www.cardsinternational.com Issue 556 / june 2018
BOOM OR BUST?
CRYPTO CARDS AIM TO BREAK THROUGH TO THE MAINSTREAM
ANALYSIS REGULATION COUNTRY SNAPSHOTS
What long-term damage Australian Royal Need-to-know data on did the Visa crash cause to Commission focuses on card payments in Portugal, its brand, and the industry? credit card decisioning Finland and Kenya
CI June 2018 556.indd 1 15/06/2018 14:32:51 contents this month
NEWS 05 / EDITOR’S LETTER 06 / DIGEST • Wells Fargo bans credit card cryptocurrency purchases • Mastercard seeks patent for blockchain-based verification tech • Chase and Starbucks launch rewards-based Visa prepaid card • New coalition to enhance US card payment security • Mastercard to make contactless standard in five years • Mastercard, Diebold to trial digital ATM transaction • Mastercard announces solutions for Open Banking transformation • Visa introduces programme for COVER STORY European fintech startups • YouGov poll reveals UK consumers seek better protection and control CRYPTO CARDS 11 • Monobank introduces credit card platform in Norway • Centenary Bank launches new Visa Editor: Group Editorial Director: Director of Events: debit card Douglas Blakey Ana Gyorkos Ray Giddings +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2585 • Precise Biometrics launches smart [email protected] [email protected] [email protected] card algorithm
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 6592 +44 203 096 2622 [email protected] [email protected] [email protected]
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2 | June 2018 | Cards International
CI June 2018 556.indd 2 15/06/2018 14:33:06 contents June 2018
s to talk about cracking China, disrupting SWIFT,COUNTRY and leveraging SNAPSHOTS WeCha 16 / PORTUGAL The Portuguese banking sector was deeply affected by the economic crisis, but consumer preference for debt-free payments and prudent spending has resulted in growing debit card transaction volumes and values 18 / FINLAND Frequency of card use is higher in Finland than in other mature European markets such as the UK and Germany. Debit cards are the most popular card type, and are used almost six times more than pay-later cards 20 / KENYA Kenya’s payment card market is still very much in a developmental stage. The East African nation recorded a penetration rate of 30 cards per 100 individuals in 2017, and just 16.0 transactions per card per year
20 ANALYSIS REGULATION 10 / VISA CRASH 14 / AUSTRALIA On 1 June 2018, Visa Europe suffered an The Royal Commission into Misconduct in outage that affected thousands – if not millions the Banking, Superannuation and Financial – of consumers. While the system was back Services Industry in Australia has attracted running by the end of the day, what damage publicity for all the wrong reasons, and as Tom did it do? Patrick Brusnahan writes Ravlic reports, the cards sector is not immune 16 FEATURE INDUSTRY INSIGHT 11 / CRYPTO CARDS 22 / CARDTRONICS A growing number of crypto lenders are Commentators have used the 20th anniversary looking to disrupt the traditional card sector. of online banking to declare another banking Ivan Castano reports on their prospects, and revolution: one of mobile apps, artificial asks whether they really can give Visa and intelligence and Open Banking, writes Mastercard a run for their money 22 Cardtronics director Duncan Faithfull
www.cardsinternational.com | 3
CI June 2018 556.indd 3 15/06/2018 14:33:14 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF PRIVATE BANKING Private Banking & Wealth Management: Switzerland 2018 12th December 2018 ∤ Marriott, Zurich
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Key Issues :
∤ Economic trends to 2020. Wealth ∤ How should Switzerland’s private banking management industry performance industry define itself in the age of digital technology and intensifying competition? ∤ With technology playing an increasingly significant role in service delivery what ∤ What channels are working for attracting, benefit does institutional size confer? retaining and managing an increasingly diverse customer universe? ∤ What are the implications for service, delivery and product distribution in the ∤ What’s the connection between distribution age of the digital wealth manager? and profitability? How are Swiss private banks adapting to the challenge of tight ∤ How is technology enabling faster, more cost margins and higher costs? effective on-boarding, KYC and compliance reporting among wealth management ∤ What does the country need organisations? to do to stay ahead?
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Untitled-2 1 15/06/2018 15:15 editor’s letter
RBC gunning for TD
Douglas Blakey, Editor
y almost every business metric – mortgages, Almost 90% of Canadian adults hold at least one credit card; consumer lending, mutual funds, business lending the average number of credit cards per Canadian adult is about B and deposits – Royal Bank of Canada (RBC) ranks 2.2 cards, with reward programme benefits a key issue in the in first place in its domestic market – but not in the credit cards battleground. Canadians belong to an average of around cards sector. 11 loyalty programmes, with almost 80% of Canadian adults RBC, with a 27.3% market share, is now gunning for market holding a credit card offering rewards. leader Toronto Dominion (TD). This will be worth watching: McKay said RBC’s decision 20 years ago not to outsource its RBC CEO Dave McKay is not in the habit of missing targets. rewards programme had paid off handsomely. RBC Rewards TD Bank captured the number one spot back in 2013, has five million members; last year RBC Rewards points overtaking long-term credit card market share leader CIBC. At redemptions grew by 7%, and according to McKay, RBC an investor day in Toronto on 13 June, McKay, outlined plans Rewards will deliver more points than any rival offering by to grow its Canadian customer numbers by 2.5 million in the 2019. next five years, with credit card growth very much in his sights. RBC Rewards members are 1.7 times more digitally engaged RBC will spend C$3.2bn ($2.5bn) on technology this year, than non-members, hold 1.5 times the average number of including investment on digital marketing, AI and social media. RBC products per person and are twice as profitable as non- members. RBC, WestJet launch Ampli RBC is also forming a next-generation loyalty platform, Digital customers up 8% to 6.5 million dubbed Ampli, with airline Westjet, with the aim of delivering Overall, RBC digital customer numbers grew by 8% last year to unparalleled value to consumers through amplified earning 6.5 million, and its digital adoption rate of 49% of all customers power on a simple and convenient digital solution. is up by six percentage points since 2015. Open to all Canadians, Ampli will provide members with Digital sales as a percentage of all sales grew also rose by six merchant offers, flexible rewards and exclusive bonuses. In percentage points in the same period, from 24% to 30%, and addition, members who spend on RBC cards and fly with McKay has targeted 50% of sales by digital by 2021. Currently, WestJet will receive augmented rewards. 35% of all credit card sales are digital – a figure RBC is also McKay said:“The Canadian loyalty landscape is ready for committed to growing. disruption, and Ampli is a fundamental shift in the business A renewed focus on digital marketing is paying off in the model. We are bringing together top Canadian brands to help credit card sector. The rate of growth of approved new-to-RBC them reach consumers more efficiently and effectively. We will credit card applications is on track to rise threefold in the 12 also provide consumers with opportunities to earn rewards months to the end of the first half of 2018 compared to the and save money like never before.” previous 12-month period. Ampli will go head to head with the Aeroplan rewards RBC estimates that its current credit card customer programme. Last year, WestJet rival Air Canada announced acquisition rate is between two and three times the rate of its that it would split with Aeroplan and start its own rewards peers. RBC is also attracting more premium customers. The programme. Visa provides Aeroplan-branded credit cards average FICO score of new customers acquired is a healthy issued by TD and CIBC; American Express Canada also 780, while around 35% of new Visa Infinite RBC Avion credit partners with Air Canada as a credit card partner in the cardholders are new customers to RBC, up 15 percentage Aeroplan rewards programme. RBC became the first major points from 2015. issuer in Canada to offer both Visa and Mastercard credit cards CIBC held the top slot by market share for around 10 years when it teamed up with WestJet to launch a travel rewards until 2013; TD has ranked first for the past five years. This one Mastercard co-branded with WestJet. will run and run. <
Get in touch with the editor at: [email protected]
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CI June 2018 556.indd 5 15/06/2018 14:33:16 News | Digest
news digest
