Contactless Payments Are Still Accessed Their Bank, Credit Union, Credit Card Not to Want to Save up Loyalty Points Over a Longer Growing in Their Popularity

July 2016 Issue 533 www.cardsinternational.com

CHINA: Becoming more inclusive?

• OPINION: Brexit • PRODUCTS: PassportCard • REGULATION: AML • GUEST COMMENTS: Hyperwallet & SIX Payment Services

CI 533.indd 1 13/07/2016 15:38:21 Multichannel digital solutions for ﬁ nancial services providers

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IE RBI final design.indd 1 05/05/2016 10:36:41 Cards International EDITOR’S LETTER

CONTENTS EDITOR’S LETTER 5 OPINION: BREXIT Cards and payments operators Millennials – the crown jewel of have little choice but to continue with business as usual while they try to prevent a talent drain post- demographics referendum. Anna Milne writes

6 PRODUCTS: PASSPORTCARD anks have been obsessed with millenni- So, how can marketers at card issuers leverage Jessica Longley looks at als for what seems like an age. these key insights into millennials’ financial and PassportCard and how it is And the love affair with those custom- best prepare for the dramatic generational shift attempting to penetrate the ers born between 1981 and 1997 is only saturated niche market that is travel underway? insurance. CEO Sharon Haran claims Bbecoming more intense. Three strategies are suggested. that PassportCard will revolutionise Traditionally, banks tended to focus their atten- • Implement the Use of Data and Analytics the travel industry tion on customers aged 35 to 50 and likely to be in • Develop an Advanced Digital Engagement 7 REGULATION: AML their peak earning and spending period. Strategy, and There is a common cycle in financial But no longer. The millennials segment has even • Build a Compelling and Affordable Rewards security. The EC’s AML division is been called ‘the crown jewel’ of demographics. making progress, however, with Strategy stronger rules to combat new In the US alone, there are more than 75 million of The report is well worth a read. But on the third threats. Patrick Brusnahan reports them and according to Sarbjit Nahal, head of the- point, perhaps millennials are not so different to 8 DISTRIBUTION: WELLS FARGO matic investing Strategy at Bank of America Merrill other segments. Robin Arnfield investigates Wells Lynch, millennials ‘are the most important group in Just about every report I’ve read on the topic sug- Fargo’s attempts at an omnichannel terms of the workforce, and by 2018 they’re going gests that customers of all ages appreciate rewards experience, integrating ATMs and to overtake the boomers. By 2025, we’re looking at branches with its digital offerings. and it remains the biggest single influencer in driv- Is its aggressive new approach over $8trn worth of annual net income’. ing consumer choice. working? The segment’s importance has not escaped the Release of the report from TYSYS coincided with 10 GUEST COMMENT: BREXIT attention of the credit card sector and with impec- equally interesting research from Collinson Group The UK is embarking on an unknown cable timing, TSYS have released a report enti- into over 6,000 consumers within the top 10%- path, writes Hyperwallet’s Tomas tled Addressing the Generational Shift Among 15% of earners in Australia, Brazil, China, France, Likar. While the UK was used as an entry point to the EU’s countries and Cardholders: Strategies for FIs to Successfully Hong Kong, India, Singapore, the UK, the US and populace, this situation is going to Engage Millennials. the UAE. have to change TSYS’ argues that financial institutions must cater Collinson’s research mirrors TYSYS in arguing 11: EVENT THE DIGITAL BANKING CLUB their services and marketing to or risk being left behind that brands need to prepare digital loyalty ini- Jessica Longley reports on the by digital-oriented providers (FI and non-FI) that lever- tiatives now or risk losing patronage from digital latest Digital Banking Club debate, age advanced digital and mobile technologies. natives. sponsored by Mitek. The traditional debate focused on whether Key takeaways from the report include: In particular, it finds that banking loyalty pro- fintech were friends or foes to the • 18% of 18-34 year olds switched their pri- grammes were found to encourage 82% of mem- traditional big banks mary bank within the past 12 months com- bers to spend more, while credit card initiatives 14 COUNTRY SURVEY: CHINA pared with only 10% of GenX (aged 35-54) positively influenced 79%. 16 COUNTRY SURVEY: RUSSIA and a mere 3% of boomers (aged 55+); Collinson argue that millennials typically engage 18 COUNTRY SURVEY: VIETNAM • 43% of millennials will use credit cards by across up to five screens simultaneously and their 20 GUEST COMMENT: SIX PAYMENT 2018, and ‘relationship with brands is also completely dif- SERVICES • 59% of 18-34 year-old mobile phone users ferent – they want instant gratification and claim Contactless payments are still accessed their bank, credit union, credit card not to want to save up loyalty points over a longer growing in their popularity. Sascha Breite examines their full potential or brokerage account via mobile browser, period to access a reward’. for consumers and merchants app or text messaging on their phones at Douglas Blakey least monthly in 2015. [email protected]

Editor: Douglas Blakey Sub-editor: Nick Midgley For more information on Timetric, visit our Tel: +44 (0)20 7406 6523 website at www.timetric.com. Director of Events: Ray Giddings Email: [email protected] As a subscriber, you are automatically Tel: +44 (0)20 3096 2585 entitled to online access to Cards Email: [email protected] Financial News Publishing, 2012 Deputy Editor: Anna Milne International. For more information, please Registered in the UK No 6931627 Tel: +44 (0)20 7406 6701 telephone +44 (0)20 7406 6536 or email Email: [email protected] Head of Subscriptions: Sharon Howley [email protected] ISSN 0956-5558 Tel: +44 (0)20 7406 6536 Unauthorised photocopying is illegal. The Senior Reporter: Patrick Brusnahan Email: [email protected] London Office contents of this publication, either in whole or Tel: +44 (0)20 7406 6526 71-73 Carter Lane part, may not be reproduced, stored in a data Email: [email protected] Sales Executive: Alexander Koidis London retrieval system or transmitted by any form or Tel: +44 (0)20 3096 2586 EC4V 5EQ Asia Editorial: Xiou Ann Lim means, electronic, mechanical, photocopying, Email: [email protected] recording or otherwise, without the prior Tel: +65 6383 4688 Asia Office permission of the publishers Email: [email protected] 1 Finlayson Green, #09-01 Customer Services: Singapore 049246 Group Publisher: Ameet Phadnis Tel: +44 (0)20 3096 2636 Tel: +65 6383 4688 Tel: +44 (0)20 7406 6561 or +44 (0)20 3096 2622 Fax: +65 6383 5433 Email: [email protected] Email: [email protected] Email: [email protected]

www.cardsinternational.com July 2016 y 1

CI 533.indd 1 13/07/2016 15:38:27 NEWS: DIGEST Cards International

MOBILE MasterCard migrates Vodafone Cash mobile wallets to its payment ecosystem

MasterCard has migrated two million ATM, transact securely online using a virtual “Most of all, it creates further opportuni- Vodafone Cash mobile wallets to its open credit card, and transfer money to any other ties for MasterCard to use its technology and mobile payments ecosystem. mobile wallet in Egypt. innovation to include more unbanked Egyp- The move comes as part of MasterCard’s They can also make payments by mobile tians in the financial mainstream, and in the partnership with mobile network operator phone at select merchant locations through- process help develop the industry at large and Vodafone Egypt. It will enable MasterCard out the country and access a number of gov- increase economic mobility.” to power Vodafone Egypt’s mobile money ernment services. Vodafone Egypt CEO Ahmed Essam said: service, Vodafone Cash, by processing all MasterCard Middle East and North Africa “Egypt has a mobile penetration rate exceed- financial transactions through its Mobile division president Khalid Elgibali said: “The ing 100%, yet more than 85% of the coun- Payment Gateway platform. collaboration with Vodafone Egypt is a sig- try's population lack access to formal bank- Taking advantage of the high penetration nificant milestone in the direction of scaling ing products. of mobile phones in Egypt, the platform will Egypt’s mobile ecosystem, and affirms the “This reflects a huge opportunity for facilitate all types of transaction and a range interoperability concept that MasterCard Vodafone, the largest player in Egypt’s tel- of services to Vodafone Cash customers. introduced in the Egyptian market. ecom market, to work with payments and MasterCard said that irrespective of the “The deal will help MasterCard accelerate technology industry leaders like MasterCard, service network, platform or device, custom- our cash conversion cycles and support the exe- harness the power of mobile technologies ers can now pay bills, recharge phones, send cution of our new consumer strategy by adding and bring unbanked and underbanked indi- money, deposit or withdraw cash from any five million new consumers during the year. viduals into the formal financial sector.” <

REGULATION PRODUCTS Philippine Congress approves bill US Bank launches two new Amex credit to regulate credit card industry cards

The Philippine Congress has approved a ers and collection agents from harassing US Bank has released two new Amex credit bill which aims to regulate the country’s cardholders, and ban unfair and abusive cards to offer customers more cashback, credit card industry, by bringing it under practices of collecting credit card debt. rewards and travel benefits. the control of the central bank, Bangko It will also require credit card issuers to The Cash 365 Amex card allows Sentral ng Pilipinas (BSP). reveal the number of potential and current cardholders to earn 1.5% cashback on net The proposed bill will be enacted into cardholders, and all fees charged for late purchases without any cap on cashback law once it receives approval from Presi - payments. earnings. dent Benigno Aquino III. It will empower Violation will lead to a fine of Card members will receive access to ticket BSP to supervise all credit card issuers and PHP50,000-200,000 ($1,063-4,253), presales and preferred seating, and will ben- acquirers operating in the country. or imprisonment for two to 10 years, efit from dining, shopping and travel sav- The Philippine Credit Card Industry or both, as determined by the BSP’s ings through Amex offers. Regulation Act will forbid card issu - Monetary Board.< The FlexPerks Gold Amex card allows cardholders to earn three points for every net $1 spent on dining purchases, two DIGITAL points on airline and gas net purchases, and Mexico joins Better Than Cash Alliance one point for every $1 spent in eligible net purchases on everything else. Mexico has joined the UN-based Better Than own a mobile phone. The Better Than Cash It also provides travel benefits, including Cash Alliance in a bid to speed up adoption Alliance plans to harness the popularity of a Global Entry or TSA Pre application fee of digital payments. The move comes after mobile channel for digital payments. credit, and complimentary Boingo Wi-Fi the government of Mexico introduced a Mexico Minister of Finance and Public membership. national policy on financial inclusion that Credit Luis Videgaray Caso said: “There US Bank senior-vice president for the included a call for the country to use tech- is a tremendous opportunity for financial retail credit-card division Cliff Cook said: nology to cut its dependence on cash. inclusion in front of us that we must seize to “Our rewards card programmes are recog- A study by The Better Than Cash Alli - build on the momentum of the new National nised as some of the best in the industry. ance revealed that the Mexican government Policy on Financial Inclusion. “The addition of two new American can save $1.3bn per year by digitising its “Integrating digital payment technol- Express products gives our customers more own payments from cash. Nearly 107 mil- ogy across all agencies of government is key ways to benefit from outstanding rewards, lion of Mexico’s 120 million population to this.” < convenience and security.” <

