www.electronicpaymentsinternational.com Issue 378 / DecemBER 2018

DISRUPTION BY SUBSCRIPTION FATTMERCHANT TAKES A DIGITAL CUE FROM NETFLIX AND AMAZON PRIME COUNTRY SURVEYS INSIGHT ANALYSIS

Key data and payments With strong adoption of Growth by acquisition: market analysis for Israel, fintech, is a perfect what effect is the strategy Ukraine and Peru storm of innovation having on the market?

EPI December 2018 378.indd 1 13/12/2018 08:48:21 contents this month

NEWS 05 / EDITOR’S LETTER 06 / DIGEST • Cash beats digital as preferred payment option in US • 86 400 beta app testing begins ahead of 2019 launch • Signature secures approval for blockchain-based platform • Liv cloud-based payments powered by Verrency • UNPay supports QR code payments in • Mastercard-Microsoft partnership to advance digital id innovation • SWIFT trials new system to reduce payment delays • Worldline completes SIX Payment COVER STORY Services takeover • MoneyGram expands digital reach • ECB rolls out TIPS instant payment 10 FATTMERCHANT settlement system

Editor: Group Editorial Director: Director of Events: 07 Douglas Blakey Ana Gyorkos Ray Giddings +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]

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

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

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

Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0954-0393 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online to Electronic Payments International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London Office: John Carpenter House, John Carpenter Street, London, EC4Y 0AN Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow EPI on twitter @Payments_News

2 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 2 13/12/2018 08:48:36 contents decemBER 2018

COUNTRY SNAPSHOTS 18 / ISRAEL 20 Israel is one of the most developed payment card markets in the Middle East and Africa. Israelis are prolific card users, with frequency of card use for payments standing at 148 in 2017, the highest rate in the region 20 / UKRAINE Ukraine’s economy was severely affected by the global financial crisis of 2008. The payment card market was also affected, and the total number of cards in circulation was broadly unchanged between 2013 and 2017 21 / PERU Growth in Peru’s prepaid card market was supported by the government’s financial inclusion policy, which aimed to draw the country’s significant unbanked population PRODUCTS TECHNOLOGY into the formal banking system 10 / FATTMERCHANT 14 / BARCLAYCARD Fattmerchant is disrupting the US payments Technology is transforming the payments industry with a subscription-based pricing landscape. Barclaycard CIO Keith Little model. Robin Arnfield talks to Suneera details the findings of a Barclaycard survey Madhani, CEO of the Orlando, Florida-based and the potential of emerging technologies. payments facilitator, to find out more Briony Richter reports 13 / TRAVELPORT Travellers are increasingly embracing digital 12 travel tools to make their journeys more seamless and secure. Briony Richter speaks to Travelport’s Alex Fitzpatrick about the changing shape of travel payments DISTRIBUTION RESEARCH 12 / ALIPAY & WECHAT 15 / CASHLESS SOCIETY 7-Eleven has become Canada’s first Are we really entering the dawn of a cashless convenience store chain to accept Chinese society? Consumers are switching to digital at systems Alipay and WeChat a rapid rate as convenience becomes a priority, Pay, which have previously focused on luxury but that does not mean cash has lost its brands and tourism. Robin Arnfield reports crown. Briony Richter reports 21 ANALYSIS INDUSTRY INSIGHT 16 / SWIFT PILOT 17 / PAYMENT M&A 22 / MASH Fifteen have lined up for SWIFT’s 2018 has seen a large number of deals in the China is a perfect storm for innovation, with pilot of a gpi payments service focusing on payments space, with large firms – PayPal in fintech offerings scaling at unimaginable speedy identification and eliminating errors particular – making it a part of their strategy. speed. Fuelled by strong consumer adoption, and omissions. Is this set to make payments What effect is this level of M&A having on it has become the world’s most advanced swifter than ever? Patrick Brusnahan writes the market? Patrick Brusnahan writes payments sector. James Hickson writes

www.electronicpaymentsinternational.com | 3

EPI December 2018 378.indd 3 13/12/2018 08:48:41 HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.

Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy

Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

1019Timetric_DAF_Ad.indd 1 12/12/2018 10:23 editor’s letter

2018: another blinding year for payments

Douglas Blakey, Editor

t is the time of the year to look back on the 12 even Revolut may find Canada a tougher market to crack months just ending and make some forecasts for than it thinks ahead of its launch there. I 2019. Let us start with the positives. Other 2018 highlights include strong performances The launch of Open Banking, giving consumers from newish digital-only players such as Tinkoff in Russia, the ability to enable third parties to access to their and signs that new entrants such as 86 400 and Volt can bank accounts and financial data, opens up exciting give the incumbents a run for their money in Australia. opportunities – and it allows this to be done securely. And finally, 2018 has witnessed a strengthening of the Give it time. sector, at least in certain markets, with increased capital I keep hearing that Open Banking has not really taken levels and profitibility in the US and the Middle East. off, but it remains early days. There are echoes of the PayPal passed 250 million active users in another 2018 launch of seven-day switching; ahead of its launch there highlight, while and Alipay continue to set records were many far-fetched forecasts about likely take-up. in China. In M&A activity, payments continues to attract Positive number two has to be the accelerating use of positive headlines and investors cash with the PayPal deal cashless payments and, as with Open Banking, the UK for iZettle one of the headline deals of the year. is leading the way within the EU5. In June, we saw debit In Europe, the position is not so cheery, with ongoing card transactions overtake cash for the first time in the issues of low or negative interest rates, and some sobering UK, and then in October, in-store contactless payments share-price drops at the major banks in almost every overtook chip and PIN. market Elsewhere, there are encouraging signs in Poland and Sanity, consensus, compromise Germany. A new programme set up by a coalition of Polish Reporting from the UK, it is hard to escape a reference to banks to grow acceptance has launched with the goal to Brexit when considering 2018’s lowlights. It is to be hoped double the number of points of sale accepting cards and that the new year might bring some outbreak of sanity, mobile payments in three years. And as EPI goes to press, consensus and compromise, but that may be wishful consultancy Paysys reports encouraging cashless growth thinking. in Germany, with 37% of consumer spending paid by card. Looking ahead, 2019 will be no less exciting in the Challengers and start-ups payments sector, with the challenge of strong customer A third highlight of the year has to be the health of the authentication likely to attract the most headlines in challengers and start-ups. Transferwise and Revolut Europe. Again, there will be many forecasts that biometric continue to go from strength to strength. Monzo and technology will accelerate the elimination of PIN codes Starling are growing customer numbers at a rapid rate of and passwords. I seem to have been reading such new- knots, though I remain sceptical about the eye-watering year forecasts for the past decade. valuations. Quite how Monzo can join the ranks of the In a similar vein, I have been hearing for what seems unicorns when it has full-year revenue of little more than like an age that a new year will bring forward the prospect £12m ($15m) beats me. of faster payments in the US. In the absence of firm At the end of 2017, Revolut had about 1.5 million regulation and consumer demand for change, the US is customers, and already it is way past three million. In likely to remain in the slow lane. 2019, it will be fascinating to witness just how the likes of To all subscribers, contributors, PRs and press officers, N26 and Revolut will fare as they plot expansion in North I would like to offer the very best wishes for the festive America. Again, I may be wrong, but history suggests that season and new year. <

