www.electronicpaymentsinternational.com Issue 376 / octoBER 2018

HEADING TO THE MAINSTREAM

RIPPLE AND BLOCKCHAIN LOOK TO FINALLY ACHIEVE LEGITIMACY COUNTRY SURVEYS INSIGHT RESEARCH

Analysis and key payment The challenge has evolved The worldwide non- market data for Iran, from managing liquidity to cash transaction volume Uruguay and Azerbaijan managing velocity continues to grow

EPI October 2018 376.indd 1 22/10/2018 12:06:12 contents this month

COVER STORY NEWS 05 / EDITOR’S LETTER RIPPLE AND 06 / DIGEST • Amex launches new service to BLOCKCHAIN accelerate supplier payments • BK Global Consortium to buy $353m crypto stake • WorldPay expands real-time payout service to over 50 countries • PayPal teams up with Walmart to offer cash services • Norway’s Vipps taps Inside Secure for mobile contactless payments • Allied Wallet adds AI features to payment gateway • Fitbit, Mastercard to launch Fitbit Pay in Thailand • Western Union launches high-value UK account-to-account transfers • Westpac introduces mobile cheque deposits 11 • Starling Bank Marketplace adds mobile phone insurance • Fujitsu launches biometric payments Editor: Group Editorial Director: Director of Events: Douglas Blakey Ana Gyorkos Ray Giddings • Square targets businesses with +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2585 instalment payment service [email protected] [email protected] [email protected]

Senior Reporter: Sub-editor: Head of Subscriptions: Patrick Brusnahan Nick Midgley Alex Aubrey +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Junior Reporter: Publishing Assistant: Sales Executive: Briony Richter Mishelle Thurai Jamie Baker +44 (0)20 7406 6701 +44 (0)20 7406 8633 +44 203 096 2622 [email protected] [email protected] [email protected]

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2 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 2 22/10/2018 12:06:24 contents octoBER 2018

COUNTRY SNAPSHOTS 18 / IRAN Iran’s payment card market recorded robust growths in the number of cards in circulation, transaction volume and value between 2013 and 2017, supported by government initiatives to encourage electronic payments 20 / URUGUAY Uruguay recorded a gradual shift in preference towards electronic methods of payment between 2013 and 2017, with the government taking a number of steps to reduce dependence on cash 21 / AZERBAIJAN Azerbaijan remains a cash-oriented economy, with various factors hindering the 21 development of the country’s financial system, including the payment card market, which INNOVATION PRODUCTS remains at a nascent stage of development 10 / BRAINTRI 14 / ONPEX Poland’s mobile banking sector is dynamic Flexible APIs enable businesses to harness the and ambitious. Wojciech Zatorski, COO power of the data they hold. CEO Christoph of Braintri and the creator of Biffee, speaks Tutsch explains how Onpex’s personalised to Briony Richter about the products and solutions can transform payments and services that are transforming the industry banking. Briony Richter reports 15 / SBERBANK 14 With so many different options now available for making payments, it takes effort to stand out from the crowd. Russia-based Sberbank has decided to make the process a more visual affair, writes Patrick Brusnahan 22

20 FEATURE RESEARCH INDUSTRY INSIGHT 11 / RIPPLE AND BLOCKCHAIN 16 / NON-CASH PAYMENTS 22 / STANDARD CHARTERED With major US bank PNC joining the The non-cash transaction volume is still As the world adopts real-time payments, growing list of banks that belong to growing worldwide, according to the 2018 creating huge volumes of instantaneous RippleNet, Ripple’s blockchain technology is World Payments Report. The growth also shows transfers in seconds, the challenge for banks increasingly achieving mainstream legitimacy. no sign of slowing – in fact, it is actually has evolved from managing liquidity to Robin Arnfield reports speeding up. Patrick Brusnahan reports managing velocity, says Bhupendra Warathe

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Page 1 Rachel Archer on [email protected] or call +44 (0) 20 7936 6591 editor’s letter

payments are being transformed, but do not write off the incumbents

Douglas Blakey, Editor

he consultancy annual reports season is in and Europe to pay for goods, salaries and investments in 189 full swing. The annual World Payments Report, countries and territories, with pricing at around 25% of that of T traditionally one of the better reports of its type, the high-street banks. comes to hand as EPI goes to press, and is covered on Fintech profitability: 8-12 years? pages 16-17. Accenture estimates that it could take eight to 12 years for a Two reports from Accenture are also worth a read. typical fintech start-up to achieve profitability. However, the Accenture’s research attempts to quantify the level of change report remains silent on just what percentage of fintechs will in the global banking and payment industry structure. It finds, ever achieve profitability. for example, that 17% of industry players in 2017 – around Such forecasts do little to diminish investor appetite, with 3,200 players – entered the industry in the last 13 years, and fintech deals showing no signs of slowing down – quite the have grabbed one-third of revenue growth in Europe. reverse: fintech M&A deals in the first half of 2018, some 141 In the seven major markets surveyed by Accenture – deals, are worth a disclosed transaction value of $39.3bn. Australia, Brazil, Canada, China, the EU, the UK and US – the According to the latest Fintech M&A Market Report from total number of players in banking and payments fell from international technology mergers and acquisitions adviser 24,000 in 2005 to 19,300 in 2017, due to consolidation. Hampleton Partners, total first-half deals are up 26% from the Of the new institutions, 91% are payments companies, prior half-year. The number of deals also increased, up 8% from while others are fintechs and digital challenger banks. The the second half of 2017. Again. percentage of new players in the EU is even higher, with 20% Payments and transaction processing deals capture the of 2017 participants entering the market since 2005; this headlines with some eye-watering valuations. For example, amounts to 1,400 outfits. Paypal’s all-cash acquisition of payments provider iZettle, at UK: new entrants grab 14% of revenue 19x trailing revenues, resulted in a deal worth $2.2bn. According to Accenture, the 1,400 new players in Europe since Meantime, just in time for Sibos, another report comes 2005 have captured 6-7% of banking and payment revenue, to hand from SWIFT. Its white paper examines the drivers worth around €54bn ($62bn) in 2016. of payments transformation in Europe, and looks at the In the UK, the revenue shift has been much more challenges and opportunities for financial institutions. The pronounced: new competitors have grabbed about 14% of report’s title, The transformation of the European payments revenues. The biggest gains have been made by payments landscape, is not, to be fair, over-hyped. PSD2, Open Banking, processors and licensed payment institutions, which have the growth of instant payments, and the Eurosystem’s pan- captured about 12% of the market. European Target Instant Payment Settlement (TIPS) are just While payments players such as Adyen, iZettle and Klarna some of the challenges for the incumbent banks. are taking revenue share, they are not taking a commensurate The fashionable argument with many is to write off the slice of profits. It is relatively easy to get into payments – as incumbents: “they don’t get it, culture is dated, legacy systems, Accenture highlights, capital requirements are low – but slow to reinvent themselves” are among the usual arguments. turning a profit is not so simple, and, for now, many new The writer is never in danger of being accused of being players are operating payments businesses as loss leaders. fashionable. I have had the privilege this year to share a TransferWise has grown to two million users by charging a platform on the conference circuit with payments heads fraction of the fees charged by banks, and on an underlying from banks such as ING, Nordea, BNP Paribas, UniCredit and basis remains loss-making. Deutsche Bank, among many others. I would say that the major Another new player, Azimo, is taking on established players European banks are facing up to the challenges with great with Azimo Business, enabling SME owners across the UK energy, deep pockets and sound business strategies. <