2 y July 2016 www.cardsinternational.com

CI 533.indd 2 13/07/2016 15:38:28 Cards International NEWS: DIGEST

DISTRIBUTION Visa issues over one million payWave cards in India

Visa has passed a major landmark in India Equipped with an embedded antenna and mented: “Contactless is the future of pay- by issuing more than one million Visa pay- microchip, Visa payWave contactless cards ments in India. Since its launch, Visa pay- Wave contactless cards, which are accepted provide contactless communication with a Wave has gained strong momentum and at over 100,000 merchant outlets throughout reader at the checkout. wide merchant acceptance, and we have the country. Holders tap cards over a secure reader now reached critical mass to serve as a build- The company is working with various to pay. The transaction is then processed ing block for creating the payment system of banks across the country to develop a robust through Visa’s global network, VisaNet. the future. ecosystem, enabling users to make payments Visa allows payWave cardholders to pay “With Visa payWave technology we have faster, more conveniently and securely. by contactless card without entering a PIN set a foundation for expansion into other The Visa payWave contactless technology or signing a receipt for transactions up to form factors like smartphones, wearable will further facilitate use of debit cards, that INR2,000 ($29.50). devices and stickers as also into new pay- were previously used for cash withdrawals Visa’s group country manager for India ment categories such as mass transit, tolls on ATMs, on POS terminals. and South Asia, TR Ramachandran, com- and parking.”<

MOBILE UnionPay launches HCE mobile QuickPass in South Korea

UnionPay International, in collaboration mobile phones and other mobile devices as UnionPay noted that the collabo - with KT Corporation and its subsidiary BC well as remote online payment. ration in South Korea is a significant Card, has debuted its HCE mobile QuickPass Featuring a number of mobile payment step towards expanding the QuickPass in South Korea. capabilities such as HCE, Apple Pay and solution worldwide. The HCE mobile QuickPass will allow Sumsang Pay, QuickPass is claimed to be Currently UnionPay cards can be used at local UnionPay cardholders to pay by tap- safer than other mobile payment products. approximately 70,000 ATMs for cash with- ping their mobile phones. It offers numerous security assurances, drawal in South Korea. UnionPay said that South Korea is the first including dynamic passwords and payment All merchants that accept signature pay- international market where the company has tokens. Real bankcard numbers are not ment accept UnionPay credit cards, while introduced QuickPass. The solution supports revealed during the payment process to pre- nearly 1.63 million merchants accept Union- both offline contactless payment through serve confidential cardholder information.” Pay cards for PIN-based payment.<

DISTRIBUTION RESEARCH Amex and Facebook unveil Messenger bot UK “to be cashless in 20 years” the new messenger bot, Amex said if a Plati- num card member purchases an airline ticket The UK will ditch cash and emerge as a cash- from Las Vegas to New York City, they will less society over the next 20 years, reveals a receive a purchase notification in Messenger. report issued by London & Partners. Users will also receive reminders on how to Over 2,000 consumers participated in access the Centurion Lounge at the airport, a survey which highlighted that 68% Brits and restaurant recommendations, courtesy believe cashless technology will completely of The Infatuation, for the upcoming trip. replace cash by 2036. In London alone, Amex vice-president of digital partner- around three-quarters of consumers felt that ships and development Dave Wolf said: cash would disappear within 20 years. “As a long-time partner of Facebook, we’re The survey is supported by figures show- American Express (Amex), in collaboration thrilled to be working together to create an ing the rise in contactless payment technol- with Facebook, has unveiled its latest mes- innovative experience for our card members ogy. New data from MasterCard indicates senger ‘bot’ that will enable cardholders to on Messenger. that contactless spending has grown by receive real-time purchase alerts and impor- “We know our card members appreci - 326% year-on-year in the UK. tant information about benefits related to ate the convenience of receiving informa- The Bank of England (BoE) recently their purchases. tion from Amex on digital platforms where announced plans for a fintech accelerator The Amex Bot was showcased at the they’re already spending time. programme that will work with technology Cannes-Lions Innovation festival in France. “The concept shows how we could help companies to harness fintech innovations. Amex Bot users will receive all notifications them stay on top of their purchases and take BoE Governor Mark Carney said: “Finan- through Facebook Messenger. advantage of their card benefits. cial technology companies will change the The company will start piloting the appli- “The scale and flexibility of the Messenger nature of money, shake the foundations of cation among eligible cardholders and Open platform makes it a powerful channel for us central banking and deliver nothing less customers in the US in the coming months. to explore new ways to connect with card than a democratic revolution for all who use Explaining the working methodology of members.”< financial services.” <

www.cardsinternational.com July 2016 y 3

CI 533.indd 3 13/07/2016 15:38:29 NEWS: DIGEST Cards International

SECURITY MasterCard joins Visa in accelerating EMV chip migration for US merchants

MasterCard has introduced a new EMV chip ple of weeks to a couple of hours. tions, test processes and ramp up in-field terminal testing and certification programme The new programme will enable acquir- issue resolution. aimed at accelerating chip adoption by US ers to follow recommendations and use MasterCard’s senior vice-president for merchants. MasterCard terminal testing product delivery – EMV, Chiro Aikat, said: MasterCard’s new pro - procedures, or choose alterna- “The whole industry wins when action is gramme, which is similar to tive testing processes and tools taken against counterfeit card fraud. Visa’s recently announced initia- that support the integrity of their “Reducing terminal certification-testing tives, maintains terminal testing existing procedures. time to a couple of hours from as long as a and certification quality while They will have flexibility to couple of weeks is one positive step we can easing chip card in-store termi- conduct terminal testing as a part take in a more mature market. nal testing certification and acti- of their own internal processes “Innovations including M/Chip Fast speed vation. and schedules. chip transaction times and are having a posi- MasterCard runs a chip termi- The number of required tests tive impact, as well as easing fraud costs to nal testing and certification process, which is has been cut by 58%, while mandatory tests merchants.” used by merchant bank acquirers and value- have been minimised so acquirers can use MasterCard recently announced that added resellers (VARs) before terminals go their discretion and expertise in deciding almost 70% of all US-issued MasterCard- live. when terminals are ready for deployment. branded credit cards are now chip cards. The company believes the changes could MasterCard will offer dedicated resources This is a 58% rise in chip cards in the market cut certification and testing times from a cou- to help VARs navigate terminal configura- since the 1 October 2015 liability shift.<

MOBILE MasterCard brings Android Pay to Singapore

MasterCard has added Google’s Android Pay ment terminal at any location that accepts “The availability of Android Pay will support to its debit and credit cardholders in contactless payments. allow MasterCard cardholders to make Singapore to enable customers make fast and During the transaction, MasterCard uses quick, easy and secure transactions via their secure mobile payments. a digital ‘token’ instead of the real card smartphones, both in-store and in-app to Initially DBS/POSB, OCBC and Standard number, ensuring optimum security to better serve the needs of tech-savvy, on-the- Chartered will be the first banks to sup - every transaction. go consumers.” port Android Pay in Singapore; UOB will MasterCard group head and general Android Pay is accepted by more than join soon. manager of Singapore Deborah Heng said: 30,000 contactless payments readers in the MasterCard credit and debit cardholders “The central role smartphones play in the country. Singapore is the first country in Asia and Android device owners can use the app fast-paced digital lifestyles of the Singapore and the third globally to use the Android Pay for in-store purchases. Android Pay users consumer has driven new forms of mobile service. It was launched in the US in Septem- need to tap their smartphone near a pay - payment technology, such as Android Pay. ber 2015 and in the UK in May 2016. <

SECURITY EMV chip card circulation rises to 4.8 billion

The number of EMV payment cards in global In Canada, Latin America and the Carib- tee Mike Matan said: “The global adop - circulation has increased, year on year, by bean, the EMV chip-enabled card adoption tion of the EMV specifications is imperative 1.4 billion to 4.8 billion, reveals official data rate was 71.7% up from 59.5% in 2014. to the development of a more secure and released by global technical body EMVCo. In Africa and the Middle East, the adop- interoperable payments industry. EMVCo also reported that nearly 35% tion rate was 61.2% up from 50.5% in 2014. “EMVCo welcomes engagement with of all card-present transactions globally In Europe Zone 2, the chip card adoption interested parties from across the payments between January and December 2015 used was 52.3% up from 40.4% in 2014, while ecosystem and supports a number of initia- EMV chip technology, up from 32% in 2014. Asia Pacific saw an adoption rate of 32%, up tives to enable the payments community to EMVCo’s Europe Zone 1 region, mainly from 25% the year before. be actively involved in developing, enhancing Western Europe, recorded the highest per- In the US, the EMV transition started to and evolving future specifications.” centage of EMV chip transactions. EMV chip accelerate in 2015, and its growth continued EMVCo operates as a consortium of Visa, card adoption rate was 84.3% in the region, in the first half of 2016. Mastercard, JCB, American Express, China up from 83.5% in 2014. Chair of the EMVCo executive commit- UnionPay, and Discover. <

