www.electronicpaymentsinternational.com Issue 377 / novemBER 2018

WORLD LEADER

TRANSFERWISE’S LOW-COST MODEL SCORES A TRANSFER MARKET HIT COUNTRY SURVEYS INSIGHT ANALYSIS

Analysis and key payment The ‘good guys’ need to The EWPN’s Miranda market data for Croatia, innovate at the same pace McLean on gender diversity Thailand and New Zealand as the fraudsters in

EPI November new 2018 377.indd 1 29/11/2018 16:26:48 contents this month

COVER STORY NEWS 10 05 / EDITOR’S LETTER 06 / DIGEST • Google Pay launched for New Zealand online merchants • Visa takes minority stake in payments firm Billdesk • SmartPesa unveils softPOS in South East Asia • Swiss probed over alleged Apple and Samsung Pay boycott • Westpay payment terminals introduced on Android • CYBG, Worldpay sign payments partnership • Mastercard opens payments tech hub in Australia • Amazon pumps $30m into payments arm in India • Grab and KBank partner in Thailand • Starling partners with Post TRANSFERWISE Office • TransferWise secures £65m investment Editor: Group Editorial Director: Director of Events: Douglas Blakey Ana Gyorkos Ray Giddings • MoneyGram fined $125m for AML +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2585 lapses [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]

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

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2 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 2 29/11/2018 16:26:53 contents novemBER 2018

COUNTRY SNAPSHOTS 18 / CROATIA 18 The Croatian payment card market is growing, with a penetration rate of 2.1 cards per inhabitant in 2017. Despite this, payment card frequency of use in Croatia is one of the lowest among its peer countries 20 / THAILAND Cash remains the preferred method of payment in Thailand, accounting for 96% of the total payment transaction volume in 2017. However, card payments are set to increase in popularity in coming years 21 / NEW ZEALAND According to a February 2016 Mastercard survey, New Zealand has the lowest cash use among the OECD countries, and around half of survey participants expected cash payments FEATURE RESEARCH to cease in the following 10 years 10 / TRANSFERWISE 13 / REAL-TIME PAYMENTS 14 Digital firm TransferWise is not With banks pushing to transform the user just a fintech unicorn: it believes it has now experience, customers have more choices than proved that its business model is profitable. ever. Andrew Hewitt, director of payment and Robin Arnfield talks to bank partnerships data solutions at FIS, discusses the new era for technical lead James Ferretti the banking sector with Briony Richter ANALYSIS 16 / FRAUD Cyberfraud and malware attacks are 12 / GENDER DIVERSITY decreasing, but is this just the eye of the The EWPN is a dynamic network for women storm? With heavy shopping periods left in from all EU and EEA member states working the year, cybercriminals are ready to strike in financial services. Executive board member again. Patrick Brusnahan reports Miranda McLean speaks to Briony Richter about diversity in the financial sector TECHNOLOGY 14 / TEMENOS 12 Technologies like artificial intelligence and machine learning are having a significant and positive impact on payments. Briony Richter speaks to Prema Varadhan, chief architect at Temenos, about its AI Centre of Excellence SECURITY INDUSTRY INSIGHT 15 / COMPUTOP 22 / RISK IDENT The financial sector may be moving rapidly Fighting fraud is a fast-paced business. The with multiple emerging technologies, but ‘good guys’ need to innovate at the same rate the payments system is being exploited every and, importantly, increase the agility and day. Computop CEO Ralf Gladis speaks to speed of development in software engineering, Briony Richter about fighting fraud write Felix Eckhardt and Piet Mahler

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EPI November new 2018 377.indd 3 29/11/2018 16:26:56 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

EPI November new 2018 377.indd 4 29/11/2018 16:26:57 editor’s letter

HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE 2018: a lot of OF PRIVATE BANKING positives, but a lot of Private Banking & Wealth Management: Switzerland 2018 12th December 2018 ∤ Marriott, Zurich red ink Douglas Blakey, Editor 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 s is traditional, EPI and its sister cards and with one half of SWIFT gpi payments credited to end banking titles will publish a number of beneficiaries in less than 30 minutes. with peers across the wealth industry. A end-of-year review comment pieces and The Second Payment Services Directive (PSD2), driving 2019 forecasts from leading industry figures in the radical payments transformation and requiring banks to Key Issues : January issues. open customer data to third-party providers for account If you would like to add to the debate, please let information and payment services – i.e Open Banking ∤ Economic trends to 2020. Wealth ∤ How should Switzerland’s private banking me have your comments and forecasts by email by 7 – will inevitably feature in many an expert’s year-end management industry performance industry define itself in the age of digital December – my email address is undernoted. reviews. It is early days, but Open Banking deserves to be technology and intensifying competition? ∤ With technology playing an increasingly In advance of the experts’ comments, and using editorial placed firmly in the positives column. To expect instant significant role in service delivery what ∤ What channels are working for attracting, privilege, I will get my random jottings in first. 2018 is adoption by millions of consumers was never going to benefit does institutional size confer? retaining and managing an increasingly shaping up to be a very mixed year, but let us take the happen. The rise of instant payments across Europe is also diverse customer universe? What are the implications for service, positives first. going to plan, with many domestic initiatives either live or ∤ in the process of implementation. delivery and product distribution in the ∤ What’s the connection between distribution Cash displacement age of the digital wealth manager? and profitability? How are Swiss private banks adapting to the challenge of tight In the UK, debit card transactions overtook cash as the Negatives: a lot of red in 2018 ∤ How is technology enabling faster, more cost margins and higher costs? most popular form of payment for the first time. Forecasts It has been a dire year for bank share performances. In the effective on-boarding, KYC and compliance of the impending demise of cash are usually hopelessly UK, HSBC is the strongest-performing bank stock, down reporting among wealth management ∤ What does the country need optimistic and wide of the mark, and the UK is no Sweden by a mere 13% from the start of the year as EPI goes to to do to stay ahead? organisations? Mk II, but the direction of travel is encouraging. All I would press. Lloyds is down by 17%, Barclays down by 19%, RBS suggest, gently, to the anti-cash brigade is that there will down 21%, Santander down 24%, TSB-parent Sabadell remain for some time to come consumers who want to down 33%, with Metro Bank and Clydesdale both down retain the choice of using cash. by 40%. It has been another good year for contactless payment The position in Germany is just as bad, with Deutsche acceptance across many sectors and markets, and 2019 Bank and Commerzbank down by 48% and 37% looks set for further growth. The day when the contactless respectively. In Canada, even RBC and Toronto Dominion limit is again increased cannot be far away, and a raise are down, albeit modestly by 6% and 3% respectively. from the current UK £30 limit to £50 might well be Looking ahead, UK bank stocks have the potential to

reasonable. recover in part if the gloomier forecasts relating to Brexit It has been a good year for interest rates, and further turn out to be misplaced. But across Europe, 2019 will be increases set for 2019 – all things being equal – will help no easier a year in relation to payments and compliance. to boost bank profitability. Elsewhere, the Pays continue The clock is ticking for EU banks to implement their to attract positive PR with the roll-out of Google Pay and Strong Customer Authentication solutions. Final further expansion of , notably in Germany. designs will need to be compliant without creating an Other major positives include the increasing enthusiasm unacceptable customer experience. Will customers, for of bank partnerships – and not just with fintechs. Japan’s example, be prepared to accept one-time passcodes MUFG agreement with Bradesco to develop its new cross- by SMS? There is ample evidence that many customers border payment service using Ripple’s xRapid and XRP will happily ditch PIN codes and passwords in favour of Gold Partner: Silver Partner: Bronze Partners: Exhibitor: Supported by technologies was one such deal of note. biometric authentication. SWIFT gpi has enjoyed some success with the adoption The New Year promises to be just as exciting as the year now by almost 300 financial institutions. In excess of just ending, hopefully with rather fewer endlessly boring $100bn in SWIFT gpi messages are now sent every day, Brexit squabbles in the UK. <

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Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 www.electronicpaymentsinternational.com | 5

