September / October 2016 / paymentscardsandmobile.com in this issue CARD NOTES Mastercard buys VocaLink INNOVATION Can incumbents innovate? ALTERNATIVE PAYM ENT METHODS Alternative goes mainstream DATA SECURITY PCI DSS ten years on Your Quality Confirmed.
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www.opentestsolutions.com www.paymentscm.com September | October 2016 Summer's over — back to work. Volume 8, Number 5 As the payments industry dusts itself off after an Editor-in-chief and publisher Alexander Rolfe arduous summer of drinking in the sunshine, there are Tel +44 1263 711 800 [email protected] some stark realities facing us as we get back to work. Staff Writer There is a very real triple threat which could overwhelm us. The coupling of PayTech Joyrene Thomas and the rise and rise of alternative payments methods is great news for those in the Your Tel +44 1263 711 800 industry who see themselves as disruptors. Not so for incumbents who must be [email protected] seeing the numbers and uses of PayTech as a threat and not an opportunity. Contributors Quality Data and cyber security remain very real to all of us. Woe betide anyone who thinks David Brear Francesco Burelli that as an industry we are doing enough to protect ourselves and our clients from Gwenn Bézard the threats. Business revenues lost to cyber attacks in the Asia Pacific region alone Confirmed. Dave Birch came to $81.3 billion in the 12 months to September 2015, according to a survey Head of Business Development by Grant Thornton. The region also seems to be more vulnerable to new scams. Wendy Sanders A dangerous combination of a lack of awareness and investment has resulted in Tel +44 1263 711 801 Fax +44 1263 456 100 institutions that are poorly protected – and the problem is not theirs alone. [email protected] Finally, the question has been raised about the ability of payments industry General Manager incumbents to innovate at all. The recent weeks have seen a raft of headlines from Gemma Haywood major banks urging their staff to act and treat the companies they work for as start- Tel +44 1263 711 800 Fax +44 1263 456 100 ups or tech companies, but is this possible or even realistic? Test Solutions for the payments world [email protected] Subscriptions and General Alexander Rolfe, Gemma Rolfe Editor-in-chief and publisher, Your success is our concern. You have ambitious goals and we are Tel +44 1263 711 800 Payments Cards & Mobile dedicated to helping you get there. We engage with you, help you gain Fax +44 1263 456 100 [email protected] insight and advise you. Address Editorial Advisory Board Payments Cards and Mobile > Certify your EMV Payment Terminals (accredited solutions & services) The Stable, Hall Yard John Berns Kelling, Holt Managing Partner, Accourt > Minimize downtime of your ATMs and release changes easier NR25 7EW United Kingdom Sylvie Boucheron-Saunier General Manager, Continental Europe, ACI > Validate your payment host and switch implementations Cover, Design and Origination > Onboard your partners and members efficiently Adam Unsworth Robert Courtneidge Printing Global Head of Cards and Payments, Micropress Printers Locke Lord We’d love to talk. Contact us at [email protected] All rights reserved. No part of the publication June Felix may be reproduced or transmitted in any President – Europe, Verifone form without the publisher’s prior consent. While every care is taken to provide accurate Denise Gee information, the publisher cannot accept liability for errors or omissions, no matter how Director, Magna Carta caused. Simon Hardie Payment Cards and Mobile™ Director, Magna Carta is owned and published by PaymentsCM LLP ISSN 1759-829X
© PaymentsCM LLP 2016 www.opentestsolutions.com contents
26. BANKS TRUSTED TO DELIVER COVER FEATURE BIOMETRIC AUTHENTICATION The UK is placing its trust in banks over 14-16. government agencies to protect their CAN INCUMBENTS biometric data such as fingerprints and INNOVATE ANY MORE? iris scans, according to new research from Visa. Innovation is one of the few ways to sustain competitive advantage over 27. US DEBIT CARD PERFORMANCE NEWS IN BRIEF time. But can incumbent banks and HOLDS STEADY payment companies truly innovate any more? PULSE debit card issuers saw card 6-7. THE PAYMENTS WORLD performance metrics in 2015 hold IN 60 DAYS steady, according to a recent study. FEATURE However the adoption of mobile CARD NOTES ALTERNATIVE PAYM ENT payments and EMV chip migration has METHODS been disappointing. 8. MASTERCARD ANNOUNCES ACQUISITION OF VOCALINK FOR 18-20. REGULATION £700 MILLION WHEN THE ALTERNATIVE The largest UK banks are set for another 28. FIS UNAWARE OF CUSTOMER windfall with the sale of the bank- GOES MAINSTREAM… ACCOUNT ACCESS OBLIGATIONS owned payments company VocaLink to When bank-account funded UNDER PSD2 Mastercard for £700 million ($920 million). payments, real-time payments, Only five percent of banks and other mobile and other digital payments financial institutions are aware that the 10. PREDICTING THE FUTURE OF are actually the default way to pay in revised Directive on Payment Services many countries, the term ‘alternative’ FINANCIAL SERVICES (PSD2) will require open access to seems a misnomer. The window of opportunity is closing for customer accounts, according to a UK banks to leverage their data to get ahead law firm TLT’s Digital Banking report. in digital services, says a new report from FEATURE the Mobey Forum. DATA SECURITY MOBILE PAYMENTS
12. AUSTRALIAN CARD-NOT- 22-24. 30. MOBILE PAYMENTS STUDY – PRESENT FRAUD INCREASES CARD DATA SECURITY OPPORTUNITIES FOR BANKS Australians spent AU$1.92 trillion using TEN YEARS ON First Annapolis recently completed the cards and cheques in 2015; of which third edition of its semi-annual Study 0.025 percent or AU$469 million worth of Ten years after the founding of the of Mobile Banking & Payments tracking transactions was fraudulent. Payment Card Industry Security consumer adoption and use of mobile Standards Council (PCI SSC), we banking and payments products. present a mid-term report on the 12. THE $19 TRILLION OPPORTUNITY industry’s data security efforts. A new study from the World Bank Group 31. WALMART PAY EXCEEDING and the World Economic Forum estimates RETAILER’S EXPECTATIONS the global value of micro, small and At THE CONNECT Mobile Innovation medium retailers’ transactions at $34 Summit in Chicago, Walmart Services trillion per annum. SVP Daniel Eckert revealed that Walmart Pay, the retailer’s proprietary ISSUING AND ACQUIRING mobile payment app, already boasts 20 million active users . 26. MERCHANTS SUFFER FRAUD FATIGUE 31. CHINESE BANKS STRUGGLE Retail fraud continues to rise as does IN MOBILE PAYMENTS BATTLE its cost. According to the LexisNexis AGAINST THIRD PARTY PROVIDERS True Cost of Fraud Study, fraud as a The rise of third-party m-payments in percentage of revenue has increased China at the expense of credit and debit from 1.32 percent to 1.47 percent in 2016. cards is threatening commercial banks.
4 payments cards and mobile / September / October 2016 www.paymentscm.com contents
CONTACTLESS 36. IZETTLE ACQUIRES 41. 20 GLOBAL FINTECH HUBS INTELLIGENTPOS FORM FEDERATION TO PUSH 32. CARD PAYMENTS WORLDWIDE iZettle announced it has acquired INNOVATION INCREASE 55 PERCENT TO intelligentpos, the UK’s leading cloud Financial technology groups from more 417 BILLION based point of sale solution for shops, than 20 cities across the world plan to According to Global Payment Cards bars and restaurants. form a federation of ‘FinTech’ hubs this Data and Forecasts to 2021, the total year in what would be the first attempt number of card payments worldwide E-COMMERCE to coordinate innovation transforming increased by 15 percent in 2015 to 270 the financial industry. billion, almost double the eight percent 37. FAST-TRACK MERCHANT rise in card numbers. GROWTH PATHS IN E-COMMERCE 41. JCB SET TO ROLL OUT APPLE Digital commerce is a growth PAY IN JAPAN 32. GOOGLE RUMOURED TO START imperative for virtually all retailers and JCB announced that Apple Pay will ANDROID PAY SERVICE IN JAPAN merchants as new technologies disrupt launch in Japan in October to make Google is rumoured to be launching the traditional commerce use cases and mobile payments with iPhone 7, iPhone Android Pay, digital payment service, ways of working. 7 Plus and Apple Watch Series 2. using smartphones in Japan. PRODUCTS 33. APPLE PAY COULD LOSE LEVERAGE IN US FROM 39. ACCENTURE STIRS UP AUSTRALIAN BANK FALL-OUT TROUBLE WITH BLOCKCHAIN Australian banks are pushing Apple to EDITING TECHNIQUE loosen its grip on the technology that Accenture is stirring up a Blockchain enables mobile payments. storm within the community by patenting a technique for editing 33. CONTACTLESS MOBILE PAYMENTS information stored using the nascent CONFERENCES VIA MOBILE – NO ADDITIONAL technology in a move designed to make PASSWORDS it more commercially viable. 42. THE MAIN AUTUMN For the first time in the Russian market, CONFERENCE SEASON BEGINS MDM Bank, one of the largest private 39. MASTERPASS GATHERS banks in Russia, has launched single- MOMENTUM IN EUROPE tap Mastercard contactless mobile As the share of digital payments in payments with no additional passwords. Europe keeps on growing to reach 38 percent of payments by 2020, POS TERMINALS Masterpass adoption continues to grow.
35. US EMV MIGRATION: CHIP 39. PAYWORKS LAUNCHES Money 20/20 has developed a well- IMPACT ON MERCHANTS PAYMENT GATEWAY PULSE deserved reputation for bringing As the one year anniversary of the US Payworks has launched a next together everyone from large financial EMV migration shift to chip approaches generation payment gateway to institutions, payments companies and new data has been released. simplify in-person payments for both global merchants through to start-ups. stationary and mobile environments. 36. INGENICO SHARES SUFFERS AFTER CUTTING 2016 SALES CONTRACTS FORECAST Underscoring investor skittishness 41. NETS HOLDING and low tolerance for earnings ANNOUNCES PLANS FOR IPO disappointments, shares in French Scandinavia’s biggest payments payments firm Ingenico Group fell processor is aiming to raise DKr5.5bn nearly 13 percent after the cutting ($824m) through the issue of new its full-year targets in the wake of a shares and a partial sell down by its “sudden and significant decline” private equity owners. in US sales. www.paymentscm.com www.paymentscm.com payments cards and mobile / September / October 2016 5 news in brief
SANTANDER IS SEEING RED AFTER THREE CHALLENGER BANKS HAVE losing a long-running dispute over been granted banking licences over the use of its corporate colour in Germany. the summer. First out of the blocks was For the past seven years, the Spanish Starling in mid-July. The digital bank is lender and the German savings banks have inviting prospective customers to sign up been battling over the right to trademark ahead of a January 2017 launch. German a particular shade of red. Germany’s top challenger bank N26 has been granted a court has upheld the Sparkassen trademark full German banking licence and is planning in a ruling effective immediately. Clashes to expand its retail banking activities over colours in the German courts are not across Europe. Lastly, mobile-bank Mondo unusual. Other notable disputes include those founded in February 2015 was granted a HOPING TO GAIN AN INNOVATION between Unilever and the manufacturers restricted UK banking licence in August. The and sales advantage, Samsung has of the Nivea skin-care products over the UK-based start-up, now known as Monzo, integrated an iris scanner into its new use of blue, and Langenscheidt bi-lingual confirmed in a blogpost that it would be Galaxy Note7 smartphone. It is the first dictionaries and software company Rosetta entering a ‘mobilisation’ phase, working to mass-market Android phone to feature Stone over the use of yellow. get its restrictions lifted and launch a full an infra-red iris scanner, which can be current account. used to unlock the phone, access secure apps and authenticate Samsung Pay WAL-MART HAS SIGNED A $3.3 payments. The Korean tech giant extended billion deal to buy e-commerce start- its lead over its arch-rival Apple to 24 up jet.com in an attempt to boost its million in smartphones shipped during the online presence. The transaction will include second quarter 2016, according to Gartner. around $3 billion in cash and $300 million However, Samsung was forced to recall of Wal-Mart shares paid over time. Jet. 2.5 million units of its Galaxy Note7 just TRANSPORT FOR LONDON (TFL) com was valued at around $1.5 billion at its weeks after release due to a spate of and Cubic have agreed a £15 million last funding round in December 2015 and exploding batteries. licensing deal for London’s contactless is not thought to have reached profitability. ticketing system. Signed in mid-July, the The deal illustrates the risks the bricks- deal allows Cubic to adapt the system for and-mortar behemoth is having to take other cities worldwide. Long-term partners to compete against online rivals such as TfL and Cubic introduced the contactless Amazon. The deal is expected to close Oyster travel card system in 2003 and later this year. contactless card payment on London's buses in December 2012 and on the underground and rail network in September 2014. TfL will UK BANKS HAVE BEEN TOLD use income from the deal to invest in new to adopt new digital services and set infrastructure and freeze fares. their own limits on un-arranged overdraft fees as part of a regulatory probe to reform BITCOIN PRICES PLUNGED 20 retail banking. After an investigation lasting percent after a security breach at the MPOS PAYMENT COMPANY SUMUP two years and costing around £5 million, Hong Kong-based Bitfinex exchange. 119,756 and small business banking provider the Competition and Markets Authority Bitcoins were stolen from the largest dollar- Holvi are to partner to serve businesses revealed its plans to bring competition to based Bitcoin exchange in early August. in Germany. Founded in Finland in 2011, a personal and small business banking According to Bloomberg, the price drop was Holvi is a licensed payment institution market worth around £16 billion. Measures reminiscent of the market reaction after which provides a digital current account, include the development and adoption Tokyo-based Mt Gox — then the largest paperless bookkeeping and apps to small of an open banking API standard, plus Bitcoin exchange in the world — disclosed businesses. “The Holvi business account will a comparison service, loan price and it was hacked in February 2014 and filed allow our customers to focus on their core eligibility tool for small businesses. for bankruptcy weeks later. Bitcoin prices competences, which made them start their plunged 30 percent that month. business in the first place,” said Maximilian Stella, vice president business development, SumUp. The tie-up enables Holvi to expand within Germany, and SumUp to diversify its offering beyond card acceptance services.