4 y July 2016 www.cardsinternational.com

CI 533.indd 4 13/07/2016 15:38:29 Cards International OPINION: BREXIT

Mass Brexodus could be the worst result of the UK’s vote to leave the EU With still no clear answers or outlook, and the fact that there could not be more upheaval within the UK Parliament, cards and payments operators have little choice but to continue with business as usual while they try to prevent a talent drain. Anna Milne writes on these recent and noteworthy developments

he pound plummeting and a sub - existing arrangements may not be impacted, stantial chunk lopped off the stock new ones likely will. market is a bleak yet preferential “Brexit will now force international banks scenario to one of the most discon- to reassess their European operations as a T whole. With the UK opting out of the EU, certing potential repercussions of the UK referendum result on EU membership: the 2,700 of London’s tech sector, found that there is a high chance it will move both trans- threat of departure of talented staff. 87% of members polled want to remain in actions and jobs out of the UK. This is particularly ironic, given the driving the EU. “Banks may no longer have the right to argument of Leave’s campaign having been Three-quarters of the survey respondents provide services to other locations in Europe. the influx of workers. said if the UK left the EU, tech firms would Everything could be impacted – trading, Many UK-based businesses have expressed be in a much more difficult position with investment, foreign exchange, acquiring, concern over this potential outcome, saying regard to attracting investment. etc. All services that had been provided from their current non-British staff feel unwanted The fact that large investment banks – JP London to the rest of Europe may become as a result of a vote to leave the EU, and that Morgan, Goldman Sachs, Morgan Stanley, obsolete. fintech talent may be attracted to places such HSBC – are already announcing, or heav- While this may be good for other Euro- as Dublin, Berlin, Stockholm, Luxembourg, ily rumoured to be making plans to relocate pean cities, it would have a major negative Geneva, which could replace London as a staff and offices out of the UK means fintechs impact on London, and ultimately would global fintech hub. are likely to follow. impact international merchants with UK- Uncertainty may be enough to redirect Andre Malinowski, head of international based operations too.” talent and investment away from the UK, business at payment service provider Com- Graeme Risby, co-founder and CEO of regardless of whether or not the UK breaks putop, shared the following comment: HiyaCar, although overall optimistic about ties permanently with the single market. “The Brexit result could jeopardise the his car renting business in the sharing econo- London has a lot going for it: capital city UK’s status as the preferred location for my, said, “Friday’s news regarding the UK’s status, a centre of finance, a preferential geo- global companies to conduct their Europe- exit from the EU is very disappointing. graphical location (including a favourable an business. London is the major financial “This exit could potentially make recruit- mid-position on the global timeline), as well gateway for Europe, and all of the biggest ing more difficult when it comes to attracting as being home to three top-ranking, globally international banks use the city as their hub the best talent, which could be a challenge. renowned universities, and the home of a into Europe. This exit could also have a negative impact forward-looking regulator. It is no wonder “Leaving the EU now raises the question when it comes to raising investment for some the fintech scene has thrived here. regarding whether or not licenses issued by UK companies, as I’m sure overseas investors A recent survey by Tech London Advo- the European Central Bank will still be valid might shy away from the UK due to a lack of cates, an organisation representing around for a company operating in the UK; while near-term stability.” On the plus side, there are silver linings: Visa jobs to relocate outside the UK tax breaks could be created for businesses in the event of a divorce from the single market In the aftermath of Brexit, several businesses are to monitor the situation carefully, it is premature by way of incentive to stay in the UK and considering relocating part of their operations to speculate on whether possible changes to the indeed, if passporting rights are terminated, outside the UK due to regulatory requirements. location of our data centres would make sense or be UK-regulated payments businesses could still Visa, the world’s largest credit and debit card issuer, required.” set up a subsidiary in an EU country to con- could be next. Visa is believed to have more than 1,000 employees tinue to operate their services. Although no official decisions have been made yet, in London, with hundreds of them engaged in data It just means rather an extra amount of UK-based Visa jobs may find themselves forced to centre-related activities. admin, but is not by any means impossible. move to another EU country. German regulators are also expected to push for The fintech start-up industry is by defini- This comes in light of an agreement made in Visa’s UK based data centre operations to be shifted the recent £17.5bn ($22.7bn) takeover of Visa’s to Frankfurt once the UK leaves the trading bloc. tion fast-paced and adaptable. This could be argued in two different ways. European operations by its US sister company. No decision on job relocations is likely to be Their combative spirit could be anticipated The contract requires data from Visa Card made before the terms of the UK’s future trading transactions to not leave the EU, but does not arrangements with the EU are close to being to weather the storm, adapt to a changing explicitly state that this would necessarily exclude finalised. environment and plough on, or they could just as easily cut their losses, up sticks and the UK from hosting Visa’s data centres. A Visa spokesman said: “The process and timing for A Visa spokeswoman stated: “While we continue the UK leaving Europe remains unclear. < relocate to higher ground. Let’s hope it’s not the latter. <

www.cardsinternational.com July 2016 y 5

CI 533.indd 5 13/07/2016 15:38:32 PRODUCTS: PASSPORTCARD Cards International

Leading a revolution in global travel Many businesses at the 2016 PayExpo conference introduced prepaid cards, but what makes PassportCard different is its attempt to penetrate the saturated niche market that is travel insurance. Jessica Longley met with Sharon Haran, CEO of PassportCard, to discover how exactly it aims to revolutionise travel

he 2016 PayExpo conference presents portCard looks at similar relevant scenarios PassportCard is also looking closely at the one of the best chances to meet some to deduce the cost, using the system’s ability US market, and exploring different Europe- of the biggest players in the payments to build up from other treatments. Overall, an territories as it believes they have a strong community, and also provides access 90% of claims made involve headaches, flu, travel market. T diarrhoea and high fever. Haran says that PassportCard was ‘pick- to a wide range of wearables. In his presentation at the 2016 PayExpo Haran reveals how PassportCard ing up the low-hanging fruits first, to then conference, PassportCard CEO Sharon responds in rare cases where the cost of the start dealing with different cultures and Haran admitted that although the travel emergency has been wrongly estimated. business environments [in Korea, Japan and industry has seen some major transforma- He points out that this may arise for two Australia]’, and hopes to reach these coun- tion with the likes of Uber and AirBnB, trav- main reasons: either the client has described tries in two to three years. el insurance seems to have remained stag - the situation inaccurately, or the clinic is try- Haran is determined that his business is nant in the last 50-60 years. He believes his ing to overcharge the customer. robust and prevents fraudsters from taking innovation can change the face of the travel In both cases, PassportCard can intervene advantage of the system. He emphasises that insurance industry. in real terms by negotiating with the clinic his business is based on trust and that most PassportCard prides itself in being the and optimise costs via real cost containment. customers are honest. world’s first real-time travel insurance, ben- As a precaution from fraud, PassportCard efitting both consumers and insurers alike. PassportCard around the world has implemented a system that bans certain Its business approach is novel as it involves PassportCard initially launched in Israel four merchant categories, such as restaurants no paperwork, no deductibles and no out- years ago, adopting a business-to-consumer and shops, and cannot be used online. of-pocket expenses. (B2C) approach and acquiring a 30% market Haran points out that the categories Customers are provided with a prepaid share in less than four years. blocked are very policy-specific and can be card that is topped up with the required PassportCard recently decided to further tailored to the specific insurer. funds every time an emergency occurs. expand, adopting a B2B2C approach and For example, in Germany the transport Haran assures CI that it only takes a five offering franchise models in partnership category is open to ensure PassportCard minute phone call, including a short ques- with Allianz, in both Germany launched on customers are able to travel to a clinic; this tionnaire – to ensure the caller is not a fraud- 4 April, and Canada just a few weeks ago. service is not offered in Israel. ster – before new funds are transferred onto The card is banded within the insur - The system also flags recurrent fraudsters, the card. The claim is settled on the spot. ance company. In Israel, the product is sold even if they change card, as their identity Customers can then access the new funds at $2.50 per day, $0.50 over the average and personal details are stored, allowing via PassportCard, and resolve the emergency market price. In Germany, the price has PassportCard to block them. by visiting a clinic. If a clinic does not accept increased to between €3 ($3.30) and €5. There is also a limit to the amount avail- credit cards, PassportCard also allows cus- Haran discloses that PassportCard is able on the card ($600) which limits the tomers to withdraw money from an ATM. focused on the billion-dollar travel insur- damage that can be caused by potential Insurers receive notifications on claims in ance market, and is now looking to the UK scammers. real time, and are able to charge more for as a potential future launch. PassportCard PassportCard trialled a fraud-detection their services as customers are willing to pay is currently talking with relevant market scheme in Israel, but decided is was not cost- more for the perceived value. operators and hopes to finalise the deal early effective as very few people commit fraudu- PassportCard started 15 years ago when a next year. lent acts, according to Haran. company specialising in international health When asked about Brexit, Haran tells PassportCard does not currently offer insurance started gathering claims data and CI that it will only have a relatively small contactless functionality, as most clinics indexed medical treatments across 150 impact on PassportCard as it is a global worldwide do not yet support contactless countries. Haran explains how Passport- platform that is not dependent on the UK payments. Card used the data to develop an algorithm market. He adds that Brexit might actually Haran explains that PassportCard moved that predicts with 98% accuracy the cost of create new opportunities for his business as to EMV technology last year and is explor- an emergency. it is unclear whether UK travellers will be ing alternative payment platforms such as With hundreds of thousands of claims able to use EHIC cards in the future. GoogleWallet, ApplePay and SamsungPay already in the database, Haran points out He believes this would be favourable for but that market education is still an issue to that the likelihood of encountering an PassportCard as the relevancy of a real- be addressed. unknown or extreme situation is very low. time fully cashless solution would increase Haran believes the solution is sufficient to However, in cases where this happens, Pass- significantly. accommodate the current market needs. <

6 y July 2016 www.cardsinternational.com

CI 533.indd 6 13/07/2016 15:38:33 Cards International REGULATION: AML

To catch a money launderer There is a common cycle in financial security. A criminal adapts to security protocols and regulation, the regulator adapts to combat the development, and this repeats ad infinitum. The EC’s AML division is making progress, however, with stronger rules to combat new threats. Patrick Brusnahan reports