Wells Fargo bans credit card Chase and Starbucks launch rewards-based cryptocurrency purchases Visa prepaid card US banking major Wells Fargo has decided known cryptocurrency exchanges and to ban the use of credits cards to buy digital brokerage platforms. currencies such as Bitcoin. A recent study by LendEDU revealed that A statement from Wells Fargo read: “Cus- 18% of people who bought cryptocurrency tomers can no longer use their Wells Fargo used a credit card, and 22% of then could credit cards to purchase cryptocurrency. not pay off their balance. “We’re doing this in order to be consistent Wells Fargo’s move increases the number across the Wells Fargo enterprise due to the of banks that have implemented similar pol- multiple risks associated with this volatile icies this year. In February, major banks such investment. This decision is in line with the as Lloyds Bank, JP Morgan Chase, Bank of overall industry.” America, Commonwealth Bank of Australia, Starbucks has partnered with Chase to The bank plans to start declining trans- CitiGroup, Canada’s TD Bank and Virgin launch its new general-purpose reloadable actions with bank-issued credit cards on Money introduced similar bans. < prepaid product, the Starbucks Rewards Visa prepaid card. The new card is part of the Starbucks Rewards loyalty programme, and allows Mastercard seeks patent for users to earn Star reward points even on transactions outside Starbucks, wherever blockchain-based verification tech Visa is accepted. It comes with zero monthly, annual and reload fees, and of an encrypted payment card image on cardholders will automatically receive Gold a computing device using private and status along with other existing benefits public keys. When a transaction is carried and rewards. out using plastic or chip-enabled cards, a Chase digital products head Jennifer private key will be used by the system to Roberts said: “We want to offer Starbucks decrypt the card image and cross-check customers a flexible card that delivers the payment information. more Star-earning potential in the fastest Mastercard expects the solution for way possible. The new Starbucks Rewards the sending and retrieval of payment Visa Prepaid Card is perfect for Starbucks credentials to and at a POS device through fans who want a simple way to pay and get a third-party data source will eliminate rewarded for everyday purchases.” the need to carry a payment instrument, The new Starbucks Rewards Visa Prepaid thereby improving security. Card is the second co-branded product by A statement from Mastercard’s Chase and Starbucks this year, with the application read: “The use of a third- Starbucks Rewards Visa Card introduced in party data source enables an individual to February. transact safely without concern for their Starbucks chief marketing officer Matt payment credentials being skimmed from Ryan said: “As we continue to expand and their payment instrument, or without The US Patent and Trademark Office strengthen our digital relationships with has published a patent application from having to even carry a payment instrument customers, we want to make sure we’re Mastercard for a method and system using entirely. providing choices that are both rewarding blockchain for payment card verification at “The transaction may be conducted via and meet their preferences in how they the point of sale. Mastercard filed for the the display of a machine-readable code engage with us.” patent in December 2016. to the point-of-sale device, which may Ryan added: “This reloadable Visa The new approach is intended to address further prevent skimming as the reading of Prepaid card is a unique and modern card skimming, and will involve retrieval such a code can be more easily controlled option that gives customers one more way of payment credentials from a third-party via control of the underlying display; the to earn more Stars and rewards through source via a publicly accessible blockchain. display can be easily shielded, and is often everyday spend, in a way they haven’t The two-way process will include storage obscured when in a pocket or purse.” < been able to before.” <
6 | June 2018 | Cards International
CI June 2018 556.indd 6 15/06/2018 14:33:22 News | digest
New coalition to enhance Mastercard, Diebold US card payment security to trial digital ATM Retail groups and ATM networks have organisations need to work jointly to achieve transactions formed a new coalition aimed at improving successful payment security, enhance trans- electronic payments security in the US. parency and reduce fraud. The Secure Payments Partnership (SPP) The National Retail Federation’s senior will promote card and technology payment vice-president and general counsel, Steph- security, address fraud, and work on devising anie Martz, said: “The payments system improvements. has to keep pace with rapidly evolving Founding members of the SPP include technology and the needs of consumers and Mastercard has partnered with financial the Food Marketing Institute, the National commerce. The US payments infrastructure services provider Diebold Nixdorf to trial Retail Federation, the National Association should be the strongest, most innovative two new ATM products to enable digital of Convenience Stores, the National Grocers and most secure in the world, but we won’t cash transactions. Association, First Data’s Star Network and get there unless we change the way we make Integration of the new Mastercard Shazam. The coalition’s primary goal is to security decisions.” Cash Pick-Up and Cardless ATM, which ensure fast and secure payments with new The alliance will mainly work towards combines Mastercard services with and advanced technology. meeting consumer expectations in terms Diebold’s ATMs and middleware, will be According to the SPP, Visa and Master- of security, convenience and flexibility for assessed during the projects. card currently control security standards in payment options. The Mastercard Cash Pick-Up service the US without consideration of expertise In addition, the SPP will prioritise user aims to allow quick and secure delivery from competing card networks, merchants, authentication, open standards setting, of cash by banks even to customers who consumers and financial institutions. The innovation of payment security and network do not have an account or card. The coalition members believe all involved routing competition. < solution is designed to serve underbanked consumers, and enable financial institutions and ATM deployers to increase Mastercard to make contactless transaction volumes and revenues. The Cardless ATM service uses a mobile standard in five years banking app to enable cash withdrawals contactless card payment technology to from the nearest available ATM, with users more consumers. authenticating the transactions. Use of contactless payments, which Mastercard’s senior vice-president use dynamic EMV-grade authentication of ATM product management, Daniel to prevent fraud, is gradually increasing Goodman, said: “As a technology company, worldwide. The standard is currently active we are always considering what the future in more than eight million locations in 111 can bring, and today we have a great countries. opportunity with Diebold Nixdorf to define Mastercard’s plans mean all new the next wave of digital products to the acceptance terminals in Europe, Latin ATM channel. By bringing together the America, the Middle East, Africa and Asia- Mastercard network and Diebold Nixdorf’s Pacific will have EMV chip and contactless large global scale, we can help move the technology enabled from October this year. ATM industry towards a globally scalable All new cards issued in these regions from standard for driving digital innovation in April 2019 will carry the corresponding the ATM channel.” functionality. Diebold Nixdorf’s senior vice-president Mastercard aims to make all merchant of software, Alan Kerr, added: “This Mastercard has revealed plans to make terminals EMV chip and contactless- partnership with Mastercard is another contactless payments standard by 2023 enabled by April 2023. way we are continuing to securely bridge in Europe, the Middle East, Asia-Pacific, Mastercard chief security solutions the digital and physical worlds of cash Latin America and Africa, to ensure greater officer Ajay Bhalla said: “Our vision is a by innovating the ATM experience for payment consistency. world where everyone can simply and consumers through our Vynamic suite of The initiative is expected to enable card safely tap their card or device when paying software solutions. users to benefit from digital advances that in a store, and quickly be on their way. “Many of our customers are looking to offer improved security and convenience. “This marks a significant step towards retain consumers and drive incremental The company said it will begin multiple greater consistency, security and speed transactions to their self-service channels, card and terminal upgrades in global for everyday payments while laying the and this partnership with Mastercard regions from this year in order to deliver groundwork for future innovation.” < delivers on both of these fronts.” <
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CI June 2018 556.indd 7 15/06/2018 14:33:25 News | Digest
Mastercard announces solutions to underpin Open Banking transformation Mastercard is to develop a new suite of services designed to build trust in the new Open Banking ecosystem among consumers, banks, retailers and third parties, as well as simplifying and streamlining their interac- tions with each other. With the opening up of financial data, trusted third parties have access to infor- mation held by banks. This not only enables third parties and banking incumbents to offer enhanced and individualised products and services, but it will also allow them to initiate payments on behalf of the business or consumer in some cases. Mastercard’s new services will include: • A pan-European directory of third-par- ty providers to help banks ensure that “We believe that these services address sig- on where they add most value – creating parties seeking access to a customer’s nificant obstacles to the creation of a vibrant innovative user experiences.” account are legitimate; and successful open banking ecosystem,” “The challenge to create trust is not • A fraud-monitoring service based on said Jason Lane, Mastercard’s executive the only one – we are already working on Mastercard’s safety and security solutions, vice-president, market development Europe. improving end-user experiences in the to enable banks to better assess the risk “We recognise that trust challenges exist Open Banking environment, relating to both associated with a given third party; on both sides – third parties need to be payments and information access, and look • A dispute-resolution