March 2015 Issue 333 www.electronicpaymentsinternational.com

MOBILE BANKING FOR THE UNBANKED

•REPORT: THE GATES FOUNDATION •ANALYSIS: SOUTH AMERICAN M-PAYMENTS •REVIEW: THE GSMA •COUNTRY REPORTS: BAHRAIN, BULGARIA & LUXEMBOURG

EPI 333.indd 1 26/03/2015 11:30:57 Delivering innovative mobile & online financial services solutions to organisations that need to provide secure access

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IE-Advert-Dec-2014.indd 1 16/12/2014 12:25:21 Electronic Payments International COMMENT: EDITOR’S LETTER

CONTENTS 6 REPORT: THE GATES Can mobile be FOUNDATION The financial inclusion mobile banking could bring was one monitised? of the key takeaways from the Gates Foundation’s most recent letter, but why so? Patrick Brusnahan reports t is a topic I have been harping on to monetise app usage. 8 MARKETING: ONLINE ABANDONMENT about for a little time now: the scope It will be interesting to see if any banks in Emma Allen, head of merchant in the not too distant future for the UK, once mobile cheque deposit takes solutions at SIX Payment banks to monetise mobile banking off, consider charging a nominal fee for the Services, discusses options I new(to the UK) service. and mobile payments. to minimise online purchase Asked for suggested conference and Meantime, an outstanding report hits the abandonment roundtable suggestions by a couple of spon- inbox courtesy of the BBA and Accenture: 9 ANALYSIS: SOUTH AMERICAN sors recently, I proposed debates on how best ‘Digital Disruption’ M-PAYMENTS to monitise digital banking and payments. Crucially, the report looks at the oppor- Despite Brazil being one of the first countries in the world At various debates and conferences I have tunities created by digitisation. These are to introduce mobile payment asked for a show of hands asking if the time not just cost-saving opportunities but what regulations, the market is being has now come for banks in certain jurisdic- digital can offer customers in terms of new outpaced by Colombia and Peru. tions to consider charging for mobile bank- experiences. Robin Arnfield investigates ing and mobile payments. In 2014, 45% of UK customers surveyed 12 REVIEW: GSMA So I am obliged to the US-headquartered by Accenture who had purchased a banking The GSMA’s most recent report SNL Financial for undertaking a survey ask- product in the previous twelve months did so highlights the potential of mobile money in developing ing the key question: through the internet channel, with a further markets, so why aren’t people Would you pay $3 a month to use your 6% claiming to have done so via a mobile taking the bait? Patrick bank app? device. Brusnahan writes SNL Financial’s Mobile Money survey This trend will accelerate to the extent 13 COUNTRY REPORT: BAHRAIN was conducted in February in the US across that within a few short years, we will see the As the amount of payment cards a nationwide random sample of adults that majority of all consumer purchases of bank- in Bahrain has just exceeded included 4,371 smartphone bank app users: ing products taking place through digital one million, we examine the card market in depth one-in-four said that they would pay $3 a channels. month. One simple example from the report will 14 COUNTRY REPORT: BULGARIA Interestingly,the super-rich and those with suffice as regards the opportunities created The global financial crisis hit Bulgaria hard, but how has the a low income were least likely of bank app by digitisation. Step forward Nationwide card market recovered? users surveyed to want to pay for their bank and take a bow: In June 2014 Nationwide app. The most willing to pay $3 per month launched two innovative new features for its 15 COUNTRY REPORT: LUXEMBOURG Luxembourg’s credit cards have of the four income groups surveyed was the app, Quick Balance and Impulse Saver. a larger market share than upper-middle income bracket ($75,000 - Both features have proved to be incredibly before. How does this affect $149,999) at 30%. popular with a third of active users opting in debit and mobile payments? As SNL suggests, making money from to Quick Balance and on average using the 16 COMMENT: DOES AGE MATTER? mobile banking apps might take a more service six times a week. < Bethan Cowper examines the nuanced approach than a monthly subscrip- differences between age groups tion fee, for instance, charging a percentage and their viewpoints towards Douglas Blakey new and established payment fee per mobile cheque deposit could be a way [email protected] services

Editor: Douglas Blakey Sub-editors: Nick Midgley, Kev Walsh For more information on timetric, visit Tel: +44 (0)207 406 6523 Director of Events: Ray Giddings our website at www.timetric.com. As a Email: [email protected] Tel: +44 (0)203 096 2585 subscriber, you are automatically entitled Email: [email protected] to online access to Electronic Payments Financial News Publishing, 2012 Senior Reporter: Anna Milne International. For more information, please Registered in the UK No 6931627 Tel: +44 (0)207 406 6701 telephone +44 (0)20 7406 6536 or email Head of Subscriptions: Sharon Howley Email: [email protected] [email protected] ISSN 0956-5558 Tel: +44 (0)203 096 2636 Unauthorised photocopying is illegal. The London Office Reporter: Patrick Brusnahan Email: [email protected] contents of this publication, either in whole or 5th Floor, Tel: +44 (0)207 406 6526 part, may not be reproduced, stored in a data Farringdon Place, Email: [email protected] Sales Executive: Alexander Koidis retrieval system or transmitted by any form or 20 Farringdon Road, Tel: +44 (0)203 096 2586 London, EC1M 3AP means, electronic, mechanical, photocopying, Sruti Rao Asia Editorial: Email: [email protected] recording or otherwise, without the prior Tel: +65 6383 4688 Asia Office permission of the publishers Email: [email protected] 1 Finlayson Green, #09-01 Customer Services: Singapore 049246 Group Publisher: Ameet Phadnis Tel: +44 (0)203 096 2636 Tel: +65 6383 4688 Tel: +44 (0)207 406 6561 or +44 (0)203 096 2622 Fax: +65 6383 5433 Email: [email protected] Email: [email protected] Email: [email protected]

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EPI 333.indd 1 26/03/2015 11:30:59 COMMENT: APPLE AND GOOGLE Electronic Payments International

Will Apple Watch dominate the UK market? Douglas Blakey looks at the prospects of the incoming Apple Watch in the United Kingdom. Will it be as popular as everyone is expecting, despite the steep price point? And what will be the repercussions for banks?

I am obliged to Intelligent Environments Admittedly, the soar-away success of half of Apple mobile users are set to shell (founders of The Digital Banking Club) the iPhone 6 resulted in Apple winning its out £300-£400 for a watch? for commissioning research into the sales highest ever share of new smartphone sales I do agree with Intelligent Environments’ prospects for the eagerly awaited and much in the last quarter of 2014, roughly 40% Clayton Locke that wearable technology is hyped Apple Watch. of all sales. becoming more integrated into consumers’ According the Intelligent Environments But as things stand, if my understand - lives. survey, 12% of UK consumers expect to buy ing of the figures is correct, around 1-in- I also get the fact – a tad reluctantly as a an Apple Watch as soon as it goes on sale, 4 smartphone owners currently have an committed Android user – that the Apple The figure is certainly headline-grabbing Apple handset. brand has phenomenal appeal. and at first glance seems to the writer to be So call it about 12.5 million adults. But are one half of them going to rush quite astonishing. Now go back to the Intelligent Envi - out to buy an Apple Watch? Consider some quick stats. ronemnts survey: 12% of UK consumers If they do, banks big and small, estab - Of the UK population of 64 million, will buy an Apple Watch so roughly six lished and new challenger brands, are roughly 50 million are aged 18 or over: million. going to have no option but to offer com - 12% of this figure is 6 million. As the Apple Watch is only of any use pelling wearable tech banking apps. As of November 2014, Apple accounted of Apple phone users – the aforementioned With launch on 10 April, it will be fasci- for roughly 25% of smartphones in the UK. 12.5 million – that means that almost one- nating to watch and learn. <

Google to launch US mobile network Simon Cadbury examines Google’s most recent foray into the payments sector and what this will mean for banks Sundar Pichai, the search Google’s vice pres- explained the bank is closely monitoring tech 40% said it was because they trusted the ident of Android and Chrome announced companies such as Google and is focused on brand. Google would rent network capacity and beating off competition from these compa- It’s clear consumers respect Google as a launch a condumer-facing network to show nies “intent on invading its territory”. creator of financial tools. Google therefore what’s possible. However, rather than a competitor, Goog- has an important role to play in the industry. In February, the search engine announced le should be seen by banks as an enabler in The firm can build on this trust and use its a payments service which will allow cus - the industry. prominent position as one of the most dis- tomers to settle debts and transfer funds via In a report published last year titled “Why ruptive and innovative brands in the world Gmail by simply clicking on a “£” icon in Google Bank Won’t Happen”, analyst firm to improve customer service in the industry. the email and entering the amount. Then, Forrester explained that due to costs, strict By pushing the boundaries of innovation, just this week, the internet giant launched regulation and the important ad revenue Google will encourage banks to do the same its free mortgage calculator enabling con- from banks, internet firms are better placed or to partner with it on future developments. sumers to compare mortgages from different to take on a support role in financial services Moreover, by offering new tools, Google finance firms on the Google browser. than to become a provider. These firms can will help to push banks to up their game in These are just the latest in a string of improve the relationship between banks and terms of the digital products and services financial tools developed by Google since their customers by offering payment services, they provide. its launch of Google Checkout in 2006. So financial advice, and product comparisons. Banks should not fear Google, but what does its future hold in this sector? Is it Our own research showed significant embrace it. Rather, as Forrester analyst realistic to talk about a Google Bank? consumer appetite for a Google payments Oliwia Berdak put it, they should “observe For a number of years now, surveys have service before plans were announced by Google’s next moves, learn from its best consistently shown that decision makers in the firm. The survey revealed Google is the practices and consider any partnership”. < banks feel web companies, such as Google, brand consumers would most like to use as pose the biggest threat to their business. a payments service, beating the likes of Face- Simon Cadbury is the Head of Strategy More recently, in an interview this month, book and Twitter, with 23% of respondents and Innovation at British software provider Ana Botin, chairwoman of Banco Santander voting for it. Of those who chose Google, Intelligent Environments.