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

www.electronicpaymentsinternational.com | 5

EPI December 2018 378.indd 5 13/12/2018 08:48:44 News | Digest

news digest Cash beats digital as preferred payment option in US Despite the increasing significance of digital payments, with two-thirds saying that laws channels, US consumers still prefer cash as a should prevent stores or restaurants from mode of payment and also want the right to limiting cash acceptance. Some 61% of select the payment method that best suits their consumers said that use of cash enables them needs, according to a survey from Cardtronics. to stay on budget. Of those polled, 73% were found to use Cardtronics EVP and managing director cash on a regular basis, and more than nine in for North America Brian Bailey said: “The 10 said that cash is necessary for those without primary conclusions from the Health of Cash a checking or . Study are that US consumers do not want to Seven in 10 people were found to have a be told how they should pay for the things preference for cash to pay back a friend, while and services they acquire. cash was also the preferred option for 65% of “In looking at their payment options, respondents owed money from a friend. consumers see unique benefits in cash as more Notably, 81% of digital users said that they than just a store of value – they consider always keep cash on hand, with the figure cash to be an important part of the social rising to 84% for all respondents. safety net, a critical tool in emergencies, and The study also revealed that 92% of an overall great way to pay for many of life’s consumers want a in how they make special moments.” < 86 400 beta app testing begins ahead of 2019 launch its core banking platform and customer and app. The bank’s experience engine. The core is seamlessly card has a simple yet sophisticated design integrated with the customer experience that features , and engine, and uses data and cloud-based functionality. technologies to allow users to view 86 400’s core banking platform includes financial transactions on a single platform. all payment rails and real-time payment In anticipation of the launch, 86 400 also functionality, with the bank stating that announced that a fully functional debit is already has money flowing through the card is live in testing. The banking start-up system. is awaiting a full banking licence from the The 86 400 mobile app promises to offer regulator before it can officially launch any an “unparalleled banking experience” for products, and aims to launch in early 2019. consumers. Through the use of customer 86 400 CEO Robert Bell stated: “Since data, the app aims to provide a seamless coming out of stealth, we’ve made and secure platform that will improve incredible progress in building our bank. customers’ financial well-being. We’ve progressed our business and 86 400 chair Anthony Thomson, continue to build the base technology commented: “2019 is going to be an that’s going to deliver value for our incredible year for 86 400, and the customers and for our shareholders. Australian banking industry as a whole. “It’s an exciting time to be at 86 400, but “I’m looking forward to spending more Australian digital challenger bank 86 400 we can’t rest on 2018’s successes. We’ve time here, working with the board as we has commenced beta testing on its app still got work to do to make sure we deliver ramp up towards the launch of our product ahead of its official launch in 2019, offering on what we’ve promised and make a real offering to the public, and speaking to an alternative to the country’s big four impact and drive genuine change in the future investors that want to be on this banks. Australian banking industry. In early 2019, journey with us. Prior to the beta testing, 86 400 said it we’ll have our bank in market and will begin “By the end of next year, 86 400 will had been investing heavily in proprietary showing Australians a different banking have a number of new investors and technology in order to successfully build experience.” shareholders engaging with our mission an efficient digital bank. 86 400 also While awaiting its licence, 86 400 has to give Australians the bank that they announced that is has been developing also been developing and fine-tuning its deserve.”<

6 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 6 13/12/2018 08:48:46 News | digest

Signature Bank secures approval for blockchain-based platform Commercial lender Signature Bank has received the go-ahead from the New York State Department of (DFS) to launch a digital payments platform powered by blockchain technology. The new Signet platform has been developed in collaboration with technology business trueDigital, and from 1 January 2019, it will facilitate real-time fund transfers round-the-clock between the bank’s commercial clients. The aim is to avoid reliance on third parties. Users will not be charged transaction fees but will require a minimum account balance of $250,000 to make payments. Signet deposits are eligible for cover by the Federal Deposit Insurance Corporation. Signature Bank president and CEO Joseph DePaolo commented: “As we have been stating, Signature Bank has made a commitment to invest in its technology and arm our commercial clients with more burgeoning sector, infrastructure, and the Signet Platform is of the types of tools and capabilities specifically within our state-chartered indicative of this investment along with the they need to successfully operate banking system. implementation of new systems for loan their businesses in our fast-changing, “New York continues to support and operations, credit approvals and foreign technology-based economy.” help advance innovation through sound exchange. DFS superintendent Maria Vullo said: state regulation and with products such as “We believe our new Signet programme “DFS is pleased to strengthen and foster Signet, which provide lower-cost ways for will further differentiate Signature Bank regulated innovation in New York’s businesses to efficiently make payments.”< Liv cloud-based payments powered by Verrency Liv, the mobile banking unit of Emirates in payments technology and rapidly deploy than 150,000. The mobile bank facilitates NBD, has signed a multi-year agreement value-added services to UAE consumers. instant account opening, money transfers with Australian fintech Verrency to support “By subscribing to the Verrency service, Liv through social media channels, instant bill payments innovation. Liv cloud-based will be able to cost-effectively remain at the splits with friends, as well as international payments will be powered by Verrency, with forefront of digital banking by continually 60-second remittances. an aim of offering value-added services to enhancing its capabilities via easy connections Liv head Jayash Patel said: “As a digital-only customers using cost-effective means. to multiple service providers without requiring bank catering to the connected generation, Verrency’s commercial director for Asia and significant change in its existing payments and we constantly seek ways to outpace traditional Middle East, Aaron Oliver, said: “Verrency technology infrastructure.” players, and our partnership with Verrency will enable Liv to deliver on its innovation-led Liv was launched by Emirates NBD last will enable us to securely deliver innovation at proposition by launching multiple global firsts year and currently has a client base of more fintech pace.”< UNPay supports QR code payments in Singapore

Payment technology provider UNPay UNPay will initially facilitate QR code “We are confident that, with our is offering Chinese QR code payment payment methods including Alipay and expertise and technology, we will be able capabilities to retail merchants in Singapore WeChat Pay at these merchants. In the to bring greater benefits to our merchants in an effort to promote cashless payments. project’s later phase, the firm plans to via our integrated payment platform, while Plans are in place to expand the initiative acquire foreign e-wallets to increase providing a more seamless and convenient to local QR code payment providers by the payment options for tourists. way for consumers to pay.” second half of 2019. UNPay CEO and founder Zhang UNPay currently has reach in over 200 The move is in response to the growing Zhenghua said: “Through our active countries, covering sectors including influx of Chinese tourists in Singapore. As acquisition of merchants, we hope to drive travel, education, e-commerce and digital part of the initiative’s first phase, UNPay the use of QR code payment in Singapore, entertainment. At present, the business has acquired merchants in the hospitality keeping in with the roll-out of the is connected to more than 500 online and food and beverage industries. SGQR code in September. payment methods. <

www.electronicpaymentsinternational.com | 7

EPI December 2018 378.indd 7 13/12/2018 08:48:50 News | Digest

Mastercard-Microsoft partnership to advance digital id innovation providers and online communities, including: • Financial services: Improve and speed up applications for new bank accounts, loan or payment service accounts; • Commerce: Provide more personalised and efficient shopping online and in stores, regardless of payment type, device or service provider; • Government services: Simplify interactions with government agencies and services – such as filing taxes, applying for passports or securing support payments, and • Digital services: Streamline and provide easier use of email, social media, movie/ music streaming services, and ride-share A partnership between Mastercard and Ajay Bhalla, president – cyber and platforms. Microsoft aims to improve how people intelligence solutions at Mastercard, said: manage and use their digital identity. “Today’s digital identity landscape is patchy A key objective of the Mastercard- The objective is to give people a secure, and inconsistent, and what works in one Microsoft partnership is to solve common instant way to verify their digital identity country often won’t work in another. We challenges, including identity inclusion. with whomever, whenever they want. have an opportunity to establish a system More than one billion people, a majority Currently, verifying identity online is that puts people first. of them women, children and refugees, still dependent on physical or digital proof “Working with Microsoft brings us are not officially recognised. According to managed by a central party. Examples one step closer to making a globally Mastercard and Microsoft, digital identity include number, proof of address, interoperable digital identity service a can improve their access to health, financial driver’s licence or user credentials. reality. We look forward to sharing more and social services. This places a huge burden on individuals, very soon.” Another challenge is identity verification. with consumers having to remember Joy Chik, corporate VP, Identity, A single, reusable digital identity can hundreds of passwords for various Microsoft, added: “Digital identity is a help people interact with a retailer, bank, identities, and being increasingly subject to cornerstone of how people live, work government agency and other digital more complexity in proving their identity and play. We believe people should be in service providers with greater integrity, and managing data. control of their digital identity and data.” lower cost and less friction. Mastercard said it is aiming to enable The Mastercard-Microsoft partnership A single digital identity can also help to individuals to enter, control and share aims to improve convenience for people reduce payments fraud and various forms identity data on devices they use every day. as they interact with businesses, service of identity theft. < SWIFT trials new system to reduce payment delays A pilot of a new SWIFT blockchain-based some payments which are badly formatted other payment startups including Revolut system has been launched, designed to and missing some information. Instead of and TransferWise. A total of 15 banks, of address payment delays due to errors in legacy correcting that later in the chain and delaying which some are participants in IIN, will join systems. payment, we are trying to anticipate as many the SWIFT pilot, the report said; among the The system gives banks access to each of those issues as possible (with prevalidation) participants is JPMorgan. other’s data through an API, which will enable so payments can be processed faster.” According to Citi’s global head of payments them to check the validity of bank account A similar initiative was made last year by and receivables, Manish Kohli, SWIFT’s new numbers before sending a payment, therefore JPMorgan. The bank launched the Interbank system would considerably lower the costs reducing delays. Data is shared through a Information Network (IIN), which aims to associated with addressing payment errors, mutually distributed ledger hosted on the reduce friction in payments using blockchain and enable banks to cut pricing. cloud, which can be accessed and edited technology. Several banks including Royal He added that he believed SWIFT’s system by participants. The move is in response to Bank of Canada, TD Bank, Santander, Credit to be superior to IIN, as its angle is “one of SWIFT’s own findings that revealed that Agricole, Reyl & Cie, Société Générale, scale and industrialisation”, and that it would nearly 10% of payments on its platform were UniCredit, ANZ, Sumitomo Mitsui Banking, be more viable as APIs are already used within delayed due to errors. and ICICI Bank are part of IIN. banks. “We felt this would be faster to scale,” SWIFT chief marketing officer Luc Through the trial, SWIFT aims to compete Kohli said.< Meurant said: “We know that there are still with JPMorgan’s blockchain project and See page 16 for analysis