EPI November new 2018 377.indd 5 29/11/2018 16:26:58 News | Digest

news digest Google Pay launched for New Zealand online merchants Google has joined forces with Paymark, an Google Pay enables users to pay for online electronic payments provider in New Zealand, purchases using payment details stored in to offer mobile payment service Google Pay to their Google account, utilising card credentials the country’s online merchants. linked to their Google account at the Paymark claims to be the first processor checkout. This eliminates the requirement to in New Zealand to provide the service, and type in credit card data. said it has worked closely with Google on the Google Pay group product manager initiative. Prasenjit Phukan said: “We want to make Paymark head of e-commerce Darren it easier for businesses like Paymark to offer Hopper said: “As New Zealand’s original a simpler, faster payment solution for their financial tech startup, Paymark has always customers. With Google Pay, customers will looked to the next innovation, to the next way be able to speed through checkout with just a to make payments easier. few clicks.” “With more consumers using mobile The Google partnership forms part of devices to make online payments, the easier Paymark’s strategy to work with fintechs, we can make the process the better. Our banks and merchants to transform New objective is to completely remove the need Zealand’s payments sector. It plans to launch to type long and tedious credit card numbers several payment innovations in the next year, into websites.” using its Open Payments Enabled Network. < Visa takes minority stake in payments firm Billdesk Visa has acquired a minority stake in Indian Having worked with BillDesk’s founders its deep network and strong relationships, payments processing business Billdesk. over the years, the Visa leadership has is a great partner, as well looking to offer BillDesk processes over $60bn in been consistently impressed with their our services in other markets.” electronic payments per year, and vision, market knowledge and execution The deal is pending statutory approval, intends to use the new capital to launch capabilities, as well as alignment on values. and Visa said it will have no direct bearing new products for payments and loyalty “This investment further reinforces our on its operations. Neither the financial businesses, and expand its presence into long-term commitment to India’s digital terms nor the size of the stake were other markets. payments growth story.” revealed. Visa’s Asia-Pacific regional president, BillDesk co-founder MN Srinivasu Visa has previously invested in various Chris Clark, said: “As a leading payments added: “We now look forward to building other fintechs, such as Paidy, Behalf, player in India, BillDesk has been a new products and solutions that benefit Marqeta, Payworks, , LoopPay, long-time business partner to Visa. merchants as well as consumers. Visa, with Square and . < SmartPesa unveils softPOS in South East Asia Singaporean mPOS solutions provider businesses accepting card payments. SmartPesa has launched a new solution SmartPesa co-founder and CEO Barry that will accept contactless card payments Levett said: “We believe this is a significant without a physical terminal. leap forward in terms of providing great The new softPOS offering can accept convenience to merchants and providing Visa payWave and Mastercard payPass more places for customers to pay with their contactless debit and credit cards, as well existing contactless cards. as Android Pay, Samsung Pay and Apple “The industry has been suffering Pay payments. confusion generated by an influx of new With softPOS, users can make e-wallet startups, which may be counter- contactless card payments on an NFC productive in terms of addressing ongoing phone, tablet or hardware running Android. payment fragmentation. SoftPOS takes a SmartPesa said the new proposition very focused, practical approach to provide will facilitate quick onboarding of new efficient card payment by using just a merchants and increase the number of mobile app. <

6 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 6 29/11/2018 16:27:03 News | digest

Swiss banks probed over alleged Apple and Samsung Pay boycott investigation and are convinced that the allegations will prove to be unfounded. We already offer to consumers in Switzerland access to Apple Pay and Samsung Pay through our subsidiary Swisscard, of which Credit Suisse owns 50%. “In addition, we have been in talks with companies such as Apple, Samsung or Google for several months to discuss how their mobile payment solutions could be offered to our clients.” UBS claimed that it held negotiations with Apple Pay in 2016, but failed to finalise an agreement. “Although we have The Swiss competition commission has cards available for use with Apple Pay and offered several alternatives, unfortunately launched a probe into several financial Samsung Pay, in order to favour the Swiss no agreement could be reached,” the bank services businesses, including UBS and solution, Twint,” the watchdog said. said. PostFinance also denied the charges. Credit Suisse, over suspicions that they PostFinance, Swisscard and Aduno were Twint added that its premises had jointly boycotted Samsung Pay and Apple also investigated, and the offices of all also been searched, even though it had Pay to benefit local mobile app Twint. these entities were raided. previously demanded a probe into Apple “There is the suspicion that the Denying the allegations, Credit Suisse for hampering the use of its app on IOS companies agreed not to make their credit said: “We are surprised about this devices. < Westpay payment terminals introduced on Android Payments solution provider Westpay has Carbon also supports 4G and dual- include a lightweight design and large screen. announced plans to launch a range of band Wi-Fi with roaming capabilities. It Westpay commented: “Big screens are not payment terminals built on the Android addresses security concerns through PCI 5.x small matters. Carbon payment terminals operating system. compliance. have the largest screen-to-body ratio yet, The new proposition, Carbon, supports “Payments must work. Simple as that! whilst maintaining a small physical footprint. cloud-based payment solutions and tight With Carbon, Westpay brings a completely A premier design in a most robust package integration to external POS apps. It also new payment experience to the market – a makes Carbon a grand experience for the integrates with Westpay’s current payment payment solution unlike any other,” the user.” gateway. As well as offering a quick experience, company said. The Westpay payment terminals are the solution will also run third-party apps To meet current customer expectations, scheduled to be introduced across Europe without hampering core payment functions. the new Westpay payment terminals will also from early next year.< CYBG, Worldpay sign payments partnership UK banking group CYBG has signed a the provision of merchant services to our referral partnership to offer Worldpay customer base is an important cornerstone payments services to business customers. of our business offering as a full-service The five-year alliance will enable challenger bank. the bank’s customers to access the full “As well as enhancing the services Worldpay payments suite, including available for existing customers, this will traditional and mobile POS solutions, also benefit customers who change their online gateway products, and omni-channel banking provider once the RBS Business payments technology. Bank Switch Scheme launches in February The bank’s customers will also be able 2019. This is a significant opportunity to access other Worldpay tools, such as to increase competition in SMB Banking its Business Dashboard. The partnership and the introduction of these additional aims to reduce the time needed for small payment products with Worldpay further businesses to set up and start operations. boosts our technology offer.” CYBG’s group customer banking director, Worldpay currently processes over Gavin Opperman, said: “The completion of 40 billion transactions per year in 146 this new agreement marks the next phase countries, and supports more than 300,000 of our partnership with Worldpay, and small businesses in the UK. <

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EPI November new 2018 377.indd 7 29/11/2018 16:27:05 News | Digest

Mastercard opens payments tech hub in Australia change in payments than we’ve seen in the previous 50 years. Australia is a unique and advanced marketplace, making it the perfect bed for testing and innovating with customers. “By closing the gap between customers, product and development, businesses of all sizes – enterprises, SMEs or startups – are now able to bypass legacy approaches. They can develop innovation at an accelerated pace.” The company’s president of operations and technology, Ed McLaughlin, added that Mastercard centres across the world enable the building of secure and convenient real- world technologies. New South Wales (NSW) Treasurer Dominic Perrottet noted: “The NSW Mastercard has opened a Global Tech Hub The card giant expects the Mastercard government is working very hard to in Sydney, to accelerate innovation beyond Global Tech Hub to support its expansion promote innovation, adopt new technology payments services. into the local payment market, working and accelerate growth and investment.” The Mastercard Global Tech Hub will with the retail, government and finance Perrottet continued: “As Australia’s only house more than 550 employees, and industries in Australia. global city, Sydney is the doorway to the enable Mastercard and its partners to Mastercard’s division president in rest of the world. This new Tech Hub is collaborate on designing, creating and Australasia, Richard Wormald, commented: another vote of confidence in the future of testing new, tailored solutions. “In the next five years we will see more NSW.” < Amazon pumps $30m into payments arm Grab and KBank from Amazon, following an INR2.3bn partner in Thailand infusion in June and INR1.9bn in March. Ride-hailing app Grab has collaborated with Amazon said that during its recent Thailand’s Kasikornbank (KBank) to launch festive season in India, digital business the GrabPay Thailand by KBank mobile accounted for 75% of all transactions, wallet. attributing the rise in digital transactions to Expected to launch early next year, the new cashback offers and other payment options wallet will enable users to pay for travel and delivered through . delivery services and online purchases, and Amazon Pay revenues rose by 5,100% transfer funds. It will also enable Grab users this financial year, although losses to make QR-code payments at restaurants increased by 88%. In the 2017-18 and shops in Thailand. QR-enabled financial year, the company posted a loss merchants in Thailand can accept the wallet of INR3.3bn and invested INR2.6bn in through the country’s national e-payments advertising and promotion. system, PromptPay. “While the services of the company Grab Financial senior MD Reuben Lai saw significant adoption in a short period said: “This partnership makes Grab Financial of time, the new KYC regulations have the first mobile payments platform to launch impacted customer experience and e-money-licensed payments services across negatively altered the migration trajectory ASEAN-6, and underlines the strength of our of cash customers to digital. Amazon Pay partnership-based strategy.” E-commerce giant Amazon has infused India Private Limited, however, remains KBank also invested $50m in Grab as INR2.2bn ($30m) into its payments arm, committed to solving this challenge and part of Grab’s ongoing fundraising round, Amazon Pay, in India, marking the fourth has applied for a KYC User Agency licence which also involved Toyota Motor, Microsoft, fund infusion into Amazon Pay by its parent to offer customers digital Aadhar-based Booking Holdings and Hyundai Motor in a year. KYC services which are currently under Group. In October, the payments business review with UIDAI,” the company stated in Features from KBank’s K Plus app and the received additional capital of INR5.9bn its filing. < Grab app will be integrated next year. <

