in London with its usage in public transport. Additionally, this trend doesn’t seem to be hitting Visa and MasterCard kick off 2017 the brakes anytime soon. Patrick Brusnahan reports on positive note 8 FEATURE: BIM Peru’s BIM is providing a reference model for how the stakeholders in a mobile money ecosystem can collaborate to build a nationwide, interoperable infrastructure. Robin s CI goes to press, Visa and MasterCard interchange regulations with greater reductions in Arnfield takes a closer look report a resilient set of results with Visa in credit cards compared to debit cards. 10 REGULATION: BREXIT particular performing strong. Add in factors such as the underbanked and The UK is likely to leave the EU single At Visa, highlights included transaction unbanked in major markets such as India and market, with the UK PM placing A China entering the cards sector for the first time. volume up 41% year over year while the number control of immigration ahead of of issued cards is up 28% year over year. Net rev- The credit card/debit cards imbalance (currently the single market’s benefits. Which countries are in prime positions to enue increased by 25%. around 70% of all cards globally in circulation are take advantage of the UK’s current There remains huge growth opportunities in debit cards) has also been boosted by a fall in the stance? Douglas Blakey writes Europe for further cash displacement and from number of credit cards in use in Russia as banks 14 GUEST COMMENT: APRIMO a parochial point of view, Visa is entitled to be stiffen eligibility criteria. The next few years in the financial upbeat about its soon to open European innova- But not so in Germany. I am obliged to Dr Hugo services sector are going to be tion centre in the UK. Godschalk of the consultants Paysys for flagging transformative from a marketing perspective, says senior financial At MasterCard, while revenue analyst forecasts up that the biggest growth driver in 2015 in Ger- marketer Stephen Ingledew. were missed by a fraction, there were encouraging many was in credit cards (11%) and ELV (10.2%). This may be the start of ‘Digital Darwinism’ signs of reliable growth and successful cost man- Now 24% of card turnover in Germany is made agement initiatives. with via credit card By contrast, the growth rate 13 GUEST COMMENT: PPRO GROUP MasterCard was also able to report progress in of the German debit card scheme fell significantly, Mobile payment methods continue to soar in popularity in the UK, China. Its focus on driving single branded card with a gain of only 1.9%. lessening the country’s dependency issuance is paying off with Bank of China added A quarter of all UK card transactions are now on cash. PPRO Group’s Ralf in the last quarter, bringing the total number of made via contactless, with 325 million purchases Ohlhausen takes a closer look programmes for single branded card issuance made using contactless debit and credit cards in 14 COUNTRY SURVEY: BAHRAIN launched in 2016 to 44, with more than 10 banks. November 2016, the most recent month for which 16 COUNTRY SURVEY: LITHUANIA Both Visa and MasterCard have been expending figures are available. 18 COUNTRY SURVEY: PORTUGAL time and money in China in the hope of breaking A record £2.9bn was spent using the technology the domestic monopoly and if they can just grab in November. This is an increase of 184% per cent 20 RESEARCH: VERDICT FINANCIAL a small share of the market, the impact on their from a year ago when contactless spending passed While the Dutch contactless card market is rising, many remain wary Asian business units can be material. £1 billion in a month for the first time. of contactless due to security issues. As for digital, CEO Ajay Banga was spot on in There are now 101.8 million contactless debit Caution is also present in Spain, with consumers reluctant to take on debt summarising strategy as ‘a marathon not a sprint’. and credit cards in circulation in the UK with 88% products. In the UK, all eyes will be on MasterCard’s execu- of contactless transactions made using a debit tion of the VocaLink deal. card, a higher proportion than for card payments Looking ahead, the consensus is that there overall (78%). remains greater scope for growth in the debit cards Douglas Blakey sector over credit cards. Many reasons, not least [email protected]

Editor: Douglas Blakey Director of Events: Ray Giddings For more information on Timetric, visit our Tel: +44 (0)20 7406 6523 Tel: +44 (0)20 3096 2585 website at www.timetric.com. Email: [email protected] Email: [email protected] As a subscriber, you are automatically entitled to online access to Cards Financial News Publishing, 2012 Deputy Editor: Anna Milne Head of Subscriptions: Sharon Howley International. For more information, please Registered in the UK No 6931627 Tel: +44 (0)20 7406 6701 Tel: +44 (0)20 3096 2636 telephone +44 (0)20 7406 6536 or email Email: [email protected] ISSN 0956-5558 Email: [email protected] [email protected] Unauthorised photocopying is illegal. The Senior Reporter: Patrick Brusnahan Sales Executive: Harry Hooker London Office contents of this publication, either in whole or Tel: +44 (0)20 7406 6526 Tel: +44 (0)20 3096 2586 71-73 Carter Lane part, may not be reproduced, stored in a data Email: [email protected] London Email: [email protected] retrieval system or transmitted by any form or EC4V 5EQ means, electronic, mechanical, photocopying, Group Publisher: Ameet Phadnis recording or otherwise, without the prior Tel: +44 (0)20 7406 6561 Customer Services: Asia Office permission of the publishers Email: [email protected] Tel: +44 (0) 20 3096 2636 1 Finlayson Green, #09-01 or +44 (0)20 3096 2622 Singapore 049246 Sub-editors: Patrick Fogarty, Nick Midgley Email: [email protected] Tel: +65 6383 4688 Fax: +65 6383 5433 Email: [email protected]

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CI 540 new.indd 1 03/02/2017 14:11:59 NEWS: DIGEST Cards International

M&A SIA concludes acquisition of UniCredit's card-processing activities in Italy, Germany and Austria

SIA has completed the acquisition of Uni- tions executed using debit, credit and pre- Credit’s card-processing business in Italy, paid cards, and for the management of POS Germany and Austria for €500m ($525m) in and ATM terminals. UniCredit said the deal cash. The card processing unit is part of Uni- would provide a consolidated net capital credit Business Integrated Solutions (UBIS), gain of around €440m for the group in 2016, an affiliate of UniCredit. and would boost its CET1 ratio by around The deal, announced in August 2016, 12 basis points. offers SIA ownership of the processing activ- The latest sale forms part of UniCred - ities of nearly 13.5 million payment cards, it’s strategic approach to boost capital, 206,000 POS terminals as well as 12,000 announced in July 2016. ATMs in Italy, Germany and Austria. The bank sold minority stakes in Bank UniCredit also agreed a 10-year Pekao and its online bank FinecoBank in outsourcing contract with SIA for the sup- July 2016, and a 32.8% stake in Bank Pekao ply of processing services related to transac- earlier this month as part of the plan.<

SECURITY Oman Arab Bank and Visa collaborate to adopt EMV chip-and-PIN technology for debit cards

Oman Arab Bank (OAB) has partnered with “The EMV-enabled cards will be perfectly Visa to migrate the bank’s current Electron compatible with our newly introduced ATM cards to secure EMV chip-and-PIN debit software, making our digital offering strong- cards. er than ever before.” Oman Arab Bank’s general manager of Visa’s general manager for Oman, Saudi retail banking, Fahd Amjad, said: “As a lead- Arabia, Kuwait and Bahrain, Ahmed Gaber, ing bank in Oman, our focus has consistently said: “EMV chip-and-PIN cards help to pro- been to enhance the customer experience by tect both the consumer and the merchant by providing a range of innovative solutions and adding an extra layer of security to a trans- services. action, while keeping the payment process “Our long-standing relationship with Visa quick and simple. goes back a decade, and our latest collabora- “We are proud that once again through “Visa is delighted to work with OAB to tion will result in the first contactless Visa innovation we will create value for our cus- roll out the technology and to help bring debit card in Oman.” tomers,” Amjad added. additional peace of mind to its customers.”<

MOBILE PRODUCTS DISTRIBUTION UnionPay launches mobile MBNA introduces new balance Procesos signs agreement to QuickPass with Mashreq Bank transfer credit card accept JCB cards in Peru

UnionPay has introduced its mobile Quick- UK-based credit card provider MBNA has JCB International (JCBI), the international Pass service in the UAE, in partnership with launched a new credit card to help customers operations subsidiary of JCB, has signed a the UAE-based Mashreq Bank. consolidate post-Christmas debts and card merchant-acquiring agreement with Peru- As part of the agreement, Mashreq Bank balances. vian acquiring and processing firm Procesos will update all its 15,000 POS terminals The MBNA Balance Transfer Credit Card, Medios. JCB cards will now be accepted at that support contactless payment to accept provides up to 43 months at 0% on balance over 70,000 Procesos merchants in Peru. mobile QuickPass, which will also support transfers, if the transfer is carried out at the Since 2003, JCBI has been building a contactless payments made using UnionPay start of the offer window. merchant acceptance network in Peru to chip cards, smartphones and wearable devic- Cardholders receive £20 ($24) cashback facilitate card use for the millions of visitors es, according to UnionPay. when they transfer £1,000 or more within drawn to Peru’s 12 World Heritage Sites. Initially, merchants including snack bars, the first 60 days of opening an account. Users Besides strengthening JCB’s card accept- digital stores and shopping centres will will have to pay a 3.29% balance transfer han- ance in Peru, the collaboration will enable accept UnionPay mobile QuickPass pay- dling fee for the card. Procesos to bring more business opportuni- ments in the UAE. MBNA marketing and digital director ties to its 70,000 merchant partners. With QuickPass-enabled UnionPay chip Richard Whatmough said: “Many people’s JCBI deputy president Kimihisa Imada cards and smartphones, customers can pay new year’s resolutions are focused on con- said: “Peru is one of the most important at contactless terminals in these stores. solidating their debts and card balances at markets for JCB’s global business expan- Mobile QuickPass, which offers payment this time of year, so we’ve looked to offer a sion, and we are pleased to welcome our new security through dynamic password and compelling new option in time for January. partner to the JCB network. tokenisation, is now accepted at restaurants, “Additionally, new customers can transfer “I am certain this new partnership with department stores and convenience stores in money into their current account using the Procesos will bring more benefits and con- Hong Kong, Macau, Taiwan, South Korea, new credit card, and pay no interest for a venience to JCB cardmembers visiting the Singapore, Australia and Canada.< period of 20 months.”< country.”<