6 payments cards and mobile / September / October 2016 www.paymentscm.com newsnews inin briefbrief
VeriFone has had the wind taken out Visa is working with several FIVE MILLION STANDARD VISA’S LONDON-BASED INNOVATION of Sail, its app and dongle-based Indian banks in order to utilise Chartered customers in 15 countries lab is piloting Bitcoin for system for turning smartphones into card the country’s biometrics-based national across Asia, Africa and the Middle East micropayment together with German acceptance devices. Having failed to gain identity system to bring financial services will soon be able to access their mobile start-up SatoshiPay. According to founder bankingtraction accountswith merchants, using their VeriFone fingerprint. will SatoshiPayand electronic Meinhard payments Benn, tothe millions proof-of- of Ininstead addition, off ervoice the technologyrecognition totechnology banks. Sail conceptpeople. involvesThe ‘Saral the Money’ integration account of fromthe willwas be launched introduced in Mayto India 2012, and but UAE according by the start-up’sVisa, Axis technologyBank, HDFC withBank, Visa’s ICICI Bank,card endto the of company,2016, with the further standalone roll-outs economics planned paymentIndian Overseas structure, Bank allowing and the automated State Bank nextof micro-merchant year. The move to acquiring biometrics ultimately is part of micropaymentsof India is designed from ato Visa solve account the long- to theproved $1.5 tobillion be unprofi technology table. investment over astanding SatoshiPay problem wallet. of Bennhow to said authenticate that the three years announced by the bank last tie-upthe many would millions investigate of Indiansa safer withoutmethod year. KarenVietnamese Fawcett, payment CEO of switch retail bankingoperator ofexisting purchasing bank small accounts amounts or ofadequate Bitcoin at StandardSmartlink Chartered is working said thatwith fingerprint Singapore usingforms credit of ID. and They debit plan cards.to tap Work into theon andtech voice vendor recognition Tagit to build technologies a mobile would bank- M2Mgovernment’s payments Aadhaar and with national IoT devicesidentity bringing service.customers Tagit’s more Mobeix convenience platform andwill issystem believed which to beuses on fingerprint the development and iris Insight is securitybe available when to overaccessing 40 million their cardholders accounts roadmap.biometric Elsewhereinformation Visa to verify is partnering users and whereverbelonging they to Smartlink’s were. more than 50 mem- withauthorise Toronto-based payments. BTL There Group are to currently explore how its interbank settlement system can everything! ber banks. Vietcombank will be the fi rst to 210 million Aadhaar card holders, with BREACH, BREACH, BREACH. leverage Blockchain for domestic and roll out the service, enabling customers to the government planning to expand this August was a busy month for cross-border payments. download an iOS, Android, BlackBerry or Java to 600 million by 2015. In-depth analysis, breaches.app that can Oracle be used confirmed for account thatinformation it had industry snapshots, news “detected and addressed malicious code THE EUROPEAN BANKING queries, fund transfers, bill payments and Just 3% of UK organisations have in certain legacy Micros systems.” It was Authority (EBA) has published its in brief and authoritative mobile top-ups. Through the Tagit system, made preparations for the intro- also asking all Micros customers to reset long-awaited consultation paper on the Smartlink customers will also be able to con- features – Payments their passwords for its online support portal. draftduction regulatory of SEPA fortechnical direct debits,standards lagging for nect with third parties such as utility compa- Yahoo said that it was investigating a strongbehind customer rivals in Franceauthentication and Germany under as Cards and Mobile’s nies and government agencies. possible data breach of 200 million accounts thethe revisedcountdown Payment to the Services 2014 migrationDirective authoritative, impartial, at the start of the month. Around 68 million (PSD2).begins. TheThe surveyEBA hasof 300 the businesses delegated in Royal Bank of Scotland, Lloyds Dropbox account details, relating to a 2012 authorityFrance, Germany for 11 mandatesand the UK arising conducted out editorial coverage TSB and NatWest in the UK are in breach at the cloud storage firm, were ofby the Edgar PSD2, Dunn including & Company strong on customerbehalf of separates hype from a generous mood, having set aside £10 dumped on the internet at the end of August. authenticationSteria, finds that and almost secure 70% and of Europeancommon million to refund customers who forgot happening within the communications.businesses are aware This particular of SEPA in standard general, to pick up cash dispensed at the ATM. The aimsand tomore set outthan a 80%harmonised of businesses framework have payment cards and banks are set to compensate hundreds toheard ensure about an appropriate SEPA Direct level Debit of in security France mobile payment of thousands of customers who made a forand consumers Germany. However,and payment only 26% service of UK withdrawal at the ATM but walked away industry. providers.businesses The are deadline aware of for the submission mandate. of without the cash. Unlike other banks which comments is 12 October 2016. automaticallyAPPLE HAS re-credit JOINED consumer A GROWING accounts TimelyTimely insight insight - Sweden’s Swedbank is piloting whenlist the of machine companies retracts to launchthe forgotten a bug FIRST THERE WERE SMARTPHONES. the use of mobile couponing with on paperon paper - on screen bountycash, the programme, banks diverted which the rewards funds into hackers their Then there were smart watches. merchants in Uppsala, the country’s forown notifying reserves companies account and of onlyvulnerabilities paid up if Now prepare for the smart handbag with subscribeon screen now! fourth-largest city which is attempting inthe their customer products. asked Apple for awill refund. pay an invited in-built robotics designed to help control on-line group of security researchers up to $20,000 impulseto eradicate spending. cash as Thepart ofiBag2 a local features crime- Visit: for theUS most start-up serious Movenbank, bugs identified. which has“It’s physicalfi ghting initiative.cues to Swedbankremind shoppers is trialling ofthe subscribewww.paymentscardsandmobile.com now! getting positionedincreasingly itself difficult as a mobile-only, to find card-some theiruse ofspending MasterCard’s goals whenever they and click ‘Subscribe’ www.paymentscm.com ofless, those branchless most bank,critical may types be forced of security to off er reachmobile for application their wallet and self-locks, vulnerabilities,”companion plastic said Ivan cards Krstic, to customersApple’s head in flashesKoy with and highvibrates when they enter oforder security to be compliantengineering with and MasterCard architecture, rules. theirstreet ‘danger merchants spending zones’. Powered speakingMovenbank at is workingthe Black with MasterCardHat security on a bywho a microprocessor, can use the the bag also contains conferenceplanned February in Las Vegas. 2013 launch Google, which Facebook, will see vibrationapp to post motors, deals a timer, GPS, RFID Yahoo,customers Mozilla issued have withalready contactless paid out millionsstickers technologyto subscribers and that LED lights. It was created in bug bounties. Such programmes are now to counter an impulse shopping habit that they can attach to their mobile phones, can be redeemed spreading to the banking, financial services, worth an estimated £43.2 billion in the says founder and CEO Brett King. However, from the user’s airline and automotive industries. UK each year. he maintains that the fi rm is still “anti-card”. smartphone.
www.paymentscm.com payments cards and mobile / September / October 2016 7 paymentscardsandmobile.com payments cards and mobile | January | February 2013 7
PCM_JF13_40pp.indd 7 28/01/2013 11:49 card notes UK MASTERCARD ANNOUNCES ACQUISITION OF VOCALINK FOR £700 MILLION The largest UK banks are set for another windfall with the sale of the bank-owned payments company VocaLink to Mastercard for £700 million ($920 million).
NEWS OF THE deal came in July, months card payments. At a time when prices, costs March, claiming that common ownership after the UK payment systems regulator and margins are under pressure within the of the national payments infrastructure was (PSR) recommended the divestment of the cards business, such convergence could “hampering competition and the speed of company. It came hard on the heels of the sale potentially alter the payments landscape. innovation in the market.” of the bank-owned association Visa Europe to The proposition of push payments to Whilst the Mastercard acquisition would US-listed Visa Inc, which completed in June. retailers — immediate settlement of funds tick the recommended divestment box, it The VocaLink deal will see the sale of and no chargebacks — is very attractive. may not necessarily increase competition 92.4 percent of the company. A majority “Real-time payment solutions are taking and innovation. In an official statement, of VocaLink’s shareholders will retain the account-to-account ACH transactions, the PSR confirmed that it would discuss remaining 7.6 percent ownership for at which were anything but real-time, into the developments with Mastercard and VocaLink least three years. An earn-out for existing real-time domain. So suddenly you have a and with the relevant merger authority, shareholders of up to £169 million ($220 completely different set of rails available where appropriate. million) is included if performance targets are for retail transactions,” explained Francesco “At present, common ownership and met. Barclays has confirmed that it stands Burelli, managing director, Accenture Global control remains a key issue. However, the to net £104 million for its 15.18 percent stake, Payment Services. “These systems provide recent news that Mastercard intends to buy with the potential for a further maximum immediate or near-immediate confirmation VocaLink could address the issues we have earn-out of £29 million. that the transaction has taken VocaLink operates the key technology place, the money moves and the platforms behind the UK payment payment is irrevocable.” infrastructure. This includes the automated “We need to distinguish between clearing house (ACH) network, the real- the interface that is used to activate, time payments network known as Faster initiate and authenticate the Payments and the LINK ATM network. payments, and the rails on which VocaLink was formed from the merger of the payment runs. Right now, we Voca Limited and LINK Interchange Network are seeing the convergence of the Limited in 2007. It is owned by a consortium rails: the back-end. As to the front- of the UK’s 18 biggest banks and building end, we don't know what type of devices identified,” said Hannah Nixon, managing societies, including Barclays Bank plc, Royal are going to hold payment credentials. director, PSR. Bank of Scotland Group, Lloyds Banking Mobile handsets are very well positioned to “We must not lose sight of the other issues Group, HSBC and Santander. be holding payment credentials, but these that are causing concern. The problem changes are not short-term.” runs deeper than just the ownership of the CONVERGENCE OF CARD AND The acquisition also gives Mastercard infrastructure provider and we will want NON- CARD PAYM ENTS access to Zapp. This puts real-time to see further changes in the market if payments on consumers’ mobile phones competition is to be effective,” she continued. Speaking at the time of the through an existing mobile banking app, By acquiring VocaLink, Mastercard has announcement, Ajay Banga, president allowing secure, instant retail payments. taken a massive stake in the convergence of and CEO, Mastercard described the UK This direct-to-bank-account interface the industry in the medium-term. The key to as “a very strategic market for us” and allows Mastercard to challenge Visa in dominating the 20th century economy was to looked forward to playing a bigger role in the debit space in the UK. It also unlocks own the means of production. Whereas in the payments in the UK. Visa dominates the huge potential P2M volumes as real-time 21st century, advantage belongs to those who UK on debit, leaving Mastercard with less payments expands globally. own and create the means of connection. than five percent of the debit card market. Who will own and create the connections? However the significance of this deal goes WHO WILL OWN THE MEANS With Mastercard acquiring VocaLink and Visa beyond debit cards. OF CONNECTION? building out its real-time payment capabilities The acquisition will give Mastercard with the expansion of Visa Direct in the US, it access to real-time payment rails, and see The UK payment systems regulator would be unwise to discount the traditional the potential convergence of card and non- published an interim market review in card incumbents just yet.
8 payments cards and mobile / September / October 2016 www.paymentscm.com ID)��[©\VJ�� BIXOLON Discover a World of Printing with BIXDLON
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® For more informationon BIXOLON's leading range of mPOS mobile printing solutions, BIXOLON contact the team on +49 211 68 78 54 0 or visit www.BixolonEU.com www.BixolonEU.com card notes GLOBAL PREDICTING THE FUTURE OF FINANCIAL SERVICES The window of opportunity is closing for banks to leverage their data to get ahead in digital services, says a new report from the Mobey Forum. Predictive Analytics in the Financial Industry - The Art of What, How and Why contends that banks and financial institutions that are not yet engaged with predictive analytics need to start now if they are to maintain future competitiveness.
“BANKS HAVE GREAT data but if they want banks for the right to use their customers’ data, The report suggests several areas of to compete in the digital age they need to get so they need to leverage their data to remain application for predictive analytics. These more strategic and more professional about relevant to customers. include card-linked offers with merchants how they use it,” comments Amir Tabokovic, and ‘next best action marketing’. This offers BigML and co-chair of the predictive analytics PREDICTIVE ANALYTICS advice and support to customers based on working group, Mobey Forum. “The PSD2 EXPLAINED their financial and lifestyle habits, rather than regulations will soon force banks to provide products. From a risk point-of-view, more access to account data through third party Traditional business intelligence used accurate predictions about future behaviour APIs. This means that if the banks don’t to understand the past typically includes would give organisations the chance to assess leverage their data soon, someone else will.” descriptive and diagnostic analytics. This risk better. Use cases for predictive analytics answers the questions ‘what happened?’ and include risk assessments, advanced early THE PERFECT STORM ‘why did it happen?’. According to research warning systems, credit collection analysis, firm Gartner, there are two further types of fraud detection analysis and pricing. On the We are in the midst of a perfect storm for analytics: predictive and prescriptive. These operational side, predictive analytics can help predictive analytics. The ‘dataverse’ is growing answer the questions ‘what will happen?’ and with predictive maintenance of systems to exponentially. From smartphone data and ‘how can we make it happen?’. prevent failure and minimise downtime. social media sites to online banking, the Internet of Things and wearables, we create THINK BIG, START SMALL, START around 2.5 quintillion bytes of data every day, NOW according to IBM. Additionally the price of data storage and computing power is falling and Naturally there are hurdles organisations have becoming more available. to overcome before predictive analytics can Not for the first time, technology giants such deliver benefits. Not least of which is a cultural as Google, Apple, Facebook and Amazon change within companies towards effective (GAFA) are setting the standard in terms use of data. This cannot be considered an of customer expectations and what can IT department-only project or responsibility. be done with data. Smartphones as the The report sets out ten further challenges in perfect communication channel to customers the predictive analytics lifecycle, ranging from are already deployed in large numbers. So data management to analysis and modelling, much so GAFA are moving from mobile- and deployment. first to AI-first companies. They are evolving At the same time, it contends that banks from companies that retrieve and display Through predictive analytics, companies and financial institutions should think big, information to those which inform and assist. can predict changes in customer needs, start small and start now with regard to Smart use of data is no longer a nice-to- target customers with well-timed and predictive analytics. They should work on have but a must-have, especially in the wake appropriate offers, and build loyalty by building a digital services infrastructure, with of upcoming changes in regulation. In Europe, offering contextual information and advice data analysis at the centre, which can be financial services such as payments may that improves the customer experience. For leveraged to support the whole business over be further commoditised as a result of new example, Netflix and Amazon use predictive the long term. regulation. As a result, the value-add around analytics to show recommendations of “The threat is real, but there is also huge payments will become ever-more important. movies and books to customers, based opportunity for banks in this field,” said Sirpa Under the PSD2, any entity with a payment on search history and the past purchases Nordlund, executive director, Mobey Forum. licence can compete for customer payment of customers and others like them. The “From now on, it’s all about the data. With data. New areas of competition will emerge 2012 Obama presidential campaign predictive analytics, banks can establish greater once customers can decide with whom they used predictive analytics to influence relevance and appeal, increase trust and wish to share their transactional data. Banks individual voters with particular types of ultimately create a more stable commercial will compete with each other and with non- messaging and contact. and operational footing in the digital age.”
10 payments cards and mobile / September / October 2016 www.paymentscm.com ADVERTORIAL National payment tieto.com/cards switches: navigating the complexity
A national payment switch has become a necessity for a cashless or ‘less cash’ society. The advantages of such a switch include boosting financial inclusion, stimulating innovation, competition, growth and economic prosperity. So, how does a market best implement a national payment switch? And how does it cope with the considerations and inevitable trade-offs?