8 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 8 13/12/2018 08:48:52 News | Digest

Worldline completes SIX Payment Services takeover Worldline has wrapped up the acquisition of SIX Payment Services, the payment services arm of Swiss stock exchange operator SIX. The deal, first announced in May this year, offers SIX a 27% stake in Worldline. Consideration includes 49.1 million new Worldline shares along with a cash payment of CHF338m ($342m). “With revenues reaching an estimated €2.3bn [$2.63bn] in 2019, Worldline reinforces its existing number 1 position within the European payments landscape,” Worldline said in a statement. The former offices of SIX Payment Services’ offices have now become Worldline premises; however, they will retain the SIX Payment Services brand. A total of 1,300 SIX employees have migrated to Worldline, and SIX representatives Romeo Lacher and Giulia Fitzpatrick have joined the Worldline board. The merged entity is said to be the largest European payments provider, with a 10% merchant-acquiring market share in Europe and a 20% market share in financial services. leader of payment services in Europe. I am Grapinet added: “This is a very positive Worldline CEO Gilles Grapinet also particularly pleased by the quality and sign for the future execution of our synergy commented: “This transaction leads indeed fast pace of the integration preparation plan and the proof that Worldline is the ideal to a major transformation of our company, programme, thanks to the exemplary platform to continue building the European and positions it by far as the undisputed cooperation between the two companies.” consolidation of our industry.” < MoneyGram expands digital reach US-based money transfer business services are also available in Australia, MoneyGram.com from three markets to 24 MoneyGram.com has expanded its digital Austria, Belgium, Canada, Denmark, France, markets in just 10 months. reach to seven new countries, bringing the Germany, Ireland, Italy, Netherlands, “We will continue to build and deploy total to 24. Norway, Poland, Portugal, Spain, Sweden, our digital services to offer our customers The seven new countries where the UK and the US. MoneyGram.com users more choice and to ensure we are platform has been rolled out are Estonia, can check the status of transactions and well positioned to compete in today’s Finland, Latvia, Lithuania, Malta, Slovakia estimate transfer fees. competitive industry.” and Switzerland. Customers in these MoneyGram chair and CEO Alex MoneyGram said online and mobile countries are now able to make remittances Holmes said: “Throughout 2018 we have transactions have grown 16% on a year-on- to MoneyGram locations in over 200 successfully delivered on our strategy to year basis. Digital is now said to generate countries, or to beneficiaries’ bank expand our digital services internationally. 16% of the company’s total money transfer accounts and mobile wallets. MoneyGram We have increased the availability of revenue. < ECB rolls out TIPS instant payment settlement system The European Central Bank (ECB) has However, the first 10 million payments Crédito and Teambank are the other gone live with its pan-European service settled on each TIPS account by the end of participating banks. for instant payment settlement, known as next year will have their fees waived. “Banks across Europe can now follow the TARGET instant payment settlement (TIPS). The service was first used by a customer lead of France, Germany and Spain, which Payment settlement through TIPS is of Spain’s CaixaBank, who used the service have already connected to TIPS, by linking expected to take place in less than 10 to pay a client of France’s Natixis. to the platform and developing user- seconds. It does not charge entry or Abanca Corporación Bancaria, Banco friendly solutions that support the take-up maintenance fees for users. Bilbao Vizcaya Argentaria, Banco de of instant payments by appealing to both For the first two years, ECB will charge Crédito Social Cooperativo, Berlin Hyp, retailers and consumers,” the ECB said in a banks €0.0020 for each transaction. Caja Laboral Popular Cooperativa de statement. <

www.electronicpaymentsinternational.com | 9

EPI December 2018 378.indd 9 13/12/2018 08:48:54 products | fattmerchant

fattmerchant: Netflix-style model disrupts payments processing

Fattmerchant is disrupting the US payments industry with a subscription-based pricing model. Robin Arnfield talks to Suneera Madhani, CEO of the Orlando, Florida-based payments facilitator

s well as flat rate pricing, Founded in 2014, Fattmerchant raised an abbreviation for fast affordable transaction Fattmerchant makes life easier for $10.5m in July 2018 in a Series C funding technology.” A small and medium-sized businesses round led by Atlanta-based Fulcrum Equity (SMBs) with a single omnichannel Partners. The funding was used to develop PAIN POINTS processing and analytics platform. Omni, which was launched in October. To Omni enables merchants to accept date, Fattmerchant has raised almost $20m “In 2011-2012, I was working in the payments through multiple channels – in capital and in 2018 processed in excess of payments industry selling merchant services including mobile devices, traditional POS $2bn in transactions. to SMBs,” Madhani continues. “One of the terminals and the web – and lets them access “We’re growing by 100% year on year,” biggest pain points I heard about from them, detailed payment data and customer analytics notes CEO Suneera Madhani. “Our name is was the lack of transparency on information across all these channels. processing fees. Merchants view acquirers Omni also offers bidirectional integration and processors as a necessary evil, but have with popular business tools such as no loyalty to them. They have a very poor QuickBooks Online, so merchants can experience of customer service, and don’t get report and send payments to their particular any valued added from traditional acquirers e-commerce platform. besides processing their transactions. The Omni users can accept card-present and acquirers just compete by undercutting each card-not-present payments from EMV other by basis points.” terminals, mPOS devices, virtual terminals As a millennial, Madhani was very and e-commerce sites, all from a single API. comfortable with consumer subscription- They can track data such as sales trends, based online services, such as Netflix, which customer loyalty information, inventory were very new at the time. So she thought: management, transaction histories, batch why not offer subscription-based merchant reports and account information. Merchants services with a fixed monthly fee instead of can accept cash, gift cards, debit cards, variable, percentage-based fees and hidden credit cards and Automated Clearing House charges? However, none of the 12 payments payments via Omni. Suneera Madhani, Fattmerchant companies Madhani suggested this idea to

10 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 10 13/12/2018 08:48:58 products | fattmerchant