8 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 8 29/11/2018 16:27:08 News | Digest

Starling Bank partners with Post Office Starling Bank has announced a partnership only Starling – can withdraw and deposit cash, with the Post Office, enabling the digital and check balances through their local Post challenger bank to offer everyday banking Office branch. services to both personal and business Starling Bank CEO Anne Boden said: customers. “There are now over 1,500 communities The Post Office has more branches than all in the UK with no bank branch, so by UK banks and building societies combined, combining Starling’s cutting-edge digital including around 6,000 branches in rural banking technology with the unique reach of areas, meaning 99.7% of people in the UK Post Office branches, we can bring simple and live within three miles of their nearest branch, affordable banking back to these bank branch and almost 93% live within just a mile. deserts. The partnership will enable Starling Bank “I set up Starling Bank with the mission to provide solutions to the more than 1,500 of improving financial health and making rural “banking deserts”, rural communities banking about the customer again. This is Anne Boden, Starling Bank that have been left without any access to a exactly the kind of development that will help local bank branch. It will also allow Starling customers, which will be able to see near- us achieve this, returning banking services to Bank current and business account customers real-time credit into their accounts from cash often forgotten communities.” to deposit and withdraw cash using the Post deposits into Post Offices. The market has The challenger faces competition from Office’s 11,500 branches across the UK. seen rapid growth for the Post Office, with Monzo and Revolut, but views its proposition With Starling users currently managing around 25 million business deposits in 2017. as long-lasting and more valuable. all their finances within the bank’s app, the The partnership brings the total number of The Telegraph recently reported that Starling partnership with the Post Office creates a new banks in the Post Office Banking Framework had secured £10m ($12m) in new funding platform for its customers. to 28, meaning that customers of almost from Bahamas-based hedge fund manager The Starling partnership also delivers all UK banks – from traditional high street Harald McPike, as it gears up for an £80m significant benefit to business account branches to online banks and now mobile- round to challenge rivals. < TransferWise secures £65m investment from NatWest, JP Morgan, LHV Bank UK-based money transfer business bespoke funding solution that is reflective conveniently. This revolving loan provides TransferWise has raised £65m ($83.2m) in of the company’s exponential growth and cost effective working capital, helping us funding from NatWest, JP Morgan and LHV unique business model. We look forward continue to deliver an exceptional service Bank. to continue working with the team and to customers as we grow at pace.” The company plans to support existing supporting their future growth ambitions.” In June 2018, TransferWise collaborated and future working capital needs with the TransferWise currently has a client base with UK challenger bank Monzo to new syndicated debt facility. of over 4 million, and moves £3bn a month strengthen its international payments NatWest relationship director Matt on behalf of its clients. capabilities. Earlier in the year, it became Whittle said: “We are delighted to continue TransferWise CFO Matt Briers said: the first non-bank member to gain direct our support of TransferWise; NatWest has “TransferWise is all about moving money access to the UK’s Faster Payments worked closely with the team to structure a around the world faster, cheaper and more Scheme. < MoneyGram fined $125m for AML lapses MoneyGram International has agreed to money transfers and share them with the In response, MoneyGram chair and CEO pay a fine of $125m to resolve charges by FTC, as required under the 2009 order. It Alex Holmes said: “Over the past several the US Federal Trade Commission (FTC) also failed to offer adequate training on years, we have taken significant steps to and the Department of Justice (DoJ) that it fraud management to agents, the FTC said. improve our compliance programme and failed to control fraudulent . At the same time, MoneyGram was have remediated many of the issues noted The FTC said MoneyGram breached accused of breaching a 2012 deferred in the agreements. a 2009 order that required it to probe, prosecution agreement with the DoJ that “Currently, our consumer fraud reports suspend and terminate high-fraud agents. required the company to put in place are at a seven-year low; less than 0.05%, The agency alleged that the company did effective AML measures. The breach or five basis points, of all transactions not adequately address fraud originating resulted in the processing of another conducted through MoneyGram systems from large agents, and instead focused on $125m of fraudulent transactions are reported as fraudulent. We will lower-volume “mom and pop” agents. between April 2015 and October 2016. continue to bolster our compliance The firm was also accused of failing to The settlement amount will be paid to programme to ensure it meets the highest record complaints about fraud-induced consumers affected by the fraud. industry standards.” <

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EPI November new 2018 377.indd 9 29/11/2018 16:27:08 feature | transferwise

transferwise: using a low-cost model to build profitability

Digital remittance firm TransferWise is not just a fintech unicorn: in its latest financial year, it moved into profit. The business, whose stated aim is to bring the cost of remittances down to nearly zero, says it has now proved its model is profitable.Robin Arnfieldtalks to bank partnerships technical lead James Ferretti

n September 2018, TransferWise into and out of the US since TransferWise’s market is a good thing and can result in more announced that its annual revenues had launch in 2011. choice for consumers, but we believe new Irisen by 75% in the year to 31 March “TransferWise doesn’t view itself as a entrants should aim to meet new standards of 2018 to £117m ($151m), from £66m. remittance company,” says senior Aite Group transparent pricing, speed and convenience for TransferWise posted net profit after tax of analyst Talie Baker. “It’s targeting a different the benefit of customers.” £6.2m for the year to 31 March 2018. After segment of the population, whereas firms such Ferretti says TransferWise’s vision is to make a tax credit of £6.99m, TransferWise posted as Paysend, InstaRem, XendPay, WorldRemit, money move around the world as fast and net profit of £6.19m last fiscal year. Operating Xoom and TransferGo target migrant workers as cheaply as email. “We call that vision our profit rose to £9.5m in fiscal 2018, after a loss and focus on frequent, small-value transfers. Mission Zero,” he explains. of £519,000 in fiscal 2017. “Since inception, TransferWise has focused “There’s really no reason people have to pay TransferWise has seen significant growth, on a more affluent segment of the population so much to send bits and bytes across borders. particularly since launching its borderless – people who travel internationally and need We’re the cheapest, fastest provider for most account for consumers in April 2018. This to frequently exchange money. It’s more of a people who need to send money overseas, follows the 2017 launch of a business version marketplace: ‘I have euros and need dollars. but we still try to lower prices whenever we of the borderless account. You have dollars and need euros. The app manage to cut our costs through innovation or connects us, and we exchange funds more economies of scale.” 40 CURRENCIES cheaply than a bank would do for us.’” In 2018, TransferWise has had 30 price drops to date, and once or twice has also TransferWise’s borderless account lets COMPETITION had to raise prices where costs rose, Ferretti customers hold over 40 different currencies says. “The important thing is that customers and send and spend money abroad using their James Ferretti, bank partnerships technical should pay for the service they receive – no contactless TransferWise debit Mastercard. lead at TransferWise, recognises that the cross-subsidisation, no hidden charges, no Account-holders receive Australian, UK, company has to remain competitive with window-dressing of the product as ‘free’. Just European and US bank account numbers. other digital remittance firms such as one simple up-front fee.” As of September 2018, over 2 million WorldRemit, InstaRem, Xoom, TransferGo transactions had been made on TransferWise and Paysend. B2B debit cards, with a US debit card launch “Since TransferWise’s launch, there have planned for the fourth quarter of 2018. always been other digital money-transfer Ferretti believes businesses have a huge need Globally, TransferWise’s 4 million firms on the market,” he says. “Some provide for services such as TransferWise. customers use the platform to transfer $4bn a fair service, but many still hide their fees in “In the UK, Capital Economics has found every month. The US remains a major poor exchange rates, and lots are almost as that SMEs lose £4bn a year in exchange rate corridor, with customers moving over $19bn expensive as the banks. Competition in the mark-ups when they send money abroad,” he