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www.paymentscm.com payments cards and mobile / September / October 2016 11 card notes GLOBAL AUSTRALIAN CARD-NOT-PRESENT FRAUD INCREASES
AUSTRALIANS SPENT AU$1.92 trillion percent or AU$226.3 million occurring percent over the last ten years, the using cards and cheques in 2015; of which overseas. This increase partly reflects the total value of cheques has remained 0.025 percent or AU$469 million worth of growth of cybercrime, large-scale data steady. Cheques accounted for less than transactions was fraudulent. While some compromises and the move to remote five percent of non-cash payments in areas of card fraud have declined, overall fraud generally. As the US migrates Australia in 2015 and the rate of fraud card fraud has risen due to a significant to EMV chip technology, criminals are under one percent in every AU$1,000. increase in card-not-present fraud. rushing to use counterfeit cards at US In 2015, the total rate of cheque fraud Australians are spending more than merchants where the magnetic stripe is increased to 0.7 cents per AU$1,000 ever on cards and the rate of fraud is still accepted. The window for this type of transacted, up from 0.5 cents in 2014. The increasing, according to data published fraud is closing, which largely explains the total amount of cheque fraud increased by the Australian Payments Clearing 77 percent rise in counterfeit/skimming from AU$6.5 million to AU$8.4 million in Association (APCA). The total amount fraud on Australian cards overseas. 2015, having dropped from AU$7.1 million spent on cards in 2015 increased five Although cheque use has fallen 70 the previous year. percent to AU$689,470 million. The rate of card fraud increased to 66.8 cents per CARD-NOT-PRESENT FRAUD ON ALL AUSTRALIAN CARDS 2010-2015 AU$1,000, up from 58.8 cents in 2014. With EMV chip technology providing AU$250m 226.3 strong protection against counterfeit Fraud in Australia Fraud Overseas AU$200m 200.9 fraud at point-of-sale in Australia, fraud is increasingly migrating online. Domestic AU$150m 124.4 124.5 136.7 110.3 counterfeit and skimming fraud actually AU$100m 99.1 fell ten percent in 2015 to AU$22.9 million, 85.0 85.9 73.7 72.8 whereas domestic card-not-present fraud AU$50m 46.1 increased 38 percent to AU$136.7 million, 0 up from AU$99 million in 2014. 2010 2011 2012 2013 2014 2015 Overall card-not-present fraud increased to AU$363 million, with 62 Source: Australian Payments Fraud Details and Data 2016, Australian Payments Clearing Association (APCA)
THE $19 TRILLION OPPORTUNITY A NEW STUDY from the World Bank of which would be surprising to payment and international card models to reach Group and the World Economic Forum industry veterans. small retailers with electronic payments. estimates the global value of micro, small Cash usage is entrenched in people’s However, innovators in developing markets, and medium retailers’ transactions at $34 daily interactions and user behaviour is primarily non-bank organisations, will trillion per annum. An estimated $19 trillion notoriously difficult to change. There may need to create tailor-made models to was made in cash and cheques, and $15 be technical or infrastructure barriers. address barriers and merchant needs. trillion by electronic payment means. The value proposition and economics for Big and small data, both payment and “While many foundations and drivers electronic payments may be inadequate. non-payment-related, will increasingly be exist for achieving financial access Electronic payments is a two-sided market. used to offer value-added services to small and inclusion, the potential impact of There may be insufficient customer businesses, such as micro-loans. extending the use of digital financial demand and the distribution models for The report confirms the widely-held services through a more widespread hard-to-reach merchants ineffective. belief that the most groundbreaking acceptance of electronic payments Merchants may be reluctant to declare or innovations are occurring where traditional among small retailers is substantial,” said pay full taxes on sales. card payment infrastructure is limited. This is Gloria Grandolini, senior director, finance The study contends that innovations that particularly the case in Sub-Saharan Africa & markets, World Bank Group. go beyond facilitating electronic payments and certain developing Asian countries. Despite the $19 trillion opportunity to to providing value-added services promise Conversely, in developed markets where displace paper-based payments, the high success. This is particularly the card infrastructure is well-established, adoption of electronic payment has been case among small and lower-income organisations are looking to tweak the slow and patchy worldwide. The study sets merchants. Developed markets may only existing card model rather than create out some possible reasons for this, none require adjustments to existing domestic a new one.
12 payments cards and mobile / September / October 2016 www.paymentscm.com GLOBAL card notes
With regard to distribution models, customer payments as well as supplier socioeconomic benefits. Moreover, non-traditional payment actors are well payments, wages and salaries. Suppliers substantial business opportunities and positioned to help acquire and retain can also take an active role in boosting avenues for public-private cooperation retailers for electronic payments in merchant adoption of electronic payments exist in better serving the micro, small and developing countries. This is in large part for their mutual benefit. medium segment,” said Matthew Blake, on account of their existing relationships “Moving away from cash toward head of banking and capital markets, with small retailers. The study considered electronic payments can have substantial World Economic Forum.
Global payments by micro, small and medium retailers (estimated values) 2015
Global / Total: $34 trillion / Electronic: $15 trillion (44%)
High-income OECD / Total: $11.1 trillion / Electronic: $7.9 trillion (71%)
Latin America & the Caribbean / Total: $3.5 trillion / Electronic: $1.5 trillion (46%)
Sub-Saharan Africa / Total: $1.5 trillion / Electronic: $0.4 trillion (25%)
Middle East & North Africa / Total: $1.3 trillion / Electronic: $0.4 trillion (30%)
Europe & Central Asia / Total: $3.1 trillion / Electronic: $1.3 trillion (46%)
South Asia / Total: $4 trillion / Electronic: $0.8 trillion (20%)
East Asia & Pacific / Total: $9.5 trillion / Electronic: $2.7 trillion (31%)
Source: World Bank Group
www.paymentscm.com payments cards and mobile / September / October 2016 13 Can incumbents innovate any more?
by Joyrene Thomas
Innovation is one of the few ways to sustain competitive advantage over time. But can incumbent banks and payment companies truly innovate any more? PCM examines how incumbents are innovating the way they innovate, and considers the implications for collaboration and the future.
THERE’S A THEORY that goes something “If you look at the general picture for is utterly different to banks,” says Birch. like this: incumbents are encumbered when European banks, around 90 percent of Banks are not necessarily set up or able to it comes to innovation. The encumbrances the IT spend goes on maintaining the innovate in the same way as start-ups. This are many and varied. On the one side legacy systems,” says Dave Birch, director may be neither appropriate nor desirable. there is legacy infrastructure, which is of innovation, Consult Hyperion. “Of the Yet when simple things take a long time complex and costly to maintain. On the remaining 10 percent, around 90 percent and cost a lot of money, innovation around other are the demands of regulatory of that goes on compliance and regulatory customer experience or business models compliance, maintaining interoperability requirements. So the amount of resource becomes very difficult. and 24/7 operations. And an under- that banks actually have available for Innovation teams faced some resistance developed internal cultural of innovation or innovation is negligible.” at most (63 percent) of the 38 institutions ‘intrepreneurship'. But how much of this is Legacy infrastructure may also foster surveyed by the Aite Group for their theory? Does it in fact reflect the practical a legacy mindset. Birch cites the example report Innovation in financial services: reality within many banks and payment of being a judge at a hackathon where how banks and insurers are gearing up. companies today? competitors were building apps quickly. The barriers depended by company and They did this by taking APIs from different ranged from technology outsourcing, INNOVATION ROADBLOCKS sources and combining them with natural to industry complexity and driving out language processing and so on. “The large-scale innovation. For Gwenn Bézard, Legacy infrastructure is definitely a contestants live in this world so it is very research director at the Aite Group, the practical reality for many organisations. easy for them to pull this together. That main inhibitor to innovation for larger
14 payments cards and mobile / September / October 2016 www.paymentscm.com cover story companies is also cultural, but in a slightly “FinTech is such a broad statement in different way. terms of change within the industry. It’s “One company had a team “There are always different things to more of a movement than a collection focused on cutting red tape, blame and that get in the way on a day-to- of companies. A statement of intent to making it easier for start- day basis. But if you step back and look at deliver things in a certain way.” That way ups to work with financial what really is the barrier, I think it is the fear is generally to use technology to make institutions to pilot and win contracts.” of disrupting the business you have,” says financial services more efficient. It means Bézard. If companies did not fear upsetting developing products and services that are Gwenn Bézard, research director, Aite Group the status quo, all the other barriers would more user-friendly, cost less to deliver and probably disappear. “Senior management are optimised for digital channels. would find resources to align with the new The fear, uncertainty and doubt among Investment funds are another way to business. They would hire more people, incumbents during the first wave of FinTech collaborate with start-ups. Two notable spend more money, raise more money to has given way to more collaborative examples are Santander and BBVA which get things done,” he says. approach in the second wave. This is have dedicated funds, although many partly because most of the FinTechs that other incumbents are active in this space. emerged early on have become more a Santander announced a further $100 “Do incumbents need to threat to suppliers than banks, contends million injection in July from its balance innovate the way they do innovation? Absolutely. That Brear. It is also partly out of necessity. sheet into the Santander InnoVentures comes from a more deep- fund. Meanwhile BBVA shut its in-house seated need to change how FROM OSMOSIS THROUGH TO venture arm earlier this year. It combined they do change.” INVESTMENT the $100 million in the fund with a further $150 million to create a new venture capital David Brear, CEO, 11:FS There are as many ways to collaborate as vehicle, Propel Venture Partners. there are collaborations. Accelerators and “If you really want a part of the Caught between the constraints of a incubators are one way for incumbents interesting firms moving through and you legacy infrastructure and cultural fears and start-ups to get close to and learn from want to be continually learning from them, about disrupting the status quo, how do each other. Mastercard set up one such then either acquiring them or buying a incumbents innovate? The options have programme nearly three years ago and proportion allows you do that. And bring to traditionally been threefold: build, outsource has worked with more than 60 start-ups market something that is a win-win for both or cooperate. The third, more collaborative worldwide since. the bank and the start-up,” says Brear. way is now in the ascendant, particularly The mandate for Mastercard Start Path was This win-win achieved through as a new breed of innovators is emerging. simple. “A large amount of innovation is being collaboration seems to be the guiding created by these early-stage companies. We principle behind much of the engagement NEW KIDS ON THE BLOCK felt it was very important as an organisation to between incumbents and start-ups today. have a way to connect with that ecosystem,” The strengths and weaknesses of both Over the last decade, a new source explains Stephane Wyper, global lead, start- parties mean that they will often do better of innovation within financial services up engagement, Mastercard. by collaborating than by competing. This is has surfaced: financial technology, or Mastercard takes a three-pronged the central premise of Santander’s paper FinTech, start-ups. FinTech is attracting approach to working with start-ups. Firstly, FinTech 2.0: re-booting financial services. attention, talent and investment. More than supporting the start-ups to solve tangible, It acknowledges that while banks have $50 billion has been invested in nearly operational issues. Secondly, supporting disadvantages relative to start-ups, they 2,500 companies since 2010, according Mastercard clients to get closer to start-ups also have advantages. Being regulated is a to Accenture. Engagement with the in areas that interest them. Finally, making burden, but it creates consumer confidence. FinTech community has also evolved over strategic investments. A long history brings with it legacy systems, that time. “We’re more interested in the collaboration but also builds trusted brands and provides “Initially FinTech was seen as a sky- and commercial opportunities before we even historic data, scale, a banking licence and is-falling moment and everyone was start discussing whether investment makes a head-start in compliance activities. Banks terrified,” explains David Brear, CEO and sense,” says Wyper. “Where we do make also understand banking and the risks co-founder of digital banking consultancy investments, we behave very much like a involved, which new entrants may not. 11:FS. Incumbents were fearful that FinTech strategic investor. It isn’t just about the funding, “It’s a very interesting challenge. On would disrupt everything they were doing it’s about what can we bring with that funding one side, we have people with all the and how they were doing it. This is almost to help the company scale. This is why we money and all the customers. And on the a mis-classification of what FinTech is, actively pilot with many of the start-ups we other side, we have a bunch of young, argues Brear. invest in as well.” hungry start-ups with new brands and new
www.paymentscm.com payments cards and mobile / September / October 2016 15 cover story mentalities. Really, it’s about a race to the their operating costs. Whereas it costs a IN SUMMARY middle,” says Brear. big bank £160-180 to run a current account, the new players can do this for around five “Innovation is easy to talk about but NEW BATTLEGROUNDS percent of that cost. “The worrying trend hard to measure,” says Bézard from for banks is that if they start to concede the Aite Group. Innovation is broader Any discussion about the collaborative the customer engagement, they start to than new entrants offering the same future of innovation quickly turns into a lose how they have that relationship — and services as incumbents, but better. It’s broader discussion about the future of it becomes a downward spiral towards a about innovating every aspect of the value banking and payments. What does the dumb pipe,” contends Brear. chain — innovating everything, including future hold? And what exactly are partners There is also the looming threat from the nature of innovation itself. collaborating to create? the technology giants. Google, Apple There are barriers, of course. Established “The future will be tied into the regulatory and Facebook are getting very close to businesses are fearful of disrupting existing changes happening across the industry,” disrupting both the customer engagement business and revenue streams. Then argues Brear. Chiefly this will centre around and payment utility sides. If it comes down there are the cultural factors: decades of the provisions included in the revised to marketing spend and building brand things being done a certain way; product, Directive on Payment Services (PSD2), equity, the banks may come off worse. divisional and investment silos, and deep- and the open banking initiatives already Technology companies already dominate seated supplier relationships. Almost underway in many markets. This allows the best global brands lists. Their above- nothing happens in the payments industry third parties to access data and payment the-line spend can equal even the biggest that does not involve multiple counter utilities using APIs. The EU General Data banks, and their customers are more loyal. parties, working across many different Protection Regulation (EU GDPR) also parts of the ecosystem. This in itself may contains a section on data portability. FROM DUMB TO SMART PIPE impact the ability of any organisation to Regulation is driving a cultural change in innovate in isolation. how data is regarded, plus the products In the future, banks may provide more of and services that can be built on it. a utility service delivered by APIs, rather “In the past you had three Opportunities and threats exist in the same than end-services themselves. Meanwhile options [build, outsource, future. Banks will become custodians of they can also set up initiatives to consume cooperate]. But looking their customers’ data, rather than owners. their own and competitors’ APIs. “I think forward, there is a fourth, and They will have to turn over customer data we have to start planning for that future,” in many ways more interesting, to third parties, including competitors, if says Birch. This may be difficult for banks at option.” their customers consent to this. the moment, because they do not have the Dave Birch, director of innovation, Two main battlegrounds are emerging infrastructure. They also have an unresolved Consult Hyperion. as a result, according to Brear. “The front- tension around cannibalising existing office engagement with the customer business and revenue streams. There are various ways for banks and the back-office payment utility.” Any Banks essentially need more transactions, and payment companies to innovate, party who can give the best customer more data and better risk management, but increasingly it involves engaging experience, and be the most creative which feeds off better data from more with FinTech in a mutually beneficial around engagement and loyalty, is going to savings and loans products. All of these manner. This collaboration is causing win at front-office customer engagement. things could be facilitated by FinTechs significant changes in itself. For some, it Brear cites a parallel with the insurance rather than by the banks themselves. “It is supply chain disruption. For others, it sector in the UK. Price comparison could be that the bank has a better, more is an acquisition and absorption strategy. sites have built successful brands and effective role as a facilitator of FinTech and For everyone, it involves a cultural as re-engineered age-old business models RegTech evolution, rather than a progenitor,” much as a technological transformation. for selling insurance. These sites have Birch argues. Any discussion about innovation become financial services organisations In this way, banks reinvent themselves industrywide inevitably broadens without being licensed in the same way and behave as an intelligent pipe, facilitating out into one about the the future of as incumbents. “I can see a similar battle FinTech innovation rather than trying to banking and payments. What do happening in the banking space where an capture it. Maybe banks have to disrupt incumbents see themselves as being? interesting start-up creates a compelling themselves, before they are disrupted. What do the regulators, quite apart aggregated experience,” says Brear. “There’s a great difference between from their customers, see them as The back-office battleground is about choosing to provide a utility service — being a being? Who knows? Maybe one of avoiding a commoditised, utility play with pipe — and developing a strategy around that. the best ways for banks and payment slowing growth and falling prices. Historically And being forced into being a pipe because companies to predict the future is to banks have not been good at controlling you have been outwitted,” concludes Birch. create it themselves.