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

www.electronicpaymentsinternational.com | 5

EPI October 2018 376.indd 5 22/10/2018 12:06:30 News | Digest

news digest

Amex launches new service to accelerate supplier payments American Express has launched a new service, “Now companies can leverage their Early Pay, in a bid to speed up payments to accounts payables to reduce costs of goods suppliers. and services while offering automatic, flexible The Early Pay service is designed for payment terms to their eligible suppliers.” large US businesses purchasing goods from The payments operator will not charge US-based suppliers. It connects suppliers to implementation, setup or maintenance fees for a digital platform that enables invoices to buyers signing up. be paid before their due dates at an early- Early Pay offers several funding options payment discount. to buyers, including one in which Amex Amex’s senior vice-president and general funds early invoice payments to suppliers on manager for global commercial financing, behalf of buyers. This option enables buyers Gina Taylor Cotter, said: “The genesis of to improve their cash flow and meet working Early Pay actually began within the walls of capital requirements while maintaining the American Express. We originally developed a existing terms of payment with suppliers. service to use with our own suppliers in 2016, Buyers repay Amex on the original invoice and its quick adoption and success led us to payment date. develop the Early Pay solution for external Another option enables buyers to self-fund clients. invoice payments prior to the due date. < BK Global Consortium to buy $353m crypto stake Singapore-based BK Global Consortium healthcare, fintech, blockchain and biotech largest stakeholder on completion of the has agreed to purchase a stake in South firms. He is the right person to pursue acquisition, with a 38% stake. The deal is Korean digital currency exchange Bithumb, the systemisation and globalisation of the expected to complete by February 2019. which is operated by BTC Korea Holdings, virtual currency exchange,” a consortium Bithumb came under scrutiny earlier this for KRW400bn ($353m). official commented. year after the theft of virtual coins worth BK Global Consortium is led by The consortium will acquire 50% plus around KRW35bn from its platform. The Kim Byung-gun, a plastic surgeon and one share of BTC’s 75.99% stake in the exchange halted all deposit and withdrawal prominent blockchain investor. crypto exchange. service shortly afterwards. Despite the “Kim has demonstrated his multinational The consortium, which was BTC’s fifth- hack, the firm posted a net profit of around management ability in the field of largest shareholder, will become Bithumb’s $35m in the first half of 2018. < WorldPay expands real-time payout service to over 50 countries Payments platform WorldPay has expanded Worldpay’s executive vice-president the reach of its real-time payout service, and head of global enterprise e-commerce, FastAccess, to more than 50 countries in Shane Happach, said: “As more and more Europe and Asia. companies send payments at lower values The FastAccess service enables card- cross-border, it will become a competitive based payouts within 30 minutes, and differentiator to send quicker payouts to will now be integrated with Worldpay’s consumers and inexpensive disbursements Bankout solution, which currently operates to vendors and suppliers.” in 154 jurisdictions. Happach continued: “It is estimated that, Through the service, customers can by 2025, the sharing economy will generate receive funds or refunds by card in near- Europe-wide revenues worth over €80bn real time, either through a mobile wallet or ($92.8bn) and facilitate nearly €570bn of directly in to a local bank account. transactions. The payout solutions, WorldPay said, “At the heart are seamless, transparent, have the potential to benefit multiple secure payouts, which can be made via industries, including travel and tourism, card, mobile wallet or bank transfer in any gaming and insurance. currency, anywhere in the world.” <

6 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 6 22/10/2018 12:06:33 News | digest

PayPal teams up with Walmart to offer cash services Walmart’s senior vice-president of services and digital acceleration, Daniel Eckert, said: “With 90% of Americans living within 10 miles of a Walmart store, we know that offering PayPal cash-in and cash- out money services for an exclusive low fee is going to provide great value to the many people who rely on Walmart and PayPal to help manage and move their money.” PayPal president and CEO Dan Schulman added: “We are committed to working together to make it simple and easy for people to use PayPal cash-in and cash-out money services at every Walmart location in the US. We look forward to working hand in hand to help people and families with their financial services needs.” PayPal has partnered with Walmart to offer users to withdraw cash from their PayPal PayPal recently updated its online various financial products and services for accounts at Walmart stores. Customers can payments mobile app to improve the their shared customers in the US. also load cash onto their PayPal balances. customer experience. As well as sending As part of the alliance, PayPal cash- Similarly, PayPal Cash Mastercard and receiving funds, the upgraded in and cash-out money services will be holders will have access to their cash app offers new features such as alerts, available at Walmart for an exclusive fee balances via Walmart Service desks, ATMs contact list personalisation and advanced of $3 per service. The services will enable and cash registers for a low fee. authentication. < Norway’s Vipps taps Inside Secure for Allied Wallet adds mobile contactless payments AI features to Vipps, the provider of Norway’s national payment gateway BankAxept payment system, has selected Inside Secure in a bid to protect its mobile Online payment processor Allied Wallet contactless payments. has incorporated new artificial intelligence BankAxept’s contactless payment capability (AI) features into its NextGen payment will be secured by Inside Secure’s Code gateway in a bid to prevent fraud. Protection and Whitebox solutions. The The new AI-based features, known protection will be enabled for all cards and as the Transaction Anomaly System, are mobile phone payments. part of the latest version of NextGen, Inside Secure uses the latest mobile which is capable of assessing hundreds of payment technology and code-protection transactional data points to identify spikes tools to identify potential threats and protect and anomalies, and determine their scores applications. in real time. Vipps official Bjørn Skjelbred said: “We Allied Wallet claims that deployment of see Inside Secure as a dedicated partner in the latest version will enable an in-depth our commitment to providing the strongest review of all transactions, offering an possible security for our country-wide additional layer of security. consumers. It’s clear that Inside Secure Allied Wallet CEO Andy Khawaja offers not only the technology, but also the said: “Your business is only as strong as knowledge needed to work with demanding your security. Protecting your profit is financial institutions.” important, but in our opinion, protecting Skjelbred added: “Inside Secure’s protection It is tasked with managing payment your customers is even more important. solutions for mobile contactless payments solutions in new channels on a commercial “As e-commerce continues to grow, provide the peace of mind we need as we basis, which include the deployment of it’s absolutely necessary that we all do expand our business and innovate.” contactless payments by card and mobile, our best to protect the online shopping Owned by Norwegian banks, Vipps is online payment solutions, peer-to-peer experience and implement new technology responsible for processing eight out of 10 store payments, electronic invoices and digital to prevent information from being purchases made by card in the country. authentication solutions. < compromised.” <

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EPI October 2018 376.indd 7 22/10/2018 12:06:35 News | Digest

Fitbit, Mastercard to launch Fitbit Pay in Thailand Wearable device manufacturer Fitbit has teamed up with Mastercard, Siam Commercial Bank and Krungthai Card to launch Fitbit Pay in Thailand. Customers can now add Mastercard cards to two Fitbit smartwatches, the Fitbit Ionic or Fitbit Versa, to make contactless payments. Fitbit Pay will also be introduced on the Fitbit Charge 3 soon. The service uses Mastercard’s Digital Enablement Service, which digitises the card onto the device to enable contactless transactions. All contactless payments are secured through its tokenisation technology. Fitbit’s regional director for South East Asia, Hong Kong and Taiwan, Louis Lye, said: “Fitbit Pay will provide consumers with the option of hassle-free contactless Mastercard’s country manager for “This collaboration between Mastercard, payments, which is in line with the Thai Thailand, Donald Ong, added: “Mastercard Fitbit, financial institutions and merchants government’s efforts to establish a digital is committed to driving the development enables Mastercard cardholders to make economy in the country. and wider usage of contactless payments quick and easy contactless payments on “It also offers banks an exciting technology in Thailand. the go domestically and internationally, opportunity to engage with their customers “Thais are living increasingly connected while still enjoying the highest level of in unique ways while supporting them on lifestyles which are changing the way they security that protects their personal data their health and fitness journeys.” interact, engage and make transactions. and secures their transactions.” < Western Union launches high-value Westpac introduces mobile cheque deposit Westpac has introduced mobile cheque UK account-to-account transfers deposit solution in a bid to streamline cheque Western Union has launched a high-value financial payments such as mortgages or processing services. account-to-account money transfer service investments.” The move will allow all eligible customers that enables its UK customers to transfer Western Union, which has recently of the Australia-based bank to deposit funds to any bank account in the world. invested heavily in expanding its bank cheques using a smartphone. Customers The service will enable customers in payout network and real-time compliance upload pictures of both the sides of a cheque the UK to send up to £50,000 ($65,500) controls, now plans to expand the account- to the Westpac app, after which it will clear in directly into a beneficiary’s bank account to-account transfer service to other major three business days. Westpac research recently through a smartphone using the Western money-sending countries. found that around 41% of Australians still use Union mobile app, or from wu.com. Western Union global payments cheques for payments. Western Union Global Money Transfer president Jean-Claude Farah said: “Now Westpac Consumer Bank CEO George president Odilon Almeida commented: our money transfer customers can also Frazis said: “While cheques have a reputation “With this launch, we have added one more connect to billions of accounts in more for being old-fashioned, we still receive more milestone in our quest to serve the diverse than 70 countries, and this will continue to than 30,000 from customers every day. money transfer needs of our customers accelerate.” “We’ve introduced our Mobile Cheque – many of whom are global citizens with According to data from the World Bank, Deposit feature to offer customers even more assets and holdings in multiple countries.” around $26bn was sent through person-to- choice and convenience in how they do their Almeida continued: “The opportunity person transfers from the UK to the rest of banking. Now, more customers will have to send £50,000 per transaction, 24/7, the world last year. Around $13bn of the the capability to deposit their cheque via around the world enables our customers – total amount sent was remitted to Nigeria, smartphone, as well as the option of heading representing a mix of affluent expats and India, France, Germany, Pakistan, Poland into a branch or visiting one of our smart natives – to send money in larger values and China. ATMs.” with confidence. Western Union said it currently caters All iPhone and Android phone users with “They send money between their bank to more than 150 million consumer- the latest version of the Westpac app installed accounts across countries for high- to-consumer and business-to-business can use the service, with an initial weekly value purchases such as real estate, or customers in 200 countries. < deposit limit of A$1,000 ($713). <