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EPI 333.indd 2 26/03/2015 11:30:59 Electronic Payments International NEWS: ROUND-UP

DIGITAL Deutsche Bank veteran launches Brazil-based bitcoin exchange Deutsche Bank veteran Marcelo Miranda, powered by AlphaPoint's trading software The new exchange will be interconnected who created the IXBTC index, Brazil's pri- and will offer individuals and firms access to with 20 digital currency exchanges offering mary price reference for bitcoin, has publicly an enterprise-grade trading experience. competitive exchange rates and liquidity. launched a new digital currency exchange FlowBTC will leverage the AlphaPoint Marcelo Miranda said: "Today, less than based in Rio de Janeiro. exchange platform to provide clients with a 300 Bitcoins change hands in local exchang- The bitcoin exchange FlowBTC, which custom-built technology supporting nearly es in Brazil each day, due to a lack of reliable has been built on Miranda's 15 years of one million transactions per second and lay- local exchanges. With FlowBTC, we expect experience in the technology space, will be ered security architecture for data protection. to multiply this number tenfold.” <

PRODUCTS INFRASTRUCTURE Vodafone rolls out money transfer service for Tanzania and EBA Clearing sets Kenya up new task force British mobile group Vodafone has rolled out a channels may be up to 31% of the transaction, new international mobile transfer service called said Vodafone. for instant payment M-Pesa between Tanzania and Kenya. According to Vodafone, transfer of $50 via processing services With the new service, the M-Pesa custom- M-Pesa across the Tanzania-Kenya border ers from the two countries can transfer money would incur a fee around 1% of the transac- EBA Clearing, a provider of pan-Euro- using mobile phones in a simple, safe and tion plus a foreign exchange fee. pean payment infrastructure, has estab- secure way through an established, combined Vodafone director of mobile money Michael lished a new Instant Payment TaskForce network of 180,000 agents. Joseph said: "With a substantial unbanked to support the launch of a pan-Europe- The service will benefit customers from the population transacting mainly in cash, the an solution for instant payment process- low-cost of M-Pesa against existing interna- Tanzania-Kenya corridor represents a signifi- ing. tional remittance services between the two cant opportunity for M-Pesa to give people and Additionally, the company is planning countries. companies an accessible, low-cost alternative to to launch Europe-wide instant payment International money transfer via traditional traditional international remittances." < processing services to payment service providers (PSPs) in the infrastructure PRODUCTS layer by 2018. The task force, which was formed McDonald's & MasterCard collaborate for electronic by the EBA Clearing board last month, payments aims to work on a roadmap and blue- print for the required deliverables. MasterCard and McDonald's have formed a be available to customers across the region for The task force includes around 20 strategic collaboration to introduce electronic McDonald's online ordering. experts from EBA Clearing user institu- payment solutions at McDonald's restaurants The in-store and online payment technologies tions. across key markets in the Middle East and will be rolled out in all McDonald's restaurants The move is in response to a call for Africa. across the Middle East and Africa. action by the Euro Retail Payments MasterCard's technology will enable McDonald's Middle East Development Board (ERPB), which has expressed McDonald's customers to use a range of devices Company vice president Yousif Abdulghani a need for at least one pan-European including contactless cards, mobile phones, and said: "This integration of MasterCard's state- instant payment solution for EUR open other NFC-enabled wearable products to pay of-the-art smart payment technologies across to any PSP in the European Union. for purchases at McDonald's restaurants. our restaurants will will add to our customers' Moreover, EBA Clearing aims to pro- MasterCard's digital wallet, MasterPass, will convenience and ease of accessibility." < vide its users with these initial deliveries in due course to ensure that PSPs can M&A take this planning into consideration during 2016 budget planning. PayPal to acquire mobile payment start-up Paydiant EBA Clearing chairman Erkki Pou- tiainen said: "After an initial evalu- PayPal has agreed to acquire mobile payment ing risk management, 24 hours customer sup- ation done in summer 2014, we put start-up Paydiant in a deal expected to close port, loyalty points and private label card our instant payment initiative on a fast in late March or April 2015 after meeting cus- acceptance. track in late 2014 following this call for tomary closing conditions including regulatory Paydiant's team of mobile developers, busi- action. approvals. ness leaders along with its founders Kevin "Together with interested users, we The acquisition will present Paydiant's mer- Laracey and Chris Gardner will join PayPal as have begun to define the roadmap 2015 chant clients with an open payments platform part of the deal. - 2018 for the delivery of an inter-PSP and global reach into more than 200 markets Paydiant's platform will let PayPal offer infrastructure solution at a pan-Europe- and 162 million active digital wallets. merchant partners their own branded wallets an level and we are working on a blue- The deal will enable Paydiant to offer value allowing merchants to use the mobile payment print setting forth one or more suitable added services to merchant customers includ- technology, including QR codes and NFC. < solutions by mid-2015." <

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EPI 333.indd 3 26/03/2015 11:31:00 NEWS: ROUND-UP Electronic Payments International

PRODUCTS STRATEGY Ingenico unveils audio-jack based MoneyGram signs agreement with Landbank in Philippines contactless payments solution MoneyGram, a global money transfer company, has inked a new agreement with Ingenico Mobile Solutions, a provider of tion completion and an SDK for mobile Landbank of the Philippines to enable inter- mobile payment acceptance services, has application integration. national money transfer services at over 300 unveiled an audio-jack based contactless Additionally, the device will include EMV Landbank branches in the Philippines. mobile card acceptance solution at the Level 1 contactless certification, certifica- MoneyGram comprises over 10,000 2015 GSMA Mobile World Congress. tion for qVSD and MSD (Visa), plus M/ agent locations across the country, and the The novel solution, named RP170c, will Stripe and M/Chip (MasterCard) and an new agreement expands its receive locations support Apple Pay, MasterCard contactless integrated rechargeable battery. footprint. and Visa payWave while processing pay - Ingenico Group EVP for smart terminals For receiving money in the Philippines, ments via magstripe contactless as well as and mobile solutions Jacques Guerin said: customers will have to go to a MoneyGram EMV contactless cards. "Today, we are introducing the only mPOS agent location, complete a form, give their RP170c, which can be connected to iOS solution that will be able to process Apple reference number as well as show a photo or Android phones via a 3.5mm standard Pay, MasterCard contactless and Visa pay- identification to receive their remittances. audio jack, will feature an NFC reader and Wave transactions. With such a solution, Following this process, the funds can be a dual track magnetic stripe reader, audible we continue to provide merchants with collected in minutes upon sending, subject buzzers and color LEDs to signal transac- future-proof mPOS solutions." < to agent availability, hours of operation and local laws and regulations. MoneyGram's executive vice president, DISTRIBUTION business development Grant Lines said: "MoneyGram and Landbank are both Airtel partners with Visa to bring mobile focused on innovation which makes us natu- payments in seven African markets ral collaborators to deliver financial services across the Philippines. Visa and Bharti Airtel, a telecommunica- to withdraw money and make payments "Adding Landbank to our network in the tions services provider across Asia and from their Airtel Money account via Airtel Philippines enables us to expand our reach Africa, have formed a partnership to bring Money Visa companion card besides per- in the country." < mobile payment services to seven markets mitting micro-payments, fund transfers, in Africa. airtime purchase and pre-paid electricity. The new payments services will be Visa vice president of MNO Partner - PRODUCTS launched in markets including Gabon, ships Vish Sowani said: "Mobile payments Evolve Money expands Ghana, Kenya, Madagascar, Rwanda, Sey- can transform the lives of people through- payment choices with chelles and Tanzania. out Africa who commonly have access to a The relationship will build on the existing mobile phone, but not a bank. MasterCard, Visa and Discover capabilities of Airtel's Mobile Money ser- "For most new subscribers, this will repre- Evolve Money, the bill payment app for vice, allowing subscribers to use their Airtel sent their first payment account and bring mobile and desktop devices, has added Money account to pay in stores and online some of the latest digital payment advance- MasterCard, Visa and Discover credit cards wherever Visa is accepted. ments into the day-to-day experiences of as new options for bill payment. Visa and Airtel will allow customers Airtel's customers." < Users of the app will now be able to add virtually any Visa, MasterCard or Discover credit or debit card to their profile to make DIGITAL bill-payments to any of the 12,000 service providers supported by the app. Velcro Pay rolls out online invoicing Evolve Money, owned and operated by PreCash, also enables users to pay with cash solution using Evolve Pay Bucks and RELoadit packs, apart from Visa, MasterCard and Discover Velcro Pay has launched an online invoicing Velcro Pay executive vice president Mat- credit and debit cards. solution to offer small businesses an efficient thew Loughran said: "This solution can also PreCash CEO Steve Taylor said: "Our way to get paid and keep cash flow moving. be ideal for local freelance businesses as well goal is to provide services that enable our The Velcro Pay online invoicing solution who are tired of paying high fees with their end-users the ability to make payments uses the Level 1 PCI compliant Velcro Pay- current invoicing service. whenever, wherever and however they like. ment Gateway providing secure transaction "We typically say as a rule of thumb if you "By expanding available payment options, for business owners. are accepting more than $3000 a month in Evolve Money is further meeting consumer The service will provide real time invoice payments with either a mobile swiper or demand created by market shifts and chang- creation and delivery for business owners through online invoicing then you should es. Not all billers accept credit payments and will accept full or partial payments really get an actual merchant account and through their sites, so this really opens it up besides supporting multiple currencies and separate yourself from those aggregators to for consumers, and gives them more flexibil- tax structures. save on costs. < ity to pay their bills." <

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EPI 333.indd 4 26/03/2015 11:31:00 Electronic Payments International NEWS: ROUND-UP