– its bank for its POS processing, Square for mPOS, for e-commerce and QuickBooks for invoicing – and four sets of fees. “Yet none of these systems are integrated with the others,” Madhani says. “The unique point about Omni is that each channel talks to the others, and the platform offers one single merchant account, including cards on file and invoicing.” In Sally’s Catering’s bricks-and-mortar store, an employee using Omni can take a card payment from a customer. “The customer’s card number is then on file for when the store sends them an invoice,” says Madhani. “If the customer makes a deposit, the system will automatically remind the merchant to collect the balance.” Merchants can keep their existing payment systems, as Fattmerchant is able to integrate were interested so, in 2014, she started her to take payments on mPOS devices and a Omni with whatever solution the client is own company. separate invoicing platform in the back office, already using, Madhani says. Instead of charging an ad valorem fee which don’t talk to each other.” per transaction, Fattmerchant has a flat These services companies can use PAYMENTS FACILITATION subscription. “Merchants pay us a monthly Fattmerchant’s mPOS devices to take membership fee, but we can’t get rid of the payments in the field, and its back-office As a payments facilitator, Fattmerchant is able direct cost of interchange,” Madhani says. “So invoicing system, and the two systems to consolidate its total payment volumes in there’s still interchange in our model. But, are integrated. The field agents swipes the order to get a good deal on interchange for while acquirers charge a 30-40% markup payment card, which is then tokenised. its clients. All Fattmerchant’s transactions are on top of the Visa and Mastercard fee, we “As we’re PCI-compliant, the back-office processed via WorldPay. removed the middleman and charge the SMB person sees the payment but not the card “We control everything on the transaction directly for the Visa and Mastercard fee.” number,” says Madhani. “The back-office end, but WorldPay is our back-end clearing Fattmerchant charges $99 per month if person can put the client on a recurring house,” says Madhani. “Our SMBs pay 1.5- merchants process under $500,000 annually. invoice or set them up with a one-time 2% for using Visa and Mastercard’s networks, Plans start at $199 per month if merchants invoice. If the bill changes, either the mobile which means they are getting the credit card process over $500,000 annually. field agent can make the changes, or the back- processing rate that the big merchants like “In the last four years, we’ve experienced office person can make the changes for the Walmart pay.” very rapid growth and seen a lot of traction, field agent instantly without having to disrupt Madhani says that, despite huge inroads as we’ve benefited from a first-to-market the transaction. For example, the field sales by mobile payments and e-commerce, advantage,” says Madhani. “We’ve invested person can see that the back office quoted 40-50% of merchants still want traditional our own technology in developing a solution $200, but the job really should be charged at POS terminals. “Right now, traditional POS that enables SMBs to accept payments from $500, so the amount needs to be changed.” terminals don’t provide any additional value one single platform on multiple channels. It and there’s no analytics when someone uses a works with POS terminals, mobile payments MAKING THINGS EASIER terminal,” she says. “But we offer merchants and e-commerce. Our fee really isn’t for real-time analytics such as identifying processing the payment, but for the added Madhani says Fattmerchant is not just about returning customers and lifetime customers. value we provide through our technology.” price savings but about fee transparency and We tell them how their sales are performing making payments easier for SMBs. month on month and what is the average MPOS “The big pain point for SMBs is a disjointed lifetime value for their customer. The payments experience,” she says. “The example merchant can then create marketing offers Fattmerchant has developed its own I use is a fictitious firm called Sally’s Catering, based on this data.” proprietary mPOS solution which is similar to which has a traditional POS terminal in its “Our real challenge is to educate Square Register for the iPad. store. To accept payments on the go at trade customers,” Madhani continues. “Many of “With mPOS, we’ve noticed that one of our shows and food markets, it uses an mPOS them think our model is too good to be true. biggest markets is services companies – both device. For invoicing for online catering orders We have to spend time on education, as professional services firms or non-professional – for weddings, for example – the firm uses people are so used to the traditional payment services like builders, lawn-care providers or QuickBooks. It also has an online shopping processing fee-charging model. plumbers,” Madhani says. “They have a back cart for selling its cakes on its website.” “When I started Fattmerchant, the office that sends invoices, and also have field So, Sally’s Catering has four types of subscription model was very new, so it was reps, but they’ve been using a mobile company payment account and payment solution hard to explain to people.” <

www.electronicpaymentsinternational.com | 11

EPI December 2018 378.indd 11 13/12/2018 08:49:01 distribution | alipay &

Alipay and WeChat Pay on a single merchant platform. We normally just represent Alipay.” 7-eleven canada to Using Citcon’s technology, merchants are able to receive payments in their local currency, with Chinese consumers charged in renminbi. “We can supply a QR code reader accept alipay if the merchant doesn’t have QR scanning capability, and we can integrate their own QR code reader with our system,” says Yang. The advantage to Chinese consumers is and that they can pay a foreign merchant with a method with which they feel comfortable and familiar: Alipay or WeChat Pay. “Chinese 7-Eleven has become the first convenience store chain in consumers have difficulty paying overseas with their cards, as the main Chinese card network Canada to accept rival Chinese mobile payment systems is China UnionPay,” says Yang. Alipay and WeChat Pay. The roll-out marks a new departure “After the initial pilot, we plan to roll out Alipay and WeChat pay to additional 7-Eleven for the two operators that have concentrated on gaining Canada stores in early 2019 and then to acceptance among luxury brands and tourist destinations 7-Eleven USA,” says Yang. “We’re also talking popular with Chinese travellers. Robin Arnfield reports to 7-Eleven about rolling out Alipay and WeChat Pay globally at their stores.” “We’re excited to be able to lead the way orking with Santa Clara, Chinese tourism to Canada has grown at in Canadian convenience retail by offering California-based Citcon, 24% per year, generating over $3bn in Alipay and WeChat Pay at participating W7-Eleven has rolled out Alipay export revenue,” Alipay’s presentation says. 7-Eleven stores in Canada,” Laurie Smith, and WeChat Pay acceptance at 35 stores in In 2017, there were 672,300 Chinese visitors 7-Eleven Canada’s national communications Vancouver and Toronto. to Canada, up 345% from 195,000 in 2010. manager, tells EPI. “We’re focused on the Citcon is a cross-border mobile payment Canada has set a goal of doubling the number convenience experience and supporting the processor and marketing technology provider, of Chinese tourists visiting the country by needs of tourists and the Chinese community. enabling merchants globally to accept QR- 2021. This initial rollout will determine next steps based mobile wallets in-store and online. In North America, Alipay, which is owned and how we can continue to enhance the It also enables merchants to run marketing by Ant Financial Services Group, launched experience of our customers.” and loyalty campaigns through its partner in-store, offline payments services in 2017. Yang says Citcon’s pricing model for network. Alipay is accepted by North American retailers acquiring merchants who accept Alipay Alipay and WeChat Pay are hugely popular such as Sephora, Lacoste, Guess, Rebecca or WeChat Pay is similar to credit card in China, with over a billion active users Minkoff, Holt Renfrew, Harry Rosen and processing. “We charge a percentage and a of the QR code-based apps. The Wall Street duty-free store chain DFS. per-item dollar amount per transaction,” she Journal reported in January 2018 that mobile Partnerships with local tourist organisations says. “The rate is up to 40% lower compared payments had risen to $9trn a year in China. are also an important way for Alipay to to US merchants accepting foreign credit Alipay and WeChat Pay dominate the Chinese increase its merchant acceptance. “We’re cards. We also offer no fraud or mobile payment market with an estimated partnering with Tourism Toronto and Tourism liability for merchants, and no set-up or joint 90% share. Richmond in British Columbia, and in talks monthly fee. Alipay and WeChat Pay cross- With government restrictions on the cash with Tourism Yellowknife in the Northwest border payment allows consumers to pay in Chinese tourists can take abroad, and foreign Territories,” says an Alipay spokesperson. Renminbi and merchants to be settled in local merchants that do not accept Chinese cards currencies. Consumers enjoy the best rate on issued under the China UnionPay scheme, CITCON the market, and for merchants, there’s no extra it makes sense for retailers to accept Alipay cost for foreign currency exchange.” and WeChat Pay. An estimated 65% of “Citcon was formed three years ago with Based on merchants’ business categories, Chinese consumers use mobile payment venture capital backing, and is an acquirer/ Citcon enables them to issue coupons and platforms while travelling overseas, a 7-Eleven processor and payment gateway,” says Evelyn special offers to Chinese consumers on its spokesperson says. Yang, Citcon’s head of marketing. “We partners’ networks, which include Alipay, According to an Alipay presentation, over started working with Alipay in 2016. Citcon WeChat/Tencent, airlines, telcos, banks and four million Chinese tourists visited North is working with over 5,000 retailers in the e-commerce platforms. America in 2018. The US Travel Association hospitality, luxury, travel, fashion, e-commerce “This means the merchants can expand estimates that in 2017, 3.2 million Chinese and convenience sectors as well as with hotels, their reach, increase engagement, and tourists visited the US. cruise lines, theme parks and destinations. The drive traffic and sales,” Yang says. “We’re “Since 2009, when Canada was granted significance of our deal with 7-Eleven is that building a payment ecosystem that facilitates ‘approved destination’ status from China, it’s the first time Citcon has brought together partnerships among payment players.” <