8 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 8 22/10/2018 12:06:36 News | Digest

Starling Bank Marketplace adds mobile phone insurance Starling Bank’s in-app Marketplace has added mortgage broker Habito, travel insurance so-sure, to enable the bank’s customers to provider Kasko, and receipts and loyalty access mobile phone insurance. partner Flux. so-sure is a start-up that claims to offer Starling added life insurer Anorak to the quick, secure and reliable mobile phone platform in September, and aims to have 25 insurance. It declines less than 4% of mobile marketplace partners by the end of the year. insurance claims, a rate that it says is far lower Megan Caywood, chief platform officer than the traditional insurance industry. at Starling Bank, said: “Through our so-sure is also introducing a ‘social Marketplace, we want to enable our customers insurance’ platform that enables customers to manage their whole financial life in one to connect policies with friends and family place. As a mobile-only bank, we understand members who also have policies with so-sure. Starling’s Marketplace has been expanding the need for affordable mobile phone If no one to whom a customer is connected its products and services to meet the needs insurance, so partnering with so-sure was a makes a claim, the customer receives up to of its growing customer base. It launched in natural fit. 80% of their premium back at the end of the February 2018, and offers customers direct “so-sure shares our ethos of putting the policy year. access to financial services and products customer first, and is another example of our so-sure describes its offer as “one simple securely on their phone. commitment to partnering with disruptors policy with no hidden terms and covers Starling already has partnerships with that are working to improve customers lives customers for loss, theft, accidental damage, pension provider PensionBee, digital investing through intuitive products and fair and out-of-warranty breakdown and more”. services Wealthsimple and Wealthify, transparent pricing.” < Fujitsu launches biometric payments system Fujitsu Laboratories, a research centre server,” Fujitsu said in a statement. “When actual authentication is needed owned by Japanese technology giant Users hold their hands over a payment at time of payment, users in the selected Fujitsu, has developed a non-contact palm terminal and stand in front of a face- group can be quickly identified simply vein and facial data authentication system scanning camera. To enable instant by holding their palms over payment for retail payments at physical stores, or for facial-recognition processing, Fujitsu has terminals,” Fujitsu noted, adding that admissions to events. developed an algorithm that reduces separating the two recognition processes “By using this new technology, real-time processing size to a tenth of that provided reduces the load on the authentication authentication can be performed on a scale by traditional technology. server and supports high-speed processing of one million people without inputting “Facial data captured by a camera while without the need to increase resources. additional personal information, such as individuals operate a payment terminal is The company plans to announce further with cards or other types of information, used to narrow down similar groups from details at the International Conference on while controlling the increase of computing databases that have a scale of one million Image Processing 2018 in Athens, and make resources needed for the authentication registered users. the technology practical by 2020. < Square targets businesses with new instalment payment service Payment processor Square has introduced the complexity associated with financial a service that enables businesses to offer products, enabling more businesses to financing to customers. access incredible tools that can help them The Square Installments service aims to grow. Square Installments delivers simple benefit smaller businesses and sellers that and quick financing to customers seeking are otherwise unable to offer instalment greater flexibility as they make purchasing payments due to prohibitive minimum- decisions.” sales requirements. Customers apply online to use Square The company said the process of Installments. Once approved, they setting up similar existing options is time- receive the option to pay for purchases consuming and labour-intensive, preventing in fixed instalments over three, six or 12 sellers from providing flexible payment months. The service is available through services. With no minimum sales volumes participating Square sellers in 22 US states and quick setup, the new payment method for purchases from $250 to $10,000. eliminates these difficulties, Square claims. According to Square’s August 2018 Square Installments is offered by Consumer Shopper Survey, 68% of Square Capital, a wholly owned Square respondents said they were likely to subsidiary. Square Capital head Jacqueline consider a small or local business for Reses said: “We’re focused on removing purchases if they offer financing options. <

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EPI October 2018 376.indd 9 22/10/2018 12:06:37 innovation | Braintri

OPEN BANKING braintri: Zatorski believes that, in many ways, banks and financial organisations in Poland are better equipped and more motivated to implement the PSD2 regulation than their powering banks European neighbours. Braintri is working alongside KIR, the national clearing house that provides solutions to meet the needs of the banking and payments sectors. through big data Commenting on the Open Banking transformation, Zatorski says: “I’m very proud of the work we have done. Poland is going to have a single standard for Open Banking – the and open banking PolishAPI.” The PolishAPI standard is the critical part of implementing Open Banking in the Polish Poland’s mobile banking sector is dynamic and financial sector, providing a single platform to enable third parties to access payment ambitious, and embracing the full potential of Open accounts and offer tailored services. Banking opens doors to more innovative solutions. Embracing all the opportunities of Open Wojciech Zatorski, COO of Braintri and creator of Banking will give banks and financial institutions the ability to be at the forefront of Biffee, speaks to Briony Richter about the products this financial revolution, and Braintri has two and services that are transforming the industry products that aim to do just that. One is the Jiffee payment solution, which enables customers to pay through any Android ith more consumers turning “The idea was to start the scheme with or iOS phone, and also allows merchants to to digital channels, financial the critical mass of users and large-enough include loyalty programmes. This has created a Woperations are becoming far acceptance network. Initial conversations with frictionless app that can help target customer more digitally focused. This revolutionary the banks led to creating a joint venture of the behaviour and communication at any time. shift has led to the growth of fintechs. six largest Polish banks, which together had The unique aspect of Jiffee lies with Braintri was formed in 2013, and specialises around 70% of Polish banked customers.” its Bluetooth functionality. Using Jiffee, in mobile applications, payments and Big The banks involved were Alior Bank, Bank merchants can plug an adapter into older cash Data. In September, it was awarded the 2018 Millennium, Bank Zachodni WBK, BRE registers or POS terminals, allowing them to Polish Innovation Award for Jiffee, a mobile Bank, ING Bank and PKO Bank Polski, and accept wireless payments. payment and loyalty technology that is also the joint venture had the goal of building a The other product is Biffee, which Bluetooth-based. common standard for mobile payments. was created by Zatorski. Many banks are struggling to utilise the full potential of Open MOBILE APPS POLISH CONSUMERS Banking, and a lot of the problems stem from outdated legacy systems. This is where Biffee Braintri has been significantly involved in the Zatorski says Polish consumers adapted to comes in; but how does it tackle that problem? development of mobile apps for the largest digitisation very quickly. “Both the banking Zatorski explains: “Biffee is our data- banks in Poland. Speaking about the award, industry and customers across Poland have offloading engine. The platform takes all Zatorski says: “We have been involved in a lot moved quickly from standard traditional customer data from the core banking system. of innovative projects with our customers, and branches to internet banking to mobile,” he It then goes into advanced analytics and starts that has advanced developments within the notes. “Consumers are very receptive to all the gathering more data on customer behaviour. Polish sector. We also won ‘Best of Show’ at new features that are delivered; for example, “You also get additional benefits: for Finovate New York in 2017.” in the first week of Apple Pay launching in example, the process has lower IT costs. Braintri has held a pivotal role as part of Poland there were 200,000 activations.” It is fully operational and ready for the team developing PKO Bank Polski’s IKO He adds that in the fast-paced market, commercialisation.” mobile banking app. cheques are almost non-existent. According Poland is one of Europe’s most innovative Zatorski explains: “In 2013 we had been to GlobalData research, levels of awareness markets, with a consumer base that welcomes asked by the bank to help in the process of and holding of mobile wallets are slowly rising new technology that makes their financial lives transforming a bank’s mobile wallet token- among Polish consumers – a trend that should easier. based transactions service that has been used become more significant as smartphone The ability to leverage Big Data is becoming primarily for quick ATM withdraws, in a penetration increases. By 2021, smartphone more important, and banks will need to limited number of POS and into the Polish penetration is expected to reach 70% of address this to thrive in an Open Banking mobile payment scheme. Poland’s adult population. environment. <