STRATEGY DIGITAL Line partners with Barclays to enable payments through Twitter CyberSource for mobile payments In a UK first, Barclays is set to launch a new Barclays Mobile Banking and Pingit service which will allow individuals and director Darren Foulds said: "We are services small businesses make payments instantly always on the lookout for new and exciting Line Corporation, a Japanese internet ser- by using their Twitter handle. ways to make people's lives easier and cus- vices and mobile applications company, has The service, which will be powered by tomer feedback plays a big part in how we formed a strategic partnership with Cyber- Pingit, will be available on Android phones choose to further develop our apps. Source, a Visa company that provides eCom- as well as iOS devices from 10 March. "Adding the ability to pay people or a merce payment management services. For signing up to the service, users will small business using just a Twitter handle Through the partnership, Line will lever- just have to link their Twitter handle to their brings together a social and digital experi- age CyberSource's payment management Pingit profile under the app menu. ence to create a new step forward for mobile platform to provide customers with pay- Once users sign up, they need to log into payments in the UK." ment security for its mobile payment service Pingit, enter the Twitter handle or select a The new service will be offered to all Pin- LINE Pay. payee from the contact list, and complete git customers, regardless of whether they CyberSource's global payment gateway payments instantly. bank with Barclays or not. < will facilitate Line to process online pay - ments from multiple card brands and issu- ers along with certain alternative payment STRATEGY methods. Line will also utilise CyberSource Deci- ParkHub.com & American Airlines Centre sion Manager, the fraud management tool partner for credit card payment in which features fraud detection radar to pin- point fraud accurately and with less manual parking lots intervention. Line Corporation COO Takeshi Idezawa American Airlines Center, an event centre in The new solution by ParkHub.com will said: "With our entry into the mobile pay- the US, has forged a partnership with Dallas- enable attendants to validate all pre-pur- ments market, we are now able to empower based technology company ParkHub.com to chased parking and season ticket holders' our customers with more flexibility and enable credit card payments in all their park- passes via Ticketmaster. choice in online payments. ing lots. American Airlines Center executive vice "On top of that, we are also able to protect Utilizing ParkHub.com's software and president and CFO Craig Courson said that their interests with CyberSource's payment hardware solution, American Airlines Center he, "look[s] forward to exploring other ver- security expertise. We strongly believe this will roll out a new mobile point-of-sale pro- tical marketing opportunities that ParkHub. will be pivotal in helping us accelerate our gram, Prime, that accepts all major credit com's platform supports in an effort to maxi- global growth." < cards. mize the system and our revenue potential."<

News in Brief Samsung works with to authorise payment without secure payment experience to wearables, will enable customers MasterCard and Visa for new exposing actual account details. Samsung Galaxy users." of participating financial mobile wallet service Samsung will also forge institutions to pay in-store with Samsung Electronics has partnered partnerships with key financial Visa partners with financial their Visa accounts by waving their with major payment networks partners globally, including institutions worldwide for Android mobile phone in front of a mobile payment services MasterCard and Visa to launch new American Express, Bank of America, contactless reader, following a one- Visa has partnered with several mobile payment services, Samsung Citi, JPMorgan Chase, and US Bank time enrollment process. Pay, in summer 2015. to provide flexibility, access, and financial institutions around the Visa senior vice president of Samsung Pay will leverage both choice for customers while enabling world to offer new mobile payment digital solutions Sam Shrauger said: Near Field Communication (NFC) secure payment experience. services. “2015 is the year in which fast and and Magnetic Secure Transmission Samsung Pay will initially be With the partnership, BBVA safe mobile payments based on Visa (MST) technologies to enable available in the US and Korea and and Cuscal has launched new technology will proliferate across consumers to utilise their mobile expand to other regions, including issuer-branded mobile payment devices to pay at existing point-of- Europe and China with Samsung applications for Android operating the world. sale terminals. Galaxy S6 and Galaxy S6 edge. system and Banco do Brazil, PNC “We are very proud that Visa’s Visa will support Samsung Pay Samsung Electronics executive Bank and US Bank will launch Digital Solution is now accessible with its token service technology vice president Injong Rhee similar capabilities in the future. to the broader market to be used that Visa replaces sensitive said: "Using Samsung's KNOX Visa Digital Solutions, a across multiple devices and form payment account information security platform and fingerprint comprehensive suite secure factors - enabling secure, fast and on plastic cards with a unique authentication, Samsung Pay will payments offerings across a range engaging commerce experiences in series of numbers that can be used deliver a truly revolutionary and of internet-connected devices and any environment.” <

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EPI 333.indd 5 26/03/2015 11:31:00 REPORT: THE GATES FOUNDATION Electronic Payments International

The Gates Foundation turns to mobile banking as a solution to poverty In its annual letter, the Bill and Melinda Gates Foundation states its latest views on how to help those in the world that need it most. This can range from increasing education to improving agriculture. This year, they have set their sights on mobile banking. Patrick Brusnahan reports

hile the letter is usually a very bold at the Gates Foundation, believed mobile It does not have to be this way though. In read, this year has taken that a step money to be crucial for development. He Kenya, 76% of the population has used further. The letter stated that ‘the said: “In the previous five years, a couple mobile money, largely due to the success of lives of people in poor countries of things had changed. One is overall net- M-Pesa, with 68% of the population being W work coverage in lower income markets. active users (having used it in the previous will improve faster in the next 15 years than at any other time in history’. No pressure. Cellphone coverage had grown up to 90% 90 days). So there is a massive opportunity In terms of mobile banking, the Founda- in most markets. to be utilised. tion predicts that ‘by 2030, two billion peo- “We’re getting to a tipping point where As a matter of fact, the Gates Foundation ple who don’t have a bank account today mobile payments are going to become ubiq- has been working on this issue for quite will be storing money and making payments uitous in particular markets and then, sec- some time. Voorhies said: “The foundation with their phones. And by then, mobile ondarily, these platforms are going to grow has worked in this space for probably close money providers will be offering the full and be able to create environments for sav- to ten years. It started out by looking at tra- range of financial services, from interest- ings, insurance and credit. The economics ditional microfinance. Then, based on the bearing savings accounts to insurance to and the technology have changed and the empirical evidence about what really mat- credit’. evidence base is now thicker in order to push tered to low income households, we really The main issue stated in the latter is that into this market.” saw that savings had a really big impact. So current financial services for the poor are With the increased adoption of mobile the foundation really doubled down on get- incredibly inefficient. People would rather technology, it appears to be the perfect ting small savings to poor people. save money by hiding cash around the time to raise awareness of mobile payments. “As we began to look at the evidence in house or buying commodities that quickly According to Financial Inclusion Insights, what it would take to scale this, we kept lose their value. Exchanging money between countries such as Nigeria, Kenya and Tanza- running into a transaction cost problem. It friends or relatives takes a day of delivering nia have high levels of mobile phone penetra- didn’t really matter how great the service the cash themselves. Not having access to tion with 90%, 74% and 67% of the popu- was if every time you served a poor person, easy financial services keeps people poor lation, respectively, owning a mobile phone. you lost money.” and can even make them poorer. On the other hand, only 38%, 27% and 10% So what steps needs to be taken to increase Mobile phones are set to change this. The respectively own a bank account. In Uganda, mobile banking adoption? One major hur- foundation predicts that by 2030, two bil- 14% of the country own, or have access to, dle is regulation. Voorhies said: “Regula - lion people who do not have an account a bank account, but less than 10% of the tions were designed, in many ways, to reach today will be storing money and making country uses this service actively. There is middle class people. They had requirements payments with their phones. a wide gap between the number of people around identification, which most poor peo- Usage of mobile phones is booming in with access to a bank account and access to ple didn’t have. Some locations had require- the developing world. Financial Inclusion a mobile phone. Therefore, it makes sense ments around minimum balances or visiting Insights found that, in 2014, 86.4% of peo- that people would be more likely to use their a branch to go through a lot of paperwork. ple in Bangladesh, India, Kenya, Nigeria, mobile phone for financial services than go In some countries, it was taking over 35 days Pakistan, Uganda and Tanzania have access through a bank. to open an account because everyone would to a mobile phone with 54.8% of respond- This, unfortunately, is not the case. In review the paperwork. ents owning a mobile phone. The problem Nigeria, only 0.3% of the population has “There were just a bunch of regulatory bar- was with awareness as 71.4% of people in used mobile money. The figure is the same riers that needed to change. It’s to make sure these countries were not aware of mobile for India, a country with over seven times that regulatory environment creates a level money. the population, and only 0.2% of the pop- playing field for new entrants in the market When he spoke to EPI, Rodger Voorhies, ulation being a registered mobile money to create disruption. We think an economy director of the financial services for the poor user and half of that number being active. that includes everyone benefits everyone.”

n ACCOUNTS IN DEVELOPING COUNTRIES

Kenya India Pakistan Bangladesh Nigeria Uganda Tanzania Own bank account 27% 47% 7.40% 18% 38% 12% 10% Own or have access to a bank account 29% 48% 8.60% 20% 44% 14% 11% Active bank account user (past 90 days) 21% 25% 6.40% 12% 35% 9.90% 7.60% Source: Financial Inclusion Insights

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EPI 333.indd 6 26/03/2015 11:31:01 Electronic Payments International REPORT: THE GATES FOUNDATION