12 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 12 13/12/2018 08:49:01 research | travelport

travelport: enabling a digital travel transformation

Travellers are increasingly embracing digital travel tools to make their journeys more seamless and secure. Briony Richter speaks to Alex Fitzpatrick, vice-president of global travel payment solutions at Travelport, about the changing shape of travel payments

n recent years, Travelport has been industries need to step up to ensure that Travelport’s research also found that 37% of developing new travel payment customers’ financial information and data is UK leisure travellers now use digital payment Isolutions on a global level. The secure. wallets or payment apps while travelling. company aims to make it easier to manage Travelport’s research reveals that over a Digital payment technology is a worldwide and buy travel. third of UK travellers now use voice search trend that all industries are embracing, and Speaking to EPI, Alex Fitzpatrick says: to research trips, demonstrating increasing although this form is on the rise, Fitzpatrick is “Travelport is a technology company, so we levels of tech-savviness and affinity for digital even more passionate about the potential that distribute travel content from airlines, hotels, technology to negate the inconveniences blockchain has to offer. car operators etc. We distribute that content associated with travel. Illustrating the Over recent years, blockchain technology to both online and travel agencies. We also significant rise in digital tools, a further 69% has generated significant excitement across develop applications for them to use in the were open to offering biometric data to reduce numerous industries. The technology has booking, servicing and the payment. My role waiting times in security lines. the potential to completely revolutionise the is vice-president of global travel payments, and way data is stored and used, and offers more I oversee the whole payments element. Digital A FRICTIONLESS JOURNEY transparency and security. is a very important element. Earlier this year, Travelport partnered with “We operate predominantly in the B2B As fraud becomes more prevalent, there is an IBM to support businesses in managing space. We are not directly in contact with urgent need for security measures to mature at corporate travel spending. Travelport will the consumer; the consumer would use our a faster rate to protect customers from attacks. utilise IBM Blockchain to enhance and technology via their preferred channel, but Travelport constantly explores how to enhance streamline and transform the whole consumer we provide the technology to support our its security protocols to ensure that every step experience, from researching travel all the way customers in providing that B2C digital of a transaction is covered and protected. through to booking it. All information is on application, whether it’s for booking or “We have our own payment-authorisation one single platform, which Fitzpatrick adds payments.” platform which can be connected to all the will always be frictionless – not only up front Enabling a frictionless journeys for schemes, so we do authorisation as well,” but in the back end as well. customers and travel companies, Travelport Fitzpatrick explains. “In addition to that, we The travel industry relies on different developed Trip Assist, a mobile platform that bring in fraud control and screening, and companies passing information between each allows travellers and travel companies to better it’s all integrated. That’s the case for all our other. Blockchain will make accessing and manage the travel experience through a set of solutions: they are all integrated to create a holding sensitive information far more reliable digital tools available on iOS and Android - frictionless platform.” for all parties involved. including a smart itinerary manager, a day-of- Speaking about the impact of PSD2, Asked what is next for Travelport, travel assistant, a push-notification engine and Fitzpatrick highlights that Strong Customer Fitzpatrick says “in terms of payments, a real-time alert system. Authentication will ultimately force many it’s going to be far more blockchain and “The platform is very easy to use. more transactions down the digital path. more digital apps,” adding that harnessing Consumers often have various trips planned “PSD2 is going to have a huge influence blockchain and other technologies will be on different airlines. This platform enables on the different forms of payment. It is taking massively important in relation to tackling them to go to one spot to find everything. off in numerous countries, and obviously fraud and creating a harmonious platform. Push notifications are sent out to alert different countries develop different standards, Travelport will continue to provide choice travellers about flight changes, delays and but anything that protects the consumer and for travellers, and ensure that its platform gates,” Fitzpatrick highlights. reduces fraud is a good thing. It is going to be offers personalised responses and solutions to With technology rapidly changing, all a global trend.” their evolving needs. <

www.electronicpaymentsinternational.com | 13

EPI December 2018 378.indd 13 13/12/2018 08:49:02 technology | barclaycard

the role of the cio: driving payments evolution with next-gen technology

Technology innovation is transforming the payments landscape, with new capabilities and developments that enable its evolution. Barclaycard CIO Keith Little details the findings of a Barclaycard survey and the potential of emerging technologies. Briony Richter reports

merging technologies that create of the most used, and with a lot to offer, is new capabilities have the potential machine learning. Eto redefine the very culture of “That’s the one that is with us today. It payments. As payments evolve, so too has a number of use cases, including fraud does the role of those working within the prevention. We use it to make the customer industry. experience enhanced and take pain points Speaking to EPI, Keith Little describes in the past five years – this is definitely the away, making it a frictionless journey. his role and how it is changing. “I look after case for Barclaycard, which has a range of “At Barclaycard we also use it to look at various areas of technology, such as technology products and solutions that create a seamless how data can improve our products, asking that supports fraud, which is massively experience for its customers. how we can help our customers get a better important to Barclaycard,” he explains. “I Barclaycard recently partnered with understanding of their customers,” Little adds. work across the Barclaycard business on the Evernym to explore the benefits of self- Other technologies include blockchain and technology side. It’s a lot of work, but very sovereign identity, enabling consumers to the Internet of Things. Of those surveyed, interesting.” securely store information about their digital 35% have adopted or are piloting blockchain A recent Barclaycard survey of 100 UK identities. Barclaycard predicted that by 2022, to provide greater transparency and increased CIOs explored how the role is rapidly 40% of interactions between businesses and security for data. Although this is increasing, changing. Among the findings, 78% of CIOs their customers will be affected by a form of a further 43% have absolutely no plans to put believe they need a wider skill set than five digital ID. blockchain technology into production. years ago, while 66% believe that providing Little notes that there many changes in “Blockchain is really interesting. There payment solutions is of high importance, the industry are having a massive impact on are a lot of people piloting it but nobody and 77% are executing new approaches to payments, such as PSD2, which will bring is necessarily doing it,” Little says. “We are implementing technologies. consumers closer to ditching passwords for still looking for that killer use case. I’m not It is clear that CIOs are not just exploring more secure technologies like biometric totally convinced it’s in payments yet, but it’s the potential of new technologies, but are also security. Little explains that it is part of his something we will be keeping a close watch on actively implementing them. role to ensure that products and solutions are as it is clearly something on the minds of our “The idea behind the survey was to make always digitally efficient and responsive. customers. It’s a great technology in general, sure that we understood our customers well, and it has so much potential.” hence why we went out to them and asked EMERGING TECHNOLOGIES Looking ahead, 2019 will be an even busier them for feedback. Also, we looked deeper year for Barclaycard. Its focus will be on PSD2 into the decision making,” Little says. The survey highlighted growing concern and launching more innovative solutions for “If you see some of the stats, you’ll see that around fraudulent activity. Attacks from customers that will improve their financial a growing amount of decision making in the hackers have been getting more sophisticated wellbeing. Over the next five years technology payments and finance area is now very much in recent years, and the technology to stop such as machine learning and blockchain will part of the CIO’s responsibility. That theme them has to become more mature and faster. also become mainstream. has carried on. For me a big point is how we Overall, 52% of CIOs think updating Little concludes that, as the landscape integrate and how we make sure our products payment technology is a high priority, and changes, CIOs must be prepared for their role deliver what the CIOs want.” it is certainly a focus for Barclaycard. Little to evolve even more, and focus on building Three-quarters (75%) of CIOs have seen highlights a number of emerging technologies the skills and expertise of their employees to increases in investment in payment technology that will reshape the payments industry. One meet customer expectations. <

14 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 14 13/12/2018 08:49:02 research | cashless society