16 payments cards and mobile / September / October 2016 www.paymentscm.com POSzle. A revolution in how POS fits together
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When the alternative goes mainstream… ltern ti e yments
by Joyrene Thomas
When bank-account funded payments, real-time payments, mobile and other digital payments are actually the default way to pay in many countries, the term ‘alternative’ seems a misnomer. We examine current and future trends in how the world chooses to pay and be paid, and the implications for customer value propositions and legacy infrastructure.
PAYMENT HABITS ARE strongly national. factors. Consumers and businesses rarely overtook card payments in 2015, claiming Germans love direct debit whereas go out of their way to pay in a new way. 51 percent of global e-commerce turnover. Russians do not. 48 percent of cashless Behaviour becomes entrenched for face- APMs are actually the default way to pay payments in Germany are via direct debit to-face payments. It is the same online in many countries, so much so the term according to the European Payment Cards as the growth of e-commerce is driving ‘alternative’ seems a misnomer. Statistical Yearbook 2015-16, yet in Russia take-up of local alternative payment “Countries that were the home of it is less than one percent. When they methods (APMs). e-commerce, such as the US and the are not paying cash, Scandinavians pay UK, are countries where cards were used by card more than 70 percent of the THE MORE DIGITAL, THE MORE and people were willing to use them time. Meanwhile the Maltese love writing LOCAL? online,” says Ralph Ohlhausen, business cheques. Around one-in-four non-cash development director, at e-payment payments in Malta is made this way. Yet There are currently more than 300 APMs specialist, PPRO. with the exception of France and Cyprus, worldwide. They range from real-time “As e-commerce grows internationally, most of mainland Europe is seemingly bank transfers, e-wallets and mobile merchants who want to sell abroad have unacquainted with a cheque book. wallets to direct debits, cash on delivery realised that in most countries, cards are Payment habits have developed over and e-invoices. According to a Worldpay not the dominant payment form. If you time and are formed by various cultural, global payments report, APMs not running want to sell in multiple countries, you need political, economic and technological on international card scheme networks to offer the local, preferred payment
18 payments cards and mobile / September / October 2016 www.paymentscm.com alternative payment methods methods so that you can reach the Instant payment is another factor m-commerce will undoubtedly continue majority of people willing and able to buy driving interest in APMs. This removes the to be significant. Global e-commerce is from you online.” middleman from the payment exchange. expected to hit $2.4 trillion in 2019 according Merchants selling online in Brazil have to “If you want to shift money from to Worldpay, with 23 percent of accept the post-pay Boleto Bancário option, the customer to the merchants, this being exclusively from mobile which accounts for around 15 percent of the vehicle in-between becomes devices. The rise of chat bots could online payments. Merchant selling into the less necessary with the advance potentially drive m-commerce Netherlands have to accept iDEAL. The of technology,” says Ohlhausen. “If figures higher still. Chat bots are Dutch make 56 percent of their payments instant payments are introduced natural language programmes online (€18.1 billion) using this real-time bank where the money is moved which allow businesses and transfer method. In Russia, acceptance of within seconds, what you really customers to communicate e-wallets such as Qiwi, WebMoney and need is the technology enabling directly via messenger chat Yandex are a must. Generally there are that transfer. There is no need platforms. They facilitate quick and certain regional characteristics of APMs. to go through any other quasi- convenient contextual exchanges, In Europe with a high banked population, instant payment system, such as and integrating payments is a APMs tend to be based on online banking. card networks.” natural next step. Users are either redirected to their online Consequently cards as a One only has to look to China banking facility, or select their bank payment instrument become less where Tencent-owned WeChat from the provider’s page to complete a and less of a necessity. Payment (or Weixin as it is known locally) payment. In Africa, mobile wallets are credentials could equally be held has long been a stalwart of social popular, e-wallets in Asia and e-cash elsewhere or on another form networking, messaging and e/m- in Latin America. factor, such as a mobile handset. commerce. The WeChat app, However the trend towards mobile which also includes payment, THE PUSH AND PULL OF payments may yet revive interest is ubiquitous in Chinese social PAYM ENT in cards and pull payments in and business life with around 697 general. This is because mobile million monthly users. Western APM growth is set to continue. APMs are payments tend to work with stored technology companies are expected to account for 55 percent of data that is retrieved, activated playing catch-up. Facebook e-commerce turnover by 2019, with North and executed via a single click. launched developer tools for America showing the biggest shift towards “In the matter of one-click payments, its Messenger service in April this year these methods, says Worldpay. But aside they are only possible if data has been and Apple for its Siri voice assistant in from the growth in e-commerce volumes, stored previously so that one click can September. These tools allow developers why are APMs capturing a greater share retrieve it to execute the transaction,” to design integrations for payments of payment volume and value? explains Ohlhausen. “Most push payments into messaging apps. Conversational For Ohlhausen, it has much to do with the have a user interaction that needs to and contextual commerce will take off inherent advantages and disadvantages happen at that point. That’s why it is a push. and drive m-commerce and potentially of cards and more traditional systems. The customer has to do something, and APM-style wallets. The question is when Apart from growing levels of fraud on usually one click is not enough.” and how, not if. cards, there is also the vexed issue of In the short-term, APMs and indeed The revised Directive on Payment chargebacks. “It’s something that is very all payment methods are seeing a Services (PSD2) is another driver of annoying from a merchant’s perspective — changing, rather than a new, lease of APM growth, particularly in Europe. The it always has been,” contends Ohlhausen. life. As payment becomes more digital, regulation has the potential drive more “This is linked to pull payments, meaning it becomes more local. Both in terms of bank-to-bank payments, rather than credit that it is the merchant who initiates national payment habits, but also local to or debit card payments. It also lays the payment by pulling the money from the the customer’s online account or device. foundation for new entrants and payment customer. In return and in most countries The battle to become the embedded card behaviour change. In the future, large and with most schemes, the customer is or stored payment method will become retailers could consider becoming payment granted the right to pull the money back, ever-more important. initiation service providers (PISPs) under more or less at their discretion. From a PSD2. This allows them to initiate payments merchant’s perspective, that is a huge risk LONGER-TERM TRENDS from a customer’s account via a SEPA and a huge cost. Since APMs are, more credit transfer or similar push payment. This often than not, push payments, there is no Looking further into the future, a number of would be preferable to retailers over SEPA chargeback right. For a merchant, they are trends could drive the next 10-20 percent direct debits, card or other pull payments, much more secure.” growth in APMs. Mobile and increasing which carry a chargeback risk.
www.paymentscm.com payments cards and mobile / September / October 2016 19 alternative payment methods
The changing culture around data On the technical side, the integration is not merely a question of integrating as protection and privacy could also provide a of APMs brings with it a number of many as possible, but exploiting all the boost for APMs. As above, this draws on the considerations, as Ali Mentesh, sales functionality provided to integrate them as inherent advantage of APMs as push rather director at payment integration firm Volanté deeply as possible. than pull payment methods. Technologies, explains. The APM payment “From a data privacy and protection cycle consists of two very different worlds. IN SUMMARY point-of-view, another big advantage of The APMs themselves are typically based push payments is that as the customer, I on modern technologies, and therefore Not for the first time in business or do not have to disclose any information,” tend to be modular, system-agnostic and payments, the internet changed everything. explains Ohlhausen. For a pull payment, the flexible. The systems that do the payments It conflated distance, bringing the world customer has to provide their bank account processing are typically complex legacy to the user’s home, office or wherever or card details to enable the merchant to pull systems. they were via their mobile device. At the the payment. For a push payment, it is the “Although these back-end payment same time, it also brought the user and opposite. The merchant has to provide their processing systems are highly scalable and their particular local payment habits to account information to enable the payment. proven in reliability, they lack the nimbleness the world. It has become good business and flexibility necessary to adapt to change — as well as good manners — to offer a THE OPERATIONAL NITTY- quickly and economically,” he says. “Volanté customised shopping experience, including GRITTY contributes to the APM/legacy systems localising language, currency, delivery environment by offering an ‘insulation’ and payment options. Merchants, payment service providers layer around these critical core payment APMs are on the rise and set to and acquirers want and need to localise processing systems. No matter what APM capture an ever-greater share of digital their offering to close sales and compete emerges, the core systems can quickly and payment volume and value. While the effectively. Of course, payments is only part easily integrate with them. An example of downward pressure on interchange of localisation, alongside language, currency, this is the recent Volanté Ripple API that globally has triggered renewed interest in-country logistics, tax requirements, fraud enables any modern or legacy payment in cards from the acquirer/merchant prevention and so on. However with regard processing hub to integrate with Ripple.” side. The price of payment acceptance is to localising payment, considerations include There is no such thing as a simple coming down across the board, including integration, contractual requirements, payments system. The depth of integration for APMs. Therefore, the advantages or statement and settlement dates, and back- for each APM is significant, in addition to disadvantages of cards versus APMs, pull office reconciliation. the number of payments integrated and versus push payments, remain. A solution provider should be able to how this is achieved technically. “There is a The growth of m-commerce, particularly
PERCENTAGE OF NON-CARD TRANSACTIONS ONLINE
45% 87% 66% 23% 87% 53% 41% 33% 37% 28%
BRAZIL GERMANY INDIA MALAYSIA NETHERLANDS RUSSIA SPAIN SWEDEN UK US
Source: Worldpay Global Payments Report, 2015 offer international card and local schemes, lot more devil in the detail than you see on conversational and contextual commerce bank transfers, e-wallets and instalment the face of it — that goes for every payment via chat bots, as well as new regulation options via a single integration. If they can method, even the most popular ones,” around payments, and data protection do this on a single contract, so much the says Ohlhausen. and privacy is driving interest in the better. Back-office reconciliation should “There are details, such as lack of a refund APM proposition. also be as streamlined as possible with a or particular payment statuses to map. If a Providing solution vendors and those single statement and settlement date for all particular payment method has the risk of wishing to deploy APMs can address payments, irrespective of country, currency missing funds, you need to look at a more technical integration, contractual and or acceptance channel. This helps cut the granular level at the different stages of back-office reconciliation issues, the operational cost, time and resources required how a payment is done to circumvent that future for payments looks as bright as it to manage payment-related admin. risk.” The operational nitty-gritty of APMs does alternative.
20 payments cards and mobile / September / October 2016 www.paymentscm.com www.accourt.com
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STRATEGY | DELIVERY | OPERATIONAL EFFECTIVENESS data security
Card data security ten years on by Joyrene Thomas
Ten years after the founding of the Payment Card Industry Security Standards Council (PCI SSC), we present a mid-term report on the industry’s data security efforts. As both cyber attacks and regulatory interest in data privacy and protection increase, we also examine the outlook for data security and PCI DSS.