10 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 10 22/10/2018 12:06:37 feature | ripple and blockchain

ripple: gaining momentum in cross-border payments

With major US bank PNC joining the growing list of banks that belong to RippleNet, Ripple’s blockchain technology is increasingly achieving mainstream legitimacy. Robin Arnfield reports

onvenience is touted as the major concept of using blockchain platforms an indicator of this phenomenon.” advantage of virtual banking, but it separately from cryptocurrencies to address Speaking at Ripple’s October 2018 Swell Cis not the only one: there are many problems in the payments industry – conference in San Francisco, Cory Johnson, reasons to bank online, from 24/7 service specifically B2B and P2P transfers – especially Ripple’s chief market strategist, said: “The and a speedy process. for smaller businesses and enterprises,” says world is used to getting things, right now, on In September 2018, Ripple said PNC senior Celent analyst Alenka Grealish. demand. They aren’t waiting for anything. Treasury Management is to participate in “In Ripple’s case, this has resulted in the When we look at blockchain and the solutions RippleNet, the US fintech’s inter-bank firm developing enterprise-level software to it offers in cross-border payments, we have an blockchain network, enabling PNC’s facilitate a variety of cross-border transfers, opportunity to address their needs.” commercial clients to receive real-time cross- not just B2B. We’re now at the tipping point A survey of nearly 700 global payments border payments via Ripple. professionals across multiple industries “Leveraging Ripple, a PNC commercial and in 22 countries for Ripple’s Blockchain client in the US receiving a payment from an in Payments report found that 18% of overseas buyer will receive payments against respondents are in production or near their invoices instantly, transforming the way production for blockchain-based payments. they manage their global account receivables We’re now at the The report, released at the Swell conference, and allowing them to better manage their said that a further 27% of those surveyed are working capital,” a Ripple press release noted. tipping point of in pilot with or are close to signing with a “PNC is an early adopter of a lot of blockchain-based payments provider. payments and banking technology,” says enterprise and bank Other payments-related blockchain senior Aite Group analyst Talie Baker. “For initiatives include the IBM Blockchain World example, in August 2018, PNC said it use of the blockchain Wire, the JP Morgan Interbank Information would allow clients to originate payments Network, Visa B2B Connect, and the Stellar to corporate or consumer receivers via The Development Foundation. Clearing House’s RTP [real-time payments] network, so it isn’t surprising that PNC is BRIDGING FIAT CURRENCIES involved with Ripple.” in terms of enterprise and bank use of the blockchain, with early-mover banks and As use of blockchain for cross-border EVOLUTION other enterprises moving into production payments moves into production, the next and fast followers moving into pilots, which step change will be the use of cryptocurrencies “We’ve seen an evolution from the original begins fuelling the network effect. The recent to enable real-time settlement. The idea of just using cryptocurrency to the announcement of PNC joining RippleNet is cryptocurrency will act as a bridge between

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EPI October 2018 376.indd 11 22/10/2018 12:06:41 feature | ripple and blockchain

Grealish wrote that Ripple “is striving and Western Union, xRapid was commercially the xrapid process to connect not only banks but also other launched in October 2018 and is live with An xRapid payment flow from the US payment providers and companies, in three companies: London-based MercuryFX, to Mexico involving Bittrex and Bitso particular new economy companies. It is US-to-Mexico remittance service Cuallix, and will proceed as follows: solving end users’ cross-border payment pain wholesale cooperative financial firm Catalyst points and FIs’ internal challenges (e.g. legacy Corporate Federal Credit Union, which serves Bittrex and Bitso are Ripple’s systems, the need to de-risk and retrench 1,400 US credit unions. preferred digital asset exchanges for correspondent banking relationships, and So far, Ripple has not publicly announced xRapid transactions moving through liquidity constraints)”. that any banks are piloting xRapid, and US dollars and Mexican pesos Ripple has three products addressing key according to Reuters, said that major banks respectively. issues related to payments: are unlikely to be the first to test or use it. An FI with an account with Bittrex • xCurrent: A messaging and settlement “PNC Bank will not be using XRP or xRapid initiates a payment in US dollars via platform that allows FIs to communicate to carry out payments for now,” Asheesh Birla, xRapid, which is instantly converted information about a payment with each Ripple’s senior vice-president for product into XRP on Bittrex. The payment other in real time, and settle the payment management, told Reuters. amount in XRP is settled over the XRP instantly; In May 2018, Birla said that for payments Ledger. • xVia: A protocol that standardises in the US-Mexico remittance corridor, Bitso – through its Mexican peso connections between different payment companies using xRapid saved 40-70% liquidity pool – instantly converts networks, so service providers such as compared to normally FX broker fees. the XRP into fiat currency, which money network operators (MNOs), “An average xRapid payment took just over is settled into a destination bank banks and corporates can send payments two minutes, compared to today’s average of account. via any RippleNet-participating FI. The two to three days when sending cross-border advantage of using Ripple’s protocol is that payments,” Birla wrote in a blog. Source: Ripple it makes integration with other FIs and “The portion of the transfer that relies on payment services companies much easier the XRP Ledger takes two to three seconds, two fiat currencies, Grealish says. than integrating with multiple different with the additional processing time attributed However, senior Aite Group wholesale companies’ APIs, and to movement across the intermediary digital banking analyst Erika Baumann warns that • xRapid: A liquidity management asset exchanges and local payment rails.” using a cryptocurrency as the bridge between system enabling businesses to source two fiat currencies introduces extra FX risk, liquidity on demand using Ripple’s XRP DEPLOYMENTS due to the volatile nature of cryptocurrencies. cryptocurrency and its XRP Ledger. This Traditionally, financial institutions (FIs) involves exchanging fiat money for XRP Ripple CEO Brad Garlinghouse announced provide liquidity for cross-border transfers by and then instantly into the desired fiat at Swell that, between quarter three of 2017 pre-funding Nostro accounts on each side of a currency. Ripple says on-demand liquidity and quarter three of 2018, Ripple’s customer transaction in each country’s native currency. means quicker payments, no more tied-up base grew by 100% to over 120. The company According to a 2016 McKinsey Global capital, and no more reliance on big banks is signing up an average of two production Payments report, there is approximately $5trn to handle foreign exchange. customers per week across its suite of dollars sitting dormant in these accounts products, he said. around the world. After being in pilot phase with several According to Garlinghouse, Ripple now “The big benefit is that real-time settlement money-transfer firms, including MoneyGram has customers in over 40 countries in six eliminates the need for pre-funded accounts at correspondent banks,” says Grealish. “Blockchain’s use case in cross-border Ripple’s Blockchain in Payments Report: Key findings payments is meeting two of the three • This year, blockchain moves from extremely or very interested in using requirements for success: customer value and experiments to production: 18% a digital asset as a settlement and/or technological viability. The third, economic of respondents are in production or a base currency. viability, is still a work in progress and hinges near production for the payments • Growing blockchain connectivity on at least one of the contenders achieving the use case. facilitates digital asset adoption: network effect.” • The tipping point for mass adoption 85% of those using blockchain in RIPPLE’S PLATFORM of blockchain is fast approaching: production and 90% of those quickly 45% of those surveyed said they moving to production are either are already in production, piloting extremely or very interested in using According to Grealish’s Celent report, or close to signing with a blockchain digital assets as a form of payment. Blockchain in Action in Corporate Banking: provider. Contenders out of the Blocks, Ripple “is the • The size of the global market for only blockchain technology provider to FIs • Use of digital assets in payments is cross-border payments is $27trn: that offers the entire stack from the protocol experiencing breakthrough interest: Another $20trn could be up for and network to the applications and a native 75% of respondents state they are grabs during 2018-2026. < digital asset (XRP).”

12 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 12 22/10/2018 12:06:42 feature | ripple and blockchain