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CI 540 new.indd 2 03/02/2017 14:12:01 Cards International NEWS: DIGEST

RESEARCH STRATEGY SECURITY Visa US chip card transactions Walmart lifts ban on use of Visa CarIFS selects Fiserv's EMV- pass 800m in November 2016 credit cards in Canadian stores compliant payment platform

Walmart Canada and Visa have reached an agreement whereby the retailer is now accepting Visa-branded credit cards from 6 January at its Manitoba and Thunder Bay stores. Walmart claimed it was paying more than $100m in interchange fees per annum, despite the fact that Visa and MasterCard, both agreed with the Canadian competition authorities to put a voluntary cap of 1.5% on interchange rates for five years. Visa has reported its EMV credit and debit When Visa did not respond to Walmart Caribbean Integrated Financial Services card volume in the US hit 805.9m million Canada’s call for a fee reduction, the super- (CarIFS), Barbados’s national debit network transactions in November 2016, compared market chain threatened that it would no operator, has upgraded to the latest version to 175.6 million by the same point in 2015. longer accept Visa cards in its stores unless of POSH, a flexible switch solution for pay- Payment volume on Visa EMV cards Visa reduced its interchange fees. ment transactions developed by Fiserv. reached $43.8bn in November, represent- Walmart Canada banned Visa, warning CarIFS has been using POSH since 2008, ing a 262% rise from $12.1bn in November it would eventually ban the cards at all its and made the decision to upgrade to the lat- 2015. outlets in Canada. est version to offer better functionality and Around 399.9 million Visa credit and In a statement, Walmart said: “We have more secure processing services to connect- debit cards now feature a chip, up 105% come to an agreement with Visa which ing members. from 195.4 million in November 2015. allows us to continue offering Visa as a form CarIFS offers its services to five commer- At the outset, issuers focused on convert- of payment in our (Canadian) stores. cial banks and three credit unions in the ing more credit than debit cards to EMV “Customers in Manitoba and Thunder region, and processes more than eight mil- chip; however, more than half of Visa’s cur- Bay, Ontario, will be able to use their Visa lion transactions a year. rent chip card base is currently debit. credit card starting January 6, 2017.”< The adoption of the latest version of Visa said 1.75 million merchants, repre- POSH is part of CarIFS’s long-term plan to senting 38% of US card-accepting store- SECURITY support EMV chip card issuing and acquir- fronts accepted chip cards in November, Shift4, InnQuest Software ing for its members, as well as to enable new compared to 690,000 in 2015. launch joint EMV solution payment technologies, especially mobile According to data released by Visa, 75% payments. of chip-accepting merchants are small and Payment gateway provider Shift4 and prop- POSH has obtained PCI Payment Applica- medium-sized businesses, and chip-ready erty management software developed Inn- tion Data Security Standard (PA-DSS) certi- merchants are now generating 46% of Visa’s Quest Software have launched joint EMV- fication, that gives CarIFS advanced security in-store payment volume. certified solution for the hotel and lodging standards. Visa said that merchants which had com- industry. Fiserv said the latest version of POSH pleted EMV upgrades recorded a 45% Using Shift4’s independent payment gate- includes fully featured EMV support, remote reduction in counterfeit fraud as of August way solution, Dollars on the Net, and Inn- key injection handling, mPOS support and 2016, as compared to August 2015.< Quest’s roomMaster solution, hotel opera- robust integration capabilities that will sup- tors are now able to process EMV payments port multi-channel transactions for mer- PRODUCTS while adding the layered security of point-to- chants. UCO Bank introduces new point encryption and tokenisation. The new POSH, which operates on a Win- prepaid card Keeping sensitive cardholder data out of dows-based server platform, can enable cli- the hotelier’s payment-processing environ- ents to reduce investment risk and improve UCO Bank, a public sector lender in India, ment, the technology protects guest payment operating efficiency. has launched its latest offering, the UCO data from potential threats such as hackers Tony Del Castilho, general manager of Suvidha e-Prepaid Card. and cybercriminals. Prism Financial Processing Services, opera- Promoted as an easy alternative to cash, Shift4 supports a number of EMV-capable tor of CarIFS, commented: “Providing the card can be used to make cash withdraw- terminals from Ingenico Group and Veri- secure, compliant and reliable payments pro- als and purchases, and will also facilitate fone, with options for USB, serial, ethernet, cessing services to our connecting members online shopping. bluetooth and Wi-Fi connectivity. This ena- and achieving PCI PA-DSS certification is of The card enables users to load and reload bles hoteliers to easily implement EMV using critical importance to us. amounts, and will be targeted at corpora- their devices of choice. “By enhancing our existing Fiserv pay- tions, government departments, institutions Shift4 is currently certified for EMV with ments platform, we have full confidence and other similar organisations. eight key processors in the US and Canada, that we will be supported in our objectives Established in 1943, UCO Bank manages and allows hotel operators to adopt EMV by a proven and reliable vendor who will more than 3,000 service units, including spe- without shifting financial relationships. It continue to offer the highest standards of cialised and computerised branches in India also enables them to negotiate payment- technology, service and support,” Del Cas- and overseas.< processing rates, or switch if required.< tilho added. <

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CI 540 new.indd 3 03/02/2017 14:12:04 NEWS: DIGEST Cards International

SECURITY Danske Bank selects Worldline's ACS solution for secure e-commerce payments

Denmark-based Danske Bank has selected Worldline’s Access Control Server (ACS) solution to secure e-commerce transactions with 3D-Secure authentication in Denmark, Sweden, Finland, Norway and the UK. Worldline said the ACS solution will help the Danish lender to fight fraud efficiently, and provide customers with a unified authen- tication experience across all channels. During e-commerce transactions, the 3D-Secure dynamic protocol verifies cardholders’ information to prevent fraud. Strong Customer Authentication (SCA) is ment, activity monitoring and reporting, as Bank access to the highest security standards an important requirement of the European well as fraud-prevention capabilities. in the market, and ensure that our clients Banking Authority (EBA) guidelines and The solution delivered to Danske Bank will avoid the misuse of their payment cards and PSD2, with which all European banks are be firmly linked to the domestic ID solution still feel secure when purchasing online. required to comply. in each Nordic country. “The solution is fully integrated in the The Worldline ACS solution, which is pro- Danske Bank head of customer solutions domestic authentication solutions, and at the vided in SaaS mode for easy service setup, Claus Bunkenborg said: “The five-year same time the agreement is also cost-attrac- offers straightforward workflow manage- agreement with Worldline will allow Danske tive for Danske Bank.”<

PRODUCTS ST, G&D and FitPay develop turnkey, certification-ready solution for wearable devices

STMicroelectronics (ST), Giesecke & Devri- The new technology aims to cut barriers operating system. The solution has been ent (G&D) and FitPay have jointly developed arising in implementing card payments on incorporated and fully integrated around a turnkey, certification-ready solution for mobile devices, enabling wearable device ST’s ST54E well-established security chip wearable devices. OEMs to concentrate more on product which manages cryptographic processing The firms have used ST’s security chip to development. and tamper-proofing. create the first secure hardware and software The solution will enable users to load mul- FitPay CEO Michael Orlando said: “Wear- solution pre-approved for use by device man- tiple payment cards from various banks and able devices are transforming the payment ufacturers, with the aim of developing inte- from different payment networks onto wear- experience, and FitPay, ST and G&D are grated tokenised payments from MasterCard able devices, thereby making contactless pay- making it easier to develop payment-enabled or Visa. ments easy, independent of the end-device’s wearables. ”<

PRODUCTS Virgin Money launches new credit card range in UK

UK lender Virgin Money has launched its The purchase/all-round cards provide 27 latest range of credit cards, which include a months at 0% interest on purchases; and 26 selection of balance transfer as well as pur- months at 0% interest on purchases, balance chase cards. transfers and money transfers, with a one-off The balance transfer cards offer 41 months transfer fee of 2.69%. at 0% interest on balance transfers, with a The introductory rates are applicable to one-off transfer fee of 3.09%; 32 months at balance and money transfers made within the es, and a credit card can be a very effective 0% interest on balance transfers, with a one- first 60 days of an account opening. tool for saving money.” off transfer fee of 0.63%; and 30 months at Virgin Money director of credit card prod- Cardholders can access Virgin Money 0% interest on balance transfers, with a one- ucts Chris Taylor said: “January is the perfect lounges, and receive discounts on a Virgin off transfer fee of 0.55%. time for people to take stock of their financ- products such as holidays and train tickets.<

STRATEGY Citi Retail Services and Toro Company sign long-term credit card agreement

Citi Retail Services has signed a long-term its dealer network. The new programme will enter the power equipment space with an agreement with The Toro Company, a US- offer Toro and Exmark dealers with POS industry-leading provider. based provider of outdoor maintenance processing, new-to-industry marketing pro- “This agreement allows us to utilise and equipment, to offer a private-label credit card motions and more flexible financing terms. expand our deep expertise in consumer and programme in the US. Commenting on the deal, Citi Retail Ser- commercial private label credit, helping Citi will provide and service Toro and vices head Craig Vallorano said: “This new solidify our leadership position in the dealer Exmark OEM-branded cards throughout partnership is a great opportunity for us to distribution market space.”<

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CI 540 new.indd 4 03/02/2017 14:12:06 Cards International NEWS: DIGEST

REGULATION UK watchdog finds competition concerns with MasterCard’s takeover of VocaLink