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EPI November new 2018 377.indd 10 29/11/2018 16:27:10 feature | transferwise

says. “That’s all hidden fees on top of the up- He added that TransferWise was applying front charge their bank told them about. for a stored-value facility licence in Hong “Since 2015, we’ve worked on a suite of Kong so it can connect to Hong Kong’s Faster products to meet the needs of businesses, Payments System. from sole traders to bigger firms, including TransferWise is part of a Monetary the launch of our borderless account and new Authority of Singapore working group features such as batch payments. It’s a work in examining how non-banks can connect progress, but things are going well. Currently, to Singapore’ bank-only Fast and Secure we’re adding 5,000 new, active business Transfers system, Reuters says. accounts every week.” In April 2018, TransferWise secured The TransferWise borderless account is a authorisation to hold a settlement account huge focus area for the company right now, in the Bank of England’s Real Time Gross says Ferretti. “It’s the first time anyone has Settlement system, making it the first non- been able to get real bank details in sterling, James Ferretti, TransferWise bank member to gain direct access to the UK’s euros, US dollars and Australian dollars in type of partnership allows banks to offer the Faster Payments Scheme. minutes, without paying extortionate fees to service to their clients, while offloading the “We’re calling on regulators and central their bank for a specialist account,” he says. risk and cost of compliance to TransferWise. banks around the world to make it possible “We’ve accepted over £2bn in customer While TransferWise gets more people using its [for us to join faster payments schemes],” says deposits since we launched the business platform, the banks offer a service and make Ferretti. “Right now, the Bank of England is borderless account in 2017, and the borderless some money while maintaining the customer the only central bank in a major market to account is live for consumers and businesses relationship. It’s a great way for banks to stay allow fintechs access to settlement accounts across Europe, the US and Australia so far. in the remittance biz.” and direct membership of a faster payment We launched the debit card attached to the TransferWise has additional bank scheme.” account in Europe in April 2018, and plan to partnerships in the pipeline, Ferretti says. Ferretti says direct access to faster payments roll that out in the US and further afield from schemes is hugely important for TransferWise. 2019.” FASTER PAYMENTS “It means we can compete on a level playing field with the incumbents, and offer a faster, API INTEGRATION One of TransferWise’s stated aims is to speed more efficient service for customers by cutting up international remittances; to do this, it out the middle man,” he says. Instead of competing with them, TransferWise needs direct access to faster payments systems “In the long term it will enable us to lower has been signing deals with banks to ensure in multiple markets. costs too. Other central banks around the that their customers can send and receive In October 2018, TransferWise CEO world are following the UK’s lead – Hong money via its platform from the bank’s digital Kristo Käärmann told Reuters that the firm Kong, Singapore, Australia and the EU – but app. plans to connect to new instant payments we would love the US to consider the same In June 2018, TransferWise announced API infrastructure in Hong Kong and Singapore. approach.” < partnerships with BPCE Group in France and UK challenger bank Monzo, in addition to existing API partnerships with Germany’s N26 and Estonia’s LHV. Its API integration with TransferWise: born of frustration BPCE goes live in early 2019, while Monzo Sending money abroad is deceptively it does not. An epiphany saved them has already added a TransferWise tab to its expensive, thanks to the hidden thousands of pounds. charges we’ve all been forced to pay. banking app. Taavet had worked for Skype in The banks claim “free money transfers”, Ferretti says that, since launching its Monzo Estonia, so was paid in euros, but lived “0% commission” – sounds like money’s API integration in June, TransferWise has sent in London. Kristo worked in London, over £10m overseas for Monzo customers. already flowing freely, but far from it. but had a mortgage in euros back in “The Monzo partnership is growing about It’s pure propaganda. Estonia. They devised a simple scheme. 200% month on month right now,” he says. TransferWise removes all the Each month the pair checked that “The BPCE partnership will be launched to wrongness, letting people send money day’s mid-market rate on Reuters to BPCE’s 15 million customers in 2019. That’s abroad at the lowest possible true cost. find a fair exchange rate. Kristo put our first incumbent banking partnership Using only real exchange rates and tiny pounds into Taavet’s UK bank account, and it will be a game changer in France. not-hidden fees. Headaches averted, and Taavet topped up his friend’s Overnight, BPCE will become the cheapest and a revolution sparked. bank in the market for money transfers.” euro account with euros. Both got the Baker is convinced that TransferWise’s How it happened currency they needed, and neither paid a cent in hidden bank charges. API partnerships with banks is a brilliant Taavet Hinrikus and Kristo Käärmann business move. “Banks have got out of the are two friends who believe that “There must be others like us,” the remittance business as regulation made it money is meant to flow freely. But epiphany went. “And the rest is unprofitable, even though banks realise their in the absence of a global currency, TransferWise.” < customers need the service,” she says. “This

www.electronicpaymentsinternational.com | 11

EPI November new 2018 377.indd 11 29/11/2018 16:27:10 analysis | gender diversity

There is still a very long way to go, although McLean points out some promising and empowering women significant improvements. “Shared parental leave in some markets has allowed more women to return to work sooner, and the gender pay gap has finally been recognised, to transform the which means progress can be made.” She continues: “One very important change took place in 2015, when Martha Meghendi- Fisher founded the EWPN to champion payments sector the skills and expertise of women in the burgeoning fintech and payments sectors. Some very big companies have joined – and The European Women Payments Network (EWPN) is a not just those with a high proportion of women in leadership.” dynamic and inclusive network for women from all EU and EEA member states working in various financial services. WHAT CAN BE DONE? Miranda McLean, global head of marketing for Banking A proactive approach to creating diversity in Circle and a member of the EWPN executive board, speaks the financial sector will essentially broaden to Briony Richter about diversity in the financial sector the talent pool and enhance the workplace culture. However, there is no simple solution to the issue of gender inequality: it needs reating diversity in the top levels “Of course, this results in very few women to become a bigger conversation, and of financial services continues to sitting around the table at decision-making organisations need to ensure that any steps Cbe a challenge for the industry. meetings, where the outcomes could affect implemented are adhered to. Improving diversity and inclusion for opportunities available to other women. So what can financial services organisations women is not a quick process, especially at Policies can inadvertently disadvantage do to ensure that they are moving in the right executive levels. women, but a board entirely made up of men direction to improve diversity? It is crucial for those in top positions to can mean that those at the top are “Change can only happen when actively encourage and follow through with unaware of the issue, so things the wider industry accepts there inclusion policies. While gender diversity is do not change.” is a problem and moves to often a priority for many organisations, many There are still many make a momentous change,” do not ensure that steps filter all the way companies around the McLean says. though the company; unless this happens, world that do not run “Companies must change will not. programmes designed encourage women to step EWPN’s main goal is to create an inclusive specifically to help women forward for the higher roles, and professional platform that will empower, enhance their leadership and must provide them with Miranda McLean, inspire and support women across the skills. McLean highlights that EWPN tailored training to give them industry. The initiatives will help them achieve what EWPN has noticed is that the boost they need. The right their full career potential through various many women suffer from ‘imposter support will empower women to more programmes including: syndrome’ – meaning women themselves readily step out of their comfort zone. • Remarkable Women in Leadership; do not believe they bear close scrutiny in “The biggest change needs to be made to • Mentorship; top roles. It is a matter that EWPN has the preconceptions of the industry. We need • Millennials Young Leaders; been strongly working on to promote those to work together to change how everyone sees • Individual and Corporate Membership, and programmes, and McLean adds that there has the industry and its opportunities. If we can • Corporate Sponsorship. been great success with its programmes in a change the masculine image now, we will be short period. able to encourage young women and girls still Speaking to EPI, McLean talks about some As in any industry, the gender pay gap at school today to consider a future career in of the challenges that women face while trying means there is less motivation to progress up finance, payments and fintech. to reach the top in the financial industry. the ladder. In addition, women often feel held “The more diverse the industry, the wider “Encouragingly, getting into the industry back from reaching their full career potential the range of experience and insights from doesn’t seem to be an issue for women,” she when they have to take maternity leave and which it can benefit. It will also be better notes. “We are well represented in entry-level come back part time. Although these are very suited to meet the needs of an increasingly and mid-management positions throughout normal stages in a woman’s life, a stigma still diverse customer base.” the industry. However, there are very few surrounds it. In many ways, women in the Creating an inclusive platform that offers women in the more senior roles. In fact, the financial sector and others feel more grateful equal opportunities for everyone working in further up the chain you look, the lower the to have a job than confident that they have the payments industry will deliver benefits to numbers of women. earned it. both the employees and employers. <