hreats associated with money laundering, which can lead to terrorist financing, are constantly evolving. T The European Commission (EC) has stated that recent terrorist attacks in the European Union (EU) and beyond, as well as the ‘Panama Papers’ scandal, have brought this issue further into the foreground. In May 2015, the EU adopted the Anti- Money Laundering (AML) Package, a significant step forward in combating money laundering. Just over a year later, amendments sage from the European Commission, that Monaco explains: “As far as prepaid cards have been made to Directive (EU) 2015/849 they embrace and value technology as long are concerned, the fact that the European on preventing the use of financial systems for as the prevention of anti-money laundering Commission proposal indicates that anony- money laundering or terrorist financing. and terrorism financing can continue and mous prepaid cards issued outside the Union improve.” will only be used in the Union where they Digital currencies can be shown to comply with requirements A key measure added to the regulation Tackling the anonymous within prepaid equivalent to the ones in 4AMLD, clearly regards digital and virtual currencies. Vir- Two propositions were put forward with shows that for UK-issued prepaid cards – tual currency exchange platforms and wal- regards to prepaid instruments. Firstly, low- whether after Brexit the UK gets a EEA sta- let providers have been added to the list of ering the amount, from €250 ($277) to €150, tus or starts a bilateral agreements negotia- obliged entities to regulation. This means for non-reloadable prepaid instruments to tion with the EU – prepaid cards issued in that, as gatekeepers, they are the first step which customer due diligence (CDD) applies. the UK will need to comply with EU regula- for the public to enter the marketplace, and Secondly, to suppress CDD exemptions for tion equivalent to be used in the European need to be monitored. online use of prepaid cards. Union.” This means the sector is now obliged to The intention is to better serve identifica- However, David Parker, founder and CEO undergo the same level of regulation and tion purposes and widen customer verifica- of Polymath Consulting, believes the new monitoring as other financial institutions. tion requirements. regulation to be unnecessary. Monica Monaco, founder and MD of In a factsheet, the EC stated: “Limiting the He says: “How many terrorists are really TrustEu Affairs, says: “It is interesting that anonymous use of prepaid instruments will going to wander about buying gift cards to virtual currency exchange platforms and provide a clear disincentive for use for ter- use when the limit is already so low? custodian wallet providers are becoming rorist and criminal purposes. Prepaid cards “Will lowering the limit by €100 really obliged entities, and that definitions of cus- will continue to be an accessible instrument.” affect the use of these products by terrorists, todian wallets and exchanges are in the Pro- Furthermore, anonymous prepaid cards or just provide a nice headline for politicians? posal; this is the first time that virtual curren- issued outside the EU will only be used in I would contest that a gift card of €250 is still cies exchange platforms and custodian wal- the union where they can be shown to com- only half a European-issued €500 note that lets are defined under European law. ply with requirements equivalent to the ones really is totally anonymous.” “I think this comes with a very clear mes- presented in this regulation. He is even harsher on the measure for prepaid instruments issued outside the EU. Parker continues: “[It is] totally unenforce- The nine measures able in the real world. How will a merchant • Designate virtual currency exchange platforms • Harmonise the EU approach towards high-risk know to decline the transaction from a card (and wallet providers) as obliged entities third countries issues in, let’s say, Mongolia? • Tackle the use of anonymous prepaid • Improve transparency: new rules on access to “If the acquirer has to decline, they will instruments beneficial ownership information need a list of what programmes do not meet the AML requirements. • Give new powers to FIUs to request information • Interconnection on national central registers from any obliged entity “Who provides this? Who vets it? Who says • Additional technical clarifications it falls short? • Enable FIUs and competent authorities to • Earlier transposition “This is a great political statement that can- identify holders of bank and payment accounts not be practically enforced.”<

www.cardsinternational.com July 2016 y 7

CI 533.indd 7 13/07/2016 15:38:35 DISTRIBUTION: WELLS FARGO Cards International

Wells Fargo dedicated to omnichannel Wells Fargo is seeking to maximise customer use of branches and ATMs while deploying omnichannel technology to integrate them with its digital offerings. Fusing retail banking distribution with its digital platform ensures an enhanced customer experience, Wells Fargo claims. Robin Arnfield investigates

obile is at the heart of Wells Far- go’s omnichannel strategy, as the bank believes mobile’s real power Mis its ability to interact and inte - grate with other channels. According to David Albertazzi, senior analyst at US-based consultancy Aite Group, Wells Fargo’s investment in mobile is in line with its two main US rivals, Bank of America and Chase. “All three are focusing on mobile banking delivery and growth,” he says. “The emphasis is on usability and customer experience across all digital channels, online and mobile. The three banks’ goal is to offer a consistent experience across their digital platform for the different devices that people use. They are all implementing responsive design, which adapts well to different screen sizes and device types.”

Feedback To develop its mobile offering, Wells Fargo listens to its customers and takes its cue from developments in mobile services outside banking. “We enhance our digital properties using customer feedback and data, as well as through an understanding of what other mobile experiences our customers have on a “From the app’s homepage, or Front Porch, “Wells Fargo began integrating Touch ID regular basis,” says Brett Pitts, Wells Fargo’s to the account information displayed after into the iPhone user experience beginning in head of digital. login, customers will see information that March, and will enable fingerprint authenti- “Our main objective is to update and is easier to read, presented more intuitively, cation for more devices later this year,” says improve the customer experience. So look- and provides educational content focusing Hilary O’Byrne, associate vice-president, ing at customer patterns in terms of general on their financial health,” Pitts says. corporate communications at Wells Fargo’s mobile app behaviour is key for us. We also “This mobile redesign is part of a larger Digital Channels Group. look at how other successful companies out- effort to continue to create and evolve a side the financial services industry create and more consistent digital experience across PFM tool manage their online and mobile customer customers’ devices.” The Wells Fargo app includes a My Spend- experiences.” Pitts believes Wells Fargo’s mobile app ing Report feature that allows customers to This strategy is paying off in terms of redesign will ‘continue to give the bank’s cus- track their spending on the go. The personal mobile banking customer growth. As of tomers an experience that remains one of the financial management (PFM) tool was first November 2015, Wells Fargo had 16.2 mil- best among its peers, while also being much launched in 1995 for Wells Fargo Online, lion active mobile customers, up 14% year- more intuitive and user-friendly’. providing a daily consolidated overview of on-year. He says: “The emphasis on consumer transactions from a customer’s debit card, financial education makes it easier for cus- credit card, chequeing account and bill pay- Enhancements tomers to access information that makes ments. During the first quarter of 2016, Wells Fargo them better informed about their options as My Spending Report can be accessed via is redesigning its mobile app to provide an Wells Fargo customers.” Wells Fargo’s iPhone and Android apps as improved experience for customers who Another planned enhancement for 2016 is well as on its mobile website. Transactions manage finances on their smartphone. Touch ID. are organised by categories such as food/

8 y July 2016 www.cardsinternational.com

CI 533.indd 8 13/07/2016 15:38:39 Cards International DISTRIBUTION: WELLS FARGO

drink, health, travel, automobile/transporta- “At a growing number of Wells Fargo It also gives advisors direct access to sup- tion, travel, and ATM withdrawals. stores, customers can begin their transaction port staff who can take immediate action on at an ATM, but if they need more assistance the client’s investments while the advisor is Call centre integration or if a transaction requires approval, a store away from the office. A key feature of Wells Fargo’s app is the ease team member is alerted on a wireless tablet “Smart2Go is now available to all financial with which it hands off the customer to the and provides in-person assistance to com- advisors who have personal devices equipped call centre. plete the transaction.” with the Good mobile app,” O’Byrne says. “We know that many of our customers like Another feature is ATM personalisation. “Currently, we have some 1,600 active to begin interactions with us in a self-service “Using predictive analytics, Wells Fargo’s Smart2Go users with around 4,000-5,000 mode like mobile, but may want to shift into ATMs present customers with touchscreen logins per month.” assisted or full-service mode for more com- buttons based on their previous transactions plex needs,” O’Byrne says. and preferences,” says Shevlin. Alerts To help customers do this, the app con - Wells Fargo customers can sign up via their tains a Click for Care feature that allows Mobile cardless ATM access online account for a dozen different types of them to chat with a call centre agent without Wells Fargo plans to provide its custom - alert from the bank, specifying whether they re-authenticating themselves. ers with the ability to carry out mobile want to receive alerts by email or on their Albertazzi is impressed by this feature. cardless ATM withdrawals, says Jonathan mobile device. Millions of customers have “The app provides a true omnichannel expe- Velline, head of Wells Fargo’s ATM and signed up for alerts, according to Pitts. rience through Click for Care,” he says. “It’s store strategy. Between January 2015 and September all about reducing friction between the dif- The bank plans two methods for card - 2015, Wells Fargo sent out over 500m text ferent channels.” less ATM access, one using near-field com- and email alerts, the most popular being munication (NFC) and the other using updates on deposits or withdrawals, daily Branches access codes generated by the Wells Fargo and weekly account balance summaries, and While JPMorgan Chase has been closing mobile app. alerts notifying customers when balances are branches, Wells Fargo, which has the largest To use their NFC-enabled smartphones above or below a pre-determined amount. branch network in the US, is committed to its for cash withdrawals, customers will need to “The purpose of Wells Fargo’s alerts is to physical locations. load a debit or ATM card into the mobile engage customers, and this is what tends to “Our branches will look and be different wallet stored on their phone. They then happen,” says Albertazzi. in the future, but will always be part of the authenticate themselves on their phone using “Wells Fargo has a focus on customer mix,” O’Byrne says. a thumbprint or passcode. engagement and consistently trying to bring “We know it’s important to our customers Once authenticated, customers hold their its customers back to the mobile app.”< to be able to speak with a banker who can phone near the NFC-enabled ATM terminal, help them with their financial needs.” which displays the main menu and asks for O’Byrne notes that the majority of Wells them to enter their ATM PIN. This feature Wells Fargo: Fargo customers use all the bank’s channels. will start rolling out in the second quarter of key data for year-end “In a recent six-month period, over 75% of 2016, Velline says. 31 December 2015 our customers, including millennials, inter- A different mobile ATM withdrawal sys- acted with a teller or banker in a physical tem, using one-time passcodes, will pilot at Retail Banking: store,” she says. the end of 2016, Velline says. Customers will ❙❙ Primary consumer chequeing customers authenticate themselves by logging into the up 5.6% year-on-year Aggressive approach to digital Wells Fargo mobile app. ❙❙ Retail Bank household cross-sell ratio of “Wells Fargo is very aggressive about using They will then select an account and 6.11 products per household, compared digital channels and technologies, and that request an access code, which arrives in the with 6.17 year-on-year focus is seen in a number of offerings,” says form of an eight-digit token. ❙❙ Customers rated their overall experi- Ron Shevlin, Director of Research at US con- Once at the ATM, they have to type in ence, satisfaction with visit, and loyalty sultancy Cornerstone Advisors. their access code and ATM PIN and proceed with Wells Fargo stores at all-time highs “To increase awareness about its introduc- to the main menu to perform their transac- based on fourth-quarter 2015 survey results. tion of Apple Pay, Wells Fargo used pop-up tions. branches to generate traffic and provide Branches: training. Digital for financial advisors ❙❙ 8,643 physical locations comprising “In its redesigned website, the link farm Wells Fargo is enabling its wealth manage- 6,132 retail banking stores, 1,383 Wells Fargo Advisors offices, 663 Wholesale was replaced with an interactive ribbon ment staff to visit customers at their homes offices, 465 Mortgage offices structured around life needs. Also, Wells and offices fully equipped with digital con- ❙❙ 12,954 ATMs Fargo is very active on social media channels, nections. Online and mobile banking: and developed an online discussion forum In June 2015, Wells Fargo Advisors to engage college-bound students and their launched the Smart2Go app for tablets for ❙❙ 26.4 million active online customers, up parents in student loan discussions.” the benefit of its 15,000 advisors. 7% year-on-year The app, an extension of Wells Fargo’s ❙❙ 16.2 million active mobile customers, up ATMs desktop SmartStation program, allows 14% year-on-year ❙❙ Wells Fargo is integrating its ATMs into its advisors to provide reviews, compare asset Active Customers: Customers who actively use their chequeing account with transac- digital technology platform. “We’ve begun allocation models, read research reports and tions such as debit card purchases, online to connect our full-service teller and self-ser- review customers’ account holdings and bill payments, and direct deposit.< vice ATM experiences,” says O’Byrne. activity.