VocaLink manages BACS, the UK’s auto- “These concerns warrant a closer investi- mated clearing house network that allows gation in the event that MasterCard cannot credit and debit payments between bank address them at this stage.” accounts. It also operates the country’s Faster With respect to BACS and FPS, the compe- Payments Service (FPS) for real-time account- tition watchdog did not find concerns in the to-account payments via online systems, provision of payment infrastructure services, mobile devices, and telephone. as there are numerous credible alternatives to The CMA said the merger of MasterCard VocaLink and MasterCard. and VocaLink would put two of the country’s Furthermore, the CMA said the companies three leading ATM network-services suppli- can avoid the merger being referred for an ers under one corporate roof, which will in-depth investigation if they can provide a decrease the number of bidders and limit the remedy to address the competition concerns ability of the Link scheme to achieve good identified. value when tendering for an infrastructure It gave MasterCard and VocaLink a dead- The UK Competition and Markets Authority provider. line of 11 January 2017 to propose a rem- (CMA) has found that MasterCard’s planned The CMA acting CEO Andrea Coscelli edy to its concerns, ahead of launching a full £700m ($850m) acquisition of UK-based said: “The Link ATM network provides an investigation. VocaLink may reduce competition in the sup- essential service for millions of customers. MasterCard commented: “We welcome ply of ATM network services. “It’s important that Link has a good choice today’s decision by the CMA, regarding our MasterCard and VocaLink offer services of provider when it comes to supplying the planned acquisition of VocaLink. to the Link ATM network, which represents necessary infrastructure so it can take advan- “The thoroughness of the review reflects nearly 70,000 cash machines in the UK and tage of the opening up of payment systems to the significance of this deal and its potential Europe. competition. for the industry.”<

DIGITAL DIGITAL UBA launches merchant app using MasterPass QR payments OpenSky introduces digital gift cards using CashStar platform to pay for goods and services in Nigeria and across the continent. Using the merchant app, business owners can receive instant notification of payments in real time, view current banking state - ments, and gain insights into sales trends. With the aim of enabling merchants to expand their business models and develop a network of micro-merchants, the app will enable them to provide value-added services such as bill payments or airtime top-ups to customers. Online marketplace OpenSky has selected UBA Group head of consumer and digital CashStar’s Commerce platform to offer digi- banking Yinka Adedeji said: “As a group, we tal gift cards to consumers. are committed to driving financial inclusion The CashStar Commerce platform allows and empowering businesses across Africa. shoppers to “give the gift of OpenSky” “Our partnership with MasterCard ena- through a digital gift card. bles us to deploy safe digital solutions for As well as being able to customise cards United Bank for Africa (UBA) has introduced customers, and the UBA MasterPass QR with personalised messages, customers can merchant-focused app featuring Master- Merchant App is just such a solution.” add a photograph, select a purchase denomi- Card’s mobile payment solution, MasterPass MasterCard vice-president and area busi- nation and choose from multiple faceplates QR. ness head for West Africa Omokehinde for their gift cards. The UBA MasterPass QR Merchant App Adebanjo commented: “As part of our OpenSky GM Andrew Pavoni said: “We is be promoted as the first merchant app in commitment to empowering MSMEs, the selected CashStar to power our gift card pro- Nigeria and the rest of Africa. The launch introduction of MasterPass QR through our gramme because they’re the ideal partner for is part of UBA’s strategy to connect 100,000 partner’s mobile merchant app is one of the our e-commerce business model. micro-merchants to the formal economy by most significant contributions we have made “They are proven experts in digital gifting early 2017, as part of a wider move to drive to Africa. with a flexible, scalable platform that will financial inclusion in the region. “It speaks directly to our global goal of ensure a seamless customer experience. The move follows the pan-African com- connecting 40 million MSMEs to our pay- “We are especially excited to support our mitment made by the UBA and MasterCard ment network by 2020, in support of our customers’ affinity for sharing OpenSky in July 2016, whereby both firms agreed to global Financial Access 2020 commitment,” with friends and family by providing them introduce safer and more convenient ways Adebanjo added. < with a new e-gifting experience.”<

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CI 540 new.indd 5 03/02/2017 14:12:14 ANALYSIS: UK CONTACTLESS Cards International

No end in sight for UK’s contactless surge

Since the launch and popularisation of contactless payments in the UK, there seems to be no peak in the solution’s use. Much has been made of contactless’s success in the UK and, according to new research, the success is not over yet. Patrick Brusnahan reports on how this boom has changed the payments landscape

ccording to Verdict, the global by 194.2% year-on-year in August 2016. of mobile and wearable NFC-enabled pay- contactless card transaction value Major issuers including Barclays, RBS, ments. will almost quadruple between Lloyds Banking Group, HSBC, Nationwide, Apple Pay, bPay, and Android Pay’s respec- 2016 and 2020, while the global Santander, and American Express have all tive launches also supported a growth in A contactless payments. Apple Pay entered the mobile near-field communication (NFC) issued contactless cards. transaction value will grow more than According to the UKCA, 325 million pur- UK market in July 2015 in partnership with fivefold. chases were made with contactless technol- some of the country’s largest banks, includ- The research also forecasts that, in the ogy in November 2016, accounting for one ing HSBC, RBS, Lloyds and Santander. short to medium term, contactless cards are in every four purchases. Almost simultaneously, Barclaycard set to dominate the global contactless envi- A key driver of contactless payments in launched bPay contactless mobile payments ronment. This is especially true in the UK. the UK has been its introduction to Lon - with wearable band and NFC sticker solu- Since 2013, the UK payment cards mar- don’s public transport system; more than tions. More recently, Google launched its ket has seen a startling uptake in contactless 500 million journeys have been made using contactless mobile payment (m-payment) technology. The number of contactless card contactless payments on London’s transport solution, Android Pay, in the UK in May transactions rose from 1.7 million in 2010 network to date. 2016. The expected launch of Samsung Pay to over one billion in 2015, according to the The UKCA expects the trend to continue, in 2017 is anticipated to add even more com- UK Card Association (UKCA). Additionally, as a result of an increase in the contactless petition into the market. the number of contactless transactions rose spending limit, and the growing popularity While cashless payments have overtaken use of notes and coins, cash is still a popular mode of payment for low-value transactions. n VOLUME AND VALUE OF CONTACTLESS CARDS BY TYPE, (MILLIONS/£), 2010–2016 This is particularly true in the cases of vend- Indicator Unit 2010 2011 2012 2013 2014 2015 H1 2016 ing machines, supermarkets, confectionery, Contactless credit/charge tobacco, newspapers, fast food, personal m 0.4 1.04 4.21 15.56 41.06 134.18 135.08 card transaction volume care, pubs, coffee and the Post Office. More merchants are anticipated to facilitate the Contactless debit card m 1.27 4.48 21.38 84.83 278.17 911.39 963.95 transaction volume shift from cash to contactless payments, to avoid costs incurred in cash handling. Contactless credit/charge £m 1.68 5.24 25.92 97.65 263.69 967.81 1,130.78 card transaction value Total spending on contactless cards reached £7.75bn ($9.33bn) in 2015, up by Contactless debit card £m 5.71 24.21 139.24 555.73 2,060.67 6,778.94 8,140.33 233.3% on 2014. It registered a similar trend transaction value in 2016, reaching £9.27bn during the first Source: Verdict half of the year.

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CI 540 new.indd 6 03/02/2017 14:12:18 Cards International ANALYSIS: UK CONTACTLESS

In addition, a record £2.9bn was spent ried out on the TfL network in 2015. By the n VOLUME OF CONTACTLESS CARDS IN THE UK using the technology in November 2016, an end of March 2016, around 7.5 million jour- (MILLION), 2009–H1 2016 increase of 184% from November 2015. neys a week were paid for using contactless. Overall, 1.1 billion contactless purchases Contactless payments accounted for 26% of 100 were made in the UK during the first half of all pay-as-you-go tube and rail journeys, as 2016, more than the amount of purchases well as 23% of bus journeys. made in the whole of 2015. In a further attempt to increase contactless 80 transactions on transport, the Mayor of Greater market share London and TfL decided in December 2015 60 The number of contactless cards reached to allow London taxis to accept card and

81.6 million in 2015, equivalent to 46.5% of contactless payments. 40 all UK payment cards. It rose to 98.9 million Following negotiations with TfL, card by September 2016. issuers agreed to reduce costs for drivers In August 2016 alone over 275 million for card payment acceptance. From Octo- 20 contactless transactions were made in the UK: ber 2016, all 22,500 licensed taxis began to 242.1 million debit card transactions, and 33 accept card and contactless payments, and 0 million credit and charge card transactions. customers were no longer required to pay 2009 2010 2011 2012 2013 2014 2015 To encourage contactless payments, the surcharges on fares. H1 2016 UKCA increased the spending limit on Collaborating with the UK’s public trans- Source: UK Cards Association contactless transactions from £20 to £30 port operators, the UKCA developed a new in September 2015. The logic behind this, framework to enable passengers to use MasterCard, in September 2014, according to the UKCA, is that the average contactless cards and devices to pay for trav- announced that European merchants, includ- payment at a supermarket is £25, therefore el. The framework is designed to help trans- ing UK retailers, must be equipped with raising the limit will give contactless payment port operators utilise contactless payments contactless terminals by 2020 to be able technology a boost. on local pay-as-you-go journeys, including to accept MasterCard and Maestro cards. single trips or combined travel on more than While new POS terminals were required to Payments travel fast one type of transport. meet the new standard from January 1 2016, Oyster is the UK’s most popular contactless In January 2016, the UK’s five main bus existing POS terminals must be replaced by prepaid card. Until September 2014, it was operators – Stagecoach, First Bus, Go-Ahead, January 1 2020 at the latest. the UK’s only contactless payment solution Arriva, and National Express – announced Merchants accepting contactless payments available to travellers on London’s trans- plans to provide facilities on every bus by in the UK are wide and varied. They include port system. Following its success, Trans- 2022. They are also in the process of develop- Aldi, Boots, Greggs, Marks and Spencer, port for London (TfL) began accepting Visa, ing their own contactless ticketing solutions. McDonald’s, Morrisons, Nandos, Starbucks, MasterCard, and American Express-branded The rail industry has also stated its plans to Subway, Waitrose and WH Smith. contactless payment cards. support contactless payments by 2025. Starbucks launched its own NFC m-pay- Following successful launches on the tube, ment solution in January 2012, enabling trams, DLR, London Overground and most Craving acceptance customers to make contactless payments in National Rail services in London, TfL has The number of contactless point-of-sale its stores. It now faces competition from a become Europe’s fastest-growing contactless (POS) terminals in the UK reached 309,706 number of other mobile solutions, including merchant. by December 2015, representing roughly Apple Pay, Android Pay and bPay. According to TfL, more than one million 15.8% of all POS terminals in the country. More than 250,000 merchants in the journeys are made on the network every As of September 2016, there were 419,431 country accept payments through Apple day using contactless cards. One-in-10 contactless POS terminals, representing a Pay, including Tesco, Waitrose, Starbucks, contactless transactions in the UK were car- 45.5% annual increase. McDonald’s and Subway. <

n CONTACTLESS: DEBIT VS CREDIT AND CHARGE n CONTACTLESS TRANSACTIONS BY TYPE OF n GEORGRAPHIC BREAKDOWN OF CONTACTLESS CARDS IN THE UK (%), 2015 RETAILER IN THE UK (%), 2015 TRANSACTIONS IN THE UK (%), 2015