Mobile money services in the developing world n MOBILE MONEY IN THE DEVELOPING WORLD Country Active accounts per 1000 people (2013) bKash: Launched in 2011, bKash is responsible population of Kenya now uses M-PESA and over Kenya 1018 for over 80% of transactions in Bangladesh sex million transactions a day are carried out with over 2.2m registered users. As of December over the service. In addition, as of May 2013, Tanzania 418 2013, the average transaction volume per month M-PESA in Tanzania has over 5m subscribers. Botswana 385 through bKash is $680m. MTN Mobile Money: MTN Mobile Money in M-Pesa: With over 19m registered users, 12.2m Zimbabwe 325 of whom are active, and 81,000 agent outlets, Uganda holds over 6.7m customers and 18,000 Cameroon 117 Safaricom’s M-PESA has drastically altered the agents in the country with approximately 70% of Philippines 85 financial sector in Kenya. Over half of the adult the entire market share. Bangladesh 42 Source: IMF The foundation has seen some of its work leap-frogged internet banking and gone succeed. It founded the Alliance for Finan- straight to mobile mostly due to the fact cial Inclusion in 2008 and it now holds over many do not have laptops and PCs or fixed now to determine how they can capture 100 financial institutions as members. All of line connections. these unbanked people now, and mobile will the members of the alliance have also signed “Mobile offers communication at a lower be the most efficient and low-cost point of the Maya Declaration; a statement of com- price point of entry, and now that phones entry to do so.” mon principles regarding the development of are much more capable, they are having an When asked if he felt similarly, Voorhies financial inclusion policy. However, making even bigger impact. According to a report recognised this issue and, slightly, agreed. waves in the regulatory space is a different from the World Bank in 2012, about 75% of He said: “In some ways, I think you’re right. struggle altogether. adults earning less than $2 a day don’t have a It’s straight forward to the average person Voorhies added: “Regulators have this bank account, more than 2.5 billion people to say ‘Let’s eradicate malaria because we balances that they need to keep. They are around the world don’t have a bank account, know it matters.’ Yet, financial services are responsible for the financial stability of the with the poor facing bureaucratic, travel dis- a strange thing because we all have them and entire sector. What we would argue is that tance and cost barriers. Mobile banking can they work for us. They feel invisible. with 2.5bn people left out, that system is not help to bridge this gap, and I expect that we “The person [Nachiket Mor, president of enough to stay stable. They have to figure will start to see mobile only banks in these the ICICI Foundation for Inclusive Growth] out how to bring the other half of the world regions.” who led the committee to change the finance in and stabilise that. We think that bring- Where opinion may differ is if mobile regulation in India said that financial ser- ing this group in actually increases financial banking is actually a top priority for devel- vices work like noise cancelling headphones transparency and financial accountability. oping countries. With many other crises in where there’s a lot of technology built into Let’s actually have proportional standards play, such as hunger and war, mobile money them, a lot of value that has driven them, but so we can bring people in and then control could be the least of people’s priorities with when you put them on, they seem easy and by monitoring behaviour on those systems. emerging economies a better place to push nobody notices all the work that has been “We have, in some cases, for example, Tan- this form of banking. Gupte said: “We need put into them. I think we have that problem zania, 90% of the population is unbanked to consider people’s priorities within many in our own lives. and they couldn’t meet Western standards. of these regions. Would a person living in “Poor people have none of this so they have We thought about how we could actually a war torn country with limited access to to cobble together their own tools, which think about the needs in those countries and food and water be worrying right now about take a huge amount of cognitive bandwidth. how we could support them to move for- mobile banking? Probably not. Bearing this So communicating that is one of the reasons ward. The changes in guidelines have to be in mind, banks are probably best positioned Bill and Melinda put it into their annual let- powerful enough to give poor countries the to focus on emerging economies first. ter that by 2030, they want to get two billion flexibility to apply them to the local context.” “Currently half the world’s population lives more people in the system.” It is not only the Bill and Melinda Gates in China and India, yet there is still limited Voorhies concluded: “In the next fifteen Foundation which sees the potential in this uptake of mobile banking. For banks, these years, these breakthroughs are going to cut area. Sameet Gupte, Senior Vice President are the economies to watch in the short-term poverty dramatically, as we’ve seen in the and Managing Director Europe for Virtusa, as there is phenomenal potential for penetra- last decade. Those drivers are going to not commented: “We can already see that in tion through mobile, particularly now that just be a ghettoised one-off approach where many emerging and developing economies, many rural areas are becoming more con - poor people live in a system separate to the in particular in Africa, that consumers have nected. Banks should therefore be acting rest of us.” <

n MOBILE MONEY USAGE IN DEVELOPING COUNTRIES

Kenya India Pakistan Bangladesh Nigeria Uganda Tanzania Own mobile phone 74% 50% 59% 58% 90% 62% 67% Have ever used mobile money 76% 0.30% 11% 22% 0.30% 43% 48% Active mobile money user (past 90 days) 68% 0.20% 8.80% 18% 0% 37% 41% Registered mobile money user 68% 0.20% 0.40% 3.40% 0.10% 29% 44% Registered active mobile money user 62% 0.10% 0.40% 2.20% 0.10% 26% 38% Source: Financial Inclusion Insights

www.electronicpaymentsinternational.com March 2015 y 7

EPI 333.indd 7 26/03/2015 11:31:01 MARKETING: ONLINE ABANDONMENT Electronic Payments International

Minimise online abandonment: know your customer For online merchants, high abandonment rates are a nightmare. So much effort has gone into the design and usability of the website and into back-end technology, only for customers to have a last minute change of heart and click away. Emma Allen, head of Merchant Solutions at SIX Payment Services, comments

he golden rule to minimise aban - The processing power needed to run such number. This has the security advantage of donment is to know your customer. systems can lead to frustrating delays and being useless to a would-be hacker. Used There are some straightforward steps abandonment. with thumbprint identification, which can that all merchants can take to mini- Speed is also a key factor in keeping a now be used to authenticate the card holder, T customer’s interest in the purchase. Given it has the potential to speed up payments, mise abandonment. First of all, ensure that delivery charges are reasonable and avoid too long to reflect or be distracted, they may cutting down the number of stages needed levying unexpected extra charges on pay- abandon the purchase simply out of bore- to perform a secure transaction. ments, such as taxes or hidden ‘processing dom. People say to themselves: “Yes, I want These kind of ‘one-touch’ payment sys- fees’. This is considered bad practice and a this, let’s transact.” The quicker you can tems are becoming ever more widespread, major cause of abandonment. It is much perform the transaction, the less time you as their popularity and ease of use is broadly better to be upfront about all fees at an early give consumers to drop out. The goal here is recognised. The introduction of univer- stage. Recent European legislation will stop ‘one touch’ payment. sally accepted ‘ewallet’ platforms will help some surcharges, and merchants should cer- Beyond understanding customers, under- address abandonment and improve loyalty. tainly avoid ‘springing’ them on customers, standing different European countries is Other ways in which technology can late in a process. also crucial to merchants’ efforts to reduce assist include identifying abnormal purchase Simplicity is key, both in terms of the num- abandonment. Especially in international behaviour which could be fraudulent, such ber of pages and questions, and the amount e-commerce, merchants need to understand as multiple email or delivery addresses relat- of information that customers are expected their target audience’s expectations in vari- ing to the same card. This will prompt more to provide. With a growing percentage of ous countries, so they can meet them, in scrutiny of payments. e-commerce taking place on mobile devices order to retain them. The important thing is By the same token, ‘normal’ payment including smartphones, tablets and hybrids, to offer the preferred payment method: you behaviour can lead to speeded up processes, it is impractical to expect people to enter have to offer what’s expected. which helps reduce abandonment. The bet- non-essential text into online forms. It’s Different geographies have developed dif- ter merchants and banks understand and about making a positive and streamlined ferently in terms of their preferred payment know their customers, the faster they can experience on these devices. methods. Credit and debit card payments process payments, to everyone’s satisfaction. The ideal is a minimal number of boxes to are the most common means of payment in People shop more in places where they feel tick or buttons to click, so that the process is the UK, France, Spain and Italy. comfortable. It’s partly about product range suitable for small screen devices and is intui- However in Germany, for example, cus- and pricing, but also about ease of payment. tive, quick and straightforward. Some say tomers are used to receiving an invoice via Certainly, many customers prefer to shop on you should be able to get through a payment bank transfer. This habit, huge return rates large, well-known and reputed e-commerce process using one hand, while on a bus. included, is down to the large catalogue mer- sites which reassure them on security con- Experts advise merchants to avoid making chants that became so popular in the ‘70s cerns. And pricing is absolutely a key reason customers register for a site. Whilst this may and ‘80s. for many, perhaps the majority, of abandon- seem tempting in terms of potential future Increasingly popular and more merchant- ments. According to a survey of the most marketing opportunities, this requirement friendly, from a fee and a risk point-of-view, frequent reasons for dropping out of online annoys customers and slows down the pur- is SEPA direct debit i.e. charging the bank purchases, Sitepoint.com identified custom- chasing process. So even though it provides account through an interface with the cus- ers comparison shopping as a major reason. helpful, potentially lucrative information tomer’s e-banking. On average, German Another potentially overlooked issue for a merchant, it is a significant obstacle to online merchants offer a choice of five and a is that of coupon codes and promotional good payment practice. half different payment methods, and a study offers: if a customer sees these options on Equally, website designers need to con- has shown that the greater the variety, the a site, they commonly abandon the process centrate on quick-loading and functioning lower the abandonment rates. and go off in search of the code, only return- pages. Slow load times are another major In Eastern Europe we see another phe - ing if they have found it. Similarly, consum- cause of payment abandonment. A help - nomenon: while the credit card population ers expect to be able to use vouchers and ful rule here is to design sites for the least soars and usage increases in urban areas, loyalty schemes in all channels. advanced technology that customers are there is still a considerable share of legacy Together with the need to offer a suitable likely to use. practices including cash payment on delivery. choice of payment methods, these are the Too often, designers themselves are using As far as the underlying technology goes, kind of details that merchants need to pick the latest, highest powered devices, which card providers routinely use ‘tokenised’ up on, as they get to know their customers load pages instantly. But only a minority of information, where a random number is and make all that e-commerce effort and their customers have such mega machines. used to replace a customer’s actual card investment worthwhile. <

8 y March 2015 www.electronicpaymentsinternational.com

EPI 333.indd 8 26/03/2015 11:31:01 Electronic Payments International ANALYSIS: SOUTH AMERICAN M-PAYMENTS