mechanism with a able to access the data and infrastructure forward to rolling those out as the services clear set of rules and a communications controlled by banks, and at the same time and ecosystem, evolves,” he added platform, leveraging Mastercard’s exper- banks need confidence that the third parties Mastercard’s new services will be launched tise of handling disputes, and requesting account access are legitimate.” first during a pilot phase in early 2019, with • A connectivity hub that will help third Lane continued: “We want our solutions to the UK and Poland being priority markets, parties to establish and maintain commu- give banks and third parties peace of mind, before being rolled out across Europe later in nication with banks. so that they can focus their time and efforts the year. < Visa introduces fast-track programme for European fintech startups Visa has announced plans for two new network to grow their businesses. support programmes for European fintechs “Our commitment is to be the most engaged in the creation of new digital responsive and supportive network for payment solutions. both emerging payment players, and our The new fintech fast-track programme existing clients and partners.” will provide early-stage startups access to Initially, the company plans to collaborate Visa’s capabilities across its global network, with payments and processing platform to enable them to build their own ideas. provider Contis, and will focus on UK- Set to begin in July 2018, the fast-track based start-up businesses. The programme initiative allows onboarding onto Visa’s will later be extended to other European global network within four weeks, including and international markets. reduced charges. Visa has also launched a $100m venture Visa said it will work with providers to fund to support startups working on fund startups to join the programme, with innovations in Open Banking, and using an aim of delivering “new and innovative technology to develop new security and digital commerce experiences to both commerce experiences. consumers and merchants”. Visa has already invested in Klarna, Visa CEO for Europe Charlotte Hogg solarisBank and Payworks in Europe. commented: “At Visa we are open for all Platforms and fintechs such as Contis, Evry, players to take advantage of the reach, Jaja, Revolut and Wirecard have said that capabilities and security of our global they intend to work with Visa. <
8 | June 2018 | Cards International
CI June 2018 556.indd 8 15/06/2018 14:33:30 News | Digest
YouGov poll reveals UK consumers Centenary Bank launches new Visa debit card seek better protection and control Uganda-based Centenary Bank has UK consumers want to see more efficient, introduced the new CenteVisa debit card secure and real-time interaction with banks, featuring chip-and-PIN technology. according to a study from YouGov on behalf The CenteVisa card can be used globally of Ondot. at all merchants enabled to accept Visa The results revealed that online security transactions. Customers can exchange is the major concern among UK consumers, old ATM cards for new ones at any of with 60% wanting ‘peace of mind’ when the bank’s 69 branches. The bank said using cards online. members need to take the new Visa cards The survey also indicated that consumers within the next six months, after which old want much more proactive roles in manag- magnetic stripe cards will be disabled from ing their money. the system. Key findings from the survey included: Centenary Bank MD Fabian Kasi said: • 50% complained about talking to banks’ “Our electronic banking story started in call centres; 2003 when we acquired the first ATM and • 50% objected to transactions being we have been growing since then. stopped without notification of the “Currently we have 176 ATMs, 64 point- reason, and of-sale machines, phone banking through • 30% resented having to wait for blocked while 22% wanted the ability to set their own our CenteMobile platform and internet cards to be replaced. transaction limits. banking. Rachna Ahlawat, founder and EVP of “Your cards are ready: simply walk into Consumers also indicated a widespread Ondot Systems, stated: “The essence of any of the 69 branches with the old ATM desire for greater control over their debit the problem is the desire for personalised card and either a national ID, passport or and credit cards, and 30% of those surveyed service. Banks respond with digital compro- driving permit and walk out with your new wanted a mobile app that could control loca- mises, like automated phone services that are Visa card at no cost.” < tion parameters, such as limiting card use at time-consuming and frustrating to navigate. a holiday destination. Over half of those surveyed complained Location control can also allow the user to about this.” Precise Biometrics launches decide a card’s activity range within a city, a She continued: “Customers are looking smart card algorithm larger geographical area, or a specified radius for better card controls that allow them around the phone’s location. By enabling to better personalise, manage and control Fingerprint technology provider Precise these features, transactions made will only how payments are made in today’s world of Biometrics has launched a new algorithm be approved if the card is being used in a always-on digital commerce. solution, Precise BioMatch Card, to match location that the user has chosen. If the card “The survey validates the need for UK fingerprints in smart cards. is used elsewhere, the transaction will be consumers to benefit from what, globally, The BioMatch Card can identify declined. more than 3,000 banks are already offering fingerprints in ‘constrained’ computing More than a quarter (27%) wanted trans- to millions of cardholders: a mobile-based settings, including Secure Elements (SEs). action alerts to be displayed in real time, payment card control app.” < SEs are processor chips embedded into biometric smart cards to offer protection Monobank introduces credit card platform in Norway against fraud. The Precise BioMatch solution can support fingerprint sensors Monobank, a digital bank based in Norway, Monobank CEO Bent Gjendem said: with an area down to 30mm square. has introduced a new credit card platform “People want safe and easy-to-use banking comprising a physical card and mobile and shopping solutions to improve their Previously, the card was a part of Precise payment application. digital experiences. Our credit card BioMatch Embedded and has now been Through the combination of the platform with the Monocard and Mono released as a stand-alone solution into the Monocard and Mono Pay app, the company Pay app provides that by combining smart card market. aims to simplify banking and shopping the traditional credit card with a mobile Torgny Hellström, executive chair of for customers, and enable tracking of payment app. Precise Biometrics’s, board said: “Smart purchases. Monobank plans to work with “It also makes it easier for users to cards are the next growth area for partners to distribute the new credit card keep track of their purchases and private fingerprint technology. In payment cards and app solution to customers. economy. We can already see that our alone, there are over three billion cards The digital bank also announced plans to customers appreciate the solution.” issued globally every year. partner with Scandinavian airline Widerøe Established in 2015, Monobank focuses “As a frontrunner in the development of to launch the Widerøe credit card in on providing new fintech solutions for biometric payment cards, it´s important for September 2018. The card will utilise the loans, deposits and credit cards in order to us to provide Precise BioMatch Card that bank’s new platform. enhance the customer experience. < specifically addresses this market.” <
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CI June 2018 556.indd 9 15/06/2018 14:33:36 ANALYSIS | visa crash
which is under investigation. ATM and Mastercard transactions are not impacted. We visa network are working to resolve the issue as quickly as possible.” Following the outage and with Visa Europe back to full capacity, Visa CEO Al Kelly goes down said: “Our goal is to ensure all Visa payments work reliably 24 hours a day, 365 days a year. We fell well short of this goal today, and we apologise to all of our partners and Visa across europe account holders for any inconvenience this may have caused.” This could cause a huge reputational On 1 June 2018, Visa Europe suffered an outage that damage for Visa, given its market share. Visa accounted for 96.8% of the overall debit card affected thousands – if not millions – of consumers. transaction value in 2017; Mastercard only People were unable to make transactions or even withdraw had 3% of the debit cards in the UK in 2017. cash. While the system was back running by the end of the While Visa will be trying to recover from the outage, Mastercard could take advantage. day, what damage did it do? Patrick Brusnahan writes In July 2017, Mastercard signed a seven-year contract with TSB – a bank that has had its he full extent of the issue is not yet processed. We are investigating the cause and own outage problems. This would make TSB clear, but Visa is still investigating working as quickly as possible to resolve the the biggest issuer of Mastercard-branded debit Tthe cause of the problems. situation.” cards in the UK. Visa Europe said in a statement at the Other card payment facilitators, such as If Mastercard proves reliable in the wake of time: “Visa is currently experiencing a service banks, were also impacted. Lloyds Bank TSB’s architecture issues, and if Visa makes disruption. This incident is preventing some released a statement saying: “We are aware of another mistake, we are likely to see a shift in Visa transactions in Europe from being an industry-wide issue effecting Visa payments market share in the UK. < back to Cash after Network Crash?