Credit & Other charge retailers cards 16% 12% Other 38% London Supermarket 38% Bars, coffee & food 46% shops & Debit cards takeaways 38% South 88% East East Anglia England South 10% 12% England 9%

Source: UK Cards Association Source: UK Cards Association Source: UK Cards Association

www.cardsinternational.com February 2017 y 7

CI 540 new.indd 7 03/02/2017 14:12:22 MOBILE: BIM Cards International

BIM mobile money scheme leads the way in interoperable payments

Peru’s BIM is providing the international banking and payments industries with a reference model for how the various stakeholders in a mobile money ecosystem can collaborate to build a nationwide, interoperable infrastructure. Robin Arnfield takes a closer look at the platform’s launch, strategy and ambitions

n February 2016, Peru’s leading sector and state-owned banks, cajas (credit tions and settling via Peru’s real-time gross banks and mobile network operators unions), microfinance institutions,licensed settlement system (RTGS). launched the Billetera Móvilmobile non-bank electronic money issuers, and the Asociación de Bancos del Perú’s financial wallet (BIM), a shared national digi- country’s largest telcos. education institute holds a majority equity I Under Peru’s Electronic Money Law, non- stake in PDP. Other investors include the UN tal financial services platform targeting the country’s unbanked and underbanked financial institutions are eligible to partici- Better than Cash Alliance and the Andean consumers. Its goal is to sign up five mil - pate in financial services and offer banking. Development Corporation-Development lion of Peru’s 10 million unbanked per - “Together these institutions have con - Bank of Latin America. sons by 2020. structed a shared infrastructure for mobile Asociación de Bancos del Perú played a BIM’s users will be offered mobile digital payments, which forms the basis for com- key role in establishing the Modelo Perú ini- financial services irrespective of which their petition on customer acquisition through tiative. It invited technology companies to bank or telco is. The services are being rolled products, all with a unifying goal of financial submit tenders to develop a national mobile out gradually, with person-to-person (P2P) inclusion,” says Bower. payments switch that would work with all transfers, deposits and withdrawals, and air- “If successful, this will be the world’s first Peru’s state-owned and private-sector finan- time top-ups launched first. attempt to build a fully interoperable nation- cial institutions, microfinance providers, and According to a GSM Association (GSMA) al mobile payments system designed to pro- telcos. The contract was won by Sweden’s report The Mobile Economy: Latin America mote financial inclusion.” Ericsson in August 2014. and the Caribbean 2016, over 70% of the PDP’s stakeholders had the opportunity Peruvian population is financially excluded. to learn from mobile money schemes imple- Progress report Jeffrey Bower, a former United Nations (UN) mented in other parts of the world before According to Felipe Vasquez de Velasco, digital finance specialist with the Better Than developing their own infrastructure. PDP’s MD, as of December 2016 BIM had Cash Alliance, says the reasons include high Many mobile money programs struggle to 280,000 customers. transaction costs, financial illiteracy, and a reach scale because they are not attractive “BIM is currently working with Movistar, lack of accessibility in remote areas. enough for people to switch away from cash. Claro, and Entel and plans to add Bitel However, with over 40,000 banking “Part of the reason is that generally these [owned by Vietnam’s Viettel] during the first agents and 10.6 million debit cards, Peru has programs are operated by one entity, usually half of 2017,” he says. a relatively well-developed formal financial a single bank or a telecoms company,” adds “Currently, 22 financial institutions are sector, says Bower, who currently runs pay- Bower. connected to BIM. Deposits are currently ments consultancy Bower & Partners. “Often these solutions are closed-loop and the number one transaction type and we Another characteristic of Peru is a high work only for an organisation’s own custom- expect to significantly increase top-ups in degree of market concentration among a ers. When such limits are placed on how and early 2017 and then focus on P2P transfers.” small number of banks. According to a where, there is little incentive for people to “I would have liked the service to have March 2016 report by JP Morgan, Peru’s change their behaviour, especially as cash is expanded more quickly,” Bower tells CI. top four banks – Banco de Crédito del Perú, universally accepted.” “But BIM’s uptake has exceeded the initial BBVA Continental, Scotiabank and Inter- Bower is a specialist in mobile money ser- expectations for the project in terms of the bank – held 87% of the country’s total loans vices, and provided advice to Scotiabank in planned targets for the number of users. All and 88% of the total deposits as of Decem- implementing Latin America and the Carib- financial institutions in Peru are pushing the ber 2015. bean’s first successful mobile payment service service. While there are a number of issues The Peruvian National Institute of Statis- in Haiti in 2010 (TchoTcho Mobile). preventing expansion, these are being dealt tics estimates that of Peru’s population of He then developed mobile money pro - with and 2017 will be a year of growth.” 30 million, 87% of homes have at least one grammes for Scotiabank in Mexico, Colom- De Velasco adds “Recently, we connected mobile phone subscriber, indicating potential bia and Peru. After leaving Scotiabank, BIM to traditional chequeing accounts at for financial inclusion via mobile devices. Bower helped the Peruvian government one of Peru’s main banks, so that money can BIM is operated by Pagos Digitales Peru- design the partnerships and strategy behind be transferred from a bank account to BIM anos (PDP), a private-sector company owned Modelo Perú. through the bank’s mobile app and internet by Modelo Perú, a partnership between PDP operates the network and switch for banking platform. Over the next few weeks, Peru’s financial institutions including private- BIM, handling the clearing of the transac- a second bank will add this functionality, and

8 y February 2017 www. cardsinternational.com

CI 540 new.indd 8 03/02/2017 14:12:27 Cards International MOBILE: BIM

the rest of the financial institutions connect- will facilitate shopkeepers to switch from American and Caribbean markets, of which ed to BIM will add it during 2017.” cash to mobile money. This pilot is one of around half are led by mobile operators and De Velasco says PDP is planning to the first multi-stakeholder mobile money the rest by banks and other financial ser- extend BIM’s coverage and user adoption projects in the world. Other countries are vices providers. by connecting the platform to the existing trying to implement similar initiatives with “The majority of countries [in Latin Amer- Peruvian point of sale (POS) networks and multiple consumer product distributors.” ica] now have two or more live services, bill payment integrators, and by developing Moving from cash to digital supply-chain while several markets now have three,” the a new type of light agent network which payments offers benefits in terms of increas- report says. “Three mobile money deploy- will work only with cash-in-cash-out BIM ing efficiencies in, and reducing the cost of, ments in Latin America have more than transactions. payments collection, as well as eliminating one million active customers, and there are “The main focus right now is on building the risk of theft and fraud. now 17.3 million registered mobile money up BIM’s customer base and improving its Providing a digital supply-chain solution accounts across the region.” agent infrastructure,” says Sonia Arenaza, that works across all financial institutions Mobile money services are a powerful regional lead for Latin America and the and all telcos means that shopkeepers can tool for deepening financial access, as half Caribbean at the Better Than Cash Alliance. become financially included, gaining access of adults in the region are underserved by Currently, BIM is available only in an to formal credit, savings and insurance. formal financial services, the GSMA says. unstructured supplementary service data In 2012, Bower worked with Scotiabank Financial exclusion levels range from over (USSD) version, a protocol used by GSM- and Backus to develop a B2B solution that 80% in Haiti and Nicaragua to less than based mobile phones for communicating would reduce the use of cash by allowing 35% in Brazil, Jamaica and Costa Rica. with a service provider’s computers. Peruvian shopkeepers to pay for goods Peru, at over 70% of adults without finan- “During 2017, BIM will become avail - using digital money. cial accounts, has the second-highest level of able as an app, but will continue to work “The solution worked, but constraints financial exclusion in the region, followed on every type of phone using the USSD ver- meant the product worked only with one by Honduras, El Salvador, Colombia and sion,” says de Velasco. “Future functionali- distributor with one bank on one network, Mexico with over 60%, and Argentina, the ty will include cash-out at ATMs, purchases which inevitably limited use,” says Bower. Dominican Republic and Venezuela with through POS networks, transfers from BIM “The interest was definitely there, but over 40%. to savings accounts, and loan payments.” shopkeepers commented that it was hard According to the GSMA, Honduras, Para- “To expand and improve its agent net - to change payment behaviour for just one guay and El Salvador are among the top 20 work, BIM needs to add other types of of their distributors. Distributors wanted markets globally for mobile money account functionality including business-to-business the solution for all their clients, not just for penetration. (B2B) transactions and merchant payments” some.” “In December 2015, 40 million mobile adds Bower. transactions were made across Latin Amer- Digitising government payments ica, including cash-in and cash-out,” it says. Pilot scheme “When you have a platform that is collabora- “Although far from the levels of uptake Three Peruvian consumer packaged goods tively designed and that operates among all and usage we have seen in Sub-Saharan manufacturers – beer producer Backus, telcos, financial institutions and approved e- Africa, Latin America is notable for more Coca-Cola bottler Corporación Lindley, money issuers, this enables a government to diverse business models, a high degree of and milk product producer Grupo Gloria – actively transfer payment streams from cash integration with the formal financial system, are participating in a multi-stakeholder sup- to e-money via the platform,” says Bower. and a strong focus on building a mobile ply chain digital money pilot linking BIM “The Peruvian government is pursuing a financial ecosystem from the start. with ‘mom’n’pop’ stores in Lima. strategy of digitising payments at many dif- “At one end of the spectrum, the LAC According to Bower, if the B2B pilot is ferent levels using BIM. region has business models similar to successful, the digital payment service for “Currently, the BIM development team those in East Africa here a mobile operator supply chains will be rolled out nationwide. is working with the government to decide assumes most of the functions in the value “The three companies are testing the dig- which are the easiest payments to digitise. chain – for example, Tigo in Central and itisation of payment streams for their supply There is now the ability to pay small busi- South America and Digicel in the Caribbean. chains,” says Bower. ness taxes via a BIM account.” “At the other end of the spectrum, banks “The cash that merchants put into their An October 2016 report by The Better drive mobile money schemes and in some BIM account to pay for their Coca-Cola than Cash Alliance, Building from a Strong cases even acquire mobile virtual network purchases can be used to pay for their milk Foundation: A Path Forward for Digitiz- operators in order to one day offer mobile and beer supplies.” ing Sub-national Government Payments in financial services independently of mobile Backus, Lindley and Gloria jointly repre- Peru, recommended that BIM be extended operators – for example, Bancolombia in sent 60–70% of the shopkeepers’ basket of to facilitate government-to-person (G2P) Colombia,” the GSMA says. goods that consumers purchase. and P2G/B2G payments. “New entities dedicated to mobile pay- “Their goal is to reduce the use of cash “Our research found that there is a poten- ments, including joint ventures between in a massive way, in every corner of Peru tial to digitise approximately PEN33.33bn mobile operators and financial institutions among the country’s hundreds of thousands ($19bn) which will have cost-efficiency or payment processing companies, are an of shopkeepers, who have traditionally paid benefits for the government and a positive alternative approach to mobile money in for their purchases from distributors in impact on financial inclusion” says Arenaza. the region – for example, Transfer, a joint cash,” Bower explains. According to the GSMA’s Mobile Econ- venture between América Móvil and Citi- “The idea is that, if Peru’s three major con- omy: Latin America and the Caribbean bank’s Banamex subsidiary in Mexico, and sumer product distributors agree on offer- 2016 report, in 2015 there were 37 live MFS, a joint venture between Telefónica ing a single digital payment product, this mobile money deployments across 17 Latin and MasterCard in Brazil.”<