Brazil lagging behind Colombia, Peru in m-payments Brazil is one of the first countries in the world to introduce mobile payment regulations, and its government encourages m-payment providers to ensure the interoperability of their services. Yet the Brazilian m-payments market is proving slow to get off the ground and is being outpaced by Colombia and Peru. Robin Arnfield writes

razil certainly has the infrastruc - correspondent agents in December 2013, “The broad view is that the BCB’s regulation ture in place for m-payments to according to Banco Central do Brasil (BCB), was positive for the market’s development, take off. Its 199 million inhabit - the Central Bank. These agents, who are as the oversight, parameters and processes it B ants have over 270 million mobile mostly small convenience stores, provide creates should decrease both individual and phones, of which around 100 million use cash deposits and withdrawals from bank systemic risks, and allow for a safer invest- 3G or 4G networks. accounts, as well as bill payments. They can ment environment. However, there are con- Camilo Tellez-Merchan, a financial sec- also provide cash-in and cash-out services cerns about the BCB’s capacity to enforce tor specialist with Washington, DC-based for prepaid cards and m-wallets. and process all of its demands, as it has CGAP (Consultative Group to Assist the manpower constraints, and about the entry Poor) says: “Brazil is one of the fastest- Regulations barriers arising from compliance costs. growing smartphone markets in Latin In October 2013, Brazilian President Dilma “As of now, the BCB’s main regula - America.” Rousseff approved Law number 12,865 tory concern is to foster competition in According to IDC, Brazilian smartphone which regulates m-payment services pro- the acquiring market, and to encourage a sales rose by 49% year-on-year in the third viders such as banks, digital wallet provid- decrease in acceptance costs, rather than quarter of 2014, and 55 million smart - ers, telcos and acquirers, and outlines the accelerate the deployment of any specific phones were sold in Brazil during 2014. government’s long-term objective of encour- technology.” GSMA Intelligence estimates that in Q3 aging interoperability between rival m-pay- Previously, only payment instruments 2014, smartphones accounted for 32.4% of ment platforms. Its primary purpose is to issued by financial institutions were subject all mobile phones in use in Brazil. facilitate financial inclusion among Brazil’s to regulation by the BCB and the MCN. By Mobile banking has proved very popu- unbanked and underbanked consumers and removing the legal uncertainty about non- lar with affluent consumers. Bradesco, one to reduce the amount of cash in circulation. bank m-payment services which previously of Brazil’s largest banks, says the number In November 2013, the BCB and Brazil- hadn’t been regulated, the Law has allowed of its Bradesco Celular m-banking clients ian financial regulator Conselho Monetário non-banks such as mobile operators and rose from three million in January 2014 to Nacional (National Monetary Council/ digital wallet providers to enter the market six million in December 2014. M-banking CMN) published rules for m-payment ser- with confidence. transactions represented 26% of Bradesco’s vices based on Law 12,865. After the draft version of the Law was total transactions in December 2014. Itaú, The Law introduced a new non-bank published in May 2013, three m-payment another leading bank, had over 3 million legal entity known as a "payments institu- schemes involving mobile operators and tar- business and consumer users of its mobile tion," regulated by the BCB and the MCN geting unbanked and underbanked consum- apps in May 2014. and permitted to offer m-payment services ers were launched: Around 1.5 million Brazilian POS ter - and e-money accounts with cash-in and • Zuum, offered by Mobile Financial minals are currently NFC-enabled, and cash-out facilities to low-income consumers. Services (MFS), a Brazilian joint ven- MasterCard and Visa have been promot- Non-bank entities which obtain pay - ture between MasterCard and Spain’s ing NFC payments in the country through ments institution licenses must have "non- Telefónica, which owns Brazilian pilots and service launches. discriminatory access to the necessary ser- mobile operator Vivo; vices and infrastructure for the functioning • Oi Carteira (Oi Wallet), a partnership SMS and USSD of the payments schemes" including domes- between Banco do Brasil, card acquir- While the largest Brazilian banks are devel- tic processing systems and the BCB’s domes- er Cielo and Brazilian mobile operator oping NFC payment offerings aimed at their tic clearing and settlement system, the Law Oi, and affluent smartphone-owning cardholders, says. • Mobile operator Claro and Bradesco’s they also provide SMS- and USSD (Unstruc- Payment institutions have fewer capital Meu Dinheiro Claro (my Claro money). tured Supplementary Service Data) based restrictions than traditional financial insti- TIM, the fourth major mobile operator, payment services to unbanked and tutions. They are required to hold BRL2m has announced plans to launch an m-wal - underbanked consumers. These services ($703,000) in minimum capital and mini- let in partnership with the government- involve general-purpose reloadable Visa- or mum equity of 2% of the average monthly owned bank Caixa Econômica Federal and MasterCard-branded prepaid cards being value of transactions they have handled in MasterCard. linked to mobile phones for m-payments at the last 12 months. the point of sale, airtime top-up and P2P Collaboration transfers. Positive “I believe the main Brazilian banks – Banco Brazil is a world leader in branchless Guilherme Lima, of Brazilian consultancy do Brasil, Bradesco and Itaú – will continue banking, with over 400,000 banking Ponto Futuro Consultoria Estratégica, says: to dominate the payments industry, and

www.electronicpaymentsinternational.com March 2015 y 9

EPI 333.indd 9 26/03/2015 11:31:02 ANALYSIS: SOUTH AMERICAN M-PAYMENTS Electronic Payments International

that includes the coming acceleration in by licensed non-banks aren’t bank depos- operated by the bank consortium Câmara m-payments,” Lima says. “The Brazilian its, and so aren’t covered by deposit insur- Interbancária de Pagamento (Interbank retail finance industry is a very powerful ance and can’t accrue interest. Low-value payments chamber) that could potentially oligopoly, and my view is that any new com- e-money accounts are subject to simplified be utilized for transacting mobile payments petitor, regardless of how big they are, will KYC procedures. but the Law doesn’t require it be used…Bra- eventually associate with the big banks at “[Brazilian and Peruvian e-money] licen- zil is a complex business environment that some level. This is happening right now in sees must set up a trust account equal in will need to figure out how to retrofit poten- the prepaid card arena, as market pioneers value to the amount of money issued elec- tially tens of millions of mobile payments are starting to be acquired by the larger tronically, and non-bank e-money issuers into the payment system.” banks.” are not allowed to intermediate funds,” “I see some consolidation in the near Mireya Almazan, manager for the GSMA’s Colombia and Peru future among the smaller m-payments pro- Mobile Money for the Unbanked program, “Colombia and Peru are really outpacing viders which had already entered the mar- wrote in a GSMA blog. Brazil in mobile payments,” Tellez-Mer- ket,” says Bruno Balduccini, a partner at chan says. “It’s early days for m-payments Brazilian law firm Pinheiro Neto Advoga- Interoperability in Brazil, and another year will be needed dos. “They will find that the cost of invest- Tellez-Merchan, in a blog, wrote: "Inter - for consumers to understand how m-wallets ing in the systems and controls to comply operability will not be mandated [in Bra- work. The Brazilian m-payment market is with the new regulations may render their zil], but is signaled as a goal further down moving very slowly, as is Mexico’s.” business not viable.” the road, and any new [m-payment] service One key advantage Peru has over Brazil “For the m-payments start-ups in Brazil, which receives a license will be required to is that ASBANC, the Association of Peru- especially in the mPOS segment, the dream have a clear roadmap of how it will eventu- vian Banks, has developed an interoperable exit strategy for most of them is an acquisi- ally interoperate with the wider [Brazilian] mobile payments platform. “This platform tion by a big bank,” says Lima. “The lack of financial ecosystem." can be used by any company applying for access to capital for SMEs and innovative “The impact of Brazil’s regulations is that an e-money licence, not just banks,” Tellez- companies will cement this trend. every m-payment service provider is on an Merchan says. “The major banks will keep m-payments equal playing field,” Tristan Hugo-Webb, According to a blog on the Better than as a top priority in the years to come, as this associate director of U.S.-based Merca - Cash Alliance website, the main Peruvian is one of the key growth paths they have tor Advisory Group’s International Advi- banks, Banco de Crédito del Perú (BCP), available, as the traditional credit card mar- sory Service, says. “Also, as the regulation Interbank, BBVA Continental, Scotiabank ket matures, due to a saturation of the tradi- encourages interoperability, consumers will Peru and Banco de la Nación, as well as tional distribution model.” be the ultimate winners, as interoperability several non-banking formal financial insti- “After 15 years of consistent 15 plus per brings down prices by increasing competi- tutions and telcos including Movistar and cent growth, credit card volumes have been tion. Brazil could benefit greatly from the Claro have joined ASBANC’s platform. slowing down, and should grow in mid-sin- emergence of m-payments, as Brazilians’ “Colombia is home to the most success- gle digits, allowing for inflation, this year.” use of mobile phones exceeds that of pay- ful m-wallet in Latin America, DaviPla - ment cards. M-payments could be a possible ta, which is issued by Colombia’s Banco Davivienda and has 2 million users, many of whom receive the government’s Familias “Brazil is among the first countries in the world to pass specific en Acción (families in action) subsidies in m-payment regulations. It’s also at the forefront of the argument for their m-wallet,” Tellez-Merchan says. “The interoperability, meaning that all mobile payment services have to Colombian government wants to pay subsi- dies to victims of the country’s recent civil work across all platforms.” war as well as various rural subsidies via Tristan Hugo-Webb, associate director of Mercator Advisory Group’s International m-wallets.” Advisory Service. Linking government welfare subsidies to m-wallet accounts is key to gaining con- sumer adoption of mobile wallets. “Brazil’s CEF could potentially be transformational E-money issuers solution to bringing Brazil’s large unbanked in the Brazilian m-payment market,” says Brazil’s regulations are similar to those and underbanked population into the main- Tellez-Merchan. “This is because the Brazil- introduced in Peru in October 2013 for stream electronic payment ecosystem.” ian government pays 12 million families the e-money issuers (Entidades Emisoras de However, m-payments interoperability Bolsa Familia (family allowance) subsidy Dinero Electrónico) by Peru’s banking will be a challenge in Brazil, due to the fact every month, and CEF, being government- regulator Superintendencia de Banca, Seg- that voice and text message communica- owned, has the only franchise to receive uros y AFP (Superintendency of Banking, tions between different Brazilian mobile these payments. So, once CEF launches is Insurance and Pension Funds). These regu- operators don’t work all that well, Eliza- m-wallet, it could have a big impact.” lations are based on the Electronic Money beth McQuerry, a consultant with U.S.- In August 2014, Colombia’s Parliament Law (Ley de Dinero Electrónico), which based Glenbrook Partners, wrote: “Every passed a Law allowing non-banks such as was passed by Peru’s Congress in January telco, bank or other payment provider will telcos and postal service providers to apply 2013 and which calls for interoperability need to be able to quickly and efficiently for mobile money licences. “There could be between m-payment schemes. exchange payments with each other,” 10-12 providers, known as Sociedades Espe- Both the Brazilian and Peruvian regula- McQuerry wrote in a separate blog: cializadas en Depósitos y Pagos Electrónic- tions state that e-money accounts issued “Brazil does have a faster payments system os (companies specialising in electronic pay-