www.cardsinternational.com July 2016 y 9

CI 533.indd 9 13/07/2016 15:38:40 GUEST COMMENT: HYPERWALLET Cards International

Brexit financial market regulations mean trouble for UK-based banks Hundreds of financial institutions and fintech startups have used London as a window to the EU’s 27 countries and common market of more than 500 people. But the window is now closing, and the UK must embark on an unknown future. Tomas Likar, vice president of strategy and business development at Hyperwallet, writes

he UK’s shocking decision to leave the to new technologies and business models, gether, because the only way they can main- European Union (EU) has left its citizens while fintech startups saw an increase in capi- tain regulatory freedom within the EU is if fearful for what is to come. Local news tal and access to the EU’s internal banking they set up additional offices across Europe. stations have been ringing the alarms market. But now, fintech startups will have Major payment processors with London- T based operations face similar threats. For for some time, with constant warnings of to look to greener pastures when identifying how Brexit will result in higher interest rates potential business partners. privacy and data security purposes, European and an increase in currency volatility – par- Prior to Brexit, fintech startups had the law requires processing centres to be part of ticularly in relation to the pound. Meanwhile, option of passporting their British eMoney the EU, so they too may need to leave London. this well-known financial capital must also license from the Financial Conduct Author- As we continue to embark on a new and not consider the potential consequences of Brexit ity to all other EU countries – giving them fully understood financial reality, the coming on the payments and fintech industries. essentially a seamless process for cross-border months will be crucial for these organisations The relationship between big UK banks and transfers. to solidify their future in Europe. fintech startups is likely to waver in the com- However, the Brexit decision will force such With both fintech startups and their pro- ing months. For a long time, these organisa- startups to apply for a license with different cessing counterparts having no option but to tions relied on a win-win partnership – UK regulators across Europe. This will likely force leave London, the future of the UK’s financial financial institutions gained greater exposure them to move operations from London alto- services market is questionable at best. <

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CI 533.indd 10 13/07/2016 15:38:40 DigitalUntitled-1 touch 1 briefings ad copy - MF 18042016.indd 1 18/04/201614/07/2016 11:15:29 09:34 Cards International EVENT: THE DIGITAL BANKING CLUB

Fintechs: Friend or foe in the world of financial services? London has gained a reputation as a leading fintech hub, hosting more and more innovative technology start-ups but can they be considered as friends or enemies of financial services? This is exactly what June’s debate from the Digital Banking Club (TDBC) set to find out.Jessica Longley reports on the action

osted at the prestigious Law Soci- ety in London, and sponsored by global leader of mobile capture H and identity verification software Mitek, this June’s TDBC debate took a slightly more traditional approach. Sophie Guibaud, George Depastas and Jon Hall argued for the motion against a team comprising Simon Cadbury, Roy Vella and David Parker. The motion: fintech, friend or foe? Guibaud, vice-president of European expansion at Fidor, kicked off the debate in support of the motion. She argued that in spite of a rocky start, the relationship between fintechs and banks have evolved and continue to evolve – with the arrival of PSD2 – into a more symbiotic one.

Fintechs and banks, a symbiotic relationship? under a 100-year-old brand.” banks, they are also threatening banks’ prof- Guibaud explained how fintechs were born, She illustrated that ‘the P2P lending part- its as they start to encroach on the end-to-end painting a picture of a change in consumer nership between Zopa and Metro Bank is a value chain. behaviour over the past 20 years with the arriv- perfect example of fintechs and banks work- According to Cadbury: “The opposition al of the internet and smartphones, allowing ing together hand in hand. Zopa offers Metro might argue that only a small percentage of customers to be permanently connected. This Bank clients a service that the bank itself revenue is migrating to fintechs, but it should led to the emergence of new agile companies would not be able to offer’. be the potential that is concerning them. as banks struggled to keep up with the change. Experts believe that 40-60% of global bank- “Banks took a while to adapt as quickly to The end of the “toothbrush era” ing profits worth $1trn are at risk.” change as other sectors for a few reasons such In response, Simon Cadbury, director of strat- Cadbury expressed his fears that tradition- as legacy and strict regulation. Organisations egy and innovation at Intelligent Environ- al banks are ‘having their no-frills moment, have a strong hierarchy and are not used to ments, made his case against the motion with just like the national airlines in the 1990s. listening to what customers want. five concise points. They’ve had to accept lower profitability and “For fintechs, it is easier to swiftly develop Basing his arguments on research from PwC remodel their proposition’. new products and respond to customer needs and McKinsey, he stated that fintechs are dis- He considered that banks are unprepared because of their new business model and bet- ruptive, steal profits, do not need banks and to face the second stage of advancement of ter customer experience,” Guibaud explained. are a threat to the future of banking. As a fintechs. Indeed, the future of fintechs is She further outlined the banks’ and fintechs’ result, the traditional players are left unde- expected to be propelled by the proposition need for each other. On one hand, banks cided and unsure of how to proceed. of a launch that will create a central hub for depend on fintechs to better connect with their He said: “We’re undergoing a natural evo- fintechs called the marketplace bank. customers and improve their understanding lution. You can describe the previous two or Cadbury explained: “The marketplace of their customer base. On the other, fintechs three years as the ‘toothbrush era’, where banks will compete directly with the tradi- need the investment and brand that banks fintechs have been taking one function and tional banks on core banking services with- offer to assert themselves in the market. performing it considerably better than any- out the need to build all the products. And on Partnerships between the two entities can one else.” this model, there’s a very good chance that come in the form of affiliations or through the Cadbury clarified: “Fintechs are typically they will actually scale much more quickly banks’ use of fintechs’ already developed and bound to be light, free from the burden of than we’ve seen historically.” tested technology. meddlesome systems and have smart unbun- As Cadbury’s speech came to an end, it Guibaud clarified: “Investments are a way dled business models. The fintechs’ disrup- was the turn of George Depastas, the head of for fintechs to reach out to other audiences tive models can find great synergy in working product and real-time analytics at Barclays, that are not their main target audience. together rather than bending over backwards to point out the inaccuracies and supposedly “It is also a way to experiment as it’s always to accommodate banks.” false arguments found in Cadbury’s speech. easier to experiment under a new brand than Not only can fintechs survive without “You’ve said that the essence of startups

www.cardsinternational.com July 2016 y 11

CI 533.indd 11 13/07/2016 15:38:42 EVENT: THE DIGITAL BANKING CLUB Cards International

is disruption. This is so last year; creation is the new bloc. “The big players in the market are not trying to chip-in the existing pipe, they are trying to create new markets,” announced Depastas. Indeed, Depastas is convinced that ‘the pie is large enough to feed everyone. They don’t have to kill each other’. Banks and fintechs have complimentary sets of skills and resources that allow them to work together. Depastas called it co-competition: ‘cooperation with some elements of healthy competition’. The huge potential for them to be and remain friends comes from, as Guibaud men- considered friendly when they were effec- ture of them, but once you zoom in on the tioned, two things. tively taking profits away from the banks. teeth, they become threatening,” admitted “For one, fintechs need the funding, “A profit pie was mentioned. It’s a bit like a Vella, insinuating that piranhas are the fin- branding and established relationships the balloon. I don’t believe that profits go up and techs and great white sharks are the banks. banks bring. The slow dinosaur banks on the up until that balloon explodes. There is only Vella concluded that we no longer need other can benefit from the agile mindset and a certain amount of profit available.” a middleman, such as the bank, in a world cutting-edge technology the fintechs offer,” According to Parker, fintechs are now serv- where we have diversity and choice. claimed Depastas. ing the profitable customers of that profit pie Jon Hall, in favour of the motion, fought Depastas further proved his point by while the banks are left with the unprofit- back the opposition by playing into their admitting that very few startups have actu- able customers: “[The banks] are left with analogy game. He decided to compare fin- ally passed the 100,000 users threshold. He the commodity-based wholesale business.” techs to Tesla, arguing that Tesla is a com- explained that these startups rely on banks’ As a dramatic conclusion to his speech, pany that turned electric cars from geeky to brands to provide their customers with the Parker specified: “This lack of real customer cool and accessible. trust and loyalty they desperately need. insight therefore becomes self-fulfilling. Hall explained that fintechs are to finan- On the other hand, banks cannot survive “The less you understand about them cial services what Tesla is to the car industry: if they do not jump on the digital wave: they today, the less you understand about them appealing to a niche market and developing understand the urgency of investing in fin- tomorrow and the less you know about them through innovation and understanding of the techs. in the future. Fintechs will leave with 60% of customer. In his closing statement, Depastas conclud- your profits in the pocket.” Hall commented: “Fundamentally, fin- ed that the $20bn investment in fintechs by Vella backed Parker’s arguments up by cre- techs are advancing in gaps. They are dealing banks reflected the confidence banks have in ating his very own analogy around sea ani- with underserved markets, they are listening start-ups: “Fintechs have proven that essen- mals. He first described the paradigm shift to what customers want and they are there tially they want to participate in the wider financial players are currently facing. responding to customer needs. It is about a ecosystem. They want to optimise processes In this highly connected world where social purpose more than a numbers game.” and build on top of APIs.” the global digital participation is unprec- Hall disputed that by working with finan- edented, there is ‘in Murdoch’s words, a sig- cial services, fintechs were demonstrating Biscuits, piranhas or electronic cars? nificant dynamic of the fast being the slow’, their maturity, sustainability and scalability. Speaking for the opposition, David Parker, explained Vella. He believed the recipe for success for banks CEO of Polymath Consulting, and Roy “We are no longer in waters that worry was a combination of two things: “Financial Vella, digital expert and consultant, chose about great white sharks, but rather we are services need to be emotional and rational as original and quirky analogies to express their now scared of the little players taking little well. They need to perform and they need to opinions. bites. Piranhas are cute when you see a pic- look good.” Parker dubbed banks the ‘manufacturers of rich tea biscuits’, and introduced fintechs as the ‘Tesco providing the rich tea biscuits’ to explain how profits depend on who knows the customer best and who controls the mar- gins. In short, Parker showed the dependence of banks on fintechs for customer data. He stated: “Fintechs, with all their weird and wonderful logos, are building brands and emotional relationships to their customer base. Banks are purely manufacturers; they have no understanding of where the market is going and no idea what the consumer is looking for in the future.” Parker argued that fintechs could not be