ASKED WHY HE robbed banks, prolific US breaches were rising. Card fraud was “Nearly everywhere I go, bank robber Willie Sutton is alleged to have increasing. And cardholders and card people are aware of the PCI responded, that’s where the money is. In issuers left out of pocket. The industry standards, understand what the modern economy, data equals money. decided to act. they’ve got to do and why Almost every business holds data about they’ve got to do it.” customers, staff or partners, for example THE FIRST TEN YEARS Jeremy King, international director, customer lists, payroll data and supplier PCI SSC bank details. Payment card data is a very The first version of the payment card particular case of where data definitely industry data security standards (PCI DSS) that has been growing and getting better. equals money. Criminals sell stolen card was published in December 2004. Two Nearly everywhere I go, people are aware data on underground carding forums. years later, the five global card brands of the PCI standards, understand what They use card data to create fake cards to founded the security standards council they’ve got to do and why they’ve got to do withdraw money from ATMs, or buy things (PCI SSC), which celebrates its ten-year it,” says Jeremy King, international director, to sell on for a profit. anniversary in September. So, where is the PCI SSC. Criminals have become adept at digital industry ten years after the founding of Undoubtedly the PCI DSS has helped set hold-ups. They rob banks but also payment the PCI SSC? a good baseline for card data security. As service providers, retailers and any other “On the whole, we are in a really good a standard, it has been regularly updated businesses that store, process or transmit place from the PCI SSC’s perspective. We and widely adopted globally across the card data. Around ten years ago, data have a fantastically strong community industry. It has helped provide the catalyst
22 payments cards and mobile / September / October 2016 www.paymentscm.com data security for investment to secure card data, plus finance sector clients, according to a recent medium end of the market, companies may personal data more generally. The PCI NTT Group report. Retail was followed by not have the skills on their team to manage DSS has helped to raise awareness of the hospitality, leisure and entertainment their environments properly. They may not the importance of data security among sector, then insurance, government and have the technology either, as this is mostly all types of businesses, albeit by accident manufacturing. This comes as no surprise, aimed at the enterprise market. rather than by design. after all that’s where the data/money is. The security focus has to be right However raising awareness and raising It is perhaps surprising that criminals to be effective. PCI DSS can almost the bar against data breaches are two are still exploiting the basics with tried give a false sense of security, if not different things. Criminals have not stood and true methods. This is illustrated by the implemented correctly. Horror stories still. If anything, the criminals and the data consolidation of vulnerabilities. The top ten abound of organisations who chase security industry are in an innovation arms external vulnerabilities accounted for nearly PCI DSS compliance in isolation and do race. Both sides are evolving their methods 52 percent of all external vulnerabilities not secure customer data. This can be and devising new ways to steal or protect used during 2015. A long-tail of thousands as valuable as cardholder data, if not card data. more accounted for the other 48 percent. It more so. For example, one online retailer “Criminals have become more aware of is a similar story with regard to the age of secured their cardholder data, but not their the opportunities for stealing data across exploits. Nearly 21 percent of vulnerabilities customer database. Criminals hacked into the board. That is probably the biggest detected in client networks were more than the database and e-mailed customers challenge we see today. When the PCI three years old. More than 12 percent were with a special offer, which connected SSC was founded ten years ago, the over five years old, and over five percent to a fake order page. When customers biggest challenge we faced was that were more than 10 years old, according to unwittingly placed orders and inputted their merchants and organisations were storing the NTT Group. card details, the information went straight vast amounts of cardholder data,” explains “I still don’t think we do enough to to the criminals. King. Companies are storing less card data, get the basics right. We still have poor preferring to tokenise or encrypt sensitive password use, poor authentication process THE BALANCING ACT data if they store it at all. Criminals have for connecting into networks, and we don’t moved to stealing data in transit. have excellent network security. When we For all that the PCI SSC has achieved in the Benjamin Hosack, director at security still don’t get the basics right and focus on last ten years, the council and the standard firm Foregenix, has also noted a change in ticking the boxes and compliance, rather are not without their detractors. Leaving data breach trends over the last decade. than security as business-as-usual, then the cardholder to one side for now, there “In the early days of PCI DSS, the data we’re open to attack,” says King. is a balance to be struck between the compromises were more manual — they According to Hosack, many businesses interests of card issuers, card acquirers did not use much automation or malware. that get compromised are not set up to and merchants. There is also a geographic Over the last 7-10 years, the attacks are effectively manage their data security balance to be struck between the US, the getting to be really quite sophisticated with themselves. Or they do not understand last major market to move to EMV chip, advanced malware in retail, hospitality and the security. Reading into the publicly- and the rest of the world which is already e-commerce environments.” available information behind most of the established with the technology. “There is a lot more compromise activity large data compromises in the US, Hosack With regard to costs and liabilities, there going on than people realise. In Europe, contends that many of these compromises is a feeling that the cost of data security e-commerce businesses are the ones that could have been picked up earlier. If the and compliance is not spread across the get hit most. In the US, it is mainly the card- technology and the teams monitoring the whole value chain. This is still a flashpoint present environment. In the Middle East and technology had been properly tuned, they between the merchant community and the Africa, it is a mix of the two,” says Hosack. could have identified and contained the issuer-centric card schemes. Merchants attacks sooner. Meanwhile at the smaller to feel disproportionately burdened with the GETTING THE BASICS RIGHT/ costs for securing card data, with few of the benefits in terms of a liability shift or WRONG? “Companies may have the interchange saving. technology and some of the Worldwide spending on information skills, but they may not have One of the most vocal detractors of the security will reach $81.6 billion in 2016, an implemented it all properly. PCI SSC is the National Retail Federation increase of 7.9 percent on 2015, according Or become overwhelmed (NRF), a retail trade association. In May to the latest Gartner forecast. Yet spending with information so they are the association asked the US Federal on info-sec tech only seems to be growing missing out on the important Trade Commission (FTC) to conduct in proportion to the volume of incidents bits.” an investigation into the PCI SSC, citing across all industries. The retail sector is still Benjamin Hosack, director, Foregenix antitrust concerns. experiencing 2.7 times more attacks than “We urge the FTC not to rely on PCI
www.paymentscm.com payments cards and mobile / September / October 2016 23 data security
DSS for any purpose, particularly not as THE FUTURE the value chain, and develop a more an example of industry best practices consistent compliance approach between nor as a benchmark in determining The future seems to be happening much card schemes. The stakes are high. As a what may constitute responsible data faster, which necessitates a new agility. worse case scenario, data security could security standards in the payment system “When you look back ten years, payments be the death of cards. If the costs of or any other sector,” said NRF general wasn’t evolving very quickly. Now it security and compliance stifle innovation, counsel, Mallory Duncan, in a letter to the seems that every week a new payment cards could become less attractive than FTC chairwoman. technology is coming along,” says King. alternative payment methods. The technologies likely to gain traction are One certainty about the future of data mobile contactless payment (the ‘Pays’), security generally is that it has a future. It “PCI itself is an inappropriate exercise of market power by where cardholder authentication is not is integral to every business, because data the dominant US payment card necessarily PIN. King also cites embedded, breaches not only threaten an organisation’s networks and PCI should not frictionless payments, where payment reputation and bottom line but their very continue setting data security happens in the back-end à la Uber. existence. As a result the profile of data standards through its current The evolution towards mobile and security generally, not just in relation to PCI processes.” cloud will have a bearing on how the PCI DSS, has become a board-level concern Mallory Duncan, general counsel, DSS standard develops. The PCI SSC will within most organisations over the last 12-18 National Retail Federation continue to consider ways of securing the months. Tone from the top is important transaction, where the data is at risk and in setting the security agenda. However, “The PCI SSC is a proprietary organisation what the criminal can gain, according to good security also involves everyone in formed and controlled by a single industry King. As the face-to-face environment an organisation, not just the IT or risk sector — the major credit card networks” becomes more secure with the roll-out of department. If the data security stakes were and “fails to meet any of the principles EMV chip and point-to-point encryption not already high enough, they are set to adopted by the federal government for technologies, this changes the risk become even higher. voluntary standard-setting organisations,” profile. PCI DSS could well move towards In addition to regulatory interest in PCI continued Duncan. a more channel-based approach. One stateside, the European regulators have The NRF’s request comes at a time that simplifies the standard for the card- also been busy. Three new pieces of when the FTC is already investigating how present environment, and evolves it for the legislation will become national law within assessors measure compliance with the PCI e-commerce environment. the next 18 months to two-and-a-half DSS. In what may prove to be a portent for years: the revised Directive on Payment operators in the rest of the world, the FTC Services (PSD2), the European Banking issued orders to nine PCI DSS-accredited Authority regulatory technical standard on assessment firms in March, requesting secure and common communications, and information and a limited set of example the EU General Data Protection Regulation PCI DSS assessments. (EU GDPR). Businesses trading in or with The request follows a long-running legal Europe will become more accountable battle between the FTC and the hotel as the custodians of personal data. They chain Wyndham Hotels and Resorts over face mandatory breach notification for a series of data breaches in 2008 and the loss of personal data, an increased 2009. In what was regarded as a test case, fine schedule of up to €20 million or the FTC was granted the power to charge four percent of global turnover, and the Wyndham with “unfair and deceptive appointment of a data protection officer. practices” in failing to protect consumer PCI DSS may become the least of payment card data. any company’s worries. The provisions The wider implications of this judgement contained in the EU GDPR are even more mean that US companies that fail to significant. Those who already comply adequately protect card data could be or are working towards compliance subject to both contractural penalties with card data security standards may from card schemes and acquirers, and have a head-start with regard to these. FTC regulatory sanctions. Whether the However, two years is not a long time to regulatory interest shown in data security in Opportunities and threats exist overhaul IT systems, internal processes the US holds up in court and goes on to set in the same PCI DSS future. There are and procedures, and company culture a precedent for other national regulators opportunities to bake security into solutions, with regard to data. Act now. The data remains to be seen. spread the cost of compliance across clock is ticking.
24 payments cards and mobile / September / October 2016 www.paymentscm.com ADVERTORIAL Which way to grow? Evaluating merchant growth paths in eCommerce ''With 1.6 billion people shopping online in 2016, spending more than $2 trillion annually, and with cross-border spending expected to hit $1 trillion by 2020, the opportunities for merchant growth have never been so significant, varied and fast. Payments, and the role they play converting shoppers into buyers, are becoming increasingly central to these growth trajectories. Savvy merchants know that payments are integral to a great shopping experience, and understand that payment can often be the differentiator. Eager to capitalize on the $2.2 trillion global eCommerce opportunity, merchants need to carefully determine which growth path to pursue, and how to tackle the specific payment challenges that each growth path entails.'' Markus Rinderer, SVP Product Line Manager, ACI Worldwide
The rules of engagement between merchant than two decades, but today’s demographic a consequence, retailers are focused more and consumer are fundamentally changing, shifts and unparalleled advances in intensely on growth through digital. But not becoming more digital and more open. smartphone technology have created new every merchant has the same starting point, Shoppers purchase goods and services at opportunities. Millennials, the generation of motivation, or resources, so growth strategies home, at work, or on the go, in lieu of digital natives who do not remember a world vary widely. buying from physical shops. Before purchase, without the internet, are now the largest ACI, the Universal Payments company, shoppers learn about products through online segment of the U.S. population and comprise identifies five key growth paths, which together review sites, and afterwards they use social 24% of the European Union’s citizens. Plus, create a framework for understanding the media to praise or disparage them. And to more people now live in cities, automobile opportunities that come from digital channels. complete purchases simply and securely, ownership is decreasing in developed markets, Although winning strategies are highly specific shoppers have a growing number of payment high-speed internet connections are becoming and no two merchants should expect the methods and mobile wallets to choose from. ubiquitous, and smartphone penetration same success with the exact same approach, This is digital commerce, and it is the primary still rising. evaluating common growth scenarios, and driver of retail sales growth in most markets The net result is that digital commerce is analyzing how successful merchants have around the world. growing 10% to 20% annually, while in-store mastered the accompanying payments Digital commerce has been a growth sales remain flat, or are even shrinking by challenges, can provide fresh insights for opportunity for retailers and brands for more as much as 5% per year in some markets. As merchants and their payment providers alike.
Merchants and acquirers are turning to their solution providers to enable them to pursue these growth trajectories, and the Going online for the first time question for those solution Investing in mobile Merchants expanding into digital channels encounter providers is then whether they Mobile is currently the priority for many businesses many new requirements; from customer experience have the tools and technology to because nothing else is driving more commerce growth today. Principles gleaned from traditional and logistics to cash management. These merchants enable their merchants to grow – eCommerce extend to mobile, but merchants must must balance the trade-offs between time to market any which way they choose. adapt the customer experience and operating model and ease of enablement with control and cost. in order to thrive.
Expanding internationally Diversifying channels Expanding to POS Although cross-border expansion is comparatively Optimization is a seemingly endless journey for online Ultimately, the lines between channels are blurring, easier in digital commerce than traditional physical merchants, given that the customer experience can as brick-and-mortar merchants continue to venture commerce, it is still challenging. Competing for foreign always be better, conversion rates can always be online, while eCommerce merchants increasingly consumers requires marketing and operational higher, and fraud can always be lower. Operational open storefronts. It is challenging for these omni- adaptation catered to local shoppers. The benefits of complexities are magnified when merchants expand channel merchants to offer shoppers a consistent and cross-border expansion are undeniable, however, as into non-direct distribution channels and business seamless experience because payment services are only China, the U.S., and the U.K. markets represent models in which enablers, intermediaries, and still too often divided between online and POS. more than 10% of total global eCommerce. aggregators alter the requirements.