www.cardsinternational.com February 2017 y 9

CI 540 new.indd 9 03/02/2017 14:12:29 REGULATION: BREXIT Cards International

Post Brexit – passport to the future

So now we know – sort of. The UK is likely to leave the EU single market. The UK PM places control of immigration ahead of the single market’s benefits, including crucial passporting rights for the financial services sector. What are the implications and which EU countries may benefit?Douglas Blakey writes

he UK’s financial services sector The initial consideration was of a long list The shortlisted top six employs 1.9 million people and of potential markets to consider; from the contributes 10% of the UK’s GDP. evaluation of this long list, a shortlist of six Cyprus Fintech is a crucial and growing countries was identified. Cyprus, with its 12.5% tax rate, favourable T The criteria used to filter the long list were: part of the sector, with payments repre - and experienced banking talent pool, open senting over 40% of financial services in and cooperative regulator and UK-derived revenue terms; in 2016, 40% of all fintech • Issuing of licences to a range of payment legal structure, will be on the list of alterna- investments were in payment companies, service providers (PSPs); tives to the UK for some operators. amounting to £10bn ($12.5bn) globally. It is relatively quick, inexpensive and easy One of the only things not in dispute amid • Supportive regulatory environment; to become regulated as an electronic money the political and economic discussions relat- institution (EMI) or payment institution (PI) ing to Brexit is the fact that the UK’s pay - • Estimated timeline for authorisation in Cyprus. Despite its low rating on the fiscal ments industry is world-leading. It delivers from application date – reasonable rating scale, recent challenges with banking innovative products and services that are dis- timeline and service-level agreements in 2013, and the active presence of Russian rupting the incumbents by solving the pay- (SLAs); money and investors make Cyprus worth ments problems of consumers, companies considering. It will allow staff and investors and institutions. • Local establishment requirements; to earn healthy post-tax rewards from basing These products and services are created a company and its staff there. by companies in the UK which, armed with • Practical anti-money laundering regula- The main challenge in Cyprus, as with passporting rights, can sell them across the tory environment that supports remote many other potential home states, is the other 27 EU countries. customers and electronic transactions; availability of local banking support. An The Emerging Payments Association EMI can, however, seek to open accounts (EPA), a commercial membership association • Ease of opening a bank account, and with any other banking institution in the EU, of payments industry influencers focused on as the local law does not preclude this. establishing the UK as the global hub for • Jurisdictional reputation and fiscal Cyprus is currently negative towards any payments innovation, is unswerving in its strength. kind of virtual currency, and has issued rel- assertion that the loss of passporting rights evant warnings in the past. will have a negative impact on fintech, pay- Some notable major territories did not ments and the UK economy. qualify for the shortlist: Germany, the Neth- Key Facts: Cyprus But if the worst happens and it becomes erlands and France are the most obvious impossible for UK-regulated companies to omissions. • Corporation tax: 12.5%, VAT: 19% deliver payment services across the EEA from The first thing that springs to mind when • Income tax: 20–35% for amounts the UK, what are the options? And which EU considering a PSP’s home state is a coun - over €19,500 ($20,847) – highly paid countries might be among the winners? try’s financial strength. The report shortlist foreign executives can benefit from a A report for the EPA, Passport to the includes countries that are fiscally strong. 50% reduction Future, authored by payments expert David But these will not necessarily be the ones that • Social insurance contributions: low– Parker, founder of Polymath Consulting and PSPs choose to make their Home State. medium (7.8% to be increased to 8.3%) Peter Howitt, of Ramparts European Law Other criteria may be more important • Cost of living is low (<75% of UK) Firm sets out to answer this question: “If it and a degree of pragmatism will come into • Crime and corruption low and medium is necessary to set up a new regulated entity play. Experienced PSPs able to accommo- • World Bank Doing Business 2017 somewhere inside the EEA but outside the date a degree of risk will put a greater deal ranking: 45th UK, which countries should UK- and Gibral- of emphasis on the country’s corporate and • Ease of opening a bank account: tar-based companies consider?” personal tax rates. negative (although local banking The report’s research was carried out They will also focus on the ease of transfer- institutions are warming towards through direct engagement with regulators, ring contracts across borders, and the avail- regulated PSP applications) with a number of companies which were ability of experienced executives to take the • Cost of registering a company is £800 operationally regulated outside the UK. role of registered officers. with no online application option

10 y February 2017 www. cardsinternational.com

CI 540 new.indd 10 03/02/2017 14:12:32 Cards International REGULATION: BREXIT

Denmark The payments regulatory team recently Malta While Denmark has limited experience in changed its service levels to ensure that good Malta has worked hard to become an regulation of e-payment companies outside applications could be processed more quickly e-commerce hub in the centre of the Mediter- the banking sector, it has shown a very strong and within a six-month window. ranean. A key part of this e-commerce activ- desire to encourage fintech and e-payment ity has been in gambling, which has poten- Key Facts: Ireland companies to relocate. tially tarnished its reputation. Responsibility for payment regulation in • Corporation tax: 12.5%, VAT: 23% Malta does not yet have a strong e-pay- Denmark is split between the Danish Cen- • Income tax: 20–40% ments sector but has a growing finance cen- tral Bank and the Financial Services Author- tre, experience of supporting cross-border • Social insurance contributions: ity (Finanstilsynet), which is responsible for medium (8–11%) regulated online gaming, and shows a will- the authorisation and supervision of EMIs. ingness to adapt and encourage new business • Cost of living: high (equivalent or > The Chamber of Commerce of Denmark UK) models and legal structures. has proposed to allow most retailers to make Malta’s geographic position means it is • Crime and corruption: medium and all money transactions electronically. very low well suited to take advantage of opportuni- The Danish regulatory environment is ties in Europe, the Middle East and Africa. • World Bank Doing Business 2017 open to developments in the payments sector ranking: 18th Key Facts: Malta and the country has a pragmatic and tech- • Ease of opening a bank account: nologically neutral anti-money laundering positive • Corporation tax: 35% (foreign compliance environment similar to the UK • Cost of registering a company: low shareholders receive 6-7% rebate (currently being updated for 4AMLD com- (less than £200) bringing effective rate to 5%), VAT: 18% pliance purposes). In addition, the verifica- • Income tax: 15–25% tion of identity papers for Danish residents • Social insurance contributions: medium can be done with NemID. Luxembourg (10% subject to maximum cap) Due to the application of NemID, many Luxembourg has worked hard to secure a • Cost of living: low (significantly < UK) companies subject to anti-money laundering good reputation for the support of innova- • Crime and corruption: low and medium (AML) regulations find the verification pro- tive payments. • World Bank Doing Business 2017 cess easier than in other territories. PayPal’s decision to relocate from London ranking: 76th in 2007 and obtain a banking licence for Key Facts: Denmark • Ease of opening a bank account: Europe is a major factor in Luxembourg’s negative early success in this area. • Corporation tax: 22%, VAT: 25% • Cost of registering a company: high Luxembourg is well located at the heart of • Income tax: marginal rate of 56%, (> £1,000 excluding additional capital effective rate is 35–48% (lower flat many major Northern European economies, requirements) tax rates of 26% for relocating staff and sees itself as a natural partner to busi- possible) nesses in the UK. Sweden • Social insurance contributions: low It is a very pro-EU country and therefore Sweden has been a leader in e-payments , as a (2%) unlikely to wish to leave. It has a strong result of banks and merchants investing and • Cost of living: high (equivalent to UK) multinational workforce: Foreign workers supporting a move to a more cashless society • Crime and corruption: low and very low account for no less than 72% of its total in the 1990s. • World Bank Doing Business 2017 workforce. Regulators have experience in regulating ranking: third While being nominally French speaking, PSPs and the payments sector is committed • Ease of opening a bank account: very people do business in English. to advancing technologies that assist con- positive In the shortlist, Luxembourg has the sumers. Authorisation and regulation of PSPs • Cost of registering a company: low (less most experience in terms of the regulation is undertaken by the Finansinspektionen. than £200) and can be done online of e-payments companies outside of bank- Sweden takes a practical stance to AML, ing sector. favouring a risk-based approach – local com- Ireland In 2016 it authorised bitcoin exchange Bit- pliance issues (including warnings and fines) Facebook had previously been rumoured to stamp as a payment institution for the fiat have related to physical money exchanges be seeking authorisation as an EMI in Ire- aspects of its operations. implementing poor AML practices. < land. Facebook finally became authorised in Key Facts: Luxembourg Key Facts: Sweden November and will do more than anything else to bolster Ireland’s reputation as a new • Corporation tax: 29%, VAT: 17% • Corporation tax: 22%, VAT: 25% e-payment hub to be reckoned with. • Income tax: 8–40% • Income tax: 31–54% Ireland is an obvious choice for interna- • Social insurance contributions: medium • Social insurance contributions: very tional payments companies. Its proximity (8%) high (approximately 30% of gross and strong relationship with the UK make it • Cost of living: very high (> UK) salary) very attractive for UK businesses. • Crime and corruption: low – very low/ • Cost of living: high (equivalent to UK) Its English law base and long-standing medium-low • Crime and corruption: low good reputation within North America are • World Bank Doing Business 2017 • World Bank Doing Business 2017 also strong factors. ranking: 59th ranking: ninth Ireland has limited experience in the regu- • Ease of opening a bank account: positive • Ease of opening a bank account: very lation of e-payments companies outside the positive banking sector. However, it has shown a strong • Cost of registering a company: low (less than £200) • Cost of registering a company: low desire to encourage fintech and e-payments.