12 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 12 29/11/2018 16:27:10 research | real-time payments

will continue to move in that direction,” Hewitt notes. real-time payments: “At FIS we understand that we have a responsibility to help the industry grow, and grow with it. With the ever-changing regulatory landscape, FIS’s strategy is to help will banks keep people connect, thrive and keep our finger on the pulse of real-time payments around the world, so that when there is a change, we have a solution for it. up with the pace? “More often than not it’s about bridging the gap between old and new. For example, our payments hub software is able to join With banks pushing to transform the user experience, up new technologies with legacy systems to customers are offered more choices than ever. Andrew Hewitt, help businesses execute the latest real-time director of payment and data solutions at FIS, discusses the payments solutions.” new era for the banking sector with Briony Richter CHALLENGES

cross the world, a growing number US are not operational at scale, the report While Open Banking opens up new of payment systems are moving to noted significant growth in the country. The opportunities, a concern for incumbent A real-time. global growth of systems moving to real-time banks is that new fintechs that have entered This is according to the fifth annual is largely driven by the explosion of new the market will be able to surpass them Flavors of Fast report from FIS. In this report technologies, and much higher customer in customer experience and innovative FIS found 40 active real-time payment demand. products. Due to their agility, speed and low programmes around the world, up from 25 costs of maintenance, fintechs can typically in 2017 and nearly three times as many as the A NEW ERA react quicker to industry changes and meet company’s inaugural 2014 study. In addition, customer expectations. it highlighted five payments programmes It is a new era for banking. New regulations Hewitt highlights that getting to real-time under development, plus another 16 that it are surfacing all over the world, and with that payments functionality is a challenge, and expects to go live over the next 12-18 months. comes a demand for responsive platforms one that has to be met to maintain seamless Discussing the report’s highlights, FIS and a more proactive approach to the value operations. director Andrew Hewitt states: “This year’s of data. In the UK, banks are still adjusting “There are two main hurdles when it report really showcases the rapid growth we to Open Banking and what to deliver as their comes to real-time payments: technical and are seeing in real-time payments. Since the unique offering. operational. Real-time payments are a 24/7 report started five years ago, the number of operation, available, 24 hours a day, seven real-time payments systems as gone from 14 days a week, 365 days a year. This means to 40. In fact, since the report launched the that the payment systems within a financial market has seen another system go live in institution must be able to be technically Hong Kong, so it’s actually 41 right now. This available and operationally staffed at all year-on-year increase shows the global growth times. This can be quite a large change for in real-time payments. There are two main an institution which is used to running a “Another interesting aspect from the report ‘business hours’ type of operation. was the rise in overlay services and open APIs. hurdles to real-time “For many businesses, it will not be Overlay services sit above the payment rails and technically or financially feasible to begin enable new and innovative user experiences payments: technical operating 24/7/365 at the flick of a switch, above that utility layer which consumers and which means an attractive option is to other service users are looking for. and operational outsource the infrastructure to a third party “In Eastern markets, there has been a boom such as FIS,” Hewitt adds. in the use of QR codes to initiate payments. The Open Banking environment is Looking ahead, it’ll be interesting to see if any pushing banks to expand their boundaries European countries will adopt QR codes in “Since Open Banking’s introduction, by improving the customer experience and the same way, where investment in consumer we’ve only seen two big moves from the delving into new ways to deliver their services. education to use contactless payments has seen traditional banks: HSBC and Barclays. HSBC The industry is starting to see the a marked rise in their usage.” was the first to market with its mobile app emergence of real-time cross-border payments The report looked into faster payments that allows users to see all accounts in one around the world. Hewitt concludes that in systems around the world. India came out place, including accounts that are other from this new environment, FIS will continue to in top place, followed by Australia and different providers. Whilst this is all we have support clients with connectivity to new and Singapore. Even though the systems in the seen at this stage, it is a clear trend and things existing real-time payments schemes. <

www.electronicpaymentsinternational.com | 13

EPI November new 2018 377.indd 13 29/11/2018 16:27:11 technology | temenos

Both machine learning and AI have the potential to revolutionise the way banking temenos: operates, by improving operational efficiency and reducing cost. And machine learning is already firmly in the banking and payments environment too, with learning algorithms ai and optimising playing important roles in helping speed along authorisation of transactions. Asked about the services the AI Centre of Excellence will provide, Varadhan notes: “It client engagement will initially focus on working with banks to help them identify and validate the best use cases of AI within their organisation. The Technologies like artificial intelligence (AI) and machine aim will be to implement those use cases, learning are becoming more accepted, and are having a which will have the most positive impact on significant and positive impact on the payments industry. the customer experience and offer greater operational efficiencies.” Briony Richter speaks to Prema Varadhan, chief architect Varadhan highlights three main focus points at Temenos, about its new AI Centre of Excellence for the Temenos AI Centre of Excellence: • Front office.Temenos will help banks he concept of AI is not new to the reactive relationship. Data is the fuel for AI. embed AI to deliver compelling customer payments industry. That being By working with Temenos and its AI centre, experiences, greater personalisation and Tsaid, the interconnectedness of banks can focus on getting the best AI tools. smoother on-boarding. This delivers cost technology and humans is new – and Temenos helps banks by providing modern savings and new revenue streams to banks. becoming stronger every day. data architectures which are able to collect, For example, Temenos Front Office Suite AI’s full potential is yet to be fully structure, record and organise data – both has numerous, integration, machine understood. What is clear, however, is that structured and unstructured – from multiple learning models, which mine transactional by making AI closer to human thinking, the data sources. data to understand customer behaviours financial industry can rapidly develop new The integration tools that Temenos provides and patterns. The results of these models ways to deliver faster, more tailored services. offer real-time data governance. Due to the are integrated within the platform in Speaking about the potential AI has in the back-end operational structure that Temenos order to provide customers with real-time banking sector, Prema Varadhan says: “AI also provides, banks can facilitate high product, service, or educational offers that is the essential component in creating the volumes of data to be consumed by AI and enhance their financial lives. intelligent, personalised bank of the future. machine learning-based applications. • Payments exemption handling. Temenos Two areas where we see strong application of will use AI technologies to identify any AI are customer engagement and experience, AI CAPABILITIES payments going into exception, monitor and data-intensive repetitive back-office users’ manual corrections, and learn how to processes. The first will provide individualised This initiative will see Temenos inject AI fix and automate these payments, thereby customer experiences and the latter will help through its digital banking platform. It will improving STP rates and lowering costs. banks reduce costs and gain efficiencies. get banks ‘AI ready’ by supplying them with • Real-time fraud detection. Temenos is “What we believe – and are working top-of-the-line data architectures and real- using AI to profile individual behaviours towards – is that AI becomes a capability time applications. and detect fraud in real time. Banks throughout the banking platform. –This is need self-learning capabilities, beyond how you can extract maximum benefit beyond rules-based engines, to profile customer point solutions.” behaviour, using vast amounts of customer The Temenos AI initiative aims to power data and transactions to flag activities banks with the ability to offer personalised outside behavioural patterns that could services to customers, enhance customers’ be a potential fraud. Temenos is working decision with data-driven machine towards using cloud computing to deliver intelligence, and maximise straight- new algorithms that help solve the real- through processing (STP) rates for financial time fraud-detection challenge. transactions at a reduced cost with limited or While AI has the power to transform the no human intervention. banking sector, a clear challenge for banks will The power of data is at the heart of this be maintaining high standards of data quality development. Data can give banks or other and governance. Only then will banks be able organisations a host of valuable information to provide personalised and seamless customer about a customer. Using it to connect at experiences. The Temenos vision is to make AI the right points with the specific products more accessible to banks as they invest more and services allows for a more proactive and Prema Varadhan, Temenos money and time towards it. <