ACI Worldwide’s new whitepaper ‘Fast-track Merchant Growth Paths in eCommerce’ explores these five growth trajectories in detail, illustrating each path with a real-world example, and setting out best practices for enabling merchant growth strategies: www.aciworldwide.com/merchantgrowth issuing and acquiring MERCHANTS SUFFER FRAUD FATIGUE
RETAIL FRAUD CONTINUES to rise as does interesting, if unsurprising, story. Remote Two-thirds of such merchants reported its cost. According to the LexisNexis True channels are getting hit harder by fraud. using an automated system to flag fraud. Cost of Fraud Study, fraud as a percentage While fraud levels have risen three percent More than three-quarters used one or of revenue has increased from 1.32 percent year-on-year for card-present merchants, more fraud mitigation solutions. However, to 1.47 percent in 2016. Every dollar of fraud they have risen nine percent and 12 nearly half of transactions flagged as is now costing merchants around $2.40 percent for online and mobile merchants fraudulent were subject to manual review, in chargebacks, fees and merchandise respectively. Furthermore, larger remote and ultimately decided by a human being. replacement, up from $2.23 in 2015. The channel merchants with international sales Manual review accounts for around 25 number of overall fraud attempts and are reporting higher fraud costs as a percent of the fraud mitigation budget for successfully prevented fraud attempts proportion of their annual revenues. large merchants. have also risen. Large remote channel merchants Against this backdrop, merchants are It is almost inevitable that fraud figures spend more on fraud mitigation — suffering fraud fatigue. False positive rates will rise as the volume of electronic commensurate with the share of fraud and fraud costs continue to grow as payment increases. However the they experience — yet some still need to merchants put money into multiple fraud distribution of fraud by channel tells an be convinced of solution effectiveness. management tools. As a result, their 2016 LexisNexis® The True Cost of FraudSM Study optimism that reduced fraud can increase AVERAGE NUMBER TOTAL AND SUCCESSFUL FRAUDULENT loyalty and sales is tempered by frustration ATTEMPTS PER MONTH BY CHANNEL (2016) that managing fraud costs too much. Perhaps it is a case of spending Larger Remote Channels Attempts per Month smarter on fraud management, rather Attempts per Month That SUCCEED are Getting Hit with 880 than spending more. There are no silver-
More Successful Fraud 757 bullet solutions to fraud mitigation and 707 Attempts per Month management. It is best to deploy a matrix 618 473 of measures, monitor the effectiveness 401 360 581 * Small/Mid = Less than 50M annual 353 432 453 of each measure, and fine-tune the mix revenue; Large = $50M+ annual revenue 164 190 199 Weighted merchant data 114 159 by industry sector, channel, customer
Q: In a typical month, approximately All Small/Mid Physical Small/Mid International Large Multi- Large Large profile, average transaction value how many fraudulent transactions * * * are prevented by your company / Merchants eCommerce POS Only mCommerce with e/m Channel eCommerce mCommerce successfully completed by fraudsters? Commerce 99% report being Multi-Channel etc. It is the effectiveness of the fraud February 2016, n varies from 190 to 1007 41% 32% 53% 34% 32% 61% 60% 66% prevention approach that is key, rather Base = All merchants experiencing specific fraud types Average # Monthly Fraud Attempts & Successes / % Successful Fraud than how many tools are deployed or Source: 2016 LexisNexis True Cost of Fraud Study how much they cost. Figure 6: Average number total and successful fraudulent attempts per month by channel (2016)
RemoteBANKS channels TRUSTED are losing more TO as a percentage DELIVER of annual BIOMETRIC revenues. AUTHENTICATION Larger remote channels are also getting hit harder on fraud cost, particularly mobile and cross-borderTHE UK transactions IS placing which its trust experience in banks 15% over- 20% higher2014, fraud when costs the asVisa a percent Biometric of Payments study Fingerprint authentication (88 percent) is also annual revenue than even the average multi-channel merchant (see figure 7). Naturally, remotegovernment channels are agencies quicker and toeasier protect ways to purchasetheir was merchandise first conducted. outside of the viewed as the most secure form of US. biometricAnd, in the dataseemingly such “borderless” as fingerprints online world,and iris it’s not Nearly surprising thattwo-thirds most Large of payment, ranking higher than other e/mCommercescans, according merchants to neware selling research merchandise from Visa. internationally.consumers This (64makes percent) remote want biometric authentication options such channel challenges even more complex. And as omnichannel retail sales are expected to Consumers are nearly twice as likely to trust to use biometrics as a method as iris-scanning (83 percent) and facial grow, the risk and cost of remote and cross-border fraud will likely intensify . banks to store and keep their biometric of payment authentication recognition (65 percent). information safe (60 percent), than they are and familiarity is increasing The research reveals how banks 83% Sell to trust government agencies (33 percent). the comfort levelInternationally of British need to mobilise to provide these Larger Remote Channels with 80% Sell 1.74% When asked who they would trust to consumers.Internationally 1.64% payment solutions and meet International Sales Indicate 1.43% 1.43% Higher Fraud Costs asoffer a biometrics authentication1.27% as a service The growth in fingerprint growing consumer appetite Portion of Annual Revenuesto confirm identity,0.94% the largest percentage authentication for mobile for biometric authentication selected banks (85 percent) and payment payments is bringing to life methods, especially among * Small/Mid = Less than 50M annual revenue; Large = $50M+ annual revenue networks (81 percent) ahead of global the benefits of biometric younger consumers. A quarter Weighted merchant data online brands International(70 percent), andDomestic smartphoneMulti Channe lauthentication,Large whichLarge is whyInternational of 18-24 year olds (25 percent) Q: What is the approximate dollar value of your Physical Physical (i.e., adding eCommerce mCommerce Merchants with company’s total fraud losses over the pastcompanies 12 months? (64 percent).POS Only ThisPOS level Only of trustremote) has 80 Mpercenterchants of Mtheerchants peoplee/mCommerce surveyed said are likely to switch banks that didn’t offer Fraud losses as a percent of total annual revenue.grown significantlyMerchants in the pastMerchants two years, up they( $50M+)were the( $50M+)most comfortableTransactions with this service, compared with 17 percent for February 2016, n varies from 26 to 636 No Remote Channels With Remote Channels Base = All merchants experiencing >$0 fraudby in the20 past percentage points from 65 percent in fingerprint recognition. other generations. 12 months Fraud Cost as a Percent of Total Annual Revenue (2016)
Figure 7: Fraud as a percentage cost of annual26 revenues payments by merchant cards type and and channel mobile (2016) / September / October 2016 www.paymentscm.com
2016 LexisNexis® True Cost of FraudSM Study 11 issuing and acquiring US DEBIT CARD PERFORMANCE HOLDS STEADY
PULSE DEBIT CARD issuers saw card than 46 percent of debit transactions would of fraud losses in 2015, a decline from 57 performance metrics in 2015 hold steady, migrate to mobile over the next five years, percent in 2014. This was offset by an almost according to a recent study. However the up from 39 percent last year. three-fold increase in skimming – from seven adoption of mobile payments and EMV chip The October 2015 US EMV chip liability percent to 20 percent of all fraud losses. migration has been disappointing. shift marked a key milestone for issuers’ The increased skimming – and related rise Two-thirds of debit cards issued are transition to chip card technology. By the end of domestic fraud – led to a tripling of PIN POS active, performing at least one transaction of 2015, almost half (45 percent) of issuers fraud to $0.008 per transaction. By contrast, per month. The average active debit card is had begun issuing chip debit cards. This was when a debit card is used without the added used 22 times per month, which equates to much lower than the 90 percent of issuers security of a PIN, the loss rate is three times an annual average spend per card of $9,739, that indicated in the previous year’s study higher, averaging $0.026 per transaction. up five percent on 2014 figures. that they expected to have chip cards in the “Issuers expect that broader adoption Current mobile wallet adoption and usage market by the end of 2015. of chip cards, and the tokenisation of rates remain low. Only 3.5 percent of debit Based upon issuers’ actual card migration, transaction data that is tied to mobile cards have been enrolled in Apple Pay, and the study estimates that one-third of all debit payments, will help to mitigate against losses 0.7 percent into Samsung Pay and Android cards featured a chip by year-end 2015. The resulting from debit card fraud in the future,” Pay. The cards that are enrolled make study forecasts that approximately three- said Jim Lerdal, vice president of fraud 0.7, 1.8 and 1.7 transactions per card per quarters of debit cards will be chip-enabled operations, PULSE. month respectively. However, expectations by year-end 2016. 72 financial institutions, including large are high for mobile payments. Respondents Fraud continues to challenge issuers. banks, credit unions and community banks, confirmed that it was their #1 opportunity Data breaches remained the most common which represent 48 percent of total US debit in the 2016 study. They also felt that more source of fraud but accounted for 33 percent card transactions participated in the study.
www.paymentscm.com payments cards and mobile / September / October 2016 27 regulation FIS UNAWARE OF CUSTOMER ACCOUNT ACCESS OBLIGATIONS UNDER PSD2
ONLY FIVE PERCENT of banks and other “The CMs’s proposal for a unitary mobile to have a frictionless, omnichannel financial institutions are aware that the app for banking services on a cross- experience,” explains Matthew Herbert, revised Directive on Payment Services provider basis, based on PSD2 and open API Director of Strategy and Digital at British (PSD2) will require open access to customer access would be a genuine game changer Bankers’ Association. accounts, according to a UK law firm in retail banking. “These are transformative times. For TLT’s Digital Banking report. This is despite “There are considerable technological, example, by 2020 most of us will be 67 percent stating that they were well security, governance and legal challenges accessing our current accounts through preparedInvestment for PSD2. plans in delivery. But, with change continual and mobiles; and that will be ahead of all Post-Brexit, some UK banks may unpredictable in this sector, it is clear that other ways combined, including desktop haveBy Jonbeen Gill hoping to move this off the established banking institutions face tough computers. agenda. But, the CMA’s recent report into competition in the years ahead.” "Making that possible, and other changes
competitionMost banks and within other financial the UK institutions retail bankingwill spend However,The report there is somealso goodfound news that for banks investing as in probably not yet even dreamed of, is a marketmore on concluded technology in thatthe coming an open year, APIwith bankingsome paymentdevelopers areservices increasingly technology providing solutions is thatfalling formidable challenge. New technology take into account these complex legacy issues. standard‘significantly’ is increasingkey to increasing budgets (8%), competition.as they continue behind areas, such as online banking that even until quite recently seemed to adapt to a digital future. Banks will therefore still need to prepare for andMost financialin-branch institutions technology are investing in in technologyterms of at the far-flung galaxies of innovation with the stated aim of generating new business (86%), a Themore commitment open banking to change environment.is clearly there, with a investment priorities for financial institutions will be widespread: wearable technology, recent survey by Celent showing that European banks reducing costs (82%) and improving security (78%). are“Regulators set to spend £46 are billion increasingly on IT in 2017 in thefocused march over the next three years. biometrics, and robotics. In other words, Some investments are clearly more defensive and onaway innovation from their analogue to encourage heritage. competition. The dominant payment services offered this will be a customer-led revolution, aimed at maintaining a competitive position. Whilst ThisThe topwas priority the for driverinvestment behind over the splittingnext three yearsout tocustomers merchants are historically remain reluctant Chip to switch & banks,PIN (65 as accessing money or financial advice theis online regulation banking, followedof payment by technology systems in branches from percent)there is concern and they contactless may be enticed payments by new digital (58 on different devices becomes even products and services. theand FCA IT systems. in the Mobile UK. banking, The new surprisingly, EU Payment is a percent), with the newer payment services more popular. distant fourth, perhaps because significant investment Services Directive is also part of that suchBanks asare alsoApple determined Pay to(35 stop percent revenue generating offering “Any suggestion that the industry has has already been made in recent years. services being cherry-picked by competitors who are agenda – lowering barriers to entry by /able 27 to percentexploit disruptive testing) technologies, and Android a determination Pay been slow to respond to FinTech as a way This prioritisation likely reflects a desire to get core that goes to the heart of how banking is reshaping its gettingbanking bankssystems toin orderopen before up information fully focusing on to new the (35 percent offering / 23 percent testing) to reach the demands of customers is to identity in the 21st century. market,”digital banking explains products David and services.Gardner, These a financial core slowly gaining more ground. There is also misunderstand the competing pressure servicessystems are, partner of course, at vitallaw to firm the success TLT. of banks, increasingIncreasing customer interest loyalty in contactless through technology payments on resources in recent years. In reality, IT with millions of customers relying on them every day, “The new PSD2 rules are clearly on viais certainly ‘wearables’, an ambition with (73%). 38 But per achieving cent itoffering will budgets in banks have had to prioritise and service failures often making headline news. depend on delivering a ‘frictionless service’ (that is, a banks’ agenda. But, there is still a lack of thissmooth service customer and experience) 23 percent that constantlytesting it. evolves mandatory change requirements to ensure Upgrading legacy systems is no easy task. After awareness within some financial institutions to “Digitalmeet their technology needs. is shaping our lives at compliance with regulatory changes decades spent carrying out piecemeal and patchy aroundmodernisation, key manyelements, traditional banksincluding must now open anMany accelerating banks are also pace,considering and the banks use of are fully that followed from the financial crisis,” accessuntangle to and customer replace these accounts. monolithic systems. engagingBlockchain, whichwith hasthe the demands power to speed of customers up Herbert concludes. Over 70 percent of financial institutions AREAS OF INVESTMENT OVER THE NEXT THREE YEARS providing payment services to merchants Areas of investment over the next three years are offering, or planning to offer, data 70% analytics and customer intelligence services Priority one Priority two Priority three as added value services. 60% “Financial institutions aren’t standing still, with effective technology-led change like 50% Source: TLT Digital banking - the increasing use of 'big data' to enhance from revolution to evolution core payment services now commonplace, 40% and brought to market through successful development and collaboration. 30% “However there are new payment services that could present a more existential threat 20% to the status quo, like peer-to-peer and digital currencies. Although these currently 10% lack the scale and market penetration to
0% mount a serious challenge, established Online In-branch Improving/ Mobile Data User Payment Channel Marketing Other banking technology replacing banking analytics experience systems & integration institutions shouldn’t be complacent,” IT systems design Services concludes Gardner.
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www.paymentcardyearbooks.com mobile payments MOBILE PAYMENTS STUDY – OPPORTUNITIES FOR BANKS
FIRST ANNAPOLIS RECENTLY completed Apple and Amazon were the most regularly (once a week or more). the third edition of its semi-annual Study frequently cited providers, and only seven Lack of merchant acceptance and of Mobile Banking & Payments tracking percent of wallet users currently get their security/privacy concerns were cited as the consumer adoption and use of mobile wallet through their bank. most significant barriers to adoption and banking and payments products. Banks, however, are respondents’ use in the current environment. Increased Given the energy surrounding all things preferred provider, cited by 40 percent deployment of contactless terminals as part mobile, it’s not surprising that consumer of current wallet users and 55 percent of the EMV migration and expansion into adoption levels are rising, but there is still of non-wallet users. Mobile wallet users new acceptance channels (e.g. ecommerce) a long way to go before consumers leave also ranked integration with mobile are likely to facilitate adoption and usage. home without their wallets — and much that banking as a ‘must have’ feature of mobile Integration of NFC payments into banks’ banks can do to help pave the way. wallets, alongside widespread merchant mobile banking solutions will also help acceptance and coupons/discounts. drive adoption of tap-and-go payments GROWING ADOPTION OF These findings suggest that banks have at the point of sale, but could introduce MOBILE PAYM ENTS an opportunity to play a greater role competition for the Pay services. in mobile payments, and bode well for While adoption of the Pays has been Consumer use of mobile channels, including recently announced FI wallets (e.g. Wells slower than many anticipated, the both mobile banking and mobile payments, Fargo Wallet) that combine both banking expansion of mobile payments, and is steadily increasing. In May 2015, 40 percent and payments. mobile engagement more broadly, is of respondents had made a mobile payment clear. The migration to mobile is shifting within the past 12 months. One year later, that NOT YET AN APPLE (PAY) A the playing field within the payments figure is now 74 percent (see Figure 1). DAY… industry in ways that could have a long- In-app/online purchases have overtaken lasting effect on consumer behaviour and bill payment as the most common form of Adoption and use of the Pays (Apple Pay, market competition. mobile payment, and adoption of other forms Android Pay, Samsung Pay) is increasing, As adoption and usage of mobile of mobile payments (ranging from receiving and satisfaction levels among users payments increases, banks should fight loyalty points to P2P payments to paying remain consistently high. Nevertheless, aggressively for ‘top of wallet’ status and for parking, taxis, and transit systems) has significant runway remains as 75 percent ownership of the consumer relationship. increased as well. Mobile wallets also gained of survey respondents with compatible The consequences of not doing so are traction: 51 percent report having a mobile devices have not enrolled in a Pay service significant now, and will only become more wallet on their phone. and only four percent report using it so in the future.
FIGURE 1: ADOPTION OF MOBILE PAYMENTS BY TYPE May 2015 Dec 2015 Jun 2016 Overa ll By Typ e 80% (N = 1,002) (N = 1,279) (N = 1,528) 74%
70%
60% 58% 55% Source: First Annapolis Consulting, Study of 54% Mobile Banking & Payments (June 2016). e l
p 50%
m 44% a
S 40% 39%
al 40% t o T
f 29%
o 30% 27% 27% 25% % 23% 23% 21% 20% 20% 16% 13% 13% 13% 9% 10% 6% 6% 7% 3% 3% 4% 4% 1% 2% 2% 0% Made mobile Purchase in-app or Paid a bill Received loyalty Sent/received Paid in-store Paid for Withdrew money Paid by text Sent money payment online points money (P2P)* parking/taxi/transit from ATM message internationally
30 payments cards and mobile / September / October 2016 www.paymentscm.com mobile payments WALMART PAY EXCEEDING RETAILER'S EXPECTATIONS
AT THE CONNECT Mobile Innovation as dramatic as I’ve ever seen. We set out retailer accepts the device’s proprietary Summit in Chicago, Walmart Services SVP to make an easy, seamless experience. payment solution. Daniel Eckert revealed that Walmart Pay, It’s about saving stress, time, customer So far, the investment seems to be the retailer’s proprietary mobile payment pain points. It’s not mobile payments for paying off for Walmart; according to app, already boasts 20 million active users payments’ sake,” said Eckert. Eckert, 80 percent of Walmart Pay in the two months since its June launch Another key advantage for retail- users are recommending the app, and across its 4,600 US stores. centric solutions: With mobile payment nearly 90 percent are repeat users. The success seems to be attributed platforms such as Walmart Pay Walmart’s next task should be to to the retailer focussing on creating a being device-neutral, both iPhone leverage the app to build long-term, frictionless experience at the point of sale. and Android users can use mobile interactive relationships with their most “The speed of customer expectation is payments without worrying whether the valuable customers.