However, the study also highlighted that, in both markets, around 80% of people said that do consumers they are comfortable using cash. The study also asked respondents whether they would prefer to live without cash and pay only using digital technologies. Overall, really want a around a third of people believe cash is outdated and is no longer useful, although the results differ between the four markets. Brazilian respondents were far more in favour cashless society? of a cashless society than the other three countries, with 47% stating that they want to get rid of cash altogether, as compared to Are we really entering the dawn of a cashless society? just 2% of South Africans. The majority of respondents voted for a balance between both Consumers are switching to digital at a rapid rate as physical and digital payment methods. convenience becomes a priority; however, that does not So, are we hurtling towards a cashless mean cash has lost its crown forever. Briony Richter reports society? The evidence suggests not quite yet. As well as highlighting consumers’ desire for a balance of both, the study also ith payments technology on WHETHER TO DITCH CASH revealed significant doubts as to whether a the rise across the world, it cashless society is even possible. The UK, W seems almost inevitable that The study highlights that, contrary to popular which uses a vast amount of alternative we are heading towards a cashless society. belief, cash is not dying out, and consumers payment technologies, represented the highest According to UK Finance, by 2026 cash will still want to use it – or at least retain the proportion (47%) of respondents who do account for just 21% of transactions. option to do so. not believe that cash will disappear, closely Consumers are increasingly using new Over the next few years, consumers are followed by Australia (42%). forms of payment methods. Technologies such likely to use cash for a smaller proportion of Overall, cash may have been surpassed by as digital wallets, biometrics, contactless and the payments they make, but cash will still digital payment methods that can offer added even cryptocurrency have had a tremendous have an important role in the economy. convenience and security. However, a cashless impact on how consumers manage their Consumers in the UK and Australia are economy is only possible if society demands transactions. People enjoy the convenience eager to jump on new and innovative cashless it, and for now the desire for cash to be fully of being able to just tap and go, without technologies, and their use is spreading. eliminated is just not there. < having to search through their purse for money. It also eliminates the possibility of the future of cash stolen physical cash. However, despite the Would it be desirable to only pay with cards or other digital means? proliferation of payment apps, cash remains Overall UK Australia Brazil South Africa widely used across the world. 80 The Travelex cashless study analyses the use 70 of cash and cashless technology in four major 60 markets: the UK, Australia, Brazil and South 50 Africa. Looking at these four markets, the 40 study found that a cashless society may not 30 be a realistic ambition. In fact, the findings 20 revealed an “immovable” 24% of consumers 10 0 who will never abandon cash – no matter Yes, cash is outdated No, digital payments are We need a balance and no longer relevant risky and we should revert to between cash and digital what technology is available to them. the security of cash The study asked respondents in all four Do you think cash will eventually disappear? markets whether they thought cash would Overall UK Australia Brazil South Africa eventually disappear as a method of payment. 50 Surprisingly, over 40% of respondents in 40 South Africa – still largely a cash-based society – stated that cash would eventually 30 disappear. According to GlobalData, for small- 20 value retail transactions, cash accounted for 64.5% of the total payment volume in 2017. 10

However, while use of payment cards is rising, 0 it is unlikely that a completely cashless society Yes No Dont know will evolve rapidly in the region. Source: Travelex

www.electronicpaymentsinternational.com | 15

EPI December 2018 378.indd 15 13/12/2018 08:49:03 analysis | swift pilot

swift pilot aims to speed up and improve payments

Fifteen banks have lined up to be part of SWIFT’s latest pilot for a gpi payments service that is focusing on enabling speedy identification and eliminating errors and omissions in payment messages. Is this set to make payments swifter than ever? Patrick Brusnahan writes

his move is the first step in SWIFT’s “Correcting these preventable errors and all the largest transaction banks, as well as a introduction of its ambitious gpi omissions before the initial instructions are couple of smaller institutions to get a more Tvalidation programme. sent will result in a far fewer investigations representative set of requirements. We will Overall, the goal is to build the foundation and rejections, and a more efficient payments open the implementation to other gpi banks of an integrated and interactive service. It is all experience.” through 2019.” about improving efficiencies in payments. If a Christof Hofmann MD and global head of success, the technology will be integrated with WORKING WITH BANKS payments and collection products at Deutsche all 10,000 banks across the SWIFT network. Bank, says: “We believe the gpi pre-validation When integrated with gpi payments, The pilot comes as SWIFT gpi has rapidly service will add significant value to our clients, the service will deliver real-time dynamic grown; currently, more than half of all increasing the overall gpi client experience. bank-to-bank interaction with APIs. SWIFT’s cross-border payment volumes go Beneficiary account validation addresses This is to improve the predictability and through SWIFT gpi. an important pain-point in cross-border efficiency of international payments. It Working with banks was crucial if payments; it will help increase STP ratios will be complemented with post-payment the trials were to be a success. Delbaere while reducing fraud and exception handling.” investigation down the line. There will also says: “The initial phase of the pilot was Manish Kohli, global head of payments be a reconciliation service that will allow for about co-creation, so kept the number of and receivables at Citi Treasury and Trade speedy resolution of all remaining payment institutions manageable. We approached Solutions, says: “The gpi pre-validation factors, usually brought on by compliance or pilot is a significant step forward for the regulatory requirements. payments industry in building a platform on Marc Delbaere, head of corporates and participating banks which banks can interact with each other in trade at SWIFT, is optimistic about the trial • Bank of America Merrill Lynch real time, both pre-transaction and post- and believes it can solve many problems. transaction. • Bank of China Speaking to EPI, he says: “More than 50% “It demonstrates how banks can leverage • Barclays of SWIFT gpi payments are credited to the SWIFT gpi to continue to transform cross end beneficiary in less than 30 minutes, and • BBVA border payments. This service is an enabler many arrive in just a few seconds. However, • BNP Paribas of our goal to provide real-time ubiquitous a sizeable number of the remaining messages • Citi cross border payments by allowing banks and are delayed due to errors in the payment our clients to rectify any issues at the point • Deutsche Bank data – such as incorrect or missing beneficiary of origination, achieving seamless end-to-end information and insufficient regulatory data.” • E.SUN Commercial Bank fulfilment along the payments delivery chain.” Delbaere continues: “The pre-validation • ICBC So how long will this last? And how can it service will allow customers to detect and • Intesa Sanpaolo be proved to be a success? Delbaere concludes: resolve errors that delay payment messages “Pilot banks will start implementing the • PMorgan before they are despatched. Using secure pre-validation service in early 2019. While APIs, the new gpi capability will ‘pre-validate’ • National Australia Bank still in pilot-mode, the banks will use live data messages, identifying and flagging potential • Piraeus Bank – which will provide them with immediate issues ahead of time – reducing delays, • Société Générale benefits. The pilot will continue throughout rejections and the return of incorrect payment • Wells Fargo 2019, and will be open to any gpi bank that messages. would like to participate.” <

16 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 16 13/12/2018 08:49:04 analysis | payment M&A

management technology provider, for $120m. These deals show a true sense of ambition payment m&A activity: from PayPal. It is clearly not resting on its laurels as it expands its offerings. The acquisition of Hyperwallet is particularly interesting as it gives PayPal a further push a year of market into physical distribution rather than sticking to online. In a similar move, it agreed to sponsor NBA basketball team Phoenix Suns, in a move that puts PayPal’s payment tech in consolidation the stadium. BIG DEALS 2018 has seen an impressive amount of deals in the Banks are getting involved as well. Deutsche payments space with large firms – PayPal in particular – Bank, for example, has taken a stake in making it a part of their strategy. What effect is this level payment startup Modo for an undisclosed fee. of M&A having on the market? Patrick Brusnahan writes “Modo’s technology will allow us to provide new transaction services and payment alternatives for the rapidly growing digital here are many reasons to partner Furthermore, PayPal spent $400m to economy, for example, vendors who provide with – or even buy – another firm. acquire payout platform Hyperwallet in June products or services like entertainment TBigger firms, held back by legacy 2018. Founded in 2000, Hyperwallet enables content or application development and infrastructure, acquire companies to speed firms to distribute payments easily under a want to be paid in their mobile wallets, an up innovation and add capabilities. range of options, such as prepaid card, bank important area of growth,” said Michael Smaller PSPs collaborate and consolidate account, debit card, cash pickup and cheque. Spiegel, global head of Deutsche Bank’s cash in order to gain scale and volume in the PayPal said the acquisition will boost management operation. payments market. In addition, companies its ability to offer payment solutions to In addition, Dutch bank ING took a 75% expand into new markets through M&A e-commerce platforms and marketplaces stake in omnichannel services firm Payvision where they see opportunity. Furthermore, it is worldwide. The transaction will make multi- for around €360m. a chance to gain a global presence. currency payment capabilities in over 200 Some deals in 2018 hit the billion-dollar The introduction of PSD2 regulation and markets available to PayPal and mark. TSYS completed its acquisition of emergence of open APIs has boosted M&A. merchants. Cayan in an all-cash deal worth $1.05bn. Banks are continuing to work with newer At the time, PayPal COO Bill Ready said: One aspect of Cayan on which TSYS focused players as data is more actively shared. The “By acquiring Hyperwallet, we will strengthen was its Genius platform which, similar to marketplace model, utilised by neobanks such our ability to provide an integrated end-to- Payvision, concerns itself with omnichannel as Monzo and Starling and increasingly by end solution to help e-commerce platforms experiences. incumbents, has also accelerated partnerships. and marketplaces – however large or small – M Woods, chair, president and leverage world-class payout capabilities in over CEO of TSYS, said: “The addition of Cayan PAYPAL 200 markets.” creates great synergies to identify best-in- That same month, Paypal agreed to class opportunities that will drive revenue. One of the biggest online payments players, buy Simility, a fraud prevention and risk Together, we will continue focusing on PayPal, has made a number of large deals in developing products, technologies and services 2018. In May 2018, it splashed out $2.2bn that merchants we serve want and need to for Swedish payments startup iZettle. The continue to grow.” takeover enables iZettle to accelerate its However, in May 2018, Worldline spent international expansion including to the US. a whopping $2.75bn to acquire SIX Group’s PayPal now has an in-store presence in 11 payments unit. In addition, SIX gained a 27% markets across Europe and Latin America. stake in Worldline. PayPal CEO Dan Schulman said: “Small All these deals prove that a number of businesses are the engine of the global companies, of all sizes, are finding money to economy, and we are continuing to expand be made. In addition, the market has seen at our platform to help them compete and win least half a decade of new firms. online, in-store and via mobile.” The market is reacting and starting to Founded in Stockholm in 2010, iZettle consolidate. However, the big question is began by selling credit and debit card readers whether the exciting new world of fintech will that could be plugged into smartphones and just be absorbed into the incumbent legacy- tablets. The company boasts around 200 hindered market of old. It is very apparent million active customers. that the money is there for that to happen. <