12 y July 2016 www.cardsinternational.com

CI 533.indd 12 13/07/2016 15:38:47 Cards International EVENT: THE DIGITAL BANKING CLUB

The bloodbath “Let’s assume it is 10 years from now. It is slightly to their detriment’. As moderator Douglas Blakey, group edi- Describe what the world would look like A member of the audience asked if innova- tor of consumer finance titles at Timetric, after all these great partnerships.” tion will bring the death of money licenses. opened up the floor to questions, the panel “[Fintechs and banks] will be able to go Parker purported that they are increasingly got their claws out to fight it out one last time the extra step. Fintechs feel there is a gap in easier to get: “It is easier to buy it off a manu- before the results. the market and can offer services that banks facturer. That is Tesco’s attitude.” When asked about how fintechs could be can’t; such as loans to high risk customers,” considered foe when they need such high Guibaud replied. The aftermath capital requirements to survive, Vella replied: Depastas regretted to say that it is ‘hard to As the debate came to an end and as the “The aspect that you’re missing is time. imagine the future in three years, even more results were about to be announced, a mem- “When it is explained that there is a poten- so in 10’. ber of the audience added that the IT depart- tial to hack into the $1trn industry and that He stated: “You go to banks for their over ments throughout large corporations are all the current players are dinosaurs, there is all package. Insights, advice... Customers often the blockers of innovation. money to be had.” want specific offerings from fintechs but are The battle had been fought and the audi- An audience member reiterated the ques- still customers of the big banks.” ence had made up their minds. So, who is the tion: “Are they a foe now or in 20 years’ Parker shut Depastas down by affirming: clear winner? time?” “Certain things are predictable. It’s very sim- Prior to the debate, the voting stood at Vella took up the question once more: ple: when someone gets good service and 84% for the motion in comparison to 16% “You stole my thunder! They may appear to good products, they tend to go back. Banks against the motion. be friendly at the moment, but time is the fac- will lose the customer relationship as fintechs After the debate, the second poll resulted tor that people are not considering.” gain that customer relationship.” with only 55% for the motion and a stagger- Guibaud retorted: “Fintechs need larger Hall cut in to explain that ‘the future will ing 45% against the motion. players over time. If you don’t have the capi- be more diverse, but I don’t think it’s a ques- It was decided at the beginning of the tal, you need to stop. tion of one or another. Banks need to be clear debate that the winner would be based on the “A lot of investment money needs to be on what they are going to serve. Choice is swing between the number of votes before spent on marketing to actually reach out to going to be phenomenal’. and after the debate. people and build a customer base.” Meanwhile, Cadbury felt that ‘banks can- On that basis, the opponent of the motion Another member of the audience added: not fulfil certain services that fintechs offer. won the debate, with a swing of 29 %. <

n DEBATE PARTICIPANT PROFILES FOR THE MOTION AGAINST THE MOTION George Depastas, head of product, real-time analytics, data products and Simon Cadbury, director of strategy and innovation, Intelligent Environments platforms, Barclays Depastas heads the real-time analytics product for Barclays Africa, driving the wider Cadbury is a product marketer and strategist with 18 years’ experience working for a innovation agenda and working closely with start-ups, to deliver cutting edge dynamic range of major international brands. customer experiences. Cadbury’s role is to work with Intelligent Environments’ investors to set and deliver the Depastas comes from an engineering background, and has experience in the areas of company’s mid- and long-term strategy, as well as overall responsibility for product digital user experience, business optimisation and innovation strategy. development and management for Interact, the company’s core product offering. Cadbury joined in 2013 from Lloyds Banking Group where he was responsible for payment technology, and also sat on the credit card division’s leadership team. Prior to this he worked on the launches of a number of firsts in new technology: the Blackberry (BT Cellnet), BT Openzone (BT Retail), 3G Live! (Vodafone Australia) and Sky HD (BSKYB). Sophie Guibaud, vice-president European expansion, Fidor David Parker, CEO, Polymath Consulting Guibaud started her career in investment banking in New York before joining a growth Parker is founder and CEO of Polymath Consulting, which has now delivered over 50 capital fund in Paris. Along with investing in startups, she advised them on their projects for clients in prepaid cards and emerging payments. The company’s current development strategy. work includes projects in the Middle East, US, Asia, Africa and Europe. However, wanting to be more involved in startup operations, she moved to London and Parker has an in-depth knowledge of payments and payment cards and is known for his was instrumental in launching HelloFresh, a Rocket Internet food subscription-based work with prepaid cards, mobile money/mobile wallets and M-pos. company. Parker has previously worked for companies such as the Gaming Bourse, the Pepper After heading product strategy and commercialisation at Bankable, a payment Corporation and Saatchi & Saatchi (Saudi Arabia). solutions company, she is now in charge of the European roll-out of Fidor. Jon Hall, MD, Masthaven Bank Roy Vella, digital expert and consultant Hall will lead Masthaven Bank, which has unveiled plans to become a new UK retail Vella is a digital entrepreneur and independent consultant to brands such as Visa, bank with a launch planned for the summer of 2016. Vodafone, GSMA, and small startups. Hall joined Masthaven in January 2015 from Saffron Building Society where he had Before offering his expertise at large, Vella served as leader of RBS global mobile been CFO since August 2004, and subsequently CEO from 2011. banking efforts. Before this, he spent five years at PayPal, starting out as director of Hall was part of the senior management teams with CT capital, a specialist mortgage business development in USA merchant services before leading the mobile payments lender and intermediary, Aviva and PwC, both in the UK and Bermuda. initiative across Europe. Prior to PayPal, Vella worked as VP of sales and marketing at 4charity, Inc., then as partner of Quantum Technology Ventures, a corporate VC firm focused on the storage industry.

www.cardsinternational.com July 2016 y 13

CI 533.indd 13 13/07/2016 15:38:48 COUNTRY SURVEY: CHINA Cards International

China focuses on the rural population Despite being Asia’s largest payment card market in terms of value and volume, much of China’s large rural population has little access to formal banking infrastructure. What will rises in the economically active population and disposable incomes, and the adoption of contactless do for card use and acceptance?

hina is Asia’s largest payment cards This is primarily a result of a lack of Consequently, the share of Chinese popu- market in terms of card transac - knowledge among the population about the lation aged 15 or above with a bank account tion value and volume, accounting benefits of electronic payments, and limited rose from 63.8% in 2011 to 78.9% in 2014, C for 74.7% and 41.2% respectively. access to banking infrastructure. according to the World Bank’s Global Findex The average annual spend per card is As the government and banks began survey. also high in China, at $1,501.40 – com - to provide basic financial access to the Rises in the economically active popula- pared to regional peers such as Malaysia unbanked population, by expanding banking tion and per capita disposable income, the ($651.20), Indonesia ($290) and India infrastructure, launching new branches and growing popularity of online shopping, the ($88.70). making efforts to change consumer payment increased acceptance of cards at retail outlets Cash, however, remains a popular pay- habits, payment cards gradually became and the adoption of contactless technology ment instrument among Chinese consumers, more accepted, with their use consequently supported the growth of payment cards over especially in rural areas. growing between 2011 and 2015. the past five years; this trend is anticipated

n VALUE OF CREDIT TRANSFERS IN CHINA n VALUE OF CHEQUE PAYMENTS IN CHINA n VALUE OF PAYMENT CARDS IN CHINA ($TRN), 2011-2015 ($TRN), 2011-2015 ($TRN), 2011–2015

250 50 8

7 200 40 6

5 150 30 4 20 100 3

2 50 10 1

0 0 0

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Source: Bank for International Settlements, Timetric Source: Bank for International Settlements, Timetric Source: Bank for International Settlements, Timetric

14 y July 2016 www.cardsinternational.com

CI 533.indd 14 13/07/2016 15:38:55 Cards International COUNTRY SURVEY: CHINA

to continue until 2020. The rising accept- n CHINA’S DEBIT CARD MARKET SHARES BY n CHINA’S DEBIT CARD MARKET SHARES BY ance of payment cards was also supported ISSUER (%), 2015 SCHEME (%), 2015 by improvements in the country’s payment infrastructure.