10 y March 2015 www.electronicpaymentsinternational.com

EPI 333.indd 10 26/03/2015 11:31:02 Electronic Payments International ANALYSIS: SOUTH AMERICAN M-PAYMENTS

n CLASSIFICATION OF BRAZILIAN PAYMENT INSTITUTIONS The BCB and the CMN have established three categories of payment institution, based on the payment services they provide: Electronic money issuers: payments institutions such as prepaid card issuers and m-payments providers which manage consumers’ prepaid payment accounts, provide 1. payment transactions based on the funds contained in these accounts, and offer cash-in and cash-out facilities. E-money is defined as funds denominated in Brazilian currency (the Real) and stored in an electronic device or system. Prepaid funds must be deposited by the payments institution at the BCB or held in government bonds; 2. Issuers of postpaid payment instruments such as credit cards. 3. Acquirers which interface with payees for acceptance of payment orders issued by a payment institution. Source: Pinheiro Neto Advogados.

ments and deposits), getting mobile money Vivo’s customers can access their Zuum over SMS and USSD due to the rapid growth licences, once the Colombian Law comes m-wallet using USSD. In addition, custom- in smartphone adoption. into effect,” Tellez-Merchan says. “I expect ers can download a smartphone app ena- “I believe that Brazil will become one of telcos to go into partnership with banks in bling them to access their Zuum m-wallet the accelerators for NFC payments, due Colombia.” on the Vivo network or any other Brazilian to its high penetration of NFC-ready POS mobile operator’s network. terminals,” says Lima. “Both Apple Pay, Brazil Zuum users can transfer money to other rumours of whose market entry have been Tellez-Merchan cites several factors for Zuum subscribers, buy prepaid airtime growing ever more intensively in the past the slow take-off of Brazilian m-payments. from their mobile operator, view account month, and, even more so, Samsung Pay “Brazil has been in recession, and there was balances, and pay bills. They can also will find a fertile ground in Brazil, once a general election in October 2014, which obtain a prepaid MasterCard that is linked the consumer mobile device installed base led to a lot of firms staying in a holding pat- to their account. Customers of Banco do renews.” tern and not making major investments,” Brasil, HSBC, Itaú, Bradesco and Banrisul Brazilian newspaper Epoca Negocios he says. “For example, CEF, being gov - can transfer funds to their Zuum account reported in February 2015 that Bradesco ernment-controlled, has been very slow to using their bank’s online service. and Itaú are negotiating with Apple to bring develop its m-payment service and has yet Marcos Etchegoyen, Zuum’s president, its Apple Pay NFC payment system to Bra- to launch.” said in a news release that the service had zil. Other reports suggest Banco do Brasil is Tellez-Merchan says Brazilian m-pay- 320,000 subscribers in October 2014 and also holding negotiations with Apple. ment providers haven’t been in tune with that he predicts 1.2 million users by the end In March 2014, Bradesco and Claro the realities of the market. “For example, of 2015. Zuum is currently available in six announced the B.pay NFC-based payment there’ve been a lot of issues with the mar- states, Sergipe, Minas Gerais, Bahia, São service which could reach over 85 mil - keting of mobile wallets,” he says. “The Paulo, Santa Catarina, and Rio Grande do lion customers once rolled out nationwide, lesson we learnt from M-Pesa in Africa is Sul, but MFS plans to roll it out to addi - according to Mercator’s Hugo-Webb. that you have to market mobile wallets in tional states during 2015. B.pay, which was initially available only a way that consumers can relate to. When Meu Dinheiro Claro is linked to a pre - in São Paulo State, uses NFC-enabled SIM I was in Brazil in 2014, I saw ads for Meu paid card and allows cash withdrawals and cards, Claro-branded mobile wallets and Dinheiro Claro which were urban and aspi- deposits at Bradesco ATMs as well as P2P TSM (Trusted Service Manager) technol- rational. This is OK for São Paulo, but not transfers, airtime top-ups, bill payments, ogy from Giesecke & Devrient, and during for the North-East of Brazil, which has a and SMS- and USSD-based payments at 2014 was rolled out to 200,000 NFC-ena- large concentration of low-income people. POS terminals connected to Cielo's net - bled POS. The reality is that to succeed, mobile wallets work. “The problem with Meu Dinheiro Separately, in July 2014, Bradesco have to target the North-East.” Claro is that Bradesco has taken a second- launched the B.wallet m-wallet which Another factor is the use of USSD for ary role to Claro, and the two companies’ allows its credit and debit cardholders mobile payments. “USSD is clumsy and you partnership isn’t in sync,” says Tellez-Mer- to make point-of-sale purchases from need to punch a lot of buttons,” Tellez-Mer- chan. “So Meu Dinheiro Claro isn’t going their Claro, Vivo and TIM smartphones. chan says. “Also, USSD payments take too too well.” To make a B.wallet payment, Bradesco long. What will make m-payments attrac- Oi Carteira consists of a prepaid card cardholders give the merchant their mobile tive to young people is m-wallet apps they linked to an m-wallet account, enabling number. They then receive a text message can download onto their smartphone.” customers to make purchases at merchants requesting that they authorize the transac- who are Cielo clients, top up their airtime, tion on their smartphone. Zuum and transfer money to other Oi Carteira In June 2014, Oi, Banco do Brasil and Tellez-Merchan says Zuum is the most suc- users. “Oi predominantly offers its m-wallet Visa launched an NFC payments service for cessful of the m-payment services launched in the North-East, and it’s now marketing holders of Banco do Brasil’s Ourocard Visa so far in Brazil. in Rio de Janeiro,” says Tellez-Merchan. credit card using NFC-based SIM cards In May 2013, MFS and Telefónica’s Vivo supplied by Oberthur. launched a pilot of Zuum in five cities in NFC Itaú launched a pilot of an NFC payment São Paulo State and in Belo Horizonte, capi- As in other countries, it’s still early days for service with TIM, acquirer Rede (formerly tal of Minas Gerais State. MFS is a separate NFC payments in Brazil. called Redecard), and Gemalto in February initiative to Wanda, MasterCard and Tel- However, Frost & Sullivan ICT analyst 2013 in the cities of São Paulo and Rio de efónica’s joint venture which is developing Carina Gonçalves predicted in a webcast Janeiro. TIM also launched an NFC pilot m-payment services in 12 Latin American that NFC payments will become the domi- with Bradesco and Gemalto in June 2013 in countries excluding Brazil. nant payment method in Brazil, winning Rio de Janeiro and São Paulo. <

www.electronicpaymentsinternational.com March 2015 y 11

EPI 333.indd 11 26/03/2015 11:31:02 REVIEW: GSMA Electronic Payments International

The developing world’s unbanked turn to mobile As mobile phone penetration grows in the developing world, so does the opportunity for mobile money vendors. With mobile financial services now available in 60% of developing countries, it is an exciting time for the market according to the GSMA’s new report. Patrick Brusnahan writes

he GSM Association (GSMA) has mobile money services sustainably; laboration are hindering mobile money from launched its 2014 State of the Indus- • Providers have begun to expand into reaching scale. try: Mobile Financial Services for the adjacent markets for mobile financial 54 developing countries do not have a Unbanked report with some interest- services, leveraging their strengths in live mobile money service. 70% of these T countries have a population of less than 10 ing insight into the 2.5 billion people cur- mobile money to provide mobile insur- rently unbanked in developing countries. ance, mobile savings and mobile credit million. Due to the relatively smaller popula- This section of society has to rely on cash to customers who previously never had tion size, it is harder to build a business case transactions or informal financial services, access to formal financial services; for investment in mobile money. It becomes which are usually expensive and unsafe. • The number of registered mobile money harder for a mobile money service provider Traditional banking infrastructure has yet to accounts globally grew to reach near- to achieve scale and actually make a profit. adapt their business model to work to serve ly 300m in 2014. While this is steady This severely reduces the desire of operators low-income customers and many do not growth, there is still much room for and banks to invest in new mobile money make the effort. further increases as these accounts only launches. The silver lining, however, is that over represent 8% of mobile connections However, 13 of the 54 developing markets two fifths of the unbanked have access to a in the markets where mobile money without mobile money services have a popu- mobile phone, which can extend the reach of services are available. 2014 saw seven lation of over ten million. 14 launches are financial services such as payments, transfers, new markets join the ranks of countries planned in these 13 markets, proving that insurance, savings and credit. Now estab- where mobile money accounts outnum- the interest is still there for new launches. lished in the majority of emerging economies, bered bank account. The number of The barrier now is regulation. mobile has become a maturing industry serv- markets with this status is now 16, and Without regulators creating an open field ing new business areas and enabling a wider • Active mobile accounts stand at 103 for mobile money services, market uptake range of digital payments. million and an increasing number of and customer adoption is hindered. Even in The report highlighted a number of key services are reaching scale. 21 servic- markets that contain an enabling licensing trends concerning the mobile financial ser- es now have over one million active or authorisation framework for non-banks, vices industry in 2014: accounts. there are barriers. Respondents highlighted • 255 mobile money services are now For those invested in the financial sec - three key regulatory priorities: available across 89 countries. This is tor, these signs of growth are encouraging. set to increase as smartphone penetra- Investment in improving and expanding 1. Transaction/balance limits too low and/ tion rises; mobile money services is continuing. Provid- or onerous customer identification • Competition is tight in markets where ers are strengthening their capability in han- requirements; mobile money is available but a grow- dling a rapidly increasing number of users ing number of mobile network opera- and transactions through platform migra- 2. Not allowed to earn interest on pooled tors (MNOs) are becoming interested tions and extension of application program- funds or to utilise interest earned, and in interoperable solutions. In 2014, ming interfaces (APIs) to third party users. MNOs interconnected their services in 2014, additionally, recorded a steep 3. Restrictions on international remittance Pakistan, Sri Lanka and Tanzania. This increase in the number of international business. follows the work of MNOs in Indone- remittances via mobile money. The GSMA sia which has had interoperability since attributed this rise to the introduction of a While obstacles remain, the mobile money 2013; new model; using mobile money as both industry continues to progress. In order for • Regulators are beginning to recognise the sending and the receiving channel. In mobile financial services to reach more peo- the importance of non-bank providers turn, mobile money is reducing the costs ple and achieve the scale it needs, the indus- of mobile money services in fostering of international remittances for consum- try will need to continue strengthening the financial inclusion. As a consequence, ers. Respondents to the survey said that the foundations for mobile money services and more are establishing more enabling median cost of send $100 was $4, less than instil best practices in order to continually regulatory frameworks for the provi- half of the average cost to send money glob- improve quality of service. Mobile financial sion of mobile money services. Reforms ally via the traditional money transfer chan- service providers have to engage with regu- have been passed in Colombia, India, nels. lators and standard setting bodies to create Kenya and Liberia in 2014. Currently, Despite the progress made in 2014, the more enabling regulatory environments to 47 out of 89 markers where mobile mobile money industry still has hurdles it foster sustainable investment in the service money is available, regulation allows needs to overcome. Regulatory barriers, low that will, eventually, underpin a balanced both banks and non-banks to provide levels of investment and lack of industry col- strong digital financial ecosystem. <