www.electronicpaymentsinternational.com | 17

EPI December 2018 378.indd 17 13/12/2018 08:49:05 country snapshot | israel

ISRAEL

country snapshot: israel Charge cards the preferred type for one of the region’s leaders

srael is one of the most developed for payments standing at 148 in 2017, the deferred payment market, unlike debit and payment card markets in the Middle East highest rate in the region. credit card markets elsewhere in the world. Iand Africa. Israelis are prolific users of The country’s payment card market Charge cards accounted for 86.3% of payment cards, with frequency of card use is unique in that it was developed as a total payment card transaction value in

value of credit transfers value of cheque payments value of payment cards

n n n ,

,

e f e f e f

Source: Bank of Israel, GlobalData Source: Bank of Israel, GlobalData Source: Bank of Israel, GlobalData

18 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 18 13/12/2018 08:49:11 country snapshot | israel

2017, and have been the main driver Debit card shares by issuer Debit card shares by scheme behind the payment card market’s growth. However, the government has launched

various initiatives to promote the adoption Others of debit and credit cards in the country. The introduction of a cap on cash astercar transactions and a reduction in interchange fees are some of the key regulatory Others measures the central Bank of Israel has undertaken to drive electronic payments. isa Isracar Robust growth in e-commerce, the adoption of EMV technology and the emergence of digital-only banks are other important trends.

DEBIT CARDS Source: GlobalData Source: GlobalData

Debit cards accounted for a minimal share pay later shares by issuer pay later shares by scheme of 8% of the overall payment card market by transaction value in 2017. Traditionally, debit cards are not very popular in Israel due to bank charges I associated with these cards, limited Others merchant acceptance, and the strong isa consumer preference for charge cards. Isracar The government has taken several steps to promote debit card adoption and use, Bank uemi such as making it mandatory to issue astercar debit cards free of charge or at reduced cost, reductions to interchange fees, and enabling consumers to open bank accounts without visiting branches. CHARGE CARDS PREFERRED Source: GlobalData Source: GlobalData

Charge cards remain the preferred type purchases on foreign sites such as Amazon Mastercard-branded payroll, travel and of payment card in Israel, accounting for and AliExpress. businesses prepaid cards issued by Bank of 86.3% of overall payment card transaction The availability of exclusive cards for Jerusalem. Similarly, Expay distributes the value in 2017. online shoppers, and the emergence of Mastercard-branded EX-CRD prepaid card, In Israel, most pay-later cards are offered alternative payment methods such as which can be used for purchases online in the form of charge cards, which are PayPal and Masterpass are also supporting and at merchant stores, as well as for cash linked directly to the customer’s bank e-commerce growth. withdrawals at ATMs. The card is issued by account, with the full outstanding amount TBI Credit. charged to the cardholder’s bank account PREPAID CARD ISSUERS on the due date. EMV STANDARDS card facilities are also In Israel, prepaid cards are mostly used available, but these are generally offered as alternatives to cash, and are targeted The government made it mandatory only on request. The steady decline in mainly at unbanked or underbanked that new POS terminals installed by new interchange fees is also driving use of individuals. or existing merchants should be EMV- charge cards. The prepaid card market registered compliant with effect from August 2017. robust growth in terms of both the number However, to provide sufficient CROSS-BORDER E-COMMERCE of cards in circulation and the total implementation time for all stakeholders, transaction value between 2013 and 2017. the liability shift mechanism date was E-commerce registered significant growth The prepaid card transaction value rose delayed from August 2017 to 1 January from ILS15.5bn ($4.4bn) in 2013 to $7bn in from $0.3bn in 2013 to $0.7bn in 2017, at 2018. 2017, at a CAGR of 12%. a CAGR of 19.5%. In August 2017, Israel-based grocery Israel’s e-commerce market is dominated Prepaid cards in Israel are also chain Shufersal partnered with POS by cross-border transactions, with over distributed and marketed through third- solutions provider to install EMV- three-quarters of online shoppers making party companies. Imagen distributes compliant POS terminals at its stores. <

www.electronicpaymentsinternational.com | 19

EPI December 2018 378.indd 19 13/12/2018 08:49:12 country snapshot | ukraine

country snapshot: UKRAINE ukraine

Debit cards dominant as government limits use of cash

kraine’s economy was severely Debit cards dominate the payment card services. Visa offers Visa Direct, which affected by the global financial crisis market, accounting for 96.6% of the total allows Visa card holders to transfer funds Uof 2008 and the political crisis of card transaction value in 2017. However, to other card holders using the 16-digit 2013-2014, which had a significant impact their use is mostly restricted to ATM cash card number. Transfers can be carried out on the banking industry. As a result, over withdrawals rather than payments, with via ATMs, mobile phones, online and POS 90 banks were declared insolvent between ATM transactions accounting for 61.1% terminals. Similarly, Mastercard offers the 2014 and 2017. The payment card market of total debit card transaction value. This MoneySend service, which allows card was also affected, with the total number implies that Ukrainian customers are more holders to make fund transfers using the of cards in circulation remaining largely comfortable making payments with cash. recipient’s mobile number. unchanged between 2013 and 2017. Increased financial awareness, E-commerce in Ukraine registered The Ukrainian government has taken restrictions on cash and rising card significant growth from UAH19.6bn several initiatives to foster banking sector acceptance are helping boost debit card ($693.7m) in 2013 to $2bn in 2017 at growth in the form of financial inclusion payments. The introduction of contactless a CAGR of 29.9%. Rising internet and programmes, payment infrastructure cards will also support this trend. mobile penetration and growing consumer modernisation, and the adoption of Electronic fund transfers by card are preference for online shopping supported technologically advanced payment cards. popular in Ukraine, with domestic scheme this. Ukraine’s largest bank, PrivatBank, The efforts led to a rise in Ukraine’s banked Prostir, as well as Visa and Mastercard, responded by launching the PrivatMarket population, with the population aged 15 offering card-to-card fund-transfer marketplace in April 2016. or above with a bank account standing at Ukraine’s card acceptance network 62.5% in 2017 – up from 49% in 2013. PAYMENT CARDS BY TYPE (MILLION) is growing. According to the NBU, by The government has also introduced Debit Pay later September 2017, the number of businesses restrictions on use of cash for individuals accepting payment cards had increased by 2013 26.8 8.8 and businesses, to reduce dependence on 13.1% compared to the beginning of the cash and promote electronic payments. 2016 29.4 3.0 year. In 2015, the Kiev Municipal State Banks are also encouraging card use 2017e 33.2 2.8 Administration introduced contactless through reward programmes, discounts and 2021f 44.3 2.8 payments on the city’s subway, enabling cashback offers. Source: GlobalData passengers to pay with Mastercard cards.< CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 26.8 5.6 2013 755.0 584.0 2013 40.4 221.2 2014 27.0 9.0 2014 693.4 879.2 2014 36.6 203.8 2015 30.0 13.6 2015 678.0 1,286.8 2015 33.3 194.5 2016 36.8 20.2 2016 738.0 1,774.6 2016 33.8 219.2 2017e 43.6 27.5 2017e 788.2 2,276.9 2017e 34.3 238.5 2018f 49.2 34.8 2018f 830.6 2,747.7 2018f 34.9 256.6 2019f 53.6 41.8 2019f 869.8 3,155.1 2019f 35.6 273.2 2020f 57.8 48.3 2020f 907.5 3,536.8 2020f 36.4 288.1 2021f 61.7 54.1 2021f 944.9 3,881.1 2021f 37.2 301.2 Source: National Bank of Ukraine, GlobalData Source: National Bank of Ukraine, GlobalData Source: National Bank of Ukraine, GlobalData