“But for established MNOs like Major companies using Ripple: MoneyGram and Western Union, the blockchain’s real benefit is taking • Brazil’s Itaú Unibanco, which uses • Indian banks Axis Bank, SBI Remit, infrastructure costs out of their business. Yes Bank and IndusInd Bank; xCurrent; “The remittance business is now so price- • Santander, which uses xCurrent for • UAE Exchange, one of the largest competitive due to the advent of digital-only its One Pay FX retail P2P cross- remittance providers in the Middle players. So, because the MNOs are being border transfer service. One Pay FX East, uses xCurrent; squeezed on their margins, they aren’t passing on cost-savings from the blockchain to launched in April 2018 in Spain, the • MoneyGram launched a pilot of customers.” UK, Brazil and Poland, with other xRapid in January 2018, and countries to follow. InnoVentures, • SBI Ripple Asia, a joint venture Santander’s $200m fintech venture SWIFT’S RESPONSE between Ripple and Japanese capital fund, invested in Ripple in banking group SBI Holdings, In response to blockchain initiatives such as 2015; went live in October 2018 with Ripple and Visa B2B Connect, and to non- • Amex’s FX International Payments MoneyTap, an xCurrent-based app bank competitors in the cross-border space, business and Santander launched that lets consumers make instant SWIFT has developed SWIFT gpi (global a partnership with Ripple to domestic payments via RippleNet payments innovation). launch cross-border non-card – i.e. using a bank account or phone Elizabeth McQuerry, who heads Glenbrook Partners’ global payments practice, described bank account to bank account – number or QR code. It is live with SWIFT gpi “as the next generation B2B payments via RippleNet in three Japanese banks, and will be gradually rolled out to the 58 banks of traditional correspondent banking, November 2017 between the US in the SBI Ripple Asia-led Japan implementing enhancements to make the and the UK; Bank Consortium. Japan’s Ministry sector more competitive through payment • SEB, which has now processed $1bn of Finance granted a licence to tracking, greater transparency, and same-day over RippleNet using xCurrent; MoneyTap in September 2018. < value delivery within the network of users”. New technology offered in SWIFT gpi continents, including new corridors in Africa, from Brazil to Spain, Italy, Germany, France includes a cloud-based tracker service that uses North America, South America, Europe and and Portugal. APIs to monitor the process of all payments. Asia. In September 2018, London-based SWIFT gpi has a strong service level “Ripple has achieved a record ‘in TransferGo began using Ripple for real-time between the banks involved, so not only are production’ number, because it has put in transfers to its Indian banking partners for gpi payments tracked and monitored, but they place the critical building block for success in the Europe-to-India corridor. TransferGo move faster as they must be processed within a implementing blockchain-based technology said it saw initial transfers over RippleNet certain timeframe. According to SWIFT, with and scaling it,” Grealish wrote in her report. take just six minutes. It is offering instant gpi, payments are credited within 24 hours “Ripple’s standard applications and the transfers via RippleNet to India for a fee, from initiation – and most within a few hours, RippleNet agreement enable relatively fast and free RippleNet-based transfers that take or even minutes. onboarding. Through RippleNet, Ripple two to three days at a mid-market inter-bank “SWIFT is going through its second has overcome the challenges of forming a exchange rate. evolution through gpi, and worked with consortium blockchain: governance, standards “It is notable that, so far, the banks some big US financial technology vendors, and scale. Ripple establishes an agreement and other companies using Ripple haven’t including ACI Worldwide, on gpi to really with network participants to use the same provided much information on their success try to solve the cross-border issues involved in technology – such as xCurrent for banks – or their cost-savings with the platform,” says using SWIFT,” says Baker. and adhere to a consistent set of rules and Baumann. “But I think Ripple is strategically “With gpi, there are finally real-time standards to ensure operational consistency positioned in terms of the partnerships it has capabilities for payments. The problem for and legal clarity. established.” corporates is that there is ambiguity in the “Its rulebook was developed in partnership “The blockchain is a great solution for market as to what solution will become the with the RippleNet Committee. On the tech digital remittance firms like TransferGo standard for cross-border transactions – for side, a RippleNet member needs only to plug or Remitly, as it helps them save costs on example the card networks’ platforms, SWIFT in once to transact with any other RippleNet infrastructure,” says Baker. or Ripple.” < member; on the commercial side, members wishing to transact with each other need to establish liquidity accounts.” Remittance companies partnering with Ripple include RationalFX, Xendpay and InstaReM for transfers from the UK to Malaysia, Vietnam, Indonesia, Sri Lanka and Bangladesh; Remitr and FlutterWave from Canada to Nigeria; and Beetech and InstaReM

www.electronicpaymentsinternational.com | 13

EPI October 2018 376.indd 13 22/10/2018 12:06:42 products | onpex

Euro Payments Area (SEPA) and cross- border payments, as well as multi-currency onpex: management. The innovation was developed as Onpex acknowledged a gap in the market for product offerings to incumbent banks and using apis to build payment service providers. Asked about their capabilities, and the clients that use banking as a service, Tutsch replies: “Our clients are mostly either e-money issuers, custom services bank institutions or even banks, who use our software and services to either completely enable their transaction banking and management capabilities, or to improve their Using flexible APIs enables businesses to harness the power existing services.” of data they hold. CEO Christoph Tutsch explains how He continues: “For example, we just signed Onpex’s personalised solutions can completely transform the with a client with 1.8 million e-wallets out there, and we made the e-wallets bankable. process of payments and banking. Briony Richter reports We attached an IBAN to each e-wallet and suddenly it’s a multi-currency e-wallet, npex is a leading provider of The ever-changing technological including an IBAN.” multi-currency IBAN solutions. environment is moving rapidly alongside an “When it comes to banks, core banking OIt enables businesses to develop increasingly compliance-focused landscape. In systems are very linear. Our system can their own financial services through an an Open Banking world, banks and financial build more accounts and structures for API-focused software-as-a-service platform institutions are turning to companies such as marketplaces. This means that banks that are that creates cost-effective, seamless and Onpex to provide the payment solutions that connecting to our system can easily enhance compliant payment and banking solutions. can thrive in the new financial ecosystem; their core banking environment with modern At the heart of Onpex are simplicity, automation is key to solving their inherent APIS and more advanced logic. Technology transparency and automation. Explaining complexities. plus financial services is what we summarise as the landscape and what Onpex can achieve, banking as a service,” Tutsch explains. Tutsch says: “The whole banking environment BANKING AS A SERVICE Banking as a Service is a great example is pretty complex in the back end. There are of how Onpex provides transparency and a lot of information services like SWIFT In August 2018, Onpex moved swiftly into simplicity to businesses across the financial message, fixed APIs etc. All this needs to be the banking-as-a-service space, launching sector through APIs. The automation allows orchestrated properly. What we do is integrate its cloud-based service that enables business for a far more seamless integration into everything into our platform and expose this to build and manage their own financial business processes, while thriving in a PSD2 with very simple APIs to our clients. services. Within the platform, various tools environment becomes much simpler through “In a core banking system, first everything enable functions such as IBAN issuing, Single the use of flexible APIs. If, for example, a starts with a normal bank system, and then business wants to open an account, close we provide very simple, easy-to-integrate it, exchange currencies or transfer money APIs for account management, account across the world, the processes can all be fully opening, account closing, transaction automated with APIs. banking in SWIFT and SEPA environments. Furthermore, there are local and cross-border ON THE HORIZON capabilities in multicurrency, and then there’s the added flexibility of changing currencies Tutsch highlights that Onpex will be within the account or between accounts.” expanding its services and products to “What we do is connect to clearing continue meeting the needs of businesses in environments,” Tutsch continues. “For a rapidly changing landscape. For the first example, we are connected to 25 currencies; quarter of 2019, high on Onpex’s agenda by the end of this year, another 15 will come.” is connecting to clearing environments for When supporting banks, Onpex cryptocurrencies. will automate their payments with its The Opex platform not only provides multicurrency IBAN accounts while also banking and payments as a service, it also meeting the requirements to remain compliant ensures that every movement and every with PSD2. The organisation has also been development is happening in a regulatory- innovating continually to create new solutions compliant space. By providing open and to enable convenient, fast and frictionless API-centred services, Onpex is at the forefront processing. Christoph Tutsch, Onpex of the Open Banking revolution. <

14 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 14 22/10/2018 12:06:44 products | sberbank

sending money in Russia. This is why, when we create services, we don’t focus on a specific, narrow audience, but instead make products sberbank postcards: for everyone. “This applies to Postcards. When working on their UX [user experience] and content, we attempted to make the service as convenient adding ‘emotion’ and universal as possible. That’s why we used well-known characters from Soviet cartoons, 1990s pop stars, fairytale characters and laconic captions for Postcards. to payments “You can select a Postcard that suits any occasion, and if there isn’t any special reason, you can use one to simply brighten up the With so many different options now available for recipient’s day.” making payments, it takes effort to stand out from the crowd. Russia-based Sberbank has decided to make the RUSSIAN MOBILE BANKING

process a more visual affair, writes Patrick Brusnahan Sberbank’s mobile banking platform has achieved mass adoption, with its currently berbank has updated its mobile EMOTION 37 million active users utilising the app for app to bring about some very visual services such as balance checks, payments and Sfeatures. Sberbank Online now offers This was a natural progression, according to transfers on both the iPhone and Android unique cash Postcards, which the bank the Russian bank. Not only was it something operating systems. believes can add a bit of “emotion” when it needed to do, but it needed to do it quickly. With such a large market, does Sberbank paying relatives and friends. Speaking to EPI, a Sberbank spokesperson believe its new function will catch on The Postcards feature has been added to the says: “We spent less than six months putting with other players? Absolutely it does. The Dialogues function in Sberbank’s mobile app. Postcards together. This service is based on spokesperson says: “We believe that this Images can have animation or sound, with the Dialogues service that we launched in format will catch on. We’re already seeing multiple options including popular fictional Sberbank Online in February 2018. Dialogues positive feedback in the few days after launch. characters or 1990s artists. lets you communicate and send money in chat Other players of the digital market always At the time, head of Sberbank’s digital format; Postcards make it possible to do this latch onto successful formats and integrate platform division, Svyatoslav Ostrovsky, with even more emotion.” them into their services to benefit clients. We said: “At the beginning of the year, we While adding Postcards to payments think this will happen with Postcards, too.” launched Dialogues in Sberbank Online. It may be an attractive-looking option, is it Sberbank takes pride in its mobile app and is quickly gaining popularity: users can now something that would entice everyone? There monitors it carefully; this even extends to its communicate, send unique stickers with are still large chunks of the world that do not rating on app stores. SberCat and transfer money in the chat. use emojis, never mind fully animated images. “It’s one of the major feedback channels for “Now we can give clients something more: So who is this feature for? us,” the spokesperson explains. “We monitor the possibility to give emotions to relatives “Our client base includes most of the ratings and comments in app stores; we read and friends. That’s why we have created country’s population,” the spokesperson every comment and act if necessary. For unique cash Postcards and carefully included explains. “The Sberbank Online application is example, we compile a list of top-requested images of Russian culture in the digital also widely used. For example, P2P transfers features based on feedback, and these serve as environment.” via Sberbank are the most popular way of priorities for future releases. Our app is rated 4.8 out of 5 in the Apple App Store, which is an excellent rating, especially among banking recent improvements to the sberbank app apps.” • The app launches faster; However, Sberbank does not see this as time • The main screen features useful recommendations: financial advice, to rest on its laurels, with more updates and personal offers, and the app’s user manual; features for the app incoming. The spokesperson concludes: “We’ve started • The main screen search can be used to look for contacts for money and will have launched self-made postcards by transfers, organisations for payments, and the bank’s products; the end of the year. The future development • The updated Operation History shows a full transaction list, including of Postcards will depend on the users, their purchases and money withdrawals, and activity and wishes that we will take into • Traffic fine payment has become more user-friendly: users can view new account when planning. and paid fines, save data on their driver’s licence and vehicle ownership “In terms of Sberbank Online in general, certificates, and check photos and locations on the map. < we have a lot of changes lined up, which we will talk about closer to the release date.” <