www.cardsinternational.com February 2017 y 11

CI 540 new.indd 11 03/02/2017 14:12:33 GUEST COMMENT: APRIMO Cards International

Digital Darwinism beginning to appear

The next few years in the financial services sector are going to be transformative from a marketing perspective – partly driven by a new generation of marketing technologies but also by changes in consumer behaviour, which will lead to Digital Darwinism, so says senior financial marketerStephen Ingledew o start, what do I mean by Digital Technology has always been around – on a truth providing transparency and consist- Darwinism? Quite simply, it means basic level it facilitates automation and effi- ency of message tone and style, you ensure when technology and society are ciency, but it does not in itself create a cus- the root core of your personality is amplified changing faster than organisations tomer-driven businesses. across all channels. While enabling creative T conversation, it gives an opportunity to pro- can adapt to, and the only positive way This enables these technical advances to to respond is to become customer-driven. be combined with innately human market- vide a consistent personality. One consequence of this is that organisa- ing skills, such as creativity, imagination tions will need to radically evolve their mar- and empathy – skills that technology cannot Marketing operations helped me sleep keting operations to become more customer- replace. As time goes on and the possibility My background as a lawyer has meant I have driven. of more jobs being replaced by technology always seen the importance of marketing To do this, financial organisations will grows, we must find a space that allows peo- compliance. I believe that the best market- need to ask themselves how they are relevant ple to add value through human skills. ing operations platforms provide governance to a consumer’s life, and how their products The right solution goes beyond the front- and control while still driving operational address real-life changing consumer needs. line marketing team and supports many efficiencies. Don’t have online account details? Failing to address the real and changing aspects of the wider marketing ecosystem The right technology platform enables needs of consumers will open the way for the such as legal, risk, sales channels and third- you to have confidence that your marketing new emerging group of market disrupters party suppliers. It helps break down silos messages are compliant. Once you have com- You and your associates may be entitled to online that will do so. within a company and provides a keen focus pliance confidence, you can empower your Established businesses can too easily on client contact, the customer need and the teams to be more creative and co-create with login credentials. The benefits of full online assume that because they are the biggest and purpose of why you are in business. It allows customers. We need governance and control access are as follows: have the most resources that they will be the the focus to not just be on technology; this is – this is where marketing operations technol- survivors, but Darwinism proves that is not important because otherwise it is all about ogy becomes invaluable. the case. Those who adapt and change will efficiency, which is not necessarily something Regulators have the power to investigate, • Timely daily news updates succeed, not those that continue to do what that gets people out of bed in the morning. fine and potentially sanction the senior per- they have always done. Within businesses there is a need to give son who is ultimately responsible for signing • Access the latest analysis consistency with regards to personality. The off marketing from a regulatory perspective. • Monthly editions sent directly to your inbox The right marketing operations platform brand is the personality – it is not the com- Therefore, as senior executives are increas- Within this rapidly evolving marketing envi- pany colours nor the logo. Customers relate ingly distanced from a firm’s day-to-day • News alerts direct to your inbox ronment, the selection of the most appropri- to personality, and they expect it to have a operations, they need the assurance that their ate marketing operations platform is impor- certain level of consistency. The more com- marketing messages are compliant and legal. • Comments from key industry influencers and leaders tant. From my broad experience of leading fortable you are with a personality, the more Once you have that confidence and com- • Search for specific, relevant content technological advances in large organisa- you engage with it. However, within market- petence teams can self-regulate, but to do this tions, I believe a good marketing operations ing different channels are often used: mobile, there is a need for governance and control, and • Access the archive platform can help transform the way busi- telephone or social. Frequently each channel this is where technology comes into its own. < nesses interact with its customers. can give a different experience or facet of Aprimo supports the key foundations of your personality. This can then lead to con- To create or activate your account please contact: marketing – issues such as governance, risk fusion on the part of the customer. Stephen Ingledew is a senior financial mar- management and supplier relationships. By having a single source of marketing keter, formerly of Standard Life [email protected]

12 y February 2017 www. cardsinternational.com www. www.privatebankerinternational.com

CI 540 new.indd 12 03/02/2017 14:12:41 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 Cards International GUEST COMMENT: PPRO GROUP

M-payments taking off: a lesson for us all Mobile payment methods continue to soar in popularity in the UK following the introduction of Apple Pay, Android Pay and Barclay’s Pingit. Together, with the anticipated launch of Samsung Pay, this is lessening the country’s dependency on cash. Ralf Ohlhausen, business development director at PPRO Group, writes

he latest digital money index from which consumers are starting to accept m-pay- follows Gartner’s hype cycle – hyped, and Citigroup and the Imperial College ments. Given how often Apple has got it right, then criticised before maturing and becom- London showed the UK to have the particularly in terms of waiting for technology ing reality. T biggest uptake in the past year. to mature and matching user expectations, When the next big thing is announced, do Mobile payments (m-payments) initially there is every reason to be optimistic. not get overly excited, or overly pessimistic. took longer to take off than predicted, and Watch it going up and down the hype curve, sceptics were unsure if we would ever reach Merchants and PSPs investing when it reaches the “trough of dis- this level of popularity. What about the payment service providers illusionment”, when everyone is quick to While the UK leads the adoption race, with (PSPs) and merchants which have been keep- point out early failures, saying: “It will never 74% managing money and making payments ing their distance? work.” using a mobile device respectively, Europe Well, as playwright Dürrenmatt famously As an industry, we have got to get better has seen a threefold increase in the last year said: “What has once been thought can never at recognising and embracing this cycle for leaping to 54%, as compared with 18% in afterwards be unthought.” what it is. 2015. Dürrenmatt was referring to nuclear power, We need to stick with good ideas, even M-payments have finally reached the tip- and while m-payments hopefully do not come when they do not seem to be fulfilling their ping point. And with companies such as with the same potential for harm, the principle early hype. Apple and Samsung now getting serious remains: It is here to stay. And merchants who Usually, it is just a matter of time and about the platform, it seems a fair bet that listened to the sceptics but did not make mobile patience, particularly when consumer hab- the pace of change is about to accelerate. a priority must start playing catch-up. its have to change, but no one wants to be Apple Pay is currently rolling out to most This is a lesson for all of us in the industry. the late adopter when, suddenly, everything major markets, keeping pace with the rate at Generally speaking, most new technology starts coming together at last.<

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CI 540 new.indd 13 03/02/2017 14:12:44 Digital touch briefings ad copy - MF 18042016.indd 1 18/04/2016 11:15:29 COUNTRY SURVEY: BAHRAIN Cards International

Government efforts to boost cards pay off

Use of payment cards is gradually increasing in Bahrain, thanks to the combined efforts of the government, private companies, banks and card issuers. The progressive approach to electronic payments has had a positive impact on the country’s e-commerce market with more benefits to come in the near future

ayment card penetration in Bah - E-government services allow residents to equipped with secured chip-and-PIN tech- rain stood at 111.2 cards per 100 pay utility bills using debit or credit cards, nology. individuals in 2016 – higher than and consumers can make payments through In 2012, the central bank enforced new regional peers including Israel a national website, via a mobile app or at guidelines under which banks must to send P free short message service (SMS) alerts to (107.4), Oman (94.6), Saudi Arabia (88.1) payment kiosks. and Lebanon (49.9). During the last decade the central bank customers for every transaction carried out The government has adopted a progres- introduced a number of security guidelines using a debit or credit card. sive stance and taken initiatives to encourage to improve consumer confidence in electron- electronic payments. In February 2015 the ic payments. In 2007, it required all ATMs Sharia-compliant banking products government’s social insurance body, the Gen- to be embedded with fraud-detecting and Demand for Islamic banking products is rising. eral Organisation of Social Insurance (SIO), -inhibiting devices. As of July 2015, there were 24 licensed Islamic launched a service allowing insured residents This was followed by guidelines on Euro- banks operating in Bahrain. The growth of to make insurance subscription payments pay, MasterCard, and Visa (EMV) adoption Islamic banking, operating in accordance with using a debit or credit card. in 2009, requiring all debit and cards to be Sharia principles, has intensified competition

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

200 30 2.0

25 150 1.5 20

100 15 1.0

10 50 0.5 5

0 0.0 0 2012 2013 2015 2016 2016 2014 2012 2013 2014 2015 2016 2012 2013 2014 2015

Source: Central Bank of Bahrain and Verdict Source: Central Bank of Bahrain and Verdict Source: Central Bank of Bahrain and Verdict