14 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 14 29/11/2018 16:27:11 security | computop

not stored in large databases where millions of records can be stolen. Instead, biometric properties are cryptographically protected and payment fraud: stored on individual devices where they are hard to steal and, even if a theft is attempted, it will be limited to just individual records, not multiple.” Biometrics not only supports can the industry the advance of payment fraud solutions, but significantly the user’s payment experience. Gladis continues: “Machine learning also helps to identify risks. At Computop, beat the hackers? we run payment data through self-learning algorithms in order to protect merchants and banks from fraud losses. Those algorithms The financial sector may be moving rapidly with multiple identify and calculate risks that evolve from emerging technologies, but the payments system is being specific countries, from specific devices being exploited every day. Computop CEO Ralf Gladis speaks to used, from specific internet connections, in different industries etc. The end result is that Briony Richter about fighting fraud and beating the hackers Computop produces a risk score based on experience with dozens of parameters. The he financial industry is under more calculation can be individual to a company or pressure than ever to ensure its industry, and with every new transaction, the Tstability and security. algorithm learns and adapts to the changing Regulations such as PSD2 open the behaviour of users and fraudsters.” industry up to exciting partnerships, but also It is easier to combat cyberattacks in some to new risks, and these enhanced security areas than others. Using biometrics and threats demand that the sector applies cutting- machine learning, banks and FIs can secure edge technology to create more sophisticated access to accounts and protect data with fraud solutions. strong asymmetric encryption. Computop Earlier this year, the Computop Paygate also provides technology using self-learning platform entered a new era with the launch algorithms to identify fraud efficiently. of Version 7.0. It delivers over 250 payment Asked about the major challenges facing the methods and provides protection against industry, Gladis highlights: “When it comes fraud, among other services. CEO Ralf to payments, banks and FIs are lagging behind Gladis talks to EPI about the fraud protection innovative payment companies like , Ralf Gladis, Computop Computop offers banks and financial or Computop. Such payment institutions (FIs). state-of-the-art encryption like point-to-point experts provide merchants with global reach “Computop focuses on three main areas encryption. Banks and FIs using Computop’s in payment processing, while the banks’ to help banks and FIs fighting fraud. Firstly, white-label solution are, therefore, well business-to-consumer capabilities are local or with biometric authentication, Computop can protected from data theft.” regional at best. protect both account and payment security. There are multiple types of payment fraud, “Fighting fraud requires knowledge and Access to accounts and payments are better and the technology used is becoming faster data about what happens at the front end protected with biometrics than with passwords and more undetectable, sparking fears that in an online shop or on a POS terminal. that can be copied or stolen. many organisations do not have sufficiently On top of that, banks are too slow to keep “Then, we help banks and FIs to protect robust platforms to combat attacks. pace with evolving payment and fraud payments by analysing payment data with One solution that is gaining attention is technologies, and they are not flexible enough a self-learning fraud solution. Computop biometrics. One of the world’s biggest card to cater to merchants’ individual demands Paygate is directly involved in the payment providers, Mastercard, has stated from April regarding integration in ERP or accounting. process of payers and payees. Therefore, we 2019, the option of biometric authorisation as At Computop, we have rapidly increased the gather data about both parties that banks and a means of identity verification during online number of white-label payment and fraud FIs don’t have because they are only steering transactions should be made available to all solutions provided to banks during the last the payment flow in the back end. Technical Mastercard users. few years.” data such as IP numbers and devices being Gladis agrees that biometrics is one way to It is a tough task, but one that has to be used, the payers’ country etc. is only available securely protect money and data, but notes addressed swiftly. There is little doubt that to Computop where self-learning algorithms that others are also taking centre-stage. “Yes, fraud in the payments sector will never are used to evaluate risk and protect merchant, biometrics is a sustainable security solution disappear fully; however, using the right banks and consumers. for our future,” he explains. “Biometric services and technology, the industry can “The third area of security is encryption. properties are well protected and hard to steal make a significant reduction in the number of Every payment transaction is protected with or copy: unlike passwords, biometric data is successful hacks. <

www.electronicpaymentsinternational.com | 15

EPI November new 2018 377.indd 15 29/11/2018 16:27:13 research | fraud

payment fraud: on the decline, but numbers still huge

Cyberfraud and malware attacks are decreasing, but is this just the eye of the storm? With heavy shopping periods left in the year, cybercriminals are ready to strike again. Patrick Brusnahan reports

n the third quarter of 2018, a decline TARGET COUNTRIES a year, holding at 55% in the third quarter in fraud from the previous quarter of 2018. However, they also made up 73% Iwas recorded. However, a sharp rise Outside the top three target countries for of fraudulent transactions in the same time was expected on Black Friday and Cyber , or even just outside Canada, very period. Year on year, fraudulent transactions Monday in November. few countries record figures over 1%. The on mobile applications increased by 27%, But at what level is the fraud threat top three countries remain the same from the indicating the growing preference among currently? According to the RSA, there are a second quarter of 2018. fraudsters. couple of trends of which the industry needs In terms of phishing, Australia dropped The biggest gap between the value of to be aware. out of the list of top 10 host countries, and genuine and fraudulent transactions was Phishing accounted for 50% of all fraud China made its way back in, although only recorded in Europe. Fraudulent transactions attacks observed but the RSA in the third 2% of phishing attacks are hosted there. The in Europe, on average, were 90% higher quarter. Furthermore, Canada, the US and US remains the top country, hosting 48% of ($420) than the value of the average genuine the Netherlands were the three countries phishing attacks last quarter. transaction. Furthermore, there was a 7% most targeted by phishing; overall, the three Mobile browsers and applications have increase in the value of the average fraudulent countries represented 69% of the total attack exceeded 50% of total transactions for over transaction globally. volume. One in nine phishing attacks targeted organisations in Latin America. AVERAGE CREDIT CARD TRANSACTION AND FRAUD TRANSACTION VALUES RSA detected 9,329 rogue apps which accounted for one-quarter of all fraud attacks Region Transaction value Fraud transaction value Difference $ Difference % in the third quarter of 2018. Fraud from European Union $160 $420 $260 90% mobile browsers and applications increased in the third quarter, accounting for 73% of total Americas $221 $403 $182 58% fraud transactions. Year on year, fraud from mobile apps increased by 27%. In addition, UK $177 $355 $178 67% RSA received nearly 5.5 million unique Australia/NZ $173 $316 $143 58% compromised cards in quarter three, an 8% increase from the previous quarter. Source: RSA

16 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 16 29/11/2018 16:27:15 research | fraud

transaction volumes vs fraud values Josh Gunnell, head of fraud and ID pre- sales at TransUnion, adds: “Black Friday is touted as one of the biggest retail occasions E-commerce payments of the year, marking the start of Christmas

% shopping and kicking off an end-of-year 60 % of transaction volume spending spree for many shoppers. But with % of fraud value the British Retail Consortium announcing 50 that over 3,000 stores have closed in the past 40 four years, it’s no surprise that it’s the online retailers that are striding ahead in the seasonal 30 57% sales showdown. 20 39% 37% “Of course, as the consumers move online, so do the fraudsters – and the holidays bring 10 18% a host of opportunities as shoppers, often 6% 0 feeling rushed and in frenzy to bag the best bargains, find themselves unwitting victims, while fraudsters can hide among atypically Newnew account/ device new device Trustedtrusted account/ device Trusted account/ high volumes for retailers.” He continues: “Cybersecurity is in the spotlight during these frenetic few weeks – if a retailer’s website doesn’t have the correct Online banking payments encryption in place, then processes such as storing credit card details or simple one-click % buying can leave the business exposed and 100 % of transaction volume the customer data vulnerable to theft. Plus, % of fraud value 80 the social engineering tactics the fraudsters employ for those on the hunt for a bargain 60 can often be quite inventive – so it’s more important than ever that businesses are 88% 40 educating their customers and alerting them to these threats. 20 “Earlier this year, CIFAS reported a huge 31% 25% 0.4% 14% 4% annual increase of 49% in relation to identity 0 fraud within online retail, which will be a key tactic during this period given the volume of