How many of us carry enough cash in The reliance on this tech has obvious three UK shoppers unable to complete our wallets to pay for our daily lunches, benefits to both merchants, who purchases. Although outages such as lattes and train fares? Last year, card receive funds into their accounts faster, Visa’s are rare, the survey also found payments overtook cash in the UK for and also consumers, who benefit from that two-thirds of consumers had the first time, and it was announced in a more convenient retail experience. experienced wider payment technology May that you can even tip buskers in hardware failing on at least one London without handing over cash. The recent Visa outage was accredited occasion. Despite this, customers still to “hardware failure”, affecting want innovation: findings show that It is estimated that contactless thousands of consumers across Europe. three-quarters of consumers support payments now make up a third of all The company said its goal is to “ensure in-store technology that makes their card purchases. Coupled with instances [the network] operates 24 hours a day, experience as seamless as possible. such as the recent Visa outage, 365 days a year”, something that all of payment providers are facing growing us – consumers and merchants alike – Payment providers will have to pressure to ensure downtime is kept take for granted these days. work closely with merchants to to a minimum. Consumers will favour minimise downtime, making sure the most convenient payment options We predict that, regardless of this they experience fewer faulty on offer, and if these instances become recent issue, retailers will face contactless machines or unresponsive more regular, they could potentially increasing pressure to provide more touchscreens. Technological advances revert to relying on cash again. cashless options as consumer demand will be essential in making sure high- for tech grows. Consumers have street retail remains an engaging Organisations will need to plan to become accustomed to one-click experience for shoppers. If this is to ensure the chance of transaction payments online, expecting the same happen, the payment industry and failures is mitigated in the first instance, easy transactions when in store. Their merchants alike will need to work or ensure downtime is minimised when shopping experience must be seamless, closely to ensure reliable, same-day it does go wrong. The industry needs and as such, data centres and merchant fixes to failing tech, avoiding lost sales to ensure that, in the case of failure, providers need to offer same-day fixes and making sure we continue our love technology can either be identified at a to keep shoppers shopping. affair with contactless. < central location, through data centres, or switched out in-store as soon as the Our recent research finds that retail Claudine Mosseri, general manager – problem arises. technology downtime is leaving one in field support, ByBox
10 | June 2018 | Cards International
CI June 2018 556.indd 10 15/06/2018 14:33:38 feature | crypto cards
crypto cards hit the market, but can they build visibility?
A growing number of crypto-lenders are looking to disrupt the traditional card sector. Ivan Castano reports on their prospects, and asks whether they really can give Visa and Mastercard a run for their money
ast October, Julian Hosp, co- were still holding dead cards, waiting for TenX and other top digital coins into fiat to meet its founder of cryptocurrency debit to issue additional ones through new partners. “making cryptocurrencies spendable anytime, Lcard TenX, posted a YouTube video anywhere” operating mantra. boasting of the business’s growth after ‘IN A 1,000 YEARS’ Still, its woes are symptomatic of the garnering $80m in its initial coin offering embryonic, $350bn cryptocurrency Wild (ICO) or crowdfunding – a blowout sale “I paid for a pre-order card, but TenX’s email West, with rollercoaster price swings and oversubscribed by 45,000. was ‘after the integration is complete we widespread scams prompting many to brand “We have been growing massively and will perform a gradual roll-out of cards by the sector a “bubble” or “rat poison”, to quote have had so many people…we are totally geographical region,’” a customer using the Warren Buffet. packed here,” Hosp brimmed as he toured name Stefanescu.octavian complained on the In late May, the US Justice Department the fledgling company’s Singapore offices, firm’s support chat. “Hmmm, in 1,000 years. I launched an investigation into traders’ alleged engaging with a bunch of glowing marketing, want my money back…” Bitcoin manipulation, sending the world’s first customer service and HR executives. To be fair, Wavecrest’s collapse – reportedly digital currency into a tailspin and dragging “We don’t have any more seats, so we have stemming from Visa’s know-your-customer other cryptos with it. people sitting on the floor,” he joked. (KYC) and anti-money-laundering (AML) The possibility that regulators will curtail Fast-forward three months and that rule violations – hit the entire sector, its skyrocketing growth is burdening the enthusiasm had soured. In January, Visa cut including main rivals Cryptopay, Xapo, new “decentralised, token economy”. So ties with TenX distributor Wavecrest, forcing Bitwala and Wirex, which had a bigger, far, the US, Europe and other developed it to cancel all its cards and angering around 500,000-card stack in circulation when economies have limited regulatory oversight 100,000 customers, many of whom requested Wavecrest collapsed. Other high-flying issuer to tackle fraud in ICOs – digital currency refunds or cut their ties with the nascent Monaco (MCO) was spared, however, as it funding events similar to initial public issuer. uses German-based network Wirecard. Bitcoin offerings – while China has fully banned Hosp and TenX representatives rushed to card Cointed also survived. cryptocurrencies. Informally, however, over- soothe irate customers, offering refunds and “It delayed everything for everyone else, the-counter crypto purchases remain brisk. reminding them that its partner’s collapse was so we were not in the worst spot,” Hosp tells That said, blockchain, the encrypted, outwith their control. Despite those spirited CI, adding that since January, the 60-strong hyperledger technology underpinning efforts, the ordeal cost the startup $2m-4m TenX has significantly streamlined customer cryptos, is booming as businesses – including in customer adjustments and reputational service for its maiden debit card, which American Express – and governments see its damage. As CI went to press, most customers enables people to convert Bitcoin, Ethereum scaling benefits, facing fewer setbacks.
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CI June 2018 556.indd 11 15/06/2018 14:33:43 feature | crypto cards
TENX TARGETS 1 MILLION
Hosp says Ten X is on the brink of obtaining a European banking licence to issue its own plastic, and has already struck deals with an unnamed US partner to issue “a high, five- digit” number of cards. It has signed another European partner, and Hosp said the identity of the firm would be revealed in the next two months. If all goes well, the business aims to have one million customers this year, up from around 300,000 now, mostly in Europe and Asia. By 2023, it is targeting several million users in 50 countries, from 25 currently. It also intends to hold 200 cryptos in its mobile wallet – from which users can load up its card – compared to 10 now. It recently The TenX card and mobile wallet added Litecoin and forged a partnership to Hold hopes to sign a distribution deal with will enable it to deploy its card in the autumn, launch co-branded cards with the sixth-largest an undisclosed European partner to launch mainly in Europe, but eventually everywhere. crypto, reinvigorating its failed plan to seduce its products in the third quarter, says adviser By using its CCR token, customers will merchants through its now-defunct Lite Pay Robin Ebers. Eventually, the debit card will be able to pay transaction fees in the card card. be available for use with 45 million merchants which will hold 20 cryptos. CCR will also With an eye to the future, Hosp says crypto and for cash withdrawals from three million offer cashback for merchant purchases, a cards will give way to more efficient payment ATMs. It will also offer 1% cashback on spokeswoman says, although she declines to systems like digital currency wallets, offering purchases. give further details. so-called ‘atomic swaps’ or the ability to To stand out in the increasingly crowded Cashback and diverse rewards – as well as exchange diverse cryptos instantly to pay at field, Hold will offer more competitive fees fancy VIP cards – should help Monaco beat various merchants. than TenX or other crypto lenders such as rivals, the company’s senior vice-president Salt and PIVX, and ensure its distribution Eric Anziani said during Consensus 2018, the COMIT ROLL OUT partnerships are successful to avoid shipping annual cryptocurrency conference. delays that he claims have hobbled Monaco. The business, which raised $26m last To profit from that era, assuming enough “Our projections look really good; lending summer, has rolled out a stylish, obsidian people use digital money in five years, TenX will be big,” Ebers boasts, without sharing black-metal card offering 2% cashback in its is rolling out a wallet system called Comit specific figures. Monaco (MCO) coin, free airport lounge that works by linking up different blockchains Size – in terms of the liquidity and lending accesses, no monthly fees and up to $1,000 in through “interoperability” protocols. pools the fledgling payment concerns will free ATM withdrawals. Hovering at $2.20 in late May, down from carry – will become increasingly crucial as, Monaco will only issue 999 of the platinum a $5.33 high last July, TenX faces cut-throat and if, the world continues to migrate into cards, which will force users to purchase competition from a string of emerging coins, decentralised payments systems. 50,000 MCOs and hold them for six months including Hold, which recently garnered “We are going to offer bigger withdrawal to obtain the perks, according to marketing $11.3m in its ICO; FuzeX, which secured and conversion – Bitcoin to euro, for instance literature. $43m in February; and Crypto Credit Card – limits, will have loan aggregators and a At the time of writing, Monaco was about (CCC), a Russian venture targeting $3m in its bigger liquidity pool,” boasts Sergey Salynin, to launch its mobile wallet and Visa-labeled crowdsale ending in late May. CEO of CCC. cards enabling customers to convert four Hold stands out by allowing customers to cryptos into seven fiat currencies to make collateralise their crypto to obtain a loan that ONE-STOP SHOP international merchant purchases. To enable they can then unload through its card. such transactions, the company charges real- Hold aims to solve a big problem with CCC is building a cryptocurrency exchange time interbank rates it claims are 5-8% lower crypto cards so far: customers’ reluctance to and mobile wallet enabling people to hold than those of high-street banks. directly spend their crypto because its price multiple fiat currencies, swap coins and obtain Anziani says Monaco is also moving to may rise overnight. crypto-backed loans to spend fiat with its deploy a card that will allow users to hedge “Instead of selling, we allow members debit and credit cards. Uniquely, the business their crypto to borrow 40-60% of their to leverage their crypto assets as collateral claims it will offer customers the ability to assets, based on whether they use MCOs or to obtain fiat whenever they need it,” the invest in a curated list of promising ICOs. Bitcoin. If, for example, a customer deposits company says on its website. By striking partnerships with leading but $10,000 MCO, the customer can borrow up “Cash advances are instant and can be used as-yet-unnamed banks in Switzerland, CCC to $6,000. globally through the Hold prepaid card and hopes to build an unrivaled “ecosystem” – Marketing aside, however, Anziani concedes mobile app.” crypto lingo for a blockchain platform that that the crypto space faces huge challenges.