20 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 20 13/12/2018 08:49:18 country snapshot | peru

country snapshot: PERU peru

Financial inclusion initiatives fuel growth in prepaid

se of cash for retail purchases active population, rising disposable income, While credit cards in circulation declined remains prevalent among most and the popularity of online shopping all marginally over the last five years, their UPeruvians, especially the rural supported payment card growth between transaction volume and value recorded population. This is primarily a result 2013 and 2017. The ongoing transition to CAGRs of 11.6% and 9% respectively. of limited public awareness of other EMV cards and the advent of contactless Banks offer benefits to attract new instruments, and low access to banking technology are likely to support growth in customers. Banco Ripley offers the infrastructure. the Peruvian payment card market. Mastercard Classic, Mastercard Gold and However, the Central Reserve Bank Nearly 65% of Peru’s population is Visa Silver credit cards with no annual fees. of Peru has taken steps to improve the unbanked. In addition to financial inclusion Banks provide reward programmes, situation. The National Financial Inclusion programmes, banks offer low-cost products cashback and discounts, and also offer Strategy adopted in July 2015 aims to with a number of benefits. The First credit card loans in addition to standard provide access to formal financial accounts Account by Banco de Crédito del Perú credit limits. Banco Ripley offers loans to to at least 75% of the population by can be opened with no minimum balance credit card holders at preferential rates 2021. The strategy promotes access to and no monthly maintenance fee. Account depending on the customer’s profile. savings, insurance and financing, consumer holders can use ATMs, internet banking E-commerce registered significant protection, financial education and and mobile banking free of charge. BBVA growth from PEN1.8bn ($546m) in 2013 to electronic payments. Continental, Scotiabank and Interbank offer $4.05bn in 2017, at a CAGR of 65.1%. This An agent banking model is also being accounts with similar benefits. was mainly supported by rising internet used to provide financial access in remote penetration, the presence of e-commerce areas. It was introduced in 2005 following a PAYMENT CARDS BY TYPE (MILLION) sites and malls, and the availability of change in regulation that allowed banks to Debit Pay later convenient payment methods. use third-party agents to provide financial Government bodies are also making 2013 12.8 6.5 services to consumers. efforts to promote online transactions. Rising bank penetration is expected 2016 15.4 6.6 In April 2017, the Lima Chamber of to drive demand for products such as 2017e 17.2 6.4 Commerce organised Cyber Peru Day bank accounts and debit cards. Changing 2021f 22.9 6.7 2017, which saw 37 companies offer lifestyles, growth in the economically Source: Superintendency of Banks and Insurance, GlobalData discounts on various products. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 70.7 12.1 2013 433.6 198.3 2013 7.0 164.2 2014 78.4 14.1 2014 455.2 234.8 2014 10.1 184.0 2015 84.1 16.6 2015 487.2 269.6 2015 14.3 199.7 2016 95.9 19.2 2016 533.9 321.9 2016 13.8 207.0 2017e 97.2 19.7 2017e 561.1 352.4 2017e 13.8 212.0 2018f 99.2 20.4 2018f 589.0 383.3 2018f 13.9 217.8 2019f 101.7 21.4 2019f 616.6 413.4 2019f 14.1 224.6 2020f 104.9 22.5 2020f 643.5 443.0 2020f 14.3 232.3 2021f 108.7 23.8 2021f 669.0 472.5 2021f 14.6 241.1

Source: Superintendency of Banks and Insurance, GlobalData Source: Superintendency of Banks and Insurance, GlobalData Source: Superintendency of Banks and Insurance, GlobalData

www.electronicpaymentsinternational.com | 21

EPI December 2018 378.indd 21 13/12/2018 08:49:23 industry insight | mash

lessons from china regulation vs innovation

China is a perfect storm for innovation, with financial technology offerings scaling at unimaginable speed and velocity. Consider the scale of the electronic payments sector: fuelled by strong consumer adoption of fintech services, it has become the most advanced in the world. Mash CEO James Hickson writes

liPay processes almost 130% more that is needed for the open banking concept So far, NIFA’s approach is proving to be transactions every second than to scale. effective, attracting the likes of JD Finance A Mastercard and Visa combined. China’s regulatory approach has attracted and Baidu Finance to this space. Ant Financial Virtually all consumer payments in China some of the country’s largest fintech providers was one of eight tech companies granted by are run through WeChat or AliPay. to participate in addressing unmet needs in the Chinese government to develop a private To understand the dynamics behind this, the market. Of its of 1.4 billion people, the credit scoring platform. Its $150bn valuation it is worth looking at the approach China has National Credit Bureau has credit information and recent $10bn funding round is testament taken to drive innovation in the consumer for less than 20% of the population. This is to the size of the opportunity. credit sector. because many citizens do not source finance The combination of a self-regulatory The Chinese government recognises that approach and the resulting desire to address without credit history, citizens struggle to unmet needs is a call for innovation. And this obtain finance, thereby limiting consumption, is being met with inventive results. economic growth and inhibiting entrepreneurs In a country where individuals are willing to grow their enterprises. Also, careful to to share their data, we are already seeing new maintain economic stability and avoid a US- Harnessing and creative ways emerge when it comes to style credit binge, the government understands credit scoring. Tencent is exploring how the that capturing more credit data enables more smartphone data quality of a user’s social network could be used informed decision making. as a metric for credit scoring. However, rather than insist on a central for credit scores Harnessing smartphone data for credit credit register, China’s National Internet scores makes sense: where China lacks credit Finance Association (NIFA) has promoted makes sense score penetration, it makes up with over 663 a self-regulatory approach. Knowing that million smartphone users. AliPay, with one of imposing stringent regulation can inhibit the lowest fraud rates in the world, last year relevance and innovation, the approach has rolled out the world’s first Smile to Pay facial resulted in robust, effective regulation while recognition system. driving innovation and adoption. from traditional banks. In fact, China has over China will likely become the beacon of Compare this with Europe, where EU- 225 million unbanked adults. innovation in data mining and credit scoring. imposed initiatives are being interpreted With just 30% penetration, China has one There is a lot that can be learnt by the likes differently in each market. Take the revised of the lowest consumer credit adoptions in of Google, Amazon and Facebook, that have Payment Services Directive for example, the world. There is a real opportunity to meet the scale and richness of data to make them which calls for banks and other fintech players the need of its growing millennial population well positioned to offer financial services in to develop their own protocols for connecting who are willing to share data, as well as the Europe. The only question is whether the with each other. Consequently, adoption and country’s strong rural population. Targeting European regulatory environment can deliver innovation has been evidently slow. these populations can help generate valuable the same infectious and impactful approach We are also likely to see disparate consortia data on individuals who previously had no that has made the Chinese payments industry emerge that lack consistency and the rigour credit score and unlock new financial services. a success. <

22 | December 2018 | Electronic Payments International

EPI December 2018 378.indd 22 13/12/2018 08:49:23 HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE OF PRIVATE BANKING

Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.

Key Issues l How is the regulation change set to challenge industry practices? l What is the future of Europe without Britain? l How can the private banking industry in Germany rival its neighbours? l Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? l How can robo-advisors present opportunity to traditional wealth managers? l How are FinTech start-ups rivalling the market? l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry

Gold Partner Lunch Partner Silver Partners Exhibitor

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37 Retail Banking London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING

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

Key Issues l Open Banking and the main results of the first stage implementation l How Millennials are shaping the future of payments l Artificial intelligence and machine learning, Innovation in branch transformation l Digital security and cyber crime l RegTech - Leveraging technology innovation to comply with regulation l Optimising customer experience in today’s competitive environment l Technophiles v Technophobes - meeting the needs of different customers

Headline Sponsor Silver Sponsors

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

1118Timetric_RBI_Ad.indd 1 26/11/2018 10:17