www.electronicpaymentsinternational.com | 15

EPI October 2018 376.indd 15 22/10/2018 12:06:44 research | non-cash payments

world payments report: the unstoppable rise of non-cash payments

The non-cash transaction volume is still growing worldwide, according to the World Payments Report 2018. What is more, the growth also shows no sign of slowing – in fact, it is actually speeding up. Patrick Brusnahan reports

lobal non-cash transactions grew at “When we look at the different markets, Another factor also made a huge impact: a rate of 10.1% in 2016, according there is still growth and untapped potential. government influence. Jan Dirk van Gto research from Capgemini and Our position is that growth will continue Beusekom, head of strategic marketing for French bank BNP Paribas published in the strongly; the plateau is far from being reached. cash management and trade finance at BNP World Payments Report 2018. Those lagging behind will accelerate and catch Paribas, says: “What also help in those regions From this rise, the global non-cash volume the leaders. This acceleration will continue for are the measurements local governments take hit 482.6 billion. However, the chief drivers of at least the next five years.” to promote non-cash transactions. Very often this growth came from Emerging Asia (25.2% He adds: “There’s no plateau in emerging this is linked to anti-corruption measures.” growth) and Central Europe, the Middle East markets. There was some slight plateau in One particular example brought up was the and Africa (CEMEA) (17.1%). China, but there are still two-digit-plus demonetisation of bills in India. The decision In addition, developing markets recorded goals and they are still very strong. We are by the Indian government to cancel the legal a rise of 16.5%. Fuelled by government very confident that this industry will remain tender of INR500 ($7.50) and INR1,000 intervention to improve financial inclusion, attractive.” denomination notes, in an effort to tackle the countries such as India (33.2%), China Currently contributing around one-third country’s ‘black money’ issue, had widespread (25.8%) and South Africa (15.1%) witnessed of non-cash transaction volume, by 2021, effects on the populace. It has also, two years some remarkable growth in non-cash emerging markets contribute half of the total. later, pushed people towards digital payments payments. To achieve that, emerging markets will grow at and solutions. Growth is not limited to developing and an exponential rate. Emerging Asia is expected Considering the sizable 1.3 billion emerging markets, however. Mature Asia- to have a CAGR of 28.8%, driven by digital population, electronic payments are not as Pacific, North America and Europe saw an innovation, mobile payment adoption and much in vogue as one might expect. Cash average growth rate of 7.1%. financial inclusion initiatives. accounts for 96.8% of the total payment Increases in non-cash are not set to slow transaction volume in India, a share that is down any time soon. The report predicts REGIONAL DIFFERENCES expect to fall over the next five years. that non-cash transactions will accelerate at a According to GlobalData’s research, the CAGR of 12.7% globally between 2016 and So why are certain regions, particularly annual value of card transactions is $78.8bn, 2021. Emerging markets will have an average Emerging Asia and CEMEA, performing with an average annual spend per card of just CAGR of 21.6%. better than others? Vergne’s explanation is over $98. There is less than one card (0.63) Christophe Vergne, payments and world pretty simple: “Emerging Asia’s success is per person, and an average of only 0.26 payments report leader at Capgemini, partly down to population. It’s the largest monthly card transactions per person. In speaking to EPI, believes there will continue region in the world.” contrast, China’s population has, on average, to be growth for a while yet. “We’ve been He continues: “As digital payments are over four cards each, and Malaysia and observing strong growth in the last 15 years now accessible, even for the non-banked Thailand have 1.71 and 1.52 respectively. So we’ve been making the report,” he notes. population or people accessing tech through why the massive increases in CEMEA? “Growth has been actually accelerating in mobile, it opens a wide realm of opportunity. “They are the same, but different,” Vergne recent years. We were projecting a little bit It is a two billion-person market equipped explains. “There are strongly growing markets over 10% last year, and this has accelerated by with mobile payments and mobile wallets: this in CEMEA, mainly Russia and South Africa. two points. is why it grows so fast.” The difference is that Africa is strongly

16 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 16 22/10/2018 12:06:45 research | non-cash payments

growing in GDP; it’s not only growing in non-cash transactions: key data digital, but in economy as well.”

Worldwide non-cash transactions E-WALLETS bn 500

The global e-wallet transaction volume for 400 Latin America 2016 is given as 41.8 billion in the report, CEMEA 300 comprising almost 8.6% of all non-cash Emerging Asia Mature Asia-Pacific 200 transactions, and suggesting that there is Europe

plenty of market potential for big technology 100 North America companies to expand. Google, Amazon, Facebook, Apple, Alibaba, and Tencent 0 2012 2013 2014 2015 2016 could all gain much more. ‘Bigtech’ already accounted for 71% of the global e-wallet market in 2016. Non-cash transactions in the top 10 markets The report states: “These companies are bn 150 leveraging their large-platform user base 2015 to make an impact in the payments space, 120 2016 focusing on providing seamless user experience and value-added features, and making use 90

of network effects. Incumbents should learn 60 from the bigtechs and invest in technology platforms in order to compete with them.” 30

0 US UK BIGTECH China Brail Japan Russia Canada Euroone Australia South Korea This rise in bigtech is reasonably sudden, and could be quite worrying for banks. How much Forecast number of worldwide non-cash transactions market share will these companies gain? bn Vergne says: “Firstly, we wanted to put 1000 a number on the market share of bigtech. 800 It’s essential, and they are close to 10% of Latin America 600 CEMEA the market. You must remember that this Emerging Asia market is the official market. Three years 400 Mature Asia-Pacific ago, we measured what we called the ‘grey’ Europe 200 North America market, which were all these closed-loop solutions, which wasn’t part of the banking 0 industry but another 10-15% of the market. 2016 2017 2018 2019 2020 2021 It’s a proportion of payments outside of the banking world that is quite substantial. Source: Capgemini/BNP Paribas “Also they have great reserves of data,” Van Beusekom continues: “Bigtechs and fintechs However, do banks really need to worry? the most trusted for data storage or cash have a different mindset first of all, but also Customers have relationships with companies handling. Bigtech will be trusted for customer up to now, they have been not subject to the such as Google and Amazon, but are they orientation, customer service and maybe even same regulatory rules as banks have. That’s a trusted? According to research from Bain, US for innovation. None of them have tried to big reason why banks are lagging, but I think consumers give Amazon much higher loyalty replace banking services, but they go on top of they are reacting currently. That’s definitely scores than they give banks. Among Amazon existing services.” something which has given the opportunity to Prime respondents, nearly two-thirds would Van Beusekom adds: “Questions we see bigtechs to gain some market share.” try a free online bank account from Amazon. very often arise around the quality of service In addition, a large part of the bigtech Even people who do not purchase from and the duration of the service. market share is in China, with two of the Amazon would give it a go – well, 37% of “It’s maybe not so much with bigtechs, but world’s biggest players: Alibaba and Tencent. them anyway. with fintechs. Consumers are overwhelmed “Alipay and WeChat Pay represent a large Another aspect of this is that Amazon with supply because there are so many and share of the bigtech market, and they operate customers are considered to be valuable. they are not used to it all and what part of the in a market where banks are totally deficient They have a hold on 75% of US household value chain they take up. in providing efficient payment solutions. On wealth and make up 75% of the wealthiest “There are other questions around fintechs: this green field and on their platforms, Alibaba households’ assets. will they be around in two years’ time? In that and Tencent were able to directly move to According to Vergne: “The trust is different regard, banks are still trusted,” Van Beusekom digital,” Vergne explains. from the trust given to banks. Banks are still concludes. <

www.electronicpaymentsinternational.com | 17

EPI October 2018 376.indd 17 22/10/2018 12:06:47 country snapshot | iran

IRAN

country snapshot: iran Bank and government initiatives lead to robust card growth

ran’s payment card market recorded and 2017, primarily supported by Consumers are now charged a fee for robust growth in terms of the number government initiatives to encourage using cash to pay utility and mobile bills. Iof cards in circulation, transaction electronic payments and reduce consumer In addition, many banks refuse to accept volume, and value between 2013 dependence on cash. bill payments in cash, requiring consumers to use cards, and have installed barcode value of cheque payments value of payment cards readers and POS terminals in branches to facilitate this. n n Furthermore, many government organisations pay bonuses to employees in the form of gift cards, which can only be used to make purchases and not to withdraw cash. These initiatives have also led to an

overall increase in Iran’s banked population. Consequently, the percentage of the

population aged 15 or above with a bank account rose from 87.2% in 2013 to 95.8%

in 2017.