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EPI 333.indd 12 26/03/2015 11:31:02 Electronic Payments International COUNTRY REPORT: BAHRAIN

Country Report: Bahrain In January 2013, the amount of payment cards in Bahrain burst through the one million mark. In addition the total transaction of payment cards was worth $3bn. Now debit cards and prepaid cards are seeing a boost in usage

ahrain has a diversified economy In terms of card penetration, Bahrain Sharia-compliant cards over the forecast with well-developed infrastruc - recorded 0.80 cards per inhabitant in 2013, period 2014-2018. tural facilities, and is home to while the UAE, Kuwait, Oman and Saudi large number of multinational Arabia recorded 1.96, 1.32, 1.03 and 0.69 Growth prospects in the prepaid cards B respectively. In terms of frequency of use, companies in the Middle-East and North market Africa (MENA). The government has Bahrain recorded 15.6 transactions per card Bahrain’s prepaid cards market grew during encouraged investment in the financial in 2013, while Saudi Arabia recorded 95.3, the period 2009–2013, in terms of both the service and tourism sectors as part of its Kuwait recorded 47.7, the UAE recorded volume of cards in circulation and trans - economic diversification plans, with spe- 43.1 and Oman recorded 13.4. action value. The increasing preference cial emphasis on Islamic banking. The for Islamic banking provides high growth country has the region’s highest density Strong demand for Sharia-compliant potential for prepaid cards, as they are com- of Islamic financial institutions, includ - banking products and services pliant with Sharia law with no riba (interest). ing 24 dedicated banks. As the need for, Islamic banking has grown significantly in Banks are targeting specific segments and awareness levels of, sophisticated Middle Eastern countries such as Bahrain, to increase prepaid card penetration. banking products and service offerings Saudi Arabia, Kuwait, Oman and the UAE. MasterCard launched the first multi-cur- increase, banks operating in the coun - From the first launch of the Sharia-compli- rency prepaid travel card, My Card, in col- try are launching new products to retain ant credit card by Kuwait Finance House – laboration with Al Baraka Islamic Bank and market share. Consequently, Bahrain’s Bahrain in November 2007, in association Nonoo Exchange Company in December cards and payments industry recorded with Visa, banks in Bahrain have come a 2012. In December 2013, BMI Bank and healthy growth during the review period long way to introduce these cards for their MasterCard launched a generic multi-pur- (2009–2013). consumers. pose prepaid card and an internet prepaid Credit transfers and cheque payments Ithmaar Bank offers the Sharia-compli- card. were the preferred payment instruments, ant Al-Rubban credit card, which also has having a combined industry share of 99.4% all the features of a conventional credit Mobile payments offer growth prospects in 2013 in terms of transaction value. The card. The bank does not charge any inter- The Bahraini government launched the eGo- share of payment cards increased from 0.4% est on outstanding balance, however, but vernment project in May 2007 to promote in 2009 to 0.6% in 2013, as the government earns income through card maintenance electronic payments among consumers with and banks are taking initiatives to increase fees. Furthermore in January 2014, Ithmaar a focus on mobile payments from May 2009. benefits and awareness levels among con- Bank launched a full suite of new Sharia- In July 2011, the government launched sumers and merchants. compliant MasterCard credit cards, while the eGovernment Mobile Portal, promoting In terms of the number of cards in circu- in May 2014 CrediMax launched a Sharia- a wide range of e-payment services, such as lation, Bahrain’s payment cards – including compliant credit card, Tayseer. A growing for health check-ups, traffic fines and driv- debit and credit cards – registered posi - number of banks are expected to launch ing license renewal, among others. < tive growth during the period 2009–2013, recording a compound annual growth rate n BAHRAIN CARD TRANSACTION VALUE BY CHANNEL (BHD MILLION), 2009–2018 (CAGR) of 5.49%, increasing from 830,360 cards in 2009 to one million in 2013. In BHD m ATM terms of transaction value, payment cards 2,000 POS reached BHD1.1bn ($3bn) in 2013, after registering a CAGR of 17.37%. Similarly in 1,500 terms of transaction volume, payment cards registered a CAGR of 17.69%, reaching 16.1 million in 2013. 1,000 The average transaction value (ATV) in Bahrain was $185.3 in 2013, which was 500 higher than Saudi Arabia with $131.3, but lower than other peer countries such as Kuwait, Oman and the UAE. Kuwait 0 recorded the highest ATV with $319.6, fol- 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 lowed by the UAE with $263.1 and Oman with $207.4. Source: Central Bank of Bahrain and Timetric

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COUNTRY REPORT: BULGARIA Electronic Payments International

Country Report: Bulgaria The global financial crisis hit Bulgaria hard. Only now are we beginning to see the signs of a recovery in an economy which contracted, but how is the card market, now with 8.5 million payment cards in circulation, boosting this recovery?

he global economic crisis in 2009– Bulgaria ranked twenty-first in terms of Mobile payment offers growth prospects 2010 had a severe effect on the Bul- card penetration, with 1.2 cards per inhab- for card transactions garian economy, with gross domestic itant, while Luxembourg recorded the high- M-payments are also gaining popular- product (GDP) contracting by 5.5% est rate with 4.4 and Romania recorded the ity in Bulgaria, and are being offered by T lowest with 0.6. Bulgaria ranked the lowest in 2009. The Bulgarian government and banks, private companies and technology World Bank entered into a memorandum among other European countries in terms providers. In December 2012, the m-pay - of understanding (MoU) in January 2012 of frequency of use, with 18.7 transactions ment service provider Cellum Group and in response. This represented an important per card, while Finland recorded the highest the telecommunications provider Vivavom step taken by the country’s government frequency with 172.8. together launched an m-payment service to draw on the World Bank’s expertise in called ‘CellumPay’. developing and implementing strategies and Prepaid card to create scope for growth in This service will enable consumers to programmes to revive the country’s econ- payment cards purchase subway tickets using their mobile omy. GDP grew by 0.9% in 2013, and is Prepaid cards recorded a CAGR of 24.99% phones. The company offers a mobile app, anticipated to rise to 3.0% in 2018, which during the period 2009–2013, increasing through which users can register their Visa, will be beneficial for Bulgaria’s cards and from 461,513 cards in 2009 to 1.1 million MasterCard or American Express cards. payments industry over the forecast period in 2013. These cards are more beneficial to Apart from purchasing subway tickets, the (2014–2018). the country’s unbanked population, as they service can be used for the top-up of pre- Bulgarian payment cards (including debit do not require a bank account to use. paid phone cards, the payment of utility and credit cards) registered positive growth Central Cooperative issues virtual pre- bills and purchasing goods over the internet. during the review period (2009–2013), paid cards that do not require an individual The growing scope for m-payments ena- recording a compound annual growth rate to have a physical card. This card is created bled new operators to enter the market. In (CAGR) of 2.08%, and increasing from 7.7 online, and can be used for the payment July 2013, Borica, a company owned by the million cards in circulation in 2009 to 8.5 of goods and services. This removes the central bank and 27 of the country’s com- million in 2013. In terms of transaction requirement for customers to visit a bank mercial banks, in partnership with seven value, payment cards valued BGN15.1bn to collect the card. The bank also issues Pre- other banks, launched an m-payment ser- ($10.7bn) in 2013, after registering a CAGR paid Gift Cards to customers, which can be vice called ‘MOBB’. between 2009 and 2013 of 7.33%. personalised and can be used to give gifts In 2013, the average transaction value on different occasions. With the increasing E-commerce offers growth prospects for (ATV) in Bulgaria was $85.5, which ranked number of prepaid cards being distributed cards and payments industry fifteenth in the overall European region. in the country, this segment is anticipated to E-commerce recorded significant growth Greece recorded the highest ATV, with undergo positive growth, with 2.1 million during the period 2009–2013, due to ris- $227.6, while Estonia recorded the lowest cards estimated to be distributed by the end ing online and mobile penetration, and an with $37.3. of 2018. increase in the presence of online payment gateways and online stores in the coun - try. The value of e-commerce grew from n BULGARIA CARD TRANSACTION VALUE BY CHANNEL (BGN BILLION), 2009–2018 BGN141.9m in 2009 to BGN358.3m in BGN bn ATM 2013, at a CAGR of 26.06%. This is expect- 25 POS ed to record a CAGR of 23.36% between 2014 and 2018, to reach BGN1bn in 2018. 20 The increasing young and urban popula- tion has a strong inclination for mobile and 15 media devices, providing strong growth opportunities for e-commerce companies. 10 Offering virtual cards for the payment of online transactions is one of the reasons 5 behind Bulgaria’s growth in e-commerce activity. These cards enable users to shop 0 online and carry out secure e-transactions.