14 y February 2017 www. cardsinternational.com

CI 540 new.indd 14 03/02/2017 14:12:51 Cards International COUNTRY SURVEY: BAHRAIN

in the domestic financial sector, and led many n BAHRAIN’S DEBIT CARD MARKET SHARES BY n BAHRAIN’S DEBIT CARD MARKET SHARES BY banks to modify and improve their product ISSUER (%), 2016 SCHEME (%), 2016 offerings to remain competitive. In August 2016, Kuwait Finance House- Bahrain launched the Wakala Investment Account, a Sharia-compliant bank account and in April 2015, the bank launched a Sha- Others ria-compliant Visa Signature credit card. 30% NBB Similarly, in May 2014, Credimax 32.8% launched a Sharia-compliant Tayseer credit Credimax Mastercard Visa card, which is available in classic, gold, plati- BBK 8.2% 61.0% 39.0% num and corporate variants. Ahli Ithmaar United BisB Bank Bank Growth prospects for pay later cards 11.0% 8.4% 18.2% Pay later card penetration in Bahrain is low, and stood at just 13.8 cards per 100 indi- viduals in 2016. To encourage consumers to use credit cards, the Industry, Commerce and Tour- ism Minister issued a directive in January Source: Verdict Source: Verdict 2016, preventing banks and merchants from imposing surcharges on credit card users. n BAHRAIN’S PAY LATER CARD MARKET SHARES n BAHRAIN’S PAY LATER CARD MARKET SHARES In accordance with the country’s Consum- BY ISSUER (%), 2016 BY SCHEME (%), 2016 er Protection Law, a fine of up to $26,595 (BHD10,000) can be imposed on companies Others violating the directive. American 5.2% Banks are undertaking several initiatives to Express promote the use of credit cards. There is no Others 7.0% minimum salary requirement for entry-level 14.7% Credimax-BBK 25.7% credit cards offered by Ahli United Bank and Citibank NBB. Both banks charge no, or very low, 11.7% annual fees. As a competitive strategy, many banks in Ahli United Mastercard Visa Bahrain now charge a low interest rate on Bank HSBC 30.2% 57.6% 20.1% conventional credit cards in an attempt to 13.5% Standard attract more consumers. Chartered In addition to pricing benefits, banks are 14.3% regularly establishing strategies to increase credit card usage. In October 2015 Credimax partnered with

hypermarket and department store chain Source: Verdict Source: Verdict Lulu Hypermarket to launch a co-branded card, MasterCard Danat. The card offers rewards, discounts and cashback at Lulu Card issuers are also playing key roles ed prepaid cards. The first is a generic mul- Hypermarkets. in promoting e-commerce in Bahrain. tipurpose prepaid card which can be used to Similarly, Standard Chartered and CrediMax organised an e-commerce work- withdraw cash and make in-store purchases, Citibank also offer co-branded credit cards shop in April 2015, which focused on the while the second has been designed exclu- in partnership with Gulf Air and Emirates government’s role in supporting various sively for online purchases. The cards can be Airlines respectively. e-commerce initiatives, and the importance loaded at all BMI Bank branches, ATMs and of new technology, innovation and business mobile banking platforms. E-commerce opportunities. In July 2015, Ithmaar Bank launched the E-commerce in Bahrain grew from $379.3m MasterCard eCard prepaid card for online in 2012 to $610.5m in 2016, at a compound Prepaid cards record robust growth shoppers. The card can be reloaded with annual growth rate (CAGR) of 12.64% The volume of prepaid cards in circulation any value between $2.70 and $26,595. for 2012–2016, and is expected to reach and their transaction value both quadrupled Cardholders are also offered membership $912.8m in 2021. Growth was driven by during 2012–2016. While the prepaid cards to the Ithmaar Rewards loyalty programme, greater internet penetration and a growing market recorded a CAGR of 42.48% in through which they are entitled to earn young population coupled with govern - terms of the number of cards in circulation, reward points for each transaction they per- ment’s efforts to promote e-commerce. it increased at a CAGR of 43.20% in terms form with the card. To promote e-commerce and create e-ser- of transaction value. The card also provides shoppers with dis- vices, the government organised the third Banks offer customised cards for online counts on shipping charges through logistics edition of the E-Commerce Forum and Exhi- and in-store payments and in January 2014, services company Aramex, as well as lifetime bition in March 2016. BMI Bank launched two MasterCard-brand- Aramex Shop and Ship membership.<

www.cardsinternational.com February 2017 y 15

CI 540 new.indd 15 03/02/2017 14:12:53 COUNTRY SURVEY: LITHUANIA Cards International

Cash still dominates but card growth is gradual

Lithuania remains a cash-dominated economy, especially in rural areas where payment infrastructure is limited, however there are positive signs for card growth thanks to the country’s above-average volume of online SME traders. The market’s current position and potential could lead to a boom in e-payments ash accounted for 68.8% of Lithu- payment card transaction values at ATMs The central bank’s financial inclusion pro- ania’s payments transaction volume accounted for 64.6% of the total transaction grammes and sustained efforts to reduce the in 2016. value in 2016. use of cash are expected to increase payment A large proportion of the popula- A lack of adequate payment infrastruc- card transaction volumes and values over C 2017–2021. tion resides in rural and remote areas, and ture is restricting the growth of the country’s prefer cash as a payment method due to lim- cards market. According to a survey con- ited access to payment infrastructure, and ducted by the central bank in 2015, 41% Central bank to encourage e-payments limited awareness of payment card benefits. of the country’s population with a payment The central bank of Lithuania took a number In a cash-dominated society, payment card expressed that there was a shortage of of initiatives in the form of financial literacy cards are primarily used for high-value ATM POS terminals at fairs, 21% stated the same programmes for children during 2012–2016. withdrawals. In Lithuania, the average trans- for beauty salons, 16% cited healthcare In October 2016, the central bank action value (ATV) at ATMs increased from facilities, and 14% identified rural shops and required banks to offer basic banking prod- $138.0 in 2012 to $146.80 in 2016, and post offices. ucts and services at no more than $1.70 per

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

300 0.40 6

0.35 250 5 0.30 200 4 0.25

150 0.20 3

0.15 100 2 0.10 50 1 0.05

0.00 0 0 2012 2013 2015 2016 2012 2013 2014 2015 2016 2014 2012 2013 2014 2015 2016

Source: Central Bank of Lithuania and Verdict Source: Central Bank of Lithuania and Verdict Source: Central Bank of Lithuania and Verdict

16 y February 2017 www. cardsinternational.com

CI 540 new.indd 16 03/02/2017 14:12:59 Cards International COUNTRY SURVEY: LITHUANIA

month, while for low-income consumers n LITHUANIA’S DEBIT CARD MARKET SHARES BY n LITHUANIA’S DEBIT CARD MARKET SHARES BY monthly charges cannot exceed $0.83. ISSUER (%), 2016 SCHEME (%), 2016 The central bank also organised a series of events, including Children’s Financial Educa- tion Week in March 2015. The event featured experts from the Association of Lithuanian Others 7.2% Banks, Swedbank, SEB Bank and DNB Bank Visa who helped children to become acquainted AB DNB 7.2% with the country’s financial system. Such bankas initiatives are anticipated to encourage elec- 21.6% Swedbank AB MasterCard tronic payments. 42.7% 80.9%

Salary accounts AB SEB bankas Banks in Lithuania are increasingly focus- 28.5% ing on working individuals in an attempt to increase their customer base and debit card penetration. Swedbank, SEB Bank and Dan- ske Bank offer salary account holders a num- ber of benefits. Swedbank provides a contactless debit Source: Verdict Source: Verdict MasterCard free of charge, and offers hous- ing and consumer loans at preferential rates for salaried customers. Similarly, SEB Bank n LITHUANIA’S PAY LATER CARD MARKET n LITHUANIA’S PAY LATER CARD MARKET also offers a range of benefits to individu- SHARES BY ISSUER (%), 2016 SHARES BY SCHEME (%), 2016 als who receive their salaries into their bank accounts. Others Aside from the working population, 6.1% banks are also targeting senior citizens and students. Senior citizens who open accounts Swedbank AB with SEB Bank are offered a choice of five Others 30.0% debit cards, SMS services, a cash pick-up 40.0% facility, and internet banking. Students receive a SEB Mylimiausia Visa MasterCard MasterCard debit card and a choice of 36.9% 57.0% MasterCard Standard credit card or Visa AB DNB Classic credit cards. Other benefits include 10.0% Danske discounts on purchases, internet banking AB AB SEB Bank facilities, and SMS alerts. Citadele 10.0% 5.0% 5.0% Credit card payments yet to gain ground Credit card penetration in Lithuania stood at 15.1 cards per 100 individuals in 2016, Source: Verdict Source: Verdict low in comparison to regional peers Sweden (135.3), Norway (126.7), Finland (94.6), of families with an income below $388.8 sumer confidence in online transactions, and Latvia (40.0), Denmark (34.4) and Estonia were indebted to credit issuers, and 71.8% the presence of online gateways. Growth has (26.7). of indebted families were unable to save in also been driven by the rising percentage of The growth of Lithuania’s credit cards the last half-quarter of 2015. SMEs selling online. market is restricted as a result of a general The RLR regulation mandates card issuers According to the Digital Economy and inclination towards debit cards. Credit card to assess borrowers’ credit repayment capa- Society Index 2015, the percentage of SMEs use is still less popular in smaller cities, and bilities before issuing credit cards. selling products online in Lithuania meas- acceptance is limited by traditional mer- ured 18% in 2015, which is above the EU chants such as beauty parlours and health- E-commerce average of 15%. The percentage of SMEs care facilities. The Lithuanian e-commerce market grew involved in cross-border e-commerce was The central bank of Lithuania amended from $368.8m in 2012 to $553.5m in 11% in 2015, the sixth-highest in the EU. the responsible lending regulations (RLR) in 2016, at a compound annual growth rate To make online transactions more secure, November 2015. According to new guide- (CAGR) of 10.69%. It is anticipated to reach the central bank set out 14 new requirements lines, the maximum monthly credit repay- $955.2m by 2021. in 2014. ment amount cannot exceed 40% of the bor- By capitalising on the available high-speed Resolution No. 03-172 requires banks in rower’s monthly income, and the maximum internet, online retailers are using social Lithuania to offer more security measures maturity of credit cannot exceed 30 years. media campaigns to gradually attract more including one-time passwords, SMS alerts, The regulation was introduced follow- customers. better identification tools, the blocking of ing a survey in January 2016 by the central E-commerce growth can be attributed to suspicious transactions, and better consum- bank of Lithuania, according to which 75% a rise in internet penetration, a growing con- er-education platforms.<

www.cardsinternational.com February 2017 y 17

CI 540 new.indd 17 03/02/2017 14:13:01 COUNTRY SURVEY: PORTUGAL Cards International