China UnionPay maintains its stranglehold China UnionPay (CUP) is China’s sole pay- Agricultural ment card scheme provider. According to Bank of China central bank regulations, all banks and card Others 24.1% issuers operating in the country are required 36.2% to route yuan-based transactions through China UnionPay CUP’s electronic payment network. Industrial and 100% However, following a complaint filed by Commercial the US against China via the World Trade China Bank of China Organisation (WTO) with regards to dis- Construction 20.6% criminating against foreign companies in Bank 2012, the WTO directed the Chinese govern- 19.1% ment to open up its payment cards market to foreign operators. Consequently, in October 2014, the Chi- Source: Timetric Source: Timetric nese government announced its decision to allow foreign companies to set up their own n CHINA’S PAY LATER CARD MARKET SHARES BY n CHINA’S PAY LATER CARD MARKET SHARES BY payment card clearing businesses, effective ISSUER (%), 2015 SCHEME (%), 2015 from June 1, 2015. The move is anticipated to intensify competition in the Chinese payment cards market, and end CUP’s dominance as China’s Industrial and only authorised card clearing organisation. Commercial However, Visa and MasterCard have a Bank of China 11.9% long way to go before they can make a dent China in CUP’s market share, as they need to build Construction up infrastructure from scratch. Bank 11.2% China UnionPay 100% Contactless mobile to gain prominence Others Contactless mobile payments (m-payments) 67.7% Bank of China 9.1% are expected to gain prominence in China, as retailers and mobile operators actively promote contactless technology to improve their businesses. Consumer preferences for secure payment services that allow them to purchase prod- Source: Timetric Source: Timetric ucts are also gaining ground. Companies are also embracing this technology to benefit E-commerce offers scope within free trade zones. With the change in from expansion in the m-payment market. China is one of the world’s largest government policy, the e-commerce market The latest initiative was the launch of e-commerce markets. In terms of transac- presents itself as a profitable market for for- Apple Pay, Samsung Pay and Huawei Pay tion value, it grew at a compound annual eign companies. in 2016, in association with CUP. Apple growth rate of 49.59%, from $151.3bn Pay entered the Chinese market in February (CNY586bn) in 2011 to $757.7bn in 2015. Increasing number of POS terminals 2016, in partnership with CUP. The service The rapid adoption of smartphones, grow- The number of POS terminals recorded a sig- uses tokenisation technology to ensure paying internet penetration, availability of secure nificant CAGR of 43.96%, rising from 4.8 ment security. online payment mechanisms, reduction in million in 2011 to 20.7 million in 2015. On adding a payment card to Apple Pay, delivery times and growing preference for The expansion of the organised retail sec- no actual card numbers are stored on the online shopping – especially among the rural tor is expected to lead to growth in the num- mobile phone, and instead a unique device population, as a result of underdeveloped ber of POS terminals over the next five years, account number is encrypted and securely bricks-and-mortar shops – led to this growth. to reach 36 million in 2020. stored, with transactions authorised with a To capture the rural market and increase The growing payment cards market had one-time dynamic security code. customer convenience, online retailers such attracted Chinese banks to launch mobile Following the launch of Apple Pay, as Alibaba and JD.com are investing heavily POS (mPOS) solutions in the market. Samsung also launched its m-payment in improving logistics infrastructure. In June 2014, for example, BOC launched service in China in March 2016, in alli - In June 2015, the Chinese government mPOS terminals in partnership with CUP ance with CUP. In June 2013, CUP and permitted 100% foreign ownership of and Visa. The-chip-and PIN reader can be China Mobile launched a NFC-based e-commerce companies, which were previ- connected wirelessly through audio cable or mobile wallet, CUP Wallet, in 14 cities. ously accessible only to companies operating Bluetooth to a smart phone or tablet.<

www.cardsinternational.com July 2016 y 15

CI 533.indd 15 13/07/2016 15:39:00 COUNTRY SURVEY: RUSSIA Cards International

Russia working on its inclusion Russia has made substantial progress in terms of financial inclusion, with numerous government programmes to promote use of card payments and other services. Economic issues and sanctions against the country following the conflict in Crimea have created challenges, although e-commerce’s growth is a positive step forward

espite economic turmoil, the Rus - speed up the pace of financial inclusion in the Consequently, Russia has made substan- sian payment card market grew country. These include the appointment of tial progress in terms of financial inclusion substantially between 2011 and non-banking agents, allowing them to offer according to the World Bank’s Global Fin- 2015, in terms of both volume and services such as opening savings accounts, dex survey 2014, with the percentage of the D Russian population aged 15 or above with an value. Economic growth has been slow, and making loan repayments, money trans- mainly as a result of falling global com - fers and tax payments. account at a financial institution rising from modity and oil prices, and US sanctions The Financial Inclusion and Shadow Bank- 48.2% in 2011 to 67.4% in 2014. These ini- against Russia. ing: Innovation and Proportionate Regula- tiatives are anticipated to encourage electron- The Russian government has taken several tion for Balanced Growth seminar, featur- ic payments and reduce dependence on cash. initiatives to promote electronic payments in ing 100 participants from 28 countries, was the country over the past five years, in the co-hosted by the central bank of Russia and Russia develops its own domestic system form of financial inclusion programmes, the Alliance for Financial Inclusion (AFI) Following Russia’s invasion of Crimea in regulation to cap cash payments, and the in Moscow in November 2015. In October March 2014, the US government imposed introduction of the National Payment Card 2014, the central bank of Russia and AFI sanctions against Russia; consequently, Visa System (NPCS). co-hosted a similar workshop in Moscow to and MasterCard stopped processing card A number of initiatives were taken to improve financial inclusion. payments in Russia. To counteract this, the

n VALUE OF CREDIT TRANSFERS IN RUSSIA n VALUE OF CHEQUE PAYMENTS IN RUSSIA n VALUE OF PAYMENT CARDS IN RUSSIA ($TRN), 2011-2015 ($M), 2011-2015 ($BN), 2011–2015

15 20 350

300 12 15 250

9 200 10 150 6 100 5 3 50

0 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Source: Timetric Source: Timetric Source: Timetric

16 y July 2016 www.cardsinternational.com

CI 533.indd 16 13/07/2016 15:39:06 Cards International COUNTRY SURVEY: RUSSIA

Russian government created the NPCS in n RUSSIA’S DEBIT CARD MARKET SHARES BY n RUSSIA’S DEBIT CARD MARKET SHARES BY April 1, 2014, and the national payment ISSUER (%), 2015 SCHEME (%), 2015 card, Mir was launched in December 2015. The government plans to issue Mir cards Others on a large scale, and promote the card among Golden Crown 11.3% government employees in 2016. A total of 3.6% 35 banks have expressed an interest in issuing Mir cards, and seven banks have already issued the cards during its pilot. To develop the new payment system and Others Sberbank Mir cards, the Russian government set a con- 39.9% MasterCard 45.8% 31.9% dition for Visa and MasterCard to make a Visa security deposit equalling 25% of their aver- 62.8% age daily turnover with the central bank, if they wanted to operate in Russia. Russian VTB24 After a series of negotiations, however, Standard 10.3% Visa and MasterCard agreed to join the Bank 4.0% NPCS. On January 12, 2015, MasterCard signed an agreement to join the NPCS, while Visa signed a similar agreement on February Source: Timetric Source: Timetric 19, 2015; from April 1, 2015, both companies started processing domestic card pay- n CHINA’S PAY LATER CARD MARKET SHARES BY n CHINA’S PAY LATER CARD MARKET SHARES BY ments through the new system. ISSUER (%), 2015 SCHEME (%), 2015

Gradual uptake of contactless American Others Contactless technology is expected to gain Express 6.8% 1.3% prominence among Russian consumers. The Russian government is also actively involved in the promotion of contactless technology, especially on public transport. Sberbank Banks and payment service providers are 28.9% also keen to promote contactless technology, Others and are launching new services to increase 46.7% Visa MasterCard 52.1% uptake. 39.8% The latest of these is the launch of the Visa VTB24 Qiwi Wallet in August 2015, which incorpo- 12.7% rates Visa’s payWave contactless technology Russian Standard by Visa and Qiwi. Bank 11.8% In June 2013, Russia Standard Bank, MasterCard and Mobile TeleSystems launched contactless m-payment service. Source: Timetric Source: Timetric Similarly, Mobile Telesystems (MTS), a leading telecommunication operator, introduced instance, eBay launched a Russian-language Increasing number of POS terminals contactless payment facilities in Lukoil pet- online marketplace in 2013, providing a plat- The number of POS terminals in Russia rol stations in Perm and the Moscow sub- form for merchants from the US and the UK increased at a CAGR of 28.59% from 557,366 way in 2010, followed by Megafon in 2011, to sell goods and services in Russia. in 2011 to 1.5 million in 2015; the number is which launched contactless payments in the eBay also launched a daily deal app which expected to reach 2.7 million in 2020. St Petersburg subway. offers coupons that can be redeemed for With the increased number of POS termi- goods and services at partner stores in Mos- nal installations at retail outlets, the potential Growing e-commerce opportunities cow. for card payments is also expected to grow. The e-commerce transaction value rose from Online retailers are also offering their own Russian Standard Bank, in partnership $11.1bn (RUB325.9bn) in 2011 to $15.8bn delivery services in Russia. For instance, with mobile app developer CCT Company, in 2015, at a compound annual growth rate Rocket Internet AG offers the Lamoda launched the Ingenico RP750 mPOS termi- (CAGR) of 9.27%. Express delivery service. Similarly, Russian nals for SMEs in March 2015. The value is expected to increase further, online retailer Ozon offers the O-Courier The terminals are EMV-compliant and at a CAGR of 17.08%, to reach $30.8bn by service, which also delivers for other online include a chip-and-PIN reader; they can 2020. An increased number of internet users retailers in the country. be connected to mobile phones through an in Russia, with a penetration rate of 71.1% While consumers in Russia mostly opt audio jack or Bluetooth. Similarly, from May in 2015, rising consumer preference for for traditional methods such as payment 2015 Surgutneftegasbank started offering online shopping and the availability of online cards and cash on delivery to pay for online mPOS terminals designed to accept chip-and- sites supported growth in e-commerce. purchases, digital wallets such as Yandex. PIN and contactless payments. The terminals The growing e-commerce market has Money, WebMoney, Visa Qiwi Wallet and were developed in partnership with the CCT attracted international online retailers. For PayPal are gaining popularity. Company. <

www.cardsinternational.com July 2016 y 17

CI 533.indd 17 13/07/2016 15:39:10 XXXX:COUNTRY XXXX SURVEY: VIETNAM Cards International

Vietnam looking to inspire engagement A large rural population means financial inclusion and payment card uptake are low in Vietnam. Nearly half of cards issued are dormant, and most of the rest are only used for cash withdrawals. The government’s key priority is microfinance, through which it aims to improve consumer awareness of financial services

ietnam remains a cash-dominant of limited consumer awareness of the ben- penetration, payment card use is expected to country, with much of its popula- efits of electronic payments, and insufficient rise over the next five years. tion having no access to the formal access to formal banking. V banking system. Nearly 50% of issued payment cards in Increasing penetration and inclusion Much of Vietnam’s population lives in the country are dormant, and 90% of active With the country’s large unbanked popula- rural areas and depends on moneylenders cards are only used for ATM cash withdraw- tion, financial inclusion remains a priority, and other informal providers to access finan- als; only 10% are used for in-store payments. and the government and other bodies have cial services. The percentage of the popula- At 0.05, the average number of monthly been taking initiatives to improve banking tion aged 15 or above with a bank account card transactions at POS terminals is signifi- penetration in Vietnam. was 30.9% in 2014, according to the World cantly lower than in peer countries including The government plans to grow microfi- Bank’s Global Findex survey. Thailand, the Philippines, Cambodia and nance in phases by 2020, by developing a Payment card uptake in Vietnam is low, Pakistan. However, with the government and safe and sustainable financial system to serve at 1.03 cards per inhabitant. This is a result banks making efforts to increase banking low-income consumers and small businesses.

n VALUE OF CREDIT TRANSFERS IN VIETNAM n VALUE OF CHEQUE PAYMENTS IN VIETNAM n VALUE OF PAYMENT CARDS IN VIETNAM ($TRN), 2011-2015 ($BN), 2011-2015 ($BN), 2011–2015