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CI June 2018 556.indd 12 15/06/2018 14:33:44 feature | crypto cards
“Only 20 million to 30 million people are come out, the more Visa makes.” differentiator. It can be used on Amazon, using crypto today. Globally, this is less than In the event that crypto adoption Uber, Deliveroo and other merchants, 1% of the population so we are facing a very strengthens, a separate, decentralised according to Uquist, which claims to operate nascent industry and we all have to collectively payments network could emerge to challenge up to 90 debit cards, including ones for work to democratise blockchain technology the incumbents, Feldman says. In that case, Bitcoin, Ethereum, EOS, Bitcoin Cash and and its use cases with the public,” Anziani they could roll out their own cards or acquire Litecoin. told Consensus, which drew 8,000 crypto their crypto competitors to rein in the market, PIVX would be “an excellent addition” enthusiasts to discuss the state of the industry he adds. for any crypto card, says an anonymous – flashy Lamborghinis in tow. However, “creating a network like Visa or executive using the pseudonym Turtleflax “It is still very difficult to buy and exchange Mastercard would be a monumental task,” to respect the business’s privacy philosophy. cryptocurrency. It is a long on-boarding says Jerry Straessle, owner of boutique US This is because the company’s success hinges process with limited customer support,” payments consultancy JLS Associates. “They on rapid merchant adoption or point-of-sale Anziani noted, referring to the long identity have created this over 40 years, and to replace applications for which it has designed its apps. checks and KYC queues required to buy it with another network would be difficult.” PIVX also makes deposits and withdrawals digital cash in exchanges like Coinbase for the Straessle adds that all financial institutions much faster and more private than rivals, first time. and retailers are tracking crypto, but none boasts Turtleflax, speaking through the This “lack of independence” to buy and sell are yet taking it too seriously – except those Discord chatting app. cryptos – and their notorious price volatility focusing on e-commerce. This is mainly “Crypto cards will be a good solution – is hindering the industry’s growth, Salynin because the SEC and other regulators have if they can navigate regulation…while the says. However, he notes that institutional yet to issue clear regulation on the space, aversion to spending with them will decrease investors’ widely anticipated jump into the something he expects will continue to hinder as volatility does.” space – a move not expected until a large and its development. trusted custodian investment firm emerges, $5TRN IN 12 MONTHS? with Coinbase and Goldman Sachs’ Circle BEATING HACKERS vying for top spot – should level the field. Turtleflax expects adoption to increase Most global merchants are shunning Security is also a big challenge at a time when rapidly, adding: “People will want crypto cryptocurrencies because their volatility can crypto exchange hackings continue unabated, because they want to control their money eat into sales margins. However, Salynin says Mike Ryan, a consultant specialising and privacy. Facebook, Amazon and others says 150 Japanese retailers already accept on Bluetooth and Internet of Things devices can offer ‘blockchain’, but they can’t offer a cryptocurrencies, showing that the feat is working in the space. decentralised system. possible, especially in the crypto-loving Asian “Every card should start with security as its “They will always control it, which means county. foundation, then user experience,” he notes. they would control your money, see your Meanwhile, many online merchants, such as OpenBazaar, are also improving the user experience, betting that an eventual crypto It is still very difficult to buy and shopping boom will boost their fortunes. Yaniv Feldman, an Israeli economist exchange cryptocurrency. It is a long on- specialising in crypto, says the ideal Bitcoin card customers are those who hold huge boarding process with limited support amounts of it and are keen to spend. “If you have 200 Bitcoins you bought for $10 a few years ago, you have lots of money “My experience with electronic cards has been information, and limit how you can spend and you want to do stuff with it because that most are focused on marketing and tech, your coins.” otherwise the tax man could see it,” Feldman and spend very little on security and user Turtleflax continues: “Crypto is here to explains, adding that many global banks experience, which should go hand in hand.” disrupt the current system, and the cracks continue to ban crypto-related deposits, FuzeX, which allows users to store up to 15 are already starting to show. Paypal continues making these crypto cards attractive options to cryptocurrency accounts, as well as 10 debit to lock people’s funds and Western Union more easily spend vast wealth. and credit cards, does those two things very continues to price-gouge people for remittance well, Ryan notes. The e-card looking to make payments.” SITTING PRETTY? physical wallets obsolete features an electronic Feldman agrees, adding that crypto could crypto balance display, letting users know soar parabolically to $3trn-5trn in 12-18 As the TenXs of the world take the market their coin balance before and after making months, and then melt down. by storm, should Visa and Mastercard be a purchase, as illustrated by a McDonald’s “It will probably crash like the dot.com worried? Not in the short term, says Feldman, demo-transaction video on its site. FuzeX also boom or 1929 [stock market crash] which is echoing other experts. comes with a lock-up feature in case its user how this market cycles go,” he says. He says: “Besides KYC or AML compliance forgets it. “Once that happens, all the speculators will issues, I don’t see a reason where legacy credit PIVX, a so-called privacy coin, has also be driven out and the economy will be able cards would suffer. They are benefitting with introduced a debit card with partner Uquist, to grow and really get value from this the new every transaction. The more [crypto] cards featuring security and privacy as a prime blockchain era.” <
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CI June 2018 556.indd 13 15/06/2018 14:33:44 regulation | australia
cba highlights dangers of poor credit decisioning
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia has attracted worldwide publicity for all the wrong reasons. As Tom Ravlic reports, the cards sector is not immune
he Commonwealth Bank of superannuation fund. The banks employ more Counsel assisting the commission, Rowena Australia (CBA) has been under fire than 200,000 people alone,” the besieged Orr QC, told the commissioner that Harris’s Tduring evidence at the Financial Turnbull told the assembled Canberra press CBA experience was one example of the Services Royal Commission (FSRC) for corps on 30 November 2017. provision of an inappropriate product to an increasing credit card limits on accounts “Now, the speculation about an inquiry individual that had warned the bank of a held by a customer who told the bank of cannot go on. It is moving into dangerous personal problem. gambling problems. territory where some of the proposals being “Mr Harris had a gambling problem of A case study presented to the FSRC, which put forward have the potential seriously which CBA was aware, at least when credit was called on 30 November 2017 by Prime to damage some of our most important limit increases were offered, and perhaps Minister Malcolm Turnbull, featured details institutions.” ought to have been aware earlier,” Orr told the about the ease with which a bank customer, Turnbull announced the appointment of commissioner. David James Harris, obtained credit from the Royal Commissioner Kenneth Hayne the day “Nevertheless, Mr Harris was offered a CBA despite self-identifying as a problem after the media release and press conference credit limit increase only days after telling the gambler. announcing the inquiry, with Hayne and his Commonwealth Bank of his problem.” Harris, 30, is one of a number of bank commission team required to report back to customers that have been called to provide the government by February 2019. GAMBLING ON CREDIT evidence to the Royal Commission, which The terms of reference require the Royal was called in part to expose the underbelly of Commission to produce a report that Harris’s written statement contains further the sales culture, compliance failures and poor looks at the full extent of the behaviour of details of his dealings with the CBA, which governance practices of the financial services banks and other