2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 DSK Bank is offering such cards to the seg- ment of customers who prefer to make regu- Source: European Central Bank and Timetric lar online purchases. <

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Electronic Payments International COUNTRY REPORT: LUXEMBOURG

Country Report: Luxembourg Post-financial crisis, the credit card market in Luxembourg saw a sharp rise in market share as consumers could no longer rely on their salaries. With the debit card market seeing its market share take a hit, can mobile payments provide some competition?

ike other EU countries, Luxem - inhabitant in 2013, followed by Norway 2009–2013, the use of credit cards increased bourg’s economy was damaged by (2.73), the UK (2.48), Sweden (2.38) and significantly both in volume and value terms the 2009 global economic crisis. Belgium (2.04). at CAGRs of 19.05% and 17.00% respec- L Following strong economic growth tively. Between 2014–2018it is projected to from 2004 onwards, Luxembourg's eco- Debit cards market share is gradually grow at respective CAGRs of 5.11% and nomic growth contracted by 5.6% in decreasing 4.48% in terms of volume and value. 2009, but recovered gradually from 2010 Prior to the eurozone crisis, consumers used Credit cards have strong growth poten- onwards. Economic turmoil in the global debit cards more frequently at POS termi- tial via online and offline retailing as well as financial markets and lower demand dur- nals. However, with uncertain economic m-commerce. Growth in the market will be ing the peak of the recession prompted conditions and increases in unemployment supported by the adoption of chip-and-PIN the government to inject capital into the from 2009 onwards, consumers moved to technology, along with the 3D Secure Code financial services sector and implement use credit cards more frequently to benefit service which facilitates secure offline and stimulus measures to boost the economy. from the interest-free credit period offered online transactions. Mobile commerce, gifts, A favourable tax regime coupled with by the banks. entertainment, online purchases and travel bank privacy legislation enabled the finan- In terms of the number of cards in cir - display positive growth potential, which is cial services sector, especially the banking culation, transaction volume and value, expected to further drive the credit cards and insurance sectors, to become the growth debit cards decreased during the period market. leader. Consequently, Luxembourg’s cards 2009–2013, which is anticipated to con - and payments industry thrived during the tinue over the period 2014–2018. In terms Adoption of secured payment technologies review period (2009–2013), which is antici- of the number of cards in circulation, debit to drive card-based transactions pated to continue over the forecast period cards accounted for 51.2% in 2009, which Several banks in the country offer enhanced (2014–2018). reduced to 27.1% in 2013. In terms of trans- security features on their cards to increase In 2013, credit transfer was the preferred action volume, its share decreased from the number of safe transactions. The major- payment instrument, having a substantial 65.9% to 57.2%, while in terms of transac- ity of banks discontinued Bancomat, the industry share of 98.1%, in terms of trans- tion value its share decreased from 61.3% to national debit card scheme, in 2011 and action value, while payment cards account- 51.6%, during the same period. adopted V PAY debit cards with the inclu- ed for just a 0.5% share. The use of cash sion of chip-and-PIN technology. Banks is continuously decreasing due to a growing Credit cards continue to dominate the started offering the 3D Secure Code service preference for electronic payment methods, market to credit cardholders from 2012 onwards to resulting in cash’s share being halved during Instead of solely depending upon their sala- increase security in online transactions. With the period 2009–2013, down from 1.5% in ries, consumers moved to credit card pay- the adoption of advanced security features, 2009 to 0.7% in 2013. ments in times of higher need, paying it back the use of debit and credit cards is expected In terms of the number of cards in circula- when they have funds. During the period to rise over the period 2014–2018. < tion, Luxembourg’s payment cards (includ- ing debit and credit cards) registered a posi- n LUXEMBOURG’S CARD TRANSACTION VALUE BY CHANNEL (€ BILLION), 2009–2018 tive growth during the period 2009–2013, recording a significant compound annual EUR bn ATM growth rate (CAGR) of 23.14%, increasing 10 POS from 992,348 cards in 2009 to 2.3 million in 2013. In terms of transaction value, payment 8 cards valued €10.2bn ($13.5bn) in 2013, after registering a CAGR during 2009–2013 6 of 10.60%. In 2013, the average transaction value 4 (ATV) in Luxembourg was $121.0, which was the fifth highest in the European region. 2 Greece recorded the highest ATV, with $227.6, followed by Switzerland ($156.6), 0 Italy ($141.2) and Germany ($131.5). How- 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 ever, Luxembourg recorded the region’s highest card penetration of 4.43 cards per Source: State Bank of Pakistan and Timetric

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COMMENT: BETHAN COWPER Electronic Payments International

Why age isn’t just a number in payments Bethan Cowper, Head of Marketing & PR at Compass Plus, examines how trends in the payments market can differ depending on the age of the consumer and how financial institutions need to react to these trends. Is it all about inclusivity or customisation?

alks around payments have a tendency things begin to shift. Despite the high street were aged 46 and over, whilst the majority of to focus on the new and exciting, from coming top for shopping, Internet banking mobile payments had been made by the col- mobile applications to the rise of the was the clear overall winner for banking lective 45 and under age group at 80%. This millennials. As customer behaviours (54%), although the branch remained popu- boils down to trust. T lar coming in second (26%), with mobile Overall, mobile was the least trusted pay change, financial institutions must be pre- - pared to adapt their products and services to banking beating telephone banking by six ment method (71%) followed by contactless reflect these changes. However, not all behav- percent (15% and 9% respectively). cards (47%). However, this is where use ioural changes are created equal and as such, When these results are broken down by age, and trust differ though the age groups. The different age groups have different require- patterns begin to emerge. Internet banking older respondents were less likely to use a ments that need to be met to truly drive loy- was the most popular method of banking for payment method they didn’t trust with 67% alty in the payments space. 45-year-olds and under (73.1%). of the over 46 year olds saying they would A recent survey from Compass Plus, the However, for respondents over 45, the never make a mobile payment and 55% say- global payments software provider, took to branch was still the most popular place to ing they won’t use mobile banking. However, the streets to question over 650 members of carry out their banking activities at 44% for although mobile was cited as the least secure the public, of all ages, from London, Welling- the 46-59s and 66% for the over 60s. For way to pay across all age groups, of those borough, Nottingham and Sheffield. All the 46-59s, this was very closely followed by interviewed under 45, 83% thought that respondents were randomly approached on Internet banking at 43%, however, the over mobile payments would be mainstream in the street and asked about their payment and 60s second choice was telephone banking 1-2 years and a whopping 90% would use banking behaviours. The aim of the survey at 20%. The mobile came in second for the mobile banking. was to get a clear cross section of opinions under 29s at 26%, however for respondents Drilling down further and looking just from all ages, from different sized cities inside in the 30-45 category the branch just won at the under 21s, 55% thought mobile was and outside of the London commuter belt. over the mobile device by 1.4%. the least secure however, 56% had used Whilst the results provided plenty of food It is clear from the results that these chang- their mobile to pay for something over the for thought and confirmed a lot of what we ing patterns of behaviour are driven by habit last month. Whereas 90% of the over 60s already know (cash is still very popular; there as the respondents in each group had a dis- thought mobile was the least secure payment is an element of distrust around mobile pay- tinct tendency to favour the banking channels method and only 1% of them had paid using ments, etc.), it was the difference of opinion that had been most dominant during their this method. This discrepancy offers hope to by age group that illustrated the most varia- banking career to date. As such the over 60s all emerging innovative players in the pay- tion. The results showed that with the prolif- were much less inclined to use mobile bank- ments industry; trust is hard to come by but eration of digital payments, the gap between ing (1.4%), whilst the under 21s were the the younger age groups are willing to use new those who are willing to use new payment least interested in telephone banking (0.8%). payment methods regardless. technology and those who aren’t, is funda- The idea of consumers sticking to what The takeaways from the survey are clear, mentally linked to age. they know was only cemented further by the FIs need to cater for all age groups and install Surprisingly, the high street was the most predominance of cash usage across all age a multichannel plan in their long term strat- popular place to shop overall (61.5%), and groups (95.8% had withdrawn cash in the egy; favouring one channel over all others this trend carried across all age groups from last month) and the use of bank cards on the will only cause frustration amongst certain the over 60s (94%) scaling more or less pro- high street (84% in the last month). Regard- age groups. Banking customers are starting portionally downwards to the under 21s less of industry predictions of a future cash- to distribute their assets across multiple insti- (56%). The only exception to this rule was less, mobile paying society, for the moment tutions more often and are quick to close their the 22-29 age bracket where Internet shop- the majority of Britons would be loathe to account and move on if their experience has ping just pipped the high street to the post leave home without their wallet: and in this been less than satisfactory. In this increasingly (49% and 47% respectively). The mobile wallet you would find cash and at least one customer-centric industry FIs need to main- device was the least popular way to pay card. tain inclusivity for all age groups. across the board at 0% for the over 60s up When we delve into newer technologies Whilst still a significant barrier, trust in to its highest result of 7% with the under 21s. like contactless cards and mobile payments, new payment types can be overcome and the It would be reasonable to expect to these fig- things start to change significantly. Of the future for mobile technology looks bright. ures to maintain a sliding scale throughout 128 people that had used a contactless card 76% of respondents predicted that payments the age groups in the under 21s favour, as in the last month 68% were 29-years-old with these devices will be mainstream in the mobile continues to gain more momentum in or younger and only 13% were 46 or older. next four years with the younger generations the marketplace. Of the 59 people that had paid using their leading the way. < When it comes to banking behaviours mobile phone over the last month, only 2% Bethan Cowper, Compass Plus

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