Debit cards retain Portuguese stranglehold

E-commerce is driving payment card market growth in a country still feeling the effects of the banking crisis, but it is the gradual adoption of contactless technology that is anticipated to solidify the future of electronic payments in Portugal and bring prosper to the cards market present in the country he Portuguese banking sector was Profitability in the payment card market Debit cards accounted for 94.8% of the deeply affected by the financial cri- decreased following the implementation of total payment card transaction value in sis and subsequent European debt EU regulations on the interchange fee cap. 2016, with consumers on marginal house- T crisis. Amid growing debt and a Consequently, large banks saw payment card hold incomes tending to be cautious of debt. decrease in profitability, many banks revenues decrease. Uncertain economic conditions discour- were forced to close operations, trigger - In a bid to combat revenue erosion, banks aged consumers from making unnecessary ing a number of mergers and acquisitions increased maintenance and annual fees, purchases, preferring debit cards as a mode (M&As), which had a direct bearing on and raised minimum balances for current of payment. An increase in debit card use for the country’s payment cards market. accounts. low-value transactions was also supported by

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

2000 250 100

200 80 1500

150 60 1000

100 40

500 50 20

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

Source: European Central Bank and Verdict Source: European Central Bank and Verdict Source: European Central Bank and Verdict

18 y February 2017 www. cardsinternational.com

CI 540 new.indd 18 03/02/2017 14:13:34 Cards International COUNTRY SURVEY: PORTUGAL

an increase in the acceptance of contactless n PORTUGAL’S DEBIT CARD MARKET SHARES BY n PORTUGAL’S DEBIT CARD MARKET SHARES BY payments at retail outlets. The convenience ISSUER (%), 2016 SCHEME (%), 2016 of making payments of up to €20 ($22.20) without entering a PIN encouraged consum- ers to use contactless debit cards. Millennium BCP offers four types of contactless debit card: Maestro, Visa Elec- Others CGD tron, Maestro Go debit, and Visa Prestige. 29.8% 24.9% During the economic crisis, Portuguese Multibanco consumers increasingly used credit cards to Millennium help meet short-term financing needs and BCP 100.0% Banco avoid liquidity constraints. However, the Novo 16.4% Portugal de Banco increase in unemployment forced many con- Investimento 14.2% sumers to default on payments, resulting in 7.3% Banco high debts. Santander Amid increasing debts and a decrease in Totta 7.4% profitability, banks were forced to close dor- mant credit card accounts and those of pay- ment defaulters, resulting in a decrease in the total volume of credit cards in circulation. Source: Verdict Source: Verdict

Gradual adoption of contactless Contactless payments are expected to gain further prominence in Portugal as consumers n PORTUGAL’S PAY LATER CARD MARKET SHARES n PORTUGAL’S PAY LATER CARD MARKET SHARES have been encouraged by banks to gradually BY ISSUER (%), 2016 BY SCHEME (%), 2016 shift from cash to card-based payments. While banks are issuing contactless pay- ment cards, merchants have started to provide the necessary infrastructure to Novo support them; Caixa Geral de Depósitos Banco Others 13.5% Millennium (CGD), Novo Banco and Banco BPI all offer 42.7% Others BCP contactless payment cards. 42.7% 13.1% The number of contactless cards in circula- Visa 53.5% tion increased from three million in 2012 to Banco MasterCard 8.2 million in 2016. CGD Santander 10.1% According to the Portuguese Central Bank, 10.1% Totta 12.5% contactless card transactions grew by 900% in 2015, both in volume and in value terms – BNP Paribas 5.7m transactions, totalling $81.6m. 8.1% However, there is still scope for growth, as contactless transactions accounted for only 0.7% of the total volume and 0.2% of the total value of the country’s transactions in Source: Verdict Source: Verdict 2015. wallets are gradually gaining prominence in for children. The My Baby prepaid card can Rise in e-commerce to support card growth Portugal and are expected to continue to do be loaded with funds of up to $2,220 online, Portugal’s e-commerce market grew from so to 2020. at ATMs or in branch. $3.1bn in 2012 to $3.9bn in 2016 and is act- Overall, digital and mobile wallets and Cardholders are entitled to discounts upon ing as a key driver of payment card market carrier billing collectively accounted for the purchase of baby products at retail out- growth, as the majority of consumers use 6.1% of the total e-commerce transaction lets and receive benefits at Lusiads hospitals. payment cards to make online purchases. value in 2016, increasing from 3% in 2012. Similarly, the LOL Junior card is aimed at Payment cards accounted for 80.4% of the children aged over 10. country’s total e-commerce transaction value Uptake of prepaid cards Other Visa-branded prepaid cards target- in 2016. Prepaid cards are increasingly gaining accept- ed at the young include the Free Junior and Banks offer payment cards exclusively for ance among Portuguese consumers, primarily Pocket NB cards from Millennium BCP and online shopping. Millennium BCP offers a due to prudent consumer spending as a result Novo Banco respectively. Visa-branded web card for an annual fee of of subdued economic growth. The number of With consumers in Portugal increasingly $11.10. prepaid cards grew from 554,745 in 2012 to using payment cards to shop online, banks Banks are also partnering with online 2.5 million in 2016, at a compound annual are providing more prepaid web cards, retailers to offer co-branded cards to online growth rate (CAGR) of 45.7%. including the Webuy PrePaid Cash card, the shoppers. CGD offers LA Visa, a co-branded Banks are offering prepaid cards targeted PrePaid Card Pro by CGD, the Free Web card in partnership with Lanidor. Emerging at children, shoppers and travellers. CGD card by Millennium BCP, and the Virtual payment methods such as digital and mobile offers MasterCard-branded prepaid cards Cash card by Banco BPI.<

www.cardsinternational.com February 2017 y 19

CI 540 new.indd 19 03/02/2017 14:13:38 RESEARCH: VERDICT FINANCIAL Cards International

Dutch consumers are familiar with contactless cards, but rarely use them While the Dutch contactless card market is on the rise, with most consumers now aware of the presence of contactless technology, many remain wary of going contactless due to security issues. Similar caution is present in Spain where consumers are reluctant to take on debt products, research from Verdict reveals

lets, however, needs to be accompanied by more investment in merchant training and general awareness of the technology. In 2015, similar to the UK, 15% of Dutch consumers would have used their contactless cards, but either did not know where to do so, or retail staff did not know how the tech- nology worked.

How to lure Spanish credit card holders Credit cards in Spain account for 26% of the total number of cards in circulation, but only for 8% of the total payment card spend. Credit cards have never taken off in Spain – with around 18m credit cards in circulation in 2015, penetration stands at 40 cards per 100 inhabitants. Amid the economic crisis of 2008, net credit card loss rates rose sharply due to high unemployment rates affecting the ability of Spanish consumers to pay their debt. The country’s credit card issuers responded by increasing interest rates and card fees to compensate for lending risk and reduced merchant revenues. The loss rate has since decreased, while credit card debt gradually increased from an estimated €13.4bn in 2010 to €15.5bn in 2015. With the share of Spanish card holders etween 2014 and 2015 the pro - providers must further develop their accept- likely to switch to a new credit card in the portion of consumers who have ance infrastructure while stepping up efforts next year being 12%, to maximise their a contactless card and use it to raise consumer and merchant awareness opportunity for acquisition providers should increased by more than 21 percent- of the benefits of contactless cards. target switchers through zero or low annual B fee structures and discounts at retailers, as age points. Contactless technology is generally per- While card holding has rapidly increased ceived positively by Dutch consumers, they are the most important features of credit over the last few years, the main challenge although security remains a major concern. card choice among Spanish consumers. for the industry as a whole remains the low More than 54% of Dutch consumers are While an annual fee is a standard feature usage of contactless cardholders. concerned about the unauthorised use of of Spanish credit cards, a number of banks, According to a Verdict Financial Con - contactless cards if they are lost. including Barclaycard, WizInk and BBVA’s sumer Survey, the share of Dutch consumers This implies that providers should include online bank Uno-e, and retailers such as who have a contactless card but do not use it and highlight security features in their value Carrefour, Ikea and Eroski offer credit cards increased by nine percentage points in 2015. propositions in order to improve card holder with no annual fees. The survey also highlighted that some attitudes. Features available include the abil- Research by Verdict Financial also finds 8% of Dutch consumers had never heard of ity to lock cards online or through mobile that the key acquisition channel for primary contactless cards, as compared to 3% in the phone app. credit cards in Span is the bank branch, with UK. Overall, 71% of Dutch contactless card half of Spanish credit card holders applying Survey results show that progress in the holders reported a positive experience with for cards using through channel. In compari- contactless cards market has not occurred contactless technology. The progress in son, 19% of UK consumers apply for credit across the board, and Dutch payment service contactless card acceptance at merchant out- cards through bank branches.<

20 y February 2017 www. cardsinternational.com

CI 540 new.indd 20 03/02/2017 14:13:44 Retail Banking Conference & Awards: London 2017 11th May 2017 • Waldorf Hilton, London

Retail Banking: London 2017 brings together high-street banks, Why Attend? retailers, new market entrants, financial professionals and industry • Hear from key senior industry thought leaders via informative and disruptors in an active discussion of the key issues facing the industry: inspiring keynote sessions • How is the Internet of Things (IOT) driving industry change? • Network with speakers, participants, partners and share best practise • Artificial Intelligence - friend or foe? with your peers • Generation Y Banking Solutions • Discover the latest key industry trends and discuss practical solutions to the most pressing industry questions • Challenger Banks disrupting the landscape • Celebrate at our black tie awards dinner recognising those at the top • Cybercrime, Identity Theft and the DarkWeb of their game • The Future of Payments

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