Newnew account/ device new device transactions taking place. As fraudsters buy Trustedtrusted account/ device Trusted account/ goods online using the victim’s name and bank details, they can often have them delivered to a different address, raising little suspicion at Source: RSA this time of gift-giving. “Plus, some of the fraudsters will be bold What the RSA report shows is that much Overall, this means there has been a 71% in their approach – reportedly, in some more needs to be done to protect consumers increase in fraud occurring from a new cases, encouraging victims to take delivery of from fraud, especially on mobile platforms. account and new devices in terms of goods obtained fraudulently using their own Cybercriminals and fraudsters are sneakily transaction volume. Almost 15% of fraud details. They sign for the package, because it’s biding their time, but with Christmas coming originates from trusted accounts and devices, a addressed to them, and then hand it over to in fast, they are set for a windfall if something strong decrease from the 27% recorded in the a fraudster posing as a courier who delivered is not done. second quarter. it in error. This is just one of many tricks that will be at play, so businesses need to be doing TRUSTED DEVICES BLACK FRIDAY all they can to help consumers shop safely.” With so many innovative fraud-reduction Online banking payments are also a risk. Gabriel Hopkins, vice-president of fraud techniques on the market – biometrics, While only 0.4% of legitimate payment product management at Fico, says: “Black geolocation, encryption and many more – it transactions were attempted from a new Friday and Cyber Monday will probably see is a shame to see fraud thrive in these times. account and a new device in the third quarter record levels of payments fraud this year.” What is very clear is that with scale comes of 2018, 31% of the total fraud value came This is a startling statement, but has been risk. Black Friday is one of the most scalable from this segment; this compares to 27% in predicted by many. For a number of years, purchasing periods on the planet, with what the second quarter and 22% in the quarter the Black Friday shopping period has been a was once a US holiday translating worldwide. before that. goldmine for fraudsters. However, the fraud has travelled with it. <

www.electronicpaymentsinternational.com | 17

EPI November new 2018 377.indd 17 29/11/2018 16:27:15 country snapshot | croatia

CROATIA

country snapshot: croatia High banked population leads to growth in card use

roatia’s payment card market is banked population. Despite this, frequency economy and limited financial awareness growing, with a penetration rate of of payment card use in Croatia is one of the among consumers. C2.1 cards per inhabitant in 2017, lowest among its peer countries, reflecting However, with a recovering economy, mainly as a result of the country’s high the cash-dominated nature of the Croatian improved banking infrastructure, lower

value of credit tRanSfers value of payments value of payment cards

bn m bn

7e f 7e f 7e f

Source: Croatian National Bank, GlobalData Source:Source: Central Croatian Bank National of Luxembourg, Bank, GlobalData GlobalData Source: Croatian National Bank, GlobalData

18 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 18 29/11/2018 16:27:19 country snapshot | croatia

interchange fees and wider acceptance Debit card shares by issuer Debit card shares by scheme of payment cards, the market is set to thers improve. The volume of payment card . transactions and frequency of use are anticipated to record robust five-year CAGRs of 6.4% and 5.3% respectively. thers Uniredit ank Debit cards remain the largest card type .7 7. astercard in terms of transaction value, followed . isa . by charge and credit cards. This indicates consumers’ desire to make payments rste ank immediately using debit cards, or to repay Intesa anpaolo . 7. outstanding amounts in full to avoid debt. The emergence of contactless technology and e-commerce growth are also anticipated to support the payment

card market. Rising investment in POS Source: GlobalData Source: GlobalData infrastructure and the proliferation of new payment solutions will also drive electronic pay later shares by issuer pay later shares by scheme payments in the country. DEBIT CARDS DOMINATE

The high banked population and debt- thers Intesa . thers astercard averse nature of Croatian consumers have anpaolo .7 . . increased debit card penetration, as the cards tend to be offered free of charge with a bank account. rste ank Banks are also adopting strategies . Uniredit ank merican xpress to cross-sell debit cards by bundling . . them with savings accounts for different customer needs. Zagrebačka Banka, part of UniCredit Group, serves consumers aged up to 29 through its Package for the Source: GlobalData Source: GlobalData Youth, which includes a current account and a complementary contactless Maestro or Visa Electron card with a giro account. However, there has been a rise in increased consumer confidence in online The card also offers student loans with pay-later cards in circulation since 2015 transactions. no processing fee. Cardholders can pay in following a recovery in domestic demand, The e-commerce market is acting instalments for both in-store and online growing employment, and rising personal as a driver of payment card market payments using a Maestro card. disposable income. growth in Croatia. Banks offer cards Despite high penetration, debit card use Banks offer multiple benefits and exclusively for online purchases, while is mostly restricted to cash withdrawals. value-added services, including instalment the availability of alternative payment ATMs accounted for 69.8% of the total facilities, reward points, cashback and solutions such as PayPal and debit card transaction value in 2017, and discounts at partner retailers. for online transactions will also boost the the average ATM transaction value is far OTP Banka offers the Visa Classic e-commerce market. higher than at the POS, implying that Instalment credit card that allows holders consumers withdraw large amounts to to convert purchases, including online, PREPAID CARDS GAIN meet liquidity requirements. into up to 12 monthly instalments. Holders are also entitled to special benefits and The number of prepaid cards in circulation CREDIT CARDS STRUGGLE discounts at participating merchants. has been rising, and the trend is expected to continue over the next five years. A Pay-later cards are not popular in Croatia, E-COMMERCE TO GROW range of prepaid card variants are issued on accounting for 19.6% of the total card the Visa and Mastercard networks. transaction value in 2017. The number of The value of e-commerce in Croatia grew Gift cards are popular among Croatian pay-later cards fell to 2014, mainly as a from HRK1.9bn ($299.57m) in 2013 to consumers, with most banks offering them. result of uncertain economic conditions $470.25m in 2017; it is anticipated to PBZ offers a Maestro gift card with a fund and rising unemployment, which made reach $646.98m by 2021. limit of $159.46, while Zagrebačka Banka consumers cautious about credit card Growth in the past five years was a result offers the Visa gift card with fund values spending. of rising online and mobile penetration, and from $15.95 to $175.41. <

www.electronicpaymentsinternational.com | 19

EPI November new 2018 377.indd 19 29/11/2018 16:27:20 country snapshot | thailand

country snapshot: THAILAND thailand Government initiatives and infrastructure growth to be key factors

ash remains the preferred method mechanisms, the establishment of an for 77.5% of total GDP in 2017. To curb of payment in Thailand, accounting integrated IT system, and industry-wide this, the central bank enforced stringent Cfor 96% of the total payment shared infrastructure and fraud-monitoring regulations on credit card issuance and transaction volume in 2017. However, card systems. personal loans. Effective from 1 September payments are set to increase in popularity The central bank introduced new 2017, all banks were required to cap as the Thai government and banks strive regulations in March 2016, requiring all interest rates at 18% per annum, down to provide basic banking services to the newly issued debit and ATM cards to be from 20%. Credit lines for new card holders unbanked population, improve financial chip-based, and existing magnetic stripe was also limited in accordance with their awareness, and expand the POS and QR cards to be upgraded by the end of 2019. monthly salaries, with the aim of helping code-based payment networks. All domestic transactions from the newly issuers to identify creditworthy individuals The central bank has taken a number issued debit cards must be processed and reduce defaults. of steps to create a steady financial by local debit card scheme provider Thai The Thai e-commerce market recorded environment and drive the country towards Payment Network (TPN). For international a CAGR of 30.4% in five years due to a cashless economy. In 2016, it articulated transactions, banks can co-badge with rising mobile and online penetration, the a Three-Year Strategic Plan (2017-2019), international scheme providers. growing presence of online gateways, focusing on financial and economic Thai household debt has been high in the and increased consumer confidence in stability, and making financial products and last four years, with loans to households online transactions. This has attracted services economical and accessible. from financial institutions accounting international companies to the country’s In March 2016, the Financial Sector e-commerce market. Credit cards are the Master Plan Phase III (2016-2020) PAYMENT CARDS BY TYPE (MILLION) most used online payment instrument, was launched to help the government, Debit Pay later while virtual payment cards and alternative business and retail sectors create an solutions including PayPal, TrueMoney, 2013 45.2 18.6 environment and infrastructure conducive AirPay, Masterpass, and mPay have also to the adoption of electronic and financial 2016 54.2 20.1 supported e-commerce growth. payments. Initiatives included developing 2017e 57.7 20.3 Prepaid cards are increasingly gaining a robust payment infrastructure, boosting 2021f 68.9 21.6 acceptance, as Thai consumers tend to consumer financial literacy, efficient pricing Source: GlobalData prefer to spend within their means. < 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 179.9 33.9 2013 1,184.2 360.4 2013 56.9 311.4 2014 190.5 37.3 2014 1,262.0 391.0 2014 61.6 388.7 2015 193.5 41.7 2015 1,322.9 435.8 2015 63.4 416.8 2016 212.6 45.6 2016 1,513.5 492.9 2016 64.1 474.4 2017e 231.2 49.5 2017e 1,682.8 551.0 2017e 64.9 711.2 2018f 249.2 53.5 2018f 1,838.7 613.7 2018f 65.8 783.0 2019f 266.2 57.2 2019f 1,987.9 679.5 2019f 66.9 841.5 2020f 281.9 60.8 2020f 2,124.4 745.2 2020f 68.2 891.5 2021f 296.4 64.2 2021f 2,250.0 811.1 2021f 69.5 930.0 Source: Central Bank of Thailand, GlobalData Source: Central Bank of Thailand, GlobalData Source: Central Bank of Thailand, GlobalData