institutions, and provide had given him a series of increases in credit sector in Australia. recommendations. These can include despite being aware he had a serious gambling recommendations for legislative change as well problem. CONSUMER PRESSURE as any instances of further investigation that He told the commission that he had applied might be required. for a credit card with a A$10,000 ($7,600) Turnbull was forced to call the full-blown The terms of reference acknowledge, limit in 2014 in preparation for a trip inquiry into bad banking behaviours as however, that Australia’s financial system is overseas. Harris was planning a trip to visit the a result of increasing pressures placed on robust and the inquiry was to investigate a UK, as well as stopping over in Thailand for him by consumer groups, members of broad range of misconduct. dental surgery. Commonwealth parliamentary committees, While he says he repaid the credit balance and financial services institutions. CBA UNDER FIRE soon after returning to Australia, Harris began “Those institutions are the bedrock of the to gamble using his credit card. economy. There would be very few Australians The commission has heard evidence “I had gambled previously, but not to that who are not a customer or shareholder of the from customers about the provision of degree, and I had previously only used my banks. Many of us are both, with almost every inappropriate advice related to the provision own money to gamble. I began using the First worker holding bank shares through their of financial products, including credit cards. CSA Credit Card to pay for my gambling
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CI June 2018 556.indd 14 15/06/2018 14:33:44 regulation | australia
expenses,” Harris explained in his written customers for credit purposes had changed spending – on shopping, or on alcohol, or statement to commission. over the past 12 months. any other causes?” he said. “This is what “Initially, I was transferring cash from the “[We’ve] acknowledged we should not we’ve grappled with. Absent any clear legal or First CSA Credit Card to another one of my have provided that final credit limit offer. regulatory guideline, how do we determine CSA accounts using the cash advance function The basis for saying that is, having had the when we intervene and impose limits?” before using it to gamble.” conversation with one of our staff members in One of the other challenges faced by the Harris developed a habit for “maxing a contact centre and declaring that Mr Harris CBA is that its internal systems failed to out” his first CBA credit card on gambling. had a gambling problem – to use the simple provide information to people selling the idea He admitted that he applied for a second description of it – without in any way trying of credit increases to someone like Harris that credit card for gambling purposes that had a to minimise the challenge that presented, there were financial or other problems that A$7,000 credit limit. that information was not in any way passed had come to the bank’s attention. Put simply, Harris also managed to get a third credit through to credit-decisioning systems,” Van the right hand at the CBA did not necessarily card with an A$8,000 credit limit. The CBA Horen told the commission. know what the left hand was doing. also offered Harris a credit increase on his first “That’s a failing, and we acknowledge that “We need to build a flag. There are card, which meant the available credit across and we’ve got to find ways to address that. So, complexities around all that, but we need to his three credit cards was A$27,100. The problem gambler told the commission that he continued his habit of reaching There would be very few Australians maximum credit on one card and then trying to pay it off with the other cards. This had who are not a customer or shareholder serious consequences for Harris’s work and social life. of the banks. Many of us are both “I was only able to continue paying off the credit card because I was working for extended periods. In the first half of 2016, I worked for to that extent, having declared it to somebody find a way to make sure that if somebody – 62 days in a row before taking one day off. I working in the Commonwealth Bank, we did and you will appreciate there’s a lot of people then worked another 40 days in a row,” Harris not use that information for the subsequent out there – has a conversation that flags a admitted. credit offer.” customer could be in difficulty, in the way “I did this because the debt hanging over Changes in the CBA’s internal processes of other flags for domestic violence, where my head was overwhelming. I was struggling had begun over the past 12 months in order we then trigger domestic violence support with depression and anxiety. My social life had to ensure that any signs of gambling by a programs,” van Horen explained. been destroyed and I wanted to get the debt bank customer with a credit card could result “We don’t have something that triggers paid off so that I could close the card.” in them being banned from getting a credit a proactive action around a self-disclosed He continued to receive offers from the increase. matter like this. It’s something we want to bank stating he was eligible for an increase in Van Horen told the commission that, do something about; we’ve got to work out credit, which he accepted. At one point his while the law did not appear to require the how we can do that, because it’s clearly not a credit limit was increased to A$35,100. This additional monitoring of how customers used simple thing to execute.” kept fuelling Harris’s gambling addiction. credit, he believed it was reasonable for banks Van Horen told the commission that details “By way of example, from Friday 9 June to look more closely at how customers with of Harris’s personal circumstances collected 2017 to Sunday 11 June, I charged at least credit limits spend those funds. by a person on the bank’s customer hotline A$18,850 to the Consolidated CBA Credit “In April last year we changed our credit- should have been recorded in some form Card in order to gamble,” Harris noted. decisioning rules such that if we observed high so anyone dealing with him was able to see levels of gambling spend in a customer’s credit personal information that would them stop COMPLAINTS card, we would not offer them any further people from sending out letters of offer to credit limit increases,” Van Horen observed. increase their credit limit. Harris made two complaints about his “That was a change that happened in April “We absolutely acknowledge we shouldn’t situation, and ended up receiving assistance last year, which in isolation should have meant have [sent out other offers to increase the from the bank to make arrangements allowing we wouldn’t offer significant [credit lending credit limit] – in a perfect world we would him to repay the debt owing on the cards. increases] to customers who exhibited high have used this information from the telephone He told the commission in his written gambling spend on their credit card.” call to find its way back into our credit submission dated 18 March 2018 that he models.” still owed A$23,400 to the CBA, while also SLIPPERY SLOPE The credit card calamities faced by Harris admitting that he had “gambled hundreds of are not the only problems faced by the CBA thousands of dollars”. The bank, however, admitted to a challenge. at the Royal Commission or with other The CBA appeared after Harris and the Gambling is legal, Van Horen noted, and at regulators. A recent inquiry by the Australian bank’s executive, Clive van Horen, told the what point should a bank decide to intervene? Prudential Regulation Authority found that commission that Harris should never have “You can quickly see the slippery slope the CBA’s board of directors had failed to do received increases in credit given his gambling that puts us on if we say you can’t spend its job properly in overseeing the conduct of addiction. Bank procedures related to assessing on gambling: what about other addictive management in multiple areas. <
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CI June 2018 556.indd 15 15/06/2018 14:33:45 country snapshot | portugal
PORTUGAL
country snapshot: portugal
Consumer prudence favours debit card transactions
ortugals’ banking sector was badly close operations, triggering mergers payment cards market fell following the affected by the economic crisis. and acquisitions which had a direct implementation of the EU interchange fee P Amid growing debt and falling bearing on the country’s payment cards cap and an increase in bad loans, which profitability, banks were forced to market. Additionally, profitability in the specifically hindered pay-later cards.