2.5 10 10

2.0 8 8

1.5 6 6

1.0 4 4

0.5 2 2

0.0 0 0

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Source: Central Bank of Vietnam and Timetric Source: Central Bank of Vietnam and Timetric Source: Central Bank of Vietnam and Timetric

18 y July 2016 www.cardsinternational.com

CI 533.indd 18 13/07/2016 15:39:18 Cards International COUNTRY SURVEY: VIETNAM

This includes formulating microfinance- n VIETNAM’S DEBIT CARD MARKET SHARES BY n VIETNAM’S DEBIT CARD MARKET SHARES BY related guidelines, developing a credit ISSUER (%), 2015 SCHEME (%), 2015 bureau, and revising the legal framework for microfinance institutions and linking them to other credit institutions. To promote financial literacy, independent consumer protection body the Vietnam VietinBank Standards and Consumers Association (Vina- 22.7% stas) is educating consumers about savings, Others loans and other financial services. Others Banknetvn 43.4% 47.5% The Women’s Union and the Vietnam 50.8% Farmer’s Union play key roles in promoting Agribank financial inclusion by providing information 21.7% about financial services to consumers, and helping them overcome financial problems. These initiatives are expected to improve consumer awareness of the financial system. Vietcombank MasterCard Visa 12.1% 1.4% Growing high-income population 1.2% Credit cards accounted for 3.6% the pay- Source: Timetric Source: Timetric ment card transaction value in 2015. Credit card penetration in Vietnam was 4.9 cards n VIETNAM’S PAY LATER CARD MARKET SHARES n VIETNAM’S PAY LATER CARD MARKET SHARES per 100 inhabitants in 2015, lower than in BY ISSUER (%), 2015 BY SCHEME (%), 2015 peer countries such as Thailand (32.0) and the Philippines (8.3). Others 4.4% Despite its small size, the credit card market offers growth potential, supported by rising middle- and high-income populations, American and changing consumer habits. Others Express 13.8% The rapidly growing middle- and high- 25.2% VietinBank income populations have driven growth in 35.6% credit cards in Vietnam. According to a sur- Visa vey by the Boston Consulting Group (BCG) 48.5% Asia in 2014, Vietnam had the fastest-growing Commercial MasterCard middle-class and high-income population in JSB 18.6% 33.3% Southeast Asia; this population is expected to Vietcombank reach nearly 30 million by 2020. 20.6% Consumer shopping behaviour is also changing gradually, with nearly 80% of consumers occasionally shopping at modern retail outlets such as supermarkets and Source: Timetric Source: Timetric hypermarkets. However traditional brick-and-mortar Traditional methods including credit trans- the industry registered an increase in the shops are the main consumer sales points, fers and payment cards remain the most pop- uptake of mPOS solutions between 2011 and according to the BCG survey. Growth in ular modes of payment for online shoppers in 2015. TPBank launched its mPOS solution modern trade combined with deals, dis - Vietnam; the two collectively accounted for in November 2014, allowing merchants to counts and promotions offered by retailers 66.1% of the total e-commerce transaction accept debit and credit card payments. encourage consumers to use credit cards value in 2015. Cash on delivery and digital This was one of the first mPOS solutions more frequently. wallets are also used for online payments, launched by a commercial bank, and con- with each accounting for 11% of the total tains slots for both chip and magnetic cards. E-commerce supporting payment card growth e-commerce transaction value in 2015. It comprises a device which can be connected E-commerce grew significantly from to a mobile phone’s audio port, and uses a $201.4m (VND4.1trn) in 2011 to $3.8bn Government encourages POS installations pre-installed mPOS app. in 2015, at a CAGR of 108.25%. Despite The number of POS terminals recorded a To capitalise on the rising uptake of mPOS the rapid growth, e-commerce accounts for a CAGR of 33.66% over the past five years, solutions among SMEs, in January 2015 tiny share of the retail sales value as consum- rising from 70,000 in 2011 to 223,381 in Vietnam Export Import Commercial Joint ers prefer to buy from conventional retailers. 2015, in response to government’s plan to Stock Bank and electronic payment service Lack of robust payment platforms, infra- increase the number of POS terminals to provider, Wirecard Group launched the structure and logistics are restricting e-com- 250,000 by 2015. With the increased num- Eximbank mPOS service to accept card pay- merce’s growth. Although a number of ber of POS terminals at retail outlets, the ments by smartphone or tablet. online marketplaces operate, they only pro- country’s potential for card-based payments The mPOS consists of a reader of magnetic vide information on products and services; is also expected to grow. strip and EMV-chip cards, and can accept there is no option to make online payments. Alongside conventional POS terminals, MasterCard, Visa and JCB payments. <

www.cardsinternational.com July 2016 y 19

CI 533.indd 19 13/07/2016 15:39:22 GUEST COMMENT: SIX PAYMENT SERVICES Cards International

Contactless payments: huge potential for consumers and merchants alike Statistics show that only a small percentage of the cardholder base across Europe is using contactless. Why are so many not taking advantage of this quick, efficient and secure solution, and will we see greater uptake with mobile devices? Sascha Breite, head of future payments at SIX Payment Services, explains

cross Europe, millions of customers Let us assume a consumer is aware of a card’s were equipped with NFC readers. now own credit and debit cards with NFC capability. At the POS, the customer has to The regulation of multilateral interchange contactless capabilities, meaning they identify whether the terminal is NFC-enabled. fees changed this: credit cards are now in a price can conveniently and easily pay, up How does a customer know this? There is nor- range for retailers to accept them as addition- A mally an NFC sticker or symbol at the POS ter- to a designated amount, at any one of many al means of payment. In the last two to three hundreds of thousands of terminals, equipped minal, telling the consumer where to place the years, many retailers have now activated NFC with contactless infrastructure. Current statis- card. The chances are that a consumer might to support faster contactless payments, which in tics show however, that only a small percentage see a POS terminal with the NFC icon and tap most cases are credit card payments. of Europe’s cardholder base is using contactless. against it for a payment. So what’s the issue? Visa and MasterCard, are also keen to intro- It is important to note that contactless usage As already mentioned, in Germany nearly duce NFC payments in the market. With mer- and behaviour is still in its early stages. Mer- seven in ten terminals have NFC readers, but chants, they have started to promote NFC capa- chants, banks and consumers are just starting only two in ten are NFC-enabled. So the chanc- bility in enabled stores. to become familiar with ‘tap and go’ contactless es are high that a consumer taps against the How does the customer experience shape the payments. Sweden and the UK are at the fore- NFC symbol – if they have the courage to do cardholder behaviour? Consumers are learning front of contactless technology. It is now possi- so despite the critical glance of the cashier – and that many large retailers offer contactless pay- ble to use cards directly on the tubes, trains and nothing will happen. ments, but in most cases customers have to use buses in central London. How often will consumers try it again in situ- a credit card. If customers are used to paying What is most interesting is that smaller issues ations where they could fail? The chances are with a debit card, they will keep their old habit are now turning into key stumbling blocks. that they will stick to old habits and give the of handing the card over or putting it into the Merchants and banks alike need to educate card to the cashier, or put it into the terminal’s terminal. Entering a PIN is still the most com- customers, not only about the benefits of the card reader. mon form of payment, and this is one of the technology, but more importantly to recognise most obvious hurdles for NFC payments. its availability in their daily lives. Reduce queuing time Another obstacle for consumers is the confu- Too often there is a habit of customers pass- Research in 2012 by Geberit AquaClean, sion of where to tap the card at the terminal ing cards to store assistants, who are trained to showed that during the average UK adult life- – at the display, or at the left or right side of insert the card into a reader and then let the cus- time of 60.5 years, 6,554 hours (273 days) are the terminal? Sometimes the NFC icon is not tomer either enter a PIN or sign a receipt. spent queuing, with supermarket queues one of clearly visible. The solution is as simple as it Banks often inform customers about the worst culprits. Wouldn’t it be great to free is effective: on top of the terminal’s casing the contactless and encourage them to take advan- up personal time in this regard? merchant could now place a cover explaining tage of it. But in many European countries the Given the number of checkouts in thousands where to tap the card. question is where can a cardholder use a near- of retail outlets in Europe, the total time savings SIX Payments Systems was one of the first field communication (NFC) payment card at that can be achieved on the merchant’s side and companies in Europe to process contactless pay- the point of sale (POS)? through contactless payment are substantial. ments, in 2007, and we have pioneered the tech- Take Germany for example: potentially two Tapping a card at a terminal’s NFC reader and nology ever since. SIX has equipped merchants in three acceptance terminals are equipped with getting a quick response takes a second, seldom in many European countries with contactless an NFC reader, but of these only 18% of more one or two seconds longer. Shouldn’t it be in payment terminals. In Switzerland, Austria than 880,000 terminals are actually contact- everyone’s interest to adopt this technology? and Luxembourg with its help, the acceptance less-enabled. Now think about the consumer Think of shorter lines at checkouts for con- network of NFC-enabled POS terminals has experience. How can someone know where sumers, and long-term efficiency gains such as reached more than 70% of the market. contactless POS terminals are located when fewer tills and related costs for merchants. As Education is critical to make NFC a success. only two in ten are active? an estimated 80% of all cash transactions are Millions of smartphones and other wearable According to a study published by the Ger- for less than €20, there is a vast and growing devices will soon be NFC-enabled. Apple Pay man Central Bank (Deutsche Bundesbank) potential demand for speedy contactless pay- and Android Pay have already started in UK, nearly 80% of the population does not know ments without having to enter a PIN. and Samsung Pay in Spain. It is only a question about contactless payments, or has only heard For many years, large retailers in Germany of time before other markets in Europe follow. about it. Just 9% have used it, at least once; such as Aldi and Lidl only accepted debit cards It is important, therefore, that merchants 12% know about the option but do not use it. due to lower acceptance fees compared to credit and customers know how to handle NFC pay- Poland is another country with a good POS cards. However, nearly all German debit cards ments at the POS, not only with the physical infrastructure. Cultural preference, however, did not have contactless features, while most but also with the digitised. Consumers and remains for cash. In fact, at 90%, Poland has credit cards did. For this reason the large retail- merchants can then reap the true benefits of Europe’s highest proportion of cash payments. ers did not enable NFC at POS terminals that contactless payments. <

20 y July 2016 www.cardsinternational.com

CI 533.indd 20 13/07/2016 15:39:24 Title Sponsor

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