The gradual adoption of contactless e f e f technology, supported by the increased availability of various alternative payment Source: Central Bank of Iran, GlobalData Source:Source: Central Central Bank Bank of Luxembourg, of Iran, GlobalData GlobalData methods, is likely to drive the Iranian

18 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 18 22/10/2018 12:06:56 country snapshot | iran

payment card market’s growth in the near Debit card shares by issuer Debit card shares by scheme future. DEBIT CARDS DOMINATE an aderat ran . Debit cards accounted for 99.5% of the isa payment card transaction volume, and . 99.4% of the transaction value in 2017. Tearat an thers thers . Consumer preference for debt-free . astercard . payments and prudent consumer spending an elli habits have resulted in the dominance of ran . debit cards in terms of both transaction volume and value. Growth was also supported by government efforts to encourage retailers

to accept card-based payments, and Source: GlobalData Source: GlobalData banks’ promotional activities to encourage retailers to install POS terminals. pay later shares by issuer pay later shares by scheme Debit cards will continue to lead the Iranian payment card market, supported by the gradual migration of low-value cash payments to payment cards. an . isa PAY-LATER CARD ADOPTION . arsian an an elli thers While debit cards remain the dominant . ran . astercard payment card type, consumer adoption and . use of pay-later cards is growing at a brisk an aderat pace, primarily supported by a number ran . of initiatives launched by the Iranian government. Targeting low-income individuals, in April 2017 the government introduced a scheme Source: GlobalData Source: GlobalData called Yarakart, which enabled banks such as Bank Keshavarzi and Iran Post Bank to issue credit cards for the lower-income payment cards to be used at Russian ATMs a three-digit CVV code, and the card sector of the population. and vice versa. is deactivated if the code is entered Similarly, in April 2018 the government incorrectly three consecutive times. announced the launch of a new credit ROBUST PREPAID GROWTH card project that will allow banks to offer CARD ACCEPTANCE AT POS credit card loans at lower interest rates for There is substantial demand for prepaid purchases of Iranian products. gift cards in Iran, in both the retail The number of POS terminals recorded a and corporate markets, with demand CAGR of 18.3% between 2013 and 2017, INTERNATIONAL SANCTIONS particularly high during festival seasons. and is anticipated to reach 8.6 million by All major banks, such as Keshavarzi Bank, 2021. The lifting of international sanctions EN Bank, Pasargad Bank and Bank Melli The transaction volume at POS terminals against Iran is expected to encourage more Iran, offer gift cards, which can be obtained increased significantly from 5.6 billion foreign banks to expand operations there. for retail and corporate customers without in 2013 to 16 billion in 2017, at a CAGR In 2016, following the implementation of an account. of 30.2%, while the transaction value the Joint Comprehensive Plan of Action for To take advantage of the growing increased from IRR10.6bn ($294.38bn) in the development of Iran’s banking system, e-commerce market, banks such as Bank 2013 to $749.67bn in 2017 at a CAGR of the Central Bank of the Republic of Iran Mellat, EN Bank, Bank Pasargad and 26.3%. (CBI) partnered with numerous banks from Parsian Bank offer prepaid cards for online Contactless POS terminals are also countries including France, Austria, India, shoppers, encouraging customers to use gaining prominence in the country. China, South Korea, Japan, Russia and e-banking services to pay for utility bills According to Tehran-based payment Turkey. and online shopping. solution provider Sadad, the company has In August 2017, the CBI announced the As an example, Bank Mellat offers a installed 650,000 POS terminals in Iran, integration of the local Shetab and Russian prepaid card that can be used for online of which 150,000 are equipped with NFC Mir card networks, which will allow Iranian shopping and to pay utility bills. It features technology. <

www.electronicpaymentsinternational.com | 19

EPI October 2018 376.indd 19 22/10/2018 12:06:58 country snapshot | uruguay

country snapshot: URUGUAY uruguay

Government measures lead to gradual shift from cash

ruguay saw a gradual shift of the total debit card transaction value in All major banks now offer premium cards. towards electronic methods of 2017. For salaried individuals, Santander offers Upayment during 2013-2017, Restrictions on cash and reduced the Visa International credit card with no with the government taking steps to interchange fees have resulted in a annual fee for the first year, as a part of its promote electronic payments and reduce significant rise in debit card use. Debit Full Inclusion salary account package. dependence on cash. cards registered significant growths in Many banks also offer customised A major milestone was the financial terms of both transaction volume and credit cards for businesses. Scotiabank, for inclusion programme, through which value at the POS, with respective CAGRs example, offers the Visa and Mastercard 850,000 bank accounts had been opened of 107.7% and 100.4%. Government Corporate credit cards. by December 2017; as a result, the restrictions on certain transaction types are The prepaid card market registered percentage of the Uruguayan population also expected to encourage debit card use. robust growth in terms of both the number aged 15 or above with a bank account rose Pay-later cards accounted for 24.3% of of cards in circulation and transaction from 38.1% in 2013 to 61.0% in 2017. the total card transaction value in 2017, value. The prepaid card transaction value Initiatives such as reductions in with these cards generally targeted at high- rose from UYU2.6bn ($90.21m) in 2015 to interchange fees and VAT on debit and income and working consumers. $927.07m in 2017. With government focus credit card transactions, as well as subsidies Uruguay’s nominal GDP per capita stood on increasing financial inclusion, prepaid for POS installations and restrictions on at $17,345.92 in 2017, which is among the issuers are offering cards for working cash, also encouraged electronic payments. highest in Latin America. individuals to receive monthly salaries. Uruguayan consumers are more likely The number of POS terminals grew from to hold a credit card than a debit card. PAYMENT CARDS BY TYPE (MILLION) 25,299 in 2013 to 58,817 in 2017, at a However, debit cards registered strong Debit Pay later CAGR of 23.5%. growth in terms of transaction volume and To encourage merchant adoption of 2013 1.9 2.6 value, with respective CAGRs of 27.1% and POS systems, the government offered 17.3%. 2016 2.4 3.0 tax benefits between August 2014 and Debit cards accounted for 75.7% of the 2017e 2.7 3.2 December 2017 for merchants investing total card transaction value. However, cash 2021f 3.6 3.7 in POS terminals, accessories and billing withdrawals at ATMs accounted for 78.2% Source: GlobalData systems. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 9.7 3.1 2013 64.3 81.4 2013 1.2 25.3 2014 11.0 3.9 2014 68.5 96.4 2014 1.4 35.4 2015 12.0 5.3 2015 71.9 124.7 2015 1.5 43.5 2016 13.0 6.9 2016 75.4 161.3 2016 2.2 48.8 2017e 14.8 9.0 2017e 77.4 225.2 2017e 2.3 58.8 2018f 16.5 11.2 2018f 79.1 296.0 2018f 2.4 67.5 2019f 18.2 13.4 2019f 80.6 369.2 2019f 2.5 74.8 2020f 19.7 15.6 2020f 81.8 441.2 2020f 2.5 80.6 2021f 21.2 17.4 2021f 82.7 500.8 2021f 2.6 85.6 Source: GlobalData Source: GlobalData Source: Central Bank of Uruguay, GlobalData