value of credit tRanSfers value of cheque payments value of payment cards
$bn $bn $bn 2,000 200 150
120 1,500 150
90 1,000 100
60
500 50 30
0 0 0
2013 2013 2016 2013 2016 2016 2017e 2021f 2017e 2021f 2017e 2021f
Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData
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CI June 2018 556.indd 16 15/06/2018 14:33:55 country snapshot | portugal
However, amid this turmoil, consumer Debit card shares by issuer Debit card shares by scheme preference for debt-free payments and prudent spending resulted in growing debit card transaction volumes and values. Consumers in Portugal made over 1.5 Caixa eral de Depositos billion purchases with debit cards at the 21.8% POS in 2017. Others Contactless card numbers and Others 2.3% 7.8% Multibanco usage have also seen strong growth in Millennium bcp 100% 16.0% recent years, with the vast majority of mBank 21.7% contactless users in Portugal seeing the Bank cards as helpful. In addition, with various ovo Banco Pekao 1 . % 12.1% government and bank initiatives, payment cards will grow steadily over the next five years and gradually become more accepted. HIGH BANK PENETRATION Source: GlobalData Source: GlobalData pay later shares by issuer pay later shares by scheme Debit card penetration in Portugal is high, supported by the large banked population. The central bank has pushed banks to offer basic accounts with minimal charges ovo Banco Others 1 .7% to all citizens, offering services including 17.5% a debit card and the ability to make credit Wi ink transfers and direct debits. According 13.6% Others Visa to the central bank, the number of basic 58. % 5 . % Mastercard bank accounts rose from 9,646 in 2013 to Millennium bcp 29.8% 13. % 34,953 in 2016. The government is also using digital channels to increase banking penetration. In July 2017, the central bank issued regulations enabling institutions with headquarters or branches in Portugal Source: GlobalData Source: GlobalData to allow customers to open accounts exclusively through digital channels. Consequently, banks such as Novo Banco, e-commerce in Portugal to record a CAGR Depósitos, for example, offers Mastercard- Millennium bcp and Santander Totta enable of 11% over the next five years. branded prepaid cards for children aged consumers to open bank accounts through over 10 years. The LOL Junior Card can be digital channels. CONTACTLESS GAINS loaded with funds from $6 to $600 through online banking, at ATMs and branches, or E-COMMERCE Contactless payments are expected to gain by direct debit. prominence in Portugal, with Caixa Geral E-commerce is acting as a key driver of de Depósitos, Novo Banco and Banco BPI INFRASTRUCTURE payment card market growth. According now offering contactless cards. to a 2016 SIBS Market Report, more than Merchants have also started to provide The number of POS terminals recorded a third of Portuguese consumers prefer the necessary infrastructure for contactless a moderate CAGR of 5.7%, rising from payment cards for online purchases. payments, and overall the number of 259,428 in 2013 to 323,931 in 2017. Many banks offer customised payment contactless cards rose from three million in Retailers are also installing POS terminals cards for online shoppers. For instance, 2013 to 11.6 million in 2017. that accept contactless payments, as a Millennium bcp offers a Visa-branded Prepaid cards are gradually gaining result of which the potential for card-based web card for an annual fee of €10 ($12). acceptance among Portuguese consumers, payments is also expected to grow. Emerging solutions such as PayPal, primarily due to prudent consumer Service providers are launching new Masterpass and Seqr are also being used spending as a result of subdued economic products. In September 2017 the National for online transactions. growth. The number of prepaid cards grew Association of Road Transport Carriers Consumers most value security when significantly from 1.1 million in 2013 to 2.6 collaborated with myPOS and the National choosing a mode of online payment, million in 2017. Digital Taxis Center to equip taxi drivers in with 44% citing this feature. The growing Banks in Portugal offer prepaid cards Lisbon with myPOS terminals that enable number of online apps such as MB Way for consumer segments such as children, credit and debit card transactions and and Masterpass is expected to drive shoppers and travellers. Caixa Geral de contactless payments. <
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CI June 2018 556.indd 17 15/06/2018 14:33:57 country snapshot | finland
FINLAND
country snapshot: finland Improved infrastructure and awareness bolster card use
innish consumers are strong users the UK and Germany. Improved banking terminals were the main growth drivers for of payment cards, with frequency infrastructure, new product developments, payment cards in Finland. Fof card use higher in Finland than in high awareness of electronic payments, and Debit cards are the most popular card other mature European markets such as wide acceptance of payment cards at POS type in Finland, and are typically used
value of credit tRanSfers value of cheque payments value of payment cards
$bn $bn $bn 5,000 10 80
70 ,000 8 60
50 3,000 6 0
2,000 30
20 1,000 2 10
0 0 0
2013 2013 2013 2016 2017e 2021f 2016 2017e 2021f 2016 2017e 2021f
Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData
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CI June 2018 556.indd 18 15/06/2018 14:34:06 country snapshot | finland
almost six times more than pay-later cards. Debit card shares by issuer Debit card shares by scheme Given the strong hold of debit cards, credit cards have been slow to take off. However, there was a significant shift in product and marketing strategies between 2013 and 2017, and credit card issuers OP Bank are now using a number of initiatives to Others 3 .5% 38.5% Mastercard attract consumers, such as no annual 0.0% Visa fees, payment-free months, reward 60.0% points, discounts at partner retailers, and cashback. Danske ordea E-commerce registered robust growth Bank 15.5% 11.6% from 2013, a trend that is expected to continue and provide market growth opportunities. Contactless payments have
steadily gained prominence, with all major Source: GlobalData Source: GlobalData banks offering cards and mobile solutions with contactless functionality. pay later shares by issuer pay later shares by scheme DEBIT CARDS Others Debit cards have traditionally been 6.9% preferred by Finnish consumers. Most ordea consumers are banked and have at least Others 32.8% 3 .3% one debit card. Visa Combined efforts by payment operators 32. % Mastercard and government bodies to promote cash- 60.7% free transactions accelerated debit card Danske OP Bank use. Rising use of debit cards for low-value Bank 2 .2% transactions, and increased consumer 8.7% preference for contactless cards are further expected to drive the debit card market over the next five years. Source: GlobalData Source: GlobalData PAY-LATER CARDS solutions including Apple Pay and on an NFC-enabled device to make Pay-later cards are not very popular among Masterpass are further forecast to support contactless payments. Finnish consumers, due to a general Finnish e-commerce growth. The number of ATMs fell from 2,241 in preference for debt-free payments and 2013 to 1,854 in 2017, and is expected prudent spending. The availability of debit CONTACTLESS PAYMENTS to fall further, mainly as a result of banks cards with credit functionality has also reducing their branch and ATM networks reduced the need for separate credit cards. Finland has registered a rise in contactless to counter rising costs, and rising consumer Although pay-later cards represent a adoption, with 6.5 million contactless preference for digital transactions. small proportion of the Finnish payment cards in circulation at the end of 2017 – There was also a decline in the number card market, they have registered steady equivalent to around two-thirds of the total of POS terminals, from 196,000 in 2013 to growth with banks promoting card use payment cards in circulation in the country. 149,102 in 2017. However, this number is by offering various cashback and reward With growing preference for contactless expected to rise as merchants install more programmes. payments, all major banks, such as OP contactless terminals. VeriFone partnered Bank, Nordea Bank and Danske Bank, now with MobilePay in December 2017 to allow E-COMMERCE GROWTH offer contactless cards. merchants to accept contactless payments Banks are also developing contactless from MobilePay users via VeriFone POS The Finnish e-commerce market posted a mobile payment solutions. OP Bank, terminals. CAGR of 13.7%, increasing from €5.8bn Nordea Bank, Danske Bank and Aktia have Payment service providers are offering ($7.0bn) in 2013 to $11.6bn in 2017. their own payment solutions: Pivo Wallet, mPOS solutions to serve small and Growth was supported by well- Nordea Pay, MobilePay and Aktia Wallet medium-sized merchants. For example, developed online and logistics respectively. iZettle offers its mPOS solution, iZettle infrastructure. The introduction of instant OP Bank launched the Pivo Wallet in Reader, in Finland. The reader can be payment system Siirto for e-commerce, March 2015. The wallet uses host card connected to a tablet or smartphone via and the launch of international payment emulation technology to emulate a card Bluetooth. <
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CI June 2018 556.indd 19 15/06/2018 14:34:09 Country snapshot | kenya
KENYA
country snapshot: kenya Consumer attitudes and limited acceptance restrict card use
enya’s payment card market is still individuals in 2017, and 16.0 transactions Overall, cash accounted for 88.4% of very much in a developmental stage. per card per year – figures lower than the total payment transaction volume in KThe East African nation recorded Kenya’s peers in the continent, including 2017. The low uptake of payment cards is a penetration rate of 30 cards per 100 South Africa, Morocco and Egypt. a result of society’s dependence on cash, and limited acceptance of payment cards at value of cheque payments value of payment cards merchant locations. Advanced security features such as EMV $bn $bn are being adopted to encourage consumer 30 2.0 adoption of payment cards. In addition,
25 scheme providers have launched campaigns 1.5 to raise overall consumer awareness of the 20 security issues and benefits related to EMV chip cards. 15 1.0 Visa ran a Security Week programme
10 in May 2015, and also launched a chip 0.5 and PIN campaign in September 2014 to 5 promote the security benefits of cards for everyday payments. 0 0.0 Similarly, Mastercard partnered with card 2013 2013 2016 2016 2017e 2021f 2017e 2021f processor Paynet in July 2013 to launch the Great Migration to EMV Chip initiative, Source: Central Bank of Kenya, GlobalData Source: Central Bank of Kenya, GlobalData which aimed to encourage consumers
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CI June 2018 556.indd 20 15/06/2018 14:34:16 Country snapshot | kenya
to switch from magnetic stripe to EMV- Debit card shares by issuer Debit card shares by scheme compliant cards. The wide popularity and acceptance of mobile payment solutions such as M-Pesa and Pesapal have been major obstacles for payment card growth, as the solutions offer Others Equity Bank convenience and cost-effectiveness. Unlike 37. % 32.0% banks, mobile payment solution providers Mastercard Visa .9% 55.1% offer their services to small merchants and charge lower processing fees, making them Co-operative attractive to consumers. KCB Bank of Kenya Overall, the Kenyan payment card 10.9% 19.7% transaction value at POS terminals recorded a subdued CAGR of 0.6% between 2013 and 2017.