CHINESE BANKS STRUGGLE IN MOBILE PAYMENTS BATTLE AGAINST THIRD-PARTY PROVIDERS THE RISE OF third-party m-payments in The move by more Chinese consumers management products,” said Zennon China at the expense of credit and debit to switch from swiping plastic cards to Kapron, founder of Kapronasia. cards is threatening commercial banks’ scanning QR codes with mobile wallet “Banks are starved of the critical access to the customer data viewed as apps knocked $20bn from banks’ fee transaction data that would help crucial to newly emerging financial and income in 2015, according to Kapronasia, them to provide competitive products consumer business models. a Shanghai-based fintech consultancy. and services.” The president of Ant Financial, Settlement fees are only part of banks’ Most users of Alipay, and rival WeChat Alibaba Group’s finance affiliate, told overall revenue mix, which is dominated Pay owned by Tencent, fund their the Financial Times earlier this month by interest income from loans. The payments by linking their traditional that payments through its Alipay unit bigger challenge to Chinese lenders, bank accounts to mobile wallet apps. bypass China UnionPay, the state-owned analysts say, comes from the way in That means traditional bank deposits settlement network with close ties to the which third-party payment providers are are still the ultimate source of funds. central bank. interposing themselves between banks But when a consumer uses Alipay The result is that UnionPay, along with and customers, depriving lenders of or WeChat for payment, banks do issuing banks and acquiring banks, is valuable data on consumption patterns. not receive data on the merchant’s haemorrhaging income from merchant “Data are increasingly the new name and location. Instead, the bank fees. The trend is fuelled not only by currency of choice in China as third- record simply shows the recipient as the rise of e-commerce but also by the party payment providers move beyond Alipay or WeChat. dramatic increase of m-payments to payments to selling a wider range of The loss of data poses a challenge offline merchants such as supermarkets products and services such as taxi- to Chinese banks at a time when their and restaurants. booking, movie tickets, and wealth traditional lending business is under pressure from interest-rate deregulation, rising defaults, and the need to curb CHINESE PAYMENTS MOVING ONLINE loan growth following the credit binge. Big data are seen as vital to lenders’ Mobile + internet share (%) ability to expand into new business lines. 200 Internet 30 Mobile “In the past, commercial banks focused 25 Cash 150 on servicing large enterprises and didn’t Credit and debit card 20 care much about consumers. But with the 100 15 macro-economy suffering, the corporate
10 business is facing pressure on margins on 50 5 growth,” said Wang Xiaoyan, senior fintech analyst at 86 Research in Shanghai. “Banks 0 0 definitely want to capture the opportunity 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 in retail banking, but if they don’t have
Source: Kapronasia, People's Bank of China, iResearch payment and consumption data, it’s difficult to gain consumer mindshare.”
www.paymentscm.com payments cards and mobile / September / October 2016 31 contactless CARD PAYMENTS WORLDWIDE INCREASE 55 PERCENT TO 417 BILLION
ACCORDING TO GLOBAL Payment Cards cash from ATMs. Incentives are also CARD PAYMENTS TO GROW Data and Forecasts to 2021, the total being offered to merchants in a bid to MORE QUICKLY THAN CARD number of card payments worldwide increase acceptance and therefore also NUMBERS IN ALL REGIONS increased by 15 percent in 2015 to 270 card usage. billion, almost double the eight percent In the Czech Republic and Poland, According to the study, the number of card rise in card numbers. meanwhile, the rapid spread of payments worldwide is projected to rise The research indicates that consumers contactless cards and acceptance by 55 percent between 2015 and 2021 to around the world are increasingly turning infrastructure has brought about a reach 417 billion. This compares to growth to cards to make purchases. surge in card payments. Contactless has of 28 percent in card numbers over the In Thailand, for example, a central bank also stimulated further card payments same period. drive to reduce cash usage has been even in more developed markets, such The rise in the number of card payments supported by heavy marketing by banks as the UK and France, which already will be strongest in the Middle East and to promote debit cards as a payment see high card usage levels at the Africa (MEA), central and eastern Europe instrument, rather than just to withdraw point of sale. (CEE) and Asia-Pacific where cards are used less frequently on average than in North America and western Europe. RBR’s NUMBER OF CARD PAYMENTS WORLDWIDE, Chris Herbert commented: BY REGION, 2015-2021 417bn “We are seeing strong growth in card usage
6% in all regions. Cardholders in developing MEA 270bn 7% markets are gradually becoming more 8% Latin America 4% accustomed to using cards rather than 7% 19% 6% CEE cash for payment, and this combined with 21% 28% Western Europe a rapidly expanding acceptance network 26% is creating the perfect environment for Asia-Pacific 33% a card payments boom. In more mature 36% North America markets, technology developments such as 2015 2021 contactless, and a willingness to use cards for ever smaller payment amounts are Source: Global Payment Cards Data and Forecasts to 2012 (RBR) boosting the cards sector.”
GOOGLE RUMOURED TO START ANDROID PAY SERVICE IN JAPAN
GOOGLE IS RUMOURED to be launching and Apple have also announced plans the Android Pay, digital payment to roll out their payment system in service, using smartphones in Japan Russia by the end of 2016. as early as autumn, in cooperation with According to reports, currently the Mitsubishi UFJ Financial Group, sources companies are in talks with Russian close to the matter say. banks and payment systems to launch The Android Pay service will their services. Samsung Pay is expected be able to be used for shopping to launch at the end of September 2016, at participating stores in Japan and with Apple Pay coming later in 2016. overseas, via devices using Google’s Both services will be supported by Android operating system, including Alfa-Bank, Otkrytiye and VTB banks. smartphones. Sberbank, Raiffeissenbank, Yandex. Google launched the digital payment Money, Tinkoff and Binbank plan to platform in the US in autumn 2015. It conclude partnership agreements has already expanded the service to with Apple Pay. the UK, Australia and Singapore. After the launch, both systems will Android Pay will be available by accept MasterCard bank cards only. installing a dedicated application to Visa plans to introduce its own solution devices with NFC functions. Samsung after 3-4 months.
32 payments cards and mobile / September / October 2016 www.paymentscm.com contactless APPLE PAY COULD LOSE LEVERAGE IN US FROM AUSTRALIAN BANK FALL-OUT
THERE HAS BEEN much written about Australia is turning out to be the most public direction of mobile payments isn’t certain. the Australian banks pushing Apple Pay of these collisions,” said Doug Parr, chief “At some point, consumers will vote to loosen its grip on the technology that revenue officer at Prairie Cloudware, a with their feet, but the parties supporting enables mobile payments. The result could software developer. mobile payments will need to cooperate, bode well for US banks as they look to Apple declined to discuss the matter and that’s what’s at the heart of the renew agreements with Apple. and US banks continue to be tight- goings-on in Australia,” Parr said. Apple has maintained tight control over lipped about their arrangements with the Australia’s largest banks recently Apple Pay since its October 2014 launch, tech company. applied to the Australian Competition forcing participating US banks to pay a But the issues are stirring up familiar and Consumer Commission to fast-track toll of 10 to 15 basis points per transaction tensions surrounding the tug of war over a request for permission to collectively to access the near-field communication who ultimately controls mobile payments — negotiate with Apple, claiming the antenna, or controller, according to banks, device makers or merchants — and company’s restrictive policy around Apple industry sources. Banks grumbled, but it’s too early to predict a winner, Parr says. Pay is stifling mobile payments innovation they paid up. So far NFC has emerged as the dominant in the country. Many of the contracts US banks initially channel for mobile wallets, because of its The Australian Retailers Association signed to support Apple Pay are coming smooth user experience and the security pledged support for the banks’ request, up for renewal, and financial institutions it offers when combined with tokenisation along with the Australian Payments hoping to renegotiate terms are closely from payment networks such as Visa and Clearing Association. watching the Australian situation for Mastercard. Plus, it’s minimally invasive to On 18 August the regulator responded signs of a thaw in Apple’s policy of merchants by riding on existing payment that it needed time to consult with parties blocking third-party access to its mobile infrastructure rails, Parr pointed out. and said it would issue a draft decision on payments solution. But merchants such as Walmart the matter in October. “Some believe Apple has been courting are developing their own apps using US banks are closely watching the conflict with the payments industry by alternative approaches like QR codes, and outcome, Parr said, because it could acting monopolistically in the way it because consumers still have not broadly provide clues to how much leverage Apple restricts access to its NFC controller, and embraced NFC-based wallets, the future can exert over banks in various markets.
CONTACTLESS MOBILE PAYMENTS VIA MOBILE – NO ADDITIONAL PASSWORDS
FOR THE FIRST time in the Russian without a mobile PIN. The new PIN- trends in the development of mobile market, MDM Bank, one of the largest less service is available to MDM Bank payment services will only help spread private banks in Russia, has launched mobile banking customers, who have HCE technology.” single-tap Mastercard contactless mobile smartphones running Android 4.4 and payments with no additional passwords. higher with NFC support. The application Using the MDM Bank mobile app, also works on phones unlocked with customers can now pay from their fingerprint sensors. Mastercard account with no need to enter “Currently only a few banks in Russia a PIN-code or additional app password have implemented contactless payments or even to activate the application via smartphone with HCE technology,” before payment. says Pavel Mikhalyov, director of the Customers simply unlock their phone development of mobile services and tap it to a contactless reader department, MDM Bank. to pay. The service is based on the “MDM Bank’s solution allows clients solutions by Mastercard and OpenWay, to make purchases without starting a recognised leader in software for the app and without the device being bankcard issuing and acquiring, payment connected to the internet. HCE technology switching, digital banking services and allowing contactless payment is going omni-channel payments. to be everywhere: to pay for public Consumers can now choose how they transportation, as an access pass pay with their mobile phones: with or for work, school or university, and
www.paymentscm.com payments cards and mobile / September / October 2016 33 18461 PayExpo MENA Adverts_Layout 1 14/07/2016 15:40 Page 1
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AS THE ONE year anniversary of the US merchant locations, representing a 159 EMV migration shift to chip approaches, percent increase since 1 October, 2015. EXPECTED EMV ADOPTION new data has been released confirming Mastercard fraud data shows a 54 RATES the positive impact the technology is percent decrease in counterfeit fraud having on issuing banks and merchants. costs at US retailers who have completed or are close to completing EMV adoption, CHIP IMPACT ON MERCHANTS when comparing April 2016 to April 2015. Demonstrating the power of EMV and the The biggest benefit of chip technology risk of not adopting it, counterfeit fraud is minimising the cost of fraud caused, costs increased by 77 percent year-over- in part, by the use of counterfeit cards. year among large US merchants who have Mastercard reports two million chip-active not yet migrated or have just begun the merchant locations on its network, a migration to chip. 468 percent increase in chip terminal “Payment cards are an essential part Source: The Strawhecker Group adoption since October 1, 2015. Two million of commerce; EMV requires a change to merchants represent 33 percent of all US the customer experience as the industry Chip cards will curtail fraud and it is merchants. shifts from swipe to chip,” said Brian Riley, exciting to see enhancements at the point Of the two million chip-active merchant director, credit advisory service, Mercator of sale that will propagate usage, reduce locations, 1.3 million are regional and local Advisory Group. friction and accelerate transaction time.”
INGENICO SHARES SUFFERS AFTER CUTTING 2016 SALES FORECAST
UNDERSCORING INVESTOR is a slowing down in the pace of adoption of will deliver excellent performances. The SKITTISHNESS and low tolerance for EMV technology, of which Ingenico Group is Group highlights the continued solid growth earnings disappointments, shares in French one of the main providers. The relaxation of dynamics in Asia Pacific and in Europe. payments firm Ingenico Group fell nearly 13 the rules is temporary, and Ingenico Group The ePayments division will also deliver percent after the cutting its full-year targets remains confident in the continued roll-out strong growth in the second half of the in the wake of a “sudden and significant of EMV in the United States which should year, enabling the Group to accelerate decline” in US sales. continue to progress in 2017 and beyond. its transition to online and mobile In the trading update note, the company In Brazil, the economic deterioration is services activity.” stated, “In recent weeks Ingenico Group affecting the Group’s performance. has been facing a sudden and significant Despite resilient performances in other decline in its US market which accounts Latin American countries, the decline in for approximately 10 percent of Group this region for the second half of the year revenues. The Group now anticipates a is now anticipated to be greater than in strong decline in sales for this country in the the first half.” second half of 2016. The statements ends on a high note This market decline has been caused by a though: “In all other geographies, as well as relaxation in the EMV rules. The result of this for the ePayments division, Ingenico Group
IZETTLE ACQUIRES INTELLIGENTPOS
IZETTLE ANNOUNCED IT has acquired an integrated payment and point of sale which gives restaurants a bird’s eye view intelligentpos, the UK’s leading cloud solution that allows small businesses to take of their tables and helps them provide a based point of sale solution for shops, card payments and use hundreds of different higher level of service; stock management, bars and restaurants. features on the point of sale app to help them which helps merchants make sure they The acquisition sees two disruptive manage and grow their businesses. never run out of their customers’ favourite companies joining forces resulting in a ‘one- Aimed at iZettle’s fastest growing users, products; and advance reporting that helps stop-shop’ for commerce in store and on the intelligentpos offers advanced point of sale users make informed decisions about go. Together iZettle and intelligentpos provide features including; table management, their business.