20 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 20 22/10/2018 12:07:02 country snapshot | azerbaijan

country snapshot: AZERBAIJAN azerbaijan

Underdeveloped card payments a government focus

zerbaijan is a cash-oriented the State Social Protection Fund. This has separate credit card. Banks are, however, economy with a high unbanked encouraged many banks to offer social encouraging credit card use through Apopulation, low financial awareness, cards to senior citizens to enable them to benefits such as instalment payments. and inadequate payment infrastructure. withdraw their monthly pensions. Azerbaijan’s e-commerce market grew This is hindering the development of its According to central bank data, the significantly from AZN2.6m ($1.5m) in financial system, including payment cards, number of social cards stood at 2.5 million 2013 to $22.6m in 2017, at a CAGR of which remain at a nascent stage. and salary (debit) cards stood at 1.8 million 96.2%. The proliferation of mobile internet In comparison to peer countries Poland, as of January 2018, constituting 74.8% of use is a key driver of e-commerce growth, Russia, Ukraine, Romania, Turkey and the total number of debit cards. and many banks now offer payment cards Kazakhstan, Azerbaijan has the lowest Pay-later cards in Azerbaijan had a exclusively for online purchases. Examples card penetration and frequency of use. penetration rate of just 6.3 cards per 100 include Kapital Bank’s Visa Virtual card, and However, with government initiatives to individuals in 2017. The number of cards IBA’s Visa Internet card and Mastercard increase awareness of non-cash payments in circulation and the transaction value WebCard. Alternative solutions such as through financial literacy programmes, both fell in the past five years, largely as a PayPal, Wallet One and Azerpay will also a strategy to develop financial services, result of low consumer awareness of the boost e-commerce over the next five years. cash withdrawal fees, and new regulations benefits of credit cards, and high costs of The number of POS terminals recorded limiting cash transactions, payment cards lending. The availability of credit facilities a CAGR of 18.4%, rising from 33,285 in are anticipated to gain traction, recording on debit cards also reduces the need for a 2013 to 65,471 in 2017. The government CAGRs of 11.1% and 11.4% respectively in announced plans to introduce the Single terms of transaction volume and value for PAYMENT CARDS BY TYPE (MILLION) POS Terminal project in 2018, allowing the period 2017-2021. Debit Pay later merchants to accept all payment cards at The primary use of debit cards is for a single POS terminal, irrespective of issuer. 2013 4.7 0.9 distributing payroll and social payments. In December 2017, the central bank All major banks offer payroll cards for 2016 4.7 0.6 installed POS terminals at the state employees, and the government distributes 2017e 5.2 0.6 agency ASAN’s service centres, enabling social benefits such as pensions and 2021f 7.0 0.7 individuals to make card payments via the social insurance through banks, under Source: GlobalData government payment portal. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 5.4 0.7 2013 54.9 12.9 2013 2.4 33.3 2014 6.2 0.8 2014 65.4 13.8 2014 2.6 73.0 2015 6.5 0.8 2015 71.0 14.2 2015 2.7 80.3 2016 6.6 0.9 2016 69.9 13.5 2016 2.5 71.8 2017e 7.6 1.1 2017e 80.4 16.4 2017e 2.4 65.5 2018f 8.6 1.2 2018f 91.0 19.6 2018f 2.4 63.4 2019f 9.7 1.4 2019f 101.2 22.8 2019f 2.5 64.2 2020f 10.7 1.5 2020f 110.2 26.0 2020f 2.5 65.6 2021f 11.7 1.7 2021f 118.7 28.8 2021f 2.6 67.6 Source: GlobalData Source: GlobalData Source: Central Bank of Azerbaijan, GlobalData

www.electronicpaymentsinternational.com | 21

EPI October 2018 376.indd 21 22/10/2018 12:07:05 industry insight | standard chartered

A rapidly changing environment has also caused banks to turn to partnerships to help real-time payments: them adapt quickly. In recent years, the concept of open APIs has become increasingly prominent in our industry. In the next three to five years, we project a massive integration taming the new of service providers’ platforms, with banks leading the charge. Open API-led transformations will enable banks to accelerate collaborations with outside monster of flow organisations and third-party developers. Increased co-created systems will allow banks to redraw the boundaries of the products and As the world adopts real-time payments, creating massive services they offer. volumes of instantaneous transfers in seconds, the challenge With ever-changing consumer needs, agile for banks has evolved from managing liquidity to managing ways of working can help banks embrace new requirements. Agile software development, an velocity, writes Standard Chartered CIO Bhupendra Warathe approach based on iterative development that brings together small, cross-functional teams igitisation is driving the growth to develop solutions within weeks rather than and future of real-time payments. months, allows a product to go live sooner. D In Singapore, funds transfers At the same time, a project that is not on between two local accounts can be done track could ‘fail fast’, allowing the team to almost instantly. Hong Kong, which launched recalibrate and take a different course quickly. its near-instant payment scheme this month, The prevalence of technology in every may see bank-to-bank transfers completed just aspect of our lives also means that IT cannot as quickly. be a department that sits on its own in a Such payments have not only created the corporation. As banking becomes a seamless need for 24/7 funds flows, but also at higher digital process, IT professionals are now frequencies. As a result, payments and treasury integrated with every banking department. departments can no longer adhere to batch At Standard Chartered, besides having and daily processes, and the need to move to IT professionals across our 60 markets, four real-time systems is urgent. Centres of Excellence – two in India, one in Bhupendra Warathe, Standard Chartered While most of the development in fast Malaysia and one in China – support and payments has focused on domestic transfers and identity checks before the payment is provide expertise for our global operations. between individuals with a capped sum, in sent. At Standard Chartered, these systems IT teams are now closely integrated with some jurisdictions participants have included are supported by as many as 12,000 coders respective product and client solution teams non-bank businesses such as remittance and technologists, and they now account for for agile delivery. providers and e-commerce players. about 15% of the workforce. The numbers Talent and resources are critical for any With the current pace of implementation, also underline the extent to which banking has strategy. Besides having the best talent, it is a matter of time that cross-border instant become a digital business. there is also a need to be faster and more payments is fast becoming a reality. Just earlier scalable. There is a progressive shift to cloud- this year, SWIFT held exploratory talks with SPEED AND AGILITY based infrastructures which can connect banks from the Asia-Pacific region about the with multiple platforms such as those of development of an Asia-Pacific cross-border As we move forward, speed and agility are two industry-specific clearing houses, e-commerce real-time payments system based on SWIFT critical factors driving success. In the past, platforms, large commercial and government global payment innovation. software upgrades took place once every a few institutions. Demand for instant liquidity, dynamic months, but with the rapid changes in today’s Without a doubt, real-time payments are FX exposure management, as well as the environment, the development of software, redefining the banking landscape. In the next ability to process real-time cash flow and upgrades and deployment need to happen at a few years, there will be a multi-fold increase transaction data, mean banks have begun to much faster pace. in volumes, with clients expecting 24/7 deploy the combined strength of distributed Development operations is one way availability and scalability to handle peaks and ledger technologies, artificial intelligence and to deploy software into the production troughs. application programming interfaces (APIs) environment more quickly. With this We foresee intense competition for talent to transform into a highly effective, high- approach, testing and deployment processes and resources – not just in the banking performing and value-added banking service are fully automated. New code is dropped into industry, but also with tech firms and telcos. for clients. production while the system with the previous A survival of the fastest, the organisations that The speed of real-time payments also makes codes will still function, allowing the end user can react to the change the fastest will be the it vital for banks to perform instant fraud to continue using the services. true winners. <

22 | October 2018 | Electronic Payments International

EPI October 2018 376.indd 22 22/10/2018 12:07:06 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF PRIVATE BANKING Private Banking & Wealth Management: Switzerland 2018 12th December 2018 ∤ Marriott, Zurich

Private Banking & Wealth Management: Switzerland 2018 Conference and Awards leverages the expertise across the Verdict research and publishing portfolio, including Private Banker International, Wealth Insight and Wealth Intelligence Centre. The event is an opportunity to share ideas, discover trends and network with peers across the wealth industry.

Key Issues :

∤ Economic trends to 2020. Wealth ∤ How should Switzerland’s private banking management industry performance industry define itself in the age of digital technology and intensifying competition? ∤ With technology playing an increasingly significant role in service delivery what ∤ What channels are working for attracting, benefit does institutional size confer? retaining and managing an increasingly diverse customer universe? ∤ What are the implications for service, delivery and product distribution in the ∤ What’s the connection between distribution age of the digital wealth manager? and profitability? How are Swiss private banks adapting to the challenge of tight ∤ How is technology enabling faster, more cost margins and higher costs? effective on-boarding, KYC and compliance reporting among wealth management ∤ What does the country need organisations? to do to stay ahead?

Gold Partner: Silver Partner: Bronze Partners: Exhibitor: Supported by

For more details please contact:

Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF RETAIL BANKING Retail Banking: Europe 2018 28th November 2018 ∤ Hesperia Hotel, Madrid

Retail Banking: Europe 2018 is moving to Madrid for a day of discussion between traditional and challenger banks along with selected solution providers about the key issues of today in the European retail banking sector. Key issues:

∤ The digital transformation ∤ Enhancing customer experience of European banking in the digital age ∤ How to make the most of Open Banking ∤ The role of branches in the 21st century ∤ How can traditional banks benefit ∤ Adapting for the millennial customer from open APIs? ∤ Are mobile-only banks the future? ∤ PSD2 and fraud: What new trends are developing? ∤ The opportunities for blockchain and cryptocurrencies ∤ GDPR: The early experiences following implementation

Silver Partner: Bronze Partner: Panel Host: In Association with:

For more details please contact:

Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580