The government has taken several Source: GlobalData Source: GlobalData initiatives to bring the unbanked population into the formal banking system, pay later shares by issuer pay later shares by scheme which in turn helps to promote card use. One initiative is the adoption of an agency Others banking model to provide financial access 2.6% to individuals in remote areas. In 2016, the government made it Others mandatory for all Kenyan individuals 2 . % to complete a form if they deposit or Barclays Mastercard 2.6% withdraw more than KES1.0m ($10,000) 36.6% Visa KCB 60.8% in cash from a bank account. The aim of 9.5% the move was to increase the traceability Co-operative of bank transactions and boost electronic Bank of Kenya payments in the country, 23.5% M-PESA REMAINS POPULAR
Source: GlobalData Source: GlobalData Card-based payments have grown marginally in the last five years due to the convenience and cost-efficiency of mobile- Between June 2016 and June 2017, PREPAID CARD GROWTH based retail payment solutions. transactions undertaken by banking agents As of March 2017, M-Pesa had 27 increased by 56.5% in value. Growth in Banks offer various customised prepaid million registered users in Kenya, as well Kenya’s banked population has led to a cards to serve consumer segments such as as more than 136,000 agents and over rise in overall debit card penetration in the students and salaried individuals. 260,000 active retail outlets. country. In July 2016, Equity Bank launched Mobile payment solution providers a Mastercard-branded prepaid card for typically charge lower processing fees than E-COMMERCE GROWTH students at Maseno University. The card other payment operators; for example, enables holders to receive loans from the Safaricom charges merchants a 0.5% Kenya’s e-commerce market recorded a Higher Education Loans Board, and to make transaction processing fee on its Lipa Na robust CAGR of 23.8% between 2013 fee payments, withdraw cash from ATMs, M-Pesa service – much cheaper than the and 2017, as a result of increased internet and make in-store payments. Card holders average merchant service charge for bank penetration and a growing middle class, also have access to cash at ATMs, branches card payments. as well as the presence of various mobile and Equity Bank agents. payment services. E-commerce growth has In September 2015 Ecobank launched AGENCY BANKING also been supported by the availability of the Visa SalaryXpress prepaid card with solutions such as M-Pesa, PayPal, mVisa chip-and-PIN technology. The card can be All major banks in Kenya offer agency and JamboPay. used to withdraw cash and make in-store banking services, with an aim to improve A number of companies have launched and online payments. financial inclusion in the country, online payment solutions, with Chinese Employers with arrangements with According to the Central Bank of Kenya, company Demart entering Kenya in May Ecobank can use the card to pay employees as of 30 June 2017, 60,102 agents from 2017 and I&M Bank’s Webpay platform directly, allowing card holders to receive 18 commercial banks and five microfinance enabling merchants to accept Visa and salaries through the card without holding banks were active in the country. Mastercard for online purchases. an Ecobank account. <
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local businesses that are in need of efficient why the digital local cash cycles. Bill payment is another function that highly developed ATMs already offer, enabling consumers to pay bills at a physical access revolution is point to banking. As the above example with our mobile wallet partners shows, the opportunities and possibilities for additional services at ATMs also physical are expanding quicker than ever. 2. New community hubs Newspapers recently reminded us that May marked Karl Taking self-service a step further, the future of Marx’s 200th birthday, while commentators have used the 20th community banking lies in local self-service anniversary of online banking to declare another revolution: banking hubs. While next-generation ATMs with deposit one of mobile apps, artificial intelligence and Open Banking, capabilities are already a large step in the right writes Cardtronics director Duncan Faithfull direction, innovative banking utility hubs will be able to offer most basic transactional hile our industry is certainly CashDash is leveraging our extensive ATM banking services that traditionally have been not shy of pointing to the network to bridge the gap between the digital provided by bank branches. W rapid pace at which the digital and physical worlds for its customers. It would also be more cost-effective for channel is developing, we tend to overlook these hubs to serve customers of more than that our physical channels are undergoing SELF-SERVICE AUTOMATION one bank. Banks will be able to share the costs a revolution as well – and I am not just while, crucially, minimising the impact of talking about the closure of unprecedented But how are banks supposed to maintain branch closures on their customer base. numbers of bank branches, which we are their basic physical service provision, while obviously hearing a lot about in the media the latest UK Finance report shows that bank 3. New relationships and collaboration at the moment. branches saw a 26% overall drop in visits The relationship between independent The wider ecosystem of physical finance between 2012 and 2017? providers and banks is also set to change is evolving rapidly, with local communities The solution lies in self-service automation, fundamentally over the next few years. across the UK set to see a fundamental change which is at the heart of the current physical As digital channels develop, the parallel in the way they are served. revolution. Retail banking specialist RBR increased focus on physical self-service There is no doubt that the digital revolution predicts that the number of ATMs worldwide automation means banks will look to benefit is driving change in our industry: UK will have grown from 3.2 million in 2015 to from the economies of scale from specialist Finance’s recent report, The Way We Bank over four million in 2021. providers, and thereby drive innovation as well Now, shows the breathtaking growth of the Taking a look at this rapidly evolving as cost-efficiency. digital channel. Thirty-eight million people in market, we find that the self-service revolution What it comes down to is this: the financial the UK – 71% of the adult population – used is following three major trends in the UK and services revolution has two sides to it. Banks online banking in 2017. Another 22 million globally: will continue to focus on their core business are regular users of banking apps, showing a in the future – selling and managing financial general shift away from desktop banking to 1. Thriving self-service innovation products through the digital channel. smartphones and mobile devices. ATMs are becoming more innovative and On the flip side, partnerships with However, with these seismic shifts well offering a broader range of self-service options. independent specialist providers will ensure underway, banks are rightly pursuing digital For example, the introduction of deposit that innovation in self-service automation transformation strategies, as it is vital that capabilities is starting to become more provides the necessary bridge to the they ensure local communities maintain basic commonplace in some markets. This is digital world of financial services in local physical access points to financial services. incredibly helpful both for consumers and communities. < As the UK’s largest independent operator of ATMs, we see the ongoing need for a bridge between the physical and digital worlds of financial services first hand. A good example is our recent partnership with CashDash, a fintech startup that specialises in digital wallets. Although online banking in Britain is among the most developed in the world, this startup’s customers are demonstrating the continuing need for access to cash. This is why
22 | June 2018 | Cards International
CI June 2018 556.indd 22 15/06/2018 14:34:19 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF LIFE INSURANCE LIFE INSURANCELife INTERNATIONAL Insurance International: Innovation Forum and Awards 2018 Innovation Conference & Awards 20177th November 2018 ∤ Waldorf Hilton, London London The 2018 edition of the Life Insurance International: Innovation Forum and Awards will be taking place in London on 7th November at the iconic Waldorf Hilton. We will once again be bringing together life insurers, insurtechs and solution providers for a day of discussion covering the major issues in the retail banking sector.
Event Highlights :
∤ Two-stream format, with a wider variety of ∤ Oxford-style live debate considering whether Life Insurance International is the only global newsletter talks analyzingand discussions, all of the latest trends case and developments studies in theand global life and health insurance advances markets in robo-advice and D2C insurance keynote presentations will make most financial advisors extinct ∤ Many issues related to innovation, ∤ Industry thought leaders from the transformation, regulation and change to be established insurers to those that are discussed to give a rounded picture of the life up-and-coming along with solution providers insurance market today ∤ Awards ceremony celebrating the ∤ InsurTech innovation lab where five of the excellence in the life insurance industry best insurtech firms can demonstrate their innovative solutions
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Untitled-2 1 15/06/2018 15:14 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE LEASING LIFE CONFERENCE & AWARDS 2018 15th November 2018 ∤ Tallinn, Estonia
For its 14th edition Leasing Life Conference and Awards 2018 moves to the Baltic Region to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry. This year’s Leasing Life conference explores how Europe’s leasing industry is responding to the value chain opportunity - the operational, and strategic, implications of the paradigm shift, and the role that technology must play in transforming the industry so that it thrives in the digital age. . Event highlights:
∤ Re-defining asset ownership for a digital generation · The Baltic Approach: Regulatory arbitrage in the digital era · GDPR and its implications for reporting, asset management and marketing · Funding strategies for a lean world · Re-defining sales and distribution channels for the digital era · Harnessing the power of agile: Assessing the transformative potential of digital · Embracing the circular value chain approach to lease delivery & design · Taking the right risks for the rewards: Strategic implications of the era of asset ownership · Using data and analytics to drive performance, deliver value
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Page 2 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580
Untitled-2 1 15/06/2018 15:15