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09-13_Money2020_Payment_Cards_Mobile.indd 1 9/12/16 3:55 PM e-commerce FAST-TRACK MERCHANT GROWTH PATHS IN E-COMMERCE
DIGITAL COMMERCE IS a growth markets around the world. specific and no two merchants should imperative for virtually all retailers and Digital commerce has been a growth expect the same success with the exact merchants as new technologies disrupt opportunity for retailers and brands same approach, this paper describes traditional commerce use cases and ways for more than 20 years. But today’s common growth scenarios and illustrates of working. demographic shifts and unparalleled how successful merchants mastered the There are a variety of alternative growth advances in smartphone technology have accompanying payments challenges. paths available in digital commerce created unique opportunities. Millennials, 1. Brick-and-mortar retailers going online ranging from cross-border expansion to the generation of digital natives who do for the first time mastering mobile commerce. Payments not remember a world without the internet, 2. Successful domestic online merchants sit at the heart of digital commerce and are now the largest segment of the US that optimise e-commerce by diversifying delivering the right customer experience is population and comprise 24 percent of the channels and distribution models critical to success. European Union’s citizens. 3. Multi-channel retailers investing in Merchants and their partners must also Other important changes include the mobile evolve over time from prioritising speed facts that more people now live in cities, 4. Domestic merchants expanding to market to optimising the trade-offs automobile ownership in developed internationally between conversion and fraud. Leveraging markets is decreasing, high-speed internet 5. Digital merchants delivering omni- open technologies and building global connections are more prevalent, and channel experiences and expanding into capabilities are keys to success. smartphone ownership has exploded. point of sale Consumer-merchant engagement is The net result of these shifts is that “Digital commerce creates many unique fundamentally changing, becoming more digital commerce is consistently growing challenges relative to in-store commerce digital and more open. Shoppers from all 10 percent to 20 percent annually, while and it is imperative that merchants age groups increasingly purchase goods in-store sales are flat or declining in expanding into or within digital commerce and services at home, at work, or on the go, some markets by as much as five percent have the right payments platforms and via e-commerce and m-commerce in lieu per year. As a consequence, retailers partners to solve these challenges,” of buying from physical shops. are focused more intensely on growth comments Joel Van Arsdale, partner, Before purchase, shoppers learn about through digital. First Annapolis. products through online review sites and However, not every merchant has the “Merchants and their partners must afterwards use social media to praise same starting point or the same motivation, also evolve over time from prioritising or disparage them. And to complete so growth strategies vary. A recent paper speed to market to optimising the purchases simply and securely, shoppers from ACI and First Annapolis, presents trade-offs between conversion and have a variety of payment methods and five growth paths, with the aim to inspire fraud. Leveraging open technologies mobile wallets to choose from. This, in a readers to exploit the opportunities that and building global capabilities are nutshell, is digital commerce, the primary come from digital channels. keys to success.” driver of retail sales growth in many Although winning strategies are highly The paradigm of payments being
Figure 3 Cross-border share of all eCommerce Figure 2 overlooked has changed with Global B2C eCommerce Cross-border mCommerce penetration Domestic (mCommerce as % of total e/mCommerce) the arrival of e-commerce,” continues Mike Braatz, chief Turnover ($ billion) Shoppers (million) US product officer, merchant, UK 44.6% $ 4500 45% 4500 45% biller and risk solutions, ACI. SWE Online shopping is extremely $ 4000 40% 4000 40% 37.5% SWZ convenient, yet so is abandoning
$ 3500 35% 3500 35% DEN a full shopping cart before $ 3000 30% 3000 28.1% 30% or during payment. After all, NOR 29.3% $ 2500 25% 2500 23.5% 25% another store is only a click GER 24.4% away and there are many things $ 2000 20% 2000 20% ITA 18.4% vying for our attention while $ 1500 15% 1500 15% 14.6% NLD we shop online. Payments, and $ 1000 10% 1000 10% the role they play converting SPA
2016 (E) $ 500 5% 500 5% shoppers into buyers, is 2014 FRA 2012 becoming even more integral $ 0 0% 0 0% 2014 2016 2018 2020 2014 2016 2018 2020 0% 10% 20% 30% 40% 50% 60% to merchants’ bottom lines and Source: Global Payment Cards Data and Forecasts to 2012 (RBR) growth trajectories.
www.paymentscm.com payments cards and mobile / September / October 2016 37 #TRUSTECH2016 COMMERCE & PAYMENTS - FINTECH DISRUPTION - BLOCKCHAIN
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AP Trustech Cannes-9 210x280.indd 1 23/08/2016 15:20 products ACCENTURE STIRS UP TROUBLE WITH BLOCKCHAIN EDITING TECHNIQUE
ACCENTURE IS STIRRING up a Blockchain technology to speed up back-office settlement needed by corporates and regulators.” storm within the community by patenting a systems and free billions in capital tied up He drew a distinction between the technique for editing information stored using supporting trades on global markets. need for an editing function on the the nascent technology in a move designed Richard Lumb, global head of invitation-only, “permissioned” to make it more commercially viable. financial services at Accenture, Blockchains that most By allowing a central administrator to told the Financial Times that banks are looking at amend or delete information stored on a financial institutions and establishing and the Blockchain, the consultancy says that its regulators would need a open, “permissionless” prototype — to be unveiled — will make the means to quickly correct Blockchains, such as Bitcoin, technology more attractive to the financial errors on the Blockchain where immutability is a services industry. before using it in securities key feature. However, to many diehard fans of the markets. He gave the example of Accenture and technology underpinning the cryptocurrency a “fat finger” trading error, or a trade Giuseppe Ateniese, a professor at Bitcoin, the move threatens one of its founding assigned to the wrong counterparty. the Stevens Institute of Technology in principles: that a Blockchain should be an “What we are talking about is adapting New Jersey, have filed a patent for their immutable ledger of events without the need the Blockchain to the corporate world and technology in the US and Europe. It uses a for a central authority. how do we make it pragmatic and useful technique called the “chameleon hash” to Having initially been sceptical about it for the financial services sector,” he said. add a type of padlock between units in a because of worries over fraud, big banks “This prototype allows you expunge a Blockchain that allows an administrator with are now exploring how they can exploit the record completely and we think that will be the key to unlock and edit them.
MASTERPASS GATHERS MOMENTUM IN EUROPE AS THE SHARE of digital payments in Sweden and Viseca in Switzerland are issuers can enhance and differentiate in Europe keeps on growing to reach now using Masterpass to integrate digital their existing product suite, including 38 percent of payments by 2020, the payments into their services. their mobile banking application, and continued transformation of Mastercard As e-commerce spend in Europe is integrate its proprietary services – is driven by the rapid growth and success predicted to grow 55 percent by 2020 including balance display, purchase alerts of Masterpass, the company’s digital and the number of global smartphone and paying with points – to differentiate payment service. subscription grow from 1.9 billion in 2013 to its solution from other digital payment 40 major issuers across 18 countries 5.6 billion by 2019, Masterpass offers the options in the market. Key issuers in in Europe, including KBC Bank in Ireland, only issuer-branded solution that supports Asia, Europe and the US have committed Intesa Sanpaolo in Italy, SEB, Nordea, multichannel and multi-device commerce. to auto-enroll 80 million wallets into Swedbank, ICA Banken and Resurs Bank By adding digital payment functionality, Masterpass by year end.
PAYWORKS LAUNCHES PAYMENT GATEWAY PULSE PAYWORKS HAS LAUNCHED Pulse, e-commerce and m-commerce needs of both their largest merchants, a next generation payment gateway payments, the area of improving as well as small and medium sized technology, simplifiying in-person card in-person payments was left untouched businesses. Alongside Pulse, Payworks payments by making it quick, easy by payment technology providers, provides Accept and Engage as and cost-efficient for developers to mostly due to the massive infrastructure additional solutions. integrate card readers into their point changes required to upgrade outdated Accept is a complete white-labeled of sale solutions, both in stationary and systems and the increasingly high security mobile POS solution, intended for mobile environments. standards imposed by the card schemes. payment providers wanting to offer Customers using a payment solution With Pulse, Payworks introduces an an easy to use payment acceptance powered by Pulse are able to pay using open, cloud-based payment processing solution to small and medium-sized the latest payment technology, including infrastructure, which is open for businesses, whereas Engage is EMV Chip & PIN cards, contactless cards innovation, easily accessible and pre- Payworks’ analytics and customer and mobile wallet payments such as certified for developers and merchants. engagement platform that brings the Apple Pay, Android Pay and Samsung Pay. Pulse is licensed by payment providers transparency of the online world to the With the exponential growth of to satisfy the increasingly demanding offline store.
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SCANDINAVIA’S BIGGEST PAYMENTS at Advent International and a Nets board Thomson Reuters. processor is aiming to raise DKr5.5 billion member, said: “When we made our initial Nets has sharply improved its performance ($824m) through the issue of new shares and investment, we envisioned a future listing when since the consortium bought it for DKr17bn a partial sell down by its private equity owners. Nets was ready. The company has exceeded from a group of 189 Nordic banks in 2014. The planned flotation on the Danish stock its ambitious performance targets and done The payments processing group has market comes only two years after Nets so faster than expected, so we are now produced strong growth on the back of rising was bought by Bain Capital and Advent executing on our plan.” use of the internet and mobile devices to International, in a consortium with Danish The move also marks an attempt to transfer money, an area in which the Nordic pension fund ATP Group. reopen the European IPO market for larger region is particularly advanced. Bo Nilsson, Nets chief executive, said in companies, which suffered a stuttering Nets handled 7.3 billion transactions last year, an interview with the FT, the IPO was “the start to the year and has been effectively up from more than 6 billion two years earlier. PAY360 next step in the development of the Nets closed since the British vote to exit the Its revenues rose 6 percent in 2015, while its group following a period of rapid growth and EU in June. earnings before interest, tax, depreciation, considerable investment, during which the The $18.5bn raised from European IPOs amortisation and special items were business has been transformed.” so far this year is down 55 percent from up by a third. INNOVATE James Brocklebank, managing partner the same period of 2015, according to 20 GLOBAL FINTECH HUBS FORM FEDERATION TO PUSH INNOVATION 23 November 2016, Hilton London Bankside FINANCIAL TECHNOLOGY GROUPS from cheaper, faster and easier-to-use services, clients outside their domestic markets. more than 20 cities across the world plan and to offer financial access to people who Innotribe, the innovation arm of financial Advancing Payments Innovation Use discount to form a federation of ‘FinTech’ hubs this do not or cannot currently use the banking communications provider SWIFT, and year in what would be the first attempt to system. Innovate Finance, the trade body for the DON’T MISS... code Paymentscm20 coordinate innovation transforming the The sector has until now developed in UK’s FinTech sector, who have together set The Emerging Payments Association’s fl agship conference financial industry. a somewhat disjointed manner, as the up the federation, believe that it will enable FinTech is under the global spotlight incumbents of the financial services sector global hubs to share business knowledge, Highlights include: because of its promise – or threat – to rush to compete with innovative give start-ups access to disrupt traditional financial activity. One start-ups by offering new new markets, and Keynote sessions from Payment heroes on their success stories, of FinTech’s fastest growing areas is the services such as mobile provide the the overcoming challenges and career triumphs Blockchain protocol, which could enable the instant-payment sector with Innovate showcases featuring the new technologies the payments clearing and settlement of securities such apps. Many start- a global industry has to offer as stocks and bonds without the need for ups have voice. intermediaries such as banks. struggled to Discussions on core debates affecting industry growth including More broadly new products emerging a c c e s s regulation & innovation and how payments innovations are leading from this sector seek to offer customers the way in promoting fi nancial inclusion JCB SET TO ROLL OUT APPLE PAY IN JAPAN Lead Sponsor Sponsors JCB ANNOUNCED THAT Apple Pay will convenience stores, supermarkets finger on Touch ID, launch in Japan in October to make and drug stores. so there’s no need mobile payments with iPhone 7, iPhone 7 The newly released JCB to manually Plus and Apple Watch Series 2. Token Platform (JTP) will fill out lengthy JCB has been a pioneer in the play an important role in the account forms or Japanese payment industry, as part technology for secure mobile repeatedly type in of this initiative, JCB introduced the payments by replacing the shipping and billing contactless payment solution QUICPay original card number with a information. in 2005, playing a leading role for mobile unique device specific number for When paying for goods Interested in Sponsorship opportunities? payments in Japan. Apple Pay users. and services on the go The QUICPay acceptance network can For JCB cardholders, online shopping in apps or Safari, Apple Pay works with [email protected] +44 20 7378 9890 now be used for Apple Pay transactions, in apps and on websites accepting Apple iPhone 6 and later, iPad Pro, iPad Air 2, and enabling everyday use at places such as Pay is as simple as the touch of a iPad mini 3 and later. Join the conversation Book your tickets on: emergingpayments.org/events/innovate16 @EPAssoc #EPAInnovate16 www.paymentscm.com payments cards and mobile / September / October 2016 41 conferences Conference diary BAI Beacon 2016 5-7 October, Chicago www.bai.org/baibeacon
GlobalPlatform Trusted Execution Environments 13 October, Santa Clara www.globalplatform.org/TEEevent/
Money2020 23-26 October, Las Vegas www.money2020.com
The Future of Nordic Banking 2-3 November, Copenhagen www.marketforce.eu.com/events/ banking/nordic-banking
Cashless World , Transforming The main autumn conference season begins Payment with Digital & Fintech 7-9 November, Brussels Money 20/20 has developed a well-deserved reputation for bringing www.cashless-world.com together everyone from large financial institutions, payments Cards & PaymentsNEED COPY Innovation Europe companies and global merchants through to start-ups. 8-9 November, Madrid www.marketforce.eu.com/events/ The organisers anticipate more than 10,000 global attendees of which 50 cards-payments-innovation-europe percent are involved in payments and financial services. There are plenty of Fintech Disruptors Report Briefing opportunities for meetings at breakfast, breaks throughout the day as well 15 November, London as evening networking. There is also scope to discover more about potential www.magnacartacomms.com business partners and customers in the large exhibition running in parallel. With up to six conference tracks including point of sale, processing and open Digital Banking Innovation Summit platforms, mobile wallets and payments, risk security and fraud, and next 15-16 November, Prague www.marketforce.eu.com/banking/ generation retail, there will be something of interest to everyone in the industry. payments-innovation-europe Money 20/20 Europe will take place in June 2017 in Copenhagen. Apps World Europe BAI Beacon is the next generation of conference evolving from the successful 19-20 October, London Retail Delivery events. Beacon will cover industry issues including payments, fraud tmt.knect365.com/apps-world/ and compliance strategy and risk management. More than 3,000 attendees are Pay360 Innovate expected from the banking and financial services industry.The winners and finalists 23 November, London of the BAI Global Banking Innovation Awards 2016 will be celebrated at the event. www.emergingpayments.org/events/ innovate16/
Smart Ticketing & Payments Ad Index September/October 2016 23 November, London Accourt www.accourt.com P21 www.smartticketingconference.com
ACI Worldwide www.aciworldwide.com P25
Bixolon www.bixolonEU.com P9 Trustech 2016 29 November-1 December, Cannes FIS www.fisglobal.com Cover P2 www.trustech-event.com Entrust Datacard Group www.datacard.com/pcm Cover P3 Miura Systems www.miurasystems.com/POSzle P17 The Future of Retail Banking Money2020 www.money2020.com P36 29 November-1 December, London Pay360 Innovate www.emergingpayments.org/events/innovate16/ P40 www.marketforce.eu.com/banking/ PayExpo MENA www.payexpo.com P34 retail-banking Payment Cards Yearbooks www.paymentcardyearbooks.com P29 RS2 www.rs2.com P13 & P27 PayExpo MENA
Star Micronics www.Star-EMEA.com Cover P4 5-7 December, UAE
Tieto www.tieto.com P11 www.payexpo.com/mena
42 payments cards and mobile / September / October 2016 www.paymentscm.com I LOST MY DEBIT CARD.
I was rushing to get to work, and I must have left it at the coffee shop. Thankfully no one used the card, but I was expecting the hassle of waiting two weeks for a new one. Instead, my local branch instantly issued me a new debit card right then and there.
What a remarkable experience.
Entrust Datacard offers a complete portfolio of instant card issuance hardware and software solutions to help you create these remarkable customer experiences. See how instant card issuance can enhance customer loyalty and drive new revenue.
Visit www.datacard.com/pcm to download the free white paper.
Trustech/Cartes | Stand LER B 025 Palais Des Festivals Cannes 29th November – 1st December 2016
Entrust Datacard and the hexagon design are registered trademarks and/or service marks of Entrust Datacard Corporation in the United States and/or other countries. ©2015 Entrust Datacard Corporation. All rights reserved. Star_mPOSmPOP_UK_280x210 22/09/2016 15:57 Page 1
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