20 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 20 29/11/2018 16:27:22 country snapshot | new zealand

country snapshot: NEW ZEALAND new zealand Large banked population leads to high levels of card penetration

ew Zealand’s cards and payments New Zealand consumers have Zealanders aged 15 or above with a bank industry is well developed, and traditionally been debt-conscious and account reached 99.6% in 2017 according Nconsumers are prolific users of prefer to pay with available funds rather to the World Bank’s Global Findex database. payment cards. than on credit. Banks offer a range of This near-saturation and rising competition According to a February 2016 benefits, including reward programmes, has driven banks to target niche segments Mastercard survey, New Zealand has the balance transfer services, and lower such as immigrants. For instance, ANZ Bank lowest cash use among OECD countries, interest rates on card transactions to offers a Migrant Banking Package, which and around half of participants expected encourage pay-later card use. includes a current account, a debit card cash payments to cease in the next 10 A number of non-bank players are and a credit card. Account holders are also years. A strong banked population and high also attempting to establish themselves. eligible for personal loans. financial awareness among New Zealanders Financial services provider Gem offers a E-commerce in New Zealand is have driven payment card penetration. The Visa credit card with 0% interest for the anticipated to record a CAGR of 8.6% over frequency of use of payment cards in New first six months on transactions above the next five years. Widespread digital Zealand stood at 117 in 2017 – the highest NZ$250 ($177.40). Similarly, Warehouse access in the form of growing internet and figure among its peer countries. Money offers the Warehouse Money Visa mobile penetration is a key growth driver. At the core of the payment market and Purple Visa credit cards. New Zealanders prefer traditional payment is consumers’ embrace of debit cards The country’s banking sector is close tools such as debit and credit cards for and Eftpos, which has been the main to saturation, and the percentage of New e-commerce, but emerging payment driver behind the growth in all non-cash methods are growing in popularity. payments. It is a highly mature market PAYMENT CARDS BY TYPE (MILLION) Contactless payments are gaining in terms of card penetration, although Debit Pay later prominence in New Zealand, with all consumers tend not to favour credit cards major banks offering contactless cards. 2013 7.9 2.7 as a payment option. Mastercard collaborated with ANZ Bank, Mobile payments need to focus on 2016 11.7 2.7 ASB Bank, BNZ and Westpac to launch replicating the convenience of debit cards, 2017e 12.3 2.7 the Switch On campaign and website in which have benefited from the widespread 2021f 13.8 3.0 July 2017 to educate retailers about the roll-out of contactless. Source: GlobalData benefits of contactless payments. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 11.5 48.5 2013 103.4 1,330.1 2013 2.6 144.0 2014 11.4 50.8 2014 98.7 1,405.7 2014 2.6 151.8 2015 11.1 53.4 2015 94.6 1,489.9 2015 2.5 158.5 2016 10.9 56.2 2016 91.0 1,578.2 2016 2.5 164.9 2017e 10.7 59.2 2017e 87.9 1,667.7 2017e 2.5 171.0 2018f 10.5 62.4 2018f 85.2 1,759.4 2018f 2.5 176.8 2019f 10.3 65.8 2019f 83.0 1,853.7 2019f 2.4 182.0 2020f 10.2 69.5 2020f 81.2 1,952.8 2020f 2.4 186.8 2021f 10.1 73.4 2021f 79.8 2,055.5 2021f 2.4 191.1 Source: Payments NZ, GlobalData Source: Payments NZ, GlobalData Source: Payments NZ, GlobalData

www.electronicpaymentsinternational.com | 21

EPI November new 2018 377.indd 21 29/11/2018 16:27:25 industry insight | risk ident

deduce the true story behind the crime. are you agile enough Visualising the potential steps of the criminal is crucial here. Fraud, for example, is never just a single transaction. Fraudsters do not simply target one victim, succeed, and to take down then retire. So, there is a whole journey here to identify their process and beat them to it with a trusted, reliable defence. They are organised, even attending their own secret ‘conferences’ to share best practice, a fraudster? and they have a growing information pool at their fingertips with the advent of the dark Fighting fraud is a fast-paced business, with fraudsters working web and repeated large-scale data breaches, 24/7 to exploit weaknesses in merchants’ systems. The ‘good such as those recently highlighted by Ticketmaster and British Airways. guys’ need to innovate at the same rate and, most importantly, If you are to understand and trace the increase the agility and speed of development in software actions of the perpetrator, you need to step engineering, write Risk Ident’s Felix Eckhardt and Piet Mahler into their shoes and think like them: what is their goal? what is their skillset? what is their raudsters do not operate within Simply speaking, it creates an ambitious yet mindset, and what identifiers might they hide boundaries, nor are they the masked achievable objective, and data scientists and or accidently leave behind? Fcriminals depicted in stock imagery software engineers have complete freedom Apply this approach to fraud and you across the world’s media. in how they achieve their targets. Defining have a far more effective defence. We are in a They are, however, professional entities, these targets in our industry is based on the technology arms race, and knowing what the operating with one sole aim: to extract as experience and knowledge of fraud experts, enemy is doing gives you an advantage in each much money from transactions as possible, in combined with regular, honest, unfiltered battle. It is equally important to learn from as quick a time as possible. To beat them, we feedback from merchants on the challenges your mistakes – also a Sherlock Holmes trait. also need to work towards a single goal and they are facing. match their freedom to innovate. THE FUTURE OF PREVENTION Anti-fraud technology should be 100% IT IS NOT ALWAYS FRAUD customer-centric, and a quick time-to- Fraudsters’ tactics change over time, as they market delivery ensures this approach is Fear of fraud can be just as damaging as aim to get through defences before they are more effective, not only in markets that fraud itself. False positives, where a retailer’s noticed. But the industry in which we operate fraudsters target across ecommerce, telecoms anti-fraud setup incorrectly determines that a is also changing, fast. Consider the last time and financial services, but in new, emerging genuine purchase attempt is fraud, costs the you interacted with a loan provider, an online markets around the world. industry millions in lost revenue each year. retailer, or even your cellphone company – it To serve these markets with industry- It is possible to accurately identify the is likely you did so online. leading fraud prevention, software engineering genuine fraudsters through a number of Our embrace of digital has pressured requires bright minds that bring the right techniques, including device identification companies to deliver products and services mindset and the right skillset to further and by linking and analysing multiple data faster than ever. Whether providing digital or develop innovative products for the industry. points. The scale of this makes it next to physical goods, there is now an expectation Fortunately, engineers are problem solvers – impossible for fraud managers on their own, for a quick and seamless payment experience, their curiosity is something you cannot teach, but incorporating machine-learning into followed by near-instant dispatch of goods. but which is invaluable to anyone working software helps them analyse and refine their This has significantly narrowed the window with data and a constantly evolving foe. fraud cases so that defences get stronger over in which merchants can confirm whether a time. It is this approach that is key to staying transaction may be fraudulent, preventing FUTURE THREATS one step ahead of the fraudsters. valuable goods coming into the hands of fraudsters. Too many delays and you risk the Across the tech development community THINK LIKE A FRAUDSTER customer leaving and never coming back. It is today, many businesses are inspired by the a balancing act. Spotify model of development, but apply their Benedict Cumberbatch is an inspiration to so So, we need to enable quicker fraud own version of it to suit their targets. many fans around the world, including us. It decisions and improve response times for We are big fans also of the OKR mindset – is not hard to see why, when you consider his active payments processing. Fraud managers objectives and key results – inspired by Intel world-famous on-screen portrayal of Sherlock cannot do so alone, but are a key part and Google. In combination, this approach Holmes. of the equation. Machine learning alone to team structure enables developers to forge The English detective employs a mnemonic cannot function without the same specialist a shared commitment to achieving specific memory technique, known as his Mind knowledge of the company fraud officer(s) goals, which studies have shown help improve Palace, where he stores each detail of every either. But combine the two, and you have a productivity and performance. case, linking and carefully analysing them to winning formula. <

22 | November 2018 | Electronic Payments International

EPI November new 2018 377.indd 22 29/11/2018 16:27:26 EPI November new 2018 377.indd 23 29/11/2018 16:27:26 Retail Banking London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING

Retail Banking London 2019 brings together high-street banks, new market entrants, financial professionals and industry disruptors in an active discussion of the key issues facing the industry: new regulation, digitalisation and tech innovations that are shaping the future of retail banking.

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1118Timetric_RBI_Ad.inddEPI November new 2018 377.indd 1 24 29/11/201826/11/2018 16